SOVIET GOLD PRODUCTION, RESERVES, AND EXPORTS THROUGH 1954 (SC RR 121)

Created: 10/17/1955

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i Dflf CurrentNo.

SOVIET GOLD PRODUCTION, RESERVES, AND EXPORTS

THROUGH

CIA HISTORICAL REVIEW PROGRAM RELEASE AS SANITIZED

Office of Research and Reports CENTRAL 1NTELLIGENCK AGENCY

BLANK PAGE

CONTENTS

Pap.c

I. Gold in Soviet

in International

'Domestic

Clandestine Purposes

Economic Warfare

A* Backing for thc

U. History of the

UI.

War

USSRhole

i. Pre- World War II, by

War II and Post-World War II

1. Glavsoloto .

War

Post-World War II

z.

-iii

World War II and Post-World War II . .

War II. by Dlotrict .

C. Potential

IV. Export! and

War 11

I. 0 -

Z. Acquisitions,

0

Calculation of Official Kcacrvca ao of . - .

17

on Soviet Cold

War Ii and Post-World War

Acquisitions.

Exports.

3- Reserves.4

Appendixes

*

Appendix A. Administrative Structure and Key Personnel

of the Gold Industry of the

Appendix It Organization ol Ihc Chittf Directorate of the Gold and Platinum Industry

(GUvzoloto).

- iv

rcrr-sr.rRr

Appendix C. Comparison and Evaluation ol Estimalc*

Ol* Production of Gold in thc

Appendix D. Estimated Production of Cold in the USSR.

by District. Selected Years.

Appendix E. Various Estimates of Gold Production

from Dal'stroy.

Appendix F. Personnel and Wage Allocations to the Cold

Industry of the USSR

Appendix G. Capital Investment Allocation* lo the Gold

Industry of the USSR

Appendix H. Operational Geological Prospecting in thc

Gold Industry of the

Appendix I. Soviet Methods of Selling

Appendix J. Methodology

Appendix K. Gapa in Intelligence

Source

Tables

1 . Index of thc Purchasing Power of Soviet Gold Sold

in thc West. Selected Years.

Production of Cold in the USSR.

Production of Cold from Dal'stroy.

'mfB^

Estimated Production ol Cold in the USSR, by District,

Selected 27

5 Kan mated Production of Cold in the USSR. . .

b. Various Estimates of Produclion o( Cold in the USSR,

82

Production of Gold in thc USSR, by District'

Selected Years. 83

Estimates of Gold Production from Dal'stroy,

85

Labor Force and Wage Payments

in the Gold Industry of thc USSR. 89

Wage Allocations to Fourteen Gold Trusts

'in the9 and

Capital Investment in the Gold Induutry

of the USSR.94 95

Allocations for Operational Geological

Prospecting in thc Cold Industry of the USSR.

nd . 98

pa

Cha rt

ir.Ui reeioraiol thePlatinum Industry (Olavnoloto). 75

- vi

H SC

SOVIET GOLD PRODUCTION, RESERVES, AND EXPORTS

THROUGH "

Summary

Soviet gold production4 Is estimated lo have beenillion troyalue of approximately0r roughlyercent of world production. This level oi productionairly steady increase in the volume of Soviet gold productionevel about double the World War II low but only about one-half the level achieved in thes.

Soviet gold exports in the postwar years were smallhen they suddenly jumped to the highest level. Total gold exportsay have amounted to about0 million. The main purpose of these exports appearo to have been to balance trade under thc "new course" following Stalin's death.

Soviet gold reserves at thc end4 amounted to about USillion, or roughly four times the size of thc gold reserves inherited from thc Tsarist government, as is shown in the following tabulation:

* The estimates and conclusions contained in this report represent the best judgment of ORR as

** Ounce figures arc Riven in troy ounces of fine gold throughout this report.

*** Gold has been valued ater ounco throughout this report.

Renervco at beginning o( poriod

Production

Other acquisitions

Total disposable gold

Exports Other uses

Total gold use

Unserves at end of period

Billion US

b

9*

fl

7

0

1

I

V

0

last Soviet announcement on gold reserves was7 and on production, These prewar..announcementsf inconclusive percentage figures. Production estimates for World War II an'**re based on inferences from indirect

cvidenca result, postwar production

figures are subjectange of error of plus or minusercent. The estimate4 gold reserves Is subjectange of error of plus or minusercent.

Thc main purpose behind the Soviet production and accumulation of gold is to use the gold as an export commodity or balancing item in foreign trade. omparison of Soviet trade balances and gold salesough correlation between the twoeriod of yearn hut not on an annual basis. This correlation has beenstriking during thcears,ubstantial trade deficit has been accompanied by large gold sales. 5owever, the USSR appears to have limited the amount of gold export! because of expoct.itionc that Ihc world gold price might increase.

Inherited from the Ts.iri.it government.

In addition to the small amounts which are hoaided. some goldused in the USSR in industry and in tho fine arts, hut these amounts are difficult to estimate. Anercent ol production ia deducted for domestic uses in thc above tabulation of reserves.

Gold also has possible covert uses. Economic warfare through "dumping" gold, however, does not appear to be one off thc world gold markets is not in the interestarge gold producer. The sparse data on other clandestine uses of gold (for example, financing foreign Communist parties) do not lendto tabulation. Accordingly, no estimate for clandestine uses is included in calculating gold reserves in this report. The amounts involved are believed to be relatively small.

The ruble-gold parity, to which frequcTJt reference is made by Soviet officials, is believed to be stressed primarily for propaganda reasons and probably does not play an important role in Soviet gold policy.

Thereumber of reasons why postwar Soviet goldshould be so much below prewar production. In the .first place, production costs were high ins and have increased considerably since that time. Remoteness and difficult workingin many of the deposits account in part for these high costs. In addition, costs ace influenced by thc probable depletion of the richest deposits. e-iult. the output per Soviet gold miner is only slightly more than one-tenth thatS gold miner. Soviet procurement prices may be considered toeavy subsidy to the gold industry,uble-dollar ratio of more thanohereas the average ratio between internal Soviet prices and world prices is somewhere in the area ofo t. In thc second place, the purchasing power of gold in world markets has declined significantly to roughly one-half the prewar level. esult, gold production in the rest of the world (excluding the Union of South Africa, where costs are reduced because uranium is obtainedyproduct) has declined byercent8 Finally, Soviet gold reserves at thc end o( World War II were already an uubstanti.il that the incentive to produce at any cost li.nl disappeared.

esult ol tins situation, Soviet gold production has risen6 largely or entirelyesult of an increase in byproduct gold production (goldyproduct in the production of copper, lead, and line). It Is reasonable co expect that any increase during the near iuture will be limited lourther increase from byproduct gold

The size of current Soviet gold reserves and thc current volume of productionotential economic weapon of real value to the USSR. Current gold production alone is sufficient to pay for about one-third of Soviet imports from the West. If the USSR felteserve level bearing the same relation to trade with Ihe West7 reserves bore7 trade with thc same countries were satisfactory, the USSR could finance with gold reserves additional Imports of about0eareriod ofears. Total annual gold export' would approach, andhort period exceed, 0 million, assuming that byproduct gold production continues to increase and that underground and placer gold production stays-constant.

I. Gold in Soviel Policy.

A. Use in International

Soviet eccinnie.it literature most often stresses the role ofintomSiional trade Gold is referred to citheralancingas an export commodity Soviei gold reserve* are also thooghla storeltn- DArtiCuIxr eserves servedagainst thcsIn pay for current trade deficits.

Thc fact that Soviet gold sales in the postwar period until late3 were small may in part be owing to the fact that Soviet trade wan relatively well balanced during this period. On lhe other hand, the recent rash' of Soviet gold'sales has undoubtedly been uocd Ui large part to offset unfavorable Soviet balances in trade with thc West.

The proposition that the USSR generally uses goldeansinternational payments to some extent begs thetbe Sovietizable imbalance in payments islan. This is the reason why gold Is referred to inas an export commodity. It is probably moreto ank why gold exports are planned, rather lhan merelyout that gold is exported when international payments Large gold exports are thus significanteflectionSoviet decision to plan an import

Soviet economic literature also indicates that world gold prices are an important consideration In tho use of_gold. Tbis may well be the key to Soviet behavior in postwar gold sales. 5 the USSR has obviously felt that gold prices were too low and wore bound to increase. Typical of Soviet statementsecture to thc Academy of Scicncien of thc USSR9 pointing out that:

4

The policy of the USA aims at tbet the lowest possibleeconomic crisis will put an end to theof gold. evaluation of the dollar wiU beresult of the crisis

Similarlyishinsky denounced the USpeech before tho UN (or "plundering its allies" by buying goldrice three times cheaper than the price for which it sold its goods.

This interest in the world price of gold on the partarge gold producer is to be expected. Similarly the Soviet government should be expected lo compare the current purchasing power of gold in terms of goods which it can buy on world markets with itn expectations of the future purchasing power of gold. If the prewar

3

ratio briwreo gold prices and Soviet import prices is comparedimilar latio in any postwar year, il is obvious lhal the USSR-found il substantially more advantageous to export gold ino than it docs today, in terms o/ what the gold would boy. (An index of lhe purchasing power of Soviet gold sold in the West lor selected. is given in Table) akes this comparison on tbe assumption that the movement of British export prices is in line with the movement o( international prices of the type ot goods which Che USSR has imported. This table indicates that the currentpower of Soviet gold is roughly one-half of9 purchasing power, lt has become relatively more advantageous (in economicherefore, for the USSR to shift labor and capital from the production of gold to the production of other goods. This does not moan that production of gold has no cconomT&ailvahtage. for there are undoubtedly many low-cost tninca. The point is Ibat Ihc production of-gold is relatively less advantageous today tban before World War II. It would appear, therefore, that, in view of the low current purchasing power ol gold, the USSR would have been inclined in the postwar yearsold at least part of its gold reserves in anticipation of better terms of tradeut fewer resources into gold production.

In spite of the low purchasing power ofizableof gold (rotn thc USSR lo the West started in3 and continued through These shipments are believed to have been from USmillion to0 million3 and from0 million to0 million It may be concluded that during this period 'he marginal utility of gold to the USSR asport was greater than its usetore of value, s peculated that dimmer expectations of an increase in world gold prices, as well as requirements of lhe "newxplain this shift in policy toward the use of gold.

ollows.

Tabic I

index ol ihc Purchasing Power of Soviet Goldelected Years,

Year

of Export Pricea (Great Britain)

of Price of Gold *J

of Purchaoing Power of

3

ased upon US price;. based uponfor gold ingots in US dollar, per. basedprice in US dollars:

derived by dividingy column 1.

B. Other Uses.

1. Domestic Consumption.

An appreciable quantity of gold is used In the USSR in industry and in Ihe fine art*, and a ounthoarded, but these

.ire difficult to estimate.

7 -

lLLUhl

A Soviet publication ives complete instructions lor accounting lor gold used for industrial purposes. These include:

Goldaw material and in semi-finished products (in ingots, strips, alloys,n laboratory and plant equipment and articles oi all kinds, in electrolytes, reagents,n scrap, factory wastes, cuttings, filing, spatters, slag, etc.

Attention is also called in this publicationumber of types offor jewelryumber of forms are

given which use as examples goia articles or*pieces for art oruse weighing uprams. It may be concluded, therefore, that gold is usedir.ab.le variety of artistic and industrialsometimes in relatively large quantities.

According to twe ources

, Soviet uses oi goto tor jewc.military, and government (metals) purposes probably areor nearly as substantial as in Western

recent report indicates thai genuine gold is being used to gila St. Basil's Cathedral.

There is onlyevidence of Soviet use of

gold in industry or in lhe line arts.

Cold is also apparently used for hoarding. Cold now(rely in "waler iized pieces'* by state storesrice ofrublen per gramOO rubles per"is about

double the estimated Sovietol production and -it the official

exchange rateountsit0 per ounce. epotted that

H

-TOr-SECRET'

gold transactions in thc Moscow black marketere so obvious that tbe government could not have been unaware of them. Although gold is ostensibly sold for dental purposes, and perhaps for jewelry making, the free saleigh price would indicate that the major aim of the government is to reduce purchasing power in the hands of consumers.

In recent years, US gold production, which has amounted to an average of over0 million per year, has been fully consumed ln industrial uses. About the name amount, possibly more, wanby industry in tbe rest of tbe world, excluding the USSR. orld production of about0 millionherefore, perhaps one-quarter went to industrial use.

Since no other information is available, an arbitrary assignmentercent of Soviet production is assumed to have gone into other than monetary uses. As compared with world consumption, this is very conservative.

Z. Clandestine Purponcs.'

The USSR is believed to amufffle eold mtocountries for clandestine purposes.

3. Economic Warfare.

II has often been sugRCGted that the USSR may orgold on thc world market for economic reasons. Usuallyribed d srupting Western finan. ial planing

although at bc.it the purported aim is somewhat obscure.

TQflSEQRE'r'

The closest approximation lo "dumping" of Soviet gold was the placing on the market7 of0 million in golderiodew months. There is no question but that at that time the gold market waa disrupted, but the stabiliration funds and gold sterilisation policies of thc Western countries quite adequately took care ol the situation.

There ia no indication that thc USSR ever intended to UBe its gold reserveseapon of economic warfare. Discussions in Soviet literature show that the USSR is primarily interested inigh price for its hard-won gold reserves. Ono Soviet economist says

As concerns the sale of^Jbld as an export commodity oreans of balancingsuch use of gold by the Soviet Union may bc undesirable in those cases where thc official price of gold in the tspitalist countries is considerably below ita actual value, aa was the case following World War II.

It appears, quite doubtful that the USSR would attempt to demoralize the Western economy by driving the price of gold down by means of "dumping" in view of (a) its limited gold stocks, fb) the ability of Western countries to insulate themselves from the effect of gold sales. And (c) theSoviet desire to raise gold prices.

4. As Backing for the Ruble.

The Soviet government taken great pride in pointing out the backing of the "hard" ruble by gold. Several Soviet economists have claimed that the ruble is thc only hard currenc

It is well known (hat only gold canthe role of an internationallacing thc rubleold basis means that the ruble is the only currency in tne worldard, gold.

- lil

This claim is in accord with thc Soviet propaganda line thai theis predestined (or the role of "the" international currencyother currencies should be linked (as arc moat SatelliteSoviet government, however, neither standsgold abroad for thc ruble nor does it provide for thegoldixed price. There is also reason to doubt thatpercent backing of gold, other preciousforeign currency for the ruble ia followed. Actuallyanaged currency on an inconvertible paper standard..purported relationship lo gold ia of little lntoreet for thethis report.

of the Industry.

Russian Empire was the leading producer of.gold in the world during the first half ofh century. Then came discoveries in Australia. North America, and South Africa which put these areas ahead of Russia. On the eve of Worldbe Russian gold industry consistedarge number o( small enterprises working the placer deposits throughout tbe Empire, mostly by primitive hand methods.3 theregold-mining establishments, andwasillionillion ounces. Annul the only currently important placer areas not contributing to this output were Yakutsk (Aldan) and Kolyma, Only the relatively rich deposits, however, were worked. The average gold content of ore worked8 wasunce por metric ton, * with aboutercent of the output corning from placer workings. The average recovery of gold in US placer mining isunce per ton.

Worldid not affect the gold industry to any majortho Revolution In the ensuing Civil War, however,virtually disintegrated. During the period ofhe Soviet government attempted touse of money. Gold-mining enterprises were dismantled inuse the equipment in otherro-

duction dropped1 toercent of lhe prewar level, or to leesuncp^cr year.

* Tonnagesiven in metric tons throughout this report.

11-

During this period o( low gold production (he gold reservesfrom Ihe Tsarist government were, expended in order loimports. Meanwhile, thc Soviet government had failed intoabor unit of accountonetaryaccount, with the result that it was threatened by totalbecause of Inflation. The introduction of tbe New(NKP) placed the whole question of goldifferent Tbe Ninth All-Russian Congress of Soviets, held lateinstructed tbe People's Commissariat of Finance to assumeofound monetary system of currency on areserves were thus needed both to conducl foreign

trade and to support the new currency.

Thc Soviet government immediately tod&ttcp's to reviveA decree of1 extended to all citizensto prospect fordecree was followed hy others

encouraging gold production, including ono ofold enterprises, both state- and privately owned,allnumber of state-operated trusts and many

privately owned enterprises were established during the period of the NEP. (For the administrative structure and key personnel of the gold industry in the USSR at present, see

The measures of the NKP for encouraging gold production yielded only relatively minor results. roduction was still less than one-half thw prewar peak ofillion toillion ounces. At this point. Stalin appears to haveirect interest in goldew All-Union.trust* brought the previously decentralized gold industry, as well as Ihe platinum industry, under central control. The head of thtu new organization. A. Serebrovnkiy, testified "that many conferences on gold were held in the office of Comrade Stalin. "

The name of thin organization has changed severalutand most often has been Glavzololo (GlavnoyePlatinovoy Promyshlciutostihief Directorate o( ihePlatinum Industry*. This namr for the trust is usedthc organisation of Glavzololo in arr

Appendix H |

-

Screbppear* to have been under lhe directi i. ionuntil when Ordrhonikidxe. the Chief of the SupremeoiEconomy, took over the general supervision ol the

gold industry.

The Firat Five Yoaraid the basis for an expansion of tbe gold industry above the prewar levels, although production did not exceed the prewar level2 The first step was to import productionechnical skill, machinery, andwhich wore not available in the USSR. Serebrovskiy himself visited all ibe principal US g legions and was very out -spoken in his admiration for US technology. He reportsreat deal of equipment through tbe Amtorg Trading Corporation. Much of this equipment was later copied aad,he USSR.

While in Alaska. Serebrovskiy hired John D, Llttlepage, an out-atandlng US gold-mining eoglneer. Littlepage arrived in Moscow

8 and stayedigh-level cocsultant to Serebrovskiyhen the latter was purged. At one time ia thes

tbere were as manyS ironing engineers and technicians

working in the USSR

As indicated by Stalin's direct interest, the gold industry in this period appears lo haveery high priority. riority was quite rationalonsiderable amount of gold was needed to help pay for essential imports under the First Five Year Plan. The effect of the depression upon the prices of other Soviet export commodities only reinforced the need for gold Thea rticularly that of the'US dollar in4 lsoactor in increasing the purchasing power of goldime when the prices of the USSR's traditional exportc were depressed.

The need loto guarantee to the USSR the ability to

purchase .ihtoad in cace of wa> became an additional factor 1st The fold induc.Uy wit. theiclore. m ie (it iodr IIke an inipiiIihni nm toiven'i -'I"'* iummhl' Hi.it .'ii.ilinpon,ni

an impetus lor tho maug colonization ol Siberia. Serebrovakiy reports discussions with Stalin in which thc latter emphasized tho role of the California gold discovery in the general development of the western part of the US. "

Large sums were poured into the industry to developbut specific data on the amounts are lacking. It hasonly that "duringmmenocmoney and energy bad been poured into tho industry." /of this investment is that for the first time the USSR beganunderground gold depositsarge scale. Lode goldfor onlyercent of gold production inthe first Five Yearumber of important golo minesUrals, Kazakhstan, and the TransbaykaPrTame intogold constitutedercent of gold production during theYearnd was planned to reachercent ofby the end of the Third Five Year Plan.

stantial investment would bc necessary to obtain these resuiis as well as lo mechanize part of thc placer operations.

The result of this large expenditure of investment funds isby ihe USSR in terms of an increase in the percent of goldobtained by mechanized operations fromercent3 percent5 lannedercent thowever, what the USSR meant by statements olA. Bochkov, Vice-Minister of the Ministry ofstated that placer mining was very backward and thatpercent of placer output was produced by means ofthin bauis, at leastercent of the total output

of gold0 was produced by manual labor. Anothertated that the future of the gold industry largely dependedmachine-buildingdegree of mechanization in

the Soviet gold industry is. therefore, quite certain.

Although increased production in thes was largely owing IO Investment in new underground mines, the Increase tn theb waa largely owjnj; to placer mining. Pari of thin increase wan the result of the success ol ihe USSR Inarge influx of

ot private prospectors into the gold industry. Thc restthe result ol the operation ol Dal'stroy, an MVD organization set up2 to exploit the mineral resources of northeastern Siberia with slave labor.

The position of the privato prospectors had become ambiguous with the end ol tho NEP On the one hand, they occupied somewhat the same plnce in industry as the individual farmers in agriculture. They were thus ideologically suspect. Many local officials were hostile toward this "capitalistic method of mining. On the other hand, the Soviet government relied on these men for almost one-half of Soviet gold production andumber of concessions to them duringeriod.

Because of this ambiguous position, production by individualremained stationary in tbe period0 In3 an ordar from the Commissar of Heavy Industry called for the abolition of the uniform pay scale and in its place tbe establishment of premiums and special rewards to prospectors. This and previous concessions ledarge increase in gold productionn increase ofercent as compared with an increase ofercent in theenterprises.

4 the Soviet government took the final steps necessary for stimulating the output of gold by individual prospectors. aw of4 rovided the following:

The enterprise should supply housing and communal services to the prospectors and furnish consumer goods at prices and Inestablished for the workers of the enterprise.

The earnings of individual prospectors should be exempt from all state and local taxation.

The holdings of prospectors should be exempt from thela* and from labor and cartage liability ol any kind.

ln the event (he prospectorich vein, he shouldonus and be granted the right to work it before it is turned over to the enterprise

All workers ol gold enterprises may prospect in their spare

ic.

At thearty Congressl was made clear ih.it private prospectors were noi to be denied their rights by hostile official*. One of the delegates illustrated this by the following example:

In ourertain queer fellow made himself conspicuousartyho advanced the "theory" that we want only socialist gold but not the "capitalist" gold produced by individual proipecting. We immediately gave such "leftist"ap on the knuckles.

V thc expansion of the gold industry wan interruptedidespread purge and chargen of "wrecking" activities. Hundreds of arrests were made throughout the industry. Part oi these "wrecking" activities may have represented resistance of workers to the Stakhanoviie movement. Special brigades of workers from Clavcoloto were sent lo the various districts in the third quarter7 to help restore labor discipline.

One resultr possibly one cause of trouble inew policy toward private prospectors. In earlystated that some of the private prospectors wouldover by Stain trusts and that the rent would be betterorder lo make proper socialist enterprises out of

production declined in8

Innew head ol Clavcoloto. described this

olicy as follows:

They tried to disorganize gold production hy pros Instead of rendcrtnr, or|;Jnirational.lid lo [iroujii- ' .inrf uinle.nl of iIivihj; .ini! working condi li mm, these eiirmn'iipeople hroujdii .ihoul tlir onnalinn ofIexiiloilcd byated .ill

'mi|iii liim.

I'.

In0 the former privileges and rights ol privatewero reaffirmed and new privileges granted, such as credits lor building homes and for various types of work preparatory to mining. The prizes for the discovery of new deposits now ranged upubles. These steps ledarge influx of private prospectors into the Industryarge increase In their production. In. trust managers were instructed to devote as much attention to providing the necessary conditionsurther increase in production bydiggers as to the work of state enterprises. Among thesewaa mechanization of the arteln in order to increase their size and make them more efficient.

The shifting policy of the Soviet government toward privatewas thusmajor factor in determining the level of goldins. The large investment "program and the increase in lode miningecond factor. Tho third factor wan the discovery of extremely rich deposits in thc Kolyma River Basin of northeastern Siberia and the exploitation of this area by Dal'stroy.

Numerous reports hav* been received that tbe Kolyma placer gold deposite'-are the richest ones in the USSR. These deposits aro located loo near thc Arctic Circle and too far from settled areas to attract free labor. From the beginning, accordingly, mining in this area has depended upon slave labor. Mining processes consisted largely of thc working of alluvial deposits by means of hand laborinimum of equipment. In spite of the primitive working and living conditions, large quantities of gold were being produced here by then. This fact, however, wan not widely known, since the operation was controlled by tho MVD.

*.

Utile is known about the wartime activities of the Soviet gold industry except that it was not shut down as wan gold mining in many other parts of the world. It is believed, however, that part of the Dal'stroy gold-mining labor force was transferred to construction and other types of -: ng. Similarly, some of CI'Vsoloto's moat important mines are reported to have been closed.

Since Worldtho Soviet gold industrycvci lo have regained ita prewar level ol production. Thin may bc one reaoon (or the virtually complete blackout on information about ihe gold There have been no announcements of great successes or even of increases in output over thc previous year. The production part of this report estimates that annual Soviet gold production ia currently less than one hall0 level.

Production.

A. Pre-World War jj.

I. USSRhole.

Thc USSR ban released no official statistics on itsin terms of quantityhen it began to putinto thc gold industry. Production in thismade hy Various authorities for

years7 have been based largely on data which give tbe percentage of changes in production from previous years, as released periodically by Soviet sources, ln addition, generalindicating the approximate size of Soviet gold production have boon made from time to time by Soviet authorities.

Reliance upon percentage data as the basis forSoviet gold production led to discrepancies among estimates from the beginning, because the percentages were continually revised as laier information became available to the Soviet authorities-Thus conflicting percentages were always available to trap the unwary researcher. In addition, neither the coverage of these statistics nor the abiolutc bane on which the percentage changes were calculated was precisely known. The data thusertain latitude for inte rpt et.ition

A study ol the major pre-World War II sail mates indicates that tli-ir duel limitationeneral failure lo include production by Dal'alroy. The percentilepon which them' (ii.tiioaier. were based appear to have only .overod production by GlavaolcMu (Onef Dire.olold aivl II all mini Industry) QbjiIm oftem stair

lb

spoke specifically o( "production ol the enterprises oiowever, Ov? existence fromn of another gold producer. Dal'stroy, was known to very few foreigners.

The study of pre-World War II estimates (see Appendix C) indicates that the most reliable ones appear lo bo those by the US Foreign Service; the American Legation at Riga; Latvia,he-yearsnd tbe American Embassy at Moscow9stimates of the Bureau of Mines, the Federal Reserve Board, and the Bureau of the Mint are based primarily on the Riga studies.

According to these studies, the major increase inproduction took place in thc3 Theremajor reasons for this increase. The gold productionbeen extended well into the fall by an order ofugustproduction in the fourth quarter of the year had Newly discovered gold districts were starting toprodection. (For production oi gold in the USSR, by, seearticular, newlode mines had come into operation In the Urals,the Transbaykal. Tbe gold Industry was becoming According to Serebrovskiy, tbe amount of goldproduced had increased fromercento 70 The labor force, and particularly the individual-

prospector section, had increased greatly, from0urges stopped this rapid increase

in gold production.

8 anear plan for2 production was to be increasedbove that ofproduction appearsdeclined inO US Foreign Servicea decline in production in these years were confirmedfficial organ of Glavzoloto.

-

Inlavzoloto was divided into Chief Directorates of the Eastern and. the Wculern Gold Industrie*. statements indicate thai thc easternhere .most of the artels were located, fulfilled their plan for the firstonths of

thc production ofgold in the western uiniricts is reported to havend plans were fulfilled by many mines beforeof thc year.

Production continued to lag during the first quarter In April, Glavzololo was again reorganized, becoming oncenified chief directorate. Wages were increased, prizes were offered for the discovery of new deposits, and the privileges of private proopecturo were reaffirmed antToSctcnded, ' Production, particularly in the private sector, recovered remarkaoiy. By October

number of prospectors wasercont higher than inand their production8 percent above that of ' The prospector plan was completely fulfilledho industry plan, byecember "for the first timeong

period." ' Glavzololo production0 ie estimated to have been

iuion ounces above that

The immediate future of the Soviet gold industryat the end0 looked very promising. For thc firstreserves sufficient for operation of the industryear hadfor extraction, The volume of prepared ores availablewasercent larger than at thc end Overewhad been discovered into the head of the

Chief Directorate of the Western Gold industry, the total gold reaerves of the USSR were the largest in thc world, arid their industry merely awaited adequate development of the reserves and greater .' The high priority given thia development is indicated by the fact tnatercent of all thc funds being expended for prospecting by lhe Mini-'lfry ofMetallurgy0 were allocated to gold, in contrast to5 percent for critically scarce tin.

! I'

Kfetiinatcd pi"lion ol gold in ihc USSUhi Table 2. These estimates (except fo: Dal'olroyt areuponorcign Service studios. Byproduct goldshown separately on the bnais ol ah estimate hy US mininghad worked In ihc chief Soviet copper, lead, and zmc mines. that aboutrama o( byproduct gold ia recovered (orol refined copper produced and aboutrama for each toozinc andproduction from Dal'atroy ia estimated

in the following section aod added to gold production from Glavzoloto in order to give total Soviet gold production. Gold production Irom Glavzoloto ia believed to be accurateange of error ol plun or minusercent and Irom Dal'stroy. within plusercent ur minusercent. Total gold production in thus accurateange of error of ahout plu6ercent ur minus

Confirmation within Ihc estimated range of error offigures78 is provided byoviet gold-bar study which indicates that gold refinedyears amounted to aboutillion ounces7 and8 million ounces inrefined, of course, might

include other than current gold proauctioo. Gold ornaments, for example, might have been melted down. Gold imports also might have been refined. There were, however, no known gold imports with the possible exception of Spanish gold. Finally, there wouldap between production and refining, and there is no assurance that the amount refined from new production in any year would correspond with thc amount produced.

1 here in considerable cvjdcn portion of the gold produced in the USSR di has come Irom the Kolyma region in north evidence indicates rather conclusively ih.il rapidly built uparge ulaw-labor forte t

2. Dal'atroy.

e to indicate thatmajor ring the last re,no intern Siberia. Thinl'Htiny exploit<

Tiblc 2

Estimated Production of Gold in the USSR

Thousand Troy Ounces

GUvsoloto

Year

and Placer

100

300

400

600

.

700

900

300

'

500

200

400

200

800

200

500

900

000

900

000

200

800

200

production

c/

data have been rounded to two significant figures.

in lode and placer.

erillion.

example, estimates0 rangelthough this range cm be narrowed substantially, there in no oaitsfaelnryalculating gold production from

VI

Dal'stroyonsiderable possible margin of error. ives various estimates of gold production from Dal'stroy. The only official statement as to the aire of gold production from Dal'stroy is an article entitled "The Kolyma Gold Field" in Pravda, This article states that "during theears the minera of theave succeeded each year in doubling the amount of gold recovered. " However, this statement covers only the initial period of Dal'stroy operations.

There are, however, some statements by Serebrovskiy on Soviet gold production which appear toarge Dal'stroy 5 he stated at different times that

Russia ineach first place in

is possible for us to take first place

shall fulfill thc promise given to Stalin and

Ordzhonikidze to take first place"

quadruple production"

"We shall exceed the production of England in

These arc the type of statements that might bc madeich, new area were just coming into large-scale production but had not yet been adequately explored. Dal'stroy bad not started operationsnd only rough estimates of its resources could have been available Even current-year plans must have been regarded as very tentative. (It might bc mentioned that South African gold production had amounted'fTmillion ounces. /) Production from Dal'stroy ofillion ounces per year ia tne only known possible explanation of the above statements, unless it ia assumed that they were lies. Too much is known about Glavzoloto to allow an error of more than plus or minusercent, orunces, in estimating its production.

In Sercbrovskiy told the foreign editor of nuB^ncas Wgok6roduction had6 million ounces and7 planned output wasillion ounces. Again production from Dal'Mroyof almas!million imms implied.

Estimated production of gold from Dal'stroys given in This table lists the more authoritativeof Dal'stroy production. The engineer and geologists are Soviet defectors: two of them formerly free workcro in the area, ami the third had important friends there. Pctrovormer slave laborer' in the area. Zamorski relied upon reportsumber of former slave laborers. Chellson based his estimates upon conversations with Little page, who is believed to have visited Kolyma. Another estimate, thatllin and Nicolaevsky, ppears to be baaed on the mine material as Zamorski's. Ofources,upport an estimateillion ounces or more.

Zamorski and the engineer defectoraximum prewar labor forcengaged dirc?tly in gold mining and an over-all total. Petrovaximum. respectively. Thc estimated labor force for Glavzololo in the same period ia. Although this Glavzololo figure includes nonproductive workers, possibly one-third of theomparison between the labor forces of Dal'stroy and Glavzololo would indicate gold production from Dal'stroy to be less than that from Glavzoloto.

On the other hand.ndependent reports on thelhe ores worked in the Kolyma areainimum richncusgrams per cubic meterichnessrams orcubic meter in some rather largeis to be

comparedichness of aboutram per cubic meter which can be profitably worked in the USSR without lhe use of dredges It is reporled thai in thc Kolyma area "the gold in plundered, only the ore with thc highest gold content being washed and the rest being / Under these conditions, gold production from Dal'stroy might well have beenillionas implied hj Serebrovskij statement*

I) is therefore concluded that gold production from Dal'stroy reachedillion ouncesnd. in the ahsenre of convincing evidence to the contrary, stayed at that level until the war. Gold production from Dal'stroy for previous years is based upon thc Pravda statoment that production had doubled each year

3. Pre-Worldy District.

Virtually all Soviet gold production has come from the Asiatic sector. Ins tho Lena placer gold fields in eastern Siberia were the main producing district In the USSR. Much of the remaining production has come from other eastern Siberian placers.

2 the Yakutskransbaykal, Western Siberia. Amur, and Yenisey districts had all surpassed Lena, with Aldap the largest producer area in the USSR. In addition, thc Kazakh, Allay, Primor'ye, and Ural districts were rapidly increasing output.

2 the rate of increase in production from Aldan slowed down, and the Transbaykal arcs became Ihe maul important. Meanwhile, however, the Baley and Darasun mines had been separated from the Transbaykal Gold Trusteaving tbe Yakutsk Gold Trust (Yakutxoloto) as the largest single producer among Soviet gold trusts, Eastern Siberia still produced over one -half ol the total, but thc new lode mines in the Transbaykal area had become almost as important as the placer districts.

Estimated Soviet production of gold, by district, for selected years.. iaFor greater detail. Sec Appendix D. )

No information Is available for the period8 which wouldasis lor calculating the share of individual districts in total production. Some idea of the future ol various districts, however, in given hy the Third Five Year. Thin Plan called [or the following now mines tu produce

Tabic 4

Estimated Production of Gold in the USSR, by District Selected

Percent Total Output

'in

a/

7

b/

7

b/

c/

2

Siberia d/

1

7

including Upper Amor

*"

1

1

Barguzin. .Baley, and Daraaun districts.

from Transbaykal

Miass. Kochkar. Bash. Dzhetygar. andmall districte.

Siberia. Khakass, and Minusa.districts.

ercent of thc total Soviet gold productions shown below:

ezovsk Maykain Kommunar Zmeinogor iik

Uralzoloto Kazr.olotopslbzoloto

I -

In addition, the Haley, Darasun. Miaas, and Dr.hetygar mine* were scheduled to douhle their outputnd two new major placer areas, one under the Lena Gold Trust (Lcnzoloto) and the oilier under lhe Dahugdshur Gold Trust (Dzhugdxhurxololo ew trual in easternore scheduled to come into operation. Underground lode-gold production waa to amount toercent of total production2 as compared with

B. Worldnd Post-World

1. Glavxoloto.

a.

There is insufficient evidence toalid judgment an io the 6iae of Soviet gold production.

laterial is availableowever, uponZbe estimates of the labor force and labor payments of Glavxoloto These estimates can, in turn, be used as the basis for estimates of production by the gold industry. (It should be remembered that Glavxolot" also controls thc much less imnortar platinum industry.

Labor and wage limit allowances are available for ZO of theold trusln known to exist* Based on these authorisations from the Chief Directorate of the Gold and Platinum Industry to the trusts,9 labor force in "basic activity" in estimated lo have been. and wages to have beenillion rubles. Labor in "basic activity" includes both indusiria and noniridunl rial workers on the payrollold trust.

Thewage paymenlb to the labor force

for "baaic activity" ran be used to estimate the ruble value nlof gold and platinum by calculatinc; thc ratio betweennd value of production In1 St-ite Plan of the USSR, wages amounted to aboutercent of the value of production Joe tin-

for the Yakutsk Gold Trusi unainvym

Trust The Dzhugdzhur Gold Trust is believed to bc leas mechanir.ed than the Yakutsk Gold Trust, which may account for its higher wage component. Both of these trusts, however, mineplacet deposits, so that thc wage component of their coils probably would bc higher than in underground mining, where the USSK uses considerably more machinery. Assuming tbe over-all wageto beercent, gold and platinum-production by Glavzoloto amounted toillion rubles

The value of platinum output has to be deductedtotal to obtain the value of gold output, Platinum production inis estimated to have0 ounces / Mostvas produced in thc Ural placer mines, where operatingare far superior to those in nastero Siberian gold placers. World War II, virtually all Soviet platinum was produced withdredges. ,' It is probable, therefore, that productionbc more in line with coats of other nonferroun mct-ils thancostn. The unweighted average ruble-dollar price ratio formosl important nonferrous metals (cupper, lead, zinc,asubles to thea world

price ofervalue of Soviet platinum production

an be estimated to liave been0 million ruble a,7 billion rubles as the value of gold production.

If the industry price* for gold were known, gold output by Glavzoloto could be easily calculated from the above esti-male ol value of output. Although the industryn.it available.

" Industry price, as used in this report, is equivalent to the average

cost of production in Glavzoloto. Inprocurement prit cs app.-ar lo be paid to individual produetion trusts on the: basis of their( nits.

considerable information is available on prices and unit costs in the gold industry. In the first place, two prices paid by the Ministry of Finance to thc individual gold-producing trusts

Second, thc ratiov_ ' Third, there is reliable information

on unitin tne 9 unit costs can be--estimatcd on

the aBBumption that costs in the gold industry increased over this period by about the same Amount as costs in other nonferrous industries.

The twoa price

ubles per gram of fine gold or tho North Caucasus Cold Trust (Scvkavzoloto)rice8 rubles for the Zabaykal Gold Prospecting Trust. ' Both of these prices art asAt thie time, the ofiicial valueram of fine gold in the USSR3 rubles. The difference between Ministry of Financepricee and the official valueram of fine gold can beto represent an indirect subsidy to the gold enterprises.

the-value of

Soviet'production oi goia and platinum in9ndicates that prices of these metaluimes during that period. This is to bo compared with an increase in price of other tems of gross production such an lumber and power of only aboutimes during the same period.

lanning price lor gold ol9 rubles per gram, the official exchange rate at that time,9 industry price wouldubles per gram.

Information67 costs in the Soviet gold industry has been supplied by US mining engineers who worked in the USSR Little page reports that the average cost of productionubles per gram of (me goldubles in thes. andubles. / August Chopp states that the price of gold in7u rubles per gram and thai this price represented the average cunt of production. / Chopp's statement wii made7 and for this reason may be more exact than Littlepago's postwar testimony. Another possibility is that the; difference in *an estimateditlepage and Chopp may be owing tolanned tutu in tiiMi,6 and

Internal pricea of nonferrouo metalsimec6 rice reform brought costs and prices- in line. (World privec of most nonferrous metals, with the notable exception of gold, more than doubled in thef coots in the gold industry had followed those in other Soviet non-ferrous industries, the average cost9 would have beenbetweenndubles per gram. *

Other indications of the cost of gold arc provided by report and the current retail price of gold-In the USSR.

reports that the cost of mining goiois auoulubles per gram. Gold is currently soMS-at retail iu Soviet Jewelry stores atubles per gram of gold ofineness, or aboutubles per gram of fine gold.

The above material suggests that thc averagegold in thc USSR9 was somewhere betweennd 60 The osl" indicator out of line with this range ofisfor Ihe Scvkavzoloto Goldt would

would appear, tnereiotthat tbis*trust iselatively high-cost producer*- ricendubles, gold production from Glavsoloto can be estimated to have been between0 million and i. HO million ounces

indicationLn the gold industry is give

the months of Mart1*,

Mdv4 from the Yakutzoloto Gold Trust.

Ine lowest

COSI ligureubles per gram, and the average is ah.

i cram. It should bcd thai the unit cost*

re for early months in the year, when unit costsncccsw-nly be high. The *akutxoloto Gold Trust mines mostly placer deposits under sub-Arctic conditions, so that most of its production is in the warmer months.

A price of fromoubles per gram of fine gold ie the equivalentuble-dollar ratio of from3 rubles to the US dollar. This compares with the following ruble-dollar ratios for selected nonferrous metals as0

.9 investment is estimated to have been jou miUion Amounting as it does to less thanercent of estimated production, this level of investment is not particularly high.lanned investment in the nonferrmrs metallurgical industry amounted to aboutercent of planned production.

b. World War II.

is known about the wartime activities of the

gold industry. Production in the first half1illion ounces, assuming that it continued athe outbreak of hostilities .tie USSR did not shut downmining as did the US. The Soviet gold industry,bound to suffer from the induction of miners into theand other dislocations resulting from .World War II. umber of reports that particular gold minesduring thc war. For example, it is reported that thcand most of the Berezov Bhafts were

probably are the most important and the highest grade lode gold mines in the USSR.

The production of lode gold requires practically lhe same type of resources as any other underground mining. the closing of lode mines like Baley wouldatural steprogram to convert the mining industry to the production of minerals necessary to fighi thc war. Although Henry Wallace

See Appendix G.

32

was told onisit to Dal'stroy that gold miningpreferred industry." l is difficult to believe that strategic war materials would not have had preference over gold. f course, may merely have meant that the industry was allowed to operate during the war.)

The USSR, in fact, had good reason not to waste its manpower and machinery on gold production during the war. Its imports consisted almost entirelynd-Lease goods. The limit to these deliveries was set by the capacity of the Allied convoys and the capacity nf the transport facilities through Iran. Had thc USSR attempted to buy large amounts of other imports, the total quantity of goods reaching her could not have been increased. Goldaccordingly, could serve no purpose in-fighting the war.

c. Other Post-Worldears.

It is only possible to speculate as to the size of Soviet gold output in thc postwar years On the one hand, the industry suffered little physical damage, as most of itB plants are located east of thc areas which were overrun by the Germans. Unskilled labor should have been comparatively plentiful, with prisoners of war available in large numbers. Byccording to Tass,illion prisoners of war bad been returned. / On tbe other hand, there were several reasons why production may probably have been lower in the early postwar years.

One reason was thc general economicthe USSRar in which much of the country had beenand much of the labor force mobilised in the armeddislocation is evident as latehen laborstill below prewar levels in both the Baley and Daraaun he only trusts for which such information isto mining leaders, "some of the causes for this laginsufficient improvement of output of workers, large Iobstime from utilizing unskilled personnel on newinuuificii-iit mechanization of labor-consuming

- li

Still another reason why Soviet gold production may have been lower in the years immediately following World War II ia the fact that proved reserves probably were exhausted during the war. During the war the emphasis was'upon exploiting known resources, and geologists were put either in the army or on production.

It can thus be concluded that Soviet gold production in the early postwar years was less9 production. Someof thia conclusion is providedoviet announcement in

hat tbe Lena Cold Trust, ths largest at that time, would double

production by

Only general indications available on the trend in Soviet gold production Significant factors in studying thia trend aro labor force, investment, availability-.and richness of reserves, and Soviet government policy.

Aa far as labor force is concerned, there is,the gold industryigh priority. In0 theof Ministers forbade mobilization of workers in the goldis evidence that this prohibition was not lifted until lthough the coal and metallurgical industriessimilar exemptionshe nonferrous1 waa able to obtain exemptions for only certain categorieshigh priority for gold, however, might be owing to

a severe labor shortage in the gold industry, as it had depended heavily upon prisoners of war9atherecision that gold "should have higher priority than other nonferrous metals.

Nevertheless, thc size of the labor force of the Soviet gold industry appears to have been stationary or to have declined between

he amnesty ofrobable reason for decline, since considerable slave labor is used in the gold industry.

At least one gold trust. Dzhugdzhur. was denied slave labor by the MVD

* Sec Appendix F. " Many slave laborers, generally criminals rather than1 nerii. were released at this lime

4 and instructed to recruit localis believed that,

among goldzhugdshur wouldelatively high priority in obtaining slave labor because of its locationemote area in eastern Siberia and because of its reliance upon unskilled labor. Accordingly, denial of such labor to Dzhugdzhur would appear to be an indication that the gold industry, aa might be expected, waa afiectcd by the amnesty.

As far as investment-is concerned.4 Soviet investment is estimated to have been aboutercent higher in eon-constant pricea than9o: estimate for the years between is possible, although it is knownumber of dredges and plants were built. Still, without knowledge of the site of such units, no judgment as to the size of the investment program in these years ia possible. Dredges, for example, may coat as littleubles, r they may cost moreiUion rubles.

The only information pertinent to the availability of deposits is provided by estimates of prospecting by Glavzoloto. Tbeae estimatesore than fourfold increase in gold prospecting9* This increase, however, is difficult to interpret, as it might represent increased difficulty in locating gold roserves. or, on thc other hand, it might be evidence of an expanded scale of activity in tbe industry. There are, however, indications that particular gold trusts, including tha largest, Lena, had run into difficulties because the richer deposits had been at least temporarily exhausted and new reserves had to be discovered. Littlepajje, who was Deputy Chief Engineer of Glavzolotoas estimated that depletion of Soviet gold reserves would start ' There is, however, no basis for concluding that the over-all availability and richness of reaerves declined9a increased prospecting may have offset any tendency to decline.

Appendix G

Appendix H.

- >5

The policy of the Soviet government toward goldin the postwar years is discussed ia C. below, in goneral, it ia concluded that because of the present fixed world price of gold, the sine of the Soviet reserves of gold bars and coins, thc present lcvol of gold output, and the high-cost nature of many of the mines, the Sovietcannot be expected to give any priority to gold mining. These factors are pertinent9 as wello that there is no obvious reason why the Soviet government should have changed its policy toward gold-mining

It thus appears impossible to determine what the trend in gold production by the enterprises under Glavzoloto has been Labor and investment inputshavx moved in opposite directions. The policy of tbe government may have remained the same. Nothing is known about changes in the availability and richness of reserves. The net effect of these factors upon production is impossible to estimate.

2. Dal'stroy.

There la no evidence that World Warorced any.r'e-duction in the over-all size of Dal'stroy. There docs appear,o haveubstantial diversion of .resources out of gold mining into tin mining and construction. ormer slave laborer in the area reports that aboutercent of tbe prisoners were sent to tin mines and road-building projects after the outbreak of the war. He estimates2 gold productionrercent of his estimate of peak production. nother defector reports that Dal'stroy began to construct military installations In thc Chukotsk Peninsula1 and5 wasrisoners on this job. ' Extensive military installations are known to exist in thc Dal'stroy area.

In thc postwar years. Dal'stroy became morein its mining efforts. Tungsten, cobalt, and uraniumproducts, with tho mining of uranium having priorityrelative priorityl'slroy'u other

activities is posstoiy indicated by thc fact thatubsidy 'com

-

the state budget was paid on tin. cobalt, and tungsten production. The failure toubsidy on gold production might be owing to tbe relative richness of thc gold deposits compared with the richness of the deposits of other minerals, even though all the minerals areunder the same unfavorable Arctic conditions. It might alsoower priority for gold.

The over-all importance of Dal'stroy is indicatedgovernment decree of5 which otates that "ordersmust in, aJl circumstances be supplied in full.

are also severaltbe high priority given to

supplies for Dal'stroy.

The slave labor force of Dal'stroy isroportion cngagedTln gold production, or for

that matter In mining, is not known. onsiderable portion, however, must be engaged in construction, agriculture, fishing, processing of food, transportation, and other activities. In addition to forced labor; the metallurgical industry in the arearee workers in the last quarter /ough idea of the size of that part of the mining labor force which is engaged in production of gold is given by the ratio between the value of gold production and tho total value of mineral production. It was estimated3 that Dal'stroy received direct payments ofillion rublcB for its gold productionillion for its total mineral production. These, estimates are very rough and are based on scattered payments data. In addition to direct payments for its products. Dal'stroy receives subsidies on its tin. tungsten, and cobalt production. These subsidies can be estimatedillion baaed on the1 subsidy rate nd the estimated value of tin, tungsten, and cobalt production. Dal'stroy would thus have received slightlyillion rubles for its mineral production. The labor force engaged inof gold might, accordingly, be expected to bc about one-third of the labor force of Dal'stroy engaged in mining. Assuming that one-half of the slave labor force of Dal'stroy were employed in mining, the labor force engaged in production of gold would amount toorkers, both direct and indirect. This in to be compared with anorkers in the prewar period.

- 17

Although Dal'stroy has received large investment funds in the postwar years, most of these arc believed to be forother than gold mining. Nevertheless, it appears that2 mechanization of the various gold operations was beingoviet broadcast about the Northern Mining Directorate, angold producer, stated that2 twice as much miningwould be in uoe ae nother broadcast about the Northern Mining Directorate indicated that new implements had increased labor productivity byercent91 and lowered the cost of sand-washing byercent. his broadcast further stated that electric drills had lowered the cost of digging byubles per cubic raster of gravel and that the number of drilling machines would be doubled This one development alone would lower gold production costs by about"?rubles per gram,rams per cubic meter.

Nothing Is known about changes in the averageof the ores that have been worked. Itfhay be remembered that the e'xtremely high degree of richness of the ore and the wasteful mining operations which exploited only thc richest ore. rather than labor force or equipment, were the main reasons for tbe highproduction. It appears that gold mining is concentrated in the same areas as in thc period before Worldnd that the new mining areas in the Kolyma region are being largely exploited for other minerals. It is reasonable to assume that the average-richness of ore has declined because such huge quantities of gold were laknn outather limiteda fact, the richness may have declined In thclone. Dal'stroy is estimated to have mined au much gold as lias been mined in Alaska from the earliest record to thc present, an area with similar geological and climatic conditions /

The above estimate of thc value of thc goldfrom Dal'stroy was based upon payments made bvto Oal'stro-

Under the Ministry ol Finance.

- 18

an averageillion rubles would appear to be reasonably accurate for the years.

Tbe price paid to Dal'stroy for its gold production is not known. If it were the same as the industry price, which is estimated to have been betweenndubles per gram, gold production could lie somewhereunces.arge drop from prewar production would appear to be unlikely, even with the considerable shift of labor force to other mining activities. It seems probable, therefore, that Dal'stroy is not paid as much as the industry price, because most of its labor force is slave labor and paidpminal wage. With wages amounting toercent of the total value.of production in Dshugdzhur, the gold trust most likely DaJJstroy, Dal'stroy's costs njjg_ht be as low asubles per gram, other things being equal. rice ofubles, the gold production of Dal'strov would amount tounces.

I'hese ngures

tnerctorc, bc the planned value and5 price for the gold production of Dal'stroy. The volume of planned gold production indicated by these figures isunces. Thc nature of tbis material, however, is such that conclusions based upon it are necessarily very tentative.*

3. Byproduct.

Byproduct gold has come to play an increasingly important role in Soviet gold production aa the Soviet copper, lead, and zinc industries have expanded. 3 these industries were producing more than twice as much as0 and were expandingaster rate than any other major industry with the exception of aluminum.

* Other estimates of production from Dal'stroy are given bl Appendix E.

-

TO

The methodology (or estimating byproduct gold production has already been explained in theuction (A.nd estimate- (or the years- through ave been included in that section. Soviet byproduct gold products04 is estimated as follows:

Year

Troy Ounces

880

300

500

value of Soviet byproduct gold production4 is thus estimated to have been aboutillion. Tbis amount would have been morn than sufficient to pay for the Soviet merchandise trade deficit with the West3 and would have paid for overercent of total Soviet imports from the West

4. Total World War II and Post-World

The preceding sections on Soviet gold production demonstrate that with thc sources of information available it has been impossible to estimate Soviet gold production year by year0 with any degree of reliability. Estimatesowever, and trends before and9 probahly are reasonable indications of tho general level of production.

-

Thc various estimatesotal9 of possiblyillion ounces. Tbe internalprice of this production is estimated to have beenillion rubles.or0 million at world-prices. If it is concluded that the USSR regards gold primarily as an international currency (and this appears to be the beetucba level would seemwith the level of Soviet gold sales to the West since World War II Even this level of production would have allowed additions to gold reservesime when the USSR was recoveringevastating war.

Soviet byproduct gold production is estimated to have increased byunces9 In tbe absence of any indication of increases in production from Dal'stroy or Glavxoloto, production4 can be estimated to have been aboutillion ounces, or about0 million.

Soviet productionie-estimated to have beeniUion ounces fromunces from byproducts, andiUion ounces from Dal'stroy,otal6 million ounces. With the full impact of World War II. production from Glavxoloto and Dal'atroy might be expected to decline drastically, and production from byproducts to vary with the output of copper, lead,nc.

In the early postwar years, gold production from Glavzoloto is estimated to have increased slowly to9 level. Gold production from Dal'stroy, on the other hand, may have remained fairly constant or decreased as tbe reaull of thc postwar emphasis on uranium and other new strategic ores. Estimated production of gold in thc USSRs given in* These estimates are believed to be accurateange of error of plus or minuoorcent.

* Thin figure ia the result of adding an allowance for byproduct gold production to the ruble valuo of Clayzo'.oto and Dal'stroy production. It'may be roughly estimated that the value ol production in the years immediately9 was somewhat lessillion rubles and in the years9 slightly, if any. greater.ollows on

Table 5

Estimated Production of Gold in the USSR

Thousand Troy Ouncca

Year

500

500

600

_^

500

900

100

400

300

200

500

400

300

400

500

BOO

production

b/

data have been rounded to two significant figures.

er9 hjllion.

5 Past-World War U. by District.

The best available indication of thc share of individual districts in total postwar production is provided by thc relative size of their labor forces The size of the labor force, however.ough indicator of Soviet gold production because the ratio between labor force and produetion varies with thc ievel ofthe richness o( thc ore.and other factors. In Ihe US thc size

of thc labor force would be an excellent measure oi production because production in both lode and placer mined ia mechanized, withS miner produced aboutorth of gold in either placer or lode mines* In the USSR, some trusts arcand others rely primarily on band labor. Tbe Transbaykal Gold Trust, lor example, has 34 'ofredge<

hercas the Oehugazhur Gold Trust,pro-

ocated in eastern Siberia, hasdentified dredges. On

other hand, trusts that primarily mine lode deposits are usually well mechanized.

Labor force figures indicate, subject to thethat the more important trusts rankedfollows in

Position**

A.*

The leading position given to the Lena Goldwas based on thc fact that its labor force9 wasas large.as any other trust's, is confirmed by anthe Soviet Home Serviceowever, there ia

considerable evidence that the Lena Gold Trust was running out of high-grade ore. In February the Lena Gold Trust requested fromdditional geologists, salary increases for its

* Calculated Irom US Bureau of Mines figures on employment and production.

See Appendix D. Nigrizoloto (Nauchno-Issledovatel'skiy Ccolugo-Razvedochnyy Institutlolocientific Research Geologies! Prospecting Institute for Cold)esearch organization under Glavzoluto,

- Ai -

management and technical workers on prospecting, and not lessof the latest drilling machines capable of drilling bores tothan ISOpurpose was to uncover new and

more profitable areas. er it waa reported that, because of the low grade of the deposits being worked and the strenuous prospecting schedule, production goals for the last half0 would have to be lowered. The level of capital investment, meanwhile, waa stepped up considerably, with capital expenditures in the firstontha amountingubles. his is to be compared with an estimated totalillion 0 figure, deflated9 prices and put on an annual basis, is aboutercent higher than The gold industry was thus pouring extensive resources into maintaining the gold production of theuat.

The decline in gold production by the Yakutsk Gold Trust, the largest trust in the prewar period, is confirmed by the fact that the value of its commercial production waa planned to amount toillion rubles ' rice of gold In the USSR has boon estimated previously in this report to have beenndubles per gram. On the basis of these prices, goldfrom tbe Yakutsk Gold Trust would have beenunces. This production is to be compared withunces

The value of commercial production by thc Dzhugdzhur Gold Trust was planned to amountillion rubleshis production, on the basis of the estimated industry price, would be0unces. Prowar production is not known.

r,

Wage figures4 indicate that certain trusts expanded and others contracted in size9 The Ural and Amur Gold Trusts ranked second and third, respectively, while the Dzhugdzhur and Yeniaey Gold Trusts dropped to sixth and ninth positions, respectively.

working primarily on gold but sometimes on other minerals. For more details, see Appendix B. footnote n,elow.

* * Sec Appendix E. See

C. Potential.

umber ol factors are pnrtinont io estimating the /uture of. Soviet gold production. First, and possibly most important in tbe present and foreseeable future, is the current state of the world gold industry. Goats hare been increasing steadily since World, while the legal price has remained fixed at. Although goldonsiderable premium in black markets in the early postwar years, this premium ended3 in the important European markets. umber of countriesanada, Australia, and theold production. Moat countries merely continue to operate those mines in which it is possible to cover current costs and close the rest. In the US the average productivity of labor in gold mining was only about Average productivity in copper mining, on the other hand, was.

Only in tbe Union of South Africa has there been any major new investment, and this has been owingfact that uranium ore is obtainedyproduct. This coincidence of rich gold and uranium ore ona large scale appears to be unique to the Union of South Africa. Gold production outside tbe USSR and tho Union of South Africa dropped from aboutillion ounces0 toillion ounces

The opposite side of this coin is that the purchasing power of gold in world trade has declined as commodity pricea have increased.

A second important factor is the relatively high cost of gold production in thc USSR. Soviet gold mining appears to have been expensive even ins. Little page reported that7 tho average cost of gold production in tho USSR0 rubles per kilogram. ' This gold could be' sold In world markets at thob rate of exchange for onlyubles. An authority on the Soviet economy concluded th* following from this and other facts

Tho continued use of large Russian resources in gold production is not derived from any strict calculus, but

* iom Bureau MIlMI figureon employrnenl ind ji roduet ion.

--

is tbe result of arbitrary decisions basederies of vague notions, ouch as fearepetition of the disastrous decline in terms of trade which was experienced in tbe Great Depression; and the repeatedly professed belief that the capitalist world economy cannot function except on the basis of gold.

Costs in Soviet gold mining probably bave followed the trend in other nonferrous mining industries and more than tripled6 Of course, world prices of most nonferrous metals more than doubled in this same* period, while the price of gold remained fixed. If world prices are takenconsideration, it is not profitable for the USSR to put resources into developing anything but very rich gold deposits. Tho USSR must take world prices into account because it uses gold mainly as an export commodity.

cossibly the main reasons for theature of many of the Soviet gold deposits are their remoteness from industrial and agricultural renters, poor transport facilities, and climate.

Of total requirements ofillion rubles,accounted for ZZ million rubles. For such items asand fuel oil, transportation costs were twice tbeof the material. ther factors leading to high costsubsidies and pay differentials amountingercentto compensate for remote areas. ' For example,the-Arctic Circle are given free food, free housing,no other Soviet industry, with

the possible exception oi uranium mining, operates under such generally disadvantageous conditions.

Another factor influencing costs in Soviet gold mining is the probable depiction of the richest deposits. With the exception ofs, the USSR has been producing atillion ounces of gold per ye.ir Ins, production was greatly increased

Over one-half of the production in1 cam' fromwhich aro usually exhaustedomparativelyol time. It was only natural that the increased outputcome primarily from placer deposits because they areexploited and require little investment as long -in theyenough to be worked by band. The Soviet placer depositsand thc Soviet government did everything it could tocitisens to mine them. In addition, it used hundreda ofslave laborers in gold raining. Statements by officials ofthat the gold content of ores mined dropped0 and that the gold content of sands declined steadilyan unstated

Tbe extent of gold resources remaanlng-in the ground atol this period is not known. In announcing the Thirdoviet source spoke of reserves sufficient toears. ' Ldttlepagc estimated that depletion wouldso did another US citizen who served aa an

advisor toestimates are very inconclusive,

particularly in connection with lode depoaita. because it is difficult to anticipate new discoveries.

A number of other factors arc also pertinent in estimating tbe future of the Soviet gold industry. Thereeed for minera in other mining induatriea. The uranium and nonferrous metal industries, in particular, have been and will continue to be expanded at an extremely rapid rate. At the same time, thc gold reserves of the USSR probably arc about USillion,evelimes the usual annual Soviet imports from the West. Even the US doea not haveavorable ratio between gold reserves and imports. The USSR can no longer look upon this reservear chest, to be used if it were invadedpecific country, because any major war probably would find most of the West aligned against it. Finally, byproduct gold production, probably the lowest cost production, now amounts to aboutillionear and can be expected to continue to increase. This amount of byproduct gold by itself would have sufficed to pay for the Soviet trade deficit in most years. Under these conditions it would appear

- 47

that thc Soviet government would not attempt to expand the goldand mighturther contraction in gold production.

IV, Exports and Reserves.

A. Pre-World War II.

he USSR exportedillion ounces of gold to the West. * At the current price, these exports would bo valued at about6 billion. During this period, gold was tbe chief source of foreign exchange for thc USSR. During the same period the USSR is estimated to have augmented its gold reserves by aboutillion ouncesillion). These reserves wereto have amounted to aboutillion ouncesillion) just after the Revolution Thus Soviet gold reserves at the end0 probably were aboutillion ouncesillion).

1 -

Accordingeport by A. Balkalov. the Bolsheviks inheritedillion ounces2 million) of gold from the Tsarist regime. his amountillion ouncesillion) of Rumanian gold held in "safe keeping" and never returned, reserves captured from the provisional government of Admiral Kolchak, and gold received from tbe isolated Czechoslovak army in Siberia.

Baikalov's data are supportedS Senatein The US Sena unreport concluded that thc Bolsheviks

bad retained between0 million and0 million in gold from

This figure does not take into account unrecorded shipments to the. Near or Far East, but the possibility of such shipments in any sizable amount Is conniderod lo bc highly unlikely. According1 to one report of gold imports, by countries, in thes, thc only sizable gold import which could not be accounted for during the period reviewed wasillion into Italy There was no reason, however, to believe thai this came from ihe USSR.

. 48

the old Tsaristreports relied heavily on the data

prepared by an official who was prominent in the Imperial StateThe size of the Russian Central Bank reserves at

the endillion ouncesillion) would indicate that the Baikalov and Senate data probably were reasonable.

Starting with the estimated Soviet reserveshe reserves0 may be calculated by adding production and other acquisitions and deducting exports and lntornal uses.

2.

he USSR is estimated to havefrom the following

Thousand

Ounces Million US Dollars

Recovered from the

Conquered Baltic

Gold was recovered from theumber of ways. Baikalov estimates that the Soviet government received gold from the population by the beginning4 in thc following amounts

Troy Ounces US Dollars

Tsarist coins from privateof church and private

From

Includeson ounces produced

A special state trading organization which existed2

-

In addition lo these acquisitions, it is reported that the Sovietreceived gold as ransom in return for safe exit from the USSR as well an through remittances from ' Acquisitions from the population4 (the date of Baikal-v't estimate) are believed to have been small.

A great deal of the gold from thc population came from the operationspecial state trading organization. Torgsin, selling consumer goods within the country for gold, foreign banknotes, jewelry, and similar articles. Torgsin was established2 and

liquidated inthat k

esult of the development of the gold industry andold receipts within thc USSR increased sixfolderiod of four.

During the Spanish Civil Warheis reported to have sent about2 million inCartagena to thc USSR. f Del Vayo, formerMinister of Foreign Affairs, states thatthan half" uf tbe Spanish gold reserves was sent tothen expended for purchasesanother

former Republican Minister reports that .tne largest part ofof thc Bank of Spain" waa sent to the

reports from Europe indicate that the USSR is selling gold barsmarking andFranco government

ofii putlaim for this gola.**

The USSR imported some gold during this period. Such imports were deducted from exports, which are considered later.t Is known that prcrevolutionary and Spanish gold reserves amounted to about0 milb'on. and tt is known that about0 million of this unaccountably disappeared. It could have gone to three the Axishe West, or tbe USSR. Tbe Tripartite Commission dealing with looted gold never discovered the Spanish reserves in Axis landsndeed, there was never any speculation that the Asia powers could have obtained it. Since the pre-World

- 50

Gold reserves in Latvia. Lithuania. Estonia, and Poland on the eve of World War II amounted to about3 million. aa la shown in the following, tabulation ":

US Dollars

5

The Polish gold was protected by being senPoutslde theubstantial amount being held in the US. The disposition of theof the other threo countries cannot-be determined exceptart held in the US. but it is likely that they could have fallen into Soviet hands. For purposes of thisis assumed that gold worth aboutillion was taken over by the USSR.

1

In addition to these sources of gold, it is conceivable that the USSR received goldalancing item during those periods ins when it had favorable balancea of payments. ossibility is not supported by studies of world gold flows ins, however, and is consequently not considered in arriving at total Soviet gold acquisitions.

It appears likely from the above estimates that during the firatears of its existence the ,pSSR managed to procure aboutillion in gold from sources other than new production. This figure isimes the estimated current annual production.

War II black market in gold was thin or nonexistent? it may be con-eluded that the gold waa not disposed of clandestinely. It may also be Concluded that the only Western markets capable of handling the goldthe British, the French, and the Dutchid not dispose of the bulkhc gold, even though some sales were made iu France. This leaves the Soviet government as the only party willing and able to handleizable amount of gold.

TOP

Official statistics of major gold importing countries* indicate that total known Soviet exports of goldmounted toillion ounces, orillion. " In addition, it is believed that minor amounts of gold were shipped from the USSR to Trance and Switzerland during this period.

On tbe basis of the computations made above. Sovietat the end0 are estimated to have been aboutas is shown in the following Changes. Troy Ounces US Dollars**

Reserves at beginning of9

Other

lncrea6ca in gold6

Total disposable

OtherI

Total gold7

Net increase inin^ 9

Reserves at

Sweden. Germany, the UK. and the US ** Atn ounce. It should be recognized that the export value figures will not correspond to actual receipts, bccautic part ol (he gold was sold at7 per ounce. Kive percent of current production.

-

7

of Official Reserves as

22 the State Bank published gold reserves figures regularly. 7uch publication'was .irregular In the course of thc devaluation of the ruble inowever, the Gosbank gold reserve was rovalued.* Gold oqual in value to the book profit8 million ounces on devaluation was transferred to the People's Commissariat of Finance. Thus the reported gold holdings of Gosbank6illion ounces as comparedillion ounces at the beginning of tho year. Gosbank holdings aa.7 wereillion ounces. Totalas7 may be estimated7 million ounces valued at1 million. This figure is derived by adding8 million ounces transferred to the Pesftle's Commissariat of Finance to that gold held in Gosbank. It is possible, however, that the People's Commissariat of Finance held reserves in addition to those received at thc time of thc devaluation. In any event, reserveson the basts of the data in this report^puld not differ significantly from the estimated combined holdings of Gosbank and the People's Commissariat of Finance on the same date.

On tbe other hand, another observer claims that Sa-asb-^avsl^ijl-bead-of^he Soviet gold- industry,oastedold reserve at the end6 of USillion. his figure seems all out or proportion; it does not>,for example, correspond with Serebrovskiy's announced.pr6duction figures during's.

on Soviet Gold Reserves.

The calculation of Soviet gold reserves as of the end0 is based on certain tenuous data: (a) available statistics on official Soviet gold exports are somewhat incomplete, (b) theconcerning Spanish gold is uncertain, (c) tbe production data

* Hya decree of6 the ruble changed5 to6 gram of fine gold,8 percent of its former value Surplus gold created by thia devaluation (in excess ofercent of the note circulation) was transferred to the People's Commissariat

oi Finance.

-

are estimated,hc amount of gold going into industrial uses is uncertain, and (e> it is probable that some gold left the country for clandestine purposes.

The figure for Rold reserves may be questioned on ) when gold reserves were statod by9 million, the USSR was trying bard to get credits and Rather than seeking credits, which had previouslyery high interestUSSR could have sold more

gold. It is likely, however, that inc Soviet governmentargehad to be kept for such unpredictable expenses as war orof the Comintern or Thirdgold, as

Soviet officials often say, ia merely aaotherTvmmbdny. it is difficult to account for the large increase in reserves ins by any other reason than national security.

B. World War II and Post-World

I. Acquisitions.

In addition to current production, the USSR couldgoldumber of other sources. Itthat reserves of certain European Satellites camecontrol at the end of World War II. One source placescertain European Satellites atnother

estimates that tho USSR received gold worth0 million tomillion from East Germany and an additionalhe other Europeanacquisitions have

never been confirmed, and there has oeen no mention in reparations reports of gold exports to the USSR. Reliable evidence based on Tripartite Commission investigations indicates that very little unaccounted-for gold existed in East Germany immediately after World War II.

It ia known that several of the European Satellite countries (Rumania, Hungary, and Czechoslovakia, as well jipoid to the West in the Immediate poslwar years.

thai the amounts involved were much too large to lt must be concluded, therefore, that

-

except lor Poland, which ia known to have sold gold received fromthe shipments were taken from reserves. It is alsoEuropean Satellite gold reserves1 amounted to overubstantial part of which must have come fromview of this, it ia probable that the Satellite govern-

ments coutd have lost only part, and perhaps none, of their prewar gold reaerves to tbe USSR.

It has been reported that the USSR appropriatesSatellite gold production amounting to over Although this may have' taken place, particularly duringyears, such acquisitions have never beensmall productionleameu in tne UoSK. Because"o? low production bySatellites, relatively high sales to the West, and lackevidence on Soviet acquisition* of European Satellite gold,from this source has been considered in calculating

The USSR could have received gold fromduring thc past few years. Annual gold production byChina was valued at aboutillionillionWar"is known that the Chinese Communlstts shipped

gold to the USbKnsuring these shipments with anothing ie known oi the size of possible

receipts from Communist China, they arehot considered in arriving at Soviet reserves,

I: <orth Korean gold Isthe USSR. The'amounts Lnvolvod aro believed toaboutillion sincebut it ia possible that

shipments have been larger. North Korea naa not sold gold on the world market, so far as is known, and It is assumed that all the current production of North Korea goes to augment Soviet reserves.

The USSR also received the gold production of Sinkiang. which has possibly amounted tomillion since World War JI. In addition, lhe hulk of the gold production of Mongolia Is believedoe

Soviet controUed. Production of Mongolia0 waat ia assumed that the USSR has received

unces per year since thc end of World War II. the

amount involved is aboutillion.

Total acquisitions from sources other than noware thus estimated atillion.

2. .

Soviet gold exportsrobably have amounted to about7illion ounces). These exports areto have been distributed as follows:

US Dollars

Western

These figures do not include clandestine exports, .sold through unofficial channels, for support of covert activities. Such exports are known to have been made, but information ia inadequate to estimate the amount.

reat extent, all'world gold movements, especially those made through the premium markets, are conducted with close secrecy. Because of this, it ia possible that the figures on gold exports in this section should beercent lower orercent higher. Cortain specific export data, however, as explained in thc text, are believed to be firmer. Annual shipmentspercont error in years when shipments are large probably would come to the attention of Western gold experts. (For methods of sales of Soviet gold, see

-

from the beginning ol World War IItatistics show the USSRubstantial amount ol gold to thc US. During much of this period, only the US had resources to sell, and, in addition, shipments to the traditional Western European markets were made hazardous by war. US Department of Commerce figures show thatbout3 million in Soviet gold was sold in the US. During this same period the Dank for International Settlements estimated that0 million in Soviet gold was sold in Western Europe otal of) million. Most of thc gold imported by tho US went to the Federal Reserve Bank of New York,arge part of it remains in itB vaults.

here were no reliable reports ofalthough therereat nurftber ofoi such shipments. One source estimates that USof Soviet gold was sold through black market channels in Duringear period, however, the Europeanexported gold worth approximately-0 million tomillion. Of these exports, only one was reported to consistbars, but the shipment concerned was from Polandthe gold in the formoviet credit. Thc reportsduring tbis period were. In many cases,

In no caseoviet shipment bo so

confirmed,the possiole exceptionungarian request foron gold to be used for industrialaddition,

a source which appeared to be well informed concerning Soviet Bloc gold shipments during thendicated no gold shipments originating in the USSR during that period. upporting this, the Bank for International Settlements claimed tnat0 there was "none but the flimsiest evidence ot any appreciable sales of Rusaisn origin." t might also be added that, during this period, (be USSR li-i" no great need to export gold for purposes ol balancing trade.

For the1izableas been accumulated concerning gold shipments from the USSR to the Wont, primarily to tho UK, the Netherlands, France, and Switzerland. These gold shipments are believed to have amounted

to from0 million to0 million3 and from0 million to0 million/ In thiB report the midpoints of these figures are used for calculating withdrawals from Soviet reserves. These shipments were concentratedonth3 to Since that lime, there has been noof other than minor shipments.

In addition to the known or suspected Soviet shipments of gold to thc West, there have been announcements or rumors of Soviet shipments of gold to Finland, Iran, and the European Satellite countries in thc following amounts;

japllion US Dollars

Finland

Iran

Poland

Inillion in gold was made available to Polandredit to be repaid by shipments of raw materials. Somewhat later, some of this gold entered the US.

In0 million credit was rumored to have been granted by the USSR to Czechoslovakia. This was to be madeercent in gold, with the remainder in hard currencies, There ia no indication that this credit waa ever implemented or even actually contemplated. old loan was announced inor which the USSR was to receive oil-drilling and coal-mining equipment. ' The amount concerned was never divulged. Although Czechoslovak gold has appeared on Western markets, it has not been practicable to determine whether it was of Soviet origin. Consequently,the Polish gold receipts are deducted from the Soviet reserves, this has not been done in the case ol Czechoslovakia.

* The existence ofredit in the amount of0 miUion has never been confirmed.

.

Finland has made three agreements with the USSR(or gold shipments or credits. In4 the Soviet government agreed toortion oi the outstanding4 Finnish-Soviet trade balance in gold and hard currencies. Ineliveries of gold amounting to about USillion were made under this agreement. t was rumored, but denied by Finland, that gold deliveredhis agreement was of Spanish origin. Two Soviet gold or bard-curroncy loans to Finland totalingillion have also been agreed upon, but neither has been utilized at this time.

During World War II. Iran made advances in rials totaling aboutillion.to the USSR. Agreement has been reached to makefillion in SovieTgold to liquidate tbis claim. "" Delivery took place in

3.

Million

Ounces

Dolls,

.9

7

6

7

the basis of the above data, Soviet gold reserves at tbe end4 are estimated bk have been about USUion, Sa ia shown in the following tabulation':

Reserves at beginning of period

Production

Other acquisitions

Increases in gold reserves

Total disposable gold

Exports Other uses

Total gold use

* Tha figure for net reserves probably is reliableange of error of plus or minusercent.

-

rni>

Million

Changes.

increasein

at end

of

Although reserves oi tbis level would appear largeountry with foreign trade thc size of that of the US5K. it should be remembered that (a) almost three-fourths of this reserve has accumulated since tha beginning* USSR was able to obtain the bulk of its wartime imports without payment, (c) Soviet leaders have repeatedly announced since World War II that they felt international gold prices were too low for profitable selling and should be increased, and (d) current production is estimated to be less than one-half the prewar peak.

C. Potential.

Estimated reserves are nowevel sufficient to allow the USSR to double its current rate* of imports from the West foreriod ofears, financing the increase through export of gold alone. There are. no indications, however, that tbe USSR has determined to liquidate its gold holdings. Furthermore, it is not known what thc USSR considers toatisfactory level of reserves. If the USSReserve lovel boaring the same relation to the current level of imports from the West7 reserves bore7 importshatatio- were adequate, the USSR could increase imports by about0eareriod ofears, financing tbis increase-irom "excess" reserves

Average. .

. 60

There have been indications in official Soviet statements that the USSR has limited its gold exports in much of thc postwar period because it felt the world price of gold would incroase. There appears to be no reason, however, why the USSR should currently expectrice increase. Announced US policy, on which any foreseeable gold price increase depends, baa consistently favored maintenance of the currentrice, and rumors, which were rampant after World War II, that thc US would increase its gold purchase price have now almost died down.

It-is possible, accordingly, that the USSR may increase imports to the level suggested by its gold reserves and exportquantities of goldumber of years. The indications are that the USSR has the capabilities for this action whenever it choosers.

- 61

top skp^pt-

HI,

APPENDIX A

ADMINISTRATIVE STRUCTURE AND KEY PERSONNEL OF THE GOLD INDUSTRY- OF THE USSR

Organisations, Locations, and Personalities.

I. Glavzoloto /Chief Directorate of thc Gold and Platinum Industry^.

*

Mohief:

Khantonov.treplaced by)

Vorob'yev. K. V.

Deputy Chiefs:. Yegorov. Maj GenIgnat'yev

Chief Geologist;

. i

Chief Engineer. Cribin, Col

Chief Mechanical Engineer: Rogox

Chief Accountant:

replaced by)

Kulikov

Appointed Acting Chief in

Chief of the Personnel Department

*** Former Chief of the Primorakly Gold Trust.

t

Zolototekhsnab /All-Union Gold Technical Supplyoscow

replaced by)

Chief:

Komarov. Maj Gen

Beketov

Deputy Chiefs:Sokolovpki>

Zolotoprodsnab /All-Union Cold Food Supplyoscow

Chief:

ol

Deputy Chief: Leont'yev. Col

Chief Accountant. Yermakov

Chief of Personnel Department: Mnskalenkc

Zolototrans /All-Union Gold Transportoscow

Korsakov. Maj Gei

o

of Planning Department Gorbunov

Z.olotorazvcdka /All-Union Gold Prospectingom

Chief Account: Podlyaschuk

/State Institute for Planning for the Gold Industry/,

Moscow

Chief:

Pakhomov

/Altay Goldemipalatinsk. Kazakh SSR

Chief:

Ksenofontov. A. later replaced by) Kuzmin

Deputy Chief: Yakovlf. "

Geologist:

Kullko* "

Geologist: Vasil'yev

Chiefkovlev

/Amur Goldvobodniy. Amur Oblast

Chief:

replaced by)

Lukinskiy-

Chief Inspector: PichugU

Former Chief oi the Kazakh Gold Trust and later Chief of the Berezovsk Gold Trust e was transferred to the Lena Gold Tru*)t.

-

IN" HI'*"

Chief oi the Political Department; Fedorov. N. D.

9. Baykalzoloto /Baykal Goldrkutnk

Chief: Kux'yan

Chief Engineer: Tikhomirov

/Baley Goldaley

Chief:

Vitkovekiy

Chief Geologist: Terent'yev

/Barguzin Goldsipikan,

Buryat-Mongol'AS5R

Chief:

replaced by)

Grigor'yev

Accountant: Bogd.irtnakiy

ftaahkir Goldfa. Bashkir ASSR

Chief:

KozlovBkiy. LI Col

1J. Berezovzoloto /Bcrerovnkly Gold Combine/. Herezovakiy, Sverdloviik Otilant

- 66

Chief:

by)

Luk:nakiy* probably replaced by) Korobeyniko.

/Chkalov Coldumak, Chkalov Oblant

Chief:

Prutkovski)

/Darasun Goldcrahina Darasuna.

Chita Oblast

Chief:

Barabanshchikov

Chief Engineer: Ovcharenkr

/Dzhetygar Goldzhetygara.

Kazakh SSR

Chief:

Voskrenenskiy

hugdzbur Goldakutsk

Chief:

tby)

Podgayevnkly.by)

Sitnikov

Deputy Chief: Shokhtin. P. A

Chief Accountant-lvano-

* Transferred in lib/ lo Lena Gold Trunl

18. Yeniseyzoloto /Yenisey Goldrasnoyarsk

Chisf:

later replaced by)

in

19- Gomoaltayzoloto" /Gornyy Altay Goldiysk

Chief:

Lazovnikov

/Georgia Goldiflia

Chief:

Yelidzharashvil

/Kazakh Goldtepnyak

Chief:

Lukinskiy (later replaced by) Sinitnkiy

/Khakass Goldbakan

Chief: Beylin

Geologist: Avdeyev

/Kochkar Gold'laat

Chief:

replaced by)

Semenenki

* ryro'zololoold

- fcB -

Chief Geologist: Danilov

Lenzoloto /Lena Goldodaybo Chief:

Chuguyev, Ltreplaced by)

Lukinskiy

Deputy Chief: Stepanov *

Chief Engineer: Zherdev

.

Chief Accountant: Troitskiy

' Maykainzoloto /Maykain Goldaykain

Chief:

Trifonov

Cbicf' Geologist: Nikitin

Accountant: Kaumenev

Miaeszoloto /Mia fin Goldiass

Chief:

Polyanskiy

Minusazololo /Minuaa Goldrternovsk

Chief:

Kuz'min *

ZH.

Chief:

Chief:

.

Chief Engineer: Stolbox

Chief Accountant: Vilenskiy

29. Scvkavzoloto /North Caucasus Goldatinsk

Chief:

Dernenyuk

/T'adzhik Goldtalinnbad, Tadzhik SSR

Officials not identified.

/Tuva Goldyzyl. Tuva

Autonomous

Tatarinox Kononcnk.,

Prohahly later transferred to the Altay Gold Trust

/Jjrals Diamondtinya. Molotov Oblast

Chief:

Vecherkin

/Ural Goldverdlovsk

Chief:

Senatov. A. P.

/Upper Amur Goldogocha,

Chita Oblast

Chief:

Ufimtsev

/Yakutsk Goldldan

Chief:

replaced by)

/.aikin

Chief Accountant: Okladnikov

Chief Engineer: Kolesoi

Geologist: Gaskaro*i

/Transbaykal Coldhita Oblasr.

Chief:

replaced by)

Tatarinov*

* Formei Chief of thc Tuva Gold Trust,

-

gig

THE CHIEF DIRECTORATE Tl JEGOLP ANITPLATINUM INDUSTRY (GLAVZOLOTO)

(Continued)

o. lot Oiicviui Itommunis! Party member.

c. These were high-level consultants from geological institutions. Ths

relationship with these people also came through Nigrlxoloto.

d Functions here are specialized by plantsT^types of machinery, and

so forth. Over-all duties are supervisory or of an inspection nature:

for example, engineers from this department carry on inspections when

Ihe plan is not met. "Officially they are there to help the trusts

actually to report on

number of geologists, drillers, and so forth are employedactivities are similar to those of chief engineer: that is.reports (using reports from theheck onof the plan, and so forth.

plans for all trusts, all related production, and

certain administrative functions.

is not certain whether the chief accountantd deputy. Itthat there wereo SO men on the accounting staff.

Gold Prospecting Trust has its own equipment and worksin discovered areas. One of its primary jobs is geological

mapping. For example, it would prfbablyknow of the existence of a

vein, which it would then explore, take samples from, and conduct

chemical analysis. an from this organization generally worked in

Moscow in the winter (writing up the trust's findings) and in thc field

in the summer. 1 the same person. Prosnv-tkov. held the position

of head ol the Gold Prospecting Trust and that ol Chief Geologist

eputy). This was not. however, the rule

j During World War II Ihe refinery moved to Novosibirsk.

k. It has been reported that all supply eomes directly under Mo-.tow.

JA

I. One project was development of substitutes for diamond drills.

ORGANISATION OF THE CHIEF DIRECTORATE F INDUS W tQLAllOLOTOi

1

(Continued)

m. It ia reported that organizations having these functions exist, but their place on the organisation chart is uncertain.

n. It was reported that the Director of Nlgrizoloto wan always aof the Communist Partyanager who did not necessarilyor geology. It was also reported at another time, however,directorrofessor at the (Moscow) Geological Institute. directors, of which there were three, were all highlyprofessors and/or geologists. Tho function of Nigrizololoon geology, mineralogy, location of deposits, andon or below the surface. This work was primarilygoldut sometimes other minerals. Geologists here workedproblems, such as methods of estimating depositof sampling, or methods of chemical analysis. ThcNigri/.oloto.is well described by the papers published inNigrizoloto. " Thc nature of this activity is more theoretical thanthe prospecting groups, which also reporthe head of the

o. Fifteen to twenty trusts were known lo tbe source. Tbe organizationample one', but all trusts known to the source bad essentially

similar organizations.

Theoretically, the Director of tbe trust reports to the Director of Glavzoloto. Actually he is responsible to all of the departments on the level below thc Director. In addition, il was believed that thef the staff positions at the trust level to those on the Glavxoloto level were close: for example, the.geologist at the trust level dealt with the Gold Prospecting Trust and the Zd Deputy Geologist at the Giavzoloto level. Heporls were frequently forwarded through this channel.

BLANK PAGE

APPENDIX C

COMPARISON AND EVALUATION OF ESTIMATES OF PRODUCTION OF GOLD IN THE USSR

Various estimates of production of gold in the USSRre given in

The most important estimates of Soviet gold output aro those by the American Legation at Riga, Latvia. An important part ol the Legation's reporting programE until Soviet occupation9 was an annual report on Soviet gold production. Ttteae reports are the most comprehensive available andontinuing research program to obtain and collate all available information. Each report revises estimates for the previous several years in the light of new information. Tbe estimates of the US Bureau of Mines, ths Bureau of the Mint, and the Federal Reserve Board are based on these reports.

The chief limitations to these reports result from the source material. old productiontate secret, and all employees in the industry were bound to secrecy. There arc. however, different figures even forroduction. The Miningthe Council of Congresses of the Gold Producers, and the state refineries published quite different figures. There was uncertainty as to whether given series contained such items as byproduct gold, gold refined abroad, and secondary metals and whethor the figurespure gold or primary gold concentrates. Similar confusions exist in regard to figures released.after World War I.

The original estimates of the Legation at Riga lor the yearsand the estimates of the Bureau ol Mines were based uponstimate was based upon a

statement in the Moscow Economic Life of2 that

Table ft follows on

- 77

Soviet gold production increased2 byercenthe Legation at Riga later revised its estimates for these-years.

3he estimates of the Bureau of the Mines are thc same as tbe last estimates by the Legation at Riga. The most reliable estimate appears to be thathen Soviet officials announced that the USSR had become the second largest gold producer. The head of the Industry first stated that3 Soviet production was greater than Canadian, which he estimatedilograms (kg). When Canadian production proved tog. he backed down and announced that the USSR had gained second position There appears to be no reason to doubt the truth of this second statement. It is thus obvious that official preliminary estimates3 Soviot productiong and that later estimates wereg.

The history of3 estimate is illustrative of theworking with Soviet data. At least two sets of conflictingfigures3 production were published infirst figure would have allowed an estimate of Soviet3g. in line with Serebrovskiy'Bincidentally, would indicate that the method ofoutput on the basis of percentage data had proved toaccurate for the years up By the timeat Riga made its first report of productionnother set of percentages had been released,Legation concluded that Serebrovskiy's statement andhad been baaed upon preliminary data. Legation3 productiong. ortatements by'Soviet authorities5 led

thc Legation to revise Its estimate in its next

N. Oparln. Assistant to the Chief of Glavzololo (Chiefthe Gold and Platinumave stillhe Legation again revised its

revision, of course, farced the Legation to

revise ils estimates of output in subsequent years.

he Legation at Riga found it increaBingly difficult to estimate Soviet gold production. be Legation reported ita difficulties aa ":

Novor before have no many conflicting statements been published than It further became evident in the courae of that year that percentage figuresere inaccurate and can no longer be regardedeliable basis for such calculations.

In spite of the frustrations of the Legation over conflicting reports, its estimates6 are based upon considerable evidence. With certain exceptions, the contradictions amongappear to ba thc result of revision* "as later figures became available. The information generally took the form of announcements of percentage increases over previous years. There were usually four types of such percentagesiven year: thc planned percentage increase, the preliminary estimate, the "farst final" estimate, and the "second final" eetimatc. Tbe latter eatimates became available onlyeriod of yeara. Such information was also available for individual trusts, which gave theecond basis for its

6 the only official announcement on total gold production giving other than thc percentage of fulfillment of the plan was an article in Izvestiya tating that "the gold production of the USSR7 was more tnan twice as large as that Thisis in line with tbe eatimates of the Legation at Riga7 based primarilytudy of announced results in various districts. Thus estimates of the Legation appear to bo reasonably reliable. However, tbe estimate of the Legation8 is the last.

The American Embassy in Moscow was assigned responsibility lor continuing the annual reports on Soviet gold production. Moat other estimates of Soviet gold production90 appear to be merely projections of estimates for previous years.

-

The8 is thus Che best year for comparing theof prewar Soviet gold production to give some idea ofoi error resulting from the use of percentage figures. indicates that the margin of error because of thisrather small, possibly leasercent. Most estimates ofarc in tbe rangeillion toillion ounces. exceptions to thiaerman estimate ' unces and an estimate byrench goldthe Revue cconomiqueunces. These

two appear to be based upon similat methods, because forears8 they differed by moreractionercent only

Although the methodology of the German estimate is notmethods are indicated in bis article. Over one-half ofbetween thc estimates of thc Bureau of Minesis because oi the useigure. 7 estimatetatement by the People'sFinance that gold productioneachedercent ofbefore the war. which according to Davidoff amounted to According' owever,

ton figure does not icprcsent pure gold, and iue maximumwas only aboutons. Forty-seven percent oiwould be close to tbe Bureau of Minos oslimateore thanons. Other differences between tbeDavidoff and of the Legation at Riga6 areof Davidoff's use of figures which tbe Legation rejected for example, his estimates for3pon percentage figures released in December of thcestimated. Davidoff does not document his estimates forexcepttatementroduction

was more than twice thatstimateimes3 estimate. The estimate of the Legation, on the other hand,1 percent of1 estimate.

Considerably more important than the difficulties oi working with percentage data in calculating anseries is the fact that the coverage of the data used by the Legation at Riga is uncertain.

- 80

It is believed that the data include only production by enterprises under Glavzoloto. Production in the Kolyma area by Dal'stroy waa not under Glavzoloto. It is doubtful tb.it statements by officials of Glavzoloto about progress in their Industry would include* Dal'stroy. Some state rnents specifically speak of "production of the enterprises ofhe fact that the estimates of the Legation based on statements on total production agree rather closely with those based on progress in the various districts under Glavzoloto is another indication that Dal'stroy is not included in total figures.

It is also possible that byproduct gold is not included in tbe cati-mates of the Legation at Riga. This gold is produced by the copper, lead, and zinc industries rather than Glavzoloto, although part of tho oreined by Glavzoloto and then sentrefineries. Tho Foroign Service, howovor, assumed that the estimates of the Legation included byproduct gold

Tbe estimates of the Legation at Riga oi-gold production indistricts are basediagram in Sovetskayashowed the share of the various districts

in thc total gold proauetlon of thc USSR 4 the increases in production over (the previous year are well documented;ess well documented:6 on, only rough guesses.

In spite of these limitations, there is considerable testimony that the estimates of the Legation at Riga are the best available, and they have been widely used by both US and foreign analysts. According to

who worked in Glavzoloto and supposedly knew how much was produced by Glavzoloto, the estimates of the Legation were closer to the truth than any others which he had seen

- 81

CfcY-TJV*r

APPENDIX F

PERSONNEL AND WAGE ALLOCATIONS TOGOLD INDUSTRY OF THE USSR

,ne estimateo laoor force and wage payraento in the gold industry

allocations

of the USSR are given The pcxBonnelold trusts and combines9 is estimatedotalemployeesillion rubles. Thesemployeesuble- for ?n

ollows on

Table, 9

Estimated Labor Force and Wag* Payments ia the Gold Industry of thc9 (Continued)

ol Enterprise of Employees (Thousand Current

Darasun

334

384

092

B20

580

816

136

rkhamur

309

i

'

(or other

enter-

000

total

- 'Ill

Table 10

Estimated Wage Allocations to Fourteen Gold Trusts in the94

Thousand Current Rubles

Allay

-

BLANK PAGE

APPENDIX G

CAPITAL IrfVESTMENT ALLOC AT IONS TO THE GOLD INDUSTRY OF THE USSR

A atudv of thewj

Jjinformation on allocations for capital .nvestment in thc Soviet gold industry reveals that it is possible to estimate total Investment9

brokencategories as follows:

nstallation

Equipment, including equipmentng installationof Current construction

of future construction

geological prospecting

(not identified any further)

Investment figuresowcvcr, arc0 prices: so they must be deflated in order to be compared9 figures.

Table 11

Estimated Capital Investment in the Gold Industry of the94

Thousand Current Rubles

of Enterprise

500

-

000

500

500

500

rabud

500

500

500

500

a

500

500

500

100

95

APPENDIX 11

OPERATIONAL GEOLOGICAL PROSPECT!NO IN THE GOLD INDUSTRY OF THE USSR

Allocations to thc gold industry for operational prospecting9 are estimatedotalillion rubles. This figure includesillion rubles for theold enterprises for which someis available andillion rubles for thenterprises. The methodology for this estimate is the same at that used in estimating capital investment in Appendix B.

Estimated aliocanoim (or operational geological prospecting in (tin gold industry in lhe USSR9ro given in*

Tableollows on.

Table 12

Estimated Allocations for Operational Geological Prospecting in the Gold Industry of thc94

Thousand Ciirrent.Rubles

of Enterprise

Allay

Amur

Baley

Barguzin

.

Baykal

Berezovsk

Chkalov

Daraaun

Dihvgdahux

Ka zakh

Khakasri

Kochkar

X.ena

Ma

Minusa

Pr imorskiy

Tuva

Ural

Verkhatnur Yakutsk Yenisey Zapsib

700

ZOO

0

0

total for other gold enterpriser.

Total

Total9 rubles

APPKNIJIX I

SOVIET METHODS OF SELLING GOLD

All operation* ia gold are concentrated in the hands ol the State Bank (Gosbank) andart ol the over-all financial plan of tbe USSR. All offer* and sales emanate as directives of the Gosbank, and the proceeds, for the most part, become part of thc receipts of the Gosbank or Its correspondent agencies abroad.

If the sale of gold is intended as tho Baleommodity, it differs little from thatumber or grain sale. ' The Soviet foreign trade corporation involved would be JreS/uzprorneksporl. (Vaesoyuznoye Gosudarstvennoye OVyedineniye Po Eksportull-Union Association for the Export of Manufactured Goods). he quantity and price at which the gold is be sold are controlled lactora and1 of the .export plan.

The greatest volume of gold trading is done with standard bars, bars weighing aboutilograms0 fine. Soviet gold bars qualify as "good delivery." The sealsertain group of refiners immediately qualifies their bars for delivery as fulfillment of contracts, and the stamps of Soviet refineries are included in this group.

It cannot bu conclusively stated (hat all Soviet gold tn shipped in standard bars, nor that it bears the mark of the hammer and sickle. Shipment* of Soviet barsilogram and not hearing Ihe Soviet

T)

emblem purportedly were received inii quite likely

that the standard bats were remolded upon their receipt into the smaller bars and tbe hammer and sickle effaced.

Almost all international precious metal shipments move by air because the insurance costs on gold shipments vary directly with the number of days tho gold is in transit and the aase of protection of the shipment. The general route followed seems to be from Moscow and Prague to London or Amsterdam. Transshipments have been made via points in Scandinavia and Amsterdam. Gold frequently reaches Paris and Zurich.

In thc West the gold market is controlled more or less by relatively few companies. In the UK. Samuel Montagu and Company and N. M. Rothschild and Sous predominate the market. Inthe Union Dank of Switzerland, and Dreyfus Soehne and Company arc the primary dealers in gold. Three main buying organizations cm at. One consists of Baker. Samuel Montagu and Company, and Johnson Matthey and Company. This group controls the gold coming from'the Union of South Africa. he second organization i* known as the Syndicato Cangallo. an informal association of gold brokerage firms including Lazard Frercs, Dreylus Soehne andSamuel Montagu and Company, and the Union Bank of Switzerland, and Mocatta and Coldsmid. The syndicate's function is to eliminate competition hetween the member firms in the purchase of gold; it does not rule out sales competition. It isegal entity although it has appointed purchasing agents in tho major gold marketn. Tbe third group, of most importance to this report, is thc Samuel Montagu and Company and the Union Bank of Switzerland consortium for theof purchasing precious metals from the USSR.

does arrive directly from tbe USSR without the aid of Consignments have been direct to the Moscowin London, the correspondent agency of the Goabank intben sold to the Bank of land for the Exchangehipment ofs also received at the Union

Bank of Switzerland direct from Prague

Amsterdam plays an important role in Soviet sales of precious

metals, notably gold. Most of the gold shipped has gone fromAmsterdam by KLM (Royal Dutch There thc gold

has been (I) immediately transshipped to its ultimate destination lZ) retained for varying periods of time by banks of private gold

traders in thethen sold to various purchasers;

ransformed in some manner (such as being recast to remove Soviet markings or convertedore suitable form ') before

moving on to other markets; ordded to holdings within the Netherlands

Prom Amsterdam much of the gold has gone to Paris. Zurich, London.

or Tangier. Gold has also been shipped from Switzerland to Amsterdam

and then to other

In addition, gold has reportedly moved fwpm Moscow to Leningrad to points in Scandinavia, wbere it has been transshipped to London.

' I. !

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APPENDIX I. SOURCE REFERENCES

materials gainederies of persona, interview* provided goodfilled some specific gaps. German and Japanese documents were fruitful sources onproduction, the latter providing excellent background material for Soviet Far Eastern gold production.

Evaluations, following tbe classification entry and designatedave the following significance:

of Information

-

ompletely

sually

CFairly

ot usually

ot- Cannot be judged

Confirmed by other sources

Probably true

Poiiuibly true

Doubtful

Probably false

Cannot be judged

refers to original documents of foreign government! and organizations: copies or translations of .such documentstaff

officer, or information extracted from such documents by slaff officer, all of which may carry the field evaluation "Documentary. "

Kvaluations not otherwise designated are those appearing on the cited document: those designated "RK" are by the author ol this report No "RR" evaluation is given when the author agrees with the evaluation on thc cited document.

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