Abstract: The unstable, and seeming unpredictable, nature of international politics presented a golden opportunity for insider-trading and arms dealing. The provocations carried out by various clandestine groups acted as a randomizing factor. Those speculators allied with various factions who timed the markets properly stood to make great fortunes with each new blast of domestic disorder and continental war fever.
Into the 20th Century, foreign intelligence services and financial markets would continue to be linked as a tool of powerful competing military-commercial syndicates, a feature of modern political warfare and strategic finance the Okhrana and the Paris bankers spearheaded in tandem. Shifting alliances between lenders and states, and between old and new elites, would set the stage for the 20th Century, and the world wars that followed.
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The Legacy of the Czar's Secret Police
The Okhrana, the Imperial Guard of Czarist Russia, was the most powerful internal security agency in the world at the turn of the 20th Century. It was the doctrinal wellspring for all the international intelligence agencies that followed, and many of its former personnel went on to man the internal security operations of a number of countries.
Okhrana officers were the unrivaled masters of political dirty tricks and covert operations. Sworn to uphold Autocracy and destroy all enemies -- reformist democrats and social revolutionaries, alike -- the Okhrana employed assassins and agents provocateur to take control of popular movements inside Russia and abroad. To a remarkable degree, Russian Imperial policemen succeeded in their long-term goal of subverting democracy and thwarting revolution around the world.
A Central Intelligence Agency (CIA) study, declassified in 1997, observes: "creation of the Okhrana marked the emergence of the modern secret or political police apparatus." The CIA cites intelligence historian Richard Deacon for the proposition that Okhrana "was, in fact, a comprehensive, coordinated espionage and counterespionage organization, the most total form of espionage devised in the latter part of the 19th century and still forming the basis of Soviet espionage and counterespionage today."
Originally authored during the 1960s by "Rita T. Kronenbitter", a CIA historian working under J.J Angleton in the Counter-Intelligence Division, Kronenbitter's report is remarkable, for it confirms the long-suspected fact that White Czarist political policemen carried out a campaign of spying, forgeries, propaganda and murder in the western democracies, often with the knowledge and assistance of the local authorities. After the Bolshevik Revolution, these anticommunist White Russians would become the backbone of secret police death squads that operated throughout the world. It appears, in fact, the Okhrana practices and procedures still, to this day, forms the basis of espionage and counterespionage services, not just of the ex-KGB in the former Soviet Union, but worldwide.
The use of agents provocateur and false flag bomb attacks against officials and police was a hallmark of Okhrana officers operating during this period in western countries, a favorite tactic to discredit the enemies of Autocracy and advance the foreign policy aims of the Czar.
The original Czarist secret police were active throughout Europe and in the United States, where they carried out operations against Russian, Polish, Ukranian, and Jewish exile groups. Of the Okhrana agents named by the CIA, it is known that in the late 1880s, a Polish-born officer, Boleslaw Malankiewicz (AKA, Boleslaw Miklaszewski), was tasked to the large Okhrana station in London, which hosted a large community of Russian and Slavic political refugees. During his tour of duty, the Royal Observatory in Greenwich Park, London was subject to a bomb attack in 1894. This was possibly the first international terrorist incident in Britain. The incident outraged the British public, leading to a crackdown on anti-Czarist exiles. The episode was immortalised by Joseph Conrad in his novel The Secret Agent.
Malankiewicz came to the United States in 1896, and set up a dissident wing of the Socialist Labor Party, leading to a violent split in the American socialist movement and divisions within the United Mine Workers union. Malankiewicz then returned to London, where he continued to manipulate exile socialist factions. [See, Mary E. Cygan, "The Polish-American Left" in "The Immigrant Left in the United States", P. Buhle and D. Georgakas, eds., Albany: State University of New York Press (1996), p. 154.]
Operations against targets in America and the United Kingdom were run out of the Paris Okhrana center, at that time under the command of P.I. Rachkovski, the spy master for all czarist espionage outside Russia from 1885-1902. Rachkovski is now generally considered the author of the notorious The Protocols of the Elders of Zion, a forgery purporting to lay out a Jewish conspiracy to destroy Christianity and European civilization by terrorism and the destabilization of national economies. By the 1920s, The Protocols had been seized on by anti-semites as genuine proof of a global Jewish plot - among others, American Henry Ford had millions of copies reprinted -- and the forgery was used to justify the very real persecutions of Jews during the following decades.
In reality, it was the Okhrana itself that was the true source of much of the worst political terrorism and economic sabotage of the time. The Protocols were a reasonably accurate reflection of the activities and plottings of the autocratic right-wing of the fin d'siecle, and provide a sort of Rosetta Stone for the international Fascist movement during the decades that followed its first appearance in 1897.
The use of forgeries and agents provocateur to carry out political destabilization and terrorist assassinations was a trademark of the Russian Imperial Guard. From the 1880s until the Revolution, Ohrana Chief, S. V. Zubatov, and the head of the St. Petersburg section, Colonel M. Gerassimov, both personally ran their own rings of penetration agents and assassins. Pretending to be revolutionary zealots, their agents provocateur murdered dozens of Okhrana targets, including officials of the Czar's government. The most zealous of their infiltration agents, Y.P. Azev, assumed the leadership of the armed wing of the Russian Battle Organization of the Socialist Revolutionary Party, and embarked on a ten-year killing spree, fleeing to Belgium after being unmasked as an Imperial police agent by his erstwhile comrades.
A later Okhrana Paris station chief, Arkadiy Harting (aka, Abraham Gelel'man, Hackelman, Hartmann, Landezen, or Landesan), was a master of the art of political provocation and destabilization. Assigned to the Okhrana center in Paris in 1890, Harting "organized a well-armed team of bombthrowers and then betrayed them to the Paris police." After a five-year tour as head of the Berlin Okhrana office, Harting was made chief of the Paris center in August 1905. He served as the chief of station in France until January 1909. During his tenure in France, he had effective command over most of the Czar's foreign espionage and counter-insurgency operations around the world. Harting's cover was blown by the French radical press, which revealed his alias as "Landesan", a "revolutionary terrorist" who had killed a French policeman in 1890.
According to a CIA history of the foreign operations of the Okhrana, "These heavily publicized arrests helped pursuade the French public of the dangers posed by French revolutionaries in France", where Russian anti-monarchists had been given asylum, and "created an atmosphere on both sides conducive to the Franco-Russian alliance of 1891." In light of these revelations, the history of radical violence, and of the Left in general, during the period of the 1880s through World War One, must be reconsidered.
The wave of terrorism carried out by Czarist agent provocateurs supported a successful effort in 1889 to transfer billions of gold rubles in Imperial Russian bonds out of the hands of the Berlin banks, and onto the Paris Bourse, where a consortium of French bankers promised to consolidate the Czar's enormous external debts. The Okhrana propaganda offensive also laid the foundation for massive arms sales between France and Russia. Historian A.J.P. Taylor states that Russian Ambassador Mohrenheim, "certainly a warm advocate of the French cause . . . was probably in the pay of French armament interests."[See, A.J.P. Taylor, "The Struggle for Mastery in Europe, 1848-1918. Oxford: (1954), p. 335.] Not long thereafter, these commercial-military relations with France pushed Russia to sever its long-standing ties with Germany. This was to have disastrous results for all three nations.
1. OKHRANA OPERATIONS AGAINST THE PRUSSIAN BANKING CIRCLE AND THE PARIS BOURSE
The Okhrana's campaign of terrorism and psychological warfare destabilized the political and economic environment of Europe during the latter decades of the 19th Century.
Russia's relations with Prussia, its historical trading partner and banker, were strained near the point of war in 1886-87. In an environment of mounting tension with Germany, a series of inflammatory forgeries appeared, the "Ferdinand documents", which seemed to implicate the German Kaiser in a plot to take over the Bulgarian throne and the Balkan states. The source of these"Kuriosnye dokumenty" , as Alexander III called them, was unbeknownst to the Czar at the time, his own secret policemen in the Paris Embassy.
The model for these secret operations were Germany intelligence operations during the 1870 Franco-Prussian War. Using a network of thousands of spies, propagandists, and saboteurs, Germany dealt France a humiliating blow after a misleading German diplomatic communique, the doctored "Ems dispatch", provoked French King Napolean III into a rash and foolish attack against the well-prepared Prussian defenses. France lost its eastern provinces, Alsace and Loraine, but more importantly, the French defeat was the springboard on which Bismarck's ambitions of a united Germany were realized in 1871.
The phony Ferdinand documents, cooked up 17 year later, were remarkably similar in execution and intended purpose, perhaps too much so to have the desired effect of provoking the Czar into the sort of suicidal assault against Germany that cost Napolean III the French throne.
In the mid-1880s, Alexander III came under intense pressure from some quarters to break off ties with his Prussian cousins and embrace Republican France, ostensibly as a means of containing Bismarck. A Triple Alliance had been secretly negotiated - a Russian continental alliance with France, and a French entente with Britain - for the encirclement of Germany. The trick was getting a reluctant Czar and an even more recalcitrant French public to accept such an uncomfortable alliance between arch-Autocrat and Radical Republicans.
The task of Franco-Russian rapproachement was complicated because the autocratic Russian Czar, and his policemen, was naturally sympathetic to the French monarchist Right, which in 1889 attempted a coup to topple the Third Republic. After the coup attempt of General Boulanger' failed, and Bismarck resigned in 1890, passions cooled on both sides sufficiently to permit a diplomatic opening between France and Russia. But, the primary motive for the Okhrana's intervention in French politics was neither strategic nor ideological -- it was financial. France had the capital the Czar desperately needed after he burned his bridges with the Berlin bankers.
For their own part, most of the Parisian money market operators, the plungeurs, were not themselves particularly principled about to whom they would lend, so long as the risk premium paid was high enough. While the returns from trading in Paris were higher than in London or Berlin in the late 19th Century, so, undoubtedly, were the risks. The value of government bonds traded on the Paris bourse jumped around wildly in response to each lurch and feint of French politics, plunging with every new threat of war against Germany, and springing back when news leaked of France's new secret alliance in the shifting game of European secret diplomacy. Russia dutifully played its role, crashing its currency and state bonds, bitterly squabbling with Austria over the Balkans, and confronting the British and Turks over the Dardanelles Straights. Then, in 1888, as the French Boulanger crisis mounted, the Czar turned his back on his German creditors, setting off panic selling in Russian bonds. The unstable, and seeming unpredictable, nature of international politics presented a golden opportunity for insider-trading and arms dealing. The provocations carried out by various clandestine groups acted as a randomizing factor. Those speculators allied with various factions who timed the markets properly stood to make great fortunes with each new blast of domestic disorder and continental war fever.
Into the 20th Century, foreign intelligence services and financial markets would continue to be linked as a tool of powerful competing military-commercial syndicates, a feature of modern political warfare and strategic finance the Okhrana and the Paris bankers spearheaded in tandem. Shifting alliances between lenders and states, and between old and new elites, would set the stage for the 20th Century, and the world wars that followed.
George Kennan, an authority on the realpolitik of German-Russian affairs, has stated that access by the money markets of Paris to the huge Russian debt was a primary motivating factor pushing the autocratic Czar to strain its traditional dependent relations with Prussia in order to embrace the French Second Republic. [George F. Kennan, THE DECLINE OF BISMARCK'S EUROPEAN ORDER: Franco-Russian Relations, 1875-1890 (Princeton University Press, 1979), see, particularly Chapters 12 and 19]. This modern alliance of spies and bankers, forged by a wave of terrorism and by the threat of war and coup d'etat, was a windfall for French banking houses, as it facilitated the transfer of more than a billion gold rubles in Imperial Russian debt, previously held by German lenders.
On this point of historical interpretation -- the Triple Alliance was as much a tool of financial as diplomatic intrigue -- Kennan agrees with A.J.P. Taylor, author of several important texts on the period. Taylor has stated, "the French used the weapon of finance, but in the reverse way. . . [t]hey gave loans to Russia in order to sweeten her for an alliance; they refused loans to Italy unless she moved away from England and Germany." As both Kennan and Taylor have noted, the isolation of Germany also had the undesired effect of pushing Emperor Wilhelm II into a closer association with Austrian Emperor Franz Josef than he would have otherwise liked. Latched to the fortunes of the sinking Austro-Hungarian Empire, enmeshed as it was in ethnic conflict with the pan-Slavic militants, the Germans found themselves doomed to collide with Russia in the East, while locked in an escalating arms race with the Western powers.
Russian meddling in French internal affairs continued with the 1892 Panama Canal Scandal, in which French investors lost billions. France was forced to ceed title over the partially completed waterway to the United States in 1901. Again, after the moderate French government of Ribot and Freycinet were turned out of office, we find Russian fingerprints at the scene. According to Taylor, "the charge ([was] no doubt well founded) that Mohrenheim had been involved in the scandal." At about the same time, France would lose its interests in the Suez canal to Great Britain under similar murky circumstances. As was typical during this period, the American and British banking interests did a masterful job of maneuvering each of its rivals against each other to contain the international ambitions of all.
Unfortunately for the Czar, the Great Power ambitions behind the Okhrana's meddling in France, and the spectacular overstretch in the Balkans and on the continental bonds markets, resulted in an assassination in Sarajevo, World War One, and the fall of the Russian Imperial Dynasty. The role in starting World War One of the Czar's intelligence service, or some faction within it, may have been entirely direct and intentional, as it is alleged that Russian officers had direct involvement in the Serbian conspiracy to assassinate Archduke Ferdinand of Austria during his state visit to Sarajevo on July 24, 1914.
As we have seen, the seeds of war between Russia and Germany were planted in the mid-1880s. By the time of the Bosnian crisis of 1908-09, they had bloomed into armed skirmishing, the first round of which was a humiliating slap-down of Russia's south Slavic allies, Bulgaria and Serbia, by Turkish forces backed by Austria-Hungary and Germany. This did not long deter the ambitions of the southern trans-Slavs. In March 1912 a secret treaty was signed between Bulgaria and Serbia, stipulating that in the event of a war with Turkey, the Czar would mediate any disagreement between the two over the contested territory of Turkish Macedonia. When French President Poincare learned of the pact five months later, he exclaimed to the Russian Foreign Minister, "To tell you the truth, it is a convention for war. Moreover, the treaty contains the germ not only of a war against Turkey, but of a war against Austria." Such a war, as he knew, would inevitably involve Russia, and its ally of convenience, France, against Germany.
In fact, the first Balkan war erupted in October of that year, which spread to include a Serbo-Bulgarian coalition with Greece and Montenegro. The victors soon fell to fighting among themselves over captured Turkish land, at which point the Austrians, as announced, interceded on the side of the Turks, threatening direct military action to block Serbia's annexation of the newly-independent Albania, established under Austrian protection. The success of Russia's allies in the Balkans then prompted Germany to send military advisors to reorganize the Turkish Army. The Czar, sensing a threat to Russian access to the Black Sea through the Dardanelles straights, convened an imperial crown council in St. Petersburg on February 21, 1914, which concluded that the "historic aims" of the Russian Empire could be had only by a general European War. The Czar's war council, however, found that it would be at least two to three years before adequate preparations could be made, and prescribed a course of diplomatic moderation until Russia was ready to move on Austria-Hungary and Germany.
The Czar's Ambassador to Belgrade, N. H. de Hartwig, and his military attaches, Colonel Victor Artamanov and Captain Alexander Werchovski, moved forward with a more aggressive strategy. Working out of the Russian Embassy, these three funneled arms and money to the Serbian "Black Hand" terrorist organization, also known as "Union or Death". The direct liaison for this aid was Colonel Dragutin Dimitrijevic, code-name "Apis", head of the military intelligence section of the Serbian Army.
In Gunther's account, Werchovski is identified as the operational officer who controlled Dimiitrijevic's Black Hand organization during the crucial weeks leading up to the assassination. Artmananov took a prolonged vacation in Switzerland starting in June, while it is thought that Hartwig may not have known the details of the murder plot in advance. The assassination proceeded despite the foreknowledge of the Serbian government. According to Gunther:
The Serbian government, that is Apis' enemy, Prime Minister Pasic, learned of the assassination plot through a secret informer planted inside the Black Hand, and actually took official steps to block its execution. . . The warning could not expose the role of the Black Hand or give any details that would enable the Austrians to arrest the killers before they could strike - otherwise Pasic and the Serbian Minister would have been signing their own death warrants. Accidentally or not, the Serbian Minister [in Vienna] sabotaged Belgrade's instructions, by the vague and bumbling way in which he delivered the warning . . . Austrian red tape and schlamperei did the rest . . ." [Edmund Taylor, The Fall of the Dynasties: The Collapse of the Old Order, 1905-1922, New York: Doubleday & Co. (1963), p. 200]
For his own part, Dimitrijevic was executed before a Serbian Army firing squad later in 1914 for the crime. Artmananov survived both World Wars and retired in Yugoslavia. Werchovski, remarkably, went on to be War Minister in Kerensky's government, and eventually to a high command in the Red Army.
The ruinous consequences for Russia, as for all the monarchies of Central and Eastern Europe, that attended the split of the Romanovs from the Hohenhollenz, was clearly foreseen by some in the Okhrana. The Czar's secret policemen were themselves deeply divided, some being profoundly skeptical about the prospect of war. Peter Durnovo, who had been Okhrana chief from 1884-94, came up with an amazingly prescient, realistic assessment. He argued that the rationale being offered for war with Germany simply did not make sense -- strategically, financially, or politically -- for the old regime.
Durnovo prepared a Memorandum to Nicholas II at the time of the War council, [(February 1914) reprinted in T. Riha, ed., Readings in Russian Civilization, Vol. II, Chicago: University of Chicago Press (second ed., revised, 1969), pp. 465-478)] in which he warned:
The vital interests of Russia and Germany do not conflict . . . even from the viewpoint of new conquests, what can we gain from a victory over Germany? Possen or East Prussia? But why do we need these regions, densely populated as they are by Poles, when we find it difficult enough to manage our own Russian Poles? Why encourage centripetal tendencies . . . the Russians cannot stifle?
As for the purported advantages of access to French loans over the terms offered by the Berlin banks, Durnovo observed, "German capital is more advantageous to us than any other. First and foremost, this capital is cheaper than any other." He cited "Germany's readiness to invest in enterprises which, because of their relatively small returns, are shunned by other foreign investors". From a balance of payments perspective, the accounts of the heavily-indebted Russian crown and the value of the ruble would have benefited had Russia not dumped its Berlin lenders. "As a result of that relative cheapness", of German capital, Durnovo argued, "its influx into Russia is attended by a smaller outflow of investor's profits from Russia, as compared with French and English investments." When one also considers the higher rate of German reinvestment, he concluded, the net result was "a larger amount of rubles remain in Russia."
The enmity created between the crown rulers of Germany and Russia, he stated, would bankrupt and destroy both. Durnovo predicted:
"war will demand such enormous expenditures that they will many times exceed the more than doubtful advantages to us of the abolition of the German [economic] domination. . . a struggle between Germany and Russia, regardless of its issue, is profoundly undesirable to both sides, as undoubtedly involving a weakening of the conservative principle in the world of which the above-named two great powers are the only reliable bulwarks . . . a general European war is mortally dangerous, both for Russia and Germany, no matter who wins.
His memo finally contains the prescient warning about the historical political consequences of war between Russia and Germany. Durnovo would go on to be Minister of the Interior (1905-1906), and finally on to the State Council, Russia's upper house, where he headed the Right Wing until his death in 1915. Writing as a veteran intelligence analyst, Durnovo offered the following assessment:
It is our firm conviction, based upon a long and careful study of all contemporary subversive tendencies, that there must inevitably break out in the defeated country a social revolution which, by the very nature of things, will spread to the country of the victor."
Social revolution certainly was the result in both countries, and the major cause was subversion from above. This outcome of the war was obviously not unforeseen in some quarters, which raises the questions of motive and loyalty behind the Paris Okhrana's actions. If the Paris agentura was not entirely serving the interests of the Czar - intentionally, functionally, or circumstantially -- then the question arises: who, aside from Mohrenheim, did benefit from Okhrana terrorism, forgery and financial skullduggery?
Power politics, like investments, must be judged in the light of relative gains or losses over time. Indeed, in the long run, not one of the Great Powers or major institutions on the Continent of Europe actually benefited from the falling out between East and West. World War also spelled the ruin of the British Empire. Of course, the trade war between Russia and Germany, and the general destabilization in Eastern Europe proved a disaster for France and Germany, which were both dragged into the 1913 Russian dispute with Austria over Serbia-Croatia. The resulting conflagration, ironically, destroyed the Autocratic Czar and ruined much of the Prussian-Baltic nobility that had controlled the Russian monarchy through intermarriage and assassination for two centuries. Neither the French nor the British came out of World War One any stronger or richer than before [though, no doubt, they hoped for better when the war started]. Quite the opposite is true. The war, of course, also shattered the standing European economic system, greatly weakening the once-dominant continental Jewish banking interests surrounding the Houses of Rothschild and Warburg that once linked the City of London with Paris, and Paris with Berlin, and Berlin with St. Petersburg.
In any forensic investigation, the first question is -- who actually benefits from the deed? C'est, qui bono? If not the Jewish bankers, the Imperial Germans, the British Empire, French Republicans, or the Czarist Russians, who then might have had both motive and opportunity to carry off a financial and political revolution on a worldwide scale?
The established players on the European Continent and in London, all, and without exception, suffered great losses from World War. No one gained, in fact, except the Russian Bosheviks and, eventually, the American bankers and industrialists. We may add to this certain speculators of the second and third ranks, who may have realized impressive returns as skillful opportunists. Likely, however, none but the most powerful and canny interests, securely removed from the chaos, could have made a consistent killing on the markets for government bonds, currencies, and commodities with each new assassination, war fever, and coup attempt.
While manipulation of the world financial markets presented an obvious motive, only a few could carry it off or hope to survive to enjoy the proceeds. Add to this scenario the services of semi-independent intelligence agencies, which provided the weapons and opportunities for provocation. Finally, there was the emergent yellow press, paid and closely controlled, that made World War One seem to the average person to be either a patriotic necessity or some kind of huge, awful accident. No great surprise, therefore, that the bodies piled up all over Europe; yet, few have asked, qui bono?
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2006, Mark G. Levey