By the late 1930s, foreign trade became difficult because Germany lacked the gold or foreign exchange needed to finance any balance of payment deficit.
[67] Further damaging foreign trade, Germany had already heavily regulated exports and imports, requiring licenses and approval for all trades so that it could favor the raw materials imports that it desperately need.
[67] Additional trading difficulties were caused by a boycott of German goods following
Kristallnacht in November 1938.
[68]
Because an autarkic economic approach or an alliance with Britain were impossible, Germany needed to arrange closer relations with the Soviet Union, if not just for economic reasons alone.
[1] Despite work on coal hydrogenisation,
[69] Germany lacked oil and could only supply 25% of its own needs.
[1] Since its main supplier, the United States, would be potentially cut off during a war, Germany had to look to Russia and Romania.
[1] Germany suffered from the same supply problems for metal ores such as
chrome,
tungsten,
nickel,
molybdenum, and
manganese, all of which were needed for hardened steel used in tanks, ships and other war equipment.
[1] For example, Germany was almost 100% reliant on imports for chrome, and the loss of South African and Turkish imports along were a blockade to arise would eliminate 80% of imports.
[70] Even for manganese, of which Germany supplied 40% of its needs, the expected British blockade would cut its link to its main outside supplier, South Africa.
[1] Germany was 35% self-sufficient for iron ore, but would lose 36% of its previous imported supply on the outbreak of war.
[70] Furthermore, Stalin's permission was needed to transit tungsten and molybdenum from China, which required Soviet-controlled rail lines.
[1] Meanwhile, the Soviet Union was the world's largest source of manganese, the second largest for chrome and platinum and the third largest supplier of crude oil, iron ore and nickel.
[70]
In 1936,
Hermann Göring told several German industrialists that "obtaining raw materials from Russia is so important that he shall raise this issue with Hitler himself—however much the latter might be ill-disposed to accept this."
[74] By 1937, the vast gulf between raw material needs and supplies had taken over Hitler's thinking for conquest. German military industry desperately needed certain raw materials, such as manganese ore and petroleum, and these could be purchased on a regular basis only from the Soviet Union.
[74] Goering had stated that Germany desired business ties with the Russians "at any cost."
[74]
After hearing the dire reports of German planners, in a November 5, 1937 meeting he told his generals that he would have to take over a neighboring country to ensure the supply of agricultural land and raw materials, now equating this massive economic need with
Lebensraum.
[75] The German
Anschluss and
German occupation of Czechoslovakia were driven by economic as much as racial motives, with heavy industry in those locations being gobbled up by the
Reichswehr rather than private industry.
[75] The day German forces entered the Czech
Sudetenland,
Hermann Göring pored over figures with generals covering every item of Sudeten economic resources, from
lignite to margarine, so that it could be allocated to the Four Year Plan.
[75] In January 1939, the huge Four Year Plan goals combined with a shortage of foreign hard currencies needed to pay for raw materials forced Hitler to order major defense cuts, including a reduction by the
Wehrmacht of its allocations by 30% of steel, 47% of aluminum, 25% of cement, 14% of rubber and 20% of copper.
[76] On January 30, 1939, Hitler made his "Export or die" speech calling for a German economic offensive ("export battle", to use Hitler's term), to increase German foreign exchange holdings to pay for raw materials such high-grade iron needed for military materials.
[76]
Germany and the Soviet Union discussed entering into an economic deal throughout early 1939.
[77] During spring and summer 1939, the Soviets negotiated a political and military pact with France and Britain, while at the same time talking with German officials about a potential political Soviet–German agreement.
[78] Through economic discussion in April and May, Germany and the Soviet Union hinted of discussing a political agreement.
[79][80][81][63][82][83][84][85][86][87]
Ensuing political discussions between the countries were channeled through the economic negotiation, because the economic needs of the two sides were substantial and because close military and diplomatic connections had been severed in the mid-1930s after the creation of the
Anti-Comintern Pact and the
Spanish Civil War, leaving these talks as the only means of communication.
[88] German planners in April and May 1939 feared massive oil, food, rubber and metal ore shortages without Soviet help in the event of a war.
[73][89][89]
https://en.wikipedia.org/wiki/Nazi–Soviet_economic_relations_(1934–41)#cite_note-ericson44-89
In late July and early August, the Soviet Union and Germany were very close to finalizing the terms of a proposed economic deal and began to more concretely discuss the possibility of a political deal, which the Soviets insisted could only follow after an economic deal was reached.
[90][91] They discussed prior hostilities between the countries in the 1930s and addressed their common ground of
anti-capitalism, stating "there is one common element in the ideology of Germany, Italy and the Soviet Union: opposition to the capitalist democracies,"
[92][93] "neither we nor Italy have anything in common with the capitalist west" and "it seems to us rather unnatural that a socialist state would stand on the side of the western democracies."
[94] The Germans explained that their prior hostility toward Soviet Bolshevism had subsided with the changes in the
Comintern and the Soviet renunciation of a
world revolution.
[94] The Soviet official at the meeting characterized the conversation as "extremely important."
[94]
