8 min read

How Russia bossed the room at Bretton Woods

How Russia bossed the room at Bretton Woods

Earlier this week Russia essentially vetoed the joint agreement at the IMF’s spring meetings - one of the most important policy documents of the economic calendar. Most of the members of the IMFC, the main IMF committee, had wanted to use the statement to condemn the invasion of Ukraine; Russia refused.

This is, to put it lightly, highly unusual. In all my years I cannot remember an episode where the IMF was unable to do something as straightforward as issue a joint statement. And this has prompted some to ask whether the IMF, and for that matter the G20 grouping of leading nations (which also failed to agree a communique), is capable of carrying on in its current form. How can an institution designed for consensus in a multilateral world survive in a multipolar world where different factions are at cold or hot war with each other? These are good questions and - spoiler alert - I have no intention of attempting to answer them in the following paragraphs. But one thing that is perhaps worth noting is that this is hardly the first time Russia has thrown a spanner in the works of a major economic and political summit.

A few years ago I wrote a book about the Bretton Woods conference, that 1944 meeting which enshrined the post-war economic system and created the International Monetary Fund and World Bank. Bretton Woods mattered for all sorts of reasons: it was arguably the only time in history where people got together, thought long and hard about the problems facing the international economy and actually did something to try to make it better.

In the course of a few weeks, in the hothouse environment of a grand old hotel in New Hampshire, they created rules about how currencies interacted and how financial systems should be run, not to mention the bodies charged with overseeing them. They did so because they figured that if they failed to clean up the financial and economic mess that had essentially caused WWII then soon enough we would be facing WWIII. It is, and I’m saying this not just because it might shift a copy of my book, a genuinely fascinating event, chock full of surprises.

One of those surprises - certainly a surprise to me as I researched the book - was how influential the Russians were throughout. This is, in hindsight, deeply odd, after all we are talking here about Stalin’s Soviet Union. What possible interest would a communist nation have in a conference mapping out the future of capitalism?

The answer, it turns out, is: rather a lot. The Russians sent an enormous delegation, led by a man called Mikhail Stepanov. Alongside him were lots of technicians who could barely speak a word of English, a fair few glamorous “secretaries” who were possibly there as honeytraps for other delegates (the Canadian delegate received a late-night knock at the door from one of them) and at least one working spy - of whom more in a moment.

The American and Russian delegations in a casual photo at Bretton Woods. Russian delegation head Stepanov can be seen seated in the middle chatting to Harry Dexter White, head of the American delegation
The American and Russian delegations in a casual photo at Bretton Woods. Russian delegation head Stepanov can be seen seated in the middle chatting to Harry Dexter White, head of the American delegation

Remember, at this point Russia was on the allied side, fighting back Hitler on the eastern front in Europe, and doing so well that among the American population the USSR was looked upon significantly more kindly than the UK. In much the same way as Germany rolled out the red carpet to Russia in recent decades in an effort to bring it onside (Ostpolitik, as it became known), the Americans rolled out the red carpet to the Russians at Bretton Woods.

These days when most people talk about Bretton Woods it is for the economic rules and institutions created there. What is far less often mentioned is how much of the conference the Americans spent cosying up to the Russians. According to one columnist, the White House was “in abject terror of Russian post-war power”, so bowed to many of their demands.

And those demands were many. One bone of contention throughout was the amount of money (or rather gold) each country would have to contribute to help set up the new IMF and World Bank. Russia wanted a large quota at both institutions (for there lay the prestige) but was decidedly reluctant when it came to pointing up the actual amount for that quota. Unlike every other country, it refused to give the same quota to both institutions until the last minute. Indeed, the Russians very nearly capsized the entire conference by refusing to contribute the amount they were supposed to until a few minutes before the closing dinner.

Some of the Russian delegation chatting to Lydia Lopokova, John Maynard Keynes's Russian wife. The man she is looking at is Stepanov, their lead delegate. At one stage, Lydia was drafted in as a translator in the face of recurrent language issues
Some of the Russian delegation chatting to Lydia Lopokova, John Maynard Keynes's Russian wife. The man she is looking at is Stepanov, their lead delegate. At one stage, Lydia was drafted in as a translator in the face of recurrent language issues

What I found especially striking as I researched the book was the divergent attitude the Americans had towards Russian intransigence as opposed to the demands of other countries. The Russians, after all, were hardly the only country being tricky at the conference. The French delegate got very upset when it emerged that there were no plans to write the IMF’s articles of agreement in French as well as English. The Mexicans spent much of the conference attempting to steer the world towards “bimetallism” whereby currencies would be backed up by silver as well as gold (Mexico being a big silver producer). The Americans, led by a US Treasury official called Harry Dexter White, paid such demands little attention. But the Russians were different.

White spent many hours shuttling in and out of private meetings with the Soviet delegates. He seemed somewhat more sympathetic to their cause. When the Russians insisted on the insertion of a clause in the Bank’s articles that any country which suffered enemy occupation (eg, well, Russia) should be allowed to hold back 0.5 per cent of its contribution to the Bank, he hurried the clause in there. It is still in the Bank’s articles today (and one wonders whether it might be used by Ukraine in the coming years).

The notes in Russian archives pertaining to the conference seemed to express surprise about how easily their delegation got their way. It was “an important diplomatic success for the USSR”, the internal documents concluded. But their aggression did not endear them to the other delegates. John Maynard Keynes, who was leading the UK delegation, wrote that while he considered the Russians “good chaps”, they “lost prestige and dignity in front of all the Delegations” and had secured nearly everything they wanted:

1. Too large a quota in the Fund. 2. Too small a contribution to the Bank. 3. Reduced gold subscriptions. 4. Provisions by which even gold they put up can probably never leave Moscow. 5. Virtually contracting out of the exchange fixing clauses and so forth.
Nearly all the concessions, however, have been at the Americans’ expense. It has been the concern of the American policy to appease the Russians and get them in. For my own part, I think this was wise. And I do not think the Russians have done themselves any good by their stonewalling tactics and hard horse-dealing.

Others were disgusted at how easily the Americans gave way to the Russians. The Belgian delegate George Theunis took one of the British delegates, Lionel Robbins, aside and shouted: “It is a disgrace! The Americans give way to the Russians every time. And you too, you British, are just as bad. You are on your knees to them. You wait. You’ll see what a harvest you’ll reap at the peace conference.”

What would you do about it? Robbins asked. “The aged statesman was taken aback, but after a moment’s hesitation he gathered his forces: ‘ne pas avoir des illusions’ he said very solemnly.”

What did happen in the end? Having dominated the Bretton Woods conference and inserted so many of their own demands into the articles of agreement, when it came to actually implementing Bretton Woods, the USSR quietly receded from sight. It never joined the IMF or World Bank. A couple of years later George Kennan wrote his famous “long telegram” from Moscow and Winston Churchill warned of an “iron curtain” descending across Europe. The Cold War began.

The Soviet decision, according to Kennan, brought forth an ‘anguished cry of bewilderment’ from the Treasury. They had allowed themselves to believe that the Fund could be a truly international body, convinced by the apparent sincerity of the Russian delegates at the conference.

Bretton Woods, in other words, was one of the final moments where America was still trying to court the USSR, outstretching the hand of friendship, perhaps naively, before the Soviet bear clamped its teeth down - echoes, perhaps of the recent G20 and G8 summits where Western leaders cosied up to Vladimir Putin, months before he invaded Ukraine and turned the international order on its head. Le plus ca change…


I mentioned earlier that among the Soviet delegation there was at least one secret agent. This was Nikolai Chechulin, a tall, handsome man who was down in the official register as the deputy president of the State Bank but who was also, it turns out, an NKVD agent. You can see him in this photograph of the US and USSR delegations, standing fifth from the right.

Chechulin met with Harry Dexter White numerous times and White would later be accused of spying on the US, having met a number of times with Chechulin and other Soviet representatives both before and after the conference. Having been the chief creator of the IMF and World Bank, he ended his career in ignominy and died three days after testifying to the House Un-American Activities Committee in 1948. There is still a live debate about the extent to which one could categorise him as a “spy” today.

While I was going through the Bank of England archives while researching my book, I spotted Chechulin’s name again. It turns out the spy had also formed a special connection with their delegate, George Bolton at Bretton Woods. Bolton reported back that Chechulin, reading the paper on the far right in the photo below, “appears to have the most profound admiration for the Bank of England”.

In his diary Bolton wrote: “In our cups we have sworn eternal friendship and promised to exchange visits in the near future … While it would obviously be unwise to pay too much attention to private conversations of this nature, more closer personal relationships may have some profitable results.”

A few years later, Chechulin’s central bank colleague F.P. Bystrov was invited to the Bank for lunch with the Governor. The Bank’s archives said: “The occasion was slightly marred by the fact that the car which brought the Russian party from Oxford was stopped by the police outside Oxford, who said they had received instructions to arrest this car and examine the passengers’ documents etc. However, not much was made of the incident and we had a very friendly discussion lasting about two hours.”

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