The Bank for Foreign Trade of the RSFSR played a pivotal role in the economic and financial system of the Soviet Union, especially during the formative years of the Russian Soviet Federative Socialist Republic. It was not just a financial institution; it was an extension of state policy, designed to manage and control foreign trade, regulate currency exchanges, and ensure that the USSR maintained its economic independence while engaging with the global capitalist market. The institution later became the foundation for one of Russia’s most significant banks Vneshtorgbank. Its creation, purpose, and operations reflect the strategic priorities of Soviet economic planning and foreign relations.
Origins of the Bank for Foreign Trade of RSFSR
The Bank for Foreign Trade of the RSFSR, also known as Vneshtorgbank (from the RussianVneshniy Torgovly Bank), was founded in the early 1920s during the period of the New Economic Policy (NEP). The NEP was an attempt by the Soviet government to revive the economy after years of civil war and revolution. One of the key elements of this revival was the reestablishment of foreign trade and the opening of the Soviet economy to some extent.
In this context, the Bank for Foreign Trade was established to manage international financial transactions and provide services that allowed the Soviet government to import machinery, technologies, and goods while exporting commodities like grain, oil, and metals. It served as a state-owned financial institution responsible for handling all external financial operations of the RSFSR and, eventually, the broader USSR.
Main Functions and Responsibilities
Facilitating International Trade
The bank was essential in managing import and export transactions. All foreign trade enterprises in the Soviet Union had to use the services of the Bank for Foreign Trade to settle payments, open letters of credit, and exchange currencies. Since the Soviet economy was not based on open market principles, foreign trade was strictly centralized, and the bank was one of the few state-controlled channels through which international trade could occur.
Foreign Exchange Control
Another critical function of the bank was controlling the flow of foreign currency. The Soviet Union did not allow citizens or domestic companies to hold or exchange foreign currency freely. All currency exchange was managed centrally, and the Bank for Foreign Trade was the key institution authorized to conduct such operations. This gave the Soviet government tight control over its hard currency reserves, a crucial issue in maintaining financial sovereignty.
Financing Large State Projects
The bank also played a significant role in financing large infrastructure and industrial projects, especially those requiring foreign technology or cooperation. By acting as an intermediary between the USSR and foreign suppliers, the bank enabled the Soviet Union to engage in selective globalization while maintaining a socialist economic model.
Structure and Governance
As a state bank, the Bank for Foreign Trade was under the direct supervision of the People’s Commissariat for Finance and later the Ministry of Finance of the USSR. It was not an independent or commercial entity in the conventional sense. Instead, its leadership and operations were directed according to central planning objectives. The board of the bank included representatives from various ministries related to trade, finance, and economic development.
Its headquarters was located in Moscow, but it maintained branches and correspondents in major cities abroad. These foreign outposts were instrumental in facilitating payments and correspondence with Western financial institutions and trade partners.
Transformation in the Late Soviet Period
By the 1980s, the global economy had changed significantly, and the USSR was under increasing pressure to modernize its economy and improve trade relations with capitalist countries. During this period, the Bank for Foreign Trade underwent reforms to make its operations more flexible and responsive to the needs of the market. It began to resemble more conventional commercial banks, though it remained state-controlled.
With the gradual loosening of the Soviet grip on the economy under Mikhail Gorbachev’s policies ofPerestroikaandGlasnost, the bank started to engage more openly with international banking systems. This included forming joint ventures and participating in international financial markets, albeit cautiously and under tight oversight.
Post-Soviet Transition and Legacy
After the dissolution of the Soviet Union in 1991, the financial landscape of Russia changed dramatically. The Bank for Foreign Trade of the RSFSR was transformed into a new commercial banking institution known as Vneshtorgbank, later rebranded as VTB Bank. VTB quickly became one of the largest banks in Russia, playing a major role in the country’s post-Soviet economic development and integration into the global financial system.
Key Legacy Points
- The original bank laid the groundwork for modern Russian banking in international trade.
- It was one of the earliest Soviet institutions to handle complex international financial agreements.
- It provided a model for centralized economic control while still participating in the global economy.
Impact on International Relations
The Bank for Foreign Trade of the RSFSR was not just an economic tool but a diplomatic one. Through its operations, the USSR could conduct negotiations with capitalist nations, settle debt agreements, and participate in economic diplomacy. The bank’s foreign offices in cities like London, Paris, and New York served as hubs of Soviet economic presence abroad, enabling financial deals and fostering business relationships despite political tensions during the Cold War.
In times of economic crisis, such as grain shortages or oil booms, the bank was responsible for securing deals that had significant political implications. For example, it played a role in securing grain imports from the United States during the 1970s and facilitated major energy export contracts in the 1980s.
The Bank for Foreign Trade of the RSFSR was a cornerstone of Soviet economic policy, built not only to handle financial operations but also to advance the strategic goals of the state. It functioned as a centralized, state-controlled entity managing all aspects of foreign trade and currency exchange. Through decades of global change, it evolved and eventually transitioned into a major post-Soviet financial institution that continues to operate today as VTB Bank. The legacy of the bank is visible in its role in shaping Russia’s approach to international trade, economic diplomacy, and financial independence during both the Soviet era and the post-Soviet transformation.