Holy Roman Empire

Chapter 397: When Money Runs Dry, the Pigs Can Only Be Butchered

In St. Petersburg, since the conclusion of the Battle of East Prussia, the beleaguered Russian government has had a hard time.

Although the frontline generals took the blame, Alexander II understood that the real reason for the Russian army’s major defeat was not an issue of the commanders’ leadership.

Had it not been for the order for a quick resolution to the war, the Battle of East Prussia might still be ongoing. According to the initial strategy, the Russian army only needed to hold its ground against the Prussians and rely on its naval advantage to win.

Offense and defense are entirely different concepts. Had the Russian army adopted a defensive strategy, they certainly wouldn’t have been defeated so swiftly. With the sudden reinforcement by the Prussians, at most, they would have lost a few defensive lines.

“Money” became the main culprit for the defeat in this battle, followed by the poor transportation system of the Russian Empire, then the corrupt bureaucratic system of the Russian government, and lastly, the “decisive battle order.”

The Minister of War, Milyutin, reported, “Your Majesty, mobilization has already been initiated. The troop losses on the frontline can be replenished to full strength within the next two months.

The lost weapons and equipment are being rushed into production day and night by domestic military industry enterprises. For the lacking parts, we have already placed orders with Austria to ensure they will be delivered to the troops before the beginning of next spring.”

Milyutin wisely overlooked the matter of assigning blame. Though the main officers at the frontline were blamed, they were not removed or held accountable. Instead, they were ordered to redeem themselves.

Overall, their performance was satisfactory. These officers were the greatest assets Russia gained from the recent Nea East War and represented the elites of the Russian military.

With more fighting ahead, Alexander II naturally would not undertake actions that would harm his own interests.

“It’s still a money problem, isn’t it?”

Alexander II asked with resignation evident in his tone, indicating that the issue of “money” was not a recent occurrence.

Minister of War Milyutin confirmed, “Yes! We have fallen too far behind on many payments, and many cooperating enterprises are now facing financial difficulties as a result. They are now demanding payment of the overdue amounts before they will organize production.”

It was common for the Russian government to owe companies money, but a situation like this where the debt was so severe was rare.

The capitalists were no fools. Knowing the Russian government’s financial troubles, they naturally would not continue extending credit.

In this regard, the Russian officials were their allies. If companies didn’t make money, what could they give as kickbacks?

Not only military-industrial enterprises but all companies cooperating with the Russian government now have accumulated significant debts.

Without resolving these issues, the Russian Empire need not consider next year’s war and might as well surrender directly.

Alexander II asked with anticipation, “What plans does the Ministry of Finance have to resolve the current crisis?”

Looking weary, Finance Minister Michael von Reutern replied, “There are two solutions: first, to levy another war tax; second, to borrow foreign debt.”

Not issuing bonds or borrowing domestically undoubtedly indicated that the Russian government’s credit had collapsed and domestic finance was also problematic.

In fact, when the Russian army had just occupied East Prussia, many outsiders were optimistic about them. The Finance Ministry took this opportunity to sell a batch of bonds.

Then nothing followed. Now, these bonds are once again being ignored. Even the Finance Minister himself is unsure if these bonds can be redeemed.

War is a money-guzzling beast. Russia was a feudal empire transitioning to capitalism, with very limited funds to mobilize.

Of course, this did not mean they had no money at all. It’s just that the shrewd financiers chose to feign poverty at this time, showing no intention of helping the Russian government.

With a sardonic smile, Alexander II said, “Can’t the domestic financial sector think of a solution? As far as I know, don’t they hold external debts from many European countries?”

There was no issue. The Russian government borrowing from foreign banks and Russian banks lending abroad are normal financial activities.

The only abnormality was that these banks were unwilling to lend to the Russian government.

Of course, this was not entirely the banks’ fault, but more an issue of successive Tsars going too far. Incidents of borrowing without repayment happened far too often, so no one wanted to be fooled again.

The topic stalled, and with the government’s financial collapse, it’s understandable that domestic banks are hesitant to lend.

Seeing no response, Alexander II did not continue this topic. He knew that for bureaucrats, some things could be done but not said, lest they leave openings to their political opponents.

“How much funding can be raised?”

Finance Minister Reutern considered and said, “A preliminary estimate is that 86 million rubles in war taxes could be levied. As for seeking loans from foreign banks, the exact amount is uncertain. This depends on how much collateral we can provide, as well as political factors that also need to be taken into account.”

“86 million rubles” may seem astronomical, but in reality, it’s insufficient to repay the debts owed to the enterprises. In the war effort, it’s merely a drop in the bucket.

It’s not that the ruble is worthless; the issue is the exorbitant costs of the war. Firing several hundred tons of shells in a day is just the basic operation.

In fact, this is already quite economical. With 500,000-600,000 troops fighting on the front lines, even if each soldier consumes five bullets a day, that’s three million bullets.

With so many troops, even if you’re as frugal as possible, you still need to fire thousands of artillery shells a day on average.

Just the basic ammunition consumption costs hundreds of thousands of rubles daily. Adding to that the consumption of various logistical supplies, and daily expenses of several million rubles are inevitable.

After all, the cost of materials on the battlefield isn’t the production cost. Many strategic materials, transported from the rear to the front lines and into the hands of the Russian army, have already doubled or even tripled in price.

Alexander II furrowed his brow and asked, “So, tell me, what are you planning to use as collateral? How much can we borrow?”

Alexander II was extremely displeased with this feeling of losing control. Unfortunately, reality left him with no choice. He couldn’t just hand over European dominance on a silver platter, could he?

If they couldn’t even handle the small Kingdom of Prussia, Russia’s international standing might fall from the top spot behind Britain, France, and Austria, down to even ranking behind Prussia.

Most of the political gains from the Near East War would be squandered in this defeat.

Finance Minister Reutern decisively passed the buck, “It depends on the negotiation results. It’s not about what we offer, but what the other side wants. We can contact several countries and try to secure the most favorable terms for us; the Foreign Ministry specializes in this.”

Foreign Minister Ivanov glared fiercely at Reutern. This was clearly setting him up.

International loans were never easy to secure. While there might be loans without conditions attached, the Russian government couldn’t obtain them.

Once they signed a treaty that harmed national interests, the Foreign Ministry would be left holding the bag. Ivanov’s mood instantly soured.

“Your Majesty, the funding gap is too large right now. There are only a handful of entities worldwide capable of offering such a loan, leaving us with virtually no choice.

If we rely on international loans to solve the financial crisis, we might have to pay a steep price just to borrow the money.

Perhaps we should explore domestic solutions. The vast Russian Empire should be able to raise several hundred million rubles.”

Ivanov’s stance was clear: borrowing money was not the best option. The current funding gap was too large, and even if they managed to borrow, they wouldn’t be able to repay it in the future.

Currently, there were not many bargaining chips they could put up as collateral. Apart from their vast territory, Ivanov did not think there was anything else that could serve as collateral for such a large loan.

Defaulting without repayment was easy, but collateralized loans were different. None of the financiers currently capable of providing them loans were soft targets. If they demanded the collateral later, it wasn’t as if Russia could wage war against them, right?

This was clearly impossible. If they had money for war, they would have repaid the debt long ago. War was actually the most extravagant of pursuits, unsuitable for the poor.

Rather than ending up in a difficult situation, it was better to flip the table preemptively. If the government was broke, they could seek money from those who had it. It wasn’t the first time, and the experience handed down from their ancestors was there to guide them.

If they took a bold step, not only could they resolve the debt crisis, but they might also line their pockets a bit. The pigs had been fattened. Now was the time to butcher them.

Alexander II nodded. This might not be the best choice, but it was the most suitable for the Russian government.

In a tacit agreement among the upper echelons of the Russian government, the Jews began to suffer misfortune. The primary targets were Jewish financiers, but the ordinary Jews suffered as well.

The nobles naturally wouldn’t miss this chance to profit. Whether reformist or conservative, they were unusually united on this issue.