APPENDIX 155 



Russia's Problem in Financing the War 



In 1914, at the commencement of the war, Russia 

 had a rapidly increasing foreign trade, which produced 

 a credit balance for meeting the service of her foreign 

 loans. Her public debt was decreasing, and was 

 largely offset by revenue-producing property owned 

 by the state. Direct taxation throughout the Empire 

 was declining year by year. The financial position 

 was sound. The government debt, considered on a 

 per capita basis, was the lowest of any European 

 country, and if considered in relation to its natural 

 resources, presented an even more favourable compar- 

 ison. This advantageous financial position and the 

 latent wealth of her resources did not save Russia, 

 however, from the severest possible difficulties in 

 financing the war. Internal loans were promptly 

 forthcoming for internal needs, which were the greater 

 part of the demands of the war, but her ports were 

 closed and commercial intercourse with the world 

 practically cut off. Not being able to export goods, 

 and not owning foreign securities, Russia found herself 

 practically without foreign resources. The unprece- 

 dented character of the war imperatively demanded 

 huge expenditures of materials, which her own manu- 

 facturers were unable to supply, even if the raw pro- 

 ducts could be obtained within her own borders. 

 The enormous depreciation of the rouble exchange, 

 inevitable under these circumstances, intensified the 

 difficulties in many ways. The situation could be met 

 only by foreign loans. Russia and the basis of her 



