“My dear Herr Klausen, our banks deal in rubles. Our costs are calculated in rubles. Our workers are paid in rubles. But we adapt to the realities of international trade. When we sell you machine tools, and we have sold many to your company, we bill you in dollars and you pay in dollars—not rubles and not marks. When, or should I say if, we sell crude petroleum and natural gas to you after this pipeline is finished, you know as well as I that the terms will be agreed upon in dollars—just as they are on oil transactions everywhere else in the world.”
“And who will give us forward foreign exchange cover? Who will give a guarantee protecting us against currency losses ten years into the future?”
“That, my dear Klausen, is your problem, as you know full well. And it’s hardly the first time you’ve had such a problem. But I’m sure you can solve it. You’re a resourceful man. You know as well as I that you and your bankers in Germany have been deeply involved in dollar financing for many years. Availability of dollar funds should be no problem. Interest rates will likewise be no problem. At the moment long-term rates in dollars and marks are almost exactly the same. We prefer dollars. We do 90 percent of our foreign trade in dollars. We do not desire to make such a major exception.”
Klausen’s thoughts raced. This is it. Either or. Either this Melekov is serious or he has been instructed to sabotage the deal. No use stalling.
“Fine, Herr Melekov. I will give you an answer at noon tomorrow. If my answer is positive, you will agree to proceeding with the final signing of the contracts as scheduled—at five tomorrow afternoon?”
“Yes,” replied Melekov.
“No other problems?”
“None.”
“May I call you tomorrow at the bank? Say, just before noon?”
“Splendid,” agreed Melekov. His assistant, who had been sitting on Melekov’s left during the entire performance was as stunned as Klausen, but his face indicated nothing more than steadily increasing boredom. The fact that he had personally drafted the final version of the financial side of this agreement—in marks—and that both Melekov and the bank’s chairman, Stepanov, had approved it was already being relegated to that particular compartment of his memory banks which he reserved for what he privately termed Kuriosum.
After leaving the Germans, Melekov took the lift to the top floor of the hotel and treated his assistant to a sumptuous lunch. No further reference was made to business. By two o’clock both were back at the Foreign Trade Bank of the Soviet Union. And the first thing Melekov did was knock on the door of the office of his boss, the bank’s chairman—Valentajn Ivanovich Stepanov, Hero at Stalingrad, protégé of Khrushchev. A remnant of the glorious past, and a big pain in the ass. After knocking he moved right in with no further formality.
“Take a seat,” commanded Stepanov, in a voice which was harsh and raspy. “How did it go?”
“Fine. I’m shifting the whole transaction onto a dollar basis.”
“You’re what?”
“I said, quite distinctly I thought, that I’m shifting the entire pipeline purchase onto a dollar basis.”
“Are you crazy?”
“No. Hardly.”
“Who authorized you to do this?”
“My dear Valentajn Ivanovich, I do not require authorization. I am in charge of the foreign exchange operations of this bank.”
“But I am in charge of this bank. And such a decision is my prerogative. My God, the basic national interests of the entire Soviet Union are at stake. Have you gone mad?”
“I believe I’ve already covered the subject of my mental health. As to the rest, I have very carefully discussed this matter with the president of the National Bank. He fully agrees with the new policy.”
“New policy? What new policy?” screamed Stepanov, who by now had risen from behind his desk and gotten very red in the face. “What new policy, I asked?”
“The new dollar policy,” replied his deputy chairman.
Stepanov seemed to sense that something was going on here that could be very very dangerous. He sat down behind his desk once again and started to fiddle with a ball-point pen.
“Melekov, I do wish you would stop talking in riddles.”
“There is no riddle. As you quite well know, if I must repeat it, I am in charge of the foreign exchange operations of this bank. And it is my duty to coordinate all plans and operations in this area with the head of our parent institution, the National Bank of the Soviet Union. After all, they—not we—hold the gold and foreign exchange reserves of this country. They also control the money supply inside the country. Therefore they set the policy. We manage the day-to-day flows of money and credits to and from our country, according to that policy. I think I hardly need to explain this to you.”
“Melekov, I’ll ask you just one more time: what new dollar policy?” His voice had sunk to a hoarse whisper.
“It is quite simple,” replied his deputy. “We have very grave doubts about the immediate future of the dollar. We think it will be devalued again, and by an appreciable amount. We have, therefore, decided to get out of that currency.”
“Just like that!” was the sarcastic comment from the other side of the desk.
“No, not just like that. During the past weeks we have given the entire matter the greatest possible consideration, done enormous research both here and abroad, and reached the conclusion that we must act now, and with the greatest possible speed. We are selling our dollars on the open market starting today. But it is being done very carefully, according to a quite definitive plan.”
“So, you and Roskin have worked out a ‘quite definitive plan,’ have you?”
“That’s right. And part of it is to pay for as many of our future imports with devalued dollars as possible, allowing us a one-time discount of perhaps as much as 15 percent on everything that we have contracted for. The Soviet Union will save billions of dollars. On the pipe contract alone it will come to a quarter of a billion.”
“And Germany will accept it—just like that?”
“They will have no choice, once the contract has been signed.”
“Fine. Very clever. But, my dear Melekov, just who says that the dollar is going to be devalued? You? That arrogant academic quack Roskin? Hasn’t the news seeped through to you geniuses that the dollar was devalued in 1971?”
Melekov sat there.
“And now, like that, based upon some crackpot thinking, you and Roskin are going to overthrow a key policy—no, the key policy of our bank?”
“That’s right,” was the cool response. “I think Roskin intends to call a meeting later this week to explain the full ramifications for the future to all of us here at the Foreign Trade Bank.”
“That is most thoughtful of Comrade Roskin. And so kind of you to give me advance notice. That’s all you have for me today, Melekov?” He did not wait for a reply. “Fine, fine. Then I see no reason to detain you any longer. I’m sure you have much more important matters awaiting you.”
Melekov rose and left Stepanov’s office without any further words. It was one of the most satisfactory moments of his career.
Five minutes later he was in the trading room of his foreign exchange department. The action was hectic. His chief trader hung up a telephone the moment he spotted Melekov and hurried over.
“I’m glad you’re here.”
“Anything wrong?”
“No, quite the contrary. But I must know where we go from here.”
“How much have you gotten rid of?”
“About a billion dollars.”
“Who are the takers?”
“We did about $500 million in both Zurich and London. We’re now working on Frankfurt and Paris.”
“What’s happening to the rates?”
“Well, we must be putting a lot of pressure on the forward dollar. But it’s holding damn well. We’re being matched immediately by takers every time.”
“Good. When does New York open?”
His man glanced at a large wall clock. It showed just a few minutes past three.
“Daylight saving time in the States is over now, so we’re back to ten hours difference. That would mean New York opens in three hours.”
“Right. Try to sell at least another billion in the United States. But mix it up. If necessary do the last part on the West Coast. But remember, keep exclusively to the forward market. Don’t touch spot. And keep the rates coming to me. I’ll be in the office until midnight.”
“One more item before you go. We made that transfer of $500 million to Zurich as you instructed. Now what should we tell them to do with it?”
“I’m handling that directly,” replied Melekov. “But I think you must be kept fully in the whole picture. We’re using it to buy gold bullion.”
“You mean that the Swiss government is actually selling gold?” was the response of his astonished trader.
“No. We’re going to get it in the free market.”
This time the only response was a low whistle.
Melekov added, “That, my friend, is for your ears only. Do we understand each other?”
The nod of agreement could not have been more emphatic. And the stride of Melekov as he left the foreign exchange trading room could not have been more confident. He was taking the biggest gamble of his entire career. But he was in his fifties and it was now or never. Such an opportunity would not come again.