Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (53 page)

Bock’s staff began planning an orderly withdrawal. He angrily wrote in his diary, “We could have finished the enemy last summer. We could have destroyed him completely. Last August, the road to Moscow was open. We could have entered the Bolshevik capital in triumph and in summery weather. The high military leadership of the Fatherland made a terrible mistake when it forced my army group to adopt a position of defense last August. Now all of us are paying for that mistake.” If Hitler had stayed with his original date to launch Barbarossa, Bock would have arrived at the door of Moscow in mid-October rather than at the beginning of December, when General Winter was primed to launch his own attack.
⁴⁹

On 6 December and with the temperature -50 degrees Celsius, Zhukov’s troops launched a huge counterattack. German troops retreated all along the Moscow front, destroying whatever equipment they could not salvage. The attack was slow but relentless. Several days later, the German High Command ordered a halt to all offensive operations. The Wehrmacht was losing twice as many men from frostbite as from enemy attacks.
⁵⁰

By mid-December, German forces had retreated more than 50 miles from the capital, and Hitler relieved Bock of his command.
Général Hiver
had once again defeated an invasion of Russia.

On December 7, 1941, the Japanese attacked Pearl Harbor, and the following day the American Congress declared war on the Empire of Japan. Four days after that, Hitler supported his Axis partner by declaring war on America. The European conflict was now a global conflict, and with America in the war, the balance of military might was now on the side of the Allies. In January, the Red Army launched a surprise counter offensive that ultimately broke the German front. The relentlessly fierce battles lasted until spring and have gone into history as the Rzhev Meat-Grinder. Nazi forces were pushed westward, with the army lines moving as fast as 25 miles a day. The tide of war had changed.

The traffic of arms going east and gold going west picked up sharply at the end of 1941 and during early 1942. In mid-November 1941 the Federal Reserve Bank in San Francisco sent to the New York Fed a message that it had just received $5.6 million in gold aboard the
SS Azerbaidjan
. On January 6, 1942, Morgenthau’s Treasury Department put out a press release announcing that it had purchased $20 million more gold from the Soviet Union.

Bullion continued to be necessary in getting weapons to the Soviets because there was a strong group in Congress that did not want Moscow included in the Lend-Lease program. They lobbied at first to restrict it only to Britain and Ireland. In the end Congress passed an extension to the law to include the Soviet Union. Although Lend-Lease had been signed into law in March 1941, countries still had to pay for weapons in gold or other assets until September of that year. The program was not fully in operation until the following July. The Soviet Union eventually received $11.3 billion in goods through Lend-Lease, second only to Britain.

The most vital Allied supply route to the Soviet Union during World War II was the 1,500-mile long Murmansk Run that Stalin had outlined to Hopkins. Located nearly one thousand miles north of Moscow on the Barents Sea, Murmansk was the Soviet Union’s safest entry point. Convoys of thirty or more ships carried war hardware from ports in Scotland and Iceland to the beleaguered country that was now bearing the brunt of the Nazi offensive. The route had been busy before the Hopkins trip to Moscow, but shipments picked up sharply afterwards.

In October 1941, Morgenthau told his staff that the U.S. would be soon buying $30 million in Soviet gold as an advance payment for more military hardware. That later went up to $40 million. Moscow wanted to make sure that payment issues did not hold up the delivery of war goods. Allied ships, unfortunately, were floating targets for Nazi planes, ships, and submarines working out of military installations in Norway. Dozens of Allied vessels went to the bottom of the Arctic Sea. Enough got through, however, to keep a military pipeline to the Soviet Union open, and ultimately that turned the tide against the Nazis.
⁵¹

Immediately after the Hopkins visit to Moscow, the Soviet tanker
Batumi
arrived in San Francisco with gold. In early 1942, the pace of Soviet shipments picked up sharply. Most of the gold arrived in the U.S., but some also went to Britain. The
SS Cairo
in February took twelve tons to London, which was then sent on to New York. The
HMS Kenya
took ten tons to the U.S.

On April 28, 1942, the convoy named PQ 11 was ready to depart from the Soviet harbor to return to Britain. Among the escorts was
HMS Edinburgh
, a 10,000-ton cruiser that was 613 feet long and had a maximum speed of 32.5 knots. It had two-dozen large guns and carried four aircraft on board. It was the largest and most powerful vessel in the group and had a crew of 850 men. Rear Admiral Stuart Bonham Carter was the convoy’s commander. He had fought World War I at sea, and early in the new conflict had commanded the Third Battle Squadron that protected Atlantic convoys landing in Halifax.

The day before the
Edinburgh
was due to leave, nearly one hundred small wooden boxes arrived at dockside and were stored in a bomb room on the starboard side deep inside the vessel. The cargo was supposed to be top secret, but one of the containers fell on the deck during the loading and smashed open. Everyone now knew the secret. The ship was carrying 93 boxes containing 465 bars of gold. Total weight: five-and-a-half tons worth just over $6 million. The Soviets were sending it to the U.S. to buy weapons.
⁵²

The second day at sea, the
Edinburgh
was steaming along fifteen miles in front of the other convoy ships. At about noon, the Nazi sub
U-456
began following it. Captain Max-Martin Teichert, the commander of the German submarine, stalked the British ship for five hours and then gave the order to fire a torpedo. The shot hit the starboard side near the bomb room and the gold. The badly damaged
Edinburgh
headed back to Murmansk, which was now 250 miles away. The
HMS Foresight
gave it a tow, but the two vessels had to limp along at only four knots.

Captain Teichert called in three German destroyers to help him finish off the
Edinburgh
, and the group finally caught up with the British ship on May 2. In an ensuing battle the crippled vessel quickly sank a German ship, but then a Nazi destroyer scored a direct hit on the side of the
Edinburgh
, which miraculously continued limping along through the night. Rather than let the Germans capture the cruiser and its gold, Bonham Carter took the decision every commander dreads. He instructed the
Foresight
to fire a torpedo at the
Edinburgh
at a range of 1,500 yards. The ship and its bullion quickly sank, with the stern going down first. Some of the men aboard were lost, but others were picked up by other vessels. As the
Edinburgh
slipped into the freezing dark waters, British sailors on nearby vessels saluted. Treasure hunters in the 1980s found much of the gold from the sunken ship and brought it up.
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That catastrophic loss of gold, however, did not stop the Soviets from sending more. On April 10, 1942, the Convoy QP 10 was returning nearly empty after dropping off weapons. It was headed for Reykjavik, Iceland. The group included sixteen merchant ships and five destroyers. The British cruiser
Liverpool
, one of the escorts, carried twenty-six tons of gold. Shortly after the convoy departed, German U-boats and aircraft began attacking the Allied ships. The fierce encounter lasted three days. Four merchant vessels were sunk, and another had to return to the Soviet Union. The convoy’s escorts, though, shot down six Nazi planes and damaged others. The
Liverpool
and its gold survived, and the treasure was soon on its way to the New York Federal Reserve. The Murmansk convoys continued to send a steady flow of gold to the U.S. On July 30, 1942, the Soviet vessel
SS Smolny
arrived in Nome, Alaska from Vladivostok with $3.7 million in gold. That was one of the last gold shipments, as finally Lend-Lease kicked in.
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As a result of their courageous efforts in moving the central bank gold and the Hermitage treasures to the far side of the Urals and because Soviet citizens held little personal gold, the Nazis captured only a small amount of gold in the Soviet Union. According to postwar studies done for the Nuremberg Trial, the country lost only a ton-and-a-half of gold bars and twenty-three tons of gold fragments and jewelry despite having suffered the lion’s share of human casualties in World War II.
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Walther Funk, the president of the Reichsbank in the summer of 1942 called Emil Puhl and asked him to come to his plush office at the Reichsbank building in Berlin. Puhl was the managing vice president and the person who ran the bank’s day-to-day operations since Funk lacked the finance background for the job. He was more interested in the trappings of power than actually doing the work. Puhl was a bank careerist and a complex figure. A member of the Nazi party since 1934 and one of only two board members who had survived the purge when Hitler fired Schacht, Puhl climbed to a high level in Hitler’s Reich.

At the same time, though, he attended the Berlin church of Pastor Martin Niemöller, one of the founders of the Confessional Church in Berlin, who spent years in the Sachsenhausen and Dachau concentration camps because of his anti-Nazi activities. Hjalmar Schacht was also a member of the church. As the German delegate on the board of the Bank for International Settlements, Puhl attended its monthly meetings in Switzerland. He sometimes brought back for the pastor new books about religion that were banned in Germany. While there, Puhl also regularly attended a cabaret that satirized Hitler and the Nazis. Few people in Berlin knew what he did in Basel outside of his BIS business, and back in Berlin he was a reliable civil servant who never spoke out of turn and followed orders. He left his ethics at the door and was one of the key Germans who made Hitler’s government work.
¹

Funk explained at the meeting with Puhl that Heinrich Himmler, the Reichsführer of the
SS
, the Nazi terror organization, had contacted him and asked that the bank take charge of valuables that people had “deposited” in what Funk called the “eastern occupied territories.” He then told Puhl to “ask no other questions.” The shipments were from inmates in the death camps Beł
ec, Sobibór, Treblinka and Auschwitz. The conversation between the two bankers was full of euphemisms, but there was no misunderstanding that Funk was talking about valuables of concentration camp victims. Himmler had explained that his own headquarters lacked a secure enough storage facility to house the valuable property. Funk told Puhl that the material had to be handled with utmost secrecy. Nothing they were discussing was to be put on paper. Funk told him to work out the details with Oswald Pohl, the head of the economics department of the
SS
and also a concentration camp inspector. Funk said that Himmler and Finance Minister Lutz Schwerin von Krosigk had already reached an agreement on the matter.
²

Funk and Himmler were now leaving the job of handling the concentration camp valuables to their deputies, and Puhl could expect to receive a phone call from his counterpart in the
SS
before long. The vice president immediately tried to get out of taking the war booty, calling it “inconvenient” and adding that he didn’t know the consequences of such action. Funk assured him that there would be only a few shipments. In the end, the two men agreed that the Reichsbank would make its services available to the
SS
. They also decided that
SS
members would deliver and unpack the material delivered to the bank. The final admonition was that no one was to be told the origin of the goods. Only a dozen or so Reichsbank officials ever knew about the operation.