Holy Roman Empire

Chapter 530: The Tsar's Choice

Chapter 530: The Tsar's Choice

St. Petersburg became the center of the storm after the full outbreak of the agricultural crisis.

European public opinion widely accused the Russians of deliberately creating the agricultural crisis, attempting to use the opportunity to destroy Europe’s agricultural production system and monopolize the continent’s grain supply.

This accusation wasn’t entirely wrong. The Russian government did indeed have such a plan, but the crisis erupted before they could implement it.

Agriculture is one of the hardest industries to monopolize since it has virtually no barriers to entry—anyone can farm. In this era, arable land is abundant, and any colonial empire can be self-sufficient without relying on others.

The Russian government had the ambition to monopolize Europe’s grain supply, but they lacked the capability to do so. Russian agricultural production costs are not competitive, making it nearly impossible to win in the market.

Faced with the overwhelming public criticism, Alexander II decisively chose to ignore it. After all, the Russian government had always been criticized on the European continent, and he had grown accustomed to it.

While public opinion could be ignored, the reactions of European governments were not something Alexander II could afford to overlook.

As of April 1873, several politicians had publicly called for increased tariffs on imported agricultural products to protect their domestic agriculture.

On the surface, raising all agricultural import tariffs seemed fair, but there was a strong undercurrent of malice behind it.

Among the four major agricultural exporters in Europe, the Kingdom of Prussia held the smallest market share and thus faced the least impact.

The Kingdom of Poland, ranking second to last, was already embroiled in internal conflict. No matter how much the situation worsened, it couldn’t get much worse.

Although the Russian Empire ranked second in total export value, in terms of volume, they were undoubtedly the leader.

Austria had the highest export value, thanks not only to domestic grain processing but also to the import of agricultural products from Russia and Poland for further processing, with much of their profit coming from added value on products.

After the outbreak of the agricultural crisis, the Russian government also prepared to process their own products, denying the Austrians the opportunity to profit from the price difference.

Unfortunately, the domestic industrial capacity was too weak, leading to high processing costs, and in the face of fierce market competition, they lost their competitive edge.

The agricultural crisis hit Austria’s agricultural processing enterprises hard, leading them to reduce production capacity. Consequently, the total volume of agricultural products exported from Russia to Austria also declined, though it still accounted for more than half of Russia’s total agricultural exports.

From an economic standpoint, the interests of both nations were intertwined—what harmed one would harm the other, and what benefited one would benefit the other. Alexander II had just received a telegram from the Austrian Agricultural Processing Enterprises Association, urging Russia to cut down on its grain exports.

The large quantities of cheap raw grain flooding the international market and directly entering European countries posed a life-and-death challenge for Austria’s agricultural processing enterprises.

As market competition intensified, these enterprises were not about to sit idly by. They wouldn’t be content with just breaking even while getting attention—they needed to make a profit.

Capitalists are shrewd, and what appeared to be an ordinary telegram was actually a final ultimatum.

Capital follows profit. If agricultural processing no longer offered profits, the capitalists wouldn’t hesitate to abandon it.

Since 1872, shrewd capitalists had already been transitioning. With the Second Industrial Revolution underway, there were plenty of other investment opportunities, and there was no need to cling to a single industry.

If the Russians were willing to reduce their grain exports, everyone’s profits would be secured, and business could continue.

Otherwise, things would get tricky. Due to plummeting grain prices, almost every grain capitalist’s warehouse was filled to the brim, waiting for the market to recover.

If there was no hope in sight, they would have to withdraw, even if it meant taking losses. This scenario would be far from ideal for the Russians because, due to the Russo-Austrian alliance, Austrian processing enterprises had consistently prioritized purchasing Russian agricultural products.

The situation was very different on the European continent, where under similar conditions, almost no capitalist would choose to cooperate with the Russians.

This was a consequence of Russia’s loss of credibility, a problem that couldn’t be resolved quickly. Currently, Russia’s agricultural exports rely solely on being cheap.

International grain prices kept dropping, largely driven down by Russian grain exports. To sell their grain, the Russians had to lower prices.

As Russia reduced its grain export prices, the market followed suit. The current international grain prices were at their lowest point in decades, squeezing everyone’s profits to almost nothing.

Alexander II knew the consequences of this approach, but faced with mountains of grain, they had no choice but to sell, even at a loss.

Moreover, the definition of “losing money” can’t be generalized. The grain exported brings in foreign currency, while what circulates domestically is paper rubles.

The paper ruble issued by the Russian government is not recognized internationally. In international trade, gold, silver, pounds, guilders, and francs are still the most commonly used currencies.

The ruble’s international credibility is lower than the krone of the Nordic Federation and also doesn’t compare to the Dutch guilder. Even the Swiss franc and the Prussian mark are more popular than the ruble.

From the perspective of national development, the Russian government must obtain as much foreign currency as possible, even if it means taking a loss. Otherwise, they won’t be able to balance the trade deficit, which could lead to an outflow of gold and silver.

However, continuously losing money isn’t sustainable. To offset the losses, the Russian government has already devalued the ruble twice.

This was a heavy blow to the ruble, which had just undergone a gold standard reform, severely damaging market confidence.

Currency cannot be devalued indefinitely. Economists have already warned Alexander II that if this continues, the market will be ruined, and they might as well go back to using gold and silver as currency!

After adjusting his emotions, Alexander II asked, “What do you think of the telegram from the Austrian Agricultural Processing Enterprises Association?”

The fact that an industry association could directly send him a threatening telegram made Alexander II very angry. If he had another choice, he would have considered cutting off trade with them altogether.

Of course, he only thought about it, but he wouldn’t actually do it. Without this biggest buyer, their situation would only get worse.

Finance Minister Kristanval responded, “Your Majesty, unless all countries jointly reduce grain export volumes to collectively raise grain prices, we absolutely cannot reduce our exports.

There is still a large amount of unsold agricultural products in the country, especially in the newly developed Siberian region, where grain is not in demand at all, and the government collects grain in lieu of taxes.

The Ministry of Finance is currently organizing manpower for transportation, but if we can’t sell this grain, all of this tax revenue will be lost.

If the problem of unsold grain can’t be resolved, we might as well use this grain to pay off foreign debt. Whether they accept it or not, we’ll only pay in grain.”

In Kristanval’s view, previous instances of default were something everyone could tolerate. Now that the Russian government is willing to acknowledge its past debts, that’s already giving them considerable face. Expecting more might be too much.

Foreign Minister Chris Basham shook his head repeatedly, “No, we finally managed to reach an agreement with the other countries. If we act rashly, we’ll quickly find ourselves in a diplomatic crisis again.

According to the previous agreement, the countries have already agreed to let us repay the debt in installments using agricultural products. There’s no need to take such extreme measures.”

Using grain to repay debt was the greatest diplomatic achievement of Russia’s Foreign Ministry. The plan was to repay all debts over fifteen years. If they suddenly decided to repay all the debt in grain at once, it might solve the agricultural crisis for Russia, but the creditors wouldn’t tolerate it!

Grain that can’t be sold is worthless. Chris Basham didn’t want to see the Foreign Ministry’s accomplishments destroyed, as that would be a disaster for the Russian Empire as well.

When it came to reducing production, no one even brought it up. Austria’s call for reduced production last year had already become a joke.

Aside from Austria reducing its grain-growing areas, Russia, Prussia, and Poland had only paid lip service and passed a few laws.

When it came to implementation, everyone realized it wasn’t so simple. Laws couldn’t dictate which plots of land should be used for growing grain and which shouldn’t.

No decree can be implemented overnight. Even with the widely recognized fallow laws, when it came to actual execution, local officials didn’t know which lands had been left fallow and which hadn’t.

Without prior statistics, how could they enforce anything? Faced with reality, officials tacitly agreed to start gathering data from now on.

If the land was used to grow grain this year, then next year, it would be designated for fallowing. Everyone recorded this clearly, and no one could complain.

As a result, this year, the grain-growing areas in all countries didn’t decrease but increased instead, leaving the governments powerless. It might take years for regulation efforts to take effect.

Market self-regulation might be more effective than government decrees. After several consecutive years of losses, ordinary people might not reduce the amount of grain they plant, but the nobles certainly would.

Minister of Agriculture Manilov interrupted, saying, “There’s no point in arguing, gentlemen. Unless we address the agricultural crisis at its root, the situation will only worsen.

Even if we forcibly offload grain to our creditors, it’s just a temporary fix and doesn’t address the underlying issues. The agricultural crisis isn’t something we can shake off in just a year or two.

According to data released by Austria’s Ministry of Agriculture, if no measures are taken and the market is left to adjust on its own, this agricultural downturn could last for decades.

Russia is a major agricultural country, and if this crisis drags on for years, initial estimates suggest that tens of millions of farmers will go bankrupt—potentially as many as twenty or thirty million.

Although the Empire’s industrialization is progressing rapidly, absorbing such a massive number of bankrupt farmers is not something that can be achieved in a short time.

Our biggest problem right now isn’t just unsold grain but how to prevent farmers from going bankrupt on a large scale.

Given the current situation, the number of bankrupt farmers this year is expected to be several times higher than last year, with an estimated fifty to eighty thousand families facing bankruptcy. If the agricultural crisis continues, this number will grow exponentially each year.”

He might as well have said plainly: If we can’t eat all this grain, we might as well go to war!

The agricultural crisis couldn’t have come at a worse time. If it had happened a few years earlier, during the Russo-Prussian War, it might have even changed the outcome of the conflict.

With plenty of cheap grain available, the Russian government could have sustained the war effort. A Tsar who can feed his soldiers is already a good Tsar and other issues can be overcome.

Even though the Russian Empire might seem somewhat diminished now, if war breaks out, Russia’s war potential would far exceed what it was a few years ago.

That’s the advantage of having an abundance of grain. No matter how difficult it is to sell the grain, as long as farmers don’t go bankrupt en masse, the problem remains manageable. In other words, if everyone is fed, there will be no uprisings.

Despite the severity of the agricultural crisis, Russian farmers have not blamed the Russian government, and Alexander II’s prestige remains intact—a benefit of keeping people fed.

After pondering for a moment, Alexander II decided to yield to reality. “Better them than us,” he thought. It’s always better for others to suffer misfortune than for them to do so.

“Have the Foreign Ministry engage in deep discussions with the Austrian government. This time, we must do whatever it takes to drag them down with us.”

Having experienced one failure, Alexander II’s arrogance had diminished significantly, and he had become much more cautious in his actions.

This is a crisis, but it’s also an opportunity. If handled well, the Russian Empire could leverage Austria’s strength to eliminate an enemy.