Chapter 530: Chapter 03, The Tsarist’s Choice
 

St. Petersburg, after the full outbreak of the agricultural crisis, became the center of the storm’s vortex.

European public opinion repeatedly blamed the Russians for intentionally creating an agricultural crisis, attempting to use the opportunity to collapse the European agricultural production system and monopolize the food supply in Europe.

This statement was not wrong; the Tsarist Government did indeed have such a plan, but the agricultural crisis erupted before they could implement it.

Agriculture is the industry hardest to monopolize, with almost no barriers to entry; anyone can cultivate land. In these times, suitable land for farming was everywhere, and any Colonial Empire did not have to be subject to others.

The Tsarist Government had the desire to monopolize Europe’s food supply but lacked the ability to execute such a plan. Russian agricultural production costs were not competitive, making it nearly impossible to win in market competition.

Faced with overwhelming public accusation, Alexander II decisively chose to ignore it. After all, the Tsarist Government had always been criticized on the European Continent, and he had grown accustomed to it.

Public opinion could be ignored, but the reactions of other European governments could not be disregarded without concern by Alexander II.

By April 1873, several politicians had publicly declared the intention to levy tariffs on imported agricultural products to protect their own agriculture.

Applying tariffs on all agricultural product imports seemed fair, but behind this seeming fairness lurked a thick malice.

Among Europe’s four major agricultural export countries, the Kingdom of Prussia had the smallest market share and consequently faced the least impact.

The Kingdom of Poland ranked second to last, and it was already caught up in internal strife; the situation could hardly worsen.

Although the Russian Empire ranked second in terms of export volume, on this scale, they were still deservedly the top.

Austria had the largest export total. Apart from processing its own food, it also imported Russian and Polish agricultural products for processing, mostly relying on the added value of products to prop up the market.

After the outbreak of the agricultural crisis, the Tsarist Government also prepared to process their own products and not leave the Austrians any opportunity to profit from the price difference.

Unfortunately, the domestic industrial capacity was too weak, leading to high processing costs and a loss of competitiveness in the brutal market competition.

Impacted by the agricultural crisis, Austrian agricultural product processing enterprises reduced their capacity, and the total amount of Russian agricultural exports to Austria declined. Nevertheless, it still accounted for more than half of the total agricultural export volume.

From the perspective of interests, both sides could be said to be both mutually harmed and mutually glorified. It was not long before Alexander II received a telegram from the Austrian Agricultural Product Processing Enterprise Association, hoping they would reduce the total amount of grain exports.

The large volume of cheap raw grains exported to the international market, and directly entering various European countries, was a battle of life and death for Austrian agricultural product processing enterprises.

As market competition intensified, these processing enterprises certainly would not sit back and wait for death. Selling at a loss to attract attention was out of the question.

Capitalists are very shrewd, and what seemed like a plain telegram was actually an ultimatum.

Capital pursues profit, and if there were no profits to be made in agricultural product processing, capitalists would not hesitate to abandon the venture instantly.

Since 1872, astute capitalists had been undergoing a transformation. Currently in the midst of the second industrial revolution, there were still many investment opportunities, and there was no need to hang all hopes on one tree.

If the Russians were willing to decrease the total grain export volume, everyone’s profits could be secured, and business could continue.

Otherwise, things would be difficult to handle. Affected by the collapse of grain prices, almost every grain capitalist had their warehouses filled with grain, waiting for the market to recover.

If no hope was seen, they could only painfully exit the market. This was definitely not good for the Russians, as because of the Russian-Austrian Alliance, Austrian processing enterprises had always prioritized buying Russian agricultural products.

The situation was utterly different on the European Continent; under the same conditions, almost no capitalists were willing to cooperate with the Russians.

This was an aftermath of lost credibility, not something that could be restored quickly. The export of Russian agricultural products relied on their cheap prices.

The continual decrease in international grain prices was, in fact, dragged down by Russian grain exports. In order to sell their grain, they had to reduce the price.

Once the Russians lowered the export price of grain, the market had to follow. The current international grain prices had hit the lowest point in decades, and everyone’s profits were squeezed out.

Alexander II knew the consequences of this action, but looking at the mountainous stockpiles of grain, they had no choice but to sell at a loss.

Moreover, the definition of “selling at a loss” could not be generalized; the grain exported in exchange for foreign currency, while the domestic circulation was in Paper Rubles.

The Paper Rubles issued by the Tsarist Government were not accepted abroad. In international trade, the most used currencies were Gold, Silver, British Pounds, Divine Shield, and Francs.

The international reputation of the Ruble was even less than that of the Nordic Federation’s Krone, not to mention the Dutch Guilder, or even the Swiss Franc and the Prussian Mark, all of which were more popular than the Ruble.

From the perspective of national development, even at a loss, the Tsarist Government had to obtain foreign currency as much as possible, otherwise it could not balance the trade deficit, leading to the outflow of gold and silver.

But selling at a loss was not a solution, and to offset the losses, the Tsarist Government had already devalued the Ruble twice.

This was undoubtedly a heavy blow to the Ruble, which had just undergone the gold standard reform, and it severely damaged market confidence.

Currency cannot keep depreciating; economists had already warned Alexander II that continuing like this would ruin the market, and it would be better to continue using Gold and Silver as currency.

After adjusting his emotions, Alexander II asked, “The telegram from the Austrian Agricultural Product Processing Enterprise Association, what do you think?”

An industry association was able to send him telegrams threatening directly, which made Alexander II extremely furious. If he had a choice, he would really want to cease all trade with them.

Of course, that was just wishful thinking; actually doing so was out of the question. Without this largest buyer, their days would only get harder.

Finance Minister Kristanval: “Your Majesty, unless all countries cut their grain exports together and jointly drive up the price of food, we absolutely must not reduce our export volume.

Currently, we have a massive surplus of agricultural products domestically, especially in the newly developed Siberian Region, where the local grain is completely ignored, and the government’s tax revenue is in grain.

The Treasury Department is organizing the transportation of these goods, and if they cannot be sold, all these tax revenues will be completely lost.”

The minister insisted that the Tsarist Government was already showing considerable face by acknowledging the debts it owed and could not possibly tolerate further nitpicking.

Foreign Affairs Minister Chris Basham shook his head repeatedly: “No, we’ve just recently reached an agreement with various countries. If we do this, we’ll immediately fall into diplomatic trouble again.

According to the prior agreement, countries have agreed to accept our agricultural products as debt repayments in installments, so there’s no need to take such an extreme measure.”

Using food to repay debts was the Russian Ministry of Foreign Affairs’ greatest achievement, with all debt to be repaid over fifteen years. Solving the agricultural crisis by suddenly repaying in grain would be a disaster for the debtholders!

Grain that can’t be sold is worthless. Chris Basham did not want to see the Foreign Ministry’s achievements destroyed overnight, as it would be a disaster for the Russian Empire as well.”

The idea of reducing production was something that everyone tacitly chose not to mention. Austria’s call last year for a reduction in production had become a joke.

Apart from Austria itself reducing its grain cultivation area, Russia, Prussia, and Poland merely paid lip service, issuing a few laws.

When it came to enforcement, they soon realized it was not so simple. You can’t legislate where to plant grain and where not to.

Any decree takes time to implement. Even with the widely accepted Fallow Law, when it came to enforcement, the local officials had no idea which lands had been fallowed and which had not.

Without prior statistics, how could they enforce it? In the face of reality, the officials tacitly chose to start gathering data from now on.

If grain is planted this year, then that plot of land should be fallowed next year. Everyone recorded it clearly, leaving no room for dispute.

As a result, this year, the acreage of grain cultivated in various countries did not decrease but increased, and governments were equally powerless. It could take years for any market regulation to take effect.

Market self-regulation was likely more effective than any government decree. Ordinary people might not reduce grain cultivation despite years of losses, but the Nobility surely would cut production.

Minister of Agriculture Malinov interjected: “Arguing over this is pointless. Unless we solve the agricultural crisis fundamentally, there will only be more severe crises to come.

Even if we force the grain onto our creditors, it will only address the symptoms, not the root cause. This agricultural crisis won’t be over in a year or two.

According to data published by Austria’s Agriculture Department, if no measures are taken and the market is left to regulate itself, this agricultural crisis could last for over a decade.

Russia is a major agricultural country. If the crisis persists for over a decade, it’s estimated that tens of millions of farmers could go bankrupt within the country, possibly 20 or 30 million.

The industrialization progress of the Empire is fast, but to accommodate so many bankrupt people will not be done in a short time.”

Our biggest problem is not the domestic surplus of grain, but how to ensure that the farmers don’t go bankrupt en masse.

Based on the current situation, the number of bankrupt farmers this year will be several times that of last year, with an estimated 50,000 to 80,000 families going bankrupt. If the crisis continues, this number will grow exponentially every year.”

It was as if he was hinting: If we can’t eat all the grain, then let’s go to war!

The timing of the agricultural crisis couldn’t have been worse. Had it occurred a few years earlier, during the Prusso-Russian War, the outcome of the war might have been completely different.

With grain in hand, the Tsarist Government could continue the war, as a Tsar who fed his soldiers well was already a good Tsar; other problems could be overcome.

Don’t be fooled by the Russian Empire appearing to have shrunk a little. If a war breaks out, the Russians’ war potential will surpass that of a few years ago by far.

This is the advantage of having plenty of grain. No matter how unsellable the grain is, as long as the farmers don’t go bankrupt on a massive scale, everything is within manageable limits. Put simply, when everyone is well-fed, there’s no question of anyone rebelling.

The agricultural crisis was so severe, yet the Russian farmers didn’t blame the Tsarist Government. Alexander II’s prestige was undiminished, all thanks to them being well-fed.

After a long contemplation, Alexander II still decided to succumb to reality. “Better for your companions to die than for yourself,” as it goes; other people’s misfortunes are always preferable to one’s own.

“The Foreign Ministry must communicate deeply with the Vienna Government, and at all costs this time, we must drag them down with us.”

Having experienced one failure, Alexander II had lost much of his arrogance and had become much more cautious in his actions.

This was a crisis, but also an opportunity. If played well, the Russian Empire could even use Austria’s power to take down an enemy.