FINNISH NICKEL AS A STRATEGIC METAL, 1920–19441

1. The authors would like to thank two anonymous referees, the editors, Robert Whaples, Edward Behrend‐Martinez, David Reid, Mary Valante, Karen Greene, and the participants of the 2006 EBHS conference for helpful comments. Responsibility for the remaining errors rests solely with the authors.

Abstract

Petsamo nickel in Northern Finland became a bargaining chip in the Great Powers' political game before and during the Second World War. ‘Weak states’ such as Finland had room to pursue their own interests both in the cartelized interwar military markets and especially during the Second World War. Despite the common assumption of weakness on the part of smaller countries, Finland was able to maintain considerable control over its natural resources, negotiate credibly with international firms in the nickel markets, as well as exploit the market opportunities that the rearmament and the Second World War brought forth due to its position as a niche player in the nickel game.

Notes

1. The authors would like to thank two anonymous referees, the editors, Robert Whaples, Edward Behrend‐Martinez, David Reid, Mary Valante, Karen Greene, and the participants of the 2006 EBHS conference for helpful comments. Responsibility for the remaining errors rests solely with the authors.

2. Strategic metals here, based on the listing of strategic (as opposed to only critical) materials provided by Horst Mendershausen for the United States, include: antimony, chromium, manganese, ferrograde, mercury, nickel, tin, and tungsten. These, he maintains, were essential, in this case to the American national defense effort, and for which the United States would be almost completely dependent on in a time of war. Elsewhere he also mentions other metals, such as aluminum, copper, lead, and magnesium. Similar dependencies were experienced by other states as well. See Mendershausen, The Economics of War, pp. 28–9 for details.

3. On the economic dimensions and demands of the First World War, see Broadberry and Harrison, The Economics of World War I in particular. On the scope of these efforts in the Second World War, in turn, see Harrison, The Economics of World War II. Six Great Powers in International Comparisons.

4. For example, for the coal industry, see Fine, “Economies of scale and a featherbedding cartel? a reconsideration of the interwar British coal industry”; Henley, “Price Formation and Market Structure: The Case of the Inter‐War Coal Industry”; Kirby, “The Control of Competition in the British Coal‐Mining Industry in the Thirties”; dyestuffs, see Schmitt and Weder, “Sunk Costs and Cartel Formation: Theory and Application to the Dyestuff Industry”; steel, see Baker, “Identifying Cartel Policing under Uncertainty: The U.S. Steel Industry, 1933–1939”; Barbeazat, “Cooperation and Rivalry in the International Steel Cartel, 1926–1933”. Broader analyses of interwar cartels can be found, for example in Cantwell and Barrera, “The Localisation of Corporate Technological Trajectories in the Interwar Cartels: Cooperative Learning versus an Exchange of Knowledge”; Hexner, “International Cartels in the Postwar World”. A rare study of a pre‐war cartel (for bromine) can be found in Levenstein, “Do Price Wars Facilitate Collusion? A Study of the Bromine Cartel before World War I”. Data on international cartels can be found in the International Cartel Database: http://www.geschiedenis.leidenuniv.nl/index.php3?m = 55&c = 439.

5. See especially Feldenkirchen, “Big Business in Interwar Germany: Organizational Innovation at Vereinigte Stahlwerke, IG Farben, and Siemens” and Schroter, “Risk and Control in Multinational Enterprise: German Businesses in Scandinavia, 1918–1939”. For a comparative perspective on France, see Montant, “The Effectiveness of the Nord‐Pas‐de‐Calais Coal Cartel during the Inter‐war Period: A Research Note”.

6. In terms of exceptions, see Main, The Canadian Nickel Industry. A Study in Market Control and Public policy as well as Sandvik, Falconbridge Nikkelverk 1910–1929–2000, et internasjonalt selskap i Norge.

7. See e.g. Krantz, Small European Countries in International Organisations: A Perspective on the Small‐State Question.

8. Salmon, Scandinavia and the great powers 1890–1940.

9. The few examples, in addition to the cartel literature already mentioned, include Caruana and Rockoff, “A Wolfram in Sheep's Clothing: Economic Warfare in Spain, 1940–1944”, which focuses on the Second World War economic warfare (for discussion of economic warfare and total war, see e.g. Milward, “Economic Warfare in Perspective” and Eloranta, “Military Spending Patterns in History”), as well as Ball, “The German Octopus: The British Metal Corporation and the Next War, 1914–1939”, which discusses British efforts to maneuver the nonferrous metals market.

10. On how to analyse the stability and/or efficiency of cartels quantitatively, see for example Dick, “When Are Cartels Stable Contracts?”; Porter, “A Study of Cartel Stability: The Joint Executive Committee, 1880–1886”.

11. For an example of such a re‐evaluation, see for example Eloranta, “European States in the International Arms Trade, 1920–1937: The Impact of External Threats, Market Forces, and Domestic Constraints”.

12. For more details, see for example Schroter, “Risk and Control in Multinational Enterprise: German Businesses in Scandinavia, 1918–1939”.

13. Auquier and Caves, “Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy”, 571–3. See also Eloranta and Ojala, “Converta – A Finnish Conduit in the East‐West Trade”.

14. Milner and Yoffie, “Between Free Trade and Protectionism: Strategic Trade Policy and a Theory of Corporate Trade Demands” – see also for example Auquier and Caves, “Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy”.

15. See especially Greif, “The Fundamental Problem of Exchange: A Research Agenda in Historical Institutional Analysis”; Greif, “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders' Coalition”; Greif, Milgrom and Weingast, “Coordination, Commitment, and Enforcement: The Case of the Merchant Guild”.

16. Handel, Weak States in the International System, 10–20. He separates states into super powers, great powers, middle powers, weak states, and mini‐states.

17. Ibid., 37–46, 52–3.

18. See Eloranta, “European States in the International Arms Trade, 1920–1937: The Impact of External Threats, Market Forces, and Domestic Constraints” for details, especially on the quantitative results.

19. For further details on this method of analysis and its empirical application, see for example Chatterjee and Hasnath, “Public Construction Expenditures in the United States: Are There Structural Breaks in the 1921–1987 Period?”; Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good Among Eleven European States, 1920–1938”; Gujarati, Basic Econometrics.

20. Nickel alloys were used in automobiles, aircraft, electrical, energy, and naval equipment, which made nickel strategically crucial especially in the Second World War. See for example Mendershausen, The Economics of War for details.

21. See also Müller‐Ohlsen, Non‐ferrous Metals: Their Role in Industrial Development; Skelton, “The Mechanics of International Cartels”.

22. See the International Cartel Database: for details on the cartels regarding non‐ferrous metals: http://www.geschiedenis.leidenuniv.nl/index.php3?m = 55&c = 439.

23. On German nickel in the First World War, see Wünsch, Das Nickel in der Weltwirtschaft unter besonderer Berücksichtigung Deutschlands. On copper cartels and production, see especially Walters, “The International Copper Cartel”.

24. For further discussion, see Salmon, Scandinavia and the Great Powers 1890–1940; Schroter, “Risk and Control in Multinational Enterprise: German Businesses in Scandinavia, 1918–1939”.

25. Hjerppe, “The Significance of Foreign Direct Investment in a Small Industrializing Economy: The Case of Finland in the Interwar Period”.

26. Some basic studies on the topic include, among others, Krosby, Finland, Germany, and the Soviet Union, 1940–1941; the Petsamo dispute; Menger, “Deutschlands letzte Bemühungen um das Petsamo‐Nickel”; Vuorisjärvi, Petsamon nikkeli kansainvälisessä politiikassa 1939–1944: suomalainen todellisuus vastaan ulkomaiset myytit .

27. Warma, “Nikkelimalmin löytöhistoria”, 23–4; Haapala, “Petsamon nikkelin tarina”, 134. Kuisma, Outokumpu 1910–1985: kuparikaivoksesta suuryhtiöksi , 59.

28. VA (National Archives of Finland), KD 164/448 KTM 1933; PM J. J. Sederholm 27.2.1934 “Aikaisemmista ostohaluista ulkomailta”; VA, Geologisen toimikunnan arkisto, Saapuneet kirjeet 95/1931, Kauppa‐ ja teollisuusministeriö geologiselle toimikunnalle 12.5.1931/1247 and appendix V. M. J. Viljanen and Eero Mäkinen's statement to the Ministry of Trade and Industry on 13.3.1931.

29. A forementioned statement by Viljanen and Mäkinen. On Krupp, see especially Berdrow and Kraft, Alfred Krupp und sein geschlecht; die familie Krupp und ihr werk von 1787–1940, nach den quellen des familien‐ und werksarchivs geschildert.

30. VA, KD 164/448 KTM 1933.

31. VA, KD 164/448, Nicholls to Ilmari Killinen 27.11.& 28.11.1933; INCO (Archives of INCO), Box 934–28, Folder 81, Metallgesellschaft 20.11.1933 to J. F. Thomson (INCO); Nicholls 29.11.1933 to Merica.

32. VA, KD 164/448 KTM 1933.

33. See Bray, “INCO's Petsamo Venture, 1933–1945: An Incident in Canadian, British, Finnish and Soviet Relations” and Plumpe, Die I. G. Farbenindustrie AG for details.

34. For more on the 1930s' rearmament, see Eloranta, “External Security by Domestic Choices: Military Spending as an Impure Public Good Among Eleven European States, 1920–1938”; Eloranta, “Military Spending Patterns in History”; Webber and Wildavsky, A History of Taxation and Expenditure in the Western World.

35. BASF (Archives of BASF), Rechtsabteilung G B4/823 Nickelvorkommen Finnland 19.7.1933–31.7.1939, Brendel's report of the trip to Helsinki 18.–22.6.1939.

36. BASF, Rechtsabteilung G B4/823 Nickelvorkommen Finnland 19.7.1933–31.7.1939, Brendel's report of the trip to Helsinki 18.–22.6.1939.

37. BASF, Rechtsabteilung G B4/823 Nickelvorkommen Finnland 19.7.1933–31.7.1939, Brendel's report of the trip to Helsinki 18.–22.6.1939.

38. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, Brendel to Mäkinen 7.9.1939.

39. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, Schlecht to Brendel 6.9.1939. “Versorgrung Deutschlands mit finnischen Nickelerzen”.

40. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, PM Werner A. Cluss 9.10.1939.

41. Petzina, Autarkiepolitik im Dritten Reich.

42. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, PM Cluss 9.10.1939 & PM Schlecht 1.11.1939.

43. UMA (Archives of the Ministry for Foreign Affairs for Finland) 39 C2, Petsamon nikkeli yl. 1934–1947, PM Eero Mäkinen 8.11.1939; ELKA (Central Archive of (Finnish) Business), Outokumpu OY, Petri Bryk collection, PM Eero Mäkinen P. M. 28.11.1939 (copy of the latter); Vuorisjärvi, Petsamon nikkeli kansainvälisessä politiikassa 1939–1944: suomalainen todellisuus vastaan ulkomaiset myytit, 33.

44. Kuisma, Outokumpu 1910–1985: kuparikaivoksesta suuryhtiöksi, 222–223; Vuorisjärvi, Petsamon nikkeli kansainvälisessä politiikassa 1939–1944: suomalainen todellisuus vastaan ulkomaiset myytit, 30–35.

45. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, PM 16.11.1939.

46. Idem.

47. ELKA, Outokumpu Oy, Petri Bryk, copy from The Metal Industry Nov. 1939.

48. BASF Rechtsabteilung G B4/816 Nickel Finnland, Zeitungsausschnitte, Metall und Erz 1939:10, 276. “Bekanntlich waren die Vorkommen auch deutschen Interessenten angeboten gewesen. Jedoch hatte man vor der Machtübernahme kein Verständnis dafür, dass kanadische Nickelmonopol mit Hilfe dieser finnischen Vorkommen zu brechen.”

49. For more on the diplomacy preceding the Winter War, see for example Jakobson, The Diplomacy of the Winter War: An Account of the Russo‐Finnish War, 1939–1940. BASF, Rechtsabteilung G B4/728, Vorgeschichte zur Broschüre Nickel/Finnland, Haefliger's PM 22.11.1939.

50. BASF, Rechtsabteilung G B4/825 Nickelvorkommen Petsamo bis 15.8.1940, Haefliger to Euler (Metallgesellschaft) 21.11.1939; BASF, Rechtsabteilung G B4/825 Nickelvorkommen Petsamo bis 15.8.1940, Mond to IGF 29.6.1934.

51. BASF, Rechtsabteilung G B4/823 Nickelvorkommen Finnland 19.7.1933–31.7.1939, PM Brendel 5.7.1939; Outokumpu (Mäkinen) 1.8.1939 to IGF; Brendel to Mäkinen 11.8.1939; Schlecht 22.8.1939 to Outokumpu; Outokumpu (Mäkinen) to IGF 25.8.1939; Brendel to Mäkinen 11.8.1939; Mäkinen to IGF 16.8.1939; VA, KTM KD 14/156 1939; Annala, Outokummun historia 1910–1959, 334–336; Kuisma, Outokumpu 1910–1985: kuparikaivoksesta suuryhtiöksi , 147.

52. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, Schlecht 14.2.1940 to Zimmermann (Reichsstelle für Metalle), Schlecht 18.4.1940 to IGF Vermittlungstelle M.

53. BASF, Rechtsabteilung G B4/824 Nickelvorkommen Finnland 1.8.1939–31.7.1941, Schlecht to Brendel 6.9.1939. “Versorgrung Deutschlands mit finnischen Nickelerzen”; PM Schlecht on the meeting in Berlin 21.–22.8. 22.8.1940; B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944, IGF to Reichstelle für Metalle 2.9.1941.

54. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944, Mäkinen 6.9.1941 to IGF; Schlecht 22.11.1941 to NA; NA to IGF 26.11.1941 & 10.12.1941. IGF to NA 16.12.1941.

55. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944 Schlecht to Reichsstelle für Metalle 14.1.1942.

56. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944. PM IGF Abteilung M 2.6.1942; Frank‐Fahle to Haefliger & al 30.9.1942.

57. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944 Mäkinen 21.12.1942 to IGF (Oppau); Kuisma, Outokumpu 1910‐1985: kuparikaivoksesta suuryhtiöksi , 233.

58. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944 Schlecht and Brendel to Haefliger and Cluss 31.12.1942; IGF to Outokumpu 31.12.1942; Brendel and Schlecht to Outokumpu 6.1.1943; Ibid., Outokumpu 1910–1985: kuparikaivoksesta suuryhtiöksi , 233.

59. BASF B4/813 Nickelvorkommen Finnland – Nivala – 1.8.1941–5.1.1944, PM from negotiations between NO and IGF 18.–20.3.1943.

60. Autere, “Rakentamista jatketaan suomalaisten johdolla”, 53.

61. VA, Väinö Tanner 53, Copy of Agreement between PNO and Outokumpu 29.12.1940; A letter of Eero Mäkinen 22.8.1941; Ibid., “Rakentamista jatketaan suomalaisten johdolla”, 53.

62. VA, Väinö Tanner 53, Eero Mäkinen 22.8.1941 to Ministry of Trade and Industry; Seppinen, Suomen ulkomaankaupan ehdot 1939–1944, 146; Autere, “Rakentamista jatketaan suomalaisten johdolla”53–54. UM58B1 Saksa 33b.

Archival Sources

Rechtsabteilung

Outokumpu Oy, Petri Bryk collection

Box 934–28, Folder 81

58B1 Saksa 33b.

39 C2, Petsamon nikkeli yl. 1934–1947

Ministry of Trade and Industry

KD 164/448 KTM 1933

KTM KD 14/156 1939

Archives of Väinö Tanner 53