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By Root 3678 0

could only be covered by the printing of paper money and fears of financial collapse were common. As a result of the war, expenditure shot up and revenues shrank. Nearly 25 per cent of anticipated revenue had failed to arrive in 1812. In the first quarter of 1813 things were worse: only 54 per cent of expected revenues had come in by late April. Gurev blamed ‘the shock felt throughout the state in 1812, when on top of normal taxes, both traditional and newly established in that year, the population was burdened by the mobilization of the militia, by recruit levies, by military demands, duties and contributions: by a very conservative estimate all this amounted to over 200 million rubles’. Faced with a vast looming deficit all Gurev could do was to reduce expenditure wherever possible and fill the gap with additional printing of paper money. In April 1813 he predicted that if the war lasted throughout 1814 and its financing continued as at present then ‘no means will remain to rescue us from the final destruction of our financial system’.16

Although Gurev feared hyper-inflation within Russia he tended to believe that the enormous amount of economic activity linked to repairing the damage caused by Napoleon’s invasion would mop up much of the newly issued paper money. So too would growing Russian external trade now the Continental System was destroyed once and for all. The finance minister’s true source of panic was the large amounts of Russian paper money which the Field Army was spending abroad. No foreigner would wish to hang on to this money, nor would private individuals use it in payment for goods and services provided by other Germans. Therefore the entire sum was likely to be remitted back to Russia for exchange, with dire consequences for the ruble’s rate against foreign currencies.

Gurev warned that if the paper ruble’s exchange rate collapsed, the Field Army’s financing would become impossible. To avoid this he dragged his heels as regards remitting funds to army headquarters and got the committee of ministers to agree to a number of proposals, including paying officers and men abroad only half their pay with the remainder to be given them on return to Russia. Gurev’s argument, partly true, was that officers and men serving abroad to a great extent lived off the land and did not need much cash. Nevertheless, had it been implemented, the impact of this policy on the morale of the troops can easily be imagined: the army was already very badly paid by European standards and was fighting an exhausting campaign on foreign territory in a cause many even of the officers did not understand.17

Faced with peremptory orders from the emperor, Gurev would have released funds for the army in all circumstances but he was also greatly encouraged in this direction by news of a large impending British subsidy, of which he had despaired. In 1812 Alexander had not requested a British subsidy. This was partly a question of pride. In addition, fighting on his own territory he could finance the war without great difficulty. Perhaps for this reason, it was actually many months after diplomatic relations with Britain were restored that Alexander got round to appointing an ambassador in London. Once Russian armies advanced across the empire’s borders, however, the matter became urgent and the emperor nominated Christoph Lieven and sent him to London in January 1813 with a message for the British government: ‘In the present circumstances every dispatch of troops abroad is becoming very expensive for me. It requires the emission of metallic currency which totally undermines our rate of exchange. This would have a serious effect on our finances which they could not ultimately sustain, since the state’s revenues are bound to shrink considerably this year as a result of the complete devastation of some provinces.’ Lieven was ordered both to ask for a subsidy and to present the British government with a scheme for ‘Federal Paper Money’. This paper was to bear interest and to be redeemable immediately after the war. It was to be guaranteed by