Chapter 06
Roosevelt’s Appeasement of Communism — Always Compliant with Soviet Demands

II. Roosevelt Confronted with $500,000

It is said that in the 1930s, in order to utilize American technology to build new warships, Soviet leaders authorized the allocation of $500,000 from the state treasury as an “administrative fund” for use by a Soviet foreign trade company — with the purpose of greasing the wheels at the highest levels of the U.S. government.

At the time, $500,000 could buy over 10,000 taels of gold, roughly equivalent to $30 million in today’s money! This secret episode was revealed by Russia’s Power magazine, published by the Kommersant Publishing House.

In 1924, the Soviet Union established the Amtorg Trading Corporation in the United States, specifically to handle Soviet-American trade. At that time, the U.S. and the Soviet Union had not yet officially established diplomatic relations, and Amtorg effectively monopolized trade activities between the two countries. By 1933, at the Soviet Union’s request and also to cater to American business interests eager to develop the Soviet market, the newly inaugurated U.S. President Franklin D. Roosevelt formally recognized the legitimacy of the Soviet government.

At that time, the U.S. economy was still in a depression. American businessmen were well aware that the orders from the Amtorg Trading Corporation were essentially orders from the Soviet government, meaning the Soviet government’s financial backing. However, from another perspective, Americans considered that signing contracts with this company meant engaging in trade with one of their most hostile countries, so they were especially cautious about providing advanced and sensitive military technology to Amtorg. In light of this, Moscow decided to establish a purely American-style company and find a trustworthy agent.

The chosen person was Karlow, an American of Russian descent. Karlow was born into a poor tailor’s family during the Tsarist era. After immigrating to the United States in 1911, he worked various odd jobs before entering the oil business. When the global economic crisis broke out in 1929, Karlow found himself in trouble and, by 1933, had to sell several of his gas stations at low prices. Subsequently, he decided to go to Moscow to see if he could find opportunities to “earn dollars in Russia.” It was in Moscow that he met officials from the Soviet Ministry of Foreign Trade and was commissioned to help the Soviet Union procure advanced equipment.

However, many people doubted Karlow’s abilities. In a report dated August 2, 1936, to the then Soviet People’s Commissar of Defense Voroshilov, the Soviet military attaché in the United States, Burzinov, stated: ‘this man (referring to Karlow) behaves carelessly and is a cause for concern. For example, wherever he goes, he carries with him a list — though not an official document — of the equipment our country is procuring, and even openly shows these documents to some business contacts and resellers. Such behavior seriously violates confidentiality regulations. In short, whenever he has the chance, he babbles on about our country’s needs.” The attaché also mentioned Karlow’s special background — that he was the brother of Zhemchuzhina, the wife of the Soviet People’s Commissar Chairman Molotov.

Despite some “black reports” against him, Karlow still retained the trust of the “higher-ups.” After reaching an agreement with the Amtrade Group Company to divide purchasing authority, he successfully completed several procurement tasks. Whenever Karlow had the chance, he boasted about his relationship with Molotov and spread some important procurement information he claimed to have received from the Soviet high command. As a result, clients quickly flocked to him. Karlow suddenly became a “miraculous” businessman.

On May 14, 1937, Rozov, Chairman of the Board of Amtrade Group Company, sent an urgent encrypted message to Moscow. The message stated: “Karp reported to me today that the U.S. government has drafted documents to sell us a battleship equipped with a 16-inch gun system and a central fire control system. To obtain these documents, he requires $500,000 to compensate the relevant parties.” After careful consideration, Moscow decided to proceed with the deal.

The Soviet side initially allocated $300,000, later adding another $200,000. The recipient of these funds was originally designated as an important figure in the U.S. Democratic National Committee and an assistant to the President. Additionally, the Soviets intended to pass the money to officials in various U.S. committees responsible for approving military-industrial technology products. In fact, this large sum ultimately ended up in the hands of President Roosevelt’s son, with the purpose of funneling the money to Roosevelt himself through him.

The Soviets did not expect that the activities conducted by Karp would be exposed by the American press! For several consecutive days, major U.S. news agencies and newspapers reported that the Soviet Union was planning to purchase a huge amount of military equipment from the United States. Many publications went so far as to depict the deal as if the orders were already being executed. Furthermore, after the U.S. State Department approved the shipment of military equipment to the Soviet Union, complications involving the procurement of battleship-related technical equipment increasingly arose.

On November 3, 1937, Moscow received a report stating: ‘the approval Karp obtained is useless for purchasing turbines specifically for battleships. General Electric, the main supplier of engines to the Navy, is unwilling to accept our order and insists on formal approval from the Navy Department. The shipyard, after a media storm of reports, also wants to receive payment from the Soviet trade mission for battleship design fees.”

According to archives, Moscow decided to have Karp continue as a lobbyist and arranged for the Soviet trade representative Troyanovsky to meet with the U.S. President. On November 27, 1937, Troyanovsky met with Roosevelt. According to his later report to Molotov, he complained to Roosevelt about the Navy Department’s indifferent attitude toward Soviet orders. Roosevelt responded that he would instruct the officials responsible for naval affairs and suggested building a shipyard directly in the United States. He also said he would design and build battleship-grade armor steel plates according to the standards of active U.S. Navy warships. After negotiations, the Americans finally agreed to allow the Soviets to take away the technical drawings related to battleship construction.

In 1938, the U.S. Congress established a special committee to investigate anti-American sentiments, and Karp attracted significant attention from this committee. He later revealed details about the use of $500,000, admitting that he personally embezzled $100,000. Karp’s sister, Zemchugina, was not spared either; in 1939, she was accused of collaborating with “enemies of the people.” In 1940, Rozov, chairman of the board of the Arm Trade Group Company, was arrested and charged with espionage, accused of continuously funneling overseas administrative funds determined by the Soviet Communist Party’s Political Bureau to Karp. By the end of 1945, the U.S.-Soviet alliance was effectively dead, and this procurement scandal, which angered the Soviets, was regarded as one of the root causes.

From this, it is evident that even then, the United States had a “deep state” actively leaking secrets to the Soviets, while the Roosevelt family aggressively played their role as profiteering traitors, betraying American interests and endangering U.S. security.