Second Round of Economic and Political Negotiations with Germany
With the negotiations on 12 May 1938 Germany launched a diplomatic offensive meant to consolidate its position in Romanian economy and to ensure its monopoly over the exports of Romanian petroleum. After the first economic agreement the Reich expected to import 400.000 tons of oil per month, but Romania delivered an astounding quantity of… 61 tons per month (OTL occurrence with changed months to pass to our scenario). At the root of this outcome stays, the Germans believed, the fact that the majority of Romania’s oil industry is in Allied hands. According to their information, Bucharest did provide the administrative and economic conditions for redirecting exports to Germany, but the foreign owners apparently refused to sell their fossil products to Axis countries. Is there a deliberate Anglo-French policy to frustrate Germany’s interests in an area of great interest?
In 1937 the percentage of investment in the Romanian oil industry was:
- British 40%;
- Romanian 29%;
- French-Belgian 23%;
- American 6%;
- Italian 2%;
- others 0,8%.
The fifth oil producer in the world, following the US, USSR, Venezuela and Iran, Romania produced in 1936 approx. 8,7 million tons of oil, which could cover at least 40% of the German needs for economy and long term war operations combined. Beside oil, Germany was interested among other product types in importing cereals, of which Romania was also one of the top world exporters, and certain ores (rare materials).
When Marshall Göring and the German Foreign Minister Baron Konstantin von Neurath received the Romanian counterparts, Mr. Grigore Gafencu and general Victor Antonescu, the negotiations were scheduled on a dual track: economic and political.
The economic negotiations were way more extensive than those from March 1938, whereby obtaining the monopoly over the Romanian oil industry was the undissimulated main focus. Berlin insisted on establishing some “German economic units in Romania, which would produce goods necessary to Germany and export them on the German market, on the creation of “mixed” economic companies or “free [economic] zones” in ports.
The position of the Romanian side towards the pretentions of the Germans was specified in the counterproposals presented on 14 May 1938. The document did not conceal the fact that the German draft exceeded, through its easily foreseen consequences, the “strictly economic framework” of the negotiations and insisted to ensure “the economic independence of Romania” and, implicitly, the political one. Premier Armand Călinescu grasped on the previous day the essence of the negotiations: “There occurs a problem between us and Germany. As objectives and purposes, the following: The issue has a double aspect: political and economic. The economic is important and decisive, while the political is accessory and an element of blackmail. That is the case for the Germans. We want to ensure our frontiers and we are paying for it.”
Whereas Germany sought to ensure for itself the energy resources for a long term war, Romania was following a policy of (geopolitical) realities and one of supporting its Eastern European allies, Poland and Czechoslovakia, by looking for a cooperative relationship with Germany and attracting Allied investment, and military and political commitment. As an effect of the increase of Germany’s role in East-Central Europe, as well as following the concessions policy made by Paris and London since Locarno, Romania had to give a great deal of importance to the specification of its relations with the Third Reich. The pervasive fear among much of Bucharest’s political class was that when and if Germany would ask for the rectification of its Eastern borders, the entire region could be destabilised by war and invasions, whereby Stalin’s Soviet Union was skulking for its chance to invade from the East too. The limits of the initiated negotiations for the Romanian delegation were set by King Carol II in accordance with economic and military circles in government in one sentence: “We shall not throw ourselves in the arms of Germany”.
The coming days tensed negotiations took place, the German negotiators resorting to certain pressures in order to make the Romanian side “more understanding”. As it was well known, harshness was one of the common procedures of the Nazi Reich, being also felt during the negotiations with the Romanian delegation. The Minister of Economy and Public Works I. Bujoiu, referring to the German proposal to create “economic units with [exclusive] German capital in Romania”, found it inadmissible, pointing out that in consequence the country would be reduced to the situation of “simple supplier of labor force, its natural resources and its production possibilities serving exclusively to the satisfaction of German needs”. Another fact one needs to consider is that during negotiations Göring and Baron Konstantin von Neurath fully profited from the advantage gained by the Reich through the engagement of nearly all Romanian troops in Bulgaria and the fresh Romanian – German direct border after the Austrian Anschluss.
The Economic Agreement, which from then on would be the base of the relations between the two countries, was intensely negotiated for three weeks, but it had to await one more week for the complicated political agreement to be ready as well.
The German-Romanian treaty, concluded for a period of five years, had in view an economic plan meant to maintain “the equilibrium of economic exchanges”, taking in consideration both Germany’s import necessities, as well as the development possibilities of Romanian production, Romania’s internal needs and its needs of economic exchanges with other countries (Article I, in OTL). The plan operated in several areas:
· the development and the orientation of Romanian agricultural production (German export of agricultural machinery and motorisation);
· the development of existing agricultural industries and the creation of new ones;
· the forest field (Romanian exports of wood);
· the deliveries of machinery and equipment for the Romanian mining industry (Germany needed to import coal and rare ores, part of them being extracted from Romanian mines. Tungsten was not among them, this metal only being present in Norway.);
· the founding of mixed companies for the capitalization of certain ores (direct investments);
· the collaboration of industrial field (investments and civil technology transfer);
· the creation of “free [economic] zones” (yes, some liberal policies iare not an anglo-saxon invention);
· deliveries of weapons and equipment for the Romanian army and war industry;
· the construction of certain equipments of public utility;
· the collaboration of certain Romanian and German banks for the interests of both countries, especially in the direction of business financing;
· “the founding of a mixed Romanian-German company that will deal with the exploitation of petroleum and the execution of a program of drilling and treating of crude oil”.
Two governmental committees were formed for the realisation of the various common projects. Provided the treaty was not denounced until May 15, 1943, it will be prolonged for an indefinite period of time (article V, OTL, only the original date being March 31, 1944).
In parallel with the economic negotiations General Victor Antonescu was received by Marshal Göring, a few days later being invited to a private discussion with Hitler. The Nazi leaders appreciated Antonescu, a military man with a high sense of honour with nationalist-conservative views, very much, which made the political negotiations smoother than otherwise. The German side wanted Romania to renounce the Allied security guarantees and anchor itself in the German sphere of influence, not just economically but also politically. Antonescu repeated the Romanian request for German security guarantees for Romania’s eastern borders instead. The Germans replied they are not ready for a full blown war against the Soviets, should they invade Bessarabia and therefore such guarantees are not feasible for the time being, but added, they would do their best to discourage the Russians from doing so before anything happens. That’s not enough, was the assessment of the Romanian government.
Another issue was Germany’s complains about Romania acting against other countries without consulting with Berlin, which will become very important once the two states will be allied or at least have close economic and political relations. The under-tone was Romania has finally to acknowledge it had entered the German sphere of influence, whether it likes it or not.
Negotiations with Italy under arbitration threats
The third major point of negotiations was Hitler’s imperious demand for an Italian-Romanian political treaty meant to definitively reconcile the two powers. The parties must negotiate a solution, including territorial concessions from the Romanian side, since Bucharest controls territories in Balkans, which Rome regards as part of their traditional sphere of interest. Should Italy and Romania fail to find a political agreement for their disputes, the Führer threatened the latter with arbitration made by itself.
King Carol II was terribly unnerved by the brazen threat, but conceded that the highest interests of his country dictated him to accept negotiations with Italy. In an act of defiance, Benito Mussolini sent his Foreign Minister Gian Galeazzo Ciano on 20 May 1938 to Berlin instead to Bucharest, to meet the Romanian delegation there. Essentially Italy was pleased with Romania ceding seven former Yugoslav provinces with majoritarian or significant Italian population and of economic significance. Among them were two major urban centres, namely Ljubljana and Split (also a port). In return Italy has relinquished its claims on Albania and recognized Romanian occupation of Hungary and Yugoslavia. Romania recognized Italian hegemony rights over the Mediterranean Sea and the adjacent zones except Greece. Foreign Minister Ciano insisted Greece is one of their special interest zones, asking Romania to explicitly stay out of it. Antonescu retorted that after the Italian attempt to dismember Romania with the help from Bulgaria and Yugoslavia, there is no way to accept the risk of Italian military bases in Greece ready to start another offensive against Romania whenever the fascist government of Mussolini wishes so. The Italian delegation underlined that the Romanian alignment with the Axis sealed by treaties excludes such a scenario and that they want to use Greece to better control the Mediterranean against British Navy as well as a logistical node towards hegemony in Eastern Mediterranean Sea and the Middle East. Italy already owns the Dodecanese Greek islands in the Mediterranean, which suffices for their power projection plans, with a considerable less threat factor for the security of Romania. General Antonescu made it clear, the occupation of Greece entails an intrinsic element of blackmail that his country is never going to accept. Should Italy not refrain from its plans in Greece, Romania will not cede to Italy any territory in former Yugoslavia.
Italian Dodecanese Islands on the lower right corner
Given the appeared deadlock in this atmosphere of distrust, Ciano asked Benito Mussolini what he prefers: Hitler’s arbitration, or signing an Agreement with Romania, thereby leaving Greece aside. Il Doce consulted Hitler on the issue. The Führer adviced him not to resort to arbitration, because an arbitration against Romanian interests could derail Romania from its pro-Axis course at a moment when Germany seeks to secure the access to Romanian oil production without risking an all-out war with the Allies (France had given security guarantees to Romania in the early 1920s). Consequently Ciano returned to the negotiaton table and in a short time the parties agreed to respect Greece’s neutrality declared by the right-wing authoritarian Metaxas Regime established since August 1936. Additionally Romania committed not to develop a substantial maritime fleet that could one day challenge Italian dominance over the Mediterranean. On the economic level, Romania promised to open its market to investments at the same preferential conditions that the German companies will enjoy after the signing of the presently negotiated comprehensive economic agreement. As a last point, Italy has promised to sell armament, especially bombers and artillery, and licences to Romania. Both countries agreed to add a non-aggression clause to the bilateral Treaty to be signed concomittently with the Anti-Copmintern Pact with the Axis powers.
Concluding results
Meanwhile, Germany insists Romania should enter an open political alliance, but it is reluctant to give security guarantees on the border with the Soviets. Romania wants those guarantees, but it is reluctant to leave the Allied security guarantees, because this way, foresaw the political factors in Bucharest, it potentially risks a two-front war with the Allies and the Soviet Union in case Germany enters war with the Allies or both. Germany reassured the Romanian delegation that a two-front war will be avoided at all costs, but the latter remained unconvinced and also fearful of the economic consequences from a decoupling from the international markets and access to capital in case of a new Axis-Allies conflict. After three days and nights of intensive negotiations Romania agreed to secretly join the Anti-Comintern Pact, under the express condition that the Romanian, Italian and German obligations regard only a defensive alliance against the Soviet Union, should one of the parties come under attack. In case the Axis would enter conflict with the Allies, Romania will declare neutrality, no matter who attacks whom.
The German-Italian-Romanian economic and political Treaty and the Anti-Comintern accession were signed on the June 1, 1938. At the conclusion of the Treaty, Grigore Gafencu affirmed that the document, in its general lines, affected the area of economic collaboration with a view to the “satisfaction of the German-Romanian complementary interests, which have always been so important”. He insisted on the fact that each of the signatories expressed “the pacifist purposes” of their policy”, reasserting that the respect of national independence represented the supreme ideal for all the European countries”. The diplomatic language in the treaty and the discourse of the Romanian Foreign Minister represented to a certain extent a subtle attempt to nudge Germany away from aggressive solutions to its eastern borders claims, or generally against touching the Cordon Sanitaire status-quo. It was doubtful though that Germany would be inclined to lend an ear to a lesser power like Romania in this issue, irrespective of how the diplomatic language of the Agreement was formulated.
With the negotiations on 12 May 1938 Germany launched a diplomatic offensive meant to consolidate its position in Romanian economy and to ensure its monopoly over the exports of Romanian petroleum. After the first economic agreement the Reich expected to import 400.000 tons of oil per month, but Romania delivered an astounding quantity of… 61 tons per month (OTL occurrence with changed months to pass to our scenario). At the root of this outcome stays, the Germans believed, the fact that the majority of Romania’s oil industry is in Allied hands. According to their information, Bucharest did provide the administrative and economic conditions for redirecting exports to Germany, but the foreign owners apparently refused to sell their fossil products to Axis countries. Is there a deliberate Anglo-French policy to frustrate Germany’s interests in an area of great interest?
In 1937 the percentage of investment in the Romanian oil industry was:
- British 40%;
- Romanian 29%;
- French-Belgian 23%;
- American 6%;
- Italian 2%;
- others 0,8%.
The fifth oil producer in the world, following the US, USSR, Venezuela and Iran, Romania produced in 1936 approx. 8,7 million tons of oil, which could cover at least 40% of the German needs for economy and long term war operations combined. Beside oil, Germany was interested among other product types in importing cereals, of which Romania was also one of the top world exporters, and certain ores (rare materials).
When Marshall Göring and the German Foreign Minister Baron Konstantin von Neurath received the Romanian counterparts, Mr. Grigore Gafencu and general Victor Antonescu, the negotiations were scheduled on a dual track: economic and political.
The economic negotiations were way more extensive than those from March 1938, whereby obtaining the monopoly over the Romanian oil industry was the undissimulated main focus. Berlin insisted on establishing some “German economic units in Romania, which would produce goods necessary to Germany and export them on the German market, on the creation of “mixed” economic companies or “free [economic] zones” in ports.
The position of the Romanian side towards the pretentions of the Germans was specified in the counterproposals presented on 14 May 1938. The document did not conceal the fact that the German draft exceeded, through its easily foreseen consequences, the “strictly economic framework” of the negotiations and insisted to ensure “the economic independence of Romania” and, implicitly, the political one. Premier Armand Călinescu grasped on the previous day the essence of the negotiations: “There occurs a problem between us and Germany. As objectives and purposes, the following: The issue has a double aspect: political and economic. The economic is important and decisive, while the political is accessory and an element of blackmail. That is the case for the Germans. We want to ensure our frontiers and we are paying for it.”
Whereas Germany sought to ensure for itself the energy resources for a long term war, Romania was following a policy of (geopolitical) realities and one of supporting its Eastern European allies, Poland and Czechoslovakia, by looking for a cooperative relationship with Germany and attracting Allied investment, and military and political commitment. As an effect of the increase of Germany’s role in East-Central Europe, as well as following the concessions policy made by Paris and London since Locarno, Romania had to give a great deal of importance to the specification of its relations with the Third Reich. The pervasive fear among much of Bucharest’s political class was that when and if Germany would ask for the rectification of its Eastern borders, the entire region could be destabilised by war and invasions, whereby Stalin’s Soviet Union was skulking for its chance to invade from the East too. The limits of the initiated negotiations for the Romanian delegation were set by King Carol II in accordance with economic and military circles in government in one sentence: “We shall not throw ourselves in the arms of Germany”.
The coming days tensed negotiations took place, the German negotiators resorting to certain pressures in order to make the Romanian side “more understanding”. As it was well known, harshness was one of the common procedures of the Nazi Reich, being also felt during the negotiations with the Romanian delegation. The Minister of Economy and Public Works I. Bujoiu, referring to the German proposal to create “economic units with [exclusive] German capital in Romania”, found it inadmissible, pointing out that in consequence the country would be reduced to the situation of “simple supplier of labor force, its natural resources and its production possibilities serving exclusively to the satisfaction of German needs”. Another fact one needs to consider is that during negotiations Göring and Baron Konstantin von Neurath fully profited from the advantage gained by the Reich through the engagement of nearly all Romanian troops in Bulgaria and the fresh Romanian – German direct border after the Austrian Anschluss.
The Economic Agreement, which from then on would be the base of the relations between the two countries, was intensely negotiated for three weeks, but it had to await one more week for the complicated political agreement to be ready as well.
The German-Romanian treaty, concluded for a period of five years, had in view an economic plan meant to maintain “the equilibrium of economic exchanges”, taking in consideration both Germany’s import necessities, as well as the development possibilities of Romanian production, Romania’s internal needs and its needs of economic exchanges with other countries (Article I, in OTL). The plan operated in several areas:
· the development and the orientation of Romanian agricultural production (German export of agricultural machinery and motorisation);
· the development of existing agricultural industries and the creation of new ones;
· the forest field (Romanian exports of wood);
· the deliveries of machinery and equipment for the Romanian mining industry (Germany needed to import coal and rare ores, part of them being extracted from Romanian mines. Tungsten was not among them, this metal only being present in Norway.);
· the founding of mixed companies for the capitalization of certain ores (direct investments);
· the collaboration of industrial field (investments and civil technology transfer);
· the creation of “free [economic] zones” (yes, some liberal policies iare not an anglo-saxon invention);
· deliveries of weapons and equipment for the Romanian army and war industry;
· the construction of certain equipments of public utility;
· the collaboration of certain Romanian and German banks for the interests of both countries, especially in the direction of business financing;
· “the founding of a mixed Romanian-German company that will deal with the exploitation of petroleum and the execution of a program of drilling and treating of crude oil”.
Two governmental committees were formed for the realisation of the various common projects. Provided the treaty was not denounced until May 15, 1943, it will be prolonged for an indefinite period of time (article V, OTL, only the original date being March 31, 1944).
In parallel with the economic negotiations General Victor Antonescu was received by Marshal Göring, a few days later being invited to a private discussion with Hitler. The Nazi leaders appreciated Antonescu, a military man with a high sense of honour with nationalist-conservative views, very much, which made the political negotiations smoother than otherwise. The German side wanted Romania to renounce the Allied security guarantees and anchor itself in the German sphere of influence, not just economically but also politically. Antonescu repeated the Romanian request for German security guarantees for Romania’s eastern borders instead. The Germans replied they are not ready for a full blown war against the Soviets, should they invade Bessarabia and therefore such guarantees are not feasible for the time being, but added, they would do their best to discourage the Russians from doing so before anything happens. That’s not enough, was the assessment of the Romanian government.
Another issue was Germany’s complains about Romania acting against other countries without consulting with Berlin, which will become very important once the two states will be allied or at least have close economic and political relations. The under-tone was Romania has finally to acknowledge it had entered the German sphere of influence, whether it likes it or not.
Negotiations with Italy under arbitration threats
The third major point of negotiations was Hitler’s imperious demand for an Italian-Romanian political treaty meant to definitively reconcile the two powers. The parties must negotiate a solution, including territorial concessions from the Romanian side, since Bucharest controls territories in Balkans, which Rome regards as part of their traditional sphere of interest. Should Italy and Romania fail to find a political agreement for their disputes, the Führer threatened the latter with arbitration made by itself.
King Carol II was terribly unnerved by the brazen threat, but conceded that the highest interests of his country dictated him to accept negotiations with Italy. In an act of defiance, Benito Mussolini sent his Foreign Minister Gian Galeazzo Ciano on 20 May 1938 to Berlin instead to Bucharest, to meet the Romanian delegation there. Essentially Italy was pleased with Romania ceding seven former Yugoslav provinces with majoritarian or significant Italian population and of economic significance. Among them were two major urban centres, namely Ljubljana and Split (also a port). In return Italy has relinquished its claims on Albania and recognized Romanian occupation of Hungary and Yugoslavia. Romania recognized Italian hegemony rights over the Mediterranean Sea and the adjacent zones except Greece. Foreign Minister Ciano insisted Greece is one of their special interest zones, asking Romania to explicitly stay out of it. Antonescu retorted that after the Italian attempt to dismember Romania with the help from Bulgaria and Yugoslavia, there is no way to accept the risk of Italian military bases in Greece ready to start another offensive against Romania whenever the fascist government of Mussolini wishes so. The Italian delegation underlined that the Romanian alignment with the Axis sealed by treaties excludes such a scenario and that they want to use Greece to better control the Mediterranean against British Navy as well as a logistical node towards hegemony in Eastern Mediterranean Sea and the Middle East. Italy already owns the Dodecanese Greek islands in the Mediterranean, which suffices for their power projection plans, with a considerable less threat factor for the security of Romania. General Antonescu made it clear, the occupation of Greece entails an intrinsic element of blackmail that his country is never going to accept. Should Italy not refrain from its plans in Greece, Romania will not cede to Italy any territory in former Yugoslavia.
Italian Dodecanese Islands on the lower right corner

Given the appeared deadlock in this atmosphere of distrust, Ciano asked Benito Mussolini what he prefers: Hitler’s arbitration, or signing an Agreement with Romania, thereby leaving Greece aside. Il Doce consulted Hitler on the issue. The Führer adviced him not to resort to arbitration, because an arbitration against Romanian interests could derail Romania from its pro-Axis course at a moment when Germany seeks to secure the access to Romanian oil production without risking an all-out war with the Allies (France had given security guarantees to Romania in the early 1920s). Consequently Ciano returned to the negotiaton table and in a short time the parties agreed to respect Greece’s neutrality declared by the right-wing authoritarian Metaxas Regime established since August 1936. Additionally Romania committed not to develop a substantial maritime fleet that could one day challenge Italian dominance over the Mediterranean. On the economic level, Romania promised to open its market to investments at the same preferential conditions that the German companies will enjoy after the signing of the presently negotiated comprehensive economic agreement. As a last point, Italy has promised to sell armament, especially bombers and artillery, and licences to Romania. Both countries agreed to add a non-aggression clause to the bilateral Treaty to be signed concomittently with the Anti-Copmintern Pact with the Axis powers.
Concluding results
Meanwhile, Germany insists Romania should enter an open political alliance, but it is reluctant to give security guarantees on the border with the Soviets. Romania wants those guarantees, but it is reluctant to leave the Allied security guarantees, because this way, foresaw the political factors in Bucharest, it potentially risks a two-front war with the Allies and the Soviet Union in case Germany enters war with the Allies or both. Germany reassured the Romanian delegation that a two-front war will be avoided at all costs, but the latter remained unconvinced and also fearful of the economic consequences from a decoupling from the international markets and access to capital in case of a new Axis-Allies conflict. After three days and nights of intensive negotiations Romania agreed to secretly join the Anti-Comintern Pact, under the express condition that the Romanian, Italian and German obligations regard only a defensive alliance against the Soviet Union, should one of the parties come under attack. In case the Axis would enter conflict with the Allies, Romania will declare neutrality, no matter who attacks whom.
The German-Italian-Romanian economic and political Treaty and the Anti-Comintern accession were signed on the June 1, 1938. At the conclusion of the Treaty, Grigore Gafencu affirmed that the document, in its general lines, affected the area of economic collaboration with a view to the “satisfaction of the German-Romanian complementary interests, which have always been so important”. He insisted on the fact that each of the signatories expressed “the pacifist purposes” of their policy”, reasserting that the respect of national independence represented the supreme ideal for all the European countries”. The diplomatic language in the treaty and the discourse of the Romanian Foreign Minister represented to a certain extent a subtle attempt to nudge Germany away from aggressive solutions to its eastern borders claims, or generally against touching the Cordon Sanitaire status-quo. It was doubtful though that Germany would be inclined to lend an ear to a lesser power like Romania in this issue, irrespective of how the diplomatic language of the Agreement was formulated.
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