In the second half of the 1960s, Austria seized on the Italian gas-for-pipe initiative and closed a deal with the Soviet Union. This presented a peculiar problem for the country’s small economy. Under the hegemony of convertibility of the US dollar, as well as the competitive, liberalizing impetus initiated in the establishment of the EEC, Austria feared that the coming large outlays in purchases of Soviet gas would not in turn be spent in Austria. The Soviets were pressuring Austria to liberalize its markets and do away with the strict balancing of trade that had been the norm during Bretton Woods through the technology of negotiated, long-term trade lists. They were right to fear. The Soviets were eager to spend the convertible currency earned through gas exports as profitably as possible. Years before military exports and Petrodollar recycling resolved a similar problem for the United States and Western Europe, Austria struggled to maintain the kind of accounts-balancing, barter exchange with the socialist world it had enjoyed in the postwar period. Market integration seemed inexorable. And the face of that inexorability was the Soviet Union.

Italy is not often featured as an important actor in the geopolitical map of the Cold War. And yet the country played an important role in breaking up a number of strictures that had kept the Soviets at bay from Western Europe. Italy’s fast growing businesses were often the first to reach out to the Soviets for large deals. Fiat very prominently sold a factory to the Soviets in the mid-1960s, representing that decade’s largest turnkey project. But this chapter argues that the more historically consequential initiative was ENI’s suggestion of a gas pipeline running from Ukrainian gas fields to the north of the Mediterranean country. This would have somewhat of a novel payment arrangement: the pipeline would be paid in gas. This arrangement effectively expanded repayment periods well beyond previous, Bretton Woods–era practices, which usually involved short-term loans that covered the time required for barter arrangements to transact. The Soviets saw an opportunity to change the temporal order of Bretton Woods, and suggested a much larger gas-for-pipes deal that would link their newly discovered gas reserves in Western Siberia to Western Europe. Italy balked initally for lack of industrial and capital resources, but others would literally capitalize on the new possibilities Italy had opened.

Despite reports to that effect, the grain crisis of 1963 did not introduce the Soviet Union to global trade. The crisis, however, did epitomize the kinds of problems the Soviets encountered in their drive to intensify their engagement with global exchange. Coming as it did in the compartmentalized world of Bretton Woods, the negotiations to import large amounts of grain from Canada and the United States subjected the Soviets to deal-making practices that ran through political agents rather than market agents. It illustrated for the Soviets the gains that could be made in setting these practices on a market basis. It also showed the extent to which the creation of the kind of market relations the Soviets aspired to undermined North American labor interests, a dynamic that became a feature of the post–Bretton Woods era – and which had the Soviet Union for an ally.

West Germany finally realized the energy project Italy had begun and Austria had advanced. West Germany made material, through the capitalization of a durable infrastructure, the relationship the Soviets had sought with Western Europe for so long. In 1962 the United States had vetoed a series of oil-for-pipes contracts that would have brought Soviet energy to the heart of Europe. This chapter recounts how half a decade later, with the groundwork having been laid by its two southern neighbors, West German business, local governments, and finance assembled the technopolitical coalition that would redraw East–West politics and labor relations throughout Europe. With the vast, capital intensive construction that West German industrial and financial power made possible, the Soviets could draw on further reserves of capital backstopped by a nigh-irrevocable, material infrastructure.

Italian state and business agents, having initiated the changes in East–West relations that this book follows, then proceeded to stall on the gas-for-pipe deal. This coda documents how it was only after West Germany jumped on the project that the Italians followed, as junior partners, through the door they themselves had opened many years before. As they did so, they entered a world of proliferating finance, debt creation, and market integrations. Closing the door behind them, they left behind the world of exchanges politicized in a Cold War key, a kind of politicization they had skillfully used throughout the 1950s and 1960s to negotiate better terms from the Soviets because of the risk to the American–Italian relationship that used to entail. What they entered was precisely the world the Soviets had fought for, one where market logic and discourse was overriding.

The Soviets deployed a performative politics of the market everywhere they went, but they used with particular insistence in Great Britain. The British economy had performed well in the postwar period, but its industry was losing out to competitors in continental Europe and Japan. This was something the Soviets liked to point out, and often. But Great Britain had a unique advantage: a still international currency with relatively deep captial markets. It is in this ambit that the British sought, in 1964, a competitive edge over its allies for Soviet business. In order to counter rising competition – and against strong American pressure – the British offered to liberalize parts of its national economy and to offer better and temporally longer finance for Soviet purchases of British industrial products. In doing so, they breached financing practices from the 1930s. The Soviets then used these new terms to pressure other European countries into better financial arrangements for their deal-making. The promotion of market practices of competition, the Soviets understood, could be achieved through financial competition in the absence of integrated global markets for industrial commodities. British financiers would be the bearers of the political transformation the Soviets sought and strove for in the world economy.

France offers a contrast to the ways in which finance and energy, and by extension economic life, was governed elsewhere in Europe. The French state, as keen as the Soviets to develop material exchanges beyond the hegemony of American stricture, sought to institutionalize these exchanges through a series of committees and working groups that would govern talks and practices. This was successful to a degree. But despite pressure from the Soviets to liberalize French trade and finance, the French state did not consider it urgent to get a hold of Soviet energy. Instituting working groups in the second half of the 1960s that would meet regularly to discuss trade and finance had been fruitful for the Soviets at the height of Bretton Woods and the technologies it purveyed, such as trade lists and long-term trade agreements. They were still, in many ways, the backbone of the economic relations the Soviet Union maintained with its Western neighbors. What they were not, however, was the future the Soviets envisaged. In Franco-Soviet relations, it was the Soviets that insistently pushed the temporal and material limits. And the French, reluctantly, followed.

This introduction develops some ideas for thinking about the compartmentalized nature of international political economy under Bretton Woods and the institutional settlements of energy and finance that made it possible. After initial institutional failures, this compartmentalized global architecture came to oversee a politics of growth that eventually incorporated the Soviet Union as an enthusiastic participant. The Soviets likewise participated in the dismantling of that architecture precisely by helping rearrange the relationships of energy and finance that had established it in the first place. This book shows that a history of the development of post–Bretton Woods capitalism requires the inclusion of the Soviet Union as one of its architects.

This chapter outlines the secular convergence of Italy’s GDP. From the mid-1890s to 1913, the centuries-long economic decline was reversed. Institution-building and time-consistent policies of monetary stability and reduction of the debt-GDP ratio were among the main causes. The convergence record of the fascist years is mixed. As growth-reducing factors, we highlight “prestige policies” leading to an overvalued currency, and autarky. Postwar reconstruction was swift, followed by a quarter-century catch-up growth and cultural renaissance. The 1970s were turbulent years, marked by terrorism and inflation. Growth however continued to show unexpected resilience. Seeds of future weaknesses were nonetheless sown. Social tensions were eased by deficit-financed benefits. In the 1980s growth continued but the ratio of debt to GDP rose from 50 to almost 100 percent.