Romania entered World War I at a difficult moment for the Central Powers. The offensive against Verdun had been an extraordinarily bloody stalemate, one that sapped the officer corps' confidence in the leadership of General Erich von Falkenhayn. In June, Russia launched its great Brusilov offensive, pushing Austria-Hungary to the verge of capitulation. Soon thereafter, the British offensive against the Somme, itself a blood-soaked disaster, nonetheless revealed an astounding Entente advantage in war material. The first part of 1916 had not been kind to the armies of the Dual Alliance.

The difficulties were in no way limited to the battlefield. The material advantage demonstrated by the British at the Somme suggested that Germany's purported martial virtues could be trumped by sheer weight of firepower. Germany would need to mobilize greater resources to keep up. The signs here, however, were likewise troubling. By spring 1916, the sales of war bonds no longer covered the financial needs of the state. This forced a growing reliance on discounted short-term notes and the inflationary Darlehenskassen (special banks created to issue loans). Concern for the external value of the mark necessitated sweeping controls on foreign exchange by January 1916, and on all foreign trade by 1917. Meanwhile, food supplies in the munitions-producing cities were becoming dangerously short. General Groener recalled in his memoirs that, “in the course of the summer of 1915 it became impossible to overlook the growing difficulty of feeding the population and army.” By February 1916, the War Minister was reporting to General Headquarters that peace must be made soon given the food crisis.Footnote ¹ The creation of the War Food Office (KEA) in May 1916 could not compensate for terrible weather in 1915 and labor shortages in the agricultural sector. The government could not prevent spreading food riots and an expanding black market. From the beginning, the KEA could not hope to meet a proposed standard of 3,000 calories daily for an adult male, aiming instead to introduce a daily ration of 1,985 calories. Ultimately, the KEA was unable to permit more than 1,336 calories. Riots, looted shops, and arrests continued until they peaked in summer 1916.Footnote ² The summer harvest brought temporary relief to Germany's food crisis but did not resolve the fundamental problems with German food supply. Indeed, worse was to come.

The entry of Romania into the war on August 27, 1916, therefore, came at a difficult point indeed. Recent events on the battlefield and at home pointed to eventual German defeat. On hearing the news of Romania's entry, the Kaiser allegedly exclaimed, “That means the end of the war!”Footnote ³ But the war did not end. The emergence of another enemy instead became the precipitating point for a series of decisions that marked what Gerald Feldman called the move from conservative militarism to radical militarism.Footnote ⁴ The pivot for that move was the appointment of the “demi-gods,” Hindenburg and Ludendorff, to replace Falkenhayn the day after Romania's declaration of war. Coming hard on this was the determination of this Third Oberste Heeresleitung (OHL) to intensify the demands on the war economy, despite the already obvious signs of strain. Germany had to match the Entente in war material or face defeat. This meant an expansion of munitions production, which was to be achieved through a reckless spending program, mobilization of national labor, and intensified exploitation of the occupied territories.

The focus of this article will be the exploitation of one of those territories, the most recent acquisition, the straw that broke Falkenhayn's back: Romania. The German engagement with Romania in the era of the Great War has been the occasional object of scrutiny by German historians. The crux of historical interest has largely been, however, the interaction between German business interests and German imperial ambitions. Historians such as Fritz Fischer, Gerald Feldman, and Renate Günther have largely focused on the Treaty of Bucharest, particularly the oil provisions therein.Footnote ⁵ These have largely been arguments about continuities in the ambitions of the D-Banks (Deutsche Bank, Diskonto-Gesellschaft, Dresdner Bank, and the Darmstadter Bank) and their supporters in government.Footnote ⁶ The exploration of occupation policy here is an effort to add to the growing historiography of the policy and experience of occupation in World War I as well as perhaps suggest alternative continuities—in the experience of occupation. German economic planners believed that they had learned important lessons from their earlier experience in occupation. Those lessons, coupled with the particular structure of the Romanian agricultural economy as well as the radicalization of the war effort, prompted an evolution in occupation policy. The exploration of this development will focus particularly on two critical areas—grain and money. The occupation also had more far-reaching ambitions that lay outside the limited space of this essay.

Romania possessed a number of attractions for Germany, many of which would become more obvious as the conclusion of peace neared. In autumn 1916, as the armies of Mackensen and Falkenhayn pushed into Wallachia, the most immediate allure was grain for Germany's cities. Romania had emerged as a significant exporter of wheat during the course of the nineteenth century. The vast latifundia organized the bulk of the Romanian countryside around the production of wheat for the international market, particularly in Belgium and Great Britain.Footnote ⁷ As the war closed the Dardanelles, Romania's traditional grain markets disappeared. Germany had sought to profit by this, but the Romanian government proved unwilling to sell substantial quantities to Germany in 1914 and 1915. The successful Gorlice offensive, which pushed Russian troops out of Poland, and then the conquest of Serbia in November and December 1915 altered the political context of Romanian decision making.Footnote ⁸ Only then did the Romanians agree to sell grain to Germany through its Central Purchasing Association (ZEG). The ZEG had contracted for several large purchases in the winter of 1915–16, totaling 2.7 million tons. A half million of this total had been arranged before August 1914, and the remainder represented claims on portions of the 1915 and 1916 harvests. The Central Powers also established the infrastructure to take delivery of that grain.Footnote ⁹ To protect the value of the mark, these purchase agreements also included complicated payment systems. Most striking was the provision that a portion of the payments made by the ZEG would flow into a Reichsbank account that would only become accessible to Romania after the war.Footnote ¹⁰ This flow of Romanian grain had been of great importance. Germany's food crisis in spring and summer 1916 would have been far deeper without this increment of grain.

August 1916 appeared to put that all in jeopardy. Germany's food crisis came suddenly to look far more dangerous as a critical granary entered the lists against the Central Powers. The defeat of the Romanian army in October and November 1916, however, raised the prospect of an early occupation of a land that was widely hailed as “one of the most fruitful lands on Earth.”Footnote ¹¹ The occupation of Romania was therefore of substantial interest to German authorities.Footnote ¹² Maximizing the production and delivery of grain to the Central Powers became a critical near-term goal. An expansion of Romanian grain deliveries would at the very least ease the looming food crisis in Germany. The weather in 1916 had not improved from 1915, and the threat of another hungry winter loomed (this would become the infamous “Turnip Winter”).

It is worth emphasizing that German authorities wanted to maximize both production and delivery. The planners of the Romanian occupation had, by autumn 1916, two years of experience in occupying territory and extracting resources. German occupation authorities in Belgium, Poland, and the Baltic lands had made widespread use of requisitions, sometimes issuing receipts that purportedly could be redeemed with the occupation authorities for the value of requisitioned goods. In practice, inhabitants often found that recompense was not forthcoming or was paid out in “East Money,” widely seen as worthless. Some of the receipts were crude jokes played by soldiers, on which were scrawled messages such as, “The bearer of this receipt is to be hung immediately.” Others were little more than scraps of paper with handwritten notes.Footnote ¹³ Not surprisingly, inhabitants sought as much as possible to hide their possessions from the authorities. Alternatively, the occupation authorities in Poland tried “voluntary” sales of metals and other industrial raw materials. As one report filed with Herbert Hoover's Commission for the Relief in Belgium argued, “in fact, these prices are imposed beforehand and with a heavy loss to the industry. People not willing to sell at these prices are running the risk of having their goods sequestered.”Footnote ¹⁴ Again, hiding material was a rational choice.

The occupation authorities in Belgium had discovered in autumn 1914 that payment in Belgian francs was more effective in acquiring food and material than either requisition or payment in marks. Money hoarding and the passive resistance of the National Bank of Belgium, however, made cash scarce—so scarce that cities could not pay the war contributions that the German military levied on them. To square this problematic circle, the Germans entered into negotiations with the Belgian financial elites and the National Bank to emit new notes, backed by international financial instruments (given the realities of the war, this meant largely German bonds and marks). With these new notes, the Belgians could pay the contributions and the Germans could pay for material rather than simply requisitioning it.Footnote ¹⁵ It seemed that printing local currency was useful for speeding the acquisition of local resources. In Poland, however, initial efforts to set up a new bank of issue foundered on the reluctance of German banks to participate and the effective denuding of the territory by the retreating Russians. The occupation had to rely on requisition, marks, and captured rubles. To the north, Ludendorff and OberOst (as the occupation zone in the Baltic lands was known) cut through all difficulties to establish a Darlehenskasse Ost in April 1916 to emit occupation rubles (“East Money”) with little effective backing aside from its legally fixed exchange rate, the anchoring of the Darlehenskasse in the German financial system, and the participation of German government (one of the participating banks was closely tied to the state-owned Seehandlung).Footnote ¹⁶

These differing efforts were local attempts to adapt to the unexpected development of a long war of attrition and extended occupation. Unintentionally they represented a series of learning experiences. While the military found the Belgian experience satisfactory,Footnote ¹⁷ the Reichsbank noted that in Poland and Lithuania “the supplies of materials that are present and liable for purchase are widely hidden away if payment is not offered in a currency that the population will accept.”Footnote ¹⁸ In the occupied territories, the process of extracting resources continuously threatened the orderly reproduction of those resources, a problem of particular salience in an agricultural territory organized to maximize profits from international sales.

The German Army had organized an Economic Staff (Wirtschaftsstab) charged with the orderly exploitation of Romania even before German troops entered Romanian territory.Footnote ¹⁹ The head of the Economic Staff was Major Friedrich von Kessler. Von Kessler had served before the war in the Railroad Division of the General Staff. When the war began, he was adjutant to the Generalintendant, von Schörler, and was charged with supplying the armies in the field. Von Kessler was particularly active early in the war in Belgium. Von Kessler also served as the General Staff's principal liaison with the Commission for the Relief of Belgium and became involved in supply questions in Poland in late 1915. Hoover described him as “not articulate on humanitarianism” but praised his fairness and determination.Footnote ²⁰ He was well chosen for his task, given his substantial experience in the occupations of both Belgium and Poland.

The German Army apparently hoped to avoid the chaos and irrationality that had marked the early occupation of Belgium and Poland. There was also an important change in policy, one that reflected the changed circumstances with the emergence of the radical militarists and the Hindenburg Plan. The occupation governments in Belgium and Poland were focused on ensuring that the armies outside Germany were as small a burden as possible for the homeland. “War must feed war” was the watchword. This understanding at best stretched the meaning of the Hague Convention on Land Warfare (over and above the many violations committed in the direct treatment of civilians).Footnote ²¹ The Hague Convention permitted occupiers to ask the occupied to pay the expenses of the occupying army; the Germans added combat formations to that total. The intention in Romania was from the beginning more radical. As Major von Kessler explained in an October 28, 1916, meeting in Berlin with representatives of the allied militaries, the task of the military government in Romania was “to get out of the land what can be gotten out.”Footnote ²² Romania was to supply not merely the occupation and combat formations, but also the homelands of the Central Powers. The occupation, therefore, had to be simultaneously more rigorous and more effective. Von Kessler, drawing on his experiences in Belgium and Poland, argued that Germany could not afford a policy of simple requisition. He observed that “where the population itself should be made interested in the production of goods, payment must be promised and actually made. One does very well with the system of requisition at the beginning, but very soon it's seen that the wells have run dry.”Footnote ²³

The Economic Staff had no intention of opening Romania to the market mechanism. The members of the Wirtschaftsstab firmly believed that the occupied territories were assets to be exploited. The Economic Staff argued on January 10, 1917, for example, that Britain had violated international law by mixing economic and military weapons, a reference above all to the blockade (they also did not like British interventions in neutral markets). The blockade forced Germany to “expand the financial and economic clauses of the Hague Conventions.” Specifically, “it must be permitted for the occupying state to take those economic and financial measures in the occupied zone that are necessary to satisfy the needs of its war economy.”Footnote ²⁴ The Economic Staff flatly stated that it intended to go beyond the limits imposed by international law.

In addition, Germany's delicate finances imposed hurdles. The Reichsbank was quite worried about protecting the external value of the mark. The expanded money supply coupled with falling exports, both very much artifacts of the wartime economy, had already led to pressure on the value of mark. By 1916, the mark had already lost a third of its prewar value in the critical neutral markets. Since a falling mark would make it more difficult to secure critical raw materials and food in neutral markets, the Reichsbank had been forced in January 1916 to take control over the conversion of foreign currencies. This problem was exacerbated in autumn 1916 when iron and steel exports had to be curtailed in the interests of the Hindenburg Program.Footnote ²⁵ What little foreign exchange steel exports had once earned was now gone. The mark, already under pressure coming into 1916, was facing new dangers. The Reichsbank responded by placing additional controls on the exchange of the mark, both by Germans and by Germany's allies.Footnote ²⁶ In fall 1916, then, there was no appetite for mobilizing substantial sums in marks to finance purchases of grain in soon-to-be-occupied Romania. As Major von Kessler pointed out in his October 28 meeting, paying in German marks would have a negative impact on prices at home.Footnote ²⁷

In principle, this was a predicament. German planners such as Major von Kessler hoped to encourage continuing grain production in Romania, but actual purchases threatened to send the mark into a tailspin. Kessler, however, came to his October 28 meeting with a solution: “A way has been found to bring an appropriate solution to this question; the Banca Generalu Romanu will be forced to issue new notes.”Footnote ²⁸

Major von Kessler had been busy in October. Before meeting with his military colleagues to coordinate occupation and exploitation policy on October 28 and 29, von Kessler met with the German civil authorities on October 23 and 28. The separate meetings were necessary, because Germany maintained unified command over Romania as long as it was treated as an active military campaign. If Field Marshall Mackensen surrendered his occupation responsibilities to a Governor-General, far more attention would likely have to be paid to the demands of the Hapsburgs. Indeed, the Hapsburgs might demand the right to appoint the Governor-General. Germany had to maintain the plausible notion that Romania was an active military front.Footnote ²⁹ Consequently, von Kessler made clear to his civilian interlocutors that it was critical that the military maintain the lead in occupation questions.

The meetings on October 23 and 28 took place in the offices of the Reichsbank, for the central question at hand was the role of currency in the upcoming occupation of Romania. Participating, besides von Kessler, were both the president and vice president of the Reichsbank, Rudolf von Haverstein and Otto Georg von Glasenapp, respectively. There were also representatives of the War Ministry, the Interior Ministry, and the Treasury in attendance.Footnote ³⁰ The critical conversations were held on October 23. The report of the meeting is unfortunately unclear about speakers, so it is not possible to determine precisely who made important policy suggestions. The meeting began with a brief discussion of the shortcomings of the occupation of Poland. The Military Administration hoped to overcome those problems by introducing new lei notes (the lei was the currency of Romania) through the Banca Generale Romana, a filial of the Disconto-Gesellschaft. To make these notes more attractive than the “East Money,” the new lei notes would be backed by a large reserve of marks deposited in the Reichsbank.Footnote ³¹ The notes were to be established at an exchange rate of 100 marks=125 lei.Footnote ³²

The idea at this point was relatively simple and unremarkable. The Military Administration and the Reichsbank both agreed that some aspects of the previous occupation policies in the east should be avoided. In particular, new notes should be issued and these notes should enjoy strong backing to make them more acceptable to the indigenous population. These notes would expand the money supply inside Romania, but German financial authorities did not think that this was terribly relevant. The critical financial determinants, as far as they were concerned, were the backing of the currency and the balance of payments.Footnote ³³ So expanding the money supply in Romania was not seen as deeply problematic. Indeed, the new notes were to be backed by a presumably harder currency, the mark, and as we shall see, balance of payments was not to be an issue. The German authorities probably did not see the new lei notes in themselves as unduly inflationary. And the new notes were to be available as soon as four weeks from late October, or so it was hoped.Footnote ³⁴

The crucial point is how marks were to be paid into the reserve fund at the Reichsbank and what was to happen to that account at the conclusion of peace.

The reserve fund was to grow continuously during the occupation. This could have the function of further stabilizing the new lei notes, but there were other, more unpalatable purposes at work. The participants at the October 23 meeting observed that:

Romanian producers would be paid by occupation authorities in the new lei notes printed by the Military Administration. They presumably would feel comfortable receiving these notes, as opposed to the old “East Money,” because they were to be backed by a mark reserve. The goods (principally grain and oil) would then be sold to the appropriate German government offices, and the proceeds of those sales would flow into the Reichsbank account, increasing the reserve. In this manner, the extraction of resources from Romania could be used to grease the skids for further extraction. As a side benefit, for the duration of the war the Reichsbank would be able to make use of the reserve funds for its own purposes. This arrangement has important parallels to the Belgian occupation francs. The notes were to be issued by a local bank and to be backed by German marks. The new lei notes, were, however, linked directly and exclusively to German “imports” from Romania. In this respect, the Reichsbank account also bears a more than passing resemblance to the financial mechanism established in early 1916 by the ZEG whereby a portion of the money paid for Romanian grain would be paid into a Reichsbank account.

The new account was not, however, the same as that set up by the ZEG. The intended future use of the monies was decisively changed. If possible, Romania would never get the money. It was suggested at the October 23 meeting that:

Either Germany would ultimately force Romania to accept the newly printed lei notes and the Central Powers would seize the reserve fund for their own benefit, or the lei notes would be taken back in return for the contents of the reserve fund. In the first case, Germany and its Allies would receive nearly two million tons of grain and more than a hundred thousand tons of petroleum in return for the costs of printing lei notes and opportunity-costs of money deposited in the Reichsbank. The second, worst-case scenario was that Romania helped to finance Germany's war effort with an interest-free loan paid in marks, a fact frankly stated by Reichsbank Vice President von Glasenapp in the October 29 meeting. “The possibility of a profit arises first with the conclusion of peace, if the Romanian government recognizes the notes as legal tender and the paid-in-coverage fund becomes free. The profit could then be divided among the allies according to their participation in the purchases that were made by means of the notes. If the reserve were to be needed to redeem the notes, then at least the individual states had gotten the advantage for their balance of payments of financing the planned purchases without using their own currency.”Footnote ³⁷ As “fate” would have it, Germany would eventually be able to impose a peace treaty on Romania, the Treaty of Bucharest. And in Article 5 of the Supplementary Legal Treaty between Romania and Germany, Romania was indeed required to take the notes issued by the Banca Generale as legal tender and the account held by the Reichsbank was declared “free.”Footnote ³⁸ At a stroke, the Central Powers managed to expropriate a large part of the national income of Romania.

The German occupation authorities, therefore, believed that they had designed a means of extracting a maximum of resources from Romania without unduly discouraging agricultural production, without substantial expense, and without great danger to their balance of payments. They sought to create two separate and self-contained financial systems that would, as much as possible, exist side by side without need for monetary exchange. To maintain that separation between financial systems, the Military Administration even had to shape the economic behavior of its own soldiers. The troops were to be paid in lei. The Military Administration declared it illegal to pay for items in Romania in anything but Romanian money.Footnote ³⁹ Money wired from Germany was paid to soldiers in lei. The official exchange offices only exchanged marks for lei and not vice versa.Footnote ⁴⁰ The army even sought to minimize the incidental use of German money by its soldiers.Footnote ⁴¹ That goods were expected nonetheless to flow from one of these financial systems to the other demonstrates the nature of the relationship (it is telling that the Economic Staff's semi-monthly reports of exports from Romania, otherwise remarkably detailed, had no columns for the value of those exports).

As German, Austrian, and Bulgarian troops swept through the southern province of Wallachia in November and December 1916, the new notes were not available. It took longer than four weeks to print them. Only at the end of January 1917 were there enough notes for the occupation authorities to begin using them systematically.Footnote ⁴² By then approximately 200 million in lei notes had arrived from Berlin. In mid February another 172 million lei were sent to Romania, and 173 million more in mid March. The occupation authorities expected another 400 million lei to be sent thereafter.Footnote ⁴³ (By November 1917, 977,415,000 lei had been imported.Footnote ⁴⁴) In the meantime, there was a wild period of mixed requisition and foreign currency. The recently mobilized Landsturmer, Gerhard Velberg, entered Bucharest three weeks after its fall to the Central Powers. Velberg describes Bucharest in December 1916 as a vast bacchanalia. Food, good food, was available everywhere, and at astoundingly low prices: “Kempinski could learn a thing or two.” The cafes and bars were filled to capacity; soldiers and their female companions crowded every table of every cafe. The officers and their ladies occupied the booths.Footnote ⁴⁵ Velburg was astounded at the consumer goods available, things that would have been confiscated long before in Germany. Silk and particularly jewelry were exchanged for “large bank notes.”Footnote ⁴⁶ Everything was for sale, until their money ran out.

That could not be the norm. Neither the army nor the Reichsbank could long tolerate such an outflow of marks. In the provinces, requisitions were the more common means of acquisition. On the first page of the first edition of the official administrative organ of the Military Administration was an order of the day that referred to the “extraordinary importance” of the “economic exploitation of the conquered Romanian territory,” and from this basis condemned the “frivolous” requisitions and the outright robbery of refugees.Footnote ⁴⁷ The official, organized requisitions began soon after. When Velburg was transferred to a Romanian town not distant from the now destroyed bridge across the Danube at Czernovoda, it was a different regime entirely than that prevailing at Christmas in Bucharest. On February 3, 1917, the German Landsturmer were ordered to begin a systematic inventory (i.e., search) and partial requisitioning of the local Romanian farmers. “A decree of the military governor has been made, whereby all grain must be seized from the Romanian civil population. Only 750 grams of corn per person, per day is to be left. It will be difficult work since if the decree is strictly enforced, the people must go hungry.” The lieutenant on his own authority added a variety of other objects to the list of items to be requisitioned. Velburg found the work disheartening, exclaiming “Basically we are acting exactly like the Bulgarians. The difference is only that first we make a decree and according to Paragraph such and such ‘requisition,’ while the Bulgarians simply take things without decrees, without paragraphs, sans facon.”Footnote ⁴⁸ The Landsturmer soon found a generous stream of “gifts” arriving from those Romanian peasants who had not yet been searched. Mysteriously, the decree was soon less strictly enforced.Footnote ⁴⁹

The military government in Romania intended to begin using the new lei as an inducement with the 1917 crops. The new notes played a central role in German plans to promote and secure the harvest. To finance the sowing of the 1917 crops, the Military Administration authorized advance payments in their new lei against the eventual harvest. This was initially undertaken by the Economic Staff of the Military Administration and the local occupation authorities. In June 1917, the responsibility for such financing measures was transferred to the National Bank's newly formed “Agricultural Loan Banks.” These banks would also be responsible for paying for the harvest itself.Footnote ⁵⁰ The prices to be offered were to be “good, such that each receives an appropriate profit.”Footnote ⁵¹ This centralized system of financing and payment made it easier both to distribute the new lei notes and to control the harvest.

It should be pointed out that the occupation authority in no way relied on carrots alone. The proposed financial inducements were coupled with the disciplinary apparatus of a military state. The occupation intervened in land contracts. The Military Administration made mayors legally responsible for full and careful sowing of the fields, and individuals were threatened with fines and imprisonment if they ignored their “duties.”Footnote ⁵² Indeed, several villages were fined in 1918 for refusing to work in the fields.Footnote ⁵³ The authorities also sought to control wages paid to agricultural labor.Footnote ⁵⁴ Guards were placed to oversee critical agricultural processes, from threshing to wool shearing,Footnote ⁵⁵ and wide use was made of forced labor by POWs.Footnote ⁵⁶

How successful was the German effort to seize control of the Romanian harvest through potentially worthless lei notes rather than straightforward requisitions? There are hints of resistance. When Gerhard Velburg returned to Bucharest in summer 1917, he observed that the only currency available was a new issue (which he mistakenly assigned to the Romanian National Bank) that was known colloquially as “bani prosti.” Velburg translated this as “dummes Geld.” The introduction of the new “dummes Geld” was associated with widespread shortages.Footnote ⁵⁷ Peasants hid grain in pits and even filled coffins with grain and held elaborate funerals.Footnote ⁵⁸ The Military Administration felt compelled in October 1917 to threaten a 3,000-lei fine and up to three months in prison for anyone who hid grain in buried containers (“in unterirdischen Behaltern”).Footnote ⁵⁹ Velberg suggested with one anecdote why farmers might have been tempted to hide their produce. He reported that one local bojar (roughly, aristocrat), Mielescu, received in earlier years “8,000 lei in gold from the Entente for one wagon of flax. Today the German Military Administration pays him 4,000 lei in bad paper for it.”Footnote ⁶⁰

Nonetheless, it appears that a combination of the authority of the occupation authorities and the new lei notes created a more or less efficient means of securing the Romanian harvest. One means of measuring this is in the quantity of material that the Central Powers managed to take out of Romania. In the year after Major von Kessler's series of meetings in Berlin, the Central Powers extracted 1,508,705 tons of grain from Romania, of which 649,668 tons were delivered to Germany.Footnote ⁶¹ In addition there was the grain consumed by the occupation troops and the 9th Army fighting on the Sereth line in Moravia and Bessarabia. This despite a quite bad harvest in 1917 officially blamed on drought.Footnote ⁶² The reports become both more sporadic and suspicious after May 1918 (cumulative foodstuffs exported to Germany went down according to a June 20, 1918, report). In any case, when the Treaty of Bucharest was signed on May 7, 1918, the Reichsbank account backing the lei was dissolved, thus ending the financial mechanism that permitted the Central Powers to receive grain and oil without making effective payment. As of May 31, 1918 (before the 1918 harvest was brought in), 1,920,305 tons of grain had been extracted, of which Germany received 788,179.Footnote ⁶³ Again, to this must be added the supplies taken by local military formations. By way of comparison, Romania had exported 2,743,822 tons of grain in 1913 (valued at 403,421,421 lei), a year with a much better harvest.Footnote ⁶⁴ In any case, the volume of food taken out of Romania was quite significant. Both General Ludendorff and Colonel Bauer suggested after the war that this was a critical aid to the war effort. In the words of Bauer, without Romanian grain, “the continuation of the war would have been much more difficult, perhaps impossible.”Footnote ⁶⁵

Another measure of German success in extracting resources from Romania was the impact on the Romanian economy. Inevitably, in assessing the economic significance of the new lei notes, it is difficult if not impossible to isolate their impact from the influence of other measures. The injection of new notes was a central pillar of a larger extractive policy. Nonetheless, one critical measure was the emergence of shortages, particularly food shortages. The Central Powers were exporting vast quantities of food, explaining Gerhard Velburg's odd experiences in August 1917. On August 13, 1917, Gerhard Velberg wrote from his village post in Fetesti that several areas around him were in the midst of bringing in a “spectacular harvest.” Nonetheless, four days later he noted that his company had to rely on official supplies now because of the “ever greater shortage” of food.Footnote ⁶⁶ He also noted in his second visit to Bucharest in June 1917 that food was no longer as easily found as in December 1916.Footnote ⁶⁷ Later, in December 1917, he discovered that Germans with access to food were particularly adept at securing the affections of Romanian women.Footnote ⁶⁸

In addition to food exports, the occupation authorities expropriated vast swathes of the material wealth and world of Romania. As a small example, within a few days, the authorities announced in the Verordnungsblatt that all wool was to be turned over between April 12 and April 20, 1917, at a price of between 1.75 and 2 lei per kilo. A few days later all church bells were seized.Footnote ⁶⁹ Other acquisitions were more locally oriented. Gerhard Velburg, for example, outfitted his office with requisitioned furniture. He had to go to a neighboring town because all the office furniture in his village had already been seized.Footnote ⁷⁰ The German authorities systematically stripped away much of the accumulated material of Romanian society for their war effort and enjoyment.Footnote ⁷¹

The result of the deliberate policy of getting “out of the land what can be gotten out” as Major von Kessler had put it, was climbing prices. In April 1918 Velberg wrote rather extensively on prices and currency. He noted that products on the Romanian street were “very expensive.” Razors were 0.75 lei and a glass of beer ran 0.5 lei. A bottle of wine was 7 lei, champagne 20 lei, and coffee with milk and sugar was 1 lei. This should be compared to the daily wages of German private soldiers: 0.88 lei.Footnote ⁷² The official price of bread ranged from 0.35 to 0.5 lei.

Perhaps the best signal of climbing prices and shortages was the introduction of rationing and price controls. In this way, the occupation authorities could limit domestic competition for goods and, for a little while, obscure the impact of the occupation. Despite Romania's agricultural richness, the Military Administration introduced rationing in January 1917. As the Austro-Hungarian members of the Economic Staff made clear, supplying the Romanian civil population with flour “could only be considered as the provision for the troops and the critical exports back home permitted.”Footnote ⁷³ Romanians were limited to a daily allowance of 225 grams of wheat flour and 150 grams of corn meal. The Military Administration assured the Romanian population that experiments had demonstrated that this was sufficient to produce “a tasty, attractive loaf weighing 440 grams.”Footnote ⁷⁴ Despite the rationing, the price of bread in Bucharest was raised approximately fourteen percent on August 1, 1917 (the Central Powers had removed 600,000 tons of food the two previous months).Footnote ⁷⁵ On January 1, 1918, the price of bread in Bucharest was raised another twenty-five percent to 0.5 lei.Footnote ⁷⁶ Even prices that were not fixed by administrative fiat were subject to the influence of the occupation. The Military Administration set maximum prices for non-necessities and stated that life necessities may not rise over the production, distribution, and overhead costs, plus a moderate profit. Stores had to give receipts, and customers could complain within two weeks to the “Price Investigation Office.”Footnote ⁷⁷ Those who “demanded a price that, given the total circumstances, would result in an immoderate profit” or held back products to increase prices artificially, could be imprisoned for up to a year and fined up to 10,000 lei.Footnote ⁷⁸

The rise in the fixed official prices in Bucharest is interesting. Bread remained rationed, so the authorities were not using prices as the usual signal to producers. That is to say, it was not an effort to convince Romanian farmers to grow more. It may have been a reaction to shortage in the sense that authorities were hoping to bring black-market grain back into official channels. More likely, the rising fixed prices for bread were an effort to soak up some of the surging money supply.

The extraction of material was in part accomplished through the creation of almost a billion additional lei notes (977,415,000), as well as several forced loans from the Romanian National Bank and the seizure of state assets in Romania and on deposit in Berlin (the ZEG account for grain deliveries, for example).Footnote ⁷⁹ By way of comparison, there had been a total of 762,200,000 lei notes in circulation in 1915. The monetary expansion that went with Romania's entry raised that to 1,451,700,000 total lei notes, in 1916.Footnote ⁸⁰ The acquisition of Romanian products for the Central Powers’ war effort was thus accompanied by a very substantial injection of liquidity into the Romanian market. The Central Powers introduced lei notes valued in excess of 128 percent of Romanian money circulating in the last full year of peace, or 67 percent of all lei circulating in 1916. That vastly expanded money supply, however, found no ready outlet. The products of the Romanian economy had been siphoned off and were thus unavailable to the Romanian population. There were, in addition, no significant commercial imports into Romania on which to spend that additional money. Thus, substantially more money was chasing substantially fewer items. Consequently, the black-market exchange rate in April 1918 for the lei fell from the official 100 marks=125 lei to 100 marks=150 lei.Footnote ⁸¹ Perhaps more telling, the agio, or discrepancy between the value of paper lei versus gold lei, grew to 322 percent by November 1918.Footnote ⁸² The rising prices for daily consumer items also pointed to building price pressures, as did the disappearance of small coinage from circulation.Footnote ⁸³ Given the dynamics created by occupation policy, it is in no way surprising that the Romanian National Bank, under German administration, saw its principal task in combating the “continually strengthening liquidity of the money market.”Footnote ⁸⁴

Money of a sort was flowing into a Romanian economy that was beset with shortages. Something had to be done with that money. The result was a flow of money into Romanian banks and financial instruments. With little to buy, Romanians sought to save or invest. Money flowed steadily into bank deposits. As the Military Administration noted, “even the peasants are buying bonds.”Footnote ⁸⁵ On October 27, 1917, Velberg recalled, a young Lieutenant Schlemmer sought to convince several worthies of the town of Fetesti to buy German war bonds. Velberg served as the incredulous translator.

The local farmers had “surplus money” (“überflussige Gelder”) that they wanted to employ. They were willing to run the risks associated with lending money to an enemy state, effectively financing the occupation of their own land. Perhaps they wanted to access a currency other than their own lei. The conditions created by the German occupation encouraged politically suspect lending, allowing the Military Administration to sell war bonds valued at 33,007,300 marks in Romania.Footnote ⁸⁷ The Hapsburgs managed to sell an additional 32 million Kroner in bonds.Footnote ⁸⁸ The flow of money to financial instruments, even potentially treasonous instruments, in a time of widespread shortage, essentially a savings overhang, strongly suggests the stress the currency and economy were under. In effect, the Romanian economy was on a prolonged war footing as it became a constituent part of the German war effort.

The multi-pronged strategy of extraction effectively bankrupted the Romanian economy and corrupted the currency in less than two years of occupation. And the Germans knew this. Georg Solmssen, Director of the Disconto-Gesellschaft's substantial interests in Romania, suggested in March 1918 that the status of the lei and the general financial well-being of Romania were in doubt, particularly if the Reichsbank kept the marks backing the notes issued by the Banca Generale.Footnote ⁸⁹ A German Treasury Official, Geheimrat Frisch, investigated Romanian finances in preparation for the final negotiations for the Treaty of Bucharest. He wrote in April 1918 that the financial situation was such that Romania would easily become “incapable of growth” and “completely uncreditworthy.”Footnote ⁹⁰

In the mid 1920s, the young Austrian Paul Held traveled across Romania on its dilapidated railroads, hoping to get a seat next to a window without glass. It was simply too dark next to the boarded-over windows. Held observed that Bulgaria's currency was outperforming the lei on international markets and wondered, “[h]ow is it possible that the Valuta of the great and victorious Romania is valued so much lower on the great European markets than the Valuta of a Bulgaria defeated and locked in social conflict and civil war? Why is it that a land so rich in natural resources as Romania is so deeply indebted domestically and internationally that the representatives of this wealthy and victorious land run about seeking loans until their feet bleed, and in vain?”Footnote ⁹¹ Held believed that a misbegotten and tyrannical middle class, created by the Romanian state for the purposes of consolidating the new, oversized “Greater Romania” was to blame.

In fact, the sources of Romania's postwar economic problems were complex. As Jean-Mircea Nicolescu observed in his study of the postwar stabilization of the lei, maladministration and the incorporation of vast new territories played havoc with government finances.Footnote ⁹² But a large part of the lingering poverty observed by Held was the consequences of an occupation policy heedless of international law—the “devastation caused by the war, the destruction of facilities of companies, the decline in the number of workers, and so on; the reduced buying power of the taxpayers,” as Nicolescu put it.Footnote ⁹³ Stated most starkly, the war resulted in the deaths of an estimated 400,000 Romanian civilians from starvation and disease (out of a prewar population of 7.5 million).Footnote ⁹⁴ As early as summer 1918, German authorities were noting the social and political implications of an expanding famine in Romania.Footnote ⁹⁵ Heavy usage and requisitions had produced shortages of draught animals, manpower, machinery, and tools, resulting in rapidly falling agricultural production.Footnote ⁹⁶ Romania's staple industry was in chaos after almost two years of effective Raubwirtschaft. German sources, for example, reported in January 1919 that wheat flour had disappeared entirely and that “the city of Bucharest is without bread.”Footnote ⁹⁷ Romania ceased to export grain at all, instead importing grain and other foodstuffs as grain production fell to thirty-five percent of prewar averages in 1919 and 1920. Indeed, Romania was reduced to pleading with Herbert Hoover for emergency assistance in food, clothing, and shoes.Footnote ⁹⁸ Soon thereafter, the Romanian state was forced onto the international grain market, exchanging its treasury notes for foreign grain, reselling the grain domestically at a steep discount.Footnote ⁹⁹ Domestic production had plummeted and domestic purchasing power was deeply reduced, such that Romania could neither feed itself nor could its inhabitants buy food with the cash on hand. Instead, food had to be purchased against future income. And in the midst of this profound economic dislocation, in an effort to unify and stabilize the national currency, the Romanian National Bank spent 1,463,546,396 lei to buy back those issued by the Germans through the Banca Generale.Footnote ¹⁰⁰ A parting gift from the Wirtschaftsstab.

Germany's occupation planners brought to Romania the perceived lessons from two years of occupation and the radicalized demands of the Hindenburg Plan. To these impulses were added the structure of the Romanian economy and concern for the position of the mark. This constellation of factors shaped the approach that Major von Kessler, the Wirtschaftsstab, and the Reichsbank would take in Romania. This mixed system of requisition, bureaucracy, and currency manipulation proved to be extremely effective at expropriating a substantial share of Romanian national wealth, leaving behind an economy in crisis.