The five countries that held most of the Baltic gold in 1940 were:

• Federal Reserve Bank of NY (USA),
• Banque de France (France),
• The Bank of International Settlements or BIS (Switzerland),
• Bank of England (U.K.),
• Swedish Riksbank (Sweden)

In 1991, the two banks that formerly held the Baltic gold but no longer held it in 1991, were the Bank of England and Swedish Riksbank. What Happened?

The Baltic Gold in the Bank of England

In 1940, after the Soviet occupation and annexation of the Baltic countries, Britain did not recognize the annexation “de jure.” It’s worth explaining this legal terminology, since we see it today and every day in Russia’s Occupation of territories inside Ukraine, Moldova, and Georgia.

De jure vs De facto

• De jure = by law, legitimate and lawful
• De facto = in fact, what exists in reality

Britain accepted that the USSR physically controlled Estonia, Latvia, and Lithuania (de facto), but refused to accept that this control was lawful (de jure).

In 1968, however, despite this policy, the British government sold the Baltic gold (≈14 tonnes total) for £5.8m or $16.1m to compensate British citizens who had lost property in the Baltic states after 1940. This was done after the UK froze the Baltic gold assets for decades. After the USSR formally renounced claims to the gold under a UK–Soviet settlement agreement, the UK used the value of the Baltic gold as part of the global claims settlement, effectively treating the USSR as the successor to Baltic obligations.

This decision was highly controversial because it clashed with the British line of “non-recognition” of Soviet annexation. Britain’s 1968 use of the Baltic gold was also legal, despite being morally wrong. The case contributed to international legal discourse [Hough] on the illegality of Occupations and the obligation of non-recognition, even while exposing tensions in asset disputes. This complex story has so many legal facets relevant to today’s debates about using Russia’s frozen assets that I’ll go deeper in a future story about the UK’s role in the Journey of the Baltic Gold.

In the Spring of 1992, the U.K. pledged the unconditional return of the Baltic Gold Reserves. Lithuania and Estonia immediately accepted. The UK’s restitution was crucial because it directly enabled Estonia’s monetary reform and Lithuania’s later litas launch.

Figure 2. Britain returns the Baltic Gold. EE 4.8t, LV 6.6t, LT 2.9t The Baltic Independent, 31 Jan - 06 February, 1992, page 2 [TBI10]

However, Latvia delayed the U.K.’s acceptance due to valuation disputes. Latvia had the largest amount (~6.6t worth $72.5m in 1992 [Calc1]) stored in the Bank of England and wished a return closer to its value in 1992. However, the UK’s decision was to keep to the 1940, 210,719.919 fine ounces of gold, not its valuation, and the two countries signed a treaty [UKTreaty] on 19 March 1993 for the Latvian gold restitution for this amount.

Given that the USSR/Russia claimed successor rights to Soviet property (including foreign assets), it's very plausible that behind the scenes, Russian diplomatic pressure and legal threats were made to Western governments (including the UK). British politicians likely anticipated that Russia would later claim the gold (or its value) as Soviet property, so they structured their restitution policy in guarded terms: same tonnage, no value uplift, final settlement- in effect, closing the door on any potential Moscow claim.

The Baltic Gold in the Swedish Riksbank

Sweden was the most challenging for the Baltic gold restitution. In 1940, Sweden handed Estonia’s and Lithuania’s Gold to the USSR, 4.18t valued in 1940 as USD 4.7025 million. Upon Re-Independence, Sweden offered an aid compensation worth the 1992 value of the gold at USD 46.6 million, which the article states was the 1992 equivalent of the 1940 Gold. Note these numbers in the news article have some numerical discrepancies with my earlier Part 1 story. See [Calc2]

Lithuanian President Landsbergis stated that the return of the Baltic gold reserves cannot be considered as part of a Western Aid program, but must remain as a wholly separate issue. This disagreement continued through April 1992 when Sweden’s Foreign Affairs committee helpfully recommended unconditional restitution. Yet the ‘gold restitution’ Swedish plan for Estonia and Lithuania, when it came, was not separated; it came from a three billion Swedish crown (USD 548 million) Aid fund to Eastern Europe. Sweden paid the amount to Lithuania and Estonia in mid-August 1992, not in gold but in German DM. [TBI24]

The Swedish case highlighted how the gold restitution wasn’t just about reserves but about recognition of sovereignty and its legality. During the half-century of the USSR Occupation of the Baltic countries, Sweden was one of the few Western countries that legally recognized the USSR’s annexation of the Baltic countries. I.e. de jure and de facto. By treating gold restitution as aid, Stockholm both avoided reopening its 1940 recognition of annexation and kept restitution within its broader “aid to Eastern Europe” budget line. This strategy was likely seen as pragmatic by the Swedish politicians.

There are a variety of indications that the KGB had an active role >1940 in Sweden and later after the USSR fell, which might explain some of Sweden’s actions. I will explore this topic of the NKVD/ KGB/ FSB in Sweden in a future article.

Figure 3. Baltic gold cannot be repaid as aid package. 28 Feb-05 Mar_1992 Lithuania and Estonia protested Sweden’s aid-substitution scheme. The Baltic Independent, 28 February - 05 March, 1992, page 4. [TBI12]

Summary of Baltic Gold Restitution

The other three banks: the Federal Reserve Bank (USA), the Banque de France (France) and the BIS (Switzerland)—provided full restitution of the Baltic Gold. Here I provide a Chronology of the Restitution phase of the return of the Baltic Gold with news sources from The Baltic Independent. See links to my original sources in the References.

(EE = Estonia, LV = Latvia, LT = Lithuania)

Restitution Phase (1991–1992)

How to Build a Country

In the large picture of renewed Independence life, the early 1990s Baltics are a fascinating study of what is needed to form an independent, democratic country upon emerging from decades of experiences from being deeply inside of the Soviet Total State system. The Baltic countries, like Ukraine, Georgia, and Moldova, were an ‘SSR’ and wholly integrated inside of the USSR, which was a different experience from that of Poland, Romania, and other USSR satellite states. The following could form the basis for today’s checklist for when territories in Eastern Russia finally emerge from Russia’s many-decades-long Occupations.

Civics teachers, take note! There are good classroom lessons here for How to Build a Country.

Baltic countries’ successes in their first Independence Year: 1992

• First Uncensored newspapers published and sold (See NAFOForum story: [NAFOGr1])
• First Uncensored Books published and sold (See NAFOForum story: [NAFOGr1])
• First Uncensored Publishing houses (See NAFOForum story: [NAFOGr1])
• First Places to House Diplomats with proper addresses and phone number
• First Governments
• First Stamps
• First Gold reserves returned ←
• First Currencies ←
• First Banks
• First Business Licenses
• First Visa Border Control
• First Auto License Plates
• First Phone Country presence
• First Internet Mail Hubs
• First International Postal Codes
• First Airlines
• First City Police
• First Armies/Territorial Defense Forces
• First Constitutions
• First or Renewed Citizenships
• First Issued Passports
• First Private Properties
• First Privatization of State-Owned-Assets
• First Criminal Code
• First Justice System
• First Jails
• First Closure of KGB houses
• First Acquisition of KGB records
• First Acquisition of a former Red Army military site or region
• First issued fines

The Soviet Red Army continued to Occupy the Baltic countries until 1993 (Lithuania) and 1994 (Latvia and Estonia). To have such successes in the first year while still being Occupied by the Soviet Army is why I sometimes call the Baltic countries ‘miracle countries’.

Figure 4. Cartoon about the continued Red Army Occupation upon Re-Independence. The Baltic Independent, 8 May -14 March, 1992, page 3.

The next part will proceed to the nitty-gritty work to Deploy the new currencies, with Gold as their financial anchor. See you there.

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The Baltic Gold Journey Stories by Amara Graps are a symbol of the Baltic countries’ prosperity in 1938, a large education in Russian-Soviet intelligence operations in 1939-1940, and a sign of hope, a half-century later in 1992-93. And just when you think that you have learned all of these lessons, the Gold points you to a few more lessons in 2008 and 2025.

References

Of The Baltic Independent (1991–1993): The links TBI1-43 are to The Baltic Independent (TBI) scanned folders from my personal Scanning Project. Example: “1b.tif” is page 1, bottom half. The links TB38-40 go to yet unscanned TBI full-page phone snapshots as a source reference.

1. Ingrida Kalnins. (ed) 2016. 1985 Baltic Tribunal Against the Soviet Union. CSCE [Tribunal]
2. Hough, William J.H. III (1985) "The Annexation of the Baltic States and Its Effect on the Development of Law Prohibiting Forcible Seizure of Territory," NYLS Journal of International and Comparative Law: Vol. 6: No. 2 , Article 5. Available at: https://digitalcommons.nyls.edu/journal_of_international_and_comparative_law/vol6/iss2/5 [PDF][Hough]
3. Calculation. Using 1 troy ounce = 31.1034768 grams, 1 metric tonne = 1,000,000 grams. 210,719.919 ozt × 31.1034768 g ≈ 6,554 kilograms ≈ 6.554 metric tonnes. 1992 valuation: 210,719.919 ozt × USD 344/ozt ≈ USD 72,487,652 [Calc1]
4. Calculation From the TBI11 news article, I show two discrepancies. First with Lithuania’s total gold from my chart in the story which has historical references. The total amount of Baltic gold in Sweden: 4.108t stolen by the USSR would imply Lithuania’s gold tonnage was 1.11t instead of 1.28t. Therefore, the 1940 value would be ≈ USD 4.520 million. The 1992 valuation x10.3 ≈ USD 45.3 million, not the USD 46.6 million in the TBI11 news article. [Calc2]
5. United Kingdom. Exchange of Notes between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Latvia concerning the Transfer to the Republic of Latvia of a Quantity of Gold held by the Bank of England. UK Treaty Series No. 50 (1993) (PDF) London: HMSO, 19 March 1993. Accessed via UK Foreign, Commonwealth & Development Office Treaties Database. [UKTreaty]
6. [TBI1]Baltic_Currencies_04-10_Oct_1991.txt Plans for kroon, lats, litas; Estonia to back currency with gold; Lithuania initially without gold backing. The Baltic Independent, 04-10 October, 1991, page 3.
7. TBI2 France_Returns_Gold_to_Lithuania_11-17_Oct_1991.txt Plans between France and Lithuania to return Lithuania’s gold; notes about issues with UK and Sweden, which gave the gold to the Soviet Union in the 1960s. The Baltic Independent, 11-17 October, 1991, page 4.
8. TBI3 Compensation_25-31_Oct_1991.txt Lithuanian diaspora estimated $462bn Soviet damages, incl. confiscated gold/litas. The Baltic Independent, 25-31 October, 1991, page 1.
9. TBI4 Estonias_Golden_Opportunity_25-31_Oct_1991.txt UK had sold Estonia’s prewar gold in 1968; Now an opportunity with bonds. The Baltic Independent, 25-31 October, 1991, page 5.
10. TBI5 Lithuanian_Gold_15-21_Nov_1991.txt Lithuania began UK negotiations on 2.9t gold; insisted it was restitution, not aid. The Baltic Independent, 15-21 November, 1991, page 5.
11. TBI6 Golden_Christmas_22-28_Nov_1991.txt UK agreed to return 2.9t gold to Lithuania “before Christmas.” The Baltic Independent, 22-28 November, 1991, page 3.
12. TBI7 Estonian_Gold_15-21_Nov_1991.txt Estonia delegation in London on 4.8t gold; Kallas said it would back kroon. The Baltic Independent, 15-21 November, 1991, page 5.
13. TBI8 France_return_Latvian_Gold_29-Nov_05-Dec_1991.txt France returned 1t of Latvian prewar gold. The Baltic Independent, 29 November – 05 December, 1991, page 5.
14. TBI9 Public_vs_Private_24-30_Jan_1992.txt Parex Bank pushed for free gold trade in Latvia; forecast hard-currency inflow. The Baltic Independent, 24 -30 January, 1992, page 3.
15. TBI10 Britain_returns_Baltic_Gold_31_Jan-06_Feb_1992.txt UK announced restitution of 14t Baltic gold (EE 4.8t, LV 6.6t, LT 2.9t). The Baltic Independent, 31 January – 6 February, 1992, page 2.
16. TBI11 Sweden_to_Compensate_21-27_Feb_1992.txt Sweden announced it would “refund” EE/LT gold (~$46m) as aid, not bullion. The Baltic Independent, 21-27 February, 1992, page 2.
17. TBI12 Baltic_gold_cannot_be_repaid_as_aid_package_28_Feb-05_Mar_1992.txt Lithuania & Estonia protested Sweden’s aid-substitution scheme. The Baltic Independent, 28 February -05 March, 1992, page 4.
18. TBI13 Lithuania_Signs_20-26_Mar_1992.txt Lithuania signed trade accord with Sweden; PM Vagnorius sidestepped gold issue, Landsbergis critical. The Baltic Independent, 20-26 March, 1992, page 4.
19. TBI14 Britain_Hands_Back_Estonian_Gold_03-09_Apr_1992.txt UK physically returned 4.8t gold to Estonia on 25 Mar 1992. The Baltic Independent, 03-09 April, 1992, page 5.
20. TBI15 Gold_Move_10-16_Apr_1992.txt Swedish parliamentary committee recommended unconditional restitution of Baltic gold. The Baltic Independent, 10-16 April, 1992, page 1.
21. TBI16 Estonia_Set_24-30_Apr_1992.txt Estonia prepared for kroon launch; backing with $120m gold + forests. The Baltic Independent, 24-30 April, 1992, page 4.
22. TBI17 Kroon_tied_D-mark_15-21_May_1992.txt Laws tied kroon to Deutsche mark, guaranteed by gold & FX reserves. The Baltic Independent, 15-21 May, 1992, page 4.
23. TBI18 Baltic_Bullion_22-28_May_1992.txt EE & LT accepted UK gold; Latvia delayed over valuation. The Baltic Independent, 22-28 May, 1992, page 5.
24. TBI19 Sweden_Returns_Gold_Aid_05-11_Jun_1992.txt Sweden’s parliament approved gold repayment (275m SEK) as part of aid package. The Baltic Independent, 05-11 June, 1992, page 4
25. TBI20 Estonia_Leaps_19-25_Jun_1992.txt Estonia announced kroon introduction (20 Jun), backed by gold & forests. The Baltic Independent, 19-25 June, 1992, page 1
26. TBI21 Bankers_Bank_19_Jun_92.txt. The Bank for International Settlements (BIS) welcomed the Baltic countries back in their membership and stated that the Baltic bullion has been returned. The Baltic Independent, 19-25 June, 1992, page 5. Latvian bullion quantity. Lithuanian bullion quantity.
27. TBI22 a. Estonian_Kroon_debut_26_Jun-2Jul_1992.txt Kroon launched; convertibility guaranteed by $120m gold + $150m forest assets. The Baltic Independent, 26 June – 02 July, 1992, page 1 b.Kroon_Smooth_Entry_26_Jun-2Jul_1992.txt Report on smooth kroon launch, gold backing as key to credibility. The Baltic Independent, 26 June - 02 July, 1992, page 4
28. TBI23 Siim_Kallas_26_Jun-2Jul_1992.txt Profile of Siim Kallas; negotiated gold restitution; managed kroon launch. The Baltic Independent, 26 June - 02 July, 1992, page 5
29. TBI24 Sweden_Refunds_Prewar_Gold_21-27_Aug_1992.txt Sweden paid $48m compensation (in DM) to EE & LT; treated as aid. The Baltic Independent, 21-27 August, 1992, page 5.
30. TBI25 Copycat_Money_04-10Sep_1992.txt Latvia’s temporary rouble criticized; only small prewar gold reserves noted. The Baltic Independent, 04-10 September, 1992, page 2.