Hell's Cartel

by Diarmuid Jeffreys

  Keppler, who had tangled with IG Farben before, took some convincing, at one point telling Haefliger that “it was not desirable that the IG should buy all the chemical plants in Austria,” although, of course, his reservations didn’t make much difference to the Rothschilds, who now had to give up their company whether to the IG or to someone else. But Keppler’s arguments did hold up proceedings for a few months. By the time he and his subordinates finally gave in to the IG’s lobbying and approved a deal in late 1938, Josef Joham had fled the country and Isador Pollack had been kicked to death by SS thugs during a search of his house. A few months after the IG acquired the business for a pittance (in return for a loose promise to pay shareholder dividends for twenty-five years), the firm was merged with the IG’s two other Austrian companies into one wholly owned subsidiary, Donau-Chemie AG.

  If the IG had been a relatively passive observer of the Anschluss, it was to take a much more active role in fomenting the conditions that led to Germany’s next territorial gain. Czechoslovakia had been created under the provisions of the Versailles Treaty in 1919 and, as its name suggests, was preponderantly populated by Czechs and Slavs. But there were large minority groups as well and some of these were unhappy about having been corralled into the new state. The most vociferous were the three-and-a-quarter-million ethnic Germans of the Sudetenland region, who wished to be reincorporated into the fatherland. Led by Konrad Henlein, a devoted Nazi, they intensified their protests in the aftermath of the Anschluss and within weeks, backed by Berlin, were inundating the authorities in Prague with demands for “self-determination.” Eduard Benes, Czechoslovakia’s president, refused to countenance the splitting up of his recently formed country and the stage was set for a confrontation with Hitler.

  On May 24, 1938, Georg von Schnitzler’s Commercial Committee, with the full backing of Hermann Schmitz and the IG’s Vorstand, sanctioned a scheme (later fleshed out by Max Ilgner) to provide financial support to the region’s pro-German newspapers and to put its sales agents in Czechoslovakia to work campaigning for “reconstruction according to the German pattern.” In the meantime, the IG proceeded to Ayranize its interests in the country in accordance with the combine’s new policy toward its foreign holdings.

  As the political tension heightened, Hitler subjected Eduard Benes and his government to a set of increasingly impossible demands, gambling again that France and Britain, Czechoslovakia’s principal allies, would be unwilling to go to war (as Britain’s Neville Chamberlain was later to say so memorably) “because of a quarrel in a far-away country between people of whom we know nothing.” Flush with money from IG Farben advertising, Sudeten newspapers upped the ante still further by running “atrocity stories” recounting imaginary attacks on ethnic Germans by Czechs and Slavs, praising the racial homogeneity of the Nazi state, and appealing for help from the international German diaspora.

  The IG’s motives were mixed. On the one hand, there was genuine sympathy in the Vorstand for the plight of the Sudeten Germans, but the concern also wished to demonstrate its suitability to take over one of Czechoslovakia’s greatest companies. The Aussiger Verein was the fourth-largest chemical firm in Europe and it had managed (with the help of Britain’s ICI) to keep the IG’s involvement in Czech chemical manufacture to the bare minimum. As a result, the IG considered the Verein an astute and potentially dangerous rival. Although its headquarters were in Prague, most of its productive capacity was in the Sudetenland. If the region was incorporated into the Reich, it was possible that the Verein might be forced to sell its plants to a German firm. The combine was keen to be the new owner, because if a non-IG firm took over the factories, it could pose a serious challenge to the IG close to its domestic heartland—especially in the dyestuffs field, where the Verein was particularly strong. Hence the cartel openly supported Hitler’s attempts to bring the Sudetenland under the Reich’s wing.

  So while von Schnitzler, Ilgner, and ter Meer turned their attention to lobbying the government, Hermann Schmitz’s office arranged a contribution of RM 100,000 to the Sudeten German Relief Fund and the Nazi-dominated Sudeten-German Free Corps, which was busy inciting civil unrest along the border with Czechoslovakia. In the meantime, the IG’s sales offices went looking for former German employees of the Aussiger Verein, so that if and when the Czech firm was forced to sell, there would be suitable replacements available for its Jewish personnel.

  Events moved quickly. At a hastily arranged peace conference in Munich on September 30, to which Eduard Benes’s government was not invited, it was decided by Hitler, Mussolini, Edouard Deladier, the French prime minister, and Britain’s Neville Chamberlain that the Sudetenland should be handed over to the Reich. The IG reacted with speed and determination. Even before Chamberlain had time to fly back to Britain to wave a copy of the agreement and declare “peace in our time,” the Vorstand had appointed von Schnitzler, ter Meer, Ilgner, and Hans Kühne, the production chief for organic and inorganic chemicals, as its special representatives to the Verein’s Sudetenland plants. Hermann Schmitz then uncharacteristically broke cover by committing himself to print. He sent a telegram to Hitler: “Profoundly impressed by the return of the Sudetenland to the Reich that you, my Führer, have achieved. The IG Farbenindustrie AG puts a sum of half a million reichsmarks at your disposal for use in the Sudetenland territory.”

  In an equally bullish mood the concern’s special representatives contacted the Aussiger Verein and began negotiating the “purchase” of its Sudetenland plants. As they had feared, there were other interested parties. Both the Ruettgerswerke AG and the Chemische Fabrik von Heyden were desperate to get their hands on the factories. Of the two, the latter was the bigger threat. Stubbornly independent, Heyden had been troublesome to the IG ever since it had caused Bayer to be stripped of its British aspirin patent in 1905. Now it lobbied the authorities assiduously, putting forward the claim that it was the only possible counterweight to the “power hunger of the IG and the strengthening of its monopoly position.” The Aussiger Verein, meanwhile, was doing its best to avoid selling at all and began appealing to the Czech government for help in hanging on to its property.

  However, von Schnitzler hadn’t risen to his senior position merely by virtue of his aristocratic charm. He quickly arranged a compromise with Heyden whereby the two companies would put in a joint bid for the plants, then he threatened the Aussiger Verein board that he would complain to the German government that “unrest and a breakdown of social peace” in the Sudetenland were becoming inevitable. Desperate to avoid giving Hitler any more reasons for intervening in the affairs of their country, the authorities in Prague advised the Verein to sell the plants on the IG’s terms—for a little over half of what the Czechs thought they were worth. The deal was signed on December 7, 1938.

  Of course, Hitler was never short of reasons for military action. Three months later he sent the Wehrmacht into the rest of Czechoslovakia and captured Prague, where the Sudeten-German leader, Konrad Henlein, was appointed head of a new Nazi administration.

  * * *

  WHILE THE IG was busy positioning itself to take over Austrian and Czech chemical firms, Standard Oil’s request for buna technology was still unresolved. Fritz ter Meer’s involvement in the Verein negotiations may have gained him some temporary respite, but Frank Howard and his colleagues couldn’t be stalled indefinitely. As the new year began, however, the IG had a more pressing problem to discuss with Standard: how to protect their agreements, and the rest of the IG’s U.S. interests, from the consequences of the deteriorating international situation. It was becoming clear that war in Europe was inevitable. In Britain, the initial relief that had greeted Neville Chamberlain on his return from Munich was turning into widespread disgust that Hitler had been allowed to get away with too much for too long. The public mood was darkening in France as well. Having suffered so grievously in 1914–18, the French had never ceased to be mistrustful of their neighbor to the east. At Munich, Prime Minister Deladier had been less con
vinced than Chamberlain about Hitler’s willingness to stop at the Sudetenland and had warned the British that giving in would only encourage more aggression. Within a few months his pessimism was proven justified. First the Nazis took over the rest of Czechoslovakia; then they forced the Lithuanian government into handing over the port of Memel. By early April 1939, Hitler’s Spanish ally, General Franco, had won the civil war to the south and Benito Mussolini had ordered the Italian army into Albania. Faced with potential belligerents on three sides, France redoubled its efforts to strengthen the Maginot Line fortifications on the border with Germany and joined with Britain in offering guarantees of military aid to Poland, Greece, and Romania in the event of a Nazi attack. By the end of April most Western European politicians privately acknowledged that it was a question not of whether war with Hitler was coming but of how and when it would begin.

  The IG had been in this situation before. In the months running up to the start of the Great War, the cartel had taken steps (which later turned out to be ineffective) to safeguard its foreign assets from seizure by hostile powers. This time it was determined to do a better job. Fortunately, Hermann Schmitz was a master of corporate camouflage. In late 1938, encouraged by Nazi officials, he began devising complicated schemes to disguise the true ownership of the IG’s overseas holdings by transferring them temporarily to apparently unconnected subsidiaries and partners. Schmitz knew his plans would work only if the IG could find compliant partners—either neutrals or citizens and businesses in potential enemy nations—who could be trusted to play along and allow the concern to reclaim its assets later. The subterfuge was easier to accomplish in some countries than in others. In the United States, for example, Standard was the obvious partner. Although the oil giant had not yet got its hands on the IG’s buna technology, it would still be keen to prevent their joint synthetic fuel operations (incorporated in the United States as the Standard-IG Company) from being seized by the U.S. government in the event of a conflict and to shield their prewar cartel agreements from scrutiny by the U.S. Anti-Trust Division. In other words, Hermann Schmitz had a nice mix of carrot and stick to ensure Standard’s cooperation: lend a hand and enjoy the benefits of some of the IG’s U.S. assets for the next few years or risk losing everything to an alien property custodian.

  In July 1939 Schmitz called in Walter Duisberg to formalize the arrangement. The eldest son of the famous Carl Duisberg, Walter worked for the concern in the United States and had become a naturalized American citizen. He was told to approach Standard’s Walter Teagle with a suggestion: the IG’s share of their joint holdings should be sold either to a U.S. citizen such as himself or to an American enterprise such as Standard. As Schmitz had expected, Teagle immediately grasped the idea and told his colleagues that “in view of the unsettled conditions” Standard should cooperate. On August 30, a deal was hastily hammered out whereby Standard agreed to acquire the IG’s 20 percent share of the Standard-IG Company (for a mere $20,000), while the concern’s 50 percent share of Jasco would be bought by Walter Duisberg (for an even more paltry $4,000). In theory, thereafter both Standard and the IG were protected should the U.S. alien property custodian ever have reason to go looking for the IG’s American assets—although it was perhaps a little ludicrous to suppose that the U.S. authorities wouldn’t spot Walter Duisberg’s antecedents. Standard’s executives were delighted, of course, because on the face of it the agreement gave their company ownership or control of a large part of the IG’s U.S. empire. Some things remained unsettled, though. The oil giant still hadn’t managed to get its hands on the concern’s buna technology, among other significant patents. If the IG didn’t come through with this information soon, Standard would have lost its chance.

  But in those final few months of peace the IG was even less responsive than before, its attention increasingly elsewhere, its managers preoccupied, its factories working overtime to fulfill a last-minute blizzard of orders from the German military. Krauch, who had finally relinquished his day-to-day responsibilities at the IG (though he had kept his seat on the Vorstand), was determined to wring every last drop of productive capacity from his old company and make sure his new masters had all the materials necessary to wage war on a grand scale: synthetic oil and rubber, aluminum, magnesium, high explosives, nickel, plastics, lubricating oil and greases, tetraethyl lead, methanol, poison gases, pharmaceuticals, photographic materials, dyestuffs, and thousands of other products indispensable to modern mechanized armed forces. Hermann Schmitz, Fritz ter Meer, Georg von Schnitzler, Wilhelm Mann, Fritz Gajewski, Max Ilgner, Heinrich Hörlein, Heinrich Bütefisch, Hans Kühne, Christian Schneider, Otto Ambros, Carl Lautenschläger, and Ernst Bürgin were doing their best to meet those needs. The IG still made aspirin and margarine, silk dye and household detergents, fertilizer, paints, and pesticides, but the company was now on a war footing and its civilian markets were fading to a shadow of what they had once been. The concern’s major scientific and technological breakthroughs were henceforth reserved for the military, its sales agencies abroad transformed into unofficial bankers for the Foreign Ministry, its economic intelligence put at the disposal of the Abwehr (the military’s intelligence office) and the SS. The IG continued to make money, of course—doubling its profits in the years to come and benefiting from almost a billion reichsmarks in additional government loans, subsidies, and tax breaks—but its independence had gone.

  By now, this level of militarization was not unique to the IG. Across the industrialized world, large corporations were hastily being transformed into executors of government policy. In Britain, for example, Imperial Chemical Industries had been gearing up for military production since late 1937, establishing the factories that would eventually produce nearly all the UK’s wartime explosives, light metals, and basic chemicals. Within Germany, too, other corporations were involved in the war effort. But the IG had been at this game for far longer and was much more practiced in responding with alacrity to a regime with aggressive intent. There was certainly no doubt about the importance of IG Farben products to the German armed forces as they prepared to invade Poland. The Heinkel and Junkers Stuka bombers that would launch attacks on Warsaw, Kraków, Lodz, and Lublin were largely made from the IG’s light metals. Around 75 percent of their engines were produced from high-grade IG nickel, their fuselages from IG aluminum, their wings from IG magnesium. Even the windshield wipers were tipped with IG buna. Their engines weren’t just fueled with IG aviation benzin; they were lubricated by the company’s oils and greases. Over 90 percent of the phosphorus incendiaries they carried were made from materials supplied by IG factories. The Wehrmacht invasion force of 1.5 million men was similarly in the IG’s debt. An estimated 25 percent of a foot soldier’s equipment, including mess kits, belt buckles, webbing, and helmets, came from the company’s materials—a proportion that was to increase as the war went on. Mechanized units were, of course, highly dependent on IG buna and fuel, but several vehicles had also been armored with specially strengthened Farben light metals. Eighty-five percent of the high explosives contained in their shells came from the IG or its subsidiaries, and amid the second wave of troops there were units equipped with IG mustard gas. The list goes on and on—from the buna boats that assault troops were to use to cross rivers to the plastic keys on the Enigma machines that signals units used to encrypt their messages, the IG’s synthetic materials were woven into the very fabric of the advancing army. No other company, be it Krupp, Siemens, Thyssen, Zeiss, Flick, or any of the other German industrial giants, could claim as much. By the eve of war, the mighty IG had become Hitler’s cartel.

  * * *

  IN THE EARLY hours of September 1, 1939, as Frank Howard was making desperate efforts to contact Fritz ter Meer and put flesh on the bones of the oil giant’s “purchase,” the first waves of Luftwaffe dive-bombers were flying eastward, high above the trucks and half-tracks that rode on the IG’s artificial tires and the artillery units that were loading shells containing its explosives. Other ar
mies could now worry about Chilean nitrate and Asian rubber and Anglo-American oil. The blitzkrieg—given teeth by IG Farben’s genius for synthetic chemistry—was about to be unleashed.

  10

  WAR AND PROFIT

  A strange air of unreality settled over the Reich during the first few days of war. The American correspondent and author William Shirer, who was in Berlin at the time, later described the peculiar apathy he encountered in the streets on September 1, with newsboys “shouting their extras” that no one wanted to buy and construction laborers working on the new IG Farben building on the Unter den Linden “as if nothing had happened.”

  But had Shirer been able to look into the IG offices he would have found a more purposeful calm—born of the fact that the concern’s senior executives had known well in advance about the attack on Poland: indeed, they even had a pretty fair idea of the date on which it would commence. The tip-off had come from Claus Ungewitter, a dedicated Nazi with close ties to the top ranks of the SS, who had been appointed Reich commissioner for chemistry at the Economics Ministry. Back in June, he had spoken to the IG’s Georg von Schnitzler and left him in no doubt as to what the government intended. As Schnitzler later recalled: