18 Alaska History Vol.

27

The Russian central government in Petersburg controlled the Russian-American

Company in far of North America. Monopolizing power proved to be a failure.
Illustration by J. A. Atkinson courtesy of the Library of Congress. (LC-DIG-ppm-
sca-09540, detail)
Spring/Fall 2012 A Failed Monopoly 19

A Failed Monopoly:
Management of the
Russian-American Company, 1799-1867

Andrei V. Grinëv

Translated by Richard Bland

The monopolistic Russian-American Company (RAC, 1799-

1871) was one of the oldest and largest stock companies of Russia.
It combined the functions of a hunting-trading organization and
a state agency inasmuch as the tsarist government delegated to it
the governance of the land and population of the Russian colonies
in Alaska. Monopolistic rights and privileges were provided to
the company for twenty years in 1799 and repeatedly extended
until 1867, when Russia sold Russian America to the United
States.1 Yet a persistent monopoly would doom the RAC’s ven-
tures in America to failure.
The management of the company relected its dual nature.
On the one hand, its mission was to obtain maximal commercial
proit; on the other, it was forced to supervise the administrative
and social life of the colonies and their defense. All this led to
large additional expenses and diiculties that were entirely or par-
tially compensated for by privileges from the state. For example,
in the mid-1840s the RAC had to spend up to 21,000 silver rubles
per year toward maintenance of schools and hospitals in the
colonies, while its annual trade return from sales of Alaskan furs
amounted only to 200,000 silver rubles.2 Occasionally the govern-
ment drew on the RAC to carry out their political and economic
tasks (for example, opening up Primor’ye and Sakhalin in the mid-
nineteenth century),3 which redirected the company’s eforts and
capital from its primary sphere of activity: organizing the procure-
ment and sale of Alaskan furs. And indeed the company had still
other expenses: inancing the Orthodox Church in the colonies,
payments for pensions and beneits, maintenance of fortiications,
and other operating costs.
For the leadership of the RAC, it was necessary to take into
account the very considerable tax burden characteristic of Russia,
Andrei Grinev is a professor in the Department of History at the St. Petersburg
State Polytechnical University in St. Petersburg, Russia, and a frequent contributor
to this journal. Richard Bland is an archaeologist with the University of Oregon
Museum of Natural History and Cultural History at Eugene.
20 Alaska History Vol. 27

exceeding the level in European countries and greatly exceed-

ing that in the United States. In a policy brief to the Emperor for
1856, the Russian economist, Actual State Councilor Yu. A. Hage-
meister, stated: “In comparison with the state of the residents,
probably nowhere are higher levies applied than in Russia.”4
All of this was compounded by the very slow—three to ive
year—return of capital, the volatility of demand, and the luctua-
tion in the value of furs. According to estimates by RAC employee
K. T. Khlebnikov, the annual proceeds from the company fur
trade had to be at least 200 percent of invested capital or it would
be uneconomical. But business itself was unstable. The Native
population, both those Aleuts, Koniag, Tanaina, and Chugach
who were dependent on the company and the independent tribes
(primarily the militant Tlingits), was critical to the RAC’s accumu-
lation of furs. But the Native groups were varied and declining.
The varied relations with numerous tribes complicated the RAC’s
relations with their fur suppliers. And the Native population’s
decline as a result of epidemics, starvation, and exploitation fur-
ther hindered obtaining furs.5
Management and inancial problems connected with a bondage
labor force in Russia also markedly complicated the position of
the RAC. The company was required to hire qualiied employees
and ordinary laborers for a period of ive to seven years and to
deliver them to the colonies, then bring them back after the expira-
tion of the contract period. Until 1835 the tsarist government, out
of iscal considerations and fearing loss of control over its subjects
in the transoceanic possessions, generally prohibited emigrants of
the Old Country from permanently setling in Alaska. Company
documents of 1845 noted that sending laborers and craftsmen to
Alaska and then returning them to the homeland cost the RAC
from 10,000 to 30,000 silver rubles annually.6
The great distance of Russian America from the European
center of the Russian Empire created great logistical diiculties.7
Supplies for the colonies (particularly before the 1830s), shipment
of colonial products to Russian markets, and administrative direc-
tions and reports from the colonies to headquarters in Petersburg
required many months. The Chinese prohibition of Russian ships
trading in Chinese ports, which was maintained until the end of
the 1840s, also impacted negatively because the Chinese allowed
the ships of the Russians’ American and British competitors. The
RAC was required to take its furs to Kyakhta on the Russian-Chi-
nese border, traversing huge Siberian expanses and spending no
small amount of resources and capital on this. Considering all the
above-mentioned factors, the RAC could not withstand economic
Spring/Fall 2012 A Failed Monopoly 21

rivalry with American and British traders without direct support

from the state, even with the most eicient management.
The necessity for regular contacts with the government on
various questions connected with the transoceanic territories was
relected in the separate echelons of company authority. From
1801 its board of directors was located in Petersburg, where it
occupied itself with resolving problems that arose with state
authorities, “strategic management,” the functioning of oices in
Russia, and general control. Direct management in the colonies
was focused in the hands of the governor, who crowned the top of
the local administrative pyramid. This situation caused discord
in several cases and at times even concealed conlicts between the
board in Petersburg and the leadership in the colonies, though
it did not lead to actual confrontation since the governor was
obliged to follow the decisions of the company directors. Having
the directors in the capital substantially eased access to the tsar’s
court and the government, making it possible to obtain necessary
decisions of state agencies more quickly. However, the lack of a
quick and reliable connection with the transoceanic colonies pre-
vented eiciently solving many important economic questions.
The colonial authorities had to wait no less than a year for deci-
sions of company directors. The long delays in adopting the most
necessary management decisions hurt the economy of Russian
America. However, without the support of the highest oicials,
successful enterprise in Russia or its American colonies was prac-
tically impossible, a dilemma that has not lost its relevance in
today’s Russian economy.
One of the characteristic features of RAC management, espe-
cially in the beginning stages, was a veil of secrecy, which was
justiied by the execution of important state tasks. Enlisting the
“highest patronage” in the person of the emperor, the directors of
the company ceased reckoning with the Siberian leadership and
in 1802 directed the governor of the colonies, A. A. Baranov, to
send all correspondence directly to the capital and not to Okhotsk,
“inasmuch as the company is in no way subject to provincial
authorities, and with this, the time now comes to form in America
many state circumstances that must be kept in great secrecy and
you alone, as the governor, will be relied upon, and therefore
there is no need to give this information to the authorities of the
Irkutsk Province, where no secret can be kept.”8
The RAC board required secrecy not so much to keep secret the
plans of government expansion in America as the desire to conceal
the board’s own failures and abuses. Information was at times
concealed even from their own stockholders. Collegiate Asses-
sor Dmitri Sobolevskii complained about this to the Minister of
22 Alaska History Vol. 27

Commerce N. P. Rumyantsev in 1806. The problem atracted the

atention of the emperor. In December 1811, Emperor Alexander
I ordered the head of the Ministry of Internal Afairs, O. P. Kozo-
davlev, to give special atention to the company inasmuch, in the
opinion of the tsar, it was created and always existed not just for
the sake of income for the directors and stockholders but “also in
general for the whole State.” Furthermore, the emperor noted that
the RAC must have special supervision, and for this all informa-
tion about its current operations “should be provided to ME by
the government of the Company through the Ministry of Internal
Afairs, so at all times all of its activities are known in detail.”9
Evidently desiring not to admit the actual strengthening of
state control over its activities while striving simultaneously to
obtain government support, the company in 1812 petitioned the
emperor for the creation of a special council. In it would be, along
with the directors, the highest oicials of the various ministries
(Ministries of Foreign Afairs, Internal Afairs, Finance, and Navy).
The creation of such a council responded to the need for more
timely decisions on speciic (primarily political) afairs, which
often lost their footing because of disunity and bureaucracy in
individual departments. As the modern Siberian historian A. N.
Ermolaev notes, the government did not approach the company,
but rather the company’s leadership itself strove to “national-
ize” the activities of the RAC. The tsar approved establishment
of the council in December 1813, further splicing the RAC with
the state structures.10 In practice the government refrained from
active intervention in the afairs of the company, and the special
council of the highest oicials and stockholders was not so much
an institution of state control over the RAC as a deliberative body
providing advice on the most important political questions.
In the RAC’s early years, incomplete and distorted accounts
marred the company’s management. Soviet researchers often
noted that inancial accounts and documents of the RAC were
falsiied during this period, or, speaking more tactfully, were
not always characterized by great precision. There was noth-
ing strange in this obfuscation. Company stock was not openly
traded, fur hunting and trading success was subject to wild luc-
tuation, and machinations and deception of some employees of
the RAC (including part of the leadership) prevented objective
accounting. It was almost a hopeless afair. Not until 1813 was
relatively objective bookkeeping achieved. Finally, transpar-
ency in the inancial sphere came at the beginning of the 1840s,
when the board of directors began to publish annual accounts of
the results of the company’s economic activities. The Ministry
of Finance forced the improved annual reports of the 1840s in
Spring/Fall 2012 A Failed Monopoly 23

which RAC ships and other property were properly valued and
nonrepayable loans were writen of. The company in 1842 con-
ceded that arbitrary assessments and imaginary sums of the early
decades of the RAC “did not signiicantly hurt the Company, [but]
they nevertheless served to cause uncertainty and confusion in the
accounts.”11
One of the reasons for the complexity in the inancial account-
ing of the RAC at the beginning stage of operation was the
struggle for leadership in the company between the descendants
of G. I. Shelikhov, the founder of the permanent Russian colonies
in the New World, and Siberian entrepreneurs. The Moscow
historian A. Yu. Petrov writes on this subject: “The atempts
of merchant families to drag capital of the company into their
pockets, their mutual distrust—all this led to signiicant errors
in creating inancial documents. . . . Later, the Shelikhov family
proposed increasing the issue of stocks, not backed by real assets,
to 1,000 shares, leading to a large internal debt and insecurity of
the assets with actual inancial content. The cost of the irst stocks
was signiicantly increased. . . . In turn, this position brought on
a crisis of the RAC that was relected in the inability to pay divi-
dends to the company stockholders and simultaneously to pay
[government] creditors.”12
This crisis was partially overcome by the transfer of the board
of directors from Irkutsk to Petersburg in 1801 and the removal
of the Siberian merchants from the company’s board of directors.
The descendants and relatives of Shelikhov, led by his sons-in-
law – merchant of the 1st guild M. M. Buldakov (top director until
1827) and chamberlain of the tsar’s court Nikolai P. Rezanov

Nikolai P. Rezanov.
Illustration courtesy of the Alaska
State Library. (PCA 20-82)
24 Alaska History Vol. 27

– seized hegemony in the company. Owing to the eforts of the

later, the emperor himself appeared among the stockholders of
the company, as did some members of his family, and Petersburg
and Moscow dignitaries and entrepreneurs. At the same time, as
A. Yu. Petrov correctly notes, the transfer of the board of direc-
tors to the capital and the arrival in it of people unacquainted
with the speciics of fur hunting and trade changed the face of
the company, turning the top managing agency of the RAC into
a bureaucratic oice that actually worked only a few months of
the year. Therefore, it could not be expected that such managers
of the RAC would make sound decisions; this occurred, in par-
ticular, with the organization of the irst Russian round-the-world
expedition (1803-1806) from Kronstadt to Kamchatka, to Japan,
and to Russian America. This expedition was extraordinarily
expensive, was unjustiied from the inancial point of view, and
served as one of the reasons for the severe crisis in the company,
which was especially exacerbated at the end of 1805. This fact was
later relected in documents of the RAC: “In 1805 the Company
was in a most impoverished position – its capital was scatered;
debts were excessive; the colonies were without support; the turn-
over was in the loss – and if it did not collapse at that time, it was
because of the personal credit of those who were then Directors
and the capital of Shelikhov’s descendants.”13
The incompetence of the managing elite of the company was
exacerbated by problems withdeception, corruption, and theft
among the lower managers in Russia and Siberia. This impacted
the supplying of the colonies in the most negative way. N. P.
Rezanov wrote with indignation during his inspection trip to Rus-
sian America in 1805-1806 that the warehouses of the company
on the islands of Kodiak and Unalaska were illed with every
kind of unnecessary stuf, which no one bought because of the
high prices. Having visited the future capital of Russian America,
Novo-Arkhangel’sk, he continued his accusation of abuses at the
RAC’s Okhotsk oice in a leter to the directors of the company:
“I have already writen to you above about the Unalaska stores,
but Kodiak stores are even more illed with trash and the Okhotsk
oice, caring more about the distribution of style than about the
delivery of vital supplies, has succeeded in loading the Port of
Novo-Arkhangel’sk with earrings, cuf links, rings, fashionable
buckles, silver watch chains, pins, ribbons, batiste, calico, lipstick,
and the like. I wonder how, with its great care, it didn’t send even
French women and hairdressers, since everything goes unpun-
ished for them.” According to Rezanov, the vodka being sent to
the colonies was diluted to such a degree by the thieving Siberian
agents that only water arrived in Russian America.14
Spring/Fall 2012 A Failed Monopoly 25

In fact, the directors of the RAC and the oices of the company
in Siberia often showed complete indiference to the needs of
the colonies. The Captain of 2nd rank V. M. Golovnin reported,
for example, that in 1810 Governor Baranov was forced to buy
Russian canvas from the Yaroslavl factories from American sea
captains! In vain he requested that the board of directors send him
ermine hides from Siberia for trade with the Tlingit. The Ameri-
cans managed to buy them in Russia and thus looded the market
with them, which made the value of ermines drop sharply. Later
another governor, Captain-Lieutenant M. I. Murav’ev, reported
to Petersburg in 1820 that the warehouses of the company were
clogged with useless tobacco, sent from Russia, which neither the
Aleuts nor the local Indians would take. Murav’ev had to create
a special commission, which decided to throw all the low-quality
tobacco into the sea.15
But the irresponsible practice of supplying the colonies with
substandard goods and products continued, and in 1832 Gov-
ernor F. P. von Wrangell, wrote with indignation to the RAC
board of directors that the people who used bread baked from
lour sent from Okhotsk sufered from stomach pains. And not
surprisingly—the lour bags were dated 1826. Only after angry
dispatches did the directors of the RAC promise Wrangell to
suppress the abuses of the Siberian clerks and agents; in fact,
they sent high-quality goods to the colonies in 1834 (but even
with this, the Okhotsk oice assigned part of them arbitrarily).
However, shipment of quality goods did not become the rule,
and frequently not only low-quality but entirely unnecessary
goods were delivered to Russian America. In 1847 Governor M.
D. Teben’kov reported to Petersburg: “In 1846 Irish linen was not
required, but 8,200 arshin [about 6,380 yards] were delivered. Out
of their kindness it was not expensive, but it is for gentlemen and
therefore it will take several years to use it up. Turpentine was
not required, we requested terpentin [tar]. Smoking tobacco sent
in cases without packing lost its value, and therefore will also
be used up only in several years. Havana cigars are not used up
because they are expensive” (emphases in original). N. Ya. Rozen-
berg, who replaced Teben’kov, wrote in 1851 to the RAC directors
in Petersburg that only half of the required corned beef was sent
from the port of Ayan, and even that was so roten that it had to
be thrown into the sea. Ten years later the government auditor
S. A. Kostlivtsov eloquently atested to the properties of goods
brought to the colonies. The poor quality of “ready-made clothing
and footwear for ordinary people surpass all probability, so that
boots last only a few days and fabric clothing no more than two
months.”16
26 Alaska History Vol. 27

In addition to poor quality, goods were periodically in short

supply. This not only inhibited exchange operations with the
Natives but also negatively inluenced the psychological climate of
colonial society and afected turnover of personnel. As previously
mentioned, Wrangell turned atention to this circumstance, report-
ing to the directors of the RAC: “Frequent changes of Oicials and
Clerks and abandonment of Company service by promyshlenniki
occurs in part from the fact that the stay in the Colonies is made
painful by reason of continuous insuiciency in goods and their
extreme expense, which in any other place are easier to bear than
in this secluded region. Grumbling engenders unwillingness to
continue service.”17
Poor RAC management existed in the colonies as well. A truly
outrageous fact in the irst years of RAC existence was the preda-
tory slaughtering of fur seals on the Pribilof Islands, inadequate
drying of the hides, and improper preservation, causing large
numbers of them to be damaged—up to 800,000 in one year in the
early nineteenth century. In the face of such outrageous misman-
agement the board of directors decided in 1804-1805 on a radical
measure: defective hides were ordered burned, with a portion to
be dumped into the sea. “By this order,” wrote K. T. Khlebnikov,
“in Unalaska up to 700,000 hides of roten seals were burned and
dumped, taken by baidar and thrown into the sea.” Properly
treated, these hides might have instead brought the company
about 800,000 rubles. Khlebnikov continued, noting that the order
to destroy the spoiled hides also was much abused to the detri-
ment of the company. “The hunters also rejected as defective seals
that were in good condition and instead of eliminating them, used
them for their clothing and other domestic requirements, and after
returning to Okhotsk sold them to merchants not associated with
the company,” a clear violation of the RAC monopoly. Ten years
later the situation was repeated: part of the fur-seal hides were
tainted from inadequate drying in baths, and in 1813 Chinese
merchants in Kyakhta rejected several batches of furs, leading to
another company loss of hundreds of thousands of rubles.18 The
reason for this was the fact that the hunters were preoccupied
with quantitative and not qualitative indices; indeed, their pay for
work depended primarily on the number of procured hides and
not on their quality. The sale of furs was the company’s responsi-
bility.
The failures and inadequacies of RAC management during
this period were compensated for by various sources. Besides
the personal capital of the company directors, substantial state
credit played a role in the inancial support of the RAC in the
mid-1800s. In addition, trade connections were strengthened at
Spring/Fall 2012 A Failed Monopoly 27

this time with foreign traders, among whom Governor Baranov,

obtained a substantial part of the necessary wares in a way that
eliminated transportation expenses and the dangers of shipwreck,
which almost annually destroyed company ships. Another factor
was the expansion of the RAC hunting area in connection with the
beginning of regular trading-hunting expeditions (often together
with American sea captains) to the shores of California, where
the dependent Natives procured sea oters, while the Russians
obtained wheat, salt, and other products from the local Spanish
setlers and missions. In 1812 the Russians built a fort in Califor-
nia, founding there an outpost not far from San Francisco, Fort
Ross, where they tried to establish agricultural production but
without substantial success.19
The primary result of the RAC’s struggles to overcome
losses from ill-conceived management decisions was the over-
exploitation of Alaska’s natural resources and dependent Native
population resulting in a constantly diminishing population of
both wildlife and the human population. According to Khleb-
nikov, Baranov sent furs worth more than 15 million rubles to
Russia in 1806-1818, obtaining in return goods totaling only
884,224 rubles. He governed the colonies with an iron hand, and
his instructions were often made more oppressive by the abuses
of clerks and local managers. Complaints about his governing
and criticism by the visiting Russian America naval oicers of
the orders prevailing in the colonies, as well as Baranov’s own
requests dating from the late 1790s to be replaced, led to his res-
ignation in 1818. Besides everything else, the company directors
worried about the fact that from 1809 to 1816 Baranov did not
provide the board of directors complete inancial reports; also,
rumors about the “frequent tippling” of the aged governor dis-
turbed the directors.20
The RAC board of directors replaced Baranov with Captain-
Lieutenant L. A. Hagemeister, commander of the ship Kutuzov.
That it was a naval oicer who was placed in the key position in
the colonies was not by chance. It strengthened state, as well as to
some extent military, control over life of the colonies. The need to
have a naval oicer at the head of Russian America was pointed
out as early as 1805 by Baranov himself,21 who endured no small
amount of trouble because of insubordination to him – a civilian
oicial – by naval oicers in the service of the RAC. Finally, the
transoceanic location of the colonies contributed to these prob-
lems. Therefore, all subsequent governors of Russian America
were selected exclusively from oicers of the naval leet and were
personally approved by the emperor. Thus began the replacement
28 Alaska History Vol. 27

in the upper management structures of representatives of mer-

chant capital by state employees.
On the one hand, leadership by the naval oicers permited
establishing stricter discipline and accounting, reducing the num-
ber of malfeasances in oice, improving the life of the dependent
Natives, and regularly practicing so-called “prohibitions” – bans
on hunting in certain territories over the course of several years to
aid recovery of the population of fur-bearing animals. However,
on the other hand, being employed for a limited period and for a
ixed wage whose size did not depend directly on the results of
their activity, the naval oicers did not have efective economic
incentive for the development of a colonial economy. Not all of
them possessed suicient business acumen and enterprise so nec-
essary for carrying out trade afairs.22 In large degree they were
administrators rather than businessmen.
Meanwhile, the RAC directors in Petersburg also practiced
far-from-efective management. The board of directors in August
1820 prohibited colonial authorities from trading with foreign sea
captains and instead sought to supply the colonies with European
wares and products from Petersburg by sending ships around the
world. However, some round-the-world expeditions organized
by the RAC board of directors were either entirely unproitable
or did not reach the Russian colonies at all. According to the
accounts of company bookkeepers, the unsuccessful expedition of
1821 of the ships Elizaveta and Ryurik alone brought the company
losses of 435,000 rubles. Nor did income from the colonies ofset
the 2.4 million rubles spent on round-the-world voyages from
1819 to 1821.23
At the same time, due to lobbying by the company directors
and the tsarist oicials (e.g., Count D. A. Gur’ev and Admiral
N. S. Mordvinov) connected with them, Emperor Alexander I
signed an edict in September 1821 prohibiting foreign mariners
and merchants from approaching the shores of Russian America
closer than 100 nautical miles under the threat of coniscation of
the ships and cargoes. This edict, designed to eliminate competi-
tion by American and English maritime traders, not only led to
a diplomatic uproar and helped prompt the Monroe Doctrine
but struck a blow to the RAC itself, since the Russian colonies in
America depended greatly on the supply of wares and products
from American sea captains. As a result, the company received a
serious inancial setback and was on the verge of bankruptcy. The
situation was aggravated by scandal, into which the directors of
the RAC were drawn, and particularly V. V. Kramer. He and his
brother – American entrepreneur Sebastian Kramer – purchased
the ship Elena in the United States for the RAC and took a 6 per-
Spring/Fall 2012 A Failed Monopoly 29

cent commission. His next shady afair was the acquisition of the
decrepit ship Elizaveta, which belonged to an insolvent debtor
of Kramer. The resourceful RAC director purchased the half-
roten old tub for the company for 30,000 rubles, which Kramer
then pocketed from the debtor, while the company had to spend
another 70,000 to repair the boat. Even so, the now-repaired
Elizaveta nearly sank along the shores of South Africa during a
round-the-world voyage to the Russian colonies. Its cargo had to
be sold at a loss and some of the crew and passengers sent back to
Petersburg. Kramer’s abuses led to his dismissal in shame from
the post of RAC director in June 1824. In February 1824 the spe-
cial council, together with the RAC board of directors conceded
that “very unfavorable consequences have resulted from the
universal ban on foreigners approaching our American ports.”24
It is not surprising that the prohibition of trade with foreign sea
captains was removed that year. The government of Russia soon
concluded a treaty with the United States (1824), and then with
Great Britain (1825), on the setlement of trade relations and
boundaries in the North Paciic.
Nevertheless, the management of the RAC directors continued
to be unsatisfactory. This was atested to in a personal leter, dated
February 4 1834, from Wrangell to his old friend, the mariner F.
P. Litke. This message is remarkable because in it Wrangell viv-
idly portrayed the inadequacies of the management culture of the
RAC board of directors; these are not relected in the oicial docu-
ments. Not suppressing his emotions, Wrangell wrote:
Oh! This board of directors! It has put me in a bad
mood, especially in the last mail, illed with hostile
spirit against me, but most important is the damage
that it inlicts upon the colonies, which makes me
lose my patience. If I could be sure to avert upset of
the Russian-American Company by cautioning the
stockholders regarding the reprehensible actions of
their directors, then I would turn to them with the
following appeal.

Dear Sirs! Whom did you entrust with the manage-

ment of the vast afairs of the Company, entrust
with the welfare of 10,000 residents and protection
of your personal proits? Delve into the course of
afairs of the Company and you will see every-
where evil, deception, ignorance, apathy with
unbearable arrogance – the imprint of ignorance
among your directors! Managing the colonies for
3½ years, I have encountered only problems and
30 Alaska History Vol. 27

obstacles, especially more important ones where

zealous and honorable cooperation of the directors
is necessary toward precise and orderly establish-
ment of colonial afairs. Instead of impersonally
discussing my ideas and opinions, they subject
these same to malevolent and ignorant trial, always
inclining toward harm. If you bid your people with
intelligence, integrity, and knowledge of the cir-
cumstances of colonial and oice afairs to examine
the activities of the Board of Directors, you will be
convinced of the necessity to require the complete
reorganization in the management of your Com-
pany, if you do not wish to allow it to fall into uter
chaos. Count the useless expenses in the oices and
brokerages from Petersburg to Okhotsk, expen-
ditures of large capital on reckless undertakings,
as for example, on the construction of a new road
from Yakutsk to the Sea of Okhotsk, the Shantarskii
expeditions, the gold ields near Yakutsk, round-
the-world expeditions, and so on! There they throw
away hundreds, thousands. Meanwhile, regarding
the organization of the colonies, they don’t think
about the need to give up even a tenth part of the
capital being spent in vain in Russia. Compare the
maintenance of oicials, storekeepers, oice man-
agers, bookkeepers in the colonies and in Russia
– and you will see the most unjust disproportion.
I assure you, Russia throws out and conceals as
much as ¼ part of what is necessary for the colo-
nies, and the harm inlicted on the colonies will in
time give a death-dealing blow to the whole Com-
pany. What is the welfare of your Company based
on if not on the welfare of the colonies? Of course,
there was a time when extraordinary abundance
of the rich colonial products, so to speak, muted
the incessant losses of capital and people (Aleuts)
and instilled a kind of indiference toward the
fate of the colonies among those members of the
Board of Directors who remained conident that
the sources of wealth brought out of the colonies
annually would never run short. And now the cir-
cumstances have changed, have been changed for
a long time. Prudence is required in the business of
hunting, and the number of Aleuts – those unique
miners of company wealth – has diminished to the
Spring/Fall 2012 A Failed Monopoly 31

Russian-American Company
lag.

extreme, their state in many regards is wretched,

and the colonial leadership is deprived of the
means to improve it. Your directors only have
hearing and feeling when you write to them about
sending out the furs; they are entirely deaf and
insensitive as statues or dolts when it is a mater of
improvements in the state of the residents here. For
maintenance of some external form they, of course,
say in their dispatches: “We will try in every way,
and we are trying to use every means, and so on,”
but in fact they act entirely in the opposite spirit.
With a sort of greed they throw themselves at
every reckless undertaking, squandering company
capital, with the true calculation that part of it will
fall into their wide pockets. And when they are
presented the most useful opportunities for the
Company that, however, do not promise personal
proits for the directors, they indignantly reject
such undertakings.”25
Nevertheless, the inclusion of Wrangell himself in the compo-
sition of the board of directors in 1842, and then his election as
chairman in 1844, did not improve the situation much. In 1845
the RAC again entered a period of severe inancial crisis. It was
brought on by internal circumstances. There was a sharp decline
in prices of Chinese tea that the company was exporting to Russia
as a result of sharp competition by Siberian merchants trading in
Kyakhta. An increase in employees’ wages because of the growth
of salaries in Russia and the increased competition for a work
force in Siberia as a result of gold mining there strained inances.
32 Alaska History Vol. 27

In addition, during this period the cost of the social infrastructure

in the colonies rose constantly, absorbing nearly a third of the
company’s total income. As a result the RAC board of directors
petitioned the government to grant the company new beneits
and privileges. Otherwise, in the opinion of the directors, further
functioning of the company and supplying of the colonies would
be impossible and the Russian American possessions should be
handed over to the treasury or ceded to some foreign power. They
wrote about this directly to the Ministry of Finance on September
21, 1845: “The gradual depletion of present resources will inevi-
tably bring disorder to the afairs of the Company, and then the
government will either have to take management of the colonies
upon itself and, being deprived of the proits at present being
obtained by them from the Company trade, burden itself with
the substantial expenses of their maintenance, or, inally, to give
up the colonies and let them go to the use of other nations that
crave such acquisitions for strengthening their rule over the seas.
Guided by these considerations, the Company dares to hope for
special atention to it from the government in those cases when,
regardless of its requests, the very circumstances atest to the
necessity for some relief in its favor.”26 Thus, by the mid-1840s
the question of Russian America being ceded was for the irst time
considered by the company itself.
In order to pull out of the crisis, the RAC board of directors and
the colonial administration resorted to various measures. One of
them was an increase in the price of goods being delivered to the
colonies. Simultaneously the company tried to intensify trade
relations with the British Hudson’s Bay Company, which operated
in neighboring British Columbia, and to enter with its aid into the
London market. However, the English treated the RAC’s proposal
without much enthusiasm. Also the RAC’s atempts to monopo-
lize trade in Kamchatka in the mid-1840s failed. In the colonies
themselves the directors of the company expected to improve their
afairs by a reduction in administrative expenses. In 1847 the Atka
and Unalaska oices were abolished and the staf of employees
on Unga Island was reduced. This produced savings of almost
15,500 rubles . These measures did not save the company. Instead
government approval after long bureaucratic negotiations of
transporting Chinese tea by sea to Petersburg, which cost 30 per-
cent less than delivery by land enabled the RAC to eliminate “the
annual deicit of managing the Colonies, which never would have
been atained in such short time by any other means, except by
annual subsidies from the Government.” Regular delivery of tea
by sea began in 1851 and the RAC was receiving a clear average
Spring/Fall 2012 A Failed Monopoly 33

annual proit of 164,000 silver rubles. For nine years, until 1860,
the total sum amounted to 1,475,000 silver rubles.27
In spite of this income, the RAC continued to experience
chronic inancial diiculties and petitioned the government to
provide it with new privileges. The lobbying bore fruit: by resolu-
tion of the Council of State, sanctioned by the emperor, from May
28, 1857 to January 1, 1862 the government reduced the customs
tax for fur seal and beaver hides imported into Russia from Rus-
sian America by 25 percent. This saved the RAC about 9,000 silver
rubles per year. In February 1858 the imperial Commerce Bank
granted the company up to 250,000 silver rubles per year in credit.
In September 1858 the government allowed the RAC to obtain up
to 300,000 silver rubles from the treasury on terms that provided
the company a 20,000 silver rubles beneit. In sum, by these means
the company obtained annual indirect subsidies from the govern-
ment in the sum of 193,000 silver rubles.28
The RAC intended to gain additional income through the
development of coal in the colonies. Coal production was viewed
not only from the point of view of economics but also of politics.
The directors wrote speciically to the governor of Russian Amer-
ica in a dispatch of November 10, 1852 that “coal in the colonies, if
it turns out of good quality and inds substantial sale in California,
should certainly be produced in large volume not only in view
of inances but also for political considerations, in order not to
deserve reproach from the Americans for the fact that the Russians
do not use products found in their possessions and necessary for
the markets of the Paciic.”29
It is evident that the RAC leadership was well aware of the
inefectiveness of the Russian colonies in America, a problem that
had not been resolved a decade later when the company’s coal
efort struggled. In spite of all the labors of the RAC directors and
of large investments, coal mining on the Kenai Peninsula turned
out to be an unproitable afair. One of the reasons was revealed
by the Finnish engineer Hjalmar Furuhjelm, who led the coal
operation. In a message sent to the RAC directors on February
14, 1863 he wrote: “The reason for such insigniicant production
can be explained by the fact that the Russian-American Company
hires people for a certain period for an agreed ixed wage; con-
sequently, they can never be forced to work for pay by the job. I
know from experience that the result, insigniicant in comparison
with work in other mines, cannot be increased even by means of
the strictest supervision, in spite of the ease of breaking up coal in
the Kenai. Working for pay by the job is particularly necessary in
the mines to speed and reduce the cost of production.”30
34 Alaska History Vol. 27

Coal was the only useful mineral that the Russians tried to
develop in Alaska. Neither the directors of the RAC nor the
administrators of the colonies showed interest in the exploitation
of other mineral resources, inasmuch as it required large capital
investments and a substantial work force. By 1783 the Russians
had learned about large copper deposits on the Copper River, but
they did not seriously pursue them. The Russians did not even
make much efort to search for gold, the irst signs of which were
revealed in Alaska at the end of the 1840s.31
Meanwhile, in 1862 a gold rush began in neighboring British
possessions in the Stikine River valley. The Russian colonial lead-
ership sent an investigative expedition there in May 1863 under
the leadership of an engineer, P. P. Andreev. An American geol-
ogy professor, William Blake, accompanied the expedition. He
recorded that Indians brought the Russians several rather large
gold nuggets from the north – from the Taku River, which lows
into the ocean in Russian territory. But these nuggets did not
interest the administration of the Russian colonies. The Russians
also knew about the presence of oil in Alaska, but this information
mainly atracted the atention of the RAC’s American partners and
not the company’s management. Representatives of the New York
fur-trading irm Shepeller and Co. sent a special request in 1865 to
the directors of the company in Petersburg, which they pursued
repeatedly, asking for detailed information on the oil deposits
there. The last governor of Russian America, Count D. P. Maksu-
tov, in his report to the RAC board of directors of February 8, 1866
conirmed the presence of “black gold” in the Russian colonies.32
But the company made no efort to study or use the resource.
Such lack of atention to mineral riches was partially caused by
the RAC’s distraction, beginning in the 1850s, in selling Alaskan
ice in California after the Gold Rush. The governor of Russian
America, Captain of 2nd Rank N. Ya. Rozenberg, initially had no
idea even how to begin this venture. “There is no doubt,” he wrote
to the RAC directors in September 1850, “that geting ice by our
own means and sending it to sell in California on our ships would
be comparatively more proitable for the Russian-American Com-
pany, but this whole operation at present is still so new to us that
we don’t even know how to begin it.” For their part the Ameri-
cans could not ignore such a proitable business, and in 1852 the
entrepreneur and banker Beverly Sanders of San Francisco created
the American-Russian Trading Company. In 1854 it entered into
a contract with the RAC to market ice in California for a period of
twenty years. The agreement was very favorable to the American
irm, which paid the RAC $35 per ton and sold it at $75. As the
American researcher Ronald J. Jensen noted: “It was an especially
Spring/Fall 2012 A Failed Monopoly 35

The Russian-American
Company placed litle
emphasis in exploring
for gold. Harper’s New
Monthly, April 1860.

proitable contract for the Americans because the Russian com-

pany did all the work and absorbed most of the expenses. It cut
the ice, carried it to San Francisco, and even paid for the ice house
in that city. The California irm merely sold the product.”33
The management of the RAC was not, however, an uninter-
rupted series of bad decisions. In fact, both the board of directors
in Petersburg and the administration in the Russian colonies in
America often responded efectively and adequately to the chang-
ing economic, ecological, and political situation. RAC leaders,
for example, sometimes prohibited hunting of some furbearers
over periods of one to three years, thus helping preserve animal
populations and the wealth of furs they provided. The breeding
of valuable species of animals on islands formerly inaccessible
to them was an economic success; this had been arranged by the
RAC board of directors as early as 1819. In 1828, for example, the
RAC released a pair of silver foxes on Amlia Island, and in 1846
M. D. Teben’kov ordered ground squirrels brought to Atu Island
where they were used to make Aleut clothing. The signing of a
neutrality pact with the Hudson’s Bay Company in 1854, on the
eve of England’s entrance into the Crimean War kept Russian
America from being devastated by an Anglo-French squadron
during the course of a military campaign in the Paciic. At times
the RAC directors and the colonial authorities atempted useful
innovations, though not always successfully. Thus in the 1830s
the board of directors hired the American harpooner Thomas
Barton to instruct Kodiak Natives and Creoles in European skills
for hunting whales in order to expand this kind of hunting in the
colonies. The experiment did not always work, as Wrangell wrote
to the RAC directors on April 30, 1830, “now the whales tore loose
from the harpoons, now the lines broke and the whales escaped,
now the hunted whale sank irretrievably into the depths.” In
36 Alaska History Vol. 27

the 1840s the directors of the company sent rubber, oil, and a
“hydro-elastic machine” to Russian America for the production of
waterproof rubber bags for protecting furs, but the novelty did not
take root. The furs continued to be sent from the colonies in the
old way and the machine itself, which cost over 11,000 rubles, was
listed as dead capital in the accounts of the Novo-Arkhangel’sk
oice.34
One of the unresolved problems of RAC management was the
lack of efective motivation of the workers because of low income,
especially among the Natives and Creoles, and debt bondage.
Referring to the Creoles in the Kodiak Department, Wrangell
wrote in 1832: “Because of their inadequate pay, the carelessness
and invariable readiness of the former Heads of the [Kodiak]
Oice to run them into debt to the [company] Treasury, people
are forced into irredeemable debt, so they are killed in spirit and
therefore of negligible beneit to the company, and it is impos-
sible to use them as managers of Stores, Shops, and Artels.” Debt
bondage was widely practiced by the RAC with Natives, Creoles,
Russian promyshlenniki, and employees of the company. For
example, promyshlenniki and company employees debt to the
RAC in 1843 reached 380,000 rubles, a third of which was counted
as worthless debts because the debtors were deserters, deceased,
or retired residents of the colonies.35 Though the company took
painful inancial losses as a consequence, it continued the policy
of issuing credit and debt bondage up till the sale of Alaska to the
United States. After all, this practice, while it may not have moti-
vated workers to extraordinary efort, could ensure maintenance
of a work force, and in particular, helped keep workers beyond
their period of contract in the colonies.
In 1818-1820 the RAC abandoned the practice of paying Rus-
sian promyshlenniki with a share of the procured furs and began
paying them a ixed wage of 350 rubles. But this measure reduced
the incentive for work. This was noted by the colonial adminis-
trators, who emphasized that a common salary of 350 rubles was
unjust, since it did not permit distinguishing the diligent worker
from the lazy one. RAC documents also indicate that as a result
the practice “instilled only indiference toward the successes of
the Company in the hunts. Each hunter is now convinced that he
will receive without fail what he was assigned even though the
hunts should be entirely unsuccessful.” Striving to compensate
for this inadequacy, the RAC administration instituted bonuses,
issuing oral and writen acknowledgments, and sometimes also
promotions. In 1823 the RAC directors approved an increase in
salary in the amount of 25 to 50 rubles per year to zealous workers
(later the sum grew to 100 rubles) and urged punishment, includ-
Spring/Fall 2012 A Failed Monopoly 37

ing corporal punishment and in extreme cases expulsion from the

colonies.36 However, these measures had limited success.
Dependent Natives had even fewer incentives to work. In the
1830s “employed Aleuts” in the service of the company had a sal-
ary of 100 to 180 rubles per year for men and 60 to 100 rubles for
women. This was ridiculously inadequate. Wrangell pointed out
that an Aleut needed clothing costing 180 rubles annually and
asked, “with what is there to dress his wife and children, from
where can he take what is necessary for a whim, tobacco and
the like, when he obtains a salary of 120 rubles to 180 and rarely
more?!” According to the calculations of the governor, each fam-
ily of Kodiak Eskimos had an average annual income of 20 rubles
36 kopecks. However, the board of directors of the company
saw the problem diferently. In a RAC Edict of 1844 a special
paragraph was introduced mandating that the governor “pays
atention to the fact that luxury not be introduced into the colo-
nies.”37
The RAC’s market monopoly on furs discouraged efort by
Native hunters. The company set the prices, controlled products
that were traded to the dependent population, and artiicially
limited the demand for what the company considered “luxury”
items. At the beginning of the 1860s the auditor of RAC activity,
P. N. Golovin, atested: “The Aleuts do not have the right to sell
their catches to anyone whomsoever except the company, or like-
wise, to buy anything other than from the company stores. From
this it happens sometimes that an Aleut asks for tea and they give him
a blanket; he asks for red material and he is given blue; he asks for lour
and they ofer him footwear” [emphasis in original text].38
The RAC’s total monopoly inevitability gave rise to low-
quality products, especially furs. They lost quality from the
start through clumsy, hasty, and careless work—a consequence
of uninterested workers. As the Russian missionary in Alaska,
Abbot Nikolai, wrote in the 1860s: “The whole operation of trade
is in company hands, for which the natives unwillingly hunt and
are dissatisied with the pay for their goods. . . . For example,
sables [martens] are plentiful and good here, but they seldom
hunt them. Instead only boys catch them for fun, they sew them-
selves parkas with the good ones, and the worst ones they take to
the company. They say: ‘All the same, they give a ruble, the com-
pany has no eyes.’”39
The low quality of furs obtained in Russian America made it
inevitable that the primary markets for the sale of RAC furs were
China and Russia, whose consumers did not expect high-quality
products. Nevertheless, the RAC board of directors, citing a
report from the Kyakhta oice on the Chinese border, pointed out
38 Alaska History Vol. 27

to the governor in a dispatch of March 23, 1828: “The oice uni-

formly observes that the working of our river beavers is not very
good because of haste and lack of skill, and often there were cuts
on the hides and roughness left, from which many of our beavers
have lost their value in comparison with foreign beavers, which
are always worked much beter, in comparison with our work-
ing.” But this helped litle, and on March 22, 1850 Governor M.
D. Teben’kov issued a special circular that ordered more atention
be devoted to the proper cleaning and dressing of hides. Still, a
substantial part of the hides received from the Unalaska Depart-
ment in 1851 were damaged from careless work, and some were
moth-eaten. Thus, the new governor, N. Ya. Rozenberg requested
that the Unalaska manager tell the local Aleuts that, if negligent
removal and dressing of hides continued, he would resort to
corporal punishment. In the 1860s, when the RAC tried to enter
into the European and American markets, it had to face constant
complaints by its trade partner about its bad quality in processing
hides as well as improper packing and storing in the holds of the
ships, resulting in deterioration of the furs.40
The system of administrative distribution that formed in the
colonies—in contrast to a free market goods-for-currency rela-
tionship—provided the opportunity for RAC managers to obtain
monopolistic super-proits owing to the price gap, between what
the monopolistic RAC would distribute and what a competitive
market would yield for purchased goods. In addition, the com-
pany could artiicially boost proits through various additional
charges and the use of special colonial “currencies,” so-called
marki, which were made of seal hides or thick paper with the
stamp of the RAC and a corresponding face value. Auditor P. N.
Golovin noted: “These marki are issued from the Main Oice of
the RAC and everything is purchased with them at a store owned
by the company, since no outsider can bring anything into the
colonies for sale. . . . This is very favorable for the company: it pays for
any kind of work in marki, issuing goods for them, to which of course it
applies a certain percent, so that in essence it pays nothing for the work”
[emphasis in original].41 Naturally, the top management of the
RAC lobbied in every way to keep such a company store system,
every time stubbornly defending the company’s monopolistic
rights and privileges rendered to it in its charters.
Central planning of the economy of the Russian colonies was
the inevitable consequence of the RAC’s monopoly. A prime
manifestation of this central planning was the governor’s direc-
tives, approved by the RAC board, for the annual summer sailings
of the RAC’s lotilla. The directives marked out its route and the
sending out hunting parties. The directives dictated every step
Spring/Fall 2012 A Failed Monopoly 39

of the subordinates to the smallest detail. A special “regulation”

for Native leaders of Kodiak Island, approved by Governor A. K.
Etolin on March 22, 1841, stated: “An elder shall always have an
accurate lists of all people of both sexes in the village entrusted
to him and the same with all Aleuts, promyshlenniki, and those
capable of company work, so that on his arrival in Pavlov Harbor
(which happens annually, usually in the month of March), on
demand from the head of the Kodiak oice, he can present these
lists for the necessary distribution of people to serve on hunting
parties and at company work, for which, if the elder himself is
illiterate, he will be given one Creole who can write.”42
Another oversight function was the constant accounting for
“company property and capital.” An entire staf of bookkeep-
ers and clerks was employed, and the governors regularly sent
trusted employees to audit all departments of the colonies. And
with good reason. In 1830 alone, according to an audit, a debt
for shortages amounting to 29,571 rubles 39¾ kopecks had accu-
mulated among the stewards and managers of the hunting artels.
Embezzlement, theft, and misrepresentation in RAC lower man-
agement in the colonies were chronic occurrences. Sometimes
abuses were also commited by higher-level managers. Checking
accounts at the Atka oice of the RAC in 1846 revealed a shortage
of goods worth 12,000 rubles, whose responsibility was borne by
P. F. Vykhodtsev, head of the Atka Department. Toward the end
of the existence of Russian America, the corruption of manage-
ment became especially noticeable. The RAC directors wrote to
D. P. Maksutov in a dispatch of December 10, 1864: “The board of
directors recently notes that some of the people, who are named in
the colonies as honorable, return to Russia with credits that they
could not have raised even if they ate and wore nothing in all the
time of their residence in the colonies; this compels the conclusion
that they obtained the credits through less than legal means.”43
Detailed accounting was one of the methods of struggling
against abuses. The widespread bureaucracy in the colonies
logically lowed from the very nature of the economic relations
developed there. It was relected in the names and structure of
the managing agencies: the vast administrative territories of Rus-
sian America, which symbolically were called “departments” and
were managed by “oices” of the RAC. Governor N. Ya. Rozen-
berg had a special love for paperwork, repeatedly requiring from
his subordinates the most detailed accounts of activities. Thus
in a message of April 17, 1851 to Troim Dushkin, the head of
Belkovsky village, Rozenberg wrote: “Former Manager of Unga
Island, Fëdor Gudkov, reported to me that you, Dushkin, begin to
perform your duty in the service badly; especially on the writen
40 Alaska History Vol. 27

part you have much disorder and many oversights. For example,
in the past year you did not present to the Management either
service records, or an award list, or a human census, or a list of
Colonial supplies. I announce to you, Dushkin, for such repre-
hensible carelessness toward the execution of your duty, my strict
reprimand, and I demand that in the future you submit to the
Management all required accounts and documents without fail
and in a timely manner, according to the instructions charged to
you and the strictest mandate of the laws, and at peril for failure,
for nonexecution of orders or the violation of the resolutions of the
Authorities.”44
Complaints, petitions, and denunciations also informed RAC
leadership of the performance of the company’s bureaucracy.
In a system of administrative control without an independent
judiciary, colonial authorities were atentive to these signals that
appeared “from below.” Many managers of hunting artels and
trading posts lost their positions because of complaints by sub-
ordinates. For example, in 1845, due to numerous complaints by
the Chugach Eskimos, Pëtr Naumov, the head of Konstantinovskii
Redoubt, was removed from his post, and in 1846 Maksim Smo-
lin was removed from the duty of steward at the trading shop
in Novo-Arkhangel’sk “for repeated complaints about him and
based on accusations of his dishonesty.”45
As diicult as administration of the colonies had been earlier
in the nineteenth century, the RAC’s challenges only became
greater in the 1860s. In 1862 the company’s charter expired and
with it went government beneits worth approximately 200,000
rubles annually. A drop in fur and tea sales in 1863 greatly aggra-
vated the situation. In that year an economic crisis in Russia left
the company with no buyers for 3,000 sea oter hides. Legal tea
imports from England and contraband tea delivered through
revolt-racked Poland substantially lowered company proits from
the tea trade. In 1863 the company was unable to sell a single case
of tea, and in 1864 it succeeded in selling tea only at extremely low
prices. In addition, the head of the Navy Department, General
Admiral Grand Duke Konstantin Nikolaevich (brother of Alex-
ander II), launched a campaign to discredit the RAC. His goal
was to sell the Russian colonies to the United States. At the same
time, American and British whalers, traders, and gold prospectors
began ever more actively to penetrate Alaska and the seas wash-
ing its shores. The RAC could not compete with foreign traders
because of higher transportation expenses and a poor assortment
of trade items, especially a lack of irearms and alcohol because
of the prohibition of such trade in the RAC’s charters before 1830.
The RAC did not sell arms to the Natives prior to 1830 for several
Spring/Fall 2012 A Failed Monopoly 41

General Admiral Grand Duke

Konstantin Nikolaevich, the
brother of the czar, sought to
undermine the Russian American
Company. Photograph cour-
tesy of the Library of Congress,
George Kennan Papers. (LC-
USZ62-128137)

reasons. Because the RAC relied more on compulsion than on

cash or trade inducements to acquire furs and other goods from
Natives, arming Natives seemed dangerous. Russians also were
reluctant to put irearms in Native hands because they believed
the sound of gunshots frightened furbearers and because irearm
use during intra- or inter-tribal strife could reduce the Native
population upon whose labor the Russians depended. The unlim-
ited sale of alcohol among Natives also undercut the eiciency of
this critical workforce.46 The refusal of the RAC to sell irearms
and drink to Natives put the company at a disadvantage, since its
foreign competitors ignored the colonial authorities’ prohibition of
such sales and international agreements between Russia and Eng-
land and the United States prohibiting the sales.
In the face of these diiculties, RAC managers strove to pre-
serve the company. The company reduced its own management
apparatus. Thus in 1864 it abolished Old World brokerages in
Kazan, Tyumen, and Tomsk, and closed the brokerage on the
Amur. It also transferred the Ayan oice to Yakutsk in 1865,
where is replaced an existing smaller brokerage. Payment of pen-
sions to former RAC employees was suspended. Concurrently the
directors recommended that the governor of the colonies discon-
tinue mining coal on the Kenai Peninsula and instead undertake
trade in Alaskan timber with Chinese ports. The board recom-
mended suspension of shipments of furs to Shanghai in exchange
for tea “because of a drop there of prices for fur goods.” The RAC
42 Alaska History Vol. 27

directors hoped to expand fur sales to markets in Europe and the

United States. In March 1865 the RAC leadership informed the
governor of Russian America about a contract signed with the fur-
trading irm of Oppenheimer & Co and instructed the governor to
send large shipments of fur-seal hides to the company in London.
However, neither this measure nor the developing trade in Alas-
kan ice to California was able to improve the inancial indices of
the company: in 1866, on the eve of the sale of Alaska, its expen-
ditures exceeded its income by more than 200,000 silver rubles,
which had to be covered by state subsidies.47
RAC management was unable to efectively respond to the
changing market conditions, to reorient itself from the procure-
ment and sale of furs and tea to a more proitable business, or to
reduce costs and improve the quality of its products. The strate-
gic miscalculation of the RAC board of directors in the 1850s, in
the opinion of A. Yu. Petrov, was focusing predominantly on the
development of the tea trade; further diversiication of sources of
income was not even examined by the directors. However, this
is not entirely true since as early as the beginning of the 1850s the
RAC directors had demanded that Governor N. Ya. Rozenberg
establish “wholesale trade with California and the Sandwich
[Hawaiian] Islands . . . irst with two articles: salt ish and timber
in round form, if not in the form of boards.” But, the RAC board
of directors rejected Rozenberg’s proposal of sending an addi-
tional eight hundred Russian workers to the colonies to develop
the timber, ishing, and coal industries and the preparation of
Alaskan ice for delivery to California. The directors considered
the expense too great. The RAC was unable to turn itself into a
large provider of timber, ish, or coal. As P. N. Golovin noted
later, the company missed a favorable moment for seizing monop-
olistic positions in the timber trade in the San Francisco market
during the California Gold Rush. “Meanwhile, the English,”
wrote Golovin, “were not dozing and the Oregon forest found a
huge and permanent demand in California.” The choice of a RAC
agent for California was also unfortunate: the aged employee P.
S. Kostromitinov was not noted for great business acumen and
did not even speak English. Golovin also noted other blunders
by RAC managers: they did not hire experienced salters for the
ish, and thus its quality left much to be desired and elicited litle
demand. Similarly, the company did not sort the coal it mined
with care, and consequently its quality and sales sufered.48
An inadequate management culture and incompetence on the
part of the RAC were manifested in the weakness of strategic
planning and the adoption of resolutions not thought through,
as well as by the striving of several directors and ordinary agents
Spring/Fall 2012 A Failed Monopoly 43

to improve their own inancial positions at the expense of the

company through various machinations, deceptions, and simple
commonplace theft. All these manifestations of poor management
cost the RAC millions of rubles and undermined Russian coloni-
zation in Alaska.
Poor management by the RAC leadership revealed itself in
poor motivation of workers, administrative excesses, and lack of
lexibility to respond to changing economic and political realities.
Beginning in the 1840s the RAC also sufered from the defeatist
atitude of the company directors, who were pessimistic about the
colonies’ future. All this, without doubt, negatively inluenced
the state of Russian America and pushed the government toward
its sale to the United States.
Of course, RAC mismanagement was only partially to blame
for the loss of the colonies. The company’s failure was inextri-
cably linked to tsarist Russia’s social, political, and economic
structure. Merchant capital was obliged to serve the interests of
the supreme state and not the reverse. The tsarist government
simply inserted the RAC into the general system of management
of the empire, and its representatives adopted the authoritative-
bureaucratic leadership style typical of the empire. Its own
monopolistic position and absence of internal competition cor-
rupted the management of the RAC, discouraged it from seeking
optimal management decisions, and set it on a course to rely on
periodic petitions to the state for support and additional beneits.
For its part, the government saddled the company with main-
taining the social infrastructure of the colonies, making it uterly
uncompetitive in the world capitalistic market that was forming in
the second half of the nineteenth century. Thus the general back-
wardness and inefectiveness in the socioeconomic system of the
Russian Empire predetermined the failure of its colonization in
the New World. This very fundamental reason ensured the weak-
ness of the RAC management, which in turn served as one of the
indirect reasons for Russia’s abandonment of its transoceanic pos-
sessions to the more successful capitalistic competitor, the United
States.

Notes

1. Rights and privileges of the RAC, signed by the Emperor on July 8, 1799, Pol-
noe sobranie zakonov Rossiiskoi imperii [Complete Collection of Laws of the Russian
Empire] (hereafter PSZRI and year), (St. Petersburg, v Gosudarstvennoi tipograii,
1830), 19.030: 700-4.
2. F. Gl. Arkhiv II-3, 1835. Op. 77. D. 7. L. 22, 29, Arkhiv vneshnei politiki
Rossiiskoi imperii [Archive of Foreign Afairs of the Russian Empire], Moscow
(hereafter AVPRI). From the beginning of the 1840s RAC accounts within Russia
were conducted in silver in accordance with the reform of the minister of inance E.
44 Alaska History Vol. 27

F. Kankrin. In the colonies all inancial operations were conducted in paper rubles.
Paper rubles were much less valuable than silver rubles; approximately 3.5 of
paper rubles equaled one silver ruble. Unless silver rubles are speciied, all refer-
ences to rubles in this paper are to the less valuable rubles on the RAC books.
3. The opening up of Priamur’ye and Sakhalin brought the RAC substantial
losses in the amount of 151,619 silver rubles, of which the treasury covered only
50,000 rubles, and the fur trade with the natives of the Primor’ye District provided
the RAC an income of about 9,500 silver rubles. P. A. Tikhmenev, Istoricheskoe
obozrenie obrazovaniia Rossiisko-Amerikanskoi kompanii i deistvii eia do nastoiashchago
vremeni [Historical Survey of the Formation of the Russian-American Company
and Its Activities to the Present Time] (St. Petersburg: E. Veimar, 1861-1863), 2:74-
78, 105-111.
4. Sud’by Rossii. Doklady i zapiski gosudarstvennykh deyatelei imperatoram o prob-
lemakh ekonomicheskogo razvitiya strany (vtoraya polovina XIX v.) [The Fortunes of
Russia. Reports and Notes of State Representatives to the Emperors about Prob-
lems of Economic Development of the Country (Second Half of the Nineteenth
Century)] (prepared by L. E. Shepelëv. St. Petersburg: Liki Rossii, 1999), 12.
5. Kirill T. Khlebnikov, Russkaya Amerika v “Zapiskakh” Kirilla Khlebnikova:
Novo-Arkhangel’sk [Russian America in the “Notes” of Kirill Khlebnikov: Novo-
Arkhangel’sk], S. G. Fedorova, comp. (Moscow: Nauka, 1985), 106; A. V. Grinëv,
“Tuzemtsy Alyaski, russkie promyshlenniki i Rossiisko-Amerikanskaya kom-
paniya: sistema ekonomicheskikh vzaimootnoshenii” [The Natives of Alaska,
Russian Promyshlenniki, and the Russian-American Company: A System of
Economic Relationships], Etnograicheskoe obozrenie [Ethnographic Review] 2000
(hereafter EO), 3:74-88.
6. A. V. Grinëv, “Kolonial’nye grazhdane Russkoi Ameriki: problema
formirovaniya postoyannogo russkogo naseleniya v Novom Svete” [Colonial
Citizens of Russian America: The Problem of Forming a Permanent Russian
Population in the New World] Amerikanskii ezhegodnik 2006 [American Annual]
(hereafter AE) (Moscow, 2008), 179-210 [See in translation “ ‘Advanced in Age,
Decrepit and Unit’: Colonial Citizens and the Formation of a Permanent Russian
Population in Alaska” Alaska History 24:2 (Fall 2009):30-60]; F. Gl. Arkhiv II-3, 1835.
Op. 77. D. 7. L. 23-24 ob, AVPRI.
7. For details see Gibson, J. R. Imperial Russia in Frontier America. The Changing
Geography of Supply of Russian America, 1784-1867 (New York: Oxford University
Press, 1976).
8. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1799-1815.
Sbornik dokumentov [The Russian-American Company and the Study of the North
Paciic Ocean. Collection of Documents] (Moscow: Nauka, 1994), 36.
9. Rossiiskii gos. istroicheskii arkhiv [Russian State Historical Archive]. F. 13.
Op. 2. D. 1243. L. 10-15; F. 40. Op. 1. D. 10. L. 142 ob-143.
10. A. N. Ermolaev, “Vremennyi Komitet i osobyi Sovet Rossiisko-Amerikanskoi
kompanii: kontroliruyushchie ili soveshchatel’nye organy (1803-1844)?” [The
Interim Commitee and Special Council of the Russian-American Company:
Controlling or Counseling Bodies (1803-1844)?] (AE 2000. Moscow, 2002), 232-49;
A. N. Ermolaev, “Glavnoe pravlenie Rossiisko-Amerikanskoi kompanii: sostav,
funktsii, vzaimootnosheniya s pravitel’stvom, 1799–1871” [Board of Directors of
the Russian-American Company: Composition, Function, and Relationship with
the Government, 1799–1871] (AE 2003. Moscow, 2005), 279; N. N. Bolkhovitinov,
Russko-amerikanskie otnosheniya: 1815-1832 [Russian-American Relations: 1815-1832]
(Moscow: Nauka, 1975), 138.
11. V. F. Shirokii, “Iz istorii khozyaistvennoi deyatel’nosti Rossiisko-
Amerikanskoi kompanii” [From the History of the Economic Activity of the
Russian-American Company], Istoricheskie zapiski [Historical Notes] (1942), 13:207-
Spring/Fall 2012 A Failed Monopoly 45

21; Semyon. B. Okun’, Rossiisko-Amerikanskaia kompaniia [The Russian-American

Company] (Moscow-Leningrad: Gos. Sotsial’no-ekonomicheskoe izd-vo, 1939),
62-65f [See in translation as: The Russian-American Company, translated by Carl
Ginsburg, edited by B.D. Grekov (Cambridge: Harvard University Press, 1951)];
“Doklad direktora Rossiisko-amerikanskoi kompanii V. V. Kramera obshchemu
sobraniyu aktsionerov, 22 avgusta 1813 goda (publ. i vstup. st. A. Yu. Petrova)”
[Report of the Director of the Russian-American Company V. V. Kramer to a Gen-
eral Meeting of the Stockholders, 22 August 1813 (published and introduced by
A. Yu. Petrov)] (AE 2001, Moscow, 2003), 220-22; Otchety Rossiisko-Amerikanskoi
kompanii Glavnogo pravleniya za 1840-1863, 1867-1869 gg. [Accounts of the Russian-
American Company by the Board of Directors for 1840-1863, 1867-1869] (St.
Petersburg, 1842-1871); Razr. 99. Op. 1. D. 125. L. 1-4 and Op. 1. D. 131. L. 1, Arkhiv
Russkogo geograicheskogo obshchestva [Archive of the Russian Geographic Soci-
ety] (hereafter ARGO), St. Petersburg; microilm Roll 14, p. 358 ob., Records of the
Russian-American Company, Records of the Former Russian Agencies, Record
Group 261 (hereafter NARA RAC Records). On March 30, 1843 the board of direc-
tors of the RAC authorized the cancellation of 503,928 rubles from the company
capital: this sum, as the document states, accumulated “from improper markdown
of ships.” Roll 14, p. 583, NARA RAC Records.
12. A. Yu Petrov, “Finansovo-khozyaistvennaya deyatel’nost’ Rossiisko-
amerikanskoi kompanii (1804-1820)” [The Financial-Economic Activity of the
Russian-American Company (1804-1820)] (AE 2001. Moscow, 2003), 115.
13. Petrov, “Finansovo-khozyaistvennaya,” 116-17, 119-20; Ermolaev, “Glavnoe
pravlenie Rossiisko-Amerikanskoi kompanii,” 274-75; Razr. 99. Op. 1. D. 134. L. 20,
ARGO.
14. F. Gl. Arkhiv 1-7, 1802 g. Op. 6. D. 1. Papka No. 35. L. 8, and L. 5 ob., AVPRI.
15. V. M. Golovnin, “Zapiska kapitana 2 ranga Golovnina o sostoyanii Ros-
siisko-Amerikanskoi kompanii v 1818 godu” [The Notes of Captain of 2nd Rank
Golovnin on the State of the Russian-American Company in 1818]. Materialy dlya
istorii Russkikh zaselenii po beregam Vostochnago okeana [Materials for the History
of Russian Setlements along the Shores of the Paciic Ocean] (St. Petersburg: V
tipograii Morskogo ministerstva, 1861), 1:103; Roll 27, p. 128 ob-129, NARA RAC
Records.
16. Roll 34, pp. 80 ob.-81 and 383 ob., Roll 8, p. 10 ob., Roll 37, pp. 62 ob.-63,
and Roll 57, p. 198 ob., NARA RAC Records; F. RAK. Op. 888, D. 125, L. 252-54,
AVPRI; Prilozheniya k dokladu Komiteta ob ustroistve russkikh amerikanskikh kolonii
[Supplements to the Report of the Commitee on the Arrangement of the Russian
American Colonies] (St. Petersburg: V tipograii Departmenta vnieshnei torglovi,
1863), 106.
17. Roll 37, p. 117, NARA RAC Records.
18. Kirill T. Khlebnikov, Russkaya Amerika v neopublikovannykh zapiskakh K. T.
Khlebnikova [Russian America in the Unpublished Notes of K. T. Khlebnikov]
compiled, authors’ introduction, and comments by R. G. Lyapunova and S. G.
Fedorova (Leningrad: Nauka, 1979), 106, 193, 214; Shirokii, “Iz istorii khozyaistven-
noi deyatel’nosti Rossiisko-Amerikanskoi kompanii,” 210.
19. In 1841 Fort Ross was sold to John Suter, a Mexican citizen of Swiss origin.
20. Kirill T. Khlebnikov, Zhizneopisanie Aleksandra Andreevicha Baranova, Glavnogo
pravitelia Rossiiskikh kolonii v Amerike [Biography of Aleksandr Andreevich Baranov,
Chief Director of the Russian Colonies in America] (St. Petersburg: Morskaya
Tipograiia, 1835), 188 [See in translation as: Baranov, Chief Manager of the Russian
Colonies in America, translated by Colin Bearne, edited by Richard A. Pierce (Kings-
ton, Ontario: Limestone Press, 1973)]; F. RAK, Op. 888, D 420, L. 1-2, AVPRI.
21. F. RAK, Op. 888, D. 251. L. 34 ob, AVPRI.
46 Alaska History Vol. 27

22. For example, Governor M. I. Murav’ev admited in a dispatch of January

19, 1821 to the directors of the RAC, that he was ignorant of commercial afairs: “I
know very litle about trade turnover.” Roll 27, p. 143, NARA RAC Records.
23. Razr. 99, Op. 1, D. 29, L. 5 ob.-8 and D. 134, L. 20 ob., ARGO.
24. T. 37, No. 28.747, pp. 823-32, PSZRI; Bolkhovitinov, Russko-amerikanskie
otnosheniya, 132-307; Razr. 99, Op. 1, D. 29, L. 7 ob., ARGO; Okun’, Rossiisko-
Amerikanskaia kompaniia, 69; F. RAK, Op. 888, D. 314, L. 3, AVPRI.
25. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1815-
1841 [The Russian-American Company and the Study of the North Paciic Ocean,
1815-1841] edited by N. N. Bolkhovitinov (Moscow: Nauka, 2005), 285. Reference
to the Shantarskii expeditions refers to several years of failed eforts in islands in
the western part of the Sea of Okhotsk.
26. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1841-
1867: sb. dok. [The Russian-American Company and the Study of the North Paciic
Ocean, 1841-1867: Collection of Documents] (Moscow: Nauka, 2010), 126-28.
27. F. Gl. Arkhiv II-3, 1835, Op. 77, D. 7, L. 32 ob. and 56-70 ob. and L. 127,
AVPRI; Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 88,
114-15, 119-20, and 128; Roll 52, p. 475, NARA RAC Records; Doklad Komiteta ob
ustroistve russkikh amerikanskikh kolonii [Report of the Commitee on the Arrange-
ment of the Russian American Colonies] (St. Petersburg: V tipograii Departmenta
vnieshnei torglovi, 1863), 389.
28. Doklad Komiteta ob ustroistve russkikh amerikanskikh kolonii, 390-91.
29. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 247.
30. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 372.
31. A. V. Grinëv, “Zoloto Russkoi Ameriki: nesostoyavshiisya Klondaik] (AE
2001. Moscow, 2003), 138-62. [See in translation “The Gold of Russian America: The
Gold Rush That Didn’t Happen” Alaska History 21:1 (Spring 2006):15-36.
32. V. P. Blek (Blake), “Opisanie reki Stakhin [Description of the Stikine River],”
Morskoi sbornik [Marine Collection] 78 (1865), 5:95-96, 105, 110; Roll 25, pp. 311-12
and Roll 65, p. 11, NARA RAC Records.
33. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1841-
1867, 215-16; Ronald J. Jensen, The Alaska Purchase and Russian-American Relations
(Seatle: University of Washington Press, 1975), 4-5.
34. Roll. 27, p. 23 ob., Roll 32, pp. 24-24 ob., Roll 34, p. 185, Roll 52, pp. 71 ob.-72
and 384, Roll 35, pp.10 ob.-11, 83 ob., and Roll 37, p. 76, NARA RAC Records.
35. Roll 34, pp. 171 ob.-172 and Roll 15, pp. 41-41 ob., NARA RAC Records.
36. Roll 27, p. 292, Roll 28, p. 43, and Roll 3, pp. 283 ob.-284, NARA RAC
Records; Razr. 99, Op. 1, D. 29, L. 5 ob., ARGO.
37. Kirill T. Khlebnikov, Russkaya Amerika v neopublikovannykh zapiskakh K. T.
Khlebnikova, 144; Roll 37, p. 80, NARA RAC Records; Ustav RAK 1844 g., §176
[RAC Edict 1844, §176] in Tikhmenev, Istoricheskoe obozrenie, Appendix, 44.
38. Tikhmenev, Istoricheskoe obozrenie, 230-32; Johan H. (I. V.) Furuhjelm, Otchet
po upravleniiu Rossiisko-amerikanskimi koloniiami s 1859 po 1863 god Kapitana 1 ranga
Furugel’ma [Report on the Management of the Russian-American Colonies from
1859 to 1863 by Captain of the 1st Rank Furuhjelm] (St. Petersburg: Tipograia
Eduarda Treimana, 1864), 37; Pavel N. Golovin, “Iz putevykh zametok P. N.
Golovina s predisloviem V. Rimskogo-Korsakova” [From Travel Notes of P. N.
Golovin with a Foreword by V. Rimskii-Korsakov], Morskoi sbornik [Maritime Jour-
nal], 65:5 (1863), 180.
39. Cited by O. D. Yakimov, “Nikolai Militov – igumen kenaiskoi pravoslavnoi
missii” [Nikolai Militov – Father Superior of the Kenai Orthodox Mission]. Russ-
kaya Amerika i Dal’nii Vostok (konets XVIII v.-1867 g.). K 200-letiyu obrazovaniya
Rossiisko-Amerikanskoi kompanii [Russian America and the Far East (End of the Eigh-
teenth Century to 1867) On the 200th year of the formation of the Russian-American
Spring/Fall 2012 A Failed Monopoly 47

Company] Materials of the International Science Conference (Vladivostok, 11-13

October 1999) (Vladivostok, 2001), 227.
40. Roll 6, p. 61 ob., Roll 57, pp. 179 ob.-180 ob., 286-286 ob., and Roll 25, pp. 228-
228 ob., 294-294 ob., 356, NARA RAC Records.
41. Golovin, “Iz putevykh zametok,” 180-81.
42. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1841-
1867, 34.
43. Roll 34, pp. 137-137 ob., Roll 52, pp. 211 ob., 451, and Roll 25, p. 174, NARA
RAC Records.
44. Roll 57, pp. 59-63, 107, and 411 ob.-412, NARA RAC Records.
45. Roll 51, p. 208 and Roll 52, p. 112 ob., NARA RAC Records.
46. Doklad Komiteta ob ustroistve russkikh amerikanskikh kolonii, 391; Otchet
Rossiisko-Amerikanskoi kompanii Glavnago pravleniya za 1863 g. [Accounts of the
Russian-American Company by the Board of Directors for 1863] (St. Petersburg:
V tipograii E. Treimana, 1865), 8-11; Roll 25 p. 230, NARA RAC Records; A. V.
Grinëv, “Velikii knyaz’ Konstantin Nikolaevich i prodazha Alyaski (k 175-letnemu
yubileyu velikogo knyazya Konstantina Nikolaevicha)” [Grand Duke Konstantin
Nikolaevich and the Sale of Alaska (On the 175th Birthday of Grand Duke Kon-
stantin Nikolaevich)] Peterburgskaya istoricheskaya shkola [The Petersburg Historical
School] (St. Petersburg: Nestor, 2004), 3:157-179; Andrei V. Grinëv, “Problema
rasprostraneniya p’yanstva sredi tuzemtsev Russkoi Ameriki” (EO, 2010), 1:131-
141 [See in translation “The Distribution of Alcohol among the Natives of Russian
America” Arctic Anthropology 47(2):69-79. 2010.
47. Roll 25, pp. 20-23, 125, 140-43, 178-80, 190, NARA RAC Records; Furuhjelm,
Otchet po upravleniiu, 13; Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeansk-
ogo Severa, 1841-1867, 392-94.
48. A. Yu. Petrov, Rossiisko-amerikanskaya kompaniya deyatel’nost’ na otechestven-
nom i zarubezhnykh rynkakh (1799-1867) [The Russian-American Company: Activity
in Russian and Foreign Markets (1799-1867)] (Moscow, 2006), 214, Roll 19, pp. 32,
565-66, 910, NARA RAC Records; F. 224, Op. 1, D. 304, L. 41 and L. 42ob-43, Rossi-
iskii gosudarstvennyi arkhiv voenno-morskogo lota [Russian State Archive of the
Naval Fleet], St. Petersburg.