Investigating the overlooked and unexplored history of VAZ.
VAZ (in Russian: ВАЗ)(1) is well known in the automotive world. It was established in 1966 as a joint-venture between the Soviet Union and Fiat to mass-produce affordable, reliable, and technologically relevant family cars for the Soviet people(2). Its first product was the VAZ-2101 Zhiguli saloon(3), a more rugged version of the Fiat 124, adapted to cope with the adverse conditions of the USSR. The Zhiguli was so successful that VAZ/AvtoVAZ would become the country’s largest car manufacturer.
Much has already been written about both the Zhiguli, which was exported under the Lada (Russian: Лада) brand, and its maker. Here on DTW you can enjoy features on both the Zhiguli(4) and the factory in Tolyatti(5) where it was built, written by my fellow contributors Sean Patrick and Andrew Miles respectively. There are, however, unexplored and unreported details of the history of VAZ. This is precisely what we will attempt to bring to light in this three-part series, primarily by examining the US State Department’s historical archives. Specifically, we will examine the politics and the diplomacy behind the establishment of the Soviet automaker.
Astonishingly, these behind-the-scenes details seem to have eluded the mainstream automotive media for decades. They provide us with two significant benefits: an insight into the nuances of US-Soviet relations in the second half of the 1960s and a wealth of information that makes certain automotive ‘urban legends’ that are still accepted as fact by many today seem far less credible, or even plausible.
The Soviet car market before VAZ
With the luxury limousines made by ZIL (ЗиЛ)(6) and GAZ (ГАЗ)(7) strictly reserved for government use, Soviet citizens could choose their cars from only three marques, depending on where they stood in the socialist pecking order, with each marque focussing on just one market segment. In Ukraine, ZAZ (Cyrillic: ЗА3)(8) produced the small, rear-engined Zaporozhets (Запорóжець)(9) saloon. Next in the hierarchy was the Moskvitch(10) large (for its time) family car made by AZLK (АЗЛК)(11). Finally, Soviet citizens in more prestigious professions could aspire to own the ‘executive’ GAZ Volga(12), its most common iterations being the GAZ-21 and GAZ-24. However, despite its large dimensions and prestigious image in Soviet society, the Volga was nowhere as refined, comfortable or well-built as the contemporary Ford Taunus P7(13) or the Opel Commodore A(14), to name but two of its Western equivalents.
There was an obvious gap in the market that needed to be filled: a small, affordable family car for the ordinary citizen, the equivalent of a Ford Anglia 105E(15) or its successor, the first-generation Escort(16). The car that would fill this gap was the Zhiguli. What is little known is that the United States, at least with Lyndon B. Johnson in the White House, was actively interested in supporting and assisting this project.
Sowing the seeds
The seeds were sown at a meeting between Fiat’s president, Vittorio Valletta, and US Secretary of State, Dean Rusk, on 22nd July 1965, where Rusk sought Valletta’s impressions of his recent discussions with Soviet Chairman of the Council of Ministers, Alexei Kosygin, in Moscow. Rusk and Valletta’s meeting was recorded in the US State Department historical records, Document 114 (‘Memorandum of Conversation’ dated 22nd July 1965)(17).
In this meeting, Professor Valletta noted two points in particular: firstly, that Kosygin desired to reduce the country’s military budget and use the savings to shift from the production of armaments and nuclear weapons to more intensive development of consumer goods and, secondly, regarding the war in Vietnam, that the Soviet leader generally wanted a resolution, but his hands were tied as there were ‘independent nations’ (China, as Valletta and everyone at the meeting understood), on which he found it difficult to exert any meaningful pressure.
The discussion also revealed that there was already an agreement in principle for Fiat to provide technical guidance in automobile production to the Soviet Union. Hence, Oscar Cox, Fiat’s American attorney, who was present at the meeting, assumed that Valletta and Kosygin would continue to have informal meetings to move forward on the project. Valletta observed that, during the discussions between Fiat and the Soviet government on that matter, Kosygin had expressed his desire to better satisfy the Soviet people’s need for a higher living standard.
Interestingly, the CIA and the US Department of Defense were already well aware of Fiat’s activities. Valletta had made it clear that, if his company’s undertaking to build an automobile factory in the USSR was against US foreign policy, he would scrap the project. At that time, no formal timetable for the Fiat-USSR cooperation existed, as the project had been discussed only in outline terms. Valletta expected that the Soviets would send a mission to Italy in due course to work out the specifics. To cut a long story short, Fiat would agree to help the Soviets build a car manufacturing plant that would produce 1,000 to 2,000 compact (in American terms) cars per day and would also assist them in modernizing their existing plants, whose capacity was 200,000 cars per year.
Rusk asked if Fiat would need some sort of American participation in this endeavour, or if the Italians could complete it without assistance. He indicated that the US was actually amenable to an increase in the production of consumer goods in the Soviet Union, and was “exploring legislation to permit American business to participate more actively in trade with Eastern Europe.”
One of the most important parts of this first document is that it calls the prevailing, fabled, and citation-free ‘rust-prone scrap metal from Soviet ship breakers’ narrative into question. Quoting from the documentary record of the meeting, “The Secretary asked how the Soviets would pay, by increased oil exports to Italy? Professor Valletta noted that the present balance of trade between Italy and the USSR favored the latter. If the automobile project went forward, credit terms would have to be arranged.” Clearly, the Italians had every reason to prefer to be paid in currency rather than in kind.
Proposed US funding for VAZ via the US Ex-Im (Export-Import) Bank
In that same volume of the US State Department historical records, Document 124 (‘Memorandum From the President’s Deputy Special Assistant for National Security Affairs (Bator) to President Johnson’ dated 29th June 1966)(18) deals explicitly with the possibility of ‘Ex-Im Financing of U.S. Equipment for an Italian Built Fiat Plant in the USSR’. In this memorandum, we learn that the Italians requested a “5-year Ex-Im Bank loan of up to US $50 million to finance export of U.S. equipment which would be used in a new Fiat automobile plant in the Soviet Union.” This action did not require formal Presidential approval as the Bank had both the authority and the money to do so and Secretary of State Rusk had already given his blessing to the deal.
The US Deputy Special Assistant for National Security Affairs, Francis M. Bator(19), was a proponent of the idea of leveraging the Ex-Im Bank to finance Fiat’s project in the Soviet Union. More specifically, he wrote: “The loan makes good sense in terms of bridge-building and our interest in having the Soviets go in for ‘middle class’ consumer goods. In terms of exports, if Ex-Im turns the Italians down we would probably lose the sale. The terms (5-years) would be standard for an export credit.” He wasn’t alone in this view: “[a]ll the relevant agencies are on board ( Commerce, Treasury, Ex-Im Bank).” Yes, the Department of Defense and the CIA were both in favour of this deal.
Bator, with his pragmatic, nuanced and analytical thinking, favoured constructive engagement with the Soviet Union and stated it openly in his memorandum: “I would vote yes – but you know my prejudice in favor of bridge-building (in terms of foreign policy, and in terms of a balanced Presidential posture against the background of Vietnam).”
From what was written and quoted above, we understand that there was a genuine, if tentative, US interest in assisting Fiat to build the VAZ plant. It was seen as a good way of improving US-Soviet relations without the risk of the Soviets gaining access to any critical technologies that could possibly be used against the US. Did this interest bear fruit, though, or did it come to nought and, if so, why? This will be investigated in the second part of this series.
Sources, quotations, and acknowledgements:
(1) Later renamed AvtoVAZ (АвтоВАЗ).
(2) Cars of the Soviet Union by Andy Thomson, Haynes Publishing, UK, 2008 (p.104)
(3) VAZ-2101 – Wikipedia
(4) The Fellow Traveller – Sean Patrick : Driven To Write, 14 November 2016
(5) Le Pas d’Acier – Andrew Miles : Driven To Write, 2 November 2021
(6) Formerly known as ZIS (ЗИС). After Stalin’s death, the company was renamed in 1956 to remove the ‘S’ reference to him in its original name.
(7) GAZ – Wikipedia
(8) ZAZ – Wikipedia
(9) ZAZ Zaporozhets – Wikipedia
(10) Moskvitch 408 – Wikipedia
(11) AZLK – Wikipedia
(12) GAZ Volga – Wikipedia
(13) Ford P7 – Wikipedia
(14) Opel Commodore – Wikipedia
(15) Ford Anglia 105E (1959–68) – Wikipedia
(16) Ford Escort – Wikipedia
(17) Foreign Relations of the United States, 1964-1968, Volume XII, Western Europe, Italy, ed. James E. Miller (Washington: Government Printing Office, 2001), Document 114 [accessed 26 April 2022]
(18) Foreign Relations of the United States, 1964-1968, Volume XII, Western Europe, Italy, ed. James E. Miller (Washington: Government Printing Office, 2001), Document 124 [accessed 27 April 2022]
(19) Francis M. Bator – Wikipedia