VAZ: Diplomacy, Politics, and Urban Legends (Part One)

Investigating the overlooked and unexplored history of VAZ.

Image: lada.ru

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

Fiat’s cooperation with the Soviet Union under Vittorio Valletta (left) caught the eye of the administration of Lyndon B. Johnson (right). Images: Stellantis and IMDb

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.

Soviet Chairman of the Council of Ministers Alexei Kosygin sought to reduce military spending and shift to the development and production of consumer goods. Image: digitalarchive.tpl.ca

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.

Francis M. Bator, Lyndon Johnson’s Deputy Special Assistant for National Security Affairs, favoured the idea of having the US Export-Import Bank fund the VAZ plant. He was not the only one. Image: Fredrick Bodin/Harvard Kennedy School

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

Author: Konstantinos Tzoannopoulos

Industrial engineer. Disgruntled lover of Italian cars. Virtual worlds dilettante.

20 thoughts on “VAZ: Diplomacy, Politics, and Urban Legends (Part One)”

  1. Good morning Konstantinos. This is a really interesting history, thank you. It’s fascinating to read that, even in the depths of the Cold War, behind the bellicose rhetoric, there were influential people in the US government lobbying for a more nuanced approach and constructive engagement with the Soviet Union. I imagine that the hope was that, by helping to promote a consumer society in the USSR, the gulf in values between the the Soviet Union and the West might be reduced. In compliance with DTW’s charter, I’ll resist the temptation to draw any comparisons with the current dismal situation.

    1. Hi Daniel. Indeed, we need a nuanced approach to international relations. The aim of this series is to highlight certain facts that will help us fact-check certain automotive narratives that are still taken at face value.

  2. Fascinating stuff indeed. I had no idea of US government involvement in this, otherwise well-known, story. Looking forward to part 2.

  3. Good afternoon, Konstantinos. I’m late to the party today. What a fascinating read about the involvement of the American government, a fact unknown to me. Looking forward to the sequel.

  4. Thanks Konstantinos, these stories are always interesting. It made sense for the US to do their bit to promote a kind of western-style consumer society in the USSR if that meant its military budget was to be reduced, and, who knows, perhaps the USSR could be a new market for American products in the long term…

  5. It would be fascinating to touch upon the Russian interest in FWD cars like the Autobianchi Primula because of its dimensions and hatchback bodystyle, before they were effectively steered by Fiat towards the Fiat 124.

    1. Found the following in Dante Giacosa’s book.

      “…In 1965, when negotiations had reached the point where final agreement loomed close, Gioia and I went to Moscow
      to try to work out a preliminary schedule of work with the leading Soviet directors and engineers at NAMI, the central automobile research institute. The meetings were presided over by engineer Strokin, Minister for the automobile industry. More an engineer than a minister, he had a thorough grasp of automobile technology.

      The numerous engineers from NAMI who took part in discussions were oriented towards front wheel drive. They had tried out French, English and German autos and finally the Primula. The majority were in favour of the Primula, which appealed because of its dimensions and three-door or hatch-back coachwork, which they felt was suited to the mixed use which would be made of it in their country.

      I had to put forward all the reasons that led us instead to choose a conventional model like the 124. Valletta had authorized me to suggest the “123” as well, but he intended that the choice should fall on the 124. Thinking back to the events of that period, I have often wondered what would have happened if the “123” had been designated the “125” or “126” to indicate a later project than the 124 and hence presumably a more modern one.

      Perhaps our President, a skilful diplomat, would not in that case have allowed me to mention it to the Soviet committee, whose first concern was to choose the most advanced project possible. To satisfy them we had to design a motor specially for the purpose. The Russians wanted to participate in the project and since they considered the engine the most important part they concentrated on that. So I presented them with the designs of two engines which differed substantially from the 124 in the heads and the distributor control. After long meetings where I had to answer innumerable questions the choice fell on the project I had recommended.

      I was perfectly frank and objective and everything went off as the President of Fiat had desired. I still had a misgiving that the choice of the 124 might not be ideal for that immense country but the Soviet engineers and above all the Minister and Assistant Minister were satisfied and confident about it.

      It took nearly a year to complete the agreement through the compilation of the innumerable clauses of the contract. This meant a year of strenuous work for all sectors of our Automobile Division and the Construction Division. The contract was signed after production of the 124 got under way at Mirafiori and its subsequent appearance at the Geneva Motor Show in March 1966. The signing ceremony was conducted at Fiat’s Historical Centre on May 4 in the presence of the top directors of the Soviet Ministry for the Automobile Industry and the men at Fiat who had done
      most to bring the negotiations to a successful conclusion. The signatories were the Soviet Minister Taraszov, who had succeeded Strokin, and Valletta.

      The work then went forward rapidly. New offices were set up especially to deal with relations with the USSR. All over Italy a search was made for interpreters and translators who knew Russian. Communications with Moscow were speeded up.

      Numerous Soviet technicians were installed in Turin so that they could take part directly in the progressive stages of the great achievement, familiarizing themselves with the organization of Fiat, the methods used in design development and testing, the organization of the works and plant. Trials of the 124 were also carried out in Russia and proved highly useful to adapt the auto to the needs of that immense country. The tests on a special track laid down
      not far from Moscow on a enormous area of land were extremely tough.

      Meetings were always long drawn-out, one reason being that every phrase had to be translated. They were exhausting, almost continual and often led to clashes of opinion but the difficulties were nearly always ironed out with patience and willingness. It would take a volume a part to go into all the various stages and events of this episode: the complications of personal relationships, reciprocal visits, journeys that were far from comfortable at times, sometimes even downright unpleasant for the staff of Fiat, unused as they were to the rigours of the Russian climate, especially as they experienced it during the building of the factory. But the long and the short of it all is that the first automobile built in the immense factory at Togliattigrad on the Volga was the Fiat 124, with all the modifications required by the new environment.”

    2. It makes sense that the 124 ended up being the chosen car. It was simpler and less expensive to produce, and I’m also sure it was easier for the driver to do DIY maintenance, given the almost complete lack of repair shops in the USSR.

    3. “[…]the Primula, which appealed because of its dimensions and three-door or hatch-back coachwork, which they felt was suited to the mixed use which would be made of it in their country.”
      As a car that has the mission to put its country on wheels, a two-volume, hatchback body makes a lot of sense, because it´s a lot more practical than a three-volume saloon and as the author says more adequate to carry people and loads. However in developing countries it seems people favour saloons, hence examples like the Dacia Logan, Renault Siete or even the Porsche C88 prototype. I think that´s because a three -volume seems “more car for the money” and in a country where any car is very expensive, that´s important.

    4. I guess an estate car would have been even more useful, but USSR-type governments discouraged anything too practical in case one accidentally branched out in to private enterprise. And hatchbacks would have been very new-fangled, back then.

    5. For more context on what preceded the deal between the Soviets and Fiat to produce the cheaper to built and less complex 124, it appears the Primula would influence the 1965 NAMI-107b ‘Vasilek’ prototype.

      It would be more accurate to say the 124 was the most advanced of the conventional and cheaper to produce cars Fiat possessed at the time, as there was also the 125 that ended up being produced in Poland that would have also fulfilled the brief.

  6. A great opening part to what promises to be a highly interesting series Konstantinos- thank you. Like (I assume) the majority of readers I was unaware of the level of involvement by the USA in this venture!

  7. I’m enjoying this history very much, Konstantinos – thank you. It’s thought-provoking, as well as being educational.

    In addition to Fiat, BMC were approached as a potential partner of course, as were Toyota, I believe.

    The Mini was in the frame at one point – I would have thought something like the Farina saloons would’ve been more suitable.

    Alternatively, given that discussions were held in the late 1960’s, the Allegro would have been on the drawing board at the time, with the Maxi nearing completion (if that’s the right word). Properly engineered, the Maxi could have been a good choice.

  8. Fascinating article Konstantinos, clearly meticulously researched, some very interesting insight into some of the more subtle thinking that was going on in the back offices of America.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: