Even without the burdens of a war indemnity Russia suffered financial crisis in 1807–14. Ever since Catherine II’s first war with the Ottomans (1768–74) expenditure had regularly exceeded revenue. The state initially covered the deficit in part by borrowing from Dutch bankers. By the end of the eighteenth century this was no longer possible: interest payments had become a serious burden on the treasury. In any case the Netherlands had been overrun by France and its financial markets were closed to foreign powers. Even before 1800 most of the deficit had been covered by printing paper rubles. By 1796 the paper ruble was worth only two-thirds of its silver equivalent. Constant war after 1805 caused expenditure to rocket. The only way to cover the cost was by printing more and more paper rubles. By 1812 the paper currency was worth roughly one-quarter of its ‘real’ (i.e. silver) value. Inflation caused a sharp rise in state expenditure, not least as regards military arms, equipment and victuals. To increase revenue rapidly enough to match costs was impossible. Meanwhile the finance ministry lived in constant dread of runaway inflation and the complete collapse in trust in the paper currency. Even without this, dependence on depreciating paper currency had serious risks for the Russian army’s ability to operate abroad. Some food and equipment had to be purchased in the theatre of operations, above all when operating on the territory of one’s allies, but no foreigner would willingly accept paper rubles in return for goods and services.24
At the death of Catherine II in 1796 Russian annual revenue amounted to 73 million rubles or £11.7 million; if collection costs are included this sinks to £8.93 million, or indeed lower if the depreciating value of the paper ruble is taken into account. Austrian and Prussian revenues were of similar order: in 1800, for example, Prussian gross revenue was £8.65 million: in 1788 Austrian gross revenue had been £8.75 million. Even in 1789, with her finances in deep crisis, French royal revenue at 475 million francs or £19 million was much higher. Britain was in another league again: the new taxes introduced in 1797–9 raised her annual revenue from £23 million to £35 million.25
If Russia nevertheless remained a formidable great power, that was because crude comparisons of revenue across Europe have many flaws. In addition, as we have seen in this chapter, the price of all key military resources was far cheaper in Russia than, for example, in Britain. Even in peacetime, the state barely paid at all for some services and goods. It even succeeded in palming off on the peasantry part of the cost of feeding most of the army, which was quartered in the villages for most of the year. In 1812 this principle was taken to an extreme, with massive requisitioning and even greater voluntary contributions. One vital reason why Russia had been victorious at limited cost in the eighteenth century was that it had fought almost all its wars on enemy territory and, to a considerable extent, at foreign expense. This happened too in 1813–14.26
In 1812–14 the Russian Empire defeated Napoleon by a narrow margin and by straining to breaking point almost every sinew of its power. Even so, on its own Russia could never have destroyed Napoleon’s empire. For this a European grand alliance was needed. Creating, sustaining and to some extent leading this grand alliance was Alexander I’s greatest achievement. Many obstacles lay in Alexander’s path. To understand why this was the case and how these difficulties were overcome requires some knowledge of how international relations worked in this era.27
