Foreign merchants tended to live in communities, a practice that Moscow formalized over time. Since the sixteenth century the capital had had a neighborhood for merchants from Poland and the Grand Duchy; in 1652 a "German" neighborhood was established for northern European Protestant traders. Small communities of Armenians were cited from the 1640s in Kazan, the 1660s in Moscow (with a church) and in St. Petersburg as early as 1710. Such neighborhoods offered the foreigners self-government and religious autonomy (there had been a Dutch Reformed church in Moscow since 1625), but they also allowed the state to collect customs and control trade more efficiently.
As in most early modern states, the tsar claimed monopolies (in Europe often called the king's economic regalia) or right of first refusal for a wide range of products; already in the sixteenth century luxury furs, walrus tusks, wax, and honey were sold by the tsar's agents for the benefit of state coffers. In 1653 the extensive transit trade in rhubarb from China (valued in Europe as a purgative) was declared a state monopoly, as Erika Monahan has shown. The Dutch in the seventeenth century won a monopoly on export of caviar (valued in Catholic countries during Lenten fast). But the state's monopolies should not be exaggerated: the state's portion of exports was perhaps 10 percent, and its preferential purchases of imports (cloths, gold, jewels, woolens, silks and velvets, wine, Persian luxury goods) at Arkhangelsk in the seventeenth century were only 1 percent of that port's volume.
Nevertheless, throughout the seventeenth century Russian merchants complained of unfair competition from foreign merchants, perhaps because foreigners easily got around prohibitions on retail sales. In petitions of 1627, 1635, 1637, 1646, and 1649 Russian merchants sought preferential tariff rates and protection in retail sales. The state responded by raising tolls on foreigners at Arkhangelsk in 1646 and in 1649 by depriving the British of their remaining tax immunities and of permission to reside in the interior (this was also in protest at the execution of King Charles I). The 1649 Lawcode codified rules against foreigners owning shops or engaging in retail trade and imposed higher fees for transport, customs, and licensing.
After 1649 Muscovite trade policy became more emphatically protectionist, but remained flexible. Decrees of 1653 simplified taxes and customs on all trade, setting a 5 percent basic rate for Russian merchants, but imposing on foreign merchants an extra 2 percent transit duty within Russia. The 1667 New Commercial Code, intended specifically to bring in bullion in the aftermath of the successful but expensive Thirteen Years War (1654-67), simplified and standardized in an effort to eliminate foreign merchants from the Russian interior. Restrictions would be applied to all foreigners, with no individual monopolies offered. Fees were raised and were to be paid up front, regardless of the subsequent success of the venture. Customs duties were to be paid in silver or gold, but export duties were forgiven if they purchased such goods in bullion. Prohibitions against retail trade were reiterated and wholesale sales tax rates for the interior were hiked up for foreigners. Foreigners were limited in their ability to own land in Russia and, to further the goal of simplification, flat rates for transit of goods were defined. Foreigners were by and large kept to border towns—the Dutch and English to Arkhangelsk, the Swedes to Novgorod and Pskov; eastern traders to Astrakhan; those trading overland to the Baltic and Poland-Lithuania to Smolensk; trade with Left Bank Ukraine to Putivl'.
The effect of the 1667 New Commercial Code was many-fold: it succeeded in bringing in specie and it protected domestic merchants and trade. In particular it reined in trade on the Volga, limiting foreign merchants' access north of Astrakhan. It also forced foreigners to work with Russian merchants to bring goods to the interior; smuggling also soared. The example of tobacco is most telling: by 1634 tobacco sales were forbidden, Russia having calculated that, as Romaniello shows, importing such a potentially popular consumer item would drain more specie than it brought to the state in fees. But illegal trade continued, with British and Chinese imports leading the way. Tobacco trade was legalized in 1697 by granting a lucrative license fee to a group of British merchants. At the same time, the state was not fully protectionist when it suited its purposes, indicated by the fact that the New Commercial Code's restrictions were generally not applied in Siberia. Bukharan merchants maintained their privileges in the China trade and in access to the domestic market.
Muscovite merchants failed to take advantage of their favorable position, however, because of dearth of credit and capital, lack of economic infrastructure, and lack of a labor market. There was insufficient capital and expertise, for example, to found a native Russian merchant marine; the only shipping done in Russian boats plied the Baltic from Livonia to Sweden in modest vessels. Only Europeans had the technological know-how and resources for the large ships required for White Sea and Baltic passages. Russia's successful merchants were constantly vulnerable to being drafted into state service in one of the three corporations of merchants, as we discuss in Chapter 11; these roles had potential for great earnings, but also exposed the merchant to the state's confiscatory power if they failed to meet their expected income. Being a merchant in Russia's underdeveloped economy was perilous.
Russia's trade policy over the seventeenth century accomplished its goals: indirect taxes on trade constituted 40 percent of budget revenue, to which were added monopolies awarded to foreigners; the percentage grew in the late seventeenth century. As Jarmo Kotilaine argues, Russia had leveraged foreign trade to gain the income and specie it needed to reform the army, win crucial wars and territory (particularly on the western frontier and Siberia), monetize its economy, and stimulate production ofproducts in demand for Europe's growing navies and industry. By refusing to grant Europeans transit rights across Russia to India and China, Russia preserved the income from a vibrant export trade. Government policies, including serfdom that kept labor costs down as well as state monopolies and protectionist fees, promoted Russia's interests.
By the end of the century, Russia was criss-crossed with several global trade nexuses—from the White Sea to Astrakhan down the Volga, from the Baltic to the interior, connecting with eastern trade through Ukrainian and Volga spheres. The Baltic was growing in importance among the key border ports. The stage was set for further growth, as demand from Europe only increased.
DOMESTIC TAX POLICY
Despite the romance of export trade transporting exotic silks and luxurious sable and fox along mighty river routes, the foundation of Russia's economy through the early modern period—and the bulk of the income of the Russian state—came from direct and indirect taxes from the towns and villages of a primarily agrarian countryside. At home peasants produced much of what they needed for daily life, but they turned to fairs, markets, and towns to sell surplus food and manufactured goods to pay cash tax levies and to obtain items they did not themselves produce. For many reasons, including the autarkic nature of Russian peasant society, towns in early modern Russia were fewer, smaller, and less "urban" in many of the characteristics that characterized towns in Europe. But they existed and provided key functions of goods exchange. With its tax and other fiscal policies, the state exerted its most direct influence on individuals across the realm.
Domestic economic policy in Muscovy was aimed to bring in income to finance war, military reform, government apparatus, subvention of the elite, and the like. Grand princes early on strove to monetize the economy by producing coinage and shifting taxes to cash. Various principalities and towns had been minting since the 1360s or 1370s, and with Moscow's conquests of Novgorod (1478), Tver' (1485), and Pskov (1510), the grand princes centralized minting. Monetary reforms of 1534-5 standardized Novgorodian and Moscow coinage to a single system and established standard weights and measures; coinage, however, was always in short supply until domestic silver mines were exploited in the mid-eighteenth century. Until then, silver coinage was produced by melting down European silver thalers.