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Russia’s Economy Has Collapsed Before (And they Sold Pepsi 20 Warships)

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Russian Military Tank Firing. Image Credit - Creative Commons.

Russia’s economy has hit hard times before. And they did some insane things to survive: Just before the fall of the Soviet Union, the communist state was so desperate for Pepsi that they traded the American beverage company some 20 warships for a shipment of their sugary elixir; making the Pepsi Navy the sixth-largest in the world at the time.

On Friday, Ukraine called out Pepsi and fellow soft drink maker Coca Cola on Twitter, saying that Coke had chosen to side with evil by choosing to continue distribution within Russia following its invasion of Ukraine that began last week. It’s unclear whether or not Ukraine is aware that the Soviet Union once outfitted Pepsi with a fleet of their own.

It’s unclear whether Pepsi will heed Ukraine’s wishes and add to the growing list of nations and corporations levying economic and commercial penalties on Russia, its president, and other prominent oligarchs. But while Pepsi considers its future with the increasingly isolated Russian state, let’s take a look back at how Pepsi and the Soviet Union handled business the last time Russia’s economy was in similarly dire straits.

The Pepsi Navy

In 1959, just two years after the first intercontinental ballistic missile (ICBM) test forced both the U.S. and Soviet Union to reassess their approach to nuclear deterrence, then-Vice President Richard Nixon and Soviet Premier Nikita Khrushchev both attended the American National Exhibition in Moscow’s Sokolniki Park. As the two men exchanged barbs about the efficacy of each nation’s respective economic model, Head of Pepsi International Donald Kendall decided to break the ice with a few small cups of their namesake soda.

As luck would have it, the Soviet Premier was immediately smitten by the sugary, carbonated drink, and a deal was struck for the Soviets to begin receiving shipments of the beverage. Pepsi had secured the first such agreement between a capitalist American company and the communist Soviet Union… but there was one serious problem. Soviet money was effectively useless outside of the nation’s borders.

But while the Soviets may have lacked hard currency, they did have something else to trade: vodka. So Pepsi and Khrushchev made a deal: Pepsi would provide shipments of soft drinks, and in return, the Soviet Union would provide vodka from their state-owned brand Stolichnaya, for resale in the United States.

For a bit less than a decade, the agreement between the Soviet Union and Pepsi stood without any issue, but in 1980, geopolitics soured the deal. The Soviet Union had invaded Afghanistan, and the American people responded by boycotting Soviet-sourced products, including the Stolichnaya vodka Pepsi was getting in trade for their soda. Within a few years, Stolichnaya sales had dropped enough for Pepsi to no longer consider the deal worthwhile.

But the Soviet Union’s love for America’s second-tier cola was too strong to let the deal lapse, and Soviet officials began looking for other ways to reimburse Pepsi for shipments of soda. By 1989, they had a solution. In exchange for Pepsi’s soft drinks, the Soviets offered them a veritable Navy. Pepsi agreed to the deal, taking possession of a Soviet cruiser, a frigate, a destroyer, 17 submarines, and a handful of oil tankers — instantly making the drink distributor the owner of the sixth-largest navy on the planet.

But despite that significant bragging point, the newly established Pepsi navy was far from battle-ready. The fleet of submarines was in a terrible state of disrepair, with many listing to one side and nearly all of them showing signs of serious rust. The surface ships in Pepsi’s new navy weren’t in much better shape, with perhaps only one that was truly seaworthy and at least one other that required constant pumping to keep it afloat.

Nonetheless, the United States government wasn’t particularly pleased to see a corporation suddenly command enough naval firepower to square off with some entire nations. Pepsi’s CEO, Donald Kendall, who had first introduced Khrushchev to the beverage, responded to America’s complaints with all the aplomb one might expect from the admiral of Pepsi’s navy, reminding the Pentagon that he had just managed to reduce the number of ships at the Soviet’s disposal by a considerable number.

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“I’m dismantling the Soviet Union faster than you are.”

-Donald Kendall (PepsiCo CEO)

Of course, his comment may also have had something to do with the Soviet people’s love for his capitalist product. A number of things ultimately led to the downfall of the Soviet Union, including Ronald Reagan’s efforts to spend the communist regime into oblivion and later, Mikhail Gorbachev’s “Glasnost” policy of more open governing… but it’s tough to dispute the effect products like Pepsi had on the Soviet populous.

Shortly after taking possession of the Pepsi navy, the soda brand sold all twenty warships to a Swedish scrap-recycling company in order to recoup the cost of their Pepsi shipment.

Alex Hollings is a writer, dad, and Marine veteran who specializes in foreign policy and defense technology analysis. He holds a master’s degree in Communications from Southern New Hampshire University, as well as a bachelor’s degree in Corporate and Organizational Communications from Framingham State University. This first appeared in Sandboxx news. 

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Sandboxx News is a digital and print military media outlet focused on the lives, experiences, and challenges facing today’s service members and America’s defense apparatus. Built on the simple premise that service members and their supporters need a reliable news outlet free of partisan politics and sensationalism, Sandboxx News delivers stories from around the world and insights into the U.S. Military’s past, present, and future– delivered through the lens of real veterans, service members, military spouses, and professional journalists.

5 Comments

5 Comments

  1. Alex

    March 6, 2022 at 12:17 pm

    Russia is the land of the Phoenix. Whoever attacks her, no matter what problems Russia has, Russia always comes back. God loves Russia and its many peoples.

  2. Axiom

    March 6, 2022 at 6:58 pm

    Russia is a bully and bullys get put in their place we are no longer in the era of fleeting demands at the cost of civilian lives. Putin will rule the day he decided that he was strong enough to take on the world. Russia as a country we hold no I’ll will towards its people. But the corruption and greed of its government will not stand.

    God Bless Ukraine and the UN forces and non allied countries that give aide and support them. Insane that hes willing to start WW3 over historical ideology.

  3. Bobby

    March 6, 2022 at 7:40 pm

    I think you mean “rue” the day. I’m sure Putin would have no problem at all with “ruling” the day.

  4. Alex

    March 7, 2022 at 6:46 am

    When the Bandera Nazis were killing Ukrainians in the east of Ukraine for 8 years, the Western countries were silent and turned a blind eye to this. There were Minsk agreements, Zelensky said bluntly – I don’t like them. To which Putin replied – like it or not, be patient, my beauty. But Zelensky again spat on these agreements and continued to kill the people of Donbass. The only way out that remained was to eradicate Nazism. And this can only be done with iron and blood.

  5. Philip Merrihew

    March 9, 2022 at 11:50 am

    Alex,
    I don’t know who your God is, but he must be a soviet created God. My God frowns on Russia along with the rest of the world except China,who have also created a God who they claim loves them.
    I promise you. God has no love for Russia.
    There are no real men in Russia. The people of the United States do not blindly follow a leader’s orders. We resist that which is wrong. The strongest man in Russia cowers to a disturbed leader saying ‘But I have to or I’ll get in trouble.’ Not in America. We have backbones. We can think for ourselves.
    We are real men.
    Russians are merely sheep being hearded by a deeply disturbed DICKtator.
    What a truly sad nation.

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