Why Did the Tsar of Russia Sell Alaska, a Resource-Rich Land, for Such a Low Price?
In 1867, Russia sold the territory of Alaska to the United States for $7.2 million at a time when the region was famous for its gold and mineral deposits. Just 50 years later, Americans extracted from this land an amount worth 100 times that price. But why did the Tsar sell such a resource-rich territory for such a low price?
A petition for Russia to re-annex Alaska that appeared on the White House website garnered over 35,000 signatures before it was removed. Many have long believed that the U.S. stole Alaska from Russia or that it was rented and never returned. However, in reality, the agreement to sell Alaska was officially and legally signed by both parties.
The agreement to sell Alaska was officially and legally signed by the U.S. and Russia.
Alaska’s “Specialties”: Gold and Sea Otter Pelts
In the 19th century, Russian Alaska was one of the international trade centers. In the capital Novoarkhangelsk (now Sitka), traders dealt in various goods such as fabrics, tea from China, and even ice shipped to the southern U.S. at a time when refrigerators did not exist. Shipbuilding thrived, and mineral extraction was busy. A significant number of gold mines were known in the area, making the sale of this resource-rich land seem truly insane.
Russian traders ventured to Alaska to hunt for walrus tusks (which were then as valuable as elephant ivory) and sea otter pelts, precious commodities provided by the indigenous Alaskans. Trade was promoted by the Russian-American Company (RAC), which controlled all mineral extraction in Alaska and enjoyed numerous exclusive privileges from the Russian Royal Government. The monarchy not only received enormous tax revenues from the company but also owned a substantial portion of RAC shares.
The talented trader Alexander Baranov held administrative power in Alaska. He established schools, factories, taught locals to grow potatoes and rubataga, built shipyards and fortresses, and expanded the sea otter trade. Under Baranov’s leadership, RAC flourished with annual profits growing over 1,000%.
However, upon Baranov’s retirement, his successor, Captain Hagemeister, replaced a series of staff and brought in many new military shareholders. The new team quickly took control of RAC’s facilities, but their actions led to the company’s ruin. The RAC leadership reduced the purchase price for sea otter pelts by half. As a result, within the next 20 years, the indigenous Eskimo and Aleut populations nearly exterminated the sea otter population, depleting the most profitable resource in Alaska. The locals rose up in rebellion, and the Russians responded by bombarding their coastal villages from warships.
RAC began to seek alternative resources, such as tea and ice trading, but business became increasingly difficult, even with the government subsidizing 200,000 rubles annually.
A Difficult Situation
When the Crimean War broke out, Britain, France, and Turkey united against Russia. Moscow could no longer subsidize or protect Alaska, leading to the gradual control of sea routes by allied ships. Even Alaska’s famous gold mining sector declined, and there were concerns that British forces could blockade Alaska, forcing the Russians to leave empty-handed.
Tensions between Moscow and London escalated, while relations with U.S. authorities became warmer than ever. Both sides simultaneously considered the idea of selling Alaska. Thus, on behalf of the Tsar, Russian envoy in Washington, Baron Eduard de Stoeckl, initiated negotiations with U.S. Secretary of State William Seward regarding this deal.
While the authorities were negotiating, public opinion in both countries opposed such an agreement. “How could we give away land that we have invested so much time and effort into developing, land where telegraph lines have been established, where gold has been discovered?”, Russian newspapers questioned. “Why do the Americans need this ‘icebox’ along with 50,000 wild Eskimos who have breakfast with fish oil?” American media raised similar concerns. Even the U.S. Congress did not approve the sale.
Nonetheless, on March 30, 1867, in Washington D.C., both parties signed an agreement for Russia to sell 1.5 million acres of land in Alaska to the U.S. for $7.2 million, which is only 2 cents per acre (about $4.74/km2).
The official transfer ceremony took place in the capital Novoarkhangelsk. Russian and American soldiers lined up under the flagpole, after which the Russian flag began to be lowered amidst a cannon salute. However, an awkward situation occurred when the flag got stuck at the top of the pole, requiring a sailor to climb up and remove it. The flag fell, landing right on the bayonet of a soldier. It was an ominous sign!
Subsequently, Americans began to seize all the buildings in Novoarkhangelsk and renamed the capital of Alaska to Sitka. Hundreds of Russians who refused to become U.S. citizens had to leave on merchant ships.
Shortly after, gold began to flow from Alaska’s “icebox,” bringing hundreds of millions of dollars to the United States.
