Cola Wars: When Pepsi Traded Cola for Russian Warships

Sometimes the only way to quench your thirst is to trade 17 submarines and three warships for Pepsi cola. Which is exactly what the Soviet Union gave Pepsi in return for their soda.

What started as probably the best example of product placement the world has ever seen, turned into one of the most peculiar international business deals in history.

In 1959, at the American National Exhibition in Sokol’niki Park, Moscow, then Vice President Nixon and Soviet leader Nikita Khrushchev got into a heated debate later known as the “kitchen debate”. Nixon, being the smooth operator he was, lead the Soviet leader to the Pepsi-Cola booth where the soda was made with either American water or Russian water. Together they grabbed a drink to cool off.

Someone then took a photo of Khrushchev sipping from a cup with “Pepsi” written on it. It was a scene nobody in the world had ever seen before or thought they would see, except one man who helped make it happen.

It was a setup

It was Pepsi executive Donald M Kendall’s idea. The rebel Pepsi employee went against the company’s wishes by sponsoring a booth and attending the cultural exchange in Moscow. To make the trip worthwhile, Kendall told Nixon the night before the exchange that he needed to “get a Pepsi in Khrushchev’s hand”.

The mission was a success. The photo launched an unexpected relationship between a capitalist American company and the USSR that would last until 1991 when the Soviet Union fell.

The USSR did not allow their currency out of their jurisdiction nor did it have any value internationally. So Kendall and the Soviets bartered instead, which revealed just how much the Soviets liked their Pepsi.

But first, vodka

Beginning in 1972, instead of paying Pepsi for their cola, the Russians gave them Stolichnaya vodka to distribute exclusively in the US.

By the time the late 1980s rolled around, Russians were drinking an estimated billion servings of Pepsi a year.

In 1988, Pepsi broadcast the first paid commercials on local TV starring pop superstar Michael Jackson.

It’s not surprising to hear that once Jackson entered the picture, things got a bit weird. As if they weren’t already.

One navy fleet for Pepsi, please!

Though Americans were downing Stolichnaya vodka like it was water, Pepsi wanted something else to trade in response to the Soviet-Afghan War.

Pepsi and the Soviet Union then signed a deal in 1989. Pepsi became a middleman and received 17 old submarines and three warships, including a frigate, a cruiser, and a destroyer, which were then sold for scrap.

Additionally, Pepsi bought new Soviet oil tankers and leased them out or sold them in partnership with a Norwegian company, all to basically double the number of Pepsi plants in the Soviet Union.

The deal made way for the infamous $3 billion deal between the soda company and the USSR in 1990. For the record, this deal fell through along with the Soviet Union in 1991.

The whole thing was just weird

There are several reasons why this particular business exchange is weird. From soda to the Russians to Michael Jackson to warships, it’s all bizarre.

But what was the weirdest part? Americans doing business with the Soviets? The Soviets drinking something besides vodka? Pepsi having the sixth largest military in the world at one point? The fact that someone would choose Pepsi over Coca-Cola? The whole thing was just bizarre.

What do you think is the strangest thing about this peculiar moment in history? Let us know in the comments and don’t forget to follow us on Facebook and Twitter to avoid missing out on new articles!