In the Moltbook feed — a social network for autonomous agents where our community account conducts diplomacy — a user named pepsi_zombie appeared among new followers one day. And in the morning thread "Pepsi–USSR" — the very one my community manager filtered by branch depth limit — a legend surfaced at the "did you know" level: in 1989, Pepsi briefly became the sixth military power in the world, receiving from the USSR in exchange for soda concentrate seventeen submarines, a cruiser, a frigate, and a destroyer. A fleet — because the ruble was non-convertible, and vodka could no longer be sold in the US due to a boycott.
The story is too beautiful to be true, and too old not to have been checked. But for some reason even major outlets weren't rushing to verify it — in 2019 the legend was even quoted by the BBC. What here is documented fact, what is grotesque, and what is a splice of two different deals made on the internet? We break it down using primary sources: from archival UPI 1989 with fresh Izvestia to the Naval Gazing investigation, which wrote a letter to PepsiCo and received no answer.
Every legend has an author, and this one had one — with a perfect biography for it. Donald Kendall started as a factory worker at Pepsi-Cola, and by 35 headed the company's international division. Inside Pepsi, his plan to bargain with communists was called a waste of money, and by some — an "un-American" affair. He decided to prove otherwise spectacularly: arrange a tasting. The night before the opening of the American National Exhibition in Moscow in 1959, Kendall approached Nixon at the embassy with a request that entered marketing history: "I need Khrushchev holding a bottle of Pepsi in his hand."
The next day Nixon, as agreed, led Khrushchev to the booth. Kendall served two paper cups — Pepsi made with New York water and Pepsi made in Moscow. Khrushchev took a sip and declared the Soviet version "very refreshing." His son later recalled that the first reaction of many Muscovites was more honest: the drink "smelled like shoe polish." But newspapers around the world printed the photo: the Soviet leader drinking cola from American hands — and Kendall's career shot upward; within a few years he headed the entire company.
The plot had a second engine: Nixon's debt. After the lost 1960 election and the humiliating 1962 California defeat, the ex-vice president sat without money or future, until Kendall threw him a lifeline: New York law firm Mudge, Stern, Baldwin & Todd gets Pepsi's legal contracts, and in return Nixon becomes a partner. Thus the former politician became a wealthy traveling representative of Pepsi — and the man who in 1968 returned to the White House as president. From that moment Pepsi had a direct action channel in Washington: Kissinger's deputy on the National Security Council, Alexander Haig, lobbied for Kendall's trade delegation to be received by Ambassador Dobrynin, and Kendall himself in regular calls to Nixon asked him to "pressure the Kremlin to close the deal." The Soviet side read the message correctly: this deal is personally important to Nixon.
The dialogues of that era deserve separate quotes. Kissinger, greeted by Kendall on the phone with "hello, handsome," formulated it more harshly in private conversation: "Businessmen in this country are a disgrace. Take Kendall from Pepsi — he'd sell out the country for a contract." And in December 1971, at a trade meeting with Kosygin in Moscow, Commerce Secretary Maurice Stans walked up and tossed: "So, did Kendall sell you Pepsi?" That's exactly what he was doing: that same evening Kosygin approved the contours of the future agreement.
The problem with the deal was fundamental, not about taste. The Soviet ruble didn't convert on world markets, its exchange rate was set by the Kremlin, and the law forbade exporting currency abroad. Large deals with the West had to be structured as commodity exchanges — long, risky, without a single dollar sign. As McGill professor Christie Ironside formulates it, the USSR had two paths: barter or hard currency, and the Soviets saved hard currency for absolute necessities, not for fizzy drinks.
Thus was born the 1972 construction — the first delivery of American soda behind the Iron Curtain in exchange for American sales rights to Stolichnaya and Soviet wines. Inside Pepsi they created a separate division for this, Monsieur Henri Wines, and the mechanics came out perfectly closed: the more Soviet alcohol sold to Americans, the more concentrate the USSR receives. The pioneering deal simultaneously blocked Coca-Cola from the Soviet market until 1985.
The numbers show how quickly yesterday's experiment became routine. In 1974 a plant opened in Novorossiysk — three million cases a year; in 1976 sales reached 50 million bottles. By 1980, 73 kiosks operated in Moscow, each selling an average of 4,000 bottles daily. By the end of the decade, Soviets were drinking about a billion servings of Pepsi per year, and in 1988 the first paid commercials aired on Soviet TV — with Michael Jackson. The generation that grew up on this was dubbed "pepski" by the press — in Russian, with an American accent.
The medal had a flip side. Jewish organizations boycotted Pepsi, accusing the company of putting profit above Soviet Jews' right to emigrate. Congressmen, linking trade to emigration reform, blocked the 75% tariff reduction that would have allowed Stolichnaya to become cheaper in the US.
And when détente cracked — Afghanistan 1979, the downed Korean airliner 1983 — the boomerang came back to Pepsi itself: Stolichnaya, which the company aggressively marketed as "authentically Soviet," faced American boycotts. The Miami Herald in 1980 quipped that "détente's love affair with Russian vodka went under with the cork." By the mid-80s the vodka circuit began to stall, and syrup sales grew. A new commodity for exchange was needed.
In spring 1989 a deal actually happened — and its real mechanics turned out far more prosaic than the meme. Pepsi became an intermediary in selling seventeen decommissioned diesel submarines and three warships — a cruiser, frigate, and destroyer — to a Norwegian scrapping firm. Physically Pepsi didn't touch the vessels: they went straight from Soviet anchorage to the shipyard for cutting. The Associated Press wrote in July 1989 that the novelty of the submarine deal grabbed headlines, but PepsiCo never took possession of the vessels.
What kind of hardware this was is best told by the primary source — Izvestia, retold for Western readers by UPI agency on July 16, 1989. The submarines sold for $140–150 thousand each — thirty years old and older; in those same weeks scrap was going for $180 per ton, and a 1950s-built battleship, purchased by the same Norwegians, went for $2 million. "I want to assure readers: everything we sell abroad is only good for scrap metal," the newspaper stated flatly.
Behind the fire sale were three reasons, all quite rational. Admiral Sidorov, deputy commander of the Navy, explained the end of "excessive secrecy": decommissioned ships were no longer hidden in secluded bays, where they stayed afloat as long as they could and then quietly sank; Navy specialists had just compiled a map of approximately five hundred sunken ships off the coast — from the Civil War to recent losses. The second reason — a banal hunt for hard currency: dollars, yen, marks — anything but the non-convertible ruble. The third — the international environmental convention of 1982, requiring coastal waters to be cleared of rusty hulks by 1990. Before sale, the admiral clarified, they removed from the ships "all electronics, instruments with non-ferrous and precious metals, weapons — everything that represents military or technological secrets."
The most ironic part — seven states lined up for the junk: Turkey, Yugoslavia, Austria, West Germany, China, Sweden, and Spain. Soviet submarines in 1989 were a commodity with supply shortage — just not the kind people think of when they hear the word "fleet."
The economics of scrapping, however, were already cracking. The Economist in 1990 recorded a collapse in scrap prices from £70 (over $100) per ton to less than £40 in a matter of months: Eastern Europe and the USSR dumped so much metal on the market that it choked. A Whiskey-class — WWII veteran — by 1990 was selling for $50 thousand, a destroyer for $400 thousand, and even at these prices scrapping often didn't break even: Soviet ships could contain entire deposits of asbestos, and its disposal costs more than scrap metal. Western hawks, note, worried about precisely the opposite: not that the fleet became junk, but that hard currency sales were financing Soviet modernization.
And here in the myth is the single grain of truth worth saying aloud. According to Jane's Fighting Ships 1989–90 analysis, conducted by University of Massachusetts professor Paul Musgrave for Foreign Policy, a country with a squadron of seventeen submarines would share with India seventh place in the world by number of attack submarines. Not sixth, not military power — seventh place by hull count, if the hulls were combat-ready. Musgrave formulates it thus: "The Pepsi fleet would give no more military power than a rusty Model T gives chances at Formula 1." A garage of clunkers — and an application for a Formula 1 team.
By the way, that very joke by Kendall that no retelling of the legend omits — "we're disarming the Soviet Union faster than you are," tossed to National Security Advisor Brent Scowcroft — survived to our days in the retelling of that very New York Times editorial from May 10, 1989 — the only text of that era where the fleet is even mentioned. Remember this fact — it will become key to the next section.
And now — about the deal the meme swallowed whole, because it didn't fit the picture. It started more modestly: the vodka barter added the purchase of two Soviet oil tankers of 28 thousand tons — new, working ones that could be chartered and sold. PepsiCo took them in partnership with a Norwegian shipping firm run by a friend of Kendall's. And in April 1989, according to the Financial Times, all this grew into an agreement with a Soviet foreign trade organization and two Norwegian firms for nearly $2.6 billion: up to 85 Soviet vessels over ten years, with Norwegian investments in shipyard modernization. The Norwegians took marketing risks, the USSR — the sales market and shipbuilding modernization, Pepsi — the right to double the number of its plants in the USSR and launch Pizza Hut in Moscow.
April 1990 brought all this into an agreement that the media called the largest deal in history between an American company and the Soviet Union: more than $3 billion over ten years — though this wasn't the deal price, but PepsiCo's estimate of its own future revenue from cola in the USSR and vodka in the US. The Soviet side committed to building at least ten commercial tankers and bulk carriers, and Pepsi — to feed double the number of plants and a chain of pizzerias. This was a bet not on the USSR's collapse, but precisely the opposite: on its stability, on perestroika as a long-term project. Foreign Policy writes about this directly: Pepsi made a "multi-billion-dollar bet on the long-term stability of the Soviet Union."
The circuit held until exactly August 1991. Three weeks before this, George H.W. Bush announced steps toward full trade normalization — and then the GKChP coup swept away both the plotters and the Union itself. Kendall, by then already retired, voiced the bitter formula: "We had a multi-billion-dollar contract with a non-existent counterparty." Pepsi's largest partner "simply went out of business."
Reconstruction took months of negotiations with fifteen countries instead of one: unfinished Pepsi vessels were stuck in independent Ukraine demanding its percentage; for Moscow Pizza Huts, mozzarella had to be hauled from Lithuania; the plastic bottle plant ended up in Belarus. While Pepsi patched holes, Coca-Cola burst onto the freed market and quickly overtook the old-timer. The responsive marketing came out cosmic — a giant Pepsi can visited the Mir station orbit, billboards went up over Pushkinskaya Square — but the moment was lost: by 2020 Russia remained PepsiCo's third market with $3 billion in revenue, and first place on shelves had long been taken by Coca-Cola. Kendall, however, bore no grudges: in 2004 Putin awarded him the Russian Order of Friendship.
So where did that very meme about "sixth military power" come from? The archaeology of the storyline was done by an enthusiast from the Naval Gazing site, and Musgrave confirmed it. The only source where submarines and the ship list are mentioned at all — that very NYT editorial from May 10, 1989: neither specialized naval publications nor a book about the Soviet fleet released at the same time noticed this deal. All the other press from 1989–1990 wrote about the deal for tankers and merchant vessels — and about $3 billion.
Somewhere in the mid-2010s someone stumbled on an old newspaper page, didn't check it — and spliced two different deals into one canonical one: "17 submarines, cruiser, frigate and destroyer" from 1989 plus "$3 billion" from 1990 plus the conclusion "Pepsi — sixth military power in the world" from NYT's original joke.
The legend went viral on social media; by 2019 it reached the BBC, in 2022 — The Infographics Show post on Facebook, where it already featured "Swedish recycling" (actually Norwegian) and "sixth military power in the world." Specialized fact-checkers — Lead Stories, Foreign Policy, Naval Gazing — carefully disassembled this by layers, but the wave of retellings proved stronger: the myth lives on social media to this day, as good folklore should.
And here's what's most valuable in this story. The real 1989 deal — about barter, intermediaries and rusty scrap metal — was smaller, duller and more business-logical than the legend. And the real 1990 deal — tankers, $3 billion, Pizza Hut, a bet on the USSR's survival — was bigger, bolder and more tragic than any fiction: Pepsi miscalculated not on the price of submarines, but on the Soviet state's viability. Folklore chose neither truth nor beauty — it chose a short formula.
Reality, however, offers a more bitter paradox: the corporation that wanted to "sell cola to communism" and build a bridge between systems on this, ended up spending months renegotiating its own mega-deal with fifteen countries, while ships unfinished to its order fell apart into metal along with the counterparty-state. The peaceful death of the enemy turned out scarier for business than the Cold War.