Today, PepsiCo is known for soft drinks and snack foods, but during the final years of the Cold War, the company became part of one of the most unusual business deals ever negotiated. For a brief period in 1989, Pepsi found itself in possession of a fleet of Soviet naval vessels—not because it wanted a navy, but because of an extraordinary barter agreement with the Soviet Union.

The arrangement stemmed from a simple problem: the Soviet Union wanted to keep importing Pepsi, but it lacked enough U.S. dollars to pay for the concentrate. Since the Soviet ruble was not freely convertible on international markets, traditional trade was difficult. Instead, the two sides relied on barter deals, exchanging goods rather than cash. Earlier agreements had included products such as Stolichnaya, but as Pepsi’s business expanded inside the USSR, a much larger agreement was needed.

As part of a landmark trade deal, the Soviet government transferred 17 decommissioned submarines, a cruiser, a frigate, and a destroyer, along with several merchant ships, to Pepsi as payment. On paper, this briefly made Pepsi the owner of more naval vessels than the fleets of many countries, giving rise to the popular claim that the company had become the world’s sixth-largest navy. While the story is widely repeated, historians note that the comparison refers to the number of ships, not their military capability. Most of the vessels were aging, decommissioned, and no longer suitable for combat.

Pepsi had no intention of operating a military fleet. Instead, the company arranged for the ships to be sold to a Swedish recycling firm, where they were dismantled for scrap metal. The unusual transaction allowed the Soviet Union to continue importing Pepsi products while providing the company with a practical way to recover the value of the deal.

The agreement became one of the most memorable examples of Cold War economics. Pepsi had already made history in 1972 by becoming one of the first major American consumer brands to enter the Soviet market, and these creative barter arrangements helped maintain that presence despite severe financial and political restrictions.

Former Pepsi executive Donald Kendall later joked to U.S. National Security Advisor Brent Scowcroft, “We’re disarming the Soviet Union faster than you are.” The remark perfectly captured the surreal nature of a deal in which a soft drink company briefly found itself owning submarines instead of simply selling soda.