Page images
PDF
EPUB
[graphic]

suggested that, by arrangement with the British, a fas ferry service should be established between the port o Koweit, on the Persian Gulf, and Bombay, and alter native plans were brought forward for a tunnel to b made under, or a bridge or train ferry established over the Bosphorus. The British were to be told that i future they would be able to enter a train at Calais o Ostend, and leave it on the shores of the Persian Gulf and the records of Russian and American railways wer searched for instances of long-distance working. T quote the words of M. Huguenin, then Assistant Director-General of the Anatolian Railway, 'It i agreed that we are to build a model line such as exists nowhere in Turkey, able in all respects to undertake efficiently an international service involving high speeds over the whole line.' It is true that Von Pressel main tained to the last that the cost of constructing a line fit to carry international expresses over the route chosen would be prohibitive. But he was not listened to; and it is certain that, once it was decided to continue the Anatolian Railway, the use of a narrower gauge for the newer sections, as urged by Von Pressel, was inadvisable. Still, the optimism of its promoters certainly exaggerated greatly the express service' possibilities of the new line.

The original proposal as made to the French was that 40 per cent. of the shares of the new concern should be reserved for French capital. A similar proportion was to be allotted to Germany, and the remaining 20 per cent. to other nations. In view of this, M. Constans, French Ambassador at Constantinople, and M. Rouvier, French Minister of Finance, favoured the new enterprise. The later German reports complain of the hostility of M. Delcassé towards them. But at the outset he was considered by those in France who disliked the enterprise to be too favourable to it. Needless to say, the Deutsche Bank took care that no real share in the control of the Bagdad Railway came into French hands; while the Germans obtained all they desired from the French-an absence of serious opposition; a certain amount of capital subscribed for the Bagdad' Turkish loans, and the assistance of the French representatives on

[ocr errors]
[graphic]

the Turkish Public Debt Administration in the various financial measures, such as Consolidation of the Turkish Debt, and increase of customs duties, which were necessary to provide for interest on the Bagdad loans.

The German financiers set great store on British co-operation. So far back as 1889, Siemens had stated that 'the scheme was impossible without England,' and had written to Zander, 'The English must come in with us.' In 1900 he went to London in the hope of securing British co-operation. Certain English financiers were not unfavourably disposed to the scheme of a land route to India; but the proposed increase in customs duties met with considerable opposition; and Siemens, reporting this, added the comment, 'That ends Bagdad' (Damit fällt Bagdad), and wrote to Schrader, The Bagdad business seems to be lost. England will enter into no agreement without being pushed, and our politicians will not push her. Nevertheless, we must go on working in Constantinople; but every farthing of backsheesh is thrown away.'

The French comment at a later date, 'Londres ne veut pas; Berlin ne peut pas,' was already applicable. However, at the moment when the original capital was being subscribed, a determined effort was made to obtain British capital and assistance in the establishment of a terminus at Koweit on the Persian Gulf. On April 8, 1903, in reply to Mr Gibson Bowles, Mr Balfour gave the House of Commons to understand that the matter was under consideration, and that the suggestion was that 'British capital and control were to be on an absolute equality with the capital and control of any other power.' The subsequent refusal of Mr Balfour and Lord Lansdowne, then Foreign Secretary, to grant any official British co-operation was due to reasons explained in an article in the Financial Times' of April 17, 1903. It was there pointed out that, as Mr Waugh, British Vice-Consul at Constantinople, had already reported, there was absolutely no guarantee that the management of the - railway would bear any relation to the nationality of the capital raised to build it. Indeed, though this was, of course, unknown in British circles at the time, Marschall von Bieberstein had sent a confidential memorandum to the financiers of the Deutsche Bank reminding them of the

[ocr errors]
[graphic]

absolute necessity of keeping the power in German hands, and warning them that Berlin would tolerate no division of control. In any case, traffic to and from the new railway would have to pass over the Anatolian line, which already was under German control, and preferential treatment for German goods would thus be easy to obtain. As before, the proposed increase of customs duties aroused opposition in England. It was further pointed out that the Germans were keeping in their own hands the contracts for construction from which an immediate profit was expected, and that the nature of the country made it improbable that any appreciable dividend should be paid on the share capital for several years to come. Against this, only the possible political gain could be urged, with the eventual saving in time for the Indian mail, the importance of which was naturally questioned by British shipping interests.

Hence there were no British representatives among the directors of the new company. A certain amount of French capital was obtained, partly through Switzerland, and a pretence was made of French association in the directorate. M. Huguenin, of the Anatolian Railway, a French Swiss, played a leading part in the development of the new line as regards the technical railway side; but Gwinner of the Deutsche Bank, as President, and Testa, German representative on the Council of Turkish Bondholders, as Vice-President of the Board, enjoyed the real controlling influence.

On March 5, 1903, a concession for the construction and working of a railway from Konia to Bagdad, via Aleppo and Mosul, had been finally granted and signed. This authorised the Anatolian Railway Company to create a new company, to be called the Imperial Ottoman Bagdad Railway Company, with a capital of 660,000 Turkish pounds (15,000,000 francs). Ten per cent. of the shares were to be reserved for the Turkish Government, and the same amount for the Anatolian Railway. The failure to obtain the expected amount of foreign capital compelled the new company to depend very largely upon the Turkish Government. Turkey's finances were, however, at that time in a most unsatisfactory condition. So long ago as June 1898, Von Kühlmann, then DirectorGeneral of the Anatolian Railway, had written that

almost all Turkey's financial resources were pledged for different purposes, and that, should she incur further obligations, any sudden emergency might lead to inability to meet railway guarantees. It is true that the succession of wars in which Turkey was involved between 1911 and 1918 could not have been foreseen. Nevertheless, in view of Turkey's existing liabilities it was hazardous to saddle her with the responsibility for an enterprise which involved an enormous expenditure of capital with an exceedingly problematical return. The Deutsche Bank group, however, did not know the extent to which 'strategical,' as against commercial, considerations were to be predominant. There were two logical courseseither for the Turkish Government to obtain from their German ally sufficient capital to build the strategical railway they considered necessary, lessening the cost by such profit on private traffic as they could get; or for a private company to build a line solely for commercial profit, choosing only such routes as gave promise of substantial traffic, and proceeding, as the Aidin Railway had done, by successive sections, each to become a paying concern before the next was begun.

Instead, a compromise was adopted by which a nominally private company, hoping to pay dividends to their shareholders, constructed a railway on purely strategical lines, often in wholly unprofitable country, on the strength of guarantees secured by a Turkish Government loan, which made that Government a partner in the enterprise, and entitled to the lion's share of any profits there might be. The attempt to combine business success with strategical considerations failed. The series of wars in which Turkey became involved naturally had an unfavourable effect upon business. But matters would not have gone so badly as they did, had the Bagdad Railway policy, from the outbreak of the Turco-Italian War onwards, been governed by strictly business considerations. Economic facts were disregarded in constructional plans. Pressed by the German Embassy on the one hand, and by the Turkish Government on the other, the business men sank deeper and deeper into the mire, ever hoping that better times would come and a larger measure of assistance be obtainable from the Governments concerned.

[graphic]

The history of the negotiations prior to the concession is interesting. The correspondence is full of complaints of the unreasonable behaviour of the Ambassador Marschall, who, as Siemens said, 'sought only political success and not primarily the carrying through of the scheme from a financial point of view.' The German diplomats were eager to force the affair through as speedily as possible, accepting any conditions the Turks might impose; while the financiers regarded that policy as extremely dangerous.' The final opinion of the financiers on the Embassy was as follows:

[ocr errors]

'We must do better over the Bagdad business, and the only way is to deal with the Wilhelmstrasse in this matter, for Marschall has no comprehension of it. Marschall desires a personal success in Constantinople. Miquel and the English Embassy do not interest him. On the contrary he experiences a malicious pleasure (Schadenfreude) in being able to say, "I was the only one that understood the affair; but they left me in the lurch everywhere," or, as he expresses it, "The Deutsche Bank did not depart from their policy of reserve.'

99 9

The same divergence of ideas is found in the records of the disputes that raged over the new guarantees. The over-eagerness of the German diplomats had led them to disclose their plans, and placed them in the position of petitioners for the favour of being allowed to build Turkey's strategical railway for her. The eventual agreement as to provision for the expenses of working and the division of profits proved unsatisfactory. But, such as it was, it was only obtained after a long struggle on the part of the business interests. The original draft was based on a supposition that working expenses could be met out of 25 per cent. of the gross receipts, the Government taking the remainder. Such a proportion of receipts to expenses would have been regarded as impracticable in countries in a high state of economic development. In view of the nature of the territory traversed and the enormous necessary cost of maintenance and operation, the idea was ludicrous.

German politicians, however, held that it was allimportant to come to an agreement with the Turks, leaving unworkable details to be modified later. In July 1900, Wangenheim, then Chargé d'Affaires at

« PreviousContinue »