Turkey, the Great Powers, and the Bagdad Railway: A study in imperialism

by Edward Mead Earle

The British Government Yields to Pressure

The Bagdad Railway came up for discussion in Parliament on April 7, 1903. Mr. Balfour then informed the House of Commons that negotiations were being carried on between British and German capitalists, and between British capitalists and the Foreign Office, for the purpose of determining the conditions upon which British financiers might participate in the enterprise. If a satisfactory agreement could be reached by the bankers, His Majesty’s Government would be asked to give its consent to a reasonable increase in the customs duties of the Ottoman Empire, to consider the utilization of the new railway for the transportation of the Indian mails, and to adopt a friendly attitude toward the establishment of the eastern terminus of the Bagdad Railway at or near Koweit.

Coöperation with the German concessionaires on any such basis was attacked vigorously from the floor of the House. One member declared it a menace to the existing British-owned Smyrna-Aidin Railway lines in Turkey, a potential competitor of British maritime supremacy, and a threat at British imperial interests in Egypt and in the region of the Persian Gulf. Another member of the House believed that “it was impossible to divorce the commercial from the political aspect of the question. What made the House take a real, live interest in it was the feeling that bound up with the future of this railway there was probably the future political control of large regions in Asia Minor, Mesopotamia, and the Persian Gulf.” Another member was certain the House “knew Mesopotamia was a blessed word. They all felt it was impossible for this country to oppose the introduction of a railway through Mesopotamia. The only wonder was that the railway was not constructed forty or fifty years ago.” At the same time, he felt, it would be well for Britain to be assured that her participation in the enterprise would not lead to another “Venezuela agreement”; Germany must be given to understand that Britain, by control of the Persian Gulf, held the “trump card” of the deck.

The Prime Minister made it plain, nevertheless, that he favored coöperation with the German concessionaires provided British capital were permitted to participate on a basis of equality with any other power. He believed, also, that an obstructionist policy would be futile. “I have no doubt that whatever course English financiers may take and whatever course the British Government may pursue, sooner or later this great undertaking will be carried out,” said Mr. Balfour. “It is undoubtedly in the power of the British Government to hamper and impede and inconvenience any project of the kind; but that the project will ultimately be carried out, with or without our having a share in it, there is no question whatsoever.”

“There are three points,” continued Mr. Balfour, “which ought not to be lost sight of by the House when trying to make up their minds upon this problem in its incomplete state. They have to consider whether it is or is not desirable that what will undoubtedly be the shortest route to India should be entirely in the hands of French and German capitalists. Another question is whether they do or do not think it desirable that if there is a trade opening in the Persian Gulf, it should be within the territories of the Sheik whom we have under our special protection and with whom we have special treaties [i.e., the Sheik of Koweit], or whether it should be in some other port of the Persian Gulf where we have no such preferential advantage. The House must also have in view a third consideration with regard to a railway which goes through a very rich country and which ... is likely after a certain period of development to add greatly to the riches of Turkey, and indirectly, I suppose, greatly to the riches of any other country which is ready to take advantage of it. Whether the British producer will be able to take advantage of it is not for me to say; but the House will have to consider whether he is more likely to be able to take advantage of it if English capital is largely interested, than if it is confined to French and German capital. The House will have to calculate whether ... it will be prudent to leave the passenger traffic in the hands of those two nations, France and Germany, with whom we are on the most friendly terms, but whose interests may not be identical with our own.”[6]

Mr. Balfour’s presentation of the case was hailed in Berlin as eminently lucid and fair. The National Zeitung and the Vossische Zeitung of April 8 expressed the hope that British participation in the Bagdad Railway would be approved by Parliament and the press, in order that the German promoters might have the opportunity to demonstrate that no political ambitions were connected with the enterprise. The Russian attitude of refusing even to discuss internationalization, on the other hand, was roundly denounced.

The London press, however, saw no reason for enthusiasm over the Prime Minister’s proposal. The Times, the Daily Mail, the Daily Telegraph, the Pall Mall Gazette, and the National Review let loose a torrent of vituperation against German imperialist activities in general and the Bagdad Railway in particular. The Spectator, forswearing any thought of prejudice against Germany, constantly reminded its readers of German unfriendliness during the Boer War and suggested that the Bagdad negotiations offered the British Government an admirable opportunity to retaliate.

The Manchester Guardian, organ of the old Liberalism, likewise was opposed to British participation in the Bagdad Railway. Pleading for continued observance of Britain’s time-honored policy of isolation, its leading editorial of April 15 said: “Mr. Balfour expressed his belief that ‘this great international artery had better be in the hands of three great countries than in the hands of two or of one great country.’ In other words, England is to be mixed up in the domestic broils of Asia Minor; every Kurdish or Arab attack on the railway will raise awkward diplomatic questions, and any disaster to the Turkish military power will place the whole enterprise in jeopardy. What is far more important, English participation in railway construction in Asia Minor will certainly strengthen the suspicions which Russia entertains regarding our policy. It is the fashion with certain English politicians to abuse Russia for building railways in Manchuria and for projecting lines across Persia. Yet Mr. Balfour seems more than half inclined to pay her policy the compliment of imitation by helping to build a railway across Mesopotamia to the Persian Gulf—and, worse still, of imperfect imitation, since the Government is certainly not prepared to occupy the territory through which the railway will pass, as Russia does in Manchuria. What vital interests of our own shall we strengthen by this sudden ardour for railways in Turkey to counterbalance the certain weakening of our friendly relations with Russia?”

Violent as was the opposition of the press to any coöperation with the Germans in the Bagdad Railway, the opposition would have been still more violent had all of the facts been public property. Mr. Balfour, however, was keeping the House and the country in complete ignorance of many of the most important aspects of the situation. Although the Prime Minister denied that there had been any negotiations between the British and German Governments regarding the Bagdad enterprise, he failed to admit that there had been such negotiations between His Majesty’s Government and German financiers. He made no mention of the fact, for example, that he and Lord Lansdowne, his Secretary of State for Foreign Affairs, had attended a meeting at the home of Lord Mount Stephen at which Dr. von Gwinner, on behalf of the Deutsche Bank, and Lord Revelstoke, on behalf of the interested British financiers, explained the terms of the proposed participation of British capital in the Bagdad Railway.[7] The plan was to place the Railway, including the Anatolian lines, throughout its entire length from the Bosporus to the Persian Gulf, under international control. Equal participation in construction, administration, and management was to be awarded German, French, and British interests to prevent the possibility of preferential treatment for the goods or subjects of any one country.[8] To this proposal both Mr. Balfour and Lord Lansdowne gave their approval, assuring the bankers that no diplomatic obstacles would be offered by Great Britain to the construction of the Bagdad Railway. Dr. von Gwinner thereupon returned home to obtain the consent of his associates to the reapportionment of interests and, perhaps, to consult the German Foreign Office and the Ottoman minister at Berlin. This was early in April, 1903.[9]

Persistent rumors in the London press that a Bagdad Railway agreement had been negotiated brought the subject to the attention of the Cabinet, which heretofore, apparently, had not been consulted by the Prime Minister and the Secretary of State for Foreign Affairs. It was decided that the Prime Minister should make a statement to Parliament—a statement which, perhaps, might serve as a sort of trial balloon to ascertain the opinion of the country upon the question. Mr. Balfour’s presentation of the Bagdad Railway affair to the House of Commons, as we have seen, however, provoked unfriendly comments from the floor and was subjected to heavy fire from the press. Thereupon a rebellious element in the Cabinet—led, presumably, by Joseph Chamberlain, who now was more interested in the development of the economic resources of the British Empire under a system of protective and preferential tariffs, than in coöperation with other nations—persuaded Mr. Balfour not to risk the life of his Ministry on the question of British participation in the Bagdad enterprise. Accordingly, the agreement with the Deutsche Bank was repudiated, and on April 23, 1903, Mr. Balfour informed the House of Commons that His Majesty’s Government was determined to withdraw all support, financial and otherwise, which Great Britain might be in a position to lend the Bagdad Railway. He was convinced, he said, after a careful examination of the proposals of the German promoters, that no agreement was possible which would compensate the Empire for its diplomatic assistance and guarantee security for British interests.[10]

This announcement was a distinct disappointment to the bankers in Berlin and in London. The directors of the Deutsche Bank were stunned by the termination of negotiations which they believed had been progressing satisfactorily. The British financiers were chagrined at the sudden decision of their Government to oppose their participation in a promising enterprise. They were convinced that the terms offered by the German bankers met every condition imposed by the Prime Minister. They were agreed on the wisdom of British coöperation with the Deutsche Bank, and they were not a little annoyed at what appeared to be bad faith on the part of Downing Street. They were convinced that only a bellicose press frustrated the attempt to make the Bagdad Railway an international highway.[11]

This, in any event, is the diagnosis of the situation furnished by Sir Clinton Dawkins, of the Morgan group, one of the British financiers interested in the project. In a letter to Dr. von Gwinner written on April 23, 1903, but not made public until six years later, he said, “As you originally introduced the Bagdad business to us, I feel that I cannot, upon its unfortunate termination, omit to express to you personally my great regret at what has occurred. After all you have done to meet the various points raised, you will naturally feel very disappointed and legitimately aggrieved. But I am glad to think, and I feel you will be convinced, that your grievance lies not against the British group but against the British Foreign Office. The fact is that the business has become involved in politics here and has been sacrificed to the very violent and bitter feeling against Germany exhibited by the majority of our newspapers, and shared in by a large number of people. This is a feeling which, as the history of recent events will show you, is not shared by the Government or reflected in official circles. But of its intensity outside these circles, for the moment, there can be no doubt; at the present moment coöperation in any enterprise which can be represented, or I might more justly say misrepresented, as German will meet with a violent hostility which our Government has to consider.”

Sir Clinton thereupon asserted that the effort of Mr. Balfour to quiet the uproar in Parliament was due to the Prime Minister’s complete satisfaction with the agreement reached by the financiers. Just as success seemed assured, a bitter attack was launched on the Government “by a magazine and a newspaper [The National Review and The Times] which had made themselves conspicuous by their criticisms of the British Foreign Office on the Venezuela affair. Who instigated these papers, from whence they derived their information, is a matter upon which I cannot speak with certainty. My own impression is that the instigation proceeded from Russian sources. The clamour raised by these two organs was immediately taken up by practically the whole of the English press, London having really gone into a frenzy on the matter owing to the newspaper campaign, which it would have been quite impossible to counteract or influence. It is, I think, due to you that you should know the histoire intime of what has passed.”[12]

There was only one London newspaper, the St. James’s Gazette, which came out frankly in favor of British participation in the Bagdad Railway. In the issue of April 14, 1903, the editor ridiculed the suggestion of the Spectator that the Foreign Office was obliged to warn bankers of the financial risks involved in the enterprise. “Why our contemporary should be so anxious to save financiers, British or foreign, from making a bad investment of their money, we cannot imagine. Financiers are generally pretty wide-awake, and the City as a rule requires no advice from Fleet Street, the Strand, or Whitehall in transacting its business.” In an editorial entitled “Bagdad and Bag Everything,” April 22, 1903, the Gazette condemned The Times for the “curious and alarmist deductions” which that journal drew from the terms of the Bagdad Railway convention. The suggestion that this was a deliberate attempt on the part of Germany to ruin British trade was characterized “as much a figment of a fevered imagination as the mind-picture of Turkey using ‘this enormous line to pour down troops to reduce the shores of the Persian Gulf to the same happy condition as Armenia and Macedonia,’ about which The Times is so suddenly and unaccountably concerned. The concession is a monument to the German Emperor’s activity, built on the ruins of the influence which we threw away, and we do not precisely see what our locus standi in the matter is. If the interests of the Ottoman Government and of the German concessionaires be served by the construction of the line, constructed the line will be, and there’s an end. Whether it ever will, or ever can pay its way, is the affair only of capitalists who are contemplating investment in it. It is not the slightest use barking when we cannot bite, and our power of biting in the present instance is excessively small.... The Emperor William, like Jack Jones, has ‘come into ’is little bit of splosh’ in Asia Minor, and it is quite useless to be soreheaded about it. It is childish to be ever carping and nagging and ‘panicking.’ We question whether the Bagdad Railway—while the rule of the Sultan endures—is going to do much good or much harm to anybody. The vision which some Germans have of peaceful Hans and Gretchen swilling Löwenbrau in the Garden of Eden to the strains of a German band, is little likely of fulfilment. If trade develops, a fair share of it will come our way, provided we send good wares and such as the inhabitants want to buy.” This minority opinion, however, was unheeded in the outburst of anti-German feeling which followed Mr. Balfour’s first statement to the House of Commons.

As events turned out, the failure of the Balfour Government to effect the internationalization of the Bagdad Railway was a colossal diplomatic blunder. If the proposed agreement of 1903 had been consummated, the entente of 1904 between France and England would have taken control of the enterprise out of the hands of the Germans, who would have possessed, with their Turkish collaborators, only fourteen of the thirty votes in the Board of Directors. Sir Henry Babington Smith assures the author that there was nothing in the arrangement suggested by the Deutsche Bank which would have prevented eventual Franco-British domination of the line. Surely, as Bismarck is said to have remarked, every nation must pay sooner or later for the windows broken by its bellicose press!