CHAPTER IV
THE SULTAN MORTGAGES HIS EMPIRE
The Germans Overcome Competition
During 1898 and 1899 the Ottoman Ministry of Public Works received many applications for permission to construct a railway to Bagdad. Whatever may have been thought later of the financial prospects of the Bagdad Railway there was no scarcity then of promoters who were willing and anxious to undertake its construction. It was not because of lack of competition that the Deutsche Bank finally was awarded the all-important concession.
In 1898, for example, an Austro-Russian syndicate proposed the building of a railway from Tripoli-in-Syria to an unspecified port on the Persian Gulf, with branches to Bagdad and Khanikin. The sponsor of the project was Count Vladimir I. Kapnist, a brother of the Russian ambassador at Vienna and an influential person at the Tsar’s court. Count Kapnist had the support of Pobêdonostsev, the famous Procurator of the Holy Synod, who was an avowed Pan-Slavist and an enthusiastic promoter of Russian colonization in Asia Minor.[1] The Sultan instructed his Minister of Public Works to study the Kapnist plan and submit a report. The Austro-Russian syndicate, however, made no further progress at Constantinople. The Sublime Porte obviously was opposed to any expansion of Russian influence in Turkey—a point of view which received the encouragement of the British and German ambassadors. Furthermore, in Russia itself there was opposition to Count Kapnist’s project. Count Witte, Imperial Minister of Finance, and foremost political opponent of Pobêdonostsev, emphasized the strategic menace to Russia of improved railway transportation in Turkey and sturdily maintained that Russian capital and technical skill should be kept at home for the development of Russian railways and industry. By the spring of 1899 the Kapnist plan had been shelved.[2]
In the meantime French bankers had become interested in the possibilities of constructing a railway from the Mediterranean to the Persian Gulf, utilizing the existing railways in Syria as the nucleus of an elaborate system. Their spokesman was M. Cotard, an engineer on the staff of the Smyrna-Cassaba Railway. This project was possessed of such strong financial and political support at Constantinople that the Deutsche Bank considered it best to negotiate for a merger with the French interests involved.[3] Accordingly conversations were held at Berlin early in 1899 between the Deutsche Bank and the Anatolian Railway Company, on the one hand, and the Imperial Ottoman Bank and the Smyrna-Cassaba Railway, representing French interests, on the other. The result was an important agreement of May 6, 1899, the chief provisions of which were as follows:[4]
1. The Deutsche Bank admitted the Imperial Ottoman Bank to participation in the proposed Bagdad Railway Company. German and French bankers were to be equally represented in ownership and control, each to be assigned 40% of the capital stock, the remaining 20% to be offered to Turkish investors. If British, or other capital were subsequently interested in the Company, the share of the new participants was to be taken from the German and French holdings in equal proportions.
2. A modus vivendi was arrived at between the Anatolian and Smyrna-Cassaba Railways. The prevailing rate-war was to be stopped; a joint commission was to be appointed to agree upon a uniform tariff for the two companies; a junction of the two lines was to be effected and maintained at Afiun Karahissar for reciprocal through traffic.
3. In order to assure the faithful execution of the agreement between the Anatolian and Cassaba railways, each of the companies was to designate two of its directors to sit on the board of the other.[5]
4. French proposals for the construction of a Euphrates Valley railway were to be withdrawn.
5. The French and German bankers were to use their best offices with their respective governments to secure united diplomatic support for the claims of the Deutsche Bank to prior consideration in the award of the Bagdad Railway concession.