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!
Vested Interests Come to the Fore
In addition to the pressure which was brought to bear on the Balfour Cabinet by the newspapers, there were important vested business interests which quietly, but effectively, made themselves heard at Downing Street during the critical days of the Bagdad negotiations of 1903.