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

by Edward Mead Earle

The improvement in the German political position at Constantinople was reflected in a changing Turkish attitude toward the Bagdad Railway. Among revolutionary leaders there was a growing realization of the great economic and political importance of railways and, particularly, of the Bagdad system. It became apparent upon examination, also, that others than Germans had obtained monopolistic concessions in the Ottoman Empire—in this respect the Lynch Brothers came in for a good deal of attention. The Ottoman General Staff—which had recalled General von der Goltz as chief military adviser—insisted that the early construction of a trans-Mesopotamian railway at whatever cost, was essential to the defence of the empire. In spite of serious financial difficulties resulting from strikes, increased cost of materials, and general economic paralysis which followed upon the heels of the revolutions of 1908 and 1909, the Anatolian and Bagdad Railway Companies advanced large sums to the Minister of Finance toward the ordinary expenses of running the Government. In addition, the concessionaires evinced a desire to meet all Turkish financial and diplomatic objections to the provisions of the concession of 1903.[9]

It was the financial needs of the Young Turk administration which enabled German diplomacy and the Deutsche Bank to reëstablish themselves thoroughly in the good graces of the Ottoman Government. But here again the Germans were given their chance only after England and France had turned the Turks away empty handed.

During the summer of 1910, Djavid Bey, as Ottoman Minister of Finance, went to Paris to raise a loan of $30,000,000, secured by the customs receipts of the Ottoman Empire. The negotiations with the Parisian bankers were complicated by a bitter anti-Turk campaign on the part of the press and by the frequent interference of the French Government. Nevertheless, Djavid Bey succeeded in signing a satisfactory contract with a French syndicate, and his task appeared to be accomplished. At this juncture, however, M. Pichon, French Minister of Foreign Affairs, informed the bankers that official sanction for the proposed loan would be withheld unless the Ottoman Government would consent to have its budget administered by a resident French adviser. The Young Turk ministry, determined to tolerate no further foreign intervention in the administrative affairs of the empire, flatly refused to consider any such proposal, and Djavid Bey was instructed to break off all negotiations. “As a true and loyal friend of France,” wrote Djavid, “I regretted this incident as one likely to strain the future relations between the two countries.”

From Paris Djavid Bey went to London. Sir Ernest Cassel appeared to be willing to negotiate a loan to Turkey of the desired amount, but, upon representations from M. Cambon, the French ambassador at London, Sir Edward Grey persuaded Cassel not to put in a bid for the bonds. This decision was reached largely, as Djavid Bey was informed by the British Foreign Office, because the Bagdad Railway was considered to be “an enterprise which under the existing concession has not been conceived in the best interests of the Ottoman Empire, while it offers, as at present controlled, an undoubted menace to the legitimate position of British trade in Mesopotamia.” To the Turkish Government this statement was a piece of gratuitous impertinence, for, as Djavid Bey replied, “It was a prerogative only of the Ottoman Government to determine whether the conditions of construction and management of the Bagdad Railway were beneficial or detrimental to Turkey. England had no more right to object to the Bagdad Railway than Germany had to object to the British and French lines in operation in Turkey.”

The collapse of the financial negotiations in Paris and London offered the Deutsche Bank an opportunity which its directors were too shrewd to overlook. Dr. Helfferich was despatched to Constantinople and within a few weeks had secured the contract for the entire issue of $30,000,000 of the Ottoman Four Per Cent Loan of 1910, upon terms almost identical with those agreed upon with the French syndicate before M. Pichon’s interference. “On this occasion,” writes Djavid Bey, “the Germans handled the business with great intelligence and tact. They brought up no points which were not related directly or indirectly to the loan, and they made no conditions which would have been inconsistent with the dignity of Turkey. This attitude of Germany met with great approval on the part of the Turkish Government, which was then in a very difficult position. The result was the greatest diplomatic victory in the history of the Ottoman Empire between the revolution of 1908 and the outbreak of the Great War.”[10]

The purchase of the loan of 1910 by the Deutsche Bank, however, did not solve the financial problems of the Young Turk Government. It was essential that measures be taken to increase the revenues of the Ottoman Empire. Accordingly, negotiations had been conducted during 1910, and were continued until midsummer of 1911, to secure the consent of the Powers to an increase of 4% in the customs duties. It was apparent from the outset that the British Government would block any project for an increase in Turkish taxes, unless it were granted important compensations of a political and economic character and unless it could determine, in large measure, the purposes for which the additional revenues would be expended. In this respect, also, it appeared that Entente policy was standing in the way of the success of the Revolution in Turkey!

British objections to the proposed increase in the Ottoman customs duties were founded in large part upon British opposition to the Bagdad Railway and, more particularly, to the sections of the Railway between Bagdad and the Persian Gulf. In the spring of 1910, the British Government proposed that a concession for a railway from Bagdad to Basra via Kut-el-Amara should be awarded to British financiers, in order that British economic interests in Mesopotamia might be adequately safeguarded. In May of that year Sir Edward Grey wrote the British ambassador at Constantinople, “Please explain quite clearly to the Turkish Government that the British Government will not agree to any addition to the taxes until this claim for a concession is taken into favorable consideration, and also that Great Britain’s attitude towards Turkey will depend largely upon how she meets this demand of yours.” Upon the refusal of the Ottoman Government to accede to this demand, Sir Edward Grey wrote to Sir Henry Babington Smith, English representative on the Ottoman Public Debt Administration, that England must be awarded at least a 55% participation in the Bagdad-Basra section of the Bagdad Railway, as well as concessions for the construction and control of port works at Koweit. In addition, Turkey should be made to understand that Great Britain could approve no agreement without the sanction of the French and Russian Governments.

When Djavid Bey was in London in July, 1910, he submitted two counterproposals to Sir Edward Grey: first, that the portion of the Bagdad Railway from Bagdad to Basra should be internationalized upon terms agreeable to Sir Ernest Cassel and Dr. Arthur von Gwinner; or, second, that the Ottoman Government itself should undertake the construction of the line beyond Bagdad. The British Foreign Office indicated that it might consent to an increase in the Ottoman customs duties until April, 1914, upon some such terms, provided the consent of the other Powers were forthcoming, and provided Turkey would surrender her right of veto over the borrowing powers of Egypt. Because of the collapse of the loan negotiations, however, nothing further came of these proposals.

On March 7, 1911, the Ottoman ministers at London and Paris presented to the British and French Governments respectively a proposition that the Bagdad-Basra section of the Bagdad Railway should be constructed by an Ottoman company, to the capital of which the Turkish Government should subscribe 40%, and German, French, and British capitalists 20% each. The Sublime Porte expressed a willingness, furthermore, to confer with representatives of France and Great Britain for the purpose of satisfying the legitimate political demands of those two nations in Syria and Mesopotamia. The following day, nevertheless, Sir Edward Grey informed the House of Commons that His Majesty’s Government was not prepared to consent to an increase in the Turkish customs duties, because it was not clear that the Ottoman Government was ready to guarantee adequate protection to British commercial interests in Mesopotamia and the region of the Persian Gulf.[11]

This decision was received in Constantinople with undisguised animosity. Young Turks were as little disposed to tolerate British, as they were French, supervision of Ottoman finances and economic policies. The press roundly denounced the British and said that once again Turkey had been shown the wisdom of friendship for Germany.[12]