5. It was agreed that appropriate diplomatic and financial measures should be taken to bring about an increase in the revenues of the Ottoman Empire, sufficient, at least, to finance all of the projected railways, both French and German. Construction of the lines already authorized, or to be authorized, should be pursued, as far as possible, pari passu, each group to receive subsidies from the Ottoman Treasury in about the same proportion.
6. The Deutsche Bank agreed to repurchase from the Imperial Ottoman Bank all of the latter’s shares and debentures of the Bagdad Railway and its subsidiary enterprises, amounting to Fr. 69,400,000. Payment was to be made in like value of Imperial Ottoman bonds of the Customs Loan of 1911, Second Series, which had been underwritten by a German syndicate.
Certain observations should be made regarding the character of this convention, if its full significance is to be appreciated. It was an agreement between two great financial groups in France and Germany; as such it was signed by M. Sergent, Sub-Governor of the Bank of France; M. de Klapka, Secretary-General of the Imperial Ottoman Bank; and Dr. Karl Helfferich, Managing Director of the Deutsche Bank. In addition, it was an understanding between the Governments of France and Germany; as such it was signed by M. Ponsot, of the French Embassy in Berlin, and by Herr von Rosenberg, of the German Foreign Office. A speech of Chancellor von Bethmann-Hollweg to the Reichstag, December 9, 1913, acknowledged the official character of the negotiations being conducted by the French and German bankers. That the French Government considered the convention a binding international agreement is made perfectly clear by a despatch of Baron Beyens, Belgian Minister in Berlin, to M. Davignon, Belgian Minister of Foreign Affairs, February 20, 1914, in which the attention of the Belgian Government is officially called to the existence of the convention.[15] The agreement, furthermore, was acceptable to the Ottoman Government, for the Sultan promptly confirmed the concessions for the new Black Sea and Syrian lines and for the necessary extensions to the Anatolian Railways. Much has been written about governmental support of investors in foreign countries, but, so far as the author has been able to ascertain, this is the first instance in which a financial pact and an international agreement have been combined in one document. No longer are treaties negotiated by diplomatists alone, but by diplomatists and bankers!
From the standpoint of the French interests involved, the February convention of 1914 was an eminently satisfactory settlement of the Bagdad Railway controversy. French capitalists secured concessions for more than 2,000 miles of railways in Asiatic Turkey, thus eliminating the danger of eventual German control of all communications in the Ottoman Empire. The Imperial Ottoman Bank was relieved of the risk of carrying an investment of almost seventy million francs in the Bagdad enterprise—an investment which had been a “frozen asset” because of the persistent refusal of the French Government to admit the Bagdad securities to the Bourse. In return, the Bank received a large block of Imperial Ottoman bonds, which were readily negotiable and which materially increased French influence in the Ottoman Public Debt Administration. Furthermore, as a result of a tacit agreement with the Deutsche Bank, the Imperial Ottoman Bank was awarded the Imperial Ottoman Five Per Cent Loan of 1914, amounting to $100,000,000, upon terms affording a handsome profit to the underwriters.[16] As for the French Government, it was enabled to emerge gracefully from the difficult situation in which it found itself after the Potsdam Agreement. France no longer was obliged to pursue a purely Russian policy in the Near East, for the Tsar’s Government—in addition to withdrawing its objections to German railways in Asiatic Turkey—gave its consent to the construction of the French Black Sea Railways with the sole proviso that the system should not be completed in its entirety until Russia had constructed certain strategic railways necessary to assure the safety of the Caucasus frontier.[17]
German diplomacy, on the other hand, had strengthened its position in the Near East by securing definite recognition of central and southern Anatolia, northern Syria and Mesopotamia as German spheres of interest. German financiers acquired exclusive control of the Bagdad enterprise and were assured that there would be no further obstruction of their plans by the French Government. The French promise to coöperate in improving the financial situation in Turkey meant that funds would be forthcoming for continued construction of uncompleted sections of the Bagdad Railway. The Young Turks were delighted at the prospect that the Powers might finally consent to the much-needed increase in the customs duties. They were no less delighted to know that railway construction in Asia Minor—which held out so much promise for the economic development and the political stability of the country—was to go on unimpeded by Franco-German rivalry and antagonism.[18]
There was some harsh criticism in Great Britain, however, of the advantages which France had obtained for herself in the Ottoman Empire. Sir Mark Sykes, an eminent student of Near Eastern affairs, believed that the new state of affairs was worse than the old. Speaking in the House of Commons, March 18, 1914, he warned the Foreign Office that “the policy of French financiers will produce eventually the collapse of the Ottoman Empire.... Take the proposed loan arranged with the French Government, for something over £20,000,000. In order to get this there are concessions which I cannot help feeling are more brazen and more fatal than any I have seen. The existing railways in Syria meander for miles to avoid legitimate profits in order to extort a guarantee. Alongside these railways you can see the merchants’ merchandise and the peasants’ produce rotting because the railway people do not trouble to warehouse the stuff or to shift it. They have got their guarantee, and they do not care. These concessions, which have been extracted from Turkey, mean a monopoly of all Syrian transit; and, further, a native press is to be subventioned practically in the interest of these particular monopolies.... In practice, loans, kilometric guarantees, monopolies, and a financed native press must, whether the financiers desire it or not, pave the way to annexation. I submit that this is not the spirit of the entente. The British people did not stand by the French people at Agadir to fill the pockets of financiers whose names are unknown outside Constantinople or the Paris Bourse.... The Ottoman Empire is shaken, and the cosmopolitan financier is now staking out the land into spheres of interest. An empire may survive disaster, but it cannot survive exploitation. A country like Turkey, without legislative capacity, without understanding what the economics of Europe mean and at the same time rich, is a lamb for the slaughter.”[19]
This trenchant criticism of French policy might have been taken more seriously had Great Britain herself been actuated by magnanimous impulses. Instead, British financiers were joining the common scramble for concessions, and British statesmen were pursuing with ruthless avidity every means of protecting British imperial interests.
The Young Turks Conciliate Great Britain
The Bagdad negotiations of 1910–1911 between Sir Ernest Cassel and Dr. von Gwinner, on the one hand, and the British and Ottoman Governments, on the other, came to naught, it will be recalled, because of the refusal of Sir Edward Grey to consent to an increase in the Turkish customs duties. The Sublime Porte was unwilling to grant the economic concessions demanded by Great Britain as the price of her assistance in Ottoman financial stabilization. But the Young Turks were shrewd enough to keep the door open for further negotiations by removing the chief political objection of England to the Bagdad enterprise—namely, that it menaced British imperial interests in the region of the Persian Gulf. In the convention of March 21, 1911, with the Bagdad Railway Company, the Ottoman Government reserved to itself considerable latitude in the disposition of the sections of the line beyond Bagdad.[20]