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

by Edward Mead Earle

This contract was so obviously in contravention of earlier rights of the Lynch Brothers, which had been specifically reaffirmed by the negotiations with Turkey, that it was amended by an agreement of March 27, 1914, between Lord Inchcape, Mr. John F. Lynch, and the Bagdad Railway Company. The latter arrangement provided: 1. That Lord Inchcape should immediately organize the Ottoman Navigation Company to take over the concession of July, 1913, and the rights conferred upon Lord Inchcape by his agreement of February 23, 1914, with the Bagdad Railway Company; 2. That the Lynch Brothers should be admitted to participation in the new Navigation Company and that Mr. John F. Lynch should be elected a director thereof; 3. That the Bagdad Railway should assign to a new Ottoman Ports Company—in which Mr. Lynch and Lord Inchcape should be granted a 40% participation—all of the rights of the Railway to the construction of port and terminal facilities at Bagdad and Basra; 4. That the Bagdad Railway Company should be granted a 20% participation in the new Ottoman Navigation Company. Thus were Lord Inchcape’s powerful interests further propitiated! Thus did the Lynch Brothers cease to be big fish in a small pond, to become small fish in a big lake!

Measures were now taken to protect another vested interest, the British-owned Smyrna-Aidin Railway Company. On March 26, a draft agreement, subsequently confirmed as part of the Anglo-German convention of June 15, was executed by Dr. Carl Bergmann, of the Bagdad Railway Company, and Lord Rathmore, of the Smyrna-Aidin Company. It provided for important extensions of over 200 miles to the existing Smyrna-Aidin line (including a junction with the Anatolian-Bagdad system at Afiun Karahissar), granted to British interests valuable navigation rights on the lakes of Asia Minor, and protected each railway from discriminatory treatment at the hands of the other. This settlement was approved by Herr von Kühlmann, on behalf of the German Government; Mr. Alwyn Parker, of the British Foreign Office; and Hakki Pasha, minister plenipotentiary of the Sultan to the Court of St. James.[29]

Oil—the magic word which has become the open sesame of so many diplomatic mysteries—was of no inconsiderable importance in 1914. Early in that eventful year the British Government—in order to insure an uninterrupted supply of fuel to the fleet—had purchased a controlling interest in the Anglo-Persian Oil Company. As a necessary step in the negotiations regarding Turkish oilfields the German Government was obliged, in March, 1914, to recognize southern Mesopotamia, as well as central and southern Persia, as the exclusive field of operations of the Anglo-Persian Company, and, in addition, to agree to the construction of a railway from Kut-el-Amara to Mendeli for the purpose of facilitating petroleum shipments. Thereupon an Anglo-German syndicate organized the Turkish Petroleum Company for the acquisition and exploitation of the oil resources of the vilayets of Mosul and Bagdad. Half of the stock of the new company was assigned to the National Bank of Turkey (controlled by Sir Ernest Cassel) and the D’Arcy group (in which Lord Inchcape was interested); one quarter was assigned to the Royal Dutch Company, and the remainder was reserved for the Deutsche Bank. Upon joint representations by the British and German ambassadors at the Sublime Porte, the Sultan, in June, 1914, conferred upon the Turkish Petroleum Company exclusive rights of exploitation of the oil resources of the Mesopotamian valley from Mosul to Bagdad.[30]

The vested interests of certain of its citizens having thus been amply protected, the British Government proceeded to complete its negotiations with the German ambassador in London. On June 15, 1914, Sir Edward Grey and Prince Lichnowsky initialed an important convention regarding the delimitation of English and German interests in Asiatic Turkey. The following day The Times announced that the terms of an Anglo-German agreement had been incorporated in a draft treaty, and on June 29, Sir Edward Grey informed the House of Commons that formal ratification of the convention was being postponed only “until Turkey and Germany have completed their own separate negotiations.” By mid-July all was in readiness for the definitive signing of the treaty, but the widening importance of the Austro-Serbian dispute and the outbreak of the Great War put an end to the Bagdad Railway conversations.[31]

The terms of the convention of June 15, 1914—which might have meant so much to the future of Anglo-German relations—constituted a complete settlement of the controversy which had waged for more than ten years over German railway construction in the Mesopotamian valley. The reconciliation of the divergent interests of the two Powers was based upon the following considerations:[32]

1. “In recognition of the general importance of the Bagdad Railway in international trade” the British Government bound itself not “to adopt or to support any measures which might render more difficult the construction or management of the Bagdad Railway by the Bagdad Railway Company or to prevent the participation of capital in the enterprise.” Great Britain further agreed that under no circumstances would it “undertake railway construction on Ottoman territory in direct competition with lines of the Bagdad Railway Company or in contravention of existing rights of the Company or support the efforts of any persons or companies directed to this end,” unless in accord with the expressed wishes of the German Government.

2. His Britannic Majesty’s Government pledged itself to support an increase in the customs duties of the Ottoman Empire from 11% to 15% ad valorem and, furthermore, to “raise no objection to the assignment to the Bagdad Railway Company of already existing Turkish State revenues, or of revenues from the intended increase in tariff duties, or of the proposed monopolies or taxes on the consumption of alcohol, petroleum, matches, tinder, cigarette-paper, playing cards, and sugar to the extent necessary for the completion of the Railway.“

3. The terminus of the Bagdad Railway was to be Basra. Both of the signatory Powers declared that under no circumstances would they “support the construction of a branch from Basra or any other point on the main line of the Bagdad Railway to the Persian Gulf, unless a complete understanding be previously arrived at between the Imperial Ottoman, the Imperial German, and His Britannic Majesty’s Governments.” The German Government furthermore pledged itself under no circumstances to “undertake the construction of a harbor or a railway station on the Persian Gulf or support efforts of any persons or companies directed toward that end, unless a complete agreement be previously arrived at with His Britannic Majesty’s Government.”

4. The German Government undertook to see that “on the lines of the Bagdad Railway Company, as hitherto, no direct or indirect discrimination in transit facilities or freight rates shall be made in the transportation of goods of the same kind between the same places, either on account of ownership or on account of origin or destination of the goods or because of any other consideration.” In other words, the German Government agreed to enforce Articles 24 and 25 of the Specifications of March 5, 1903, which provided that “all rates, whether they be general, special, proportional, or differential, shall be applicable to all shippers and passengers without distinction,” and which prohibited the Company to enter into any agreement for the purpose of granting reductions in the rates announced in its published tariffs.