Part 6

Most of these operations were controlled by the Imperial Ottoman Bank, founded by the most influential English and French financial groups, to which the Ottoman Government by its firmans of 1863 and 1875 granted the privilege of being the State bank. It thus has the exclusive right of issuing banknotes, and has the privilege of being the general paymaster of the Empire and the financial agent of the Government, both at home and abroad.

The financial activity of the French companies was only interrupted by the 1870 war. The only competition met with was that of a few English banks, which no doubt intended to second the views of the British Government in Egypt, and of an Austrian syndicate for the building of the Balkan railways which, later on, furthered the penetration of Austria-Hungary in Eastern Europe.

In 1875 the nominal capital of the Ottoman debt rose to 5,297,676,500 francs. The Ottoman Government, finding it impossible to pay the interest on the Government stocks, announced its decision on October 6, 1875, to give only one-half in cash in the future. The Imperial Ottoman Bank, which was practically under French control owing to the importance of the French capital invested in it, raised a protest on behalf of the bondholders.

The Porte then agreed to make arrangements with the French, the Italians, the Austrians, the Germans, and the Belgians. The claims of the bondholders were laid before the plenipotentiaries who had met at Berlin to revise the preliminaries of San Stefano, and were sanctioned by the Berlin treaty signed on July 13, 1878. They had three chief objects: First, to secure the right of first mortgage which the creditors of the Empire held from the loans secured on the Russian war indemnity; secondly, to appoint the contributive share of the Ottoman debt incumbent on the provinces detached from the Empire; thirdly, to decide what was to be done to restore Turkish finance.

After the conversations with the plenipotentiaries assembled at Berlin, and chiefly owing to the intervention of the French representative, M. Waddington, the Congress embodied the following clauses in the treaty in order to protect the interests of the bond-holders: Bulgaria was to pay the Sultan a tribute; part of the revenue of Eastern Rumelia was to be assigned to the payment of the Ottoman Public Debt; Bulgaria, Serbia, and Montenegro were to assume a part of the Ottoman debt proportionately to the Turkish territories annexed by each of them; all the rights and duties of the Porte relating to the railways of Eastern Rumelia were to be wholly maintained; finally, the Powers advised the Sublime Porte to establish an international financial commission in Constantinople.

In this way the Berlin treaty laid down the principles on which every financial reorganisation was to be based whenever a province should be detached from the Ottoman Empire.

Then the mandatories of the bondholders began to negotiate directly with the Ottoman Empire, but as the various schemes that were proferred failed, the Imperial Ottoman Bank, supported by the Galata bankers, proposed an arrangement that was sanctioned by the Convention of November 10 to 22, 1879. In this way the administration of the Six Contributions was created, to which were farmed out for a period of ten years the revenues derived from stamp duties, spirits in some provinces, the fisheries of Constantinople and the suburbs, and the silk tax within the same area and in the suburbs of Adrianople, Brusa, and Samsun; it was also entrusted with the collection and administration of the revenues proceeding from the monopolies in salt and tobacco.

At the request of the Imperial Ottoman Bank the revenues of this administration, first allocated to the Priority Bonds, of which she owned the greater part, were divided later on between all the bondholders.

In this way the important agreement known as the decree of Muharrem, in which the French played a paramount part, was made possible (December 8 to 20, 1881), according to which the original capital of the foreign Turkish loans was brought down to the average price of issue, plus 10 per cent. of this new capital as a compensation for the interest that had not been paid since 1876. The old bonds were stamped, converted, and exchanged for new bonds called Bonds of the Unified Converted Debt, except the “Lots Turcs,” which, being premium bonds, were treated separately.

The interest of the Converted Debt was fixed at from 1 to 4 per cent. of the new capital.

As to the amortisation, the decree divided the various foreign loans into several series according to the value of the mortgage; this classification stated in what order they would be subject to amortisation.

The outcome of these negotiations, the decree of Muharrem, also established a set of concessions which could not be revoked before the extinction of the debt, and organised the administration of the Ottoman Public Debt, which was to collect and administer, on behalf of the Ottoman bondholders, the revenues conceded as guarantee of the debt.

The Ottoman Government pledged itself to allocate to the payment of the interest and to the amortisation of the reduced debt till its extinction the following revenues: the monopolies in salt and tobacco; the Six Contributions (tobacco, salt, spirits, stamps, fisheries, silk); any increase in the customs duties resulting from the modification of the commercial treaties; any increase of the revenues resulting from new regulations affecting patents and licences (_temettu_); the tribute of the principality of Bulgaria; any surplus of the Cyprus revenues; the tribute of Eastern Rumelia; the produce of the tax on pipe tobacco (_tumbeki_); any sums which might be fixed as contributions due from Greece, Serbia, Bulgaria, and Montenegro for the service of the debt.

The administration of the Ottoman Public Debt was entrusted to “the Council for the Administration of the Ottoman Public Debt,” commonly known as “the Public Debt,” consisting of delegates of Ottoman bondholders of all nations. The French owned by far the greater part of the debt. The English represented the Belgians in the Council, the shares of these two countries in the debt being about equal.

This international council, who attended to the strict execution of the provisions of the decree, deducted all the sums required for the interest and the sinking fund, and made over the balance to the Imperial treasury.

The decree of Muharrem also entrusted to the Public Debt the control of the cultivation and the monopoly of the sale of tobacco throughout the Turkish Empire. Later on, in 1883, the Public Debt farmed out its rights to an Ottoman limited company, the “Régie Co-intéressée des Tabacs de l’Empire,” formed by a financial consortium including three groups: the Imperial Ottoman Bank, which was a Franco-English concern; the German group of the B. Bleichröder Bank; and the Austrian group of the Kredit Anstalt with a capital of 100 million francs. Only one-half of this capital was paid up—_i.e._, 50 million francs—which was cut down to 40 million francs on November 28, 1899, to make up for the losses of the first three years. It is thought in French financial circles that half this capital—viz., 20 million francs—is French, and the rest chiefly Austrian.

The “Régie,” whose activities extend throughout the Empire, may be looked upon as one of the most important financial concerns of the Ottoman Empire. It has branches in all the chief centres, controls the cultivation of tobacco, records the production, buys native and foreign tobaccos, issues licences for the sale of tobacco, and advances money to the growers; its chief factories are at Samsun, Aleppo, Adana, Smyrna, etc. In return for the monopoly it enjoys, it owes the Public Debt a fixed yearly payment, and has to divide a fixed proportion of its net profits between the Public Debt and the Ottoman Government.

The share of France in the Council of the Public Debt, in which French was the official language, gave her a paramount influence and prestige in the Ottoman Empire. Owing to the importance and extent of the part played by the Council of the Debt, in which the influence of France was paramount, the latter country indirectly acquired an influence in the administration of the _Malié_—_i.e._, in the administration of the Turkish treasury—and in this way Turkey was obliged on several occasions to call for the advice of French specialists for her financial reorganisation.

But the Ottoman Government, in order to consolidate its floating debt, which had not been included in the previous liquidation, was soon compelled to borrow money abroad. Besides, it wanted to construct a system of railways at that time.

The loan guaranteed by the customs duties in 1886, the Osmanie loan in 1890, the 4 per cent. Tombac preferential loan in 1893, the Eastern Railway loan in 1894, the 5 per cent. 1896 loan, and the 4 per cent. 1901 loan, were all floated in France, and the English had no share in the financial operations between 1881 and 1904.

During the same period Germany, through the Deutsche Bank, took up the Fishery loan in 1888 and the 4 per cent. Baghdad Railway loan in 1903. Later on the German financial companies, together with the Deutsche Bank, gave Turkey as much support as the French banks, in order to promote Pan-Germanism in the East and oust French influence. The chief financial operations carried on by these companies were the Baghdad Railway loan, the Tejhizat loan for the payment of military supplies, and the 1911 loan, which were both a guarantee and an encouragement for the German policy of penetration in Turkey, and paved the way to a Germano-Ottoman understanding.

France continued to subscribe all the same, from 1903 to 1914, to six of the twelve Turkish loans raised by the Ottoman Government; four others were taken up by Germany, another by England, and the sixth—the 4 per cent. 1908 loan—was issued one-half in France, one-fourth in Germany, and one-fourth in England. In 1914, as a reward for issuing a loan of 800 million francs in Paris—the first slice being 500 million—France obtained the settlement of several litigious cases and new concessions of railways and ports.

At the outbreak of the war, the external debt of Turkey, including the Unified Debt and other loans, amounted to 3½ milliards of francs, whereas the Turkish revenue hardly exceeded 500 million francs. One-third of this sum went to the sinking fund of the external debt, of which, roughly speaking, France alone owned nearly 60 per cent., Germany nearly 26 per cent., and England a little more than 14 per cent.

In addition to this, in the sums lent to Turkey by private companies, the share of France was about 50 per cent.—_i.e._, over 830 million francs; that of Germany rose to 35 per cent.; and that of England a little more than 14 per cent.

Foreign participation in the great works and the various economic or financial concerns in Turkey may be summed up as follows:

+----------+----------+---------- | _France._|_England._|_Germany._ -------------------------+----------+----------+---------- Banks | 37·7 | 33·3 | 28·0 Railways | 46·9 | 10·4 | 46·6 Ports and wharves | 67·9 | 12·2 | 19·7 Water | 88·6 | — | 11·3 Mines | 100·0 | — | — Various concerns | 62·8 | 24·1 | 13·0 -------------------------+----------+----------+---------- Total per cent. | 50·5 | 14·3 | 35·0 Capital (million Francs) | 830 | 235 | 575 -------------------------+----------+----------+----------

Not only had France an important share in the organisation of Turkish finances, but had opened three banks while the English established but one, the National Bank of Turkey, which holds no privilege from the State, and is merely a local bank for business men. Two German banks—the Deutsche Orient Bank and the Deutsche Palästina Bank, founded almost as soon as Germany began to show her policy regarding Turkish Asia—had turned their activity towards Turkey, as we have just seen.

France incurred an outlay of 550 million francs—not including the sums invested in companies which were not predominantly French, such as the Baghdad Railway—for the building of 1,500 miles of railway lines, while the Germans built almost as many, and the English only 450 miles; and France spent 58 million francs for the ports, whereas the English only spent 10 million francs.

The railway concessions worked by French capital included the Damascus-Hama line, which afterwards reached Jaffa and Jerusalem; the tramways of Lebanon; the Mudania-Brusa line; the Smyrna-Kassaba railway; the Black Sea railways which, according to the 1914 agreement, were to extend from Kastamuni to Erzerum, and from Trebizond to Kharput, and be connected with the Rayak-Ramleh line—viz., 1,600 miles of railway altogether in Syria; the Salonika-Constantinople line.

Before the London treaty, the Eastern railways in European Turkey, representing 600 miles, were worked by Austro-German capital, and the Salonika-Monastir line, 136 miles in length, had a German capital of 70 million francs.

The concessions with German capital in Asia Minor formed a complete system of railways, including the Anatolian railways, with a length of 360 miles and a capital of 344,500,000 francs; the Mersina-Tarsus-Adana line, 42 miles, capital 9,200,000 francs; the Baghdad Railway, whose concession was first given to the Anatolian railways but was ceded in 1903 to the Baghdad Railway Company, and which before the war was about 190 miles in length.

As the building of this system of railways closely concerned the French companies of the Smyrna-Kassaba and Beyrut-Damascus railways and the English company of the Smyrna-Aidin railway, the French companies and the Ottoman Imperial Bank concluded arrangements with the holders of the concessions to safeguard French interests as much as possible. Thus a French financial group took up a good many of the Baghdad bonds (22,500 and 21,155 bonds) and numerous shares of the “Société de construction du chemin de fer” established in 1909. On the whole, the share of the French consortium before the war amounted to 4,000,000 francs on the one hand, and 1,950,000 francs on the other; the share of the German consortium was 11,000,000 and 8,050,000 francs.

The concessions controlled by English capital were the Smyrna-Aidin line, 380 miles long, with a capital of 114,693,675 francs, and the Smyrna-Kassaba line, which was ceded later on to the company controlled by French capital which has already been mentioned. They were the first two railway concessions given in Turkey (1856 and 1863).

In Constantinople the port, the lighthouses, the gasworks, the waterworks, and the tramways were planned and built by French capital and labour.

The port of Smyrna, whose concession was given in 1867 to an English company and two years after passed into the hands of some Marseilles contractors, was completed by the “Société des quais de Smyrne,” a French limited company. The diversion of the Ghedis into the Gulf of Phocea in order to prevent the port being blocked up with sand was the work of a French engineer, Rivet.

The Bay of Beyrut has also been equipped by a French company founded in 1888 under the patronage of the Ottoman Bank by a group of the chief French shareholders of the Beyrut-Damascus road and other French financial companies.

Moreover, according to the 1914 agreements, the ports of Ineboli and Heraclea on the Black Sea, and the ports of Tripoli, Jaffa, and Haïfa in Syria, were to be built exclusively by French capital. So it was with the intended concessions of the ports of Samsun and Trebizond.

At Beyrut a French group in 1909 bought up the English concession for the building of the waterworks and pipelines, and formed a new company. French capital, together with Belgian capital, also control the Gas Company, Tramway Company, and Electric Company of Beyrut. Only at Smyrna, where the gasworks are in the hands of an English company and the waterworks are owned by a Belgian company has France not taken part in the organisation of the municipal services.

Only the port of Haïdar-Pasha, the terminus of the Anatolian Railway, has been ceded by this company to a financial company whose shares are in German hands.

To these public establishments should be added such purely private industrial or commercial concerns as the Orosdi-Back establishments; the Oriental Tobacco Company; the Tombac Company; the “Société nationale pour le commerce, l’industrie et l’agriculture dans l’Empire ottoman”; the concession of Shukur-ova, the only French concession of landed property situated in the Gulf of Alexandretta on the intended track of the Baghdad Railway, including about 150,000 acres of Imperial land, which represent an entirely French capital of 64 million francs; the Oriental Carpet Company, which is a Franco-British concern; the Joint Stock Imperial Company of the Docks, Dockyards, and Shipbuilding Yard, which is entirely under British control, etc.

During the war, the share of France and that of England were increased, as far as the Public Debt is concerned, by the amount of the coupons which were not cashed by the stockholders of the Allied countries, while the holders of Ottoman securities belonging to the Central Powers cashed theirs.

Beyond this, Turkey borrowed of Germany about 3½ milliards of francs. An internal loan of 400 million francs had also been raised. To these sums should be added 2 milliards of francs for buying war supplies and war material, and the treasury bonds issued by Turkey for her requisitions, which cannot be cashed but may amount to about 700 million francs. As the requisitions already made during the Balkan wars, which amounted to 300 or 400 million francs, have not yet been liquidated, the whole Turkish debt may be valued at over 10 billion francs.

Finally, in the settlement of the Turkish question, the war damages borne by the French in Turkey should also be taken into account, which means an additional sum of about 2 milliards of francs.

The French owned in Turkey great industrial or agricultural establishments, which were wholly or partly destroyed. At Constantinople and on the shores of the Marmora alone they had about fifty religious or undenominational schools, which were half destroyed, together with everything they contained, perhaps in compliance with the wishes of Germany, who wanted to ruin French influence for ever in that country.

In order to keep up French influence in the East, the High Commissioner of the Republic had, in the early days of the armistice, warned his Government it was necessary to provide a fund at once to defray the expenses of the schools and other institutions established by the French in Turkey in pre-war time—which sums of money were to be advanced on the outstanding indemnity. For want of any existing law, this request could not be complied with; but, as will be seen later on, the Peace Treaty, though it says nothing about this urgent question, states that the indemnities due to the subjects of the Allied Powers for damages suffered by them in their persons or in their property shall be allotted by an inter-Allied financial commission, which alone shall have a right to dispose of Turkish revenue and to sanction the payment of war damages. But all this postpones the solution of the question indefinitely.

In the settlement of the Turkish question, the chief point is how Turkey will be able to carry out her engagements, and so, in her present condition, the policy which England and America, followed by Italy and France, seem to advocate, is a most questionable one.

Javid Bey has even published an account of the condition of Turkey, in which he finds arguments to justify the adhesion of his country to the policy of Germany.

Nevertheless it seems that Turkey, where the average taxation is now from 23 to 25 francs per head, can raise fresh taxes. The revenue of the State will also necessarily increase owing to the increase of production, as a tithe of 10 to 12 per cent. is levied on all agricultural produce. Finally, the building of new railway lines and the establishment of new manufactures—to which, it must be said, some competing States have always objected for their own benefit but to the prejudice of Turkey—would enable her to make herself the manufactured goods she bought at a very high price before, instead of sending abroad her raw materials: silk, wool, cotton, hemp, opium, etc.

The soil of Turkey, on the other hand, contains a good deal of mineral and other wealth, most of which has not been exploited yet. There is a good deal of iron in Asia Minor, though there exists but one iron-mine, at Ayasmat, opposite to Mitylene, the yearly output of which is only 30,000 tons. The most important beds now known are those of the Berut Hills, north of the town of Zeitun, about fifty miles from the Gulf of Alexandretta, which may produce 300,000 tons a year. Chrome, manganese, and antimony are also found there.

There is copper everywhere in the north, in thin but rich layers, containing 20 per cent. of metal. The chief mine, which is at Argana, in the centre of Anatolia, is a State property. A French company, the Syndicate of Argana, founded for the prospecting and exploitation of the copper concessions at Argana and Malatia, and the concessions of argentiferous lead at Bulgar-Maden, had begun prospecting before the war.

Lead, zinc, and silver are found, too, in the Karahissar area, where is the argentiferous lead mine of Bukar-Dagh, once a State property. Before the war a French company of the same type as the one above mentioned, the Syndicate of Ak-Dagh, had obtained the right to explore the layers of zinc and argentiferous lead in the vilayet of Angora. The mines of Balia-Karaidin (argentiferous lead and lignite) lying north-east of the Gulf of Adramyti in the sanjak of Karassi, are controlled by French capital. The English syndicate Borax Consolidated has the concession of the boracite mines in the same sandjak.

The range of Gumich-Dagh, or “Silver Mountain,” contains much emery. At Eskishehr there are mines of meerschaum, and in the Brusa vilayet quarries of white, pink, and old-blue marble, lapis-lazuli, etc.

A few years ago gold layers were being exploited at Mender-Aidin, near Smyrna, and others have been found at Chanak-Kale, near the Dardanelles. Some gold-mines had been worked in Arabia in remote ages.

There are oil-fields throughout the peninsula, lying in four parallel lines from the north-west to the south-east. The best-known fields are in the provinces of Mosul and Baghdad, where nearly two hundred have been identified; others have also been found near the Lake of Van, and at Pulk, west of Erzerum, which are not inferior to those of Mesopotamia; and others fifty miles to the south of Sinope.

There are almost inexhaustible layers of excellent asphalt at Latakieh, on the slopes of the Libanus, and others, quite as good, at Kerkuk, Hit, and in several parts of Mesopotamia.

Finally, some coal-mines are being worked at Heraclea which are controlled by French capital, and coal outcrops have been found lately in the Mosul area near the Persian frontier, between Bashkala and Rowanduz and Zahku, close to the Baghdad Railway. But the treaty, as will be shown later on, is to deprive Turkey of most of these sources of wealth.