CHAPTER IV

THE SULTAN MORTGAGES HIS EMPIRE

THE GERMANS OVERCOME COMPETITION

During 1898 and 1899 the Ottoman Ministry of Public Works received many applications for permission to construct a railway to Bagdad. Whatever may have been thought later of the financial prospects of the Bagdad Railway there was no scarcity then of promoters who were willing and anxious to undertake its construction. It was not because of lack of competition that the _Deutsche Bank_ finally was awarded the all-important concession.

In 1898, for example, an Austro-Russian syndicate proposed the building of a railway from Tripoli-in-Syria to an unspecified port on the Persian Gulf, with branches to Bagdad and Khanikin. The sponsor of the project was Count Vladimir I. Kapnist, a brother of the Russian ambassador at Vienna and an influential person at the Tsar’s court. Count Kapnist had the support of Pobêdonostsev, the famous Procurator of the Holy Synod, who was an avowed Pan-Slavist and an enthusiastic promoter of Russian colonization in Asia Minor.[1] The Sultan instructed his Minister of Public Works to study the Kapnist plan and submit a report. The Austro-Russian syndicate, however, made no further progress at Constantinople. The Sublime Porte obviously was opposed to any expansion of Russian influence in Turkey—a point of view which received the encouragement of the British and German ambassadors. Furthermore, in Russia itself there was opposition to Count Kapnist’s project. Count Witte, Imperial Minister of Finance, and foremost political opponent of Pobêdonostsev, emphasized the strategic menace to Russia of improved railway transportation in Turkey and sturdily maintained that Russian capital and technical skill should be kept at home for the development of Russian railways and industry. By the spring of 1899 the Kapnist plan had been shelved.[2]

In the meantime French bankers had become interested in the possibilities of constructing a railway from the Mediterranean to the Persian Gulf, utilizing the existing railways in Syria as the nucleus of an elaborate system. Their spokesman was M. Cotard, an engineer on the staff of the Smyrna-Cassaba Railway. This project was possessed of such strong financial and political support at Constantinople that the _Deutsche Bank_ considered it best to negotiate for a merger with the French interests involved.[3] Accordingly conversations were held at Berlin early in 1899 between the _Deutsche Bank_ and the Anatolian Railway Company, on the one hand, and the Imperial Ottoman Bank and the Smyrna-Cassaba Railway, representing French interests, on the other. The result was an important agreement of May 6, 1899, the chief provisions of which were as follows:[4]

1. The _Deutsche Bank_ admitted the Imperial Ottoman Bank to participation in the proposed Bagdad Railway Company. German and French bankers were to be equally represented in ownership and control, each to be assigned 40% of the capital stock, the remaining 20% to be offered to Turkish investors. If British, or other capital were subsequently interested in the Company, the share of the new participants was to be taken from the German and French holdings in equal proportions.

2. A _modus vivendi_ was arrived at between the Anatolian and Smyrna-Cassaba Railways. The prevailing rate-war was to be stopped; a joint commission was to be appointed to agree upon a uniform tariff for the two companies; a junction of the two lines was to be effected and maintained at Afiun Karahissar for reciprocal through traffic.

3. In order to assure the faithful execution of the agreement between the Anatolian and Cassaba railways, each of the companies was to designate two of its directors to sit on the board of the other.[5]

4. French proposals for the construction of a Euphrates Valley railway were to be withdrawn.

5. The French and German bankers were to use their best offices with their respective governments to secure united diplomatic support for the claims of the _Deutsche Bank_ to prior consideration in the award of the Bagdad Railway concession.

This agreement temporarily removed all French opposition to the Bagdad Railway. M. Constans, the French ambassador at Constantinople, joined Baron Marschall von Bieberstein in cordial support of the new “Franco-German syndicate.”[6]

Competition had arisen, however, from a third source. During the summer of 1899 British bankers, represented in Constantinople by Mr. E. Rechnitzer, petitioned for the right to construct a railway from Alexandretta to Bagdad and the Persian Gulf. The terms offered by the British financiers were considered more liberal than any heretofore proposed,[7] and they were endorsed by the Ministry of Public Works. Mr. Rechnitzer enlisted the aid of Mahmoud Pasha, a brother-in-law of the Sultan. He secured the assistance of Sir Nicholas O’Connor, the British ambassador. He attended to the niceties of Oriental business by sending the Sultan and his aids costly presents.[8] He engineered an effective press campaign in Great Britain to arouse interest in his project. Just how much success Mr. Rechnitzer’s plan might have achieved on its own merits is an open question. It definitely collapsed, however, in October, 1899, when the outbreak of the Boer War diverted British attention and energies from the Near East to South Africa.[9] It was under these circumstances that the Sultan, on November 27, 1899, announced his decision to award to the _Deutsche Bank_ the concession for a railway from Konia to Bagdad and the Persian Gulf.[10]

The success of the Germans was not unexpected. They had a strong claim to the concession, for, in 1888 and again in 1893, the Sultan had assured the Anatolian Railway Company that it should have priority in the construction of any railway to Bagdad. On the strength of that assurance, the Anatolian Company had conducted expensive surveys of the proposed line.[11] After a short period of sharp competition for the concession in 1899, the _Deutsche Bank_ group was left in sole possession of the field—the Russian promoters had withdrawn because of lack of support at home; the French financiers had accepted a share in the German company in preference to sole responsibility for the enterprise; the British proposals had lost support when the Boer difficulty temporarily obscured all other issues. The diplomatic situation, furthermore, was distinctly favorable to the German claims. The Fashoda Affair and the serious Anglo-Russian rivalry in the Middle East had served to put Russia, France, and Great Britain at sixes and sevens, leaving Germans practically a free hand in the development of their interests in Asia Minor.

Aside from these purely temporary advantages, however, there were excellent reasons, from the Ottoman point of view, for awarding the Bagdad Railway concessions to the German Anatolian Railway Company. The usual explanations—that the soft, sweet-sounding flattery of William II overcame the shrewdness of Abdul Hamid; that Baron Marschall von Bieberstein dominated the entire diplomatic situation at the Porte; that the German military mission exerted a powerful influence in the final result—are more obvious than convincing. These were all contributing factors in the success of the Germans, but they were not determining factors. The reasons for the award of the concession to the _Deutsche Bank_ were partly economic, partly strategic, partly political.

The Germans alone submitted proposals which met the demands of the Public Debt Administration and the Ottoman Government. They proposed to extend the existing Anatolian Railway from Konia, across the mountains into Cilicia and Syria, down the valley of the Tigris to Bagdad and Basra and the Persian Gulf. The railway which they had in mind would reach from one end of Asiatic Turkey to the other; in connection with the railways of southern Anatolia and of Syria, it would provide continuous railway communication between Constantinople and Smyrna in the north and west, with Aleppo, Damascus, Beirut, Mecca, and Mosul in the south and east. There were serious technical and financial difficulties in the construction of such a railway, it is true, but there were political and economic considerations which warranted the expenditure of whatever effort and funds might be necessary to carry the line to completion.

On the other hand, the groups other than the Germans proposed the construction of a trans-Mesopotamian railway which did not come up to specifications. They submitted plans calling for the building of a line from some Mediterranean port—such as Alexandretta or Tripoli-in-Syria—down the Euphrates valley to the Persian Gulf.[12] Such a line would have had obvious advantages, from the point of view of the concessionaires, over the projected German railway. The cost of construction would have been materially less, for it would have been unnecessary to build the costly sections across the Taurus and Amanus mountains. The prospects of immediate earning power were better, for the railway would have been able to take over some of the caravan trade from Arabia to the Syrian coast and from Mesopotamia to Aleppo. From the Ottoman point of view, however, the proposal was altogether unsatisfactory. The railway would have developed the southern provinces of the empire without connecting them with Anatolia, the homeland of the Turks themselves and the heart of the Sultan’s dominions. It might have promoted a separatist movement among the Arabs. Its termini on the Mediterranean and the Persian Gulf could have been controlled by the guns of a foreign fleet. From every standpoint—economic, political, strategic—the acceptance of such a proposal was out of the question.

Even had all other things been equal, it is probable that the German bankers would have been given preference in the award of the concession. The Turkish Government was determined that the Anatolian lines should be made the nucleus of the proposed railway system for the empire. That being the case, no purpose, other than the promotion of confusion, would have been served by awarding the Bagdad plum to interests other than those which controlled the Anatolian Railway Company. This reasoning was fortified by the fact that the Company had made an enviable record in its dealings with the Ottoman Ministry of Public Works. The existing lines were well constructed and were being operated in a manner entirely satisfactory to the Ottoman Government and to the peasantry and business men of Anatolia. And M. Huguenin, Assistant General Manager of the Anatolian system, announced that his Company would observe a similar policy in the construction and operation of the proposed Bagdad Railway. “We are determined,” he said, “to build a model line such as exists nowhere in Turkey, able in all respects to undertake efficiently an international service involving high speeds over the whole line.”[13]

From the political point of view, too, there were reasons for giving preference to German capitalists. Abdul Hamid was seeking moral and material assistance for the promotion of his favorite doctrine of Pan-Islamism. He sought to foster this movement, which looked toward the unification of Islamic communities for resistance to Christian European domination over the Moslem world. As Caliph of the Mohammedan world, Abdul Hamid placed himself at the head of those defenders of the faith who had been propagating the idea that Mussulmans everywhere must resist further Christian encroachment and aggression, be it political, economic, religious, cultural. That the Sultan’s primary motives were religious is doubtful. Apparently he believed that the Pan-Islamic movement could be utilized to the greater glory of his dynasty and his empire. As the tsars of Russia had utilized their position as head of the Orthodox Church for the purpose of strengthening the power of the autocracy, so Abdul Hamid proposed to exploit his position as Caliph for purposes of personal and dynastic aggrandizement.[14]

In awarding the Bagdad Railway concession, which was of such considerable economic and political importance, it was essential to choose the nationals of a power which would be sympathetic toward Pan-Islamism. Would it be Russia, whose tsars had set fires in Afghanistan, sought to destroy the independence of Persia, and threatened all of the Middle East? Would it be Great Britain, whose professional imperialists were holding in subjection more than sixty million Mohammedans in India alone? Would it be France, whose soldiers controlled the destinies of millions of Mussulmans in Algeria and Tunis? These nations could have no feeling for Pan-Islamism other than fear and hatred,[15] for it threatened their dominion over their Moslem colonies. Germany, however, had everything to gain and nothing to lose in lending support to Abdul Hamid’s Pan-Islamic program. She had practically no Mohammedan subjects and therefore had no reason to fear Moslem discontent. She had imperial interests which might be served by the revolt of Islam against Christian domination.[16]

Turkish patriots, as well as Moslem fanatics, would have preferred to see Germans favored in the award of economic concessions in the Ottoman Empire. The Germans came to Turkey with clean hands. Their Government had never despoiled the Ottoman Empire of territory and appeared to have no interests which could not be as well served by the strengthening of Turkey as by its destruction. On the other hand, Russia, traditional enemy of the Turks, sought, as the keystone of her foreign policy, to acquire Constantinople and the Straits. France, by virtue of her protectorate over Catholics in the lands of the Sultan, sought to maintain special privileges for herself in Syria and the Holy Land. Great Britain held Egypt, a nominal Turkish dependency, and was fomenting trouble for the Sultan in the region of the Persian Gulf.[17] Germany, it appeared, was the only sincere and disinterested friend of the Ottoman Empire!

The rising prestige of Germany in the Near East and the rapid expansion of German economic interests in Turkey, however, did not, during these crucial years of 1898–1900, arouse the fear or the cupidity of other European powers. Russia, it is true, objected for strategic reasons to the construction of the proposed Bagdad Railway _via_ the so-called “northern” or trans-Armenian route from Angora. But when the Tsar was assured by the Black Sea Basin Agreement that a southern route from Konia would be substituted, M. Zinoviev, the Russian minister at Constantinople, withdrew his formal diplomatic protest.[18] The French Government adopted a policy of benevolent neutrality toward the claims of the _Deutsche Bank_ for the concession, on the ground that the Imperial Ottoman Bank, representing powerful financial interests in Paris, was to be given a substantial participation in the proposed Bagdad Railway Company. The pact of May 6, 1899, between the German and French promoters satisfied even M. Delcassé![19]

In Great Britain, likewise, there was the friendliest feeling toward the German proposals. When the Kaiser made his second visit to the Near East in 1898 the London _Times_ said: “In this country we can have nothing but good wishes for the success of the Emperor’s journey and for any plans of German commercial expansion which may be connected with it. Some of us may perhaps be tempted to regret lost opportunities for our own influence and our own trade in the Ottoman dominions. But we can honestly say that if we were not to have these good things for ourselves, there are no hands we would rather see them in than in German hands.”[20] _The Morning Post_ of August 24, 1899, expressed the hope that no rivalry over the Bagdad Railway would prejudice the good relations between Great Britain and Germany. “So long as there is an efficient railway from Haidar Pasha to Bagdad, and so long as the door there is open, it should not really matter who makes the tunnels or pays the porters. If it should be necessary to insist on an open door, the Foreign Office will probably see to it; while if it should happen to be, as usual, asleep, there are always means of poking it up. As a matter of general politics it may not be at all a bad thing to give Germany a strong reason for defending the integrity of Turkey and for resisting aggression on Asia Minor from the North.”

Sympathetic consideration of German expansion in the Near East was not confined to the press. Cecil Rhodes, great apostle of British imperialism, visited Germany in the spring of 1899 and came away from Berlin favorably disposed toward the Bagdad Railway and none the less pleased with the Kaiser’s apparent enthusiasm for the Cape-to-Cairo plan. In November of the same year William II paid a royal visit to England. It was then that Joseph Chamberlain, Secretary for the Colonies, learned the details of German plans in the Ottoman Empire, but, so far from being alarmed, he publicly announced his belief in the desirability of an Anglo-German entente. The almost simultaneous announcement of the award of the preliminary Bagdad Railway concession met with a favorable reception from the British press.[21]

At the same time, however, less cordial sentiments were expressed toward Russia and France. There was general agreement among the London newspapers regarding at least one desirable feature of the Bagdad Railway enterprise: the discomfiture it would be certain to cause the Tsar in his imperial ambitions in the Near East. _The Globe_ characterized as “impudence” the desire of Russia to regard Asiatic Turkey as “a second Manchuria.”[22] No love was being lost, either, on France. _The Daily Mail_ of November 9, 1899, said: “The French have succeeded in wholly convincing John Bull that they are his inveterate enemies. England has long hesitated between France and Germany. But she has always respected German character, while she has gradually come to feel scorn for France. Nothing in the nature of an _entente cordiale_ can exist between England and her nearest neighbor. France has neither courage nor political sense.”

THE BAGDAD RAILWAY CONCESSION IS GRANTED

It was almost three years after the Sultan’s preliminary announcement of the Bagdad concession that the imperial decree was issued. During the interval the German technical commission was completing its survey of the line; details of the concession were being arranged between Zihni Pasha, Minister of Public Works, and Dr. Kurt Zander, General Manager of the Anatolian Railway Company; Dr. von Siemens was working out plans for the financing of the enterprise. Finally, on March 18, 1902, an imperial _iradé_ of Abdul Hamid II definitely awarded the Bagdad Railway concession to the Anatolian Railway Company.[23]

The Constantinople despatches announcing the Sultan’s award met with a varied reception. In Germany, of course, there was general satisfaction and, in some quarters, jubilation. The Kaiser telegraphed his personal thanks to the Sultan. In Vienna, the semi-official _Fremdenblatt_ expressed the opinion that “the construction of the railway would be an event of the greatest economic and political importance and would materially strengthen Turkey’s power of resistance.”[24] M. Delcassé, French Minister of Foreign Affairs, interpolated in the Chamber, informed the Deputies that, whether one liked it or not, the convention was a _fait accompli_ which France must accept, particularly because French capitalists were associated with the German concessionaires in the enterprise.[25] The Russian Government was silent at the time, although two months before M. Witte had informed the press that he saw no reason for granting financial assistance or diplomatic acquiescence to a possible competitor of Russian trans-Asiatic railways.[26]

In England there was very little opposition, but much friendly comment, on the German plans. Earl Percy expressed the hope that Great Britain would do nothing to interfere with the construction of the Bagdad Railway. “Germany,” he told the House of Commons, “is doing for Turkey what we have been doing for Persia, for the social improvement and material welfare of native races; and in the struggle between the Slavonic policy of compelling stagnation and the Teutonic policy of spreading the blessings and enlightenment of civilization, the victory will lie with those nations which are striving, selfishly or unselfishly, consciously or unconsciously, to fulfil the high aims which Providence has entrusted to the imperial races of Christendom.” Lord Cranborne, Under-Secretary for Foreign Affairs, announced that, although the Government had every intention of maintaining the _status quo_ in the Persian Gulf, it would not otherwise interfere in the project for a German-owned trans-Mesopotamian railway. Lord Lansdowne, Secretary for Foreign Affairs, informed the French and German ambassadors at London that His Britannic Majesty’s Government would not oppose the Bagdad enterprise, particularly if British capital were invited to participate in its consummation.[27] This was taken as a definite promise, for English financiers already had been asked to take a share in the Bagdad Railway Company by purchase, _pro rata_, of portions of the holdings of the German and French interests.[28]

Although there was a noticeable lack of unanimity in European diplomatic circles, little or no reason existed in 1902 to believe that any determined resistance would be made to the consummation of the plans for the construction of the Bagdad Railway. The chief difficulties of the concessionaires seemed to be not political, but financial and administrative. The year 1902 was one of economic depression; in Germany, in particular, industrial and financial conditions were distinctly unfavorable for the flotation of a large bond issue such as would be required to raise funds for the construction of the Bagdad Railway. Certain of the minor provisions of the convention of 1902, furthermore, were unsatisfactory to the financiers of the project. The concession for the lines beyond Konia had been granted to the Anatolian Railway Company without privilege of assignment to any other corporation. This meant that any participation of outside capital in the new Bagdad Railway would, of necessity, involve participation in the profits of the Anatolian lines already in operation—a prospect by no means pleasing to the original promoters. Furthermore, there was some question as to the advisability of placing under a single administrative head all of the line and branches from Constantinople to the Gulf.[29]

It was because of these difficulties, financial and administrative, that the _Deutsche Bank_ marked time until March 5, 1903, when a revised Bagdad Railway convention was executed and plans were perfected for the financing of the first section of the line. It is to this Great Charter of the Berlin-to-Bagdad plan that we now must turn our attention.[30]

The definitive convention of 1903 provided that the existing Anatolian lines were to continue in the possession of their owners; the construction and operation of the new railway beyond Konia was to be vested—without right of cession, transfer, or assignment—in a new corporation, the Bagdad Railway Company. This new company was incorporated under Turkish law on March 5, 1903, with a capital stock of fifteen million francs, of which the Anatolian Railway Company subscribed ten per cent. Continued Turco-German control of the railway enterprise was assured by a provision of the charter that of the eleven members of the Board of Directors, three should be appointed by the directors of the Anatolian Railway Company, and at least three others should be Ottoman subjects.[31]

It was apparent that the Ottoman Government expected big things of the German concessionaires and their French associates. The new convention provided, first, for the construction of a great trunk line from Konia, southeastern terminus of the existing Anatolian Railways, to the Persian Gulf. This was to be the Bagdad Railway proper, but the concession carried with it, also, the privilege of constructing important branches in Syria and Mesopotamia. With all its proposed tributary lines completed, the Railway would stretch from the Bosporus to the Persian Gulf and from the Mediterranean to the frontiers of Persia. Second, it was stipulated that the Anatolian Railway Company should effect any necessary improvements on its lines to make possible the early initiation of a weekly express service between Constantinople and Aleppo and the operation of fortnightly express trains to Bagdad and the Persian Gulf as soon as the lines should be completed. The Anatolian concessions were extended for a period of ninety-nine years from 1903 to make them coincident with the new concession. The concessionaires were obliged to make all improvements and to complete all new construction by 1911, it being understood, however, that this time limit might be extended in the event of delays by the Government in the execution of the financial arrangements or in the event of _force majeure_—the latter specifically including, not only a European war, but any radical change in the financial situation in Germany, England, or France.[32]

THE LOCOMOTIVE IS TO SUPPLANT THE CAMEL

The Bagdad Railway was to revive the “central route” of medieval trade—to traverse one of the world’s historic highways. It was to bring back to Anatolia, Syria, and Mesopotamia some of the prosperity and prestige which they had enjoyed before the explorations of the Portuguese and Spaniards had opened the new sea routes to the Indies.[33]

The starting point of the new railway was to be Konia. This town of 44,000 inhabitants, situated high in the Anatolian plateau, was a landmark in the Near East. It was once the capital of the Seljuk Turks and during its heyday had been a crossroads of the caravan routes of Asia Minor. Along one of these old routes to the northwest ran the Anatolian Railway, with which the Bagdad line was to be linked. From Konia the new railway was to cross the Anatolian table-lands, at an average altitude of 3500 feet, passing through the towns of Karaman and Eregli. Just beyond the latter town are the foothills of the Taurus, the first of the mountain barriers between Asia Minor and the Mesopotamian valley. In crossing the Taurus range the railway was to pass through the famous Cilician Gates, down the eastern slope into the fertile Cilician plain. At Adana, center of the trade of this region, a junction was to be effected with the existing railway to Mersina, a small port on the Mediterranean.[34]

Formidable engineering difficulties faced the succeeding stretch of the railway. Beyond Adana stood the second mountain barrier of the Amanus range, through which there was no natural pass, and it was apparent that costly blasting and tunneling would be required before the hills could be pierced.[35] Once beyond the mountains the railway could be carried quickly to Aleppo, a city of 128,000, “the emporium of northern Syria,” and a meeting place for the Mesopotamian, Syrian, and Anatolian trade-routes. At this point connections were to be established with the important railways of Syria, providing direct communication with Hama, Homs, Tripoli-in-Syria, Beirut, Damascus, Jaffa, and Jerusalem. In fact, enthusiastic Syrians have prophesied that when all projected transcontinental railways are completed in Europe, Asia, and Africa, Aleppo will become “the crossroads of the world”—a junction point for rail communication between Berlin and Bagdad, Calais and Calcutta, Bordeaux and Bombay, Moscow and Mecca, Constantinople and Cairo and Cape Town.[36] Seventy miles away from Aleppo, along one of the few good wagon roads in Turkey, lay the important Mediterranean port of Alexandretta. Leaving Aleppo, the Bagdad Railway was to turn east, crossing a desert country, to Nisibin and to Mosul, on the Tigris. From this sector of the railway it was proposed to construct several short spurs into the Armenian foothills, as well as a longer branch from Nisibin to Diarbekr and Kharput.

The city of Mosul is the northern gateway to the Mesopotamian valley, the “Land of the Two Rivers.” In medieval times it was a center of caravan routes between Persia, Mesopotamia, Syria, and Anatolia, and once was famed for its textile manufactures, which produced a cloth named after the city, “muslin.” It is located on the site of a suburb of the ancient city of Nineveh and guards a high pass leading through the mountains into Armenia. In 1903 it had a population of 61,000 and bade fair, after the completion of the Bagdad Railway, to regain some of its lost lustre. South and southeast of Mosul flows the Tigris River all the way to the Persian Gulf. Along the valley of this river was to run the new railway, through the towns of Tekrit, Samarra, and Sadijeh, to Bagdad.[37]

In 1903 the splendor of the ancient city of Bagdad was very much dimmed. Although it still was the center of an important caravan trade with Persia, Arabia, and Syria, its prosperity was but a name compared with the riches which the city had enjoyed before the commercial revolution of the sixteenth century. The population of 145,000—in part nomad—was to a large extent dependent upon the important export trade in dates and cereals, amounting, in 1902, to almost £1,000,000. All told, the trade of Bagdad was valued at about £2,500,000 annually. Whether the shadow of the former great Bagdad could be transformed into a living thing was an open question.[38]

Five hundred miles south of Bagdad is the Persian Gulf,[39] the proposed terminus of the Bagdad Railway. About sixty miles north of the Gulf, located on the Shatt-el-Arab—the confluence of the Tigris and Euphrates Rivers—is the port of Basra, the outlet for the trade of Bagdad. Communication between these two Mesopotamian cities was carried on, in 1903, by means of a weekly steamer service operated by the English firm of Lynch Brothers, under the name “The Euphrates and Tigris Steam Navigation Company, Ltd.” The Lynch Brothers—typical British imperial pathfinders—had established themselves at Basra during the decade 1840–1850 and had succeeded during the following half-century in securing a practical monopoly of the river trade from Bagdad to the Persian Gulf. The absence of effective competition and the hesitancy of the Turkish Government to grant permission for the operation of additional steamers were responsible for a totally inadequate service. It was not uncommon for freight to stand on the wharves at Bagdad and Basra for three months or more awaiting transportation. Under these circumstances it was to be expected that freight charges would be exorbitant; it cost more to transfer cargoes from Bagdad to Basra than from Basra to London. The advent of the Bagdad Railway promised great things for the trade of lower Mesopotamia and Persia.[40]

It was the aim of the Turkish Government and the concessionaires not only to compete with the river trade of the Tigris, but to develop the Euphrates valley as well, there being no steamer service on the latter river. With this in mind, it was decided to divert the railway beyond Bagdad from the Tigris to the Euphrates and down the valley to Basra. For a time Basra was to mark the terminus of the railway; the concession made provision, however, for the eventual construction of a branch “from Zubeir to a point on the Persian Gulf to be agreed upon between the Imperial Ottoman Government and the concessionaires.”[41]

Of considerable importance was a proposed branch line from Sadijeh, on the Tigris, to Khanikin, on the Persian frontier. This railway, it was believed, would take the place of the existing caravan route from Bagdad to Khanikin and thence to Teheran. The annual value of British trade alone transported _via_ this route was estimated at about three quarters of a million pounds sterling.[42]

The Bagdad Railway, as thus projected, was one of the really great enterprises of an era of dazzling railway construction. Here was a transcontinental line stretching some twenty-five hundred miles from Constantinople, on the Bosporus, to Basra, on the Shatt-el-Arab—a project greater in magnitude than the Santa Fé line from Chicago to Los Angeles or the Union Pacific Railway from Omaha to San Francisco.[43] It was a promise of the rejuvenation of three of the most important parts of the Ottoman Empire—eastern Anatolia, northern Syria, and Mesopotamia. It was to open to twentieth-century steel trains a fifteenth-century caravan route. It was to replace the camel with the locomotive.

THE SULTAN LOOSENS THE PURSE-STRINGS

There are special and peculiar problems connected with the construction of railways in the economically backward areas of the world. In well populated regions, such as western Europe, railways have been built to accommodate existing traffic; in sparsely populated regions, such as eastern Russia and western United States, they have been constructed chiefly to create new traffic. In the economically advanced countries of the world the railway has been the result of civilization; in the backward countries it has been the outpost of civilization. A new railway in an undeveloped region is obliged at the outset to concern itself mainly with the upbuilding of the territory through which it runs, in order to assure abundant traffic for the future; during this period its receipts are rarely, if ever, adequate to meet the costs of operation. Private capital cannot be expected to assume alone the risk and burden thus involved, but the public service which the railway renders during this critical time justifies the government in subsidizing the enterprise until it can become self-supporting. The granting of state subventions has been a common practice of the nineteenth and twentieth centuries. China time and time again has pledged national revenues in support of railway construction; the Latin-American countries have been conspicuous exemplars of the same practice; more than half of the railways of Russia were constructed with government funds.[44]

There was every reason to believe that the Bagdad Railway would be built with some system of state guarantees. Almost every railway in Asiatic Turkey at one time or another had been the recipient of a government subvention, and the proposed trans-Mesopotamian railway faced many more obstacles than had faced any then in operation. The provinces through which the Bagdad Railway was to pass were sparsely settled and were too backward, economically, to warrant the construction of a railway for the accommodation of existing traffic;[45] the German technical commission of 1899 had pointed out that the estimated gross operating revenue for some years would be entirely inadequate to pay the expenses of running trains even if there should be an unlooked for volume of passenger and mail service to India. In time, it was believed, improved transportation and greater political security would induce immigration and produce widespread economic prosperity in the provinces of Anatolia, Syria, and Mesopotamia, thus assuring financial independence to the railway.[46] During the interim, however, a state guarantee appeared to be necessary.

Under the terms of the convention of 1903, the Turkish Government undertook partially to finance the construction of the Bagdad Railway. For each kilometre of the line built the Government agreed to issue to the Company the sum of 275,000 francs, nominal value, in Imperial Ottoman bonds, to be secured by a first mortgage on the railway and its properties.[47] The payment of interest and sinking fund on these bonds was to be guaranteed by the assignment to the Public Debt Administration for this purpose of the revenues of certain of the districts through which the railway was to pass. For the purpose of financing the first section of two hundred kilometres beyond Konia, there was delivered to the Company on March 5, 1903, an issue of fifty-four million francs of “Imperial Ottoman Bagdad Railway Four Per Cent Bonds, First Series.”[48] Similar payment for the construction of subsequent sections was to be made the subject of further agreement between the Government and the concessionaires.

In addition to supplying in this manner the actual funds for the building of the railway, the Ottoman Government guaranteed gross operating receipts of forty-five hundred francs annually for each kilometre of the line open to traffic. If the receipts failed to reach that sum, the Government was to reimburse the Company for the deficiency. If the receipts amounted to more than forty-five hundred francs per kilometre in any given year, the excess over that amount to ten thousand francs was to belong to the Government; any excess over and above ten thousand francs was to be divided sixty per cent to the Government, forty per cent to the Railway. The Government also agreed to reimburse the Company, in thirty annual payments of three hundred fifty thousand francs, for such improvements as might be necessary to prepare the Anatolian Railways for the initiation of a through express service to the Persian Gulf and, furthermore, to subsidize that express service at the rate of three hundred fifty thousand francs annually from the date of the completion of the main line to Aleppo.[49]

Closely connected with these financial guarantees were grants of public lands. Lands owned by the Government and needed for right-of-way were transferred to the concessionaires free of any charge. Additional land required for construction purposes might be occupied without rental as well as worked by the Company for sand and gravel. Wood and timber necessary for the construction and operation of the railway might be cut from State-owned forests without compensation. The concessionaires were permitted to operate mines within a zone twenty kilometres each side of the line, subject to such regulations as might be laid down by the Ministry of Public Works. As a public utility, the railway was granted the right of expropriation of such privately owned land as might be essential for the right-of-way, as well as quarries, gravel-pits, or other properties necessary for purposes of construction. The Company was authorized, also, to conduct researches for objects of art and antiquity along the route of the railway![50]

In the foregoing respects the Bagdad Railway Convention was by no means revolutionary in character. In issuing its bonds for the purpose of financing railway construction, in pledging public revenues as a guarantee of traffic receipts, in granting public lands for right-of-way, the Imperial Ottoman Government was following wellestablished precedents of the nineteenth century. The United States, for example, had adopted similar measures to encourage the building of transcontinental railways. To cite a single instance, Congress granted the promoters of the Union Pacific system a right-of-way through the public domain, twenty sections of land on each side of each mile of the railway, and a loan of bonds of the United States to an amount of fifty million dollars. Between 1850 and 1873 alone the Government transferred to the railways some thirty-five million acres of public lands, an area in excess of that of the State of New York.[51]

In certain other respects, however, the Bagdad Railway Convention was radical and far-reaching in its innovations. Worthy of first mention among its unusual provisions is the sweeping tax exemption granted the concessionaires by _Article 8_: “Manufactured material for the permanent way and materials, iron, wood, coal, engines, cars and coaches, and other stores necessary for the initial establishment as well as the enlargement and development of the railway and everything pertaining thereto which the concessionaires shall purchase in the empire or import from abroad shall be exempt from all domestic taxes and customs duties. The exemption from customs duties shall also be granted the coal necessary for the operation of the road, imported abroad by the concessionaires, until the gross receipts of the line and its branches reach 15,500 francs per kilometre. Likewise, during the entire period of the concession the land, capital, and revenue of the railway and everything appertaining thereto shall not be taxed; neither shall any stamp duty be charged on the present Convention or on the Specifications annexed thereto, the additional conventions, or any subsequent instruments; nor on the issue of Government bonds; nor on the amounts collected by the concessionaires on account of the guarantee for working expenses; nor shall any duty be levied on their stock, preferred stock and bonds, or on the bonds which the Imperial Ottoman Government shall issue to the concessionaires.” Thus the Bagdad Railway not only was assured of a subsidy constituting a preferred claim on certain taxes collected from the Turkish peasantry, but, in addition, was exempted from the payment of important contributions to the national revenue. The extent to which such an arrangement would confound confusion will be clear if one will recall that many other restrictions on the collection and disbursement of public funds were vested in the Ottoman Public Debt Administration.[52]

Incidental to the railway, the Bagdad Company was granted other valuable concessions. The corporation was given permission to establish and operate tile and brick works along the line of the railway. For the direct and indirect use of the railway and its subsidiary enterprises the Company was authorized to establish hydro-electric stations for the generation of light and power. The erection of necessary warehouses and depots was permitted as essential to the proper operation of the railway. The Anatolian Railway was empowered to provide for satisfactory ferry service between Constantinople and Haidar Pasha, in order to insure direct sleeping-car service from Europe to Asia and to provide other facilities for through traffic. All of these subsidiary projects were to enjoy the same exemption from taxation as the railway itself.[53]

The concessionaires were granted the right of constructing at Bagdad, Basra, and at the terminus on the Persian Gulf modern port facilities, including “all necessary arrangements for bringing ships alongside the quay and for the loading, unloading, and warehousing of goods.” During the period of the construction of the railway the Company was granted rights of navigation on the Tigris, the Euphrates, and the Shatt-el-Arab for the transportation of materials and supplies necessary to the building and operation of the main line and its branches.[54] These river and harbor concessions aroused the fear and the rage of the Lynch Brothers, who, as we shall see, were to be among the leaders of British opposition to the Bagdad Railway.[55]

These, then, were the outstanding economic provisions of the Bagdad Railway Convention of 1903. The Imperial Ottoman Government assumed the cost of the construction of the railway and, in addition, guaranteed a certain minimum annual return on each kilometre in operation. It pledged for these purposes the taxes of the districts through which the railway was to pass, and it deputed the Ottoman Public Debt Administration to collect these revenues and supervise payments to the concessionaires. As additional compensation to the Company it made large grants of public lands and conceded valuable privileges indirectly connected with the construction of the railway. In this manner the Sultan mortgaged his empire. But mortgages have their purposes, and Abdul Hamid hoped for big things from the Bagdad Railway.

SOME TURKISH RIGHTS ARE SAFEGUARDED

As mortgagor the Sultan was certain to insist upon the recognition and protection of certain rights. To assure observance by the concessionaires of their obligations under the convention, supervision over construction, operation, and maintenance of the railway was vested in the Ministry of Public Works, represented by two Imperial Railway Commissioners. As a guarantee of good faith the Company was obliged to deposit with a Constantinople bank a bond of £30,000, subject to release only upon the completion of the entire line. The Ottoman Government was determined, also, that the concession, far-reaching as were its implications, should not lead to additional extra-territorial rights, or “capitulations,” in favor of foreign powers. The concessionaires were forbidden to contract for the transportation of foreign mails, or to perform other services for the foreign post offices in Turkey, without the formal approval of the Ottoman Government. It was specified, also, that, inasmuch as the Anatolian and the Bagdad Railway Companies were Ottoman joint-stock corporations, all disputes and differences between the Government and the Companies, or between the Companies and private persons, “arising as a result of the execution or interpretation of the present Convention and the Specifications attached thereto, shall be carried before the competent Ottoman courts.” It was further provided that the concessionaires “must correspond with the State Departments in Turkish, which is the official language of the Imperial Ottoman Government!”[56]

The Government was sincere in its determination that the railway should become a powerful instrument in the economic development of the backward provinces of the empire. A significant clause specified that the section between Bagdad and Basra should not be placed in operation before the section between Konia and Bagdad should have been opened to traffic, although immediate operation of trains on the former section would have enabled the Company to compete with the valuable trade of the Lynch Brothers on the Tigris. The traffic between Bagdad and Basra would have been profitable and would thus have decreased by a considerable figure the total subsidies the Treasury might be obliged to pay for railway operation. It was of more immediate concern to the Turkish Government, however, that southern Mesopotamia should be connected by an economic and political link with the rest of the Sultan’s dominions. Elaborate regulations were laid down regarding a minimum train service which the Company was required to supply, and it was specified in this connection that Turkish mails, together with postal employees and officials, should be transported without charge and under such other conditions as the Government might stipulate. To forestall discriminatory treatment of passengers and shippers maximum rates were prescribed for all classes of traffic, including express, insurance, and similar supplementary services; it was decreed that “all rates, whether they be general, special, proportional, or differential, are applicable to all travelers and consignors without distinction”; the concessionaires were “formally prohibited from entering into any special contract with the object of granting reductions of the charges specified in its tariffs.”[57] This last provision was of the utmost importance, as it enabled Germans and Turks alike to point to the railway as an outstanding example of the economic “open door.”

One of the chief interests of the Turkish Government in the construction of the Bagdad Railway was the possibility of its utilization for military purposes. In time of peace for purposes of maneuvers or the suppression of rebellion, in time of war for purposes of mobilization, the Company was required, upon requisition of the military authorities, to place at the disposal of the Government its “entire rolling stock, or such as might be necessary, for the transportation of officers and men of the army, navy, police or gendarmerie, together with any or all equipment.” The Government undertook to maintain order along the line and to construct such fortifications as it might consider necessary to defend the railway against invading armies, and the Company was obliged to expend, under the direction of the Minister of War, a total of four million francs for the construction of military stations. To give effect to all of these provisions, a special military convention was to be drawn up and approved by the Company and the Minister of War.[58]

Upon the expiration of the concession all rights of the concessionaires in the railway, port works, and other subsidiary enterprises were to revert, free of all debt and liability, to the Imperial Government. In the meantime, a semblance of Turkish nationality was to be assured the enterprise by the stipulation that the railway employees and officials should wear the fez and such uniform as might be approved by the Government. It was contemplated, also, that within five years after the opening of each section to traffic the whole of the operating staff, except the higher officials, should be composed exclusively of Ottoman subjects.[59]

Appended to the Bagdad Railway Convention was a secret agreement binding the Company not to encourage or install foreign settlements or colonies in the vicinity of the Anatolian or Bagdad Railways.[60] Although the Sultan had mortgaged his empire, at least he was determined to retain possession![61]

BIBLIOGRAPHICAL AND EXPLANATORY NOTES

[1] On this point _cf._ M. Solovieff, _La Terre Sainte et la société impériale de Palestine_ (Petrograd, 1892). The society there referred to was said to be liberally patronized by the Tsar and other members of the imperial family.

[2] For details of the Kapnist plan see _The Times_ (London), December 17, 1898; _The Euphrates Valley Railway_—a prospectus (London, 1899).

[3] In a memorandum of June 10, 1899, to the Sultan, Dr. Kurt Zander, General Manager of the Anatolian Railway Company, said that, in accordance with the wishes of the Sultan—and “to avoid all obstacles and avert every possibility of opposition”—his Company sought to arrive at a satisfactory understanding with the Smyrna-Aidin and Smyrna-Cassaba railways. All proposals to the Smyrna-Aidin Company, however, “met with evasive answers, which finally resulted in a termination of negotiations.” _Cf._, also, E. Aublé, _Bagdad—son chemin de fer, son importance, son avenir_ (Paris, 1917), pp. 9 _et seq._

[4] For a copy of the text of this agreement the author is indebted to Mr. E. Rechnitzer. Summaries were published in _The Times_, August 10, 1899; _Le Temps_ (Paris), August 15, 1899; _Corps de droit ottoman_, Volume IV, pp. 155–156.

[5] In June, 1899, the Anatolian Railway Company elected to its Board of Directors M. L. Rambert, of the Imperial Ottoman Bank, and in June, 1900, M. Gaston Auboyneau, of the same institution. The new directors replaced Mr. George Henry Maxwell Batten, of London, and Sir Edward F. G. Law, of the Ottoman Public Debt Administration. The refusal of the Smyrna-Aidin line to come to a working agreement with the Anatolian Company thus removed the last British directors from the board of the latter. _Cf._ _Reports of the Anatolian Railway Company_, 1898–1900, _passim_.

[6] A letter from Mr. E. Rechnitzer to the Sultan, dated August 16, 1899, accuses M. Constans of having publicly referred to the “accord” between French and German interests in Turkish railways. Dr. Karl Helfferich states that the agreement between the two railway companies was supplemented by a gentlemen’s agreement between the two ambassadors. _Die Vorgeschichte des Weltkrieges_ (Berlin, 1919), p. 127. This would seem to be confirmed by André Chéradame, _op. cit._, pp. 48 _et seq._

[7] The proposals previously made called for an absolute guarantee of several thousands of francs income per kilometre per annum. Mr. Rechnitzer’s plan called for “an annual guarantee of 15,000 francs in gross receipts per kilometre, the said guarantee to be paid exclusively out of the excess of the tithes of the _vilayets_ through which the railway is to pass; it being understood that in the event that the excess of such tithes be not sufficient to defray the kilometric guarantee, the concessionaire shall have no redress against the Imperial Government on account of the insufficiency.” Memorandum of May 14, 1899, from Mr. Rechnitzer’s files. Although this plan had the great advantage of requiring no immediate payments from the Ottoman Treasury, it probably would have cost Turkey more in the long run, for the guarantee specified was excessively high. Compare with provisions of the Bagdad Railway concession of March, 1903, _infra_. Mr. Rechnitzer also asked for extensive port privileges in Alexandretta and in the port to be determined on the Persian Gulf. The chief features of the plan were outlined in a pamphlet published in London, July 29, 1899, entitled _The Euphrates Valley Railway_.

[8] Mr. Rechnitzer now has in his possession a beautiful watch—inlaid with a map of the Ottoman Empire, in precious stones, showing the route of the proposed Euphrates Valley Railway—which he presented to Abdul Hamid in 1899. He repurchased it at a public auction held in Paris after the Young Turk revolution of 1909.

[9] In a letter dated September 30, 1922, to the author Mr. Rechnitzer outlines the situation as follows: “My offer being much more favorable than that of the Germans, it seemed likely in August, 1899, that it would be accepted. Unfortunately the Transvaal War broke out in the autumn of that year, and the German Emperor, a few days after the declaration of war, specially came to London to ask our Government to give him a free hand in Turkey. It appears that there was an interview between the Emperor and Mr. Joseph Chamberlain, who was more interested in Cecil Rhodes’ scheme in Africa than in my scheme in Turkey. As a consequence Sir Nicholas O’Connor was instructed to inform the Turkish Government that the British Government’s support was withdrawn from my offers.” It is only fair to add, however, that there may have been other factors in the situation. _The Financial News_ (London), of August 17, 1899, intimated that Mr. Rechnitzer’s proposal did not have sufficiently strong financial backing; that it was more Austrian than British; that the support of the British Government was more formal than whole-hearted.

[10] _Report of the Anatolian Railway Company_, 1899, pp. 9–10; _The Annual Register_, 1899, p. 292. Simultaneously the Sultan granted the _Deutsche Bank_ group a concession for the construction of port and terminal facilities at Haidar Pasha, across the Straits from Constantinople. Sweeping privileges were granted for the building of docks, stations, sidings, and quays to a subsidiary of the Anatolian Railway, the Haidar Pasha Port Company. The latter company completed a handsome station and terminal at Haidar Pasha in 1902, the year before the definitive Bagdad Railway concession. Furthermore, it entered into close coöperation with the Mahsoussie Steamship Company, a Government-owned company operating a ferry service between Constantinople and the Asiatic side of the Straits; in this manner adequate service was assured passengers and freight from European to Asiatic points. The text of the concession is to be found in _Corps de droit ottoman_, Volume III, pp. 342–351. _Cf._, also, _Report of the Anatolian Railway Company_, 1902, p. 8.

[11] _Supra_, pp. 31–34.

[12] The single exception was Mr. Rechnitzer’s plan, which provided that within five years of the award of the concession, the Sultan might require the construction of a spur from Alexandretta to Konia, on terms to be agreed upon between the Government and the concessionaire. The chief feature of Mr. Rechnitzer’s plan, however, unquestionably was the railway from Alexandretta to the Persian Gulf—_i.e._, the Syrian and Mesopotamian, not the Anatolian and Cilician, sections. Furthermore, there were political objectives connected with the Rechnitzer proposal which, however attractive to British imperialists, could not have been regarded with equanimity by the Sultan. The following are typical quotations from Mr. Rechnitzer’s prospectus: “It has long been the object of English statesmen to consolidate the position of England in the Persian Gulf, where British interests (both political and commercial) are now paramount. With a railway in this region controlled by British interests ... a very strong foothold would accrue to British influence” (p. 12). Among the advantages of the proposed railway are listed the following (pp. 17–18): “It will place under British control two important ports, one on the Mediterranean and the other on the Persian Gulf; it will strengthen British influence in Turkey and in the Persian Gulf, and indirectly, in Persia and Afghanistan; it will afford England powerful means of exercising her influence over the territory of Central Persia, and of establishing new commercial enterprises over an enormous area of unexploited country of exceptional wealth.”

[13] Quoted by A. D. C. Russell, “The Bagdad Railway,” in _The Fortnightly Review_, Volume 235 (1921), p. 312. _Cf._, also, _Corps de droit ottoman_, Volume IV, pp. 153 _et seq._

[14] Pan-Islamism started as a religious and cultural revival but rapidly took on political and economic significance. Later, in connection with Turkish nationalism (see _infra_, Chapter IX), it became a serious international problem. A short, popular discussion of the rise of Pan-Islamism is Lothrop Stoddard’s _The New World of Islam_ (New York, 1921), Chapters I, II, V. _Cf._, also, _Mohammedan History_, No. 57 of the Foreign Office Handbooks (London, 1920),