CHAPTER X

BARGAINS ARE STRUCK

THE KAISER AND THE TSAR AGREE AT POTSDAM

During the early days of November, 1910, William II entertained at the Potsdam palace his fellow sovereign Nicholas II, Tsar of all the Russias. He extended his royal hospitality, also, to the recently chosen foreign ministers of Germany and Russia respectively—Herr von Kiderlen-Waechter, next to the ambassador at Constantinople the Kaiser’s most competent expert on the tortuous affairs of the Near East; and M. Sazonov, subsequently to guide Russian foreign policy during the critical days of July, 1914. It was apparent even to the untutored that there was some political significance to the conference between the German Emperor and his distinguished guests, and the press was rife with speculation as to what the outcome would be. The answer was forthcoming on November 4, when it was announced that the Kaiser and the Tsar, with the advice and assistance of their foreign ministers, had reached an agreement on the Bagdad Railway question.

A short time later the terms of this Potsdam Agreement were made public. As outlined by the German Chancellor, with some subsequent modifications, they were as follows: 1. Germany recognized the Russian sphere of interest in northern Persia, as defined by the Anglo-Russian agreement of 1907, and undertook not to seek or support concessions for railways, roads, telegraphs, or other means of communication in the region; in other words, there was to be no change in the _status quo_. 2. Russia recognized the rights of the _Deutsche Bank_ in the Bagdad Railway and agreed to withdraw all diplomatic opposition to the construction of the line and to the participation of foreign capital therein. 3. Russia agreed to obtain from Persia, as soon as possible, a concession for the construction of a railway from Teheran, the capital city, to Khanikin, an important commercial city on the Turco-Persian frontier. This new railway was to be linked with a branch of the Bagdad system to be constructed in accordance with the terms of the concession of 1903 from Sadijeh, on the Tigris, to Khanikin. Both lines were to be planned for through international traffic. If, for any reason, the Russian Government should fail to build the proposed railway from Teheran to Khanikin, it was understood that German promoters might then apply for the concession. 4. The policy of the economic open door was to be observed by both nations. Russia agreed not to discriminate against German trade in Persia, and the two nations pledged reciprocal equality of treatment on the new railway lines from Sadijeh to Teheran.[1]

Russia had a great deal to gain and little to lose by the Potsdam Agreement. Whether Russia liked it or not, the Bagdad Railway had become a going concern, and there was every indication that another decade would see its completion. When finished, the Bagdad system, together with projected Persian lines, would provide Russian trade with direct communications with the Indies (_via_ Bagdad and the Persian Gulf) and with the Mediterranean (_via_ Mosul, Aleppo, and the Syrian coast). By the entente of 1907 with Great Britain the Tsar had renounced his imperial interests in southern Persia; therefore he had little to gain by a dog-in-the-manger attitude toward the development of Mesopotamia by the Germans. Under these circumstances continued resistance to the Bagdad Railway appeared to be short-sighted and futile. Cheerful acquiescence, on the other hand, might bring tangible diplomatic compensations. In addition, it has been suggested, Russian reactionaries were delighted at the prospect of a _rapprochement_ with Prussia, in which they saw the last strong support of a dying autocracy.[2]

From the German point of view the agreement with Russia was a diplomatic triumph. All that Germany conceded was recognition of Russia’s special position in Persia, which affected no important German interests and exerted no appreciable influence on the balance of power in the Near East. In return, German trade was to be admitted to the markets of Persia, heretofore an exclusively British and Russian preserve; the sphere of the Bagdad Railway was to be considerably enlarged; Russian political obstruction of the Bagdad enterprise was to cease. Russian objections had been the first stumbling block in the way of the Railway; Russian protests had been the instigation of French opposition; now Russian recognition held out high promise for the final success of the Great Plan. The first breach had been made in the heretofore solid front presented by the Entente.[3]

Outside of Germany and Russia, however, the Potsdam Agreement met with a heated reception. The Ottoman press complained that Turkey was being politely ignored by two foreign powers in the disposition of her rights. One Constantinople daily said it was a sad commentary on Turkish “sovereignty” that in an important treaty on the Bagdad Railway “there is no mention of us, as if we had no connection with that line, and we were not masters of Bagdad and Basra and the ports of the Persian Gulf.”[4] M. Hanotaux, a former French minister of foreign affairs, expressed his belief that “the negotiations at Potsdam have created a situation which, from every point of view, obliges us to ask, now, if Russia has dissolved the Triple Entente.”[5] Mr. Lloyd George delivered a particularly venomous attack upon Russia for having disregarded her diplomatic engagements, and he announced in clarion tones that this desertion from the ranks of the Entente—even if condoned by France—would not cause Great Britain to alter one iota her former policy.[6] The “Slav peril” appeared to be more keenly appreciated, for the moment, in France and England than in Germany!

M. Jaurès, the brilliant French Socialist parliamentarian, believed that the Potsdam Agreement was an admirable instance of the menace of the Russian Alliance to the security of France and the peace of Europe. During the course of a bitter debate in the Chamber of Deputies he confronted the Minister of Foreign Affairs, M. Pichon, with this dilemma: “What is the situation in which you find yourself? You are going to be faced, you already are faced, with a _fait accompli_, a Russo-German convention on the Bagdad question. What do you propose to do? Well, you may pursue an independent course and continue to oppose the Bagdad Railway. In that event you will be in the unenviable position of opposing Germany in an enterprise to which Russia—whose interests are more directly involved—has given her support. Or, on the other hand, you may subscribe with good grace to this enterprise which Russia commends to you. What then will be your situation? For some years France has successfully resisted the Bagdad Railway. If during this time we have sulked at the enterprise, it was not of our own choice, but out of regard for Russia, because Russia believed her interests to be menaced. In short, we arrive at this paradox. You have created an extremely delicate situation between France and Germany by opposing the Bagdad Railway, in which you had no interests other than those of Russia. And now it is this same Russia which, without previously consulting you, places at the disposal of Germany the moral advantage of compelling you—you who resisted only on behalf of Russia—to accede to the Bagdad Railway.” Was this the sort of ally to whom France should entrust her national safety?[7]

In the midst of the storm over the Potsdam Agreement, M. Stephen Pichon and Sir Edward Grey alone appeared to be unruffled. Both of these gentlemen, interpolated in the Chamber of Deputies and the House of Commons respectively, averred that they saw no reason for becoming disturbed or alarmed at the new Russo-German understanding. This point of view was incomprehensible to the average citizen, unskilled in the niceties of professional diplomacy, until on January 31, 1911, M. Jaurès forced M. Pichon to admit that the French Foreign Office had been informed of the character of the Potsdam negotiations before they took place. Less than a month later Mr. Lloyd George severely criticized his fellow-minister Sir Edward Grey for having taken no action against the policy of Russia at Potsdam, although, as Foreign Secretary, Sir Edward had been fully posted on the nature of the negotiations. Apparently, then, Russia had come to the agreement with Germany only after having consulted France and Great Britain and, perhaps, after having received their consent.[8]

There were a few persons who hoped that the Potsdam Agreement might be the first step in a general settlement of the Bagdad Railway entanglement. One humble member of the House of Commons, Mr. Pickersgill, said, for example, “I cannot understand the policy of continued antagonism to Germany. Ex-President Roosevelt recently gave much good advice to our Foreign Minister, and amongst other things he said that the presence of Germany on the Euphrates would strengthen the position of Great Britain on the Nile.... The action of Russia in the recent meeting at Potsdam has brought matters to a head, and I hope the Foreign Office will approach Turkey with a view to an arrangement for the completion of the Bagdad Railway which might be agreeable to Turkey, Germany and ourselves.”[9]

The hope of Mr. Pickersgill was fulfilled, for the agreement of November 4, 1910, proved to be the first of a series of conventions regarding the Near East negotiated between 1911 and 1914 by Germany, Turkey, Great Britain and France. On the eve of the Great War the Bagdad Railway controversy had been all but settled!

FRENCH CAPITALISTS SHARE IN THE SPOILS

France, relieved of the necessity of supporting Russia’s strategic objections to the Bagdad Railway, was glad to compromise with Turkey—in return for compensatory concessions to French investors. The sharp rebuff given M. Pichon by the Young Turks in the loan negotiations of the spring and summer of 1910 had convinced French diplomatists and business men alike that a policy of bullying the new administration at Constantinople would be futile.[10] Continued obstruction of Ottoman economic rehabilitation could have but two effects: to injure French prestige and prejudice the interests of French business; to drive the Young Turks into still closer association with the German Government and still greater dependence upon German capitalists. On the other hand, a conciliatory policy might be rewarded by profitable participation of French bankers in the economic development of Turkey-in-Asia and by a revival of French political influence at the Sublime Porte.

Even before the negotiation of the Potsdam Agreement the Young Turks had smiled upon French financial interests in the hope that the French Government might adopt a more friendly attitude toward the new régime in Turkey. In June, 1910, for example, the Smyrna-Cassaba Railway was authorized to extend its existing line from Soma, in western Anatolia, to Panderma, on the Sea of Marmora. The concession carried with it the highest kilometric guarantee (18,800 francs) ever granted a railway in the Ottoman Empire, although the construction of the line offered fewer engineering and financial difficulties than other railways which had been constructed under less favorable terms. From the standpoint of the Turkish Government, however, the Soma-Panderma railway offered economic and strategic returns commensurate with the investment, for it was part of a comprehensive plan for the improvement of commercial and military communications in Asia Minor.[11]

The acceptance of this concession by French capitalists—presumably with the approval, certainly without the opposition, of their Government—was an interesting commentary on the official attitude of the French Republic toward the Bagdad Railway. If it was unprincipled for Germans to accept a guarantee for the construction and operation of their railways in Turkey, it is difficult to ascertain what dispensation exempted Frenchmen from the same stigma. If the Anatolian and Bagdad systems were anathema because of their possible utilization for military purposes, little justification can be offered for the Soma-Panderma line, which, completed in 1912, was one of the principal factors in the stubborn defence of the Dardanelles three years later.

Shortly after the promulgation of the Soma-Panderma convention additional steps were taken by the Ottoman Government toward the further extension of French railway interests in Anatolia and Syria. Negotiations were initiated with the Imperial Ottoman Bank for the award to a French-owned company, _La Société pour la Construction et l’Exploitation du Réseau de la Mer Noire_, of a concession for a comprehensive system of railways in northern Anatolia. It was proposed to construct elaborate port works at the Black Sea towns of Heraclea, Samsun, and Trebizond, and to connect the new ports by railway with the inland towns of Erzerum, Sivas, Kharput, and Van. Connections were to be established at Boli and Sivas with extensions to the Anatolian Railways, and at Arghana with a branch of the Bagdad line to Nisibin and Diarbekr. Thus adequate rail communications would be provided from the Ægean to the Persian Gulf, from the Black Sea to the Syrian shore of the Mediterranean.[12]

Simultaneously, negotiations were being carried on between the Ottoman Ministry of Public Works and the Imperial Ottoman Bank for extensive concessions to the French Syrian Railways, owned and operated by _La Société du Chemin de Fer de Damas-Hama et Prolongements_. Provision was made for the construction of port and terminal facilities at Jaffa, Haifa, and Tripoli-in-Syria; a traffic agreement was negotiated with the Ottoman-owned Hedjaz Railway, pledging both parties to abstain from discriminatory rates and other unfair competition; tentative arrangements were made for the construction of a line from Homs to the Euphrates. Provisional agreements embodying the Black Sea and Syrian railway and port concessions were signed in 1911, but technical difficulties of surveying the lines, together with the political instability occasioned by the Tripolitan and Balkan Wars, postponed the definitive contract.[13]

After the Treaty of Bucharest, August 10, 1913, the Ottoman Government was more determined than ever to do everything in its power to eliminate French opposition to railway construction in Asia Minor and to secure French aid in the further economic development of Turkey. Crushing defeats at the hands of the Italians and the Balkan states had emphasized the deficiencies of Ottoman communications, Ottoman economic and military organization, Ottoman financial resources. The national treasury, emptied by the drain of three wars, needed replenishment by an increase in the customs duties, to which French sanction would have to be obtained, and by a foreign loan, for which it was hoped French bankers would submit a favorable bid. All of these questions were so closely associated with the question of political influence in the Near East, however, that it was obviously desirable to arrive at some _modus vivendi_ between French and German interests in Ottoman railways and in Ottoman financial affairs. Accordingly, the Young Turk Government prevailed upon the Imperial Ottoman Bank and the _Deutsche Bank_ to discuss a basis for a Franco-German agreement, and Djavid Bey was despatched to Paris to conduct whatever negotiations might be necessary with the French Government.

On August 19 and 20 and September 24, 25, 26, 1913, a series of important meetings was held in Berlin to ascertain upon what terms French and German investments in Turkey might be apportioned with the least possibility of conflict. German interests were represented by Dr. von Gwinner and Dr. Helfferich; the chief of the French negotiators were Baron de Neuflize, a Regent of the Bank of France, and M. de Klapka, Secretary-General of the Imperial Ottoman Bank. Supposedly the conferences were conducted only between the interested financiers, but the discussions were participated in by representati