atnman s 
 ar (Eastern ^^lanis
 
 UNIVERSITY OF CALIFORNIA 
 AT LOS ANGELES

 
 E. H. HARRIMAN'S 
 FAR EASTERN PLANS
 
 MANCHURIA AND HER RAILWAYS
 
 E. H.Harriman's 
 Far Eastern Plans 
 
 By GEORGE KENNAN 
 
 THE COUNTRY LIFE PRESS 
 Garden City New York
 
 Copyright, I9I7> by 
 George Kennan
 
 
 I 
 
 
 E. H. HARRIMAN'S 
 FAR EASTERN PLANS 
 
 if^^n'7i
 
 E. H. Harriman's 
 Far Eastern Plans 
 
 Mr. Harriman's direct business rela- 
 tions with the Far East began in the 
 year 1905. The aid given by Kuhn, 
 Loeb & Co. to the Japanese Govern- 
 ment in floating its war bonds, as well 
 as Mr. Harriman's own interest in 
 China and Japan, based on his connec- 
 tion with the Pacific IMail Steamship 
 Company, early attracted his attention 
 to that part of the world, and when in 
 the spring of 1905, he received an urgent 
 invitation to visit Japan, from the Amer- 
 ican minister in Tokyo, Mr. Lloyd C. 
 Griscom, he determined to suspend for a 
 time his financial and railroad activities 
 in the United States and look over per- 
 
 3
 
 E. H. HARRIMAN'S 
 
 sonally the Oriental field, with a view 
 to ascertaining what could be done for 
 the extension of American commerce in 
 Far Eastern countries. 
 
 'It is important, ' he said in a letter 
 to Mr. Griscom, "to save the commer- 
 cial interests of the United States from 
 being entirely wiped from the Pacific 
 Ocean in the future," and ''the way to 
 find out what is best to be done is to 
 start something." This proposal to 
 "start something" was characteristic 
 of Mr. Harriman's methods. He did 
 not think it necessary to perfect all the 
 details of a plan before going to work. 
 When he had clearly defined the object 
 to be attained, his policy was to "start 
 something," and then work out the 
 scheme in accordance with circumstances 
 and conditions as they might arise. 
 The clearly defined object that he had in 
 view in this case was the extension of 
 American influence and the promotion of 
 
 4
 
 FAR EASTERN PLANS 
 
 American commerce in the Far East; 
 but beyond this, with the details not 
 yet worked out, was a plan for a round- 
 the-world transportation line, under 
 unified American control, by way of 
 Japan, Manchuria, Siberia, European 
 Russia and the Atlantic Ocean. Such 
 a railroad and steamship line, if success- 
 fully established, would unite for com- 
 mercial purposes four of the most popu- 
 lous countries on the globe; and would 
 enable the United States not only to 
 take a commanding position in the Ori- 
 ent, but to supply the wants and direct 
 in some measure the commercial activi- 
 ties of hundreds of millions of people 
 in the least developed parts of Europe 
 and Asia. 
 
 To most observers at that time a 
 round-the-world transportation line, un- 
 der American management, would have 
 seemed an unrealizable dream; but Mr. 
 Harriman had made many of his visions 
 
 5
 
 E. H. HARRIMAN'S 
 
 come true, and he believed that he could 
 give objective reality to this one. His 
 plan was, first, to secure control of the 
 South Manchuria Railway, which Japan, 
 through the fortunes of war, had just 
 acquired from Russia. This road was 
 then in a very unsatisfactory physical 
 condition; but Mr. Harriman proposed 
 to reconstruct and reequip it, with Amer- 
 ican capital, and make it the eastern 
 part of his proposed trans Asiatic line. 
 Having secured this essential link, he 
 intended to buy the Chinese Eastern, 
 which he thought the Russians, having 
 lost Port Arthur, would gladly sell, 
 and then acquire transportation or 
 trackage rights over the trans-Siberian 
 and the Russian Government roads 
 from North Manchuria to the coast of 
 the Baltic Sea. These acquisitions, 
 in connection with the Pacific Mail 
 Steamship Company and the American 
 railroad systems that he already con- 
 6
 
 FAR EASTERN PLANS 
 
 trolled, would give him a continuous 
 line more than three quarters of the way 
 around the globe, and it would be a 
 comparatively easy matter, thereafter, 
 to connect up the termini by establish- 
 ing a line of steamers across the Atlantic 
 from the United States to Russia. "^He 
 anticipated most difliculty in persuading 
 the Japanese to surrender or share the 
 control of the South Manchuria road, 
 which, \\'ith the Fushun coal fields ad- 
 jacent thereto and the southern part 
 of the island of Saghalin, were all that 
 they had been able to get from Russia, 
 by way of indemnity, to cover their 
 colossal war expenditures. However, 
 he had strong hope of success, for the 
 reason that the Japanese were heavily 
 in debt and urgently in need of capital 
 for the improvement of their transpor- 
 tation facilities and the development 
 of their recently acquired territory on 
 the Asiatic mainland. The purchase 
 
 7
 
 E. H. HARRIMAN'S 
 
 of the Chinese Eastern and the acquire- 
 ment of the necessary rights over the 
 trans-Siberian he regarded as compara- 
 tively easy. Russia had allowed a 
 Baltimore capitalist to build and man- 
 age her first railroad, from St. Peters- 
 burg to Moscow, and had even asked an 
 American engineer to finance and con- 
 struct the great road from the Urals 
 to the Pacific.^ It seemed probable, 
 therefore, that the Czar would gladly 
 make concessions to American capital- 
 ists if, with their aid, he could have the 
 trans-Siberian line double-tracked, prop- 
 erly equipped, and efficiently managed. 
 
 *The proposal to finance and build the trans-Siberian 
 railway was made by the Russian Government to 
 a well-known railroad engineer in the United States. The 
 terms offered were liberal, but the amount of capital 
 required was so great that it could not be obtained 
 without the aid, or at least the good will, of the Jewish 
 bankers and financiers in Europe. They, incensed by 
 the treatment of their people in Russia, declined to 
 cooperate, and the American engineer found it impossible 
 to organize a syndicate that would be strong enough 
 to finance the enterprise.
 
 FAR EASTERN PLANS 
 
 Preparations for the trip to the Orient 
 were begun in July and were soon com- 
 pleted. The party as made up con- 
 sisted of Mr. and Mrs. Harriman, with 
 their daughters Cornelia, Mary and 
 Carol and their sons Averell and Ro- 
 land; Mr. and Mrs. Robert Goelet; 
 Mr. R. P. Schwerin, vice president of 
 the Pacific Mail Steamship Company; 
 and Dr. W. G. Lyle, Mr. Harriman's per- 
 sonal physician. They sailed from San 
 Francisco on the steamship Siberia 
 August 1 6th and, after short stops at 
 Honolulu and Midway Island, arrived in 
 Yokohama on the evening of August 
 31st. 
 
 The reception given to Mr. Harriman 
 by Japanese officials, financiers and 
 business men was extremely cordial. 
 Representatives of the Bank of Japan 
 and the famous Mitsui Company 
 boarded the steamer as soon as the 
 anchor was down, and when the party 
 
 9
 
 E. H. HARRIMAN'S 
 
 had landed and taken quarters at the 
 Grand Hotel, calls and assurances of 
 welcome were received from the presi- 
 dent and vice president of the Yoko- 
 hama Specie Bank; the president of the 
 Industrial Bank of Japan; the manager 
 of the Japan Steamship Company; 
 Count K. Inou e one of the "Elder 
 Statesmen"; Baron Iwasaki, Senator 
 Watenabe and Mr. K. Mori, a personal 
 representative of the Minister of Finance. 
 In Tokyo on the following day, calls 
 from distinguished Japanese continued, 
 and invitations to dinners, lunches, 
 garden parties and other hospitable 
 entertainments were received from Prince 
 Fushimi, Prime Minister Katsura, the 
 Minister of Finance, Count Inouye, 
 Baron Iwasaki, Baron Shibusawa and 
 many prominent business men. On the 
 4th of September, Minister Griscom gave 
 a dinner at the legation, in honor of 
 Mr. Harriman and his party, which was
 
 FAR EASTERN PLANS 
 
 attended by the most eminent officials 
 and statesmen in the Japanese capital, 
 including the Premier, the Minister of 
 the Imperial Household, the Minister 
 of Communications, the Vice Minister 
 of Foreign Affairs, the Vice Grand blas- 
 ter of Ceremonies, Count Inouye, Count 
 Toda, and Viscount Inaba. In re- 
 sponding to a toast at this banquet, Mr. 
 Harriman hinted at the plans that he 
 had in mind and prepared the way for 
 future negotiations by saying to the 
 Japanese guests : 
 
 You have made great strides in the 
 art of war; but you must look to the 
 arts of peace for those greater achieve- 
 ments which mean prosperity, content- 
 ment and happiness. Your people will 
 advance their material welfare still 
 further and more rapidly as they realize 
 the advantages which follow concentra- 
 tion of effort and harmony of operation 
 in their industrial and commercial af- 
 fairs. From New York to the Pacific 
 
 II
 
 E. H. HARRIMAN'S 
 
 Coast, and from there to Japan, about 
 ten thousand miles, the railroad and 
 steamship lines are practically under 
 one control and one management. The 
 economies of operation, the comfort 
 to the traveling public, and the advan- 
 tages to shippers of this concentrated 
 control can be readily appreciated. 
 The benefits to the people of the United 
 States which follow, directly and in- 
 directly, are incalculable. The same 
 policy, if followed in Japan, is bound to 
 produce the same results. I hope the 
 day may not be far distant when Japan- 
 ese business men and American business 
 men, realizing that their interests are 
 common, may be brought into closer 
 relationship. 
 
 This was a sufficiently clear indication 
 of Mr. Harriman's purpose to unite, 
 if possible, the transportation systems 
 of America and the Far East; but, un- 
 fortunately, circumstances at that time 
 were such as to make the accomplish- 
 ment of this purpose unusually difficult. 
 
 12
 
 FAR EASTERN PLANS 
 
 The general outlines of the Portsmouth 
 treaty had just been published in Japan, 
 and the common people, ignorant of 
 their Government's real situation, were 
 intensely dissatisfied with the terms of 
 peace. Their armies, they reasoned, 
 had won every battle in which they had 
 been engaged, and their country was 
 clearly entitled to exact an indemnity 
 from Russia, and to demand the restora- 
 tion of the whole of the island of Sag- 
 halin. The action of their Government 
 in making peace, apparently at the 
 suggestion of President Roosevelt, with- 
 out securing the legitimate fruits of vic- 
 tory, was an unpardonable exhibition 
 of weakness for which it deserved to be 
 condemned and punished. 
 
 No hostile demonstrations were made 
 against Americans, but on the fourth 
 day after Mr. Harriman's arrival, an 
 immense mob of patriotic rioters at- 
 tacked the residence of the Home Min- 
 
 13
 
 E. H. HARRIMAN'S 
 
 ister, and when they were opposed by 
 the poHce, began destroying poHce sta- 
 tions, pohce kiosks, and street cars 
 in all parts of the city. Doctor Lyle 
 and Mr. Harriman's private secretary, 
 while on their way to dinner at the resi- 
 dence of the Finance Minister, attempted 
 to pass in jinrikishas through the crowd 
 and quickly became involved in diffi- 
 culties. The rioters were in a mood 
 to resent almost anything, and raising 
 the cry of "Russians! " they began hoot- 
 ing and throwing stones. Doctor Lyle 
 was struck on the shoulder and slightly 
 hurt, but he and his companion, after 
 some delay, succeeded in reaching safely 
 the Finance Minister's house. Although 
 this attack did not seem to be directed 
 against Doctor Lyle and Secretary 
 McKnight as Americans — it was too 
 dark to see who they were — the Govern- 
 ment thought it prudent, at the end of 
 the dinner, to send Mr. Harriman and 
 14
 
 FAR EASTERN PLANS 
 
 his party back to the legation under the 
 protection of an armed escort, and to 
 post guards in the legation grounds. 
 
 On the following evening, September 
 6th, as the street disorder still continued, 
 a dinner in honor of Mr. Harriman at 
 the Nobles' Club was abandoned, for 
 the reason that the Club happened to 
 be situated near the residence of the 
 Home Minister, which was the storm 
 centre of mob violence. Fearing that 
 the known agency of President Roose- 
 velt as an intermediary in the peace 
 negotiations might turn the hostility 
 of the uninformed but excited populace 
 toward Americans in general, and wish- 
 ing to relieve Minister Griscom as far 
 as possible from anxiety and responsi- 
 bility, Mr. Harriman decided to take 
 his party to Nikko for a few days, and 
 to return to Tokyo when the Govern- 
 ment should have suppressed the dis- 
 order and reestabhshed normal condi- 
 
 15
 
 E. H. HARRIMAN'S 
 
 tions. On the afternoon of September 
 7th, in a special train furnished by the 
 Nippon Railway Company, the Harri- 
 man party proceeded to Nikko, where 
 they arrived about 7 p.m. In the course 
 of the two days that they spent in this 
 famous resort, they visited the ancient 
 temples and the mausolea of leyasu 
 and lemitsu; rode through the cele- 
 brated avenue of giant cryptomeria 
 trees, and ascended the wild and ro- 
 mantic gorge which leads, at a height 
 of 4,300 feet, to the beautiful mountain 
 lake of Chuzenji. Learning by tele- 
 graph that the disorder in Tokyo had 
 ceased, they returned, September nth, 
 to the American legation, and on the 
 following day Mr. Harriman, Mr. Goelet 
 and Mr. Schwerin were received in au- 
 dience by the Emperor. 
 
 As Mr. Harriman could spend only 
 a limited time in the Far East, and as 
 he desired, before his return, to visit 
 16
 
 FAR EASTERN PLANS 
 
 China and Korea, he was obHged to 
 promote his round-the-world-line enter- 
 prise, as far as it could be promoted in 
 Tokyo, by a "whirlwind campaign" 
 of visits and interviews. Between the 
 ist and 13th of September, he made the 
 acquaintance of all the prominent states- 
 men in Japan, including Marquis Ito, 
 Count Okuma, the Premier and most 
 of the ministers; and succeeded in 
 awakening the interest and enhsting 
 the support of several eminent finan- 
 ciers, including especially Mr. J. Soy- 
 eda, President of the Japanese Indus- 
 trial Bank. Having thus accomplished 
 all that it was possible to accomplish 
 in a few days, he and his party started 
 on the 13th of September for Kyoto 
 and Kobe, leaving further negotiations 
 for the acquirement of the South Man- 
 churia Railway in the capable hands 
 of Minister Griscom and President 
 Soyeda. 
 
 17
 
 E. H. HARRIMAN'S 
 
 As Mr. Harriman's visit to China and 
 Korea in the latter part of September 
 and the first part of October had no de- 
 cisive bearing upon the negotiations 
 that chiefly engaged his thoughts, it 
 need not be fully described. Charter- 
 ing for his party at Kobe the commo- 
 dious steamer Ohio III, he sailed 
 through the Inland Sea and across Korea 
 Bay to Port Arthur; visited the battle- 
 fields that had given to the fortress its 
 world-wide fame, and then proceeded 
 to Tientsin and Peking. Leaving the 
 Chinese capital on the 28th of Septem- 
 ber, the party again crossed the Gulf of 
 Pechili and Korea Bay, landed at Che- 
 mulpo, and went by rail to Seoul, where 
 they attended a luncheon given in their 
 honor at the Imperial Palace and a 
 garden party arranged by Mr. T. 
 Megata, financial adviser of the Korean 
 Government. On the 8th of October 
 they took a special train to Fusan, at 
 18
 
 FAR EASTERN PLANS 
 
 the end of the peninsula, where the 
 Ohio III met them and carried them to 
 Nagasaki. After inspecting the ship- 
 building plant and dry docks in this 
 famous seaport, they sailed again for 
 Kobe, proceeded thence by rail to Yoko- 
 hama, and on the 9th of October finally 
 returned to Tokyo, thus completing a 
 journey that covered about three thous- 
 and miles and occupied twenty-six days. 
 During Mr. Harriman's absence, Min- 
 ister Griscom did all that could be done 
 to promote what seemed to him the 
 best interests of the United States in the 
 Orient by persuading the higher Jap- 
 anese authorities to consider favorably 
 Mr. Harriman's plans. In his inter- 
 views with Premier Katsura, Count 
 Inouye and the Minister of Finance, 
 he took the ground that cooperation 
 with America would be in every way 
 profitable to Japan, by strengthening 
 her credit, furnishing her with capital 
 
 19
 
 E. H. HARRIMAN'S 
 
 for the improvement of her transporta- 
 tion system, facilitating her trade, and 
 enabling her to develop quickly and 
 fully the material resources of her re- 
 cently acquired territory on the Asiatic 
 mainland. The South Manchuria Rail- 
 way was urgently in need of reconstruc- 
 tion and reequipment, and there was no 
 man in America, perhaps in the world, 
 better qualified by experience and abil- 
 ity to direct such work than the re- 
 builder of the Union Pacific. Mr. Har- 
 riman's relations, moreover, with Amer- 
 ican bankers and financiers were such 
 that he could secure at once the pecuni- 
 ary support which Japan needed, but 
 which she alone might not be able to 
 get quickly enough to meet the emer- 
 gencies of the situation. The suggested 
 project would bring Japan and the 
 United States into much closer rela- 
 tions, both commercially and polit- 
 ically, and if successful it would furnish 
 20
 
 FAR EASTERN PLANS 
 
 a large revenue to the Japanese Govern- 
 ment and thus compensate the Japanese 
 people for their failure to get a pecuni- 
 ary indemnity from Russia. 
 
 In his negotiations with the higher 
 authorities, Mr. Griscom was ably as- 
 sisted by Mr. Durham W. Stevens, who 
 had been in the service of the Japanese 
 Government for more than twenty years, 
 and who had earned the respect and 
 trust of all the Emperor's statesmen 
 and officials.^ The result of their joint 
 efforts was in every way encouraging. 
 
 'Mr. Stevens entered the service of the Japanese 
 Government in 1883, as counsellor of its legation in 
 Washington. He was soon afterward transferred to 
 Tokyo, where he became a member of the Bureau du 
 Protocol of the Conference for the Revision of Treaties 
 between Japan and Foreign Powers. Between 1887 
 and 1904 he was engaged in various diplomatic negoti- 
 ations, and in the latter year he was appointed adviser 
 to the Korean Government at Seoul. He was assassin- 
 ated in San Francisco in igo8 by a misguided Korean 
 fanatic who regarded him as an enemy of the Korean 
 people, although, in reality, he had always been their 
 sincere friend. 
 
 21
 
 E. H. HARRIMAN'S 
 
 Premier Katsura said that he would 
 give the matter immediate and serious 
 consideration, and Count Inouye, one 
 of the most influential of the Elder 
 Statesmen, promised that he would call a 
 meeting of the Minister of Finance, the 
 Minister of Communications, and other 
 high officials directly interested, and 
 would try to reach a decision at once. 
 Count Inouye himself was very favor- 
 ably impressed and said to Mr. Griscom: 
 *'We would be very foolish to let such 
 a great chance slip." 
 
 When Mr. Harriman returned to 
 Tokyo, on the 8th of October, negotia- 
 tions were so far advanced that the 
 authorities were ready to consider 
 promptly, if not to accept, a definite 
 proposition; and in three or four days 
 of strenuous activity he succeeded in 
 getting the details settled and reduced 
 to writing in the following memoran- 
 dum of agreement: 
 
 22
 
 FAR EASTERN PLANS 
 
 MEMORANDUM of a preliminary 
 understanding, dated October 12, 1905, 
 between His Excellency Count Katsura 
 Taro, representing the Japanese Gov- 
 ernment, and Mr. E. H. Harriman, 
 representing himself and associates. 
 
 A syndicate to be formed to provide 
 capital for the purchase of the South 
 Manchuria Railway, acquired by the 
 Japanese Government, and its appur- 
 tenances; the rehabilitation, equip- 
 ment, reconstruction and extension of 
 the same, and the completion and im- 
 provement of the terminals at Tairen 
 (Dalny); and it is understood that the 
 two parties are to have joint and equal 
 ownership in the properties acquired. 
 Permission to work coal mines (in con- 
 nection with the railroad) to be given 
 to a corporation by special agreement, 
 in which there shall be joint interest and 
 representation. 
 
 The principle of development of all 
 industrial enterprises in Manchuria shall 
 be such that each party shall have the 
 right to an equal interest with the other. 
 The Manchurian railroad, with its ai>- 
 
 2i
 
 E. H. HARRIMAN'S 
 
 purtenances, rails, cross ties, bridges, 
 superstructure of all character, stations, 
 buildings, platforms, warehouses, docks, 
 wharves, etc., to be taken at their true 
 value, to be determined by joint repre- 
 sentation of each party. 
 
 The organization to be made on basis 
 that will meet exigencies and conditions 
 as they may exist at the time. As it 
 is deemed advisable to meet the condi- 
 tions in Japan, the corporation is to be 
 operated with Japanese control. Changes 
 are, however, to be made therein from 
 time to time as far as circumstances 
 will permit, looking toward a final 
 equalization of representation and con- 
 trol. The corporation is to be organized 
 under Japanese law. Mr. Harriman, 
 having agreed for himself to operation 
 through a Japanese company, the only 
 open question is as to his associates agree- 
 ing thereto, which he believes they will. 
 
 To provide for an arbitrator, it is 
 agreed that Mr. Henry W. Denison 
 shall be appointed to fill that place. ^ 
 
 iMr. Denison, at that time, had been legal adviser of 
 the Japanese Foreign OfiSce for about a quarter of a 
 
 24
 
 FAR EASTERN PLANS 
 
 In case of war between Japan and 
 China, or Japan and Russia, the rail- 
 road shall at all times obey the instruc- 
 tions of the Japanese Government in 
 the matter of the conveyance of troops 
 and war materials, and the Japanese 
 Government is to compensate the rail- 
 road for services rendered and protect 
 it against agressions at all times. 
 
 It is agreed that Mr. J. Soyeda, Presi- 
 dent of the Industrial Bank of Japan, 
 shall be the medium of communication 
 between the parties hereto. 
 
 The including of any outside interests 
 (other) than the parties hereto shall be 
 done only after conference and mutual 
 agreement. 
 
 With this memorandum of agreement 
 in his possession, Mr. Harriman sailed 
 from Yokohama in the steamship 5f- 
 
 century. He had been repeatedly decorated by the 
 Emperor for distinguished service, and enjoyed the 
 implicit trust of both Government and people. He was 
 born in Guildhall, Vt., in 1846 and received his higher 
 education in the Columbian (now George Washing- 
 ton) University. 
 
 25
 
 E. H. HARRIMAN'S 
 
 beria on the afternoon of Friday, October 
 1 2th. He had not accomplished all 
 that he desired to accomplish, but he 
 had at least "started something," and 
 there seemed to be a fair prospect that 
 the concession thus obtained would 
 ultimately lead to the consohdation of 
 Japanese and American transportation 
 interests on the Asiatic mainland, and 
 greatly extend and promote the com- 
 merce of the United States in that part 
 of the Orient. 
 
 Unfortunately, while Mr. Harriman 
 was at sea, on his way to San Francisco, 
 all his Far Eastern plans were suddenly 
 blocked by an obstacle that he had 
 neither foreseen nor considered. Three 
 days after he sailed from Yokohama, 
 Baron Komura, the Japanese Minister 
 of Foreign Affairs, returned to Tokyo 
 from the United States, bringing the 
 treaty that he and Minister Takahira 
 had just negotiated with the Russian 
 26
 
 FAR EASTERN PLANS 
 
 plenipotentiaries at Portsmouth. As 
 soon as the Harriman-Katsura agree- 
 ment for joint control of the South 
 Manchuria Railway was shown him, 
 he said: "It cannot possibly be carried 
 out, because it is inconsistent with 
 Article VI of the treaty that we have 
 just made with Russia." The article 
 in question provided that the transfer of 
 the South Manchurian road from Russia 
 to Japan should be made only with the 
 consent of the Chinese Government. 
 Until, therefore, such consent should be 
 obtained, Japan had no legal rights that 
 could be shared with Mr. Harriman. 
 Aside from this, Baron Komura was 
 opposed to the Harriman-Katsura agree- 
 ment on its merits. The Japanese peo- 
 ple were already so dissatisfied with the 
 Portsmouth treaty that they had re- 
 sorted to mob violence as a protest 
 against it, and their discontent would be 
 greatly increased if they should learn 
 27
 
 E. H. HARRIMAN'S 
 
 that their Government had sold to a 
 Japanese-American syndicate nearly all 
 that they had gained in two years of suc- 
 cessful war. To have made peace with- 
 out securing a pecuniary indemnity was 
 bad enough; but to sell more than half 
 the fruits of their victory to the Ameri- 
 cans, and thus throw open to foreign 
 competition the commercial field which 
 they had bought with their treasure and 
 blood would seem to them intolerable. 
 
 Baron Komura's arguments and in- 
 fluence were too strong for the support- 
 ers of the Japanese- American agreement, 
 and in less than a week a change of policy 
 was decided upon. When Mr. Harri- 
 man, with his mind full of plans for 
 the future, arrived in San Francisco, he 
 received from the Japanese consul there 
 the following note : 
 
 " I beg to inform you that I have been 
 instructed by Count Katsura, of my Gov- 
 
 28
 
 FAR EASTERN PLANS 
 
 ernment, to deliver the following mes- 
 sage to you immediately upon your 
 arrival in San Francisco : 
 
 "'The Japanese Government have 
 found it necessary to institute a more 
 thorough investigation and examination 
 of the questions which are the subject 
 of memorandum of October 12, 1905, and 
 they consequently request you to regard 
 the memorandum as in abeyance until 
 they are able to communicate with you 
 more fully regarding the matter.'" 
 
 Ten days later, when Mr. Harriman 
 had reached New York, he received the 
 following cable message from Mr. J. 
 Soyeda, President of the Industrial 
 Bank of Japan: 
 
 Tokyo, October 30, 1905. 
 E. H. Harriman 
 
 New York. 
 
 Prime Minister requests to forward 
 following confidential message to you 
 explanatory message handed you by 
 Japanese consul San Francisco: 
 
 29
 
 E. H. HARRIMAN'S 
 
 "Having considered detailed report 
 made by Minister Foreign Affairs on 
 his return home, and having in view 
 pacific attitude Chinese Government 
 on railroad question, Japanese Govern- 
 ment has come to conclusion that ques- 
 tion embodied in memorandum, October 
 1 2th requires more thorough and com- 
 plete examination than possible at pres- 
 ent time. As you are aware, Ports- 
 mouth treaty provides for consent of 
 China regarding transfer to Japan of 
 railroad property, and for agreement 
 with Russia regulating connecting rail- 
 road service. Until agreements with 
 China and Russia are concluded, im- 
 possible to determine precisely what 
 rights and properties are included in the 
 transfer, or what earning capacity of 
 railroad is likely to be. Without full 
 knowledge on these points impossible 
 to make definite arrangements for work- 
 ing railroad and property which would 
 prove satisfactory to either Japanese 
 Government or E. H. Harriman. Con- 
 sequently Japanese Government deem 
 wise request E. H. Harriman to regard 
 
 30
 
 FAR EASTERN PLANS 
 
 said memorandum as in abeyance for 
 the time being. Japanese Government 
 will proceed, as soon as possible, to 
 conclude necessary international agree- 
 ment. Such agreement will probably 
 necessitate some essential change in 
 proposed arrangement with IMr. Harri- 
 man. But in any event, Japanese Gov- 
 ernment will consult him before making 
 arrangement with private capital." 
 
 SOYEDA. 
 
 This cable message was the result of 
 a compromise between Baron Komura 
 and the supporters of the Harriman- 
 Katsura memorandum. The former ad- 
 vocated immediate cancellation of the 
 agreement, for the reason that it was 
 inconsistent with Article VI of the 
 Portsmouth treaty. In view, however, 
 of all the circumstances, and especially 
 of Katsura's ignorance of the stipulation 
 regarding Chinese consent, Baron Ko- 
 mura agreed to regard the memorandum 
 as "in abeyance," and to leave open the 
 
 31
 
 E. H. HARRIMAN'S 
 
 possibility of confirmation at a later 
 time, provided no objection should be 
 raised by the Government of China. 
 
 If the Japanese Minister of Foreign 
 Affairs had been previously consulted, 
 and had favored the agreement on its 
 merits, he might possibly have found 
 some means of dealing with the Chinese 
 complication; but he had never met Mr. 
 Harriman and had not been impressed, 
 as had his colleagues, by the latter's 
 forceful personality; he doubted the 
 expediency of sharing control of the 
 South Manchurian road with a syn- 
 dicate about which he knew little 
 or nothing; and he believed that the 
 agreement, if allowed to go into ejffect 
 at that time, would increase his own 
 unpopularity in Japan, and would ren- 
 der extremely difficult, if not wholly 
 impossible, the negotiation of the treaty 
 with China that he then had in con- 
 templation. He therefore insisted upon 
 
 32
 
 FAR EASTERN PLANS 
 
 postponement, at least, and the other 
 members of the ministry yielded. 
 
 In this thwarting of Mr. Harriman's 
 plans there seems to have been no inten- 
 tional breach of faith on the part of the 
 Tokyo authorities. It was simply a case 
 in which one branch of the Government, 
 acting independently, concluded a treaty 
 that nullified action taken almost sim- 
 ultaneously by another branch. Count 
 Katsura did not know that Baron 
 Komura had agreed in Portsmouth 
 to make the transfer of the railroad con- 
 ditional upon Chinese consent, while 
 Komura, in concluding such agreement 
 with Russia, was ignorant of the Tokyo 
 memorandum. One compact or the 
 other had to be set aside, and in holding 
 the Harriman agreement "in abeyance" 
 while he negotiated with China, Baron 
 Komura thought, perhaps, that he was 
 making the best of an accidental and 
 unfortunate situation. But be that as 
 33
 
 E. H. HARRIMAN'S 
 
 it may, he started for Peking with Mr. 
 Denison, on the 6th of November, leav- 
 ing the raihoad matter in this unsettled 
 state. 
 
 Negotiations with the Government 
 of China for a new treaty occupied more 
 than a month, and Mr. Harriman was 
 not informed of the result until the 15 th 
 of January 1906, when he received from 
 Mr. Soyeda the following cable message : 
 
 Tokyo, January 15, 1906. 
 E. H. Harriman, 
 
 New York. 
 
 Baron Komura returned on the ist 
 of January and the new Cabinet was 
 formed on the 7th. I have been urging 
 the necessity of informing you what to 
 be done, and am now asked to wire you. 
 Count Katsura requests me to let you 
 know that obtaining from China con- 
 sent contemplated by Article VI Ports- 
 mouth, N. H., treaty it was necessary to 
 provide that Manchurian railway should 
 be worked by company composed ex- 
 clusively of Japanese and Chinese share- 
 
 34
 
 FAR EASTERN PLANS 
 
 holders, following in that respect terms 
 of original concession to Russia. Count 
 desires me to convey expression of regret 
 that, in view of above circumstance, he 
 is compelled to ask you regard memor- 
 andum of October 12, 1905 as of no 
 effect, as it is manifestly impossible to 
 make any arrangement based on it. 
 He adds, however, that the Japanese 
 Government entertain a doubt as to 
 possibility of Japanese and Chinese 
 capital alone being sufficient to meet 
 requirements of necessary improvements 
 and extension of Manchurian railway, 
 and that therefore should an occasion 
 arise in future enabling them to open 
 negotiations with foreign capitalists, on a 
 different basis, a fresh consultation may 
 be held with you. I desire to add Count 
 has been reUeved of his position as 
 Prime Minister, and send this telegram 
 after consulting with Marquis Saionji, 
 his successor. 
 
 SOYEDA. 
 
 In a letter written to Minister Gris- 
 com in January, 1906, Mr. H. W. Deni- 
 
 35
 
 E. H. HARRIMAN'S 
 
 son, legal adviser of the Japanese For- 
 eign Office, gave the following explana- 
 tion of Baron Komura's failure to get 
 the consent of China to the Harriman- 
 Katsura agreement: 
 
 "The Japanese Government have se- 
 cured the consent of China to the as- 
 signment of the railroad (the South 
 Manchurian) between Port Arthur and 
 Chang-chun, subject to the same terms 
 and conditions that attached to the 
 original grant to Russia; that is to say, 
 the railroad is to be worked by a com- 
 pany composed exclusively of Japanese 
 and Chinese shareholders. You will 
 find the original concession to Russia 
 in Rockhill's book 'Treaties and Con- 
 ventions with and concerning China 
 and Korea,' pp. 207-224, and I enclose 
 a newspaper copy of the official version 
 of Baron Komura's agreements with 
 China. ... If the Chinese avail 
 themselves of the opportunity of taking 
 half a share in the Manchurian enter- 
 prises, a definite understanding on the 
 
 36
 
 FAR EASTERN PLANS 
 
 basis of the memorandum of October 
 1 2th is impracticable. There is at the 
 present time a very strong anti-con- 
 cession wave sweeping over China. 
 The Government are endeavoring, by 
 hook or by crook, to get back the grants 
 already made. They cancel the con- 
 cessions in case of default in any direc- 
 tion, and they buy back the grants if no 
 grounds for cancellation exist. In this 
 frame of mind, and being unable to can- 
 cel or repurchase the Manchurian con- 
 cessions, it is more than likely that China 
 will gladly take the one-half interest in 
 the enterprise. In that case I believe 
 some arrangement on new lines will be 
 possible, but only if the negotiations are 
 undertaken by a man of force and pres- 
 tige like Mr. Harriman." 
 
 In the spring of 1906, Mr. Jacob H. 
 Schiff, of the firm of Kuhn, Loeb & Co., 
 happened to visit the Far East and, at 
 the request of his old friend and associ- 
 ate, Mr. Harriman, made an attempt to 
 revive the 1905 agreement; but Baron 
 
 37 
 
 16047J
 
 E. H. HARRIMAN'S 
 
 Komura was as much opposed to it as 
 ever, and after a number of conferences 
 the negotiations were again dropped. 
 
 Thus ended Mr. Harriman's attempt 
 to get control, or partial control, of the 
 South Manchuria Railway, as an essen- 
 tial Hnk in his projected round-the- 
 world transportation line. His ill suc- 
 cess, however, did not shake his faith 
 in the practicabiUty of the enterprise, 
 but merely led him to consider other 
 means of bridging the gap between the 
 Gulf of Pechili and the trans-Siberian 
 road. The difficulties in the way were 
 very great. A new and independent 
 Hne through Manchuria or Mongolia 
 could not be built without Chinese con- 
 sent, and the Chinese, at that time, were 
 strongly opposed to the granting of any 
 more railroad concessions to foreign 
 syndicates. So far, moreover, as a line 
 through Manchuria was concerned, they 
 themselves were almost powerless, for 
 
 38
 
 FAR EASTERN PLANS 
 
 the reason that, in the treaty of Decem- 
 ber, 1905, with Japan, they had agreed 
 **not to construct any main hne in the 
 neighborhood of and parallel to the South 
 Manchuria Railway." Even, there- 
 fore, if they had been willing to let Mr. 
 Harriman build a road from the Gulf 
 of Pechili to the terminus of the Chinese 
 Eastern, they could not do so, because 
 it would necessarily be a ''main line in 
 the neighborhood of and parallel to the 
 South Manchurian." 
 
 Mr. Harriman thought, at one time, 
 of building a road across the Gobi 
 Desert by the old caravan route, passing 
 through Kalgan and Urga and connect- 
 ing with the trans-Siberian near Irk- 
 utsk; but as the distance would be 
 great — 1,200 miles or more — and as 
 most of the country to be traversed 
 was so barren as to promise little in the 
 way of agricultural development, this 
 scheme was soon dismissed as imprac- 
 39
 
 E. H. HARRIMAN'S 
 
 ticable.^ The only alternative was a 
 new line, about four hundred and fifty 
 miles in length, from the Gulf of PechiU 
 to the trans-Siberian Railway at Tsit- 
 sihar. This road, although nearly par- 
 allel with the South Manchurian, would 
 be separated from it by an average dis- 
 tance of one hundred and seventy miles, 
 and consequently would not be in the 
 prohibited "neighborhood." 
 
 In the early part of 1906, Mr. Harri- 
 man received full reports on the trade, 
 industry and resources of northeastern 
 China from Colonel Holabird and Mr. 
 Wallace, two experts whom he had sent 
 to make investigations in the Far East; 
 and in that and the following year he 
 
 ^It is not certain, however, that even this Hne would 
 have been unprofitable. The Chinese themselves after- 
 ward began the construction of four hundred miles of 
 railway along this route, and on the Peking-Kalgan 
 section, which was completed in 191 2, the net profits 
 of operation in 19 13 were twenty per cent, on the in- 
 vestment. 
 
 40
 
 FAR EASTERN PLANS 
 
 was kept fully informed with regard to 
 railroad affairs in Siberia and Manchuria 
 by Mr. Willard D. Straight, Consul ^ 
 General of the United States at Mukden, i "y-^- ynA i 
 For a year or more, no opportunity to ^^<. ^. %ua 
 promote the Far Eastern enterprise S J If 
 
 'Mr. Straight was a young graduate of Cornell Uni- 
 versity whose acquaintance Mr. Harriman made in 
 October, 1905, at the house of Edward Vernou Morgan, 
 American minister to Korea. Mr. Straight was then 
 Vice Consul General in Seoul, but he had previ- 
 ously been correspondent of Renter's Agency and the 
 Associated Press in Korea and Manchuria and had spent 
 two years in the service of the Chinese Imperial Mari- 
 time Customs at Nanking and Peking. He impressed 
 Mr. Harriman as a young man of character and force, 
 and one whose ability and experience might make him 
 a valuable assistant in such an enterprise as that which 
 was then in contemplation. When the American lega- 
 tion in Seoul was closed, in the fall of 1905, Mr. Straight 
 went with Minister Morgan as private secretary, and 
 when Mr. Morgan was appointed minister to Cuba in 
 1906, he accompanied him to Havana. A few months 
 later the State Department transferred him to China and 
 made him Consul General at Mukden. On his way back 
 to the Far East, in the summer of 1906, he spent a week- 
 end at Arden, where Mr. Harriman discussed with him 
 the railroad situation in Manchuria and arranged to 
 keep in touch with him by means of correspondence. 
 
 41
 
 E. H. HARRIMAN'S 
 
 presented itself, but in September, 1907, 
 Lord Ffrench, representing Pauling & 
 Co., of London, and Mr. J. O. P. Bland, 
 representing the "British and Chinese 
 Corporation," secured from the Chinese 
 Government the right to extend the 
 Chinese Imperial Railway from Hsin- 
 min-tun to Fakumen, with the privilege 
 of building, ultimately, to the trans- 
 Siberian at Tsitsihar. As this seemed 
 to open the way for such a Russian con- 
 nection as Mr. Harriman had in view, 
 Mr. Straight wrote him, in September 
 1907, suggesting an alliance with the 
 British syndicate, as a means of securing 
 the essential link in the projected 
 round-the-world line without the coop- 
 eration of the Japanese. Mr. Harriman 
 replied by cable, however, in October 
 1907, that, owing to the panic of that 
 year, financial conditions were such as 
 to prevent the raising of the necessary 
 fimds. 
 
 42
 
 FAR EASTERN PLANS 
 
 In the summer of 1908, when the 
 financial situation in the United States 
 had somewhat improved, Mr. Harriman 
 decided to make another move in the 
 Far East, and requested Secretary Root 
 to recall Consul General Straight, in 
 order that American capitaUsts might 
 discuss with him the expediency of 
 making a loan to China for agricultural 
 development and railroad construction 
 in Manchuria. Meanwhile Mr. Straight 
 had secured from Tang Shao-yi, the 
 Chinese governor at Mukden, a signed 
 memorandum of agreement which was 
 to form the basis of negotiations for a 
 loan of $20,000,000. With this sum 
 it was proposed to establish a Manchur- 
 ian Bank, which should cooperate with 
 American and Chinese interests in the 
 construction of a railway from Tsitsihar 
 to Aigun. Then, if the bank and the 
 American capitalists could come to an 
 agreement with Pauling & Co. who had 
 
 43
 
 E. H. HARRIMAN'S 
 
 the right to build a road southward from 
 Tsitsihar to Hsin-min-tun, it would be 
 possible to construct a trunk line from 
 the Gulf of Pechili to the Amur, and 
 thus bridge the gap between the Pacific 
 Ocean and the trans-Siberian road. 
 
 In September, 1908, Consul General 
 Straight returned to the United States, 
 bringing with him the memorandum of 
 agreement with Tang Shao-yi for the 
 $20,000,000 loan. Through the influ- 
 ence of Mr. Harriman, and with the 
 cognizance and approval of the Secre- 
 tary of State, Kuhn, Loeb & Co., agreed 
 to undertake this loan, provided all the 
 details thereof could be satisfactorily 
 arranged. Late in November, Tang 
 Shao-yi came to Washington, ostensibly 
 to thank President Roosevelt for the 
 remission of part of the Boxer indemnity, 
 but really, in great part, to negotiate 
 the proposed loan for the estabhshment 
 of the Manchurian Bank. 
 44
 
 FAR EASTERN PLANS 
 
 Here again, however, Mr. Harriman's 
 plans were blocked by events that could 
 not possibly have been foreseen. Tang 
 Shao-yi's appointment had been made 
 through the influence of his friend Yuan 
 Shi-kai, who was then Grand Councillor 
 and head of the Chinese Foreign Office, 
 and who was greatly interested in se- 
 curing American capital for the develop- 
 ment of Manchurian resources. About 
 the middle of November, 1908, both the 
 Emperor and the Empress Dowager of 
 China died, and Prince Chun, an enemy 
 of Yuan Shi-kai, became regent. This 
 undermined Yuan's power, and led, a 
 few weeks later, to his dismissal from 
 ofhce. Tang Shao-yi, thus left without 
 support at home, became discouraged, 
 and the matter of the loan was allowed 
 to drop. 
 
 Mr. Harriman, however, continued 
 his negotiations for the acquirement of a 
 Manchurian Hne, both with Russia and 
 
 45
 
 E. H. HARRIMAN'S 
 
 again with Japan. In the summer of 
 1909, after he was stricken with mortal 
 illness, he secured a promise from the 
 Russian Minister of Foreign Affairs, Mr. 
 Kokovtsef , that upon the latter's return 
 from a trip that he was about to make 
 to the Far East, he would recommend 
 the sale of the Chinese Eastern Railway 
 to American interests. But even this 
 partial success came too late. On the 
 9th of September Mr. Harriman died, 
 and there was no one left in America 
 capable of undertaking, much less of 
 carrying through, such a colossal enter- 
 prise as the establishment of a round- 
 the-world American transportation line. 
 Whether the "Master Builder" himself 
 could have accomplished it, if he had 
 lived, it is impossible to say; but the 
 results of successful accompHshment 
 might have influenced profoundly the 
 world's history. No one who has stud- 
 ied Mr. Harriman's constructive and 
 46
 
 FAR EASTERN PLANS 
 
 administrative methods can doubt that 
 if he had ever acquired even partial 
 control of the trans-Siberian railway, 
 he would have doubled or trebled its 
 carrying capacity. Then, when the 
 great war of 1914 came, Russia would 
 have been able to draw heavy artillery 
 and ammunition from Japan and Amer- 
 ica over an efl5cient through line of great 
 capacity, and would not have been re- 
 duced to such straits as she was when 
 her troops, largely without proper weap- 
 ons and almost wholly without reserves 
 of ammunition, were forced out of 
 Poland and driven half way to Petro- 
 grad. Her defeats in the war with 
 Japan in 1904-5 were mainly due to the 
 inadequacy of the trans-Siberian road 
 as a means of speedy transportation, 
 and her reverses on the German frontier, 
 ten years later, were due, in part at 
 least, to the same cause. During the 
 winter and spring of every year, the rail- 
 
 47
 
 FAR EASTERN PLANS 
 
 road to the Pacific was her only open 
 line of communication with the outside 
 world, and it never was in physical con- 
 dition to meet the demands made upon 
 it. If, reconstructed and reequipped 
 by Mr. Harriman and the American 
 syndicate, it had been made part of a 
 great international transportation sys- 
 tem, it might have become the decisive 
 factor in the struggle with Germany 
 in 1914-1915, and might thus have 
 changed the earlier stages, if not the 
 whole course, of the great world war. 
 
 48
 
 THE COUNTRY LIFE PRESS 
 GARDEN aTY, N. Y.
 
 LOS ANGELES, CALIFORNIA 90095-1388 
 
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