.OFCAriFOfff., ^-^MFUNIVER% ^^>:lOSANf.fl% ^.OFCA!.IF( JiirYl i ^ ^ ^/jim' iMNniwv^ ^^0 ji"^' •^/jajMr.j iM' A^^ •dOV^ '-^Ki/( SOl^ .\V^^ ^^fcmwni', .aWFUMve THE MIDDLE EASTERN QUESTION OR SOME POLITICAL PROBLEMS OF INDIAN DEFENCE CAMi'iNc. IN A (;or<;k ok thk karun kivkk. SOUTH KKN PKRSIA (p. 143) Kronli»|iiccc THE MIDDLE EASTERN QUESTION OR SOME POLITICAL PROBLEMS OF INDIAN DEFENCE BY VALENTINE CHIROL AUTHOR OF "THE FAR EASTERN QUESTION" WITH MAPS, ILLUSTRATIONS, AND APPENDICES LONDON JOHN MURRAY, ALBEMARLE STREET 1903 D DEDICATED BY PERMISSION TO HIS EXCELLENCY LORD CURZON OF KEDLESTON VICEROY OF INDIA TO WHOSE STANDARD WORKS ON PERSIA AND CENTRAL ASIA THE AUTHOR WISHES UNRESERVEDLY TO PLACE HIS INDEBTEDNESS ON RECORD PREFACE THIS volume has grown out of a series of letters written for The Times, to whose proprietors I am indebted for permission to make the fullest use of them, during a journey I made through Persia and down the Persian Gulf, as well as to different points of the Indian frontier, in the autumn and winter of 1902-3, before and after attending the Coronation Durbar at Delhi. In order to place before my readers a more complete survey of the question which I had outlined in those letters, I have not merely revised them and brought them, as far as possible, up to date, j but I have, to some extent, recast them, and introduced I a large amount of altogether new material. I must leave these pages to speak for themselves ; but as the book I published early in 1896 on The Far \ Eastern Question was, I think, the first to call public S attention to the gravity of the problems with which, S as the result of the war between China and Japan, we were about to be confronted in Eastern Asia, I may perhaps, without too much presumption, be allowed 3 to say that the more subtle changes of which I have J attempted to describe the progress in Middle Asia o appear to me to be fraught with consequences of even greater moment to the British Empire. In Persia especially — where I had travelled eighteen years before, on my way back from a journey to India — it was sufficient to compare the conditions that pre- vailed there in 1884 and in 1902 in order to be im- pressed with the rapidity with which events are now 435'775 viii PREFACE moving even in the immutable East. Under the impact of Western forces the disintegration of Asia is proceeding apace, and new conditions are being evolved which, within a period perhaps no longer very remote, will seriously afTect, both directly and indirectly, the position of our Indian Empire. For the pressure of European ambitions successively trans- ferred from the already overcrowded stage of our own small continent to the more spacious stage of Asia is destined to rob India of the precious advantages of a t/u^3 350 3^M 37« CONTENTS XI APPENDICES PERSIA PAGB Anglo-Persian Treaty of Paris (1857) . ... 409 Anglo-Persian Commercial Convention (1903) . . . 414 Rosso-Persian Treaty and Commercial Compact of Turkman- cHAi (1S28) . . . ... 418 Russo-Persian Convene [ON, Defining Boundaries East of the Caspian Sea (1881) . . . ... 428 Russo-Persian Commercial Convention (1901) . . . 433 Correspondence between the British and Russian Govern- ments with Reference to the Integrity and Independ- ence of Persia (1834-1888) . . ... 437 Article XVIII. of German-Persian Treaty of 1873 . . 445 Russian Statistics of Russo-Persian Trade . . . 445 AFGHANISTAN Correspondence between the Indian Government and the Ameer of Afghanistan {1880-1883) . ... 448 The Ameer's Speech at the Rawal-Pindi Durbar (1885) . 451 The Durand Agreement (1893) . . ... 452 Correspondence between the British and Russian Govern- ments Respecting the Exclusion of Afghanistan from THE Russian Sphere of Influence . ... 454 Anglo-Russian Agreement with Regard to Spheres of In- fluence IN THE Pamir Regions (1895) . . . 465 TIBET, SIKKIM, BURMAH, SIAM, AND SOUTH-WEST CHINA Separate Article, relating to Tibet, of the Chefoo Agree- ment BETWEEN Great Britain and China (1876) . . 467 Anglo-Chinese Convention Relative to Burmah and Tibbi' (1886) . . . . ... 467 xii CONTENTS rAOS Anclx>Chinese Convention Kei_\tivb to Sikkim and Tibet (1890) ... 468 Anglo-Chinese Convention Kblative to Bl'rmah and Tibet (1S94) ... 470 Anglo- French DEciJiRATiON Kki.aiivb to Si am, the Mekong Valibv, and South-We^t China (il>96) . . 474 Anglo-Chinese Agree.meni (1S97) modikvino the Convention ok 1894 . ... 475 THE 15AGHDAD R.\IL\VAY Convention between the 1'orte and the Anatolian Rail- way Company (1903) . ... 477 Statutes of the "I.mi-ekial Ottoman Baghdad Railway Com- pany" (1903) ... 497 BIBLIOGRAPHY ... 499 INDEX 501 LIST OF ILLUSTRATIONS FACB PAGE CAMPING IN A GORGE OF THE KARUN RIVER . Frontispiece PERSIAN SOLDIERS, (a) "PRESENT ARMS!" (,b) MARCHING AT EASE ^ THE MORNING START FROM A PERSIAN CARAVANSERAI . . l8 THE '* RUSSIAN " ROAD FROM RESHT TO TEHERAN . . . 34 SUSPENSION BRIDGE ON THE "LYNCH ROAD " FROM AHWAZ TO ISFAHAN . . . ... 56 A SHAH ABBAS BRIDGE OVER THE ZENDEH RUD . . . 76 PERSIAN BEGGARS .... KUM AND THE GOLDEN MOSQUE OF FATIMA . LOOKING TOWARDS ISFAHAN OVER THE BISTAGOON PLAIN THE HALL OF FORTY COLUMNS AT ISFAHAN . GOING TO VISIT THE ZILL-ES-SULTAN IN THE BAKHTIARI MOUNTAINS BAKHTIARI TRIBESMEN .... THE GORGE OF THE "PULLING UP AND LETTING DOWN OF SKIRTS ' A BAKHTIARI GRAVEYARD . AMONGST THE ARABS OF THE PLAINS THE RESIDENCE OF SHEIKH KHAZZUL ON THE TIGRIS THE "GRAND CANAL " AT BASRA PERSIANS PLOUGHING A PRIMITIVE PERSIAN WELL GULF ARABS MUSCAT THE AFGHAN FORT OF BALDAK SPIN, FROM CHAMAN RUSSIAN OFFICIAL TRAVELLING WITH AN ESCORT OF PERSIAN COSSACKS ... . . KAHV-I-RUKH, THE SUMMER RESIDENCE OF THE ILKHANI OF TH BAKHTIARIS ..... KALAAT TUL, THE ANCIENT CASTLE OF THE CHAHR LANG EAKHTIARIS 305 106 1X6 129 136 140 144 148 160 170 182 200 220 234 254 270 286 296 XJV LIST OF ILLUSTRATIONS VIEW INTO AFGHANISTAN KKOM LUNPI KOTAL AFGHANS IN THE KHAIBAK IN THK KHAIBAK PASS ; AN AFGHAN CARAVAN TUB HIMALAYAS AND KANCHINJUNGA OUR INDIAN FAKIR NATANZ : A WALLED VILLAGE IN CENTRAL PERSIA J3" 400 PEDIGREE OF THE KA.IAK DYNASTY OK PF-RSIA PEDIGREE OF THE AMEEK OF AFGHANISTAN . 100 3^5 MAPS SKETCH MAT OK THE BORDERLANDS OK INDIA SKETCH MAP OF ASIA SHOWING RAILWAY KXI'ANslON 40S THE MIDDLE EASTERN QUESTION CHAPTER I THE MIDDLE EASTERN QUESTION DEFINED AT the close of the very weighty speech with which l\ the Viceroy of India concluded the Budget debate in the Indian Council at Calcutta this year (March 25th, 1903) occurs the following remarkable passage : — ** There is one final subject that is rarely mentioned in these debates, and that finds little place in the many utterances which the head of the Government is called upon to make in the course of the year, and yet in a sense it is the most important of all. I allude to Foreign Affairs ; and it must be remembered that in the case of India the phrase includes her relations with the whole of her neighbours, and that this carries with it the politics of the greater part of the Asiatic Conti- nent. 1 doubt if even the thoughtful public has at all realised the silent but momentous change that is going on, and that will one day have an effect upon India that is at present but dimly discerned. In the old days, and it may almost be said up to the last fifteen years, the foreign relations of India were practically confined to her dealings with Afghanistan, and to the designs or movements of the great Power B 2 THK M1I)I)1-E KASTERK QUESTION DEFINED beyond; and the foreign policy of India had Utile to do with any other foreign nation, it is true that we had territories or outposts of influence that brought us into contact with Persia and Turkey, and that we had occasional dealings with Arabian tribes. Now all that is changed, and events are passing which are gradually drawing this country, once so isolated and remote, into the vortex of the world's politics, and thai will materially affect its future. The change has been due to two reasons. Firstly, as our own dominion has expanded, and our influence upon our frontier consolidated, we have been brought into more direct and frequent relations with the countries lying immediately beyond. F"or instance, the annexation of Upper Burma brought us into contact with an im- portant corner of the Chinese Empire, and created a batch of frontier and other political problems of its own. But the second reason is much more important. Europe has woke up, and is beginning to take a revived interest in Asia. Russia with her vast territories, her great ambitions, and her unarrested advance, has been the pioneer in this mtnement, and with her, or after her, have come her competitors, rivals, and allies. Thus, as all these foreigners arrive upon the scene and push forward into the vacant spots, we are slowly having a European situation recreated in Asia, with the same figures upon the stage. The great European Powers are also becoming the great Asiatic Powers. Already we have Great Britain, Russia, France, Germany, and Turkey ; and then, in |ilace of all the smaller European kingdoms and principalities, wc have the empires and states of the East — Japan, China, Tibet, Siam, Afghan- istan, Persia, only a few of them strong and robust, the majtjrity containing the seeds of inevitable decay. There lie in the.se events and in this renewed contact or collision, as the case may be, between the East and the West, (»inrns of thr greatest significance to this country. Europe is so accurately parcelled out between ASIA IN FLUX AND SOLUTION 3 the various States and Powers, the balance of power is suspended on so fine a thread, and the slightest disturbance would imperil such wide interests, that short of some serious and unforeseen convulsion, which everyone would wish to avert, great changes are not to be anticipated there. Africa is rapidly being over- run by the few European Powers who have obtained a foothold upon that continent, and before long its political destinies and territorial grouping will have taken something like definite shape. But in Asia a great deal is still in flux and solution, and there must, and there will, be great changes. It will be well to realise what an effect these must have upon India, and how they must add to our responsibilities and cares. Our Indian dominions now directly touch those of Turkey in many parts of the Arabian peninsula, those of Russia on the Pamirs, those of China along the entire border of Turkestan and Yunnan, those of France on the Upper Mekong. In our dealings with them the Foreign Department in India is becoming the Asiatic branch of the Foreign Office in England. Then round all our borders is the fringe of Asiatic states to which I just now alluded, whose integrity and whose freedom from hostile influence are vital to our welfare, but over whose future the clouds are beginning to gather. In Europe we are a maritime Power who are merely called upon to defend our own shores from invasion, and who are confronted by no land dangers or foes. In Asia we have both a seaboard and a land frontier many thousands of miles in length, and though Providence has presented us on some portion of our land frontiers with the most splendid natural defences in the world, yet the situation must become more and not less anxious as rival or hostile influences creep up to these ramparts, and as the ground outside them becomes the arena of new com- binations and the field of unforeseen ambitions. All these circumstances will tend — they are already tending k 4 Till-; MIDDLK HASTERN QUESTION DKFINED —to invr.st the work of the Indian Foreif^n Department with ever-imreasing importance, and they demand a vigilance and a labour of which there are but few indications in anything that reaches the public ear or falls under the public eye. Questions of internal develop- ment, administrative anxieties, agrarian and fiscal problems, fill all our minds, just as they have occupied the greait-r part of my speech this afternoon. But do not let the people of India think that we shall never have anvthing but domestic cares in this country. Do not let them forget that there are other and not inferior duties that devolve upon her rulers, that the safety of the Indian frontier, and the maintenance of the British dominion in those parts of Asia where it has for long been established, and where it is the surest, if not the sole, guarantee for peace and progress, are in their hands, and that this, no less than internal reform, is part of England's duty. I see no reason for anticipating trouble upon our borders, and I know of no question that is at present in an acute or menacing phase. But do not let anyone, on the strength of that, go to sleep in the happy illusion that anxiety will never come. The geographical position of India will more and more push her into the forefront of international politics. She will more and more become the strategical frontier of the British Empire. All these are circum- stances that should give us food for reflection, and that impose upon us the duty of incessant watchfulness and precaution. They require that our forces shall be in a high state of efficiency, our defences secure, and our schemes of policy carefully worked out and defined. Above all, they demand a feeling of solidarity and common interest among those — and they include every inhabitant of this country, from the Raja to the Raiat — whose interests are wrapped up in the preservation of the Indian Empire, both for the .sake of India itself and for the wider good of mankind." THE FUTURE OF ASIA 5 In these pregnant sentences Lord Curzon defined, with the authority belonging alike to his intimate know- ledge of Asiatic countries and peoples and to the high office he holds under the Crown, the question with which British statesmanship is confronted in what Captain Mahan has aptly christened "The Middle East," that is to say, in those regions of Asia which extend to the borders of India or command the ap- proaches to India, and which are consequently bound up with the problems of Indian political as well as military defence. The Middle Eastern Question is itself only a part of a much larger question upon which the future of Asia depends. It is not indeed a new question, for it has occupied the minds of far-sighted statesmen for generations past. It is a continuation of the same question with which we have long been familiar in the Near East. It is closely con- nected with the more novel development of international rivalry in the Far East. It is the outcome of that con- stant projection of European forces — moral, commercial, and military — into Asia which is slowly but steadily transforming all the conditions that enabled us to achieve, and so far to retain, as the masters of India, a position of unparalleled ascendency in the Asiatic Continent. Owing partly to the innate conservatism of the British mind, which is both self-reliant and slow to move, prone to criticism yet fundamentally optimistic, and partly to the immense complexity of our national interests scattered over a world-wide Empire which has been built up by a series of individual efforts rather than by any uniform and collective design, we are apt as a nation to take things as we find them, and having no reason to be dissatisfied with them on the whole, we 6 THK MIDDLE EASTERN QUESTION DEFINED are also disposed to assume that tlu y will go on as they are, without troubling ourselves over-much about the unceasing changes which are going on around us, and which, without making themselves so directly and visibly felt as to compel public attention, are constantly and materially affecting the ground upon which we stand in our relations to the outside world. Considered solely as an absolute quantity, our position in Asia, with which it will be generally agreed that our whole position as an Empire is largely bound up, is as strong as, if not stronger than, it has ever been. Can the same be said of it if we consider it not as an absolute but as a relative quantity, i.e. in relation to the various other quantities which make up the great political equation of the balance of Asiatic power? Not to speak for the moment of the great continental powers of Europe, has the value of those other quantities in the equation, which are called Turkey, Persia, Afghanistan, China, Tibet, Siam, remained constant? or has it not, on the contrary, varied so considerably as to modify very seriously, and in most cases to our detriment, all the conditions of the equation? W'hetluT such variations are due to internal or to external causes, they necessarily affect the problem as a whole, and it wmII be my object in the folhjwing jiages to try and measure their real im- portance and to indicate some of the consequences which must inevitably ensue from them. CHAPTER II THE PERSIAN ASPECT OF THE PROBLEM OF the factors of the Middle Eastern question which most closely affect our position in India, Persia is, with Afghanistan, the most important. Nowhere certainly can the conditions which are transforming the Asiatic situation be studied with greater profit. Nearly fourteen years have elapsed since the present Viceroy of India wrote for The Times the admirable series of letters which he subsequently embodied and developed in his exhaustive work, Persia and the Persian Question —a work that deservedly ranks as the most important modern contribution to our knowledge of the condition of Persia and to a proper understanding of the part she is destined to play, whether actively or passively, in the history of Asiatic politics. Persia herself remains to-day exactly the same inert organism that Lord Curzon described in 1889-90, but her inertia has not been proof against the influence of the motive forces which have been closing in upon her in the interval. Nor is it only that she has herself suffered changes which are none the less significant because they have been forced upon her. The events which have taken place in Asia outside of Persia have reacted upon Persia herself with a force, which unaided, she has been powerless to resist. She has been gradually 7 8 THE PERSIAN ASPECT Ol- Till- I'ROBLEM caught up and ovcrulu-lmed in the vortex of inter- national ambitions, \vhich she could neither escape nor control. Up to quite the end of the eighteenth century Persia had never been st*riously thought of in Europe as a poHtical factor. All that was known of her liad been learnt from the narratives — singularly copious and romantic— of the merchant adventurers who had from time to time sought more or less successfully to open up trade relations with her from Western Europe. Curiously enough it was the British "Moscovy Com- pany" that first attempted, in the days when Ivan the Terrible reigned at Moscow and the good Queen Bess over these islands, to tap the trade of Persia in British interests by way of the Volga and the Caspian in competition with the Portuguese galleons that already s;iiled the Persian Gulf. There are few stranger pages of historv when read in the light of the present situation than the records of that Company and of its successor, the British Russia Company, which for two centuries applied themselves repeatedly, and with fluctuating fortunes, to conquer the markets of Persia for British trade from a Russian base. Their ultimate failure coincides with the period when British enterprise, which had been seeking access for some time past both from the Mediterranean and from India to the southern markets of Persia, at last succeeded in securing a strong foothold on the Persian Gulf. The British Caspian trade was abolished by a decree of the Empress Catherine t)f Russia in 1746, and the last English factories in Northern Persia were abandoned in 1749. In 170;^ the Shah Kerim Khan issued a solemn firman to "tin- Right Worshipful William Andrew Price, Esquire, Governor-General for the English nation in OUR FIRST RELATIONS WITH PERSIA 9 the Gulf of Persia," grantin^j important rights and privileges for the establishment of a factory at Bushire, and for the sending of British goods customs free all over the kingdom of Persia. It is true that long before that date there had been commercial relations between India and Persia, and British factories in the Gulf, both at Jask and at Gombroon, or Bunder Abbas, as it is now called. A British commercial agent had even resided at Isfahan. But British enterprise in the South had had to fight the ground inch by inch against other European rivals, Portuguese, Dutch, and French in succession, and it was not till the second half of the eighteenth century that that British commercial as- cendency was established, which in the course of the following century grew into an unchallenged monopoly of political influence in the Persian Gulf, extending from its shores far into the interior of Southern and Central Persia, and even to the Persian Court in the north. It was the devouring genius of the first Napoleon and his gigantic schemes of world conquest which led for the first time about a hundred years ago to the establish- ment of official diplomatic relations, and to the conclu- sion of an important political treaty between this country and Persia. The conquests of Nadir Shah, who had carried the victorious arms of Persia down to Delhi in 1739, and of Ahmed Shah Abdali, who after Nadir's death proclaimed himself independent sovereign of the Afghans, and had led them down repeatedly to plunder the cities and overrun the plains of Northern India, had brought home to the British rulers of Hindustan the ever-present danger of invasion from the North. As lately as 1796, Zeman Shah, a grandson of Ahmed Shah Abdali, had advanced as far as Lahore with the lo THE PERSIAN ASI'KCT ()!• THK PROBLEM professed purpose a{ rescuiiii: the Mui,^luil dynasty from the domination of the Mahrattas. It is not surprisintj in these circumstances that British statesmen should have trembled for the safety of our Indian possessions when it became known in 1800 that a scheme was beint^ planned in Kurope for a fresh invasion of India from Central Asia, under the joint auspices of France and Russia. Not onlv had the scheme been discussed between Napoleon and the Tsar Paul, but preparations were actually made on the Volga for the despatch of a Russian k)rce, and a secret embassy had been sent from France to Teheran to arrange for the passage of a French armv, which was to join hands with the Russians in the plains of Northern India. The whole scheme was upset by the assassination of the Tsar in March, 1801, but the British Government liad already taken steps effectually to thwart one of its main features. Lord Welleslev, then Governor-General of India, had despatched Captain John Malcolm to Persia, and in January a treaty of defensive alliance had been success- fully concluded with Fath Ali Shah, under which his Persian Majesty bound himself, in return for definite promises of material assistance, to attack the Afghans in the event of their attempting to invade India, and to prevent the French horn "establishing themselves on any of the islands or shores of Persia." A few years later, however, in 1.S05, hostilities broke out, not between Persia and France, but at the instigation of the latter, between Persia and Russia, with whom we were then in alliance against France. Hard pressed by the Russians in Gi-orgia. the Sliah ajipealed to us for assistatue, jjledging himself in return to abandon the Frrnch alliance, under which Napoleon was to help him lo recover the provinces conquered by NAPOLEON I.'s GREAT SCHEME ii Russia, and Persia was to declare war against England and, as had been already contemplated in 1800, give passage to a French army for the invasion of India. The British Government naturally held that the Treaty of 1801 had contemplated quite a different casus foe- dens, and the Persian overtures were rejected, where- upon Path Ali Shah threw himself altogether into the arms of Napoleon. General Gardanne arrived in Teheran in 1807 as the political and military pleni- potentiary of the French Emperor, who was then at the height of his power, and proceeded with the help of a large staff of French officers to reorganise and equip the Persian Army on European lines. But the Treaty of Tilsit, which had entirely changed Napoleon's policy towards Russia, cooled the ardour of the Persian monarch for a French alliance, which he had accepted with an eye to the recovery of his Caucasian provinces, rather than with any deliberate purpose of hostility towards England. The Indian Government, which had taken steps to consolidate its relations with the frontier states by despatching missions to the Ameers of Sind, to the Sikh chief- tains, and to the ruler of Kabul, where Mr. Elphin- stone concluded a treaty specifically directed against the French and Persian "confederacy," again des- patched Sir John Malcolm to Persia. By one of those strange confusions partly due to departmental jealousy and partly to official carelessness and the want of proper co-ordination of our Imperial forces, which have been so frequently and seriously detrimental to British interests in Persia, the home Government appointed at the same time without reference to India a plenipotentiary of its own to proceed direct to Teheran, Sir Harford Jones. The conflict of authority between 12 THK PKRSIAN ASPECT OF THE PROBLEM thest' i\\i» representatives, and the contradictory in- structions whicli they kept on receivinqf from Calcutta and from London, wert- not conducive to successful diplomacy. Nevertheless, thouj^h often at cross-pur- poses, our diplomacy "muddled through" in the end. On March isih. 1809, Sir Harford Jones signed a treatv with the Shah, by which Fath All annulled all previous treaties he had entered into with European Powers, and undertook to prevent the passage of European armies through his dominions towards India, whilst we promised to support him with troops and subsidies, and to abstain from intervention, except as mediators, in any war between Persia and Afghanistan. This treatv, though endorsed by the Governor-General of India, Lord Minto, was not however ratified at home, and the wrangling between Calcutta and London over the powers of Sir John Malcolm and Sir Harford Jones, who were respectively ordered to hold the ground against each other, continued to bring both governments into ridicule at Teheran, until Sir Gore Ouselev arrived in 1.S12, with authority to supersede the two rival plenipotentiaries. Even then the "defini- tive" Treaty, wiiiih Sir Gore Ouseley concluded upon arrival, was not approved in London, and it was onlv on November 25th, 1H14, that a final treaty "for the adjustment of the terms of the definitive Treaty of 1812 " was duly signed, sealed, and delivered, declaring in the preamble that "these haj)|)y leaves are a nosegay plucked from the thornless garden of concord and lied by the hand of the plenipotentiaries of the two great States." The most important modifications of the treaty oi 181 2 in the instrument which thus superseded it consisted in the withdrawal of the clauses under which England had undertaken to assist Persia in the THE SIEGE OF HERAT 13 establishment of a naval force and naval stations on the Caspian, and to supply officers and non-commissioned officers for the reorganisation of the Persian Army. In the event of an attack upon Persia by another power, England now also reserved for herself the option of paying an annual subsidy in lieu of military assistance. Fourteen years later, in 1828, when Persia was again involved in war with Russia, this obligation was com- muted into one single payment, at the price of which the articles of the treaty of 1814 binding us to give assistance to Persia were finally annulled. The French danger in Persia, which even in the days of Napoleon's omnipotence was perhaps more visionary than real, had long since passed away, and the Russian danger was not yet. So we could, it was thought, afford to regard Persia as a qiimitite negligeable. Yet during the two following decades we had frequent opportunities of realising how seriously the loss of in- fluence we had incurred at Teheran by disappointing the expectations of the Persian Government could affect our interests beyond the frontiers of Persia. Russian diplomacy encouraged Fath Ali Shah to seek once more in Afghanistan compensation for the cessions of territory he had been compelled to make to his northern neighbour. From 1837 to 1857 our relations with Persia were periodically strained by hostile movements of Persian troops, sometimes openly and always covertly supported by Russia, against Herat. The siege of Herat in 1837-8 by a Persian army under the Shah's grandson has remained ever memorable for the gallant defence, organised mainly by the energy and ability of a single young British officer, Eldred Pottinger ; but it was not raised until a demonstration had been made in the Persian Gulf, where our troops occupied the island 14 THK PKRSIAN ASPECT OK THE PROBLEM of Kharak. Ft- rsia was, however, only temporarily over- awed. In 1S31 she a^ain attempted to interfere forcibly in the affairs of Herat, and in spite of a definite enp^age- ment to abstain from such intervention, which was signed at Teheran in January, 1H53, the attitude of the Persian Court led to a complete rupture of diplomatic relations in the following year, and in 1S55 another Persian expedition was despatched to Herat. Again the British Government was compelled to bring warlike pressure upon Persia, and when Herat was captured by the Persians in October, 1856, a force was sent under Sir James Outram to occupy Bushire and .Muhammerah, at the head of the Persian Gulf. The campaign was short and almost bloodless, the Persian troops being routed at every point almost without a struggle ; and in spite of the vain-glorious rhodomon- tades of the Teheran Government, which kept on issuing grotesque bulletins of fabled victories, the Shah deemed it expedient to invoke the good ofiices of the emperor of the French, and on March 25th, 1857, a treaty of peace was signed in Paris, by which Persia relinquished all claims to sovereignty or to the right of interference in Afghanistan. This was, indeed, the only stipulation we imposed upon Persia. We exacted no guarantees for its fulfilment ; we asked for no com- pensation or concessions beyond a ceremonial apology to our .Minister, on his return to Teheran, for the insults to which he liad been subjected before the out- break of hostilities ; we agreed to restore every bit of Persian territory we had occupied ; we claimed neither political nor commercial advantages. One knows not whether to admire more the generosity or the im- providence of such a treatv. It is now sometimes suggested that there must have been some connexion TMK ANGLO-PERSIAN TRKATV OK 1857 15 between the impending outbreak of the Indian meeting and the hasty conclusion of peace with Persia. But a mere comparison of dates disposes once for all of that fiction. The treaty was negotiated in Paris in March, 1857, and neither at home nor in India had the official ear caught at that time even the faintest mutterings of the storm which was to break over India two months later. The true explanation is that the importance of Persia as a factor in the Asiatic problem, which had been momentarily realised under the pressure of the Napoleonic danger at the beginning of the last century, had then been once more entirely lost sight of. The Crimean war had just been fought, and the Eastern question, as the Asiatic problem was then called, centred at that time in Constantinople. It was held to have been settled under the walls of Sebastopol. The remoteness of Persia, the pressure we could always exercise upon her as the masters of India, and her vulnerability in the Persian Gulf com- bined to relegate her to a subsidiary position on the political chessboard. Russia, no doubt, had been for a long time pressing heavily upon Persia from the Caucasus, indeed ever since the days when Peter the Great made his descent upon the southern shores of the Caspian, and the Treaties of Gulistan in 1813 and of Turkman Tchai in 1828 had already demonstrated the powerlessness of Persia to arrest the southward progress of her northern neighbour to the west of the Caspian. But Russia's conquests appeared to consti- tute merely a not unnatural extension of her European Empire, and she hardly claimed at that time to be a great Power in Asia, notwithstanding the vast extent of territory over which she held sway in the north. Though the diplomatic records of Teheran contained ample Ih THK I'KKSIAN ASrECT OF TllK TROBLEN! evidence of tht- subser\ iciuy which ilie Persian Govern- ment had already not infrequently been compelled to show to Russia at the expense of its good relations with Great Britain, it was not until the tide of Russian con- quest swept over Central Asia in the latter part of the last century that Russia was able to challenge pwrma- nentlv in the Persian capital the position we had hitherto occupied as the greatest European Power in Asia. The military occupation of the Trans-Caspian regions and the annexation of the Khanates and of Merv gave Russia a frontier, marching for over five hundred miles with that of Persia to the east of the Caspian, and the construction of the Central Asian Railway from Khrasnovodsk secured her a strategi* position which entirely envelops the province of Khorasan, and places it and Mazanderan as completely at the mercy of a Russian army as were already the Western provinces of Ghilan and Azerbaijan. Even then the results of this great change did not make themselves thoroughly felt in Persia until the sudden collapse of the Chinese Empire under the impact of Japan produced a fresh development of the Asiatic problem, pregnant with even more momentous issues. That Russia was not satisfied with the position she had gained in Central Asia, but was determined to make her power equally felt in Eastern Asia, had been evident from the moment when in iSf^i she embarked upon so costly and formidable an enterprise as the construction of a great trunk railway connecting her l^uropean Empire through the whole length of Siberia with her remote possessions on the Pacific. The events of 1894-5 in the Far East took Russia, as they took the rest of the world, by surprise, long before the Siberian Railway could be completed. RUSSIAN POLICY IN PERSIA 17 But it was already sufficiently advanced to serve her as a weapon, offensive as well as defensive, in the conflict of international ambitions to which the inheritance of the "yellow corpse," perhaps somewhat prematurely, gave rise. Indeed, if one looks back upon the events of the last eight years in China, it is difficult to conceive how Russia could have played the part she has played with such boldness and success in the Far East had she not been in a position to use the Siberian Railway both as an excuse for pegging out her claims and as an instrument for ultimately enforcing them. Thus in the brief course of some forty years— say between i860 and 1900 — the area of that Eastern ques- tion, which only a generation ago appeared confined mainly to the southern and eastern shores of the Mediterranean and the Black Sea, has been extended, not only across the Caspian to the plains of Central Asia, but to the far-away coast of the Pacific, and the problem has assumed a magnitude and a complexity which may well strain the powers of even the highest statesmanship. Before entering upon a discussion of the immediate objects of Russian policy at Teheran and the methods it employs, it is therefore necessary to emphasise the point that the importance and signifi- cance of Russia's action in Persia cannot be measured merely by the international interests which it affects locally, though these should not be underrated. The policy of Russia in Persia is only part of a great system of Asiatic policy — commercial, military, and political — which is being steadily built up by the per- severing hands of Russian statesmen, whose breadth of grasp and continuity of purpose are liable to no disturbance from the fluctuations of public sentiment or the precariousness of parliamentary majorities. To i8 THK TKRSIAN ASPllCT OF THE PROBLEM them Teheran is merely one link in a lon^ chain which stretches from Constantinople to Peking, and the pres- sure they apply in Persia is perhaps not infrequently meant to be felt as much in the Far East or in the Near East as in the Middle East. That policy may or may not be incompatible with the interests of the British Empire — an empire whose fortunes can hardly be dis- severed from those of its great Indian dependency — but it cannot fail to affect them very considerably. In a minor or varying degree it must also affect the interests of other powers who have, or hope to acquire, a stake in Asia, but none of these are at present comparable with our own. Not many years ago the Persian question was perhaps not unnaturally regarded as a separate issue to be dealt with on its own merits. To-day it requires no exceptionally far-sighted statesmanship to see that it is merely part of the larger question, upon the solution of which the future of Asia must depend. That question is whetiier Asia is really a field in wlii( h there is room for two of the greatest European Powers, which are also the two greatest Asiatic Powers, to fulhl their peaceful mission in friendly competition, or whether their ri\.-ilr\- must ultimately degenerate into a struggle for exclusive mastery. The special interest which attaches to the Persian branch of that question is that, whereas in other regions of Asia new factors are introduced into the problem by the aspirations of other powers that claim for themselves also a place in the Asiatic sunshine. Great Britain and Russia still stand alone and almost face to face in Persia, in the presence of a si( k-bed more desperate perhaps than that of anv other Asiatic monarchv. CHAPTER III THROUGH "THE GATES OF THE CASPIAN" THE shortest and most convenient route for the traveller proceeding from Western Europe to the Persian capital is by rail through Russia to Baku and thence by steamer across the Caspian to Enzeli and Resht. He will find it also in many ways the most instructive, for it will afford him an opportunity of noting the energy and enterprise with which Russia has not only developed her means of communication in that direction, but has practically secured to herself the monopoly of access to Northern Persia. Less than twenty years ago, when I was first in Persia, the main railway system of Russia was entirely cut off from the line, which had then only been quite recently completed between Batum and Baku, by the great mountain range of the Caucasus, across which there was only the old military road from Vladikavkas to Tiflis over the Dariel Pass. Russia still considered herself bound by Article 59 of the Treaty of Berlin, under which she had under- taken to make Batum, which had been ceded to her under that instrument by Turkey, "a free port essen- tially commercial," and, by way of Batum, goods for Persia and Central Asia could still be imported from Europe under a transit pass which exempted them from the payment of Russian import duties. At that time, 19 20 THROl'GH "THE GATES OF THE CASPIAN" both for freight and passengers, the most commodious route to Northern Persia was therefore unquestionably by Constantinople and the Black Sea to Batum and thence by rail, viii Tiflis, to Baku. This has long since ceased. By a mere stroke of the pen Russia freed herself, in spite of Lord Rosebery's cogent and logically irrefutable protest, from the obligations she had contracted at Berlin. Not only has Batum ceased to be a free port, essentially commercial, but the exac- tion of Russian import and export duties on all goods sent through Batum for Persia or beyond has long since killed the old transit trade. On the other hand, the Russian railway system, which has been vigorously developed throughout Southern Russia, has been linked up with Baku and the lines south of the Caucasus to Batum and Kars by a line that runs along the northern spurs of the mountain range and the coast of the Caspian from Rostoff, on the Don, direct to Baku. Besides the ordinary daily service, which is very com- fortable but very slow, a weekly /rain de luxt\ known as the " Petroleum Express," conveys the traveller in sixty-two hours from Moscow to the great oil city on the Caspian at an average speed of twenty-seven miles an hour, which, though from our point of view noi excessive, is in the circumstances as much as can hi- rea.sonably expected. There is another and even mon expeditious route froin Central Europe, via Vienna, Lemberg, Hkaierinoslaw, and Voroshisk, to Rostoff on the Don and Baku, but it has the disadvantage of more numerous changes. It is, however, the routr used for the mails, and whereas twenty years ago thn ( weeks was the niitiinittm for the transmission of letters between London and Teheran, the mail from Teheran is now often delivered in London, or vice versa, on l! MOSCOW AND PEKING 21 twelfth day after despatch, and generally within the fortnight. From another point of view Baku may be regarded also as the most instructive as well as the most con- venient point of departure for the traveller passing out of Europe into Persia. As if to accentuate the contrast which the spectacle of an ancient Asiatic monarchy in the last stage of decay is about to present to him, Baku offers him the spectacle of a young and progressive city in which the spirit of Western enterprise is far more conspicuous than, perhaps, in any other Russian city. Distinguished Russian writers like Prince Ukhtomsky, who claim for Russia a special mission in Asia, are fond of urging that in a certain affinity of race and temperament the Russian possesses peculiar qualifica- tions for dealing with Asiatics which are denied to the Western European, and not least to the Englishman. There is no doubt much truth in this contention. The most superficial observer who passes into Russia from Germany or Austria can hardly help feeling that, what- ever the geographical text-books may say, when he has once crossed the Russian frontier he is no longer quite in Europe, though he is not yet actually in Asia. The comparison may seem paradoxical, but to anyone who has visited Northern China, Moscow itself, with its semi-sacred Kremlin, in which the barbaric splendour of palaces and churches, stiff with gold and precious stones, has been accumulated for centuries to glorify the mystical association of spiritual and temporal sovereignty in the person of the Tsar, carries more than a suggestion of Peking and its Forbidden City, sacred to the Son of Heaven. Even to the outward eye the view from the tower of Ivan Veliky over the thousands of cupolas and domes, gleaming with gold 22 THROUGH -THE GATES OF THE CASPIAN" plates or painted in vivid tints of green and blue, and the green or brown roofs of the Russian houses, inter- mingled with trees and gardens, which mark the pano- rama of Moscow, has no little in common with the spectacle which the yellow-tiled palaces and temples of Imperial Peking and the green or grey roofs of the Manchu and Chinese cities in a similar setting of foliage present from the walls of the Celestial capital. Just as there is no distinct line of demarcation drawn by nature between the Russian Empire in Europe and in Asia, and the Steppes of the Don and the Volga merge imperceptibly into the plains of Central Asia, so the Russian character seems to have passed through a series of subtle gradations from the Asiatic type out of which it was originally evolved into a type which can no longer be called Asiatic, but which should certainly not be labelled as European. In the history of nations there has been perhaps no more curious phenomenon than the experiment upon which the rulers of modern Russia have embarked in their endeavour to blend with the fatalism and mysticism and passivity of the East the spirit of enterprise and individualism peculiar to the VVest. Whatever may be the case in other parts of Russia, in Baku, at any rate, the West has triumphid. Though long strings of i;aniL'ls may still be seen journeying towards its markets laden with the produce of Asia, though the Tartar city is still girdled with its ancient walls, though Persians and Turkomans in their quaint Oriental dresses still crowd its bazaars, Baku is essen- tially a Europi-an city in which the spirit of the West prevails. It is, in fact, more European than any other town in Russia, except, perhaps, St. Petersburg, Warsaw, or Odessa. It is not only that it possesses THE OILFIELDS OF BAKU 23 spacious streets, well - stocked shops, stately public buildings, and handsome private residences, as well as great commercial houses, and is in fact equipped with most of the modern appliances of a prosperous trading city. There is something in the air of the place which makes one feel that in Baku he is in what our American cousins would call "a live city." Its extraordinarily rapid growth can indeed hardly be matched on this side of the Atlantic. When I passed through Baku in 1884 its population was about 60,000 or 70,000. To-day it is getting on for a quarter of a million. Its prosperity is, of course, entirely due to the great oilfields which surround it. In 1884 they yielded 89,000,000 puds (the pud = 36 lbs.) ; in 1901 they yielded 671,000,000 puds, or approximately 12,000,000 tons of naphtha, which produced for exportation about 2,500,000 tons of kerosene and over 5,000,000 tons of residuals used for fuel on the greater part of the Eastern and Southern Russian railways, as well as on the Russian steamers on the Volga, on the Caspian, and on the Black Sea. A few years ago there was still a disposition to believe that the supply of oil must be limited, and that the increasing rapidity of production must lead to an early exhaustion of the fields. Nothing has happened to confirm that idea, and he would be a bold man who would attempt to set a limit either to the productivity or to the life of the Baku oilfields. Though from time to time individual wells are abandoned because they are exhausted or can no longer be worked at a profit, especially in view of the heavy royalties for which too sanguine speculators made themselves re- sponsible during the petroleum "boom" a few years ago, the number of producing wells has increased steadily from 458 in 1891 to 1,924 in 1901. There were 24 THROL'iiH "THK GATES OF THE CASPIAN" S42 new wells in baring last year, and 311 old wells were being deepened, and ai the present moment an imjKjrtant scheme is being carried out for draining an inland lake, which will lay bare an entirely new field reputed to be of exceptional wealth. Of the prodigious quantities of naphtha stored away in ilu- bowels of the earth some idea may be gathered from the so-called "fountains" or springs of oil that frequently burst forth in the course of boring and, defying all restraint, sho(jt up into the air in jets over 200 feet high, which it takes days to bring under control. One of these "fountains" caught fire on one occasion and burnt steadily for three weeks, giving away so much gas thai f(jr that period the streets of Baku twelve miles away recjuired no other illuminants. Such accidents, dis- astrous as they are, the people of Baku mention, merely, and with no little pride, as illustrating what their w^ells can do, and they do not for a moment disturb their faith in the future of an industrv which, apart from other developments, already supplies more than half the world with petroleum. There is probably much more danger at present of over-production than of any falling off in {productivity. The grave economic crisis through which Russia has been and is still passing could not fail to affect Baku, and, combined witli other causes, it has substantially depressed the price of naphtha products. During the boom of iS()9 the j^rice of crude oil rose to i6"7 kopeks per pud. In 1901 it fell to 5'45 kopeks, and last year it had recovered only to just over 8 kopeks per pud. But during the cholera visitations and famines of iKc)2 3 it fell to verv much lower values, and no fluctuations, however severe, can, it is believed* permanently affect the prosperitv of a city which con- trols and handles su( h inexhaustible sources of wealth. THE LAND OF THE LION AND THE SUN 25 One important factor in the prosperity of Baku is the wide range of its trade, which extends from the British Islands in one direction to the Far East in the other. Hence, also, the cosmopolitan character of the city, where, in spite of the exclusive tendencies of Russian economic policy, British and German and French com- munities are tolerated and encouraged to play their respective parts in endowing this arid reach of the Caspian with the social amenities of Western life as well as with the material equipment of Western enter- prise, to the unquestionable benefit of the Russian State. I have dwelt at some length on the wonderful picture of successful human activity which Baku now presents, though only a hundred years ago it was a neglected outpost of the Persian Empire, which then stretched up to the Caucasus, because, as I said just now, it serves to heighten the contrast that awaits the Western traveller when he lands on Persian soil at Enzeli after a voyage of barely two hundred miles. He steps at Baku straight from the quay of a well-appointed harbour on to a small but fairly comfortable steamer, which, after calling for some hours at two intermediate points on the coast, drops anchor at an early hour on the second morning after departure from Baku opposite to a mud flat with a few low buildings over which the Persian flag displays the Lion and the Sun. That is Enzeli. The Caspian is so shallow along this shore that, though the steamer only draws about eight feet of water, she cannot, even in the most favourable circum- stances, approach within more than a mile of the royal port of Persia. In unfavourable circumstances — and the Caspian has ever been famous for the violence and suddenness of its storms — the steamer cannot even 26 THROUGH •THK C.ATI-S OF THK CASPIAN" attempt to cast anchor, and luckless passengers have been known to be carried three times from Baku to within sight ot Knzeli and back without being able to land. In calm weather the traveller's experiences between the steamer and his destination at Resht are instructive, and, according to his own idiosyncrasies, mav seem either entertaining or merely wearisome. In rough weather they are apt to be painful and sometimes even dangerous. From the steamer he transfers him- self and his effects as best he can on board a small steam launch, which conveys him over the bar to the Customs station at Enzeli. The rains caught up from the north by the great mountain range which divides the main Persian plateau from the Caspian descend with alm assure the stability of his throne. On the other hand, as the Shah must be perfectly well aware that Russia's interest in the stability of his throne is conditioned upon his subserviency to her, it is obvious that the existence of such a force, which has been practically created and is maintained solely by Russian influi-nce, adds tremendously to the prestige as well as to the power of Russia, and not merely in Teheran. Such is the confidence the Russians are now able to place in tin; efiiciency and devotion of their THE USES OF THE PERSIAN COSSACKS 47 Persian Cossacks that they no longer find it necessary to keep them always under their own eyes. Detach- ments are sent away for a time into distant provinces. There are some, for instance, in the north-eastern province of Khorasan ; there are some in Arabistan, the south-western province which marches with the Turkish vilayet of Baghdad. On my way down to Isfahan I met a party proceeding to Yezd and Kerman in South-Eastern Persia. They are often appointed to act as guards or escort to provincial governors, and as such they are in a position not only to collect a great deal of useful intelligence for the Russian headquarters in Teheran, but to exercise in the same interest con- siderable local influence. Every one of these men carries to remote parts of the Persian kingdom not only the story of Russian might, but the praise of Russian methods ; and in this case the praise is not undeserved. Nor would it be fair to forget that the presence of such a force in the hands of Russian officers may sometimes be a guarantee for the maintenance of public security which enures to the benefit of foreign residents of all nationalities, as was clearly seen two years ago, during the bread riots provoked by the audacious attempt of the Governor of Teheran to engineer a corner in wheat. Whether, in the event of a great crisis, the Cossacks would be proof against an appeal to religious sentiment remains to be seen, for the influence of the Mullahs is still considerable. Whether they would remain at all costs true to their salt would probably depend, in a great measure, upon the personality of the Russian officer then in command. General Kosagowsky's term of service in Persia expired last spring. It is difficult to replace a man of his stamp, and Colonel Zuboff, the 48 RUSSIAN ASCENDENCY IN TEHERAN distinguished young offictr who, at least temporaril\ . succeeded him, is of a diflferent type. But the Cossack brigade will anvhow remain a significant and per- manent emblem of Russian military ascendency in Teheran, which, short of a Russian army of occupa- tion actually quartered in the Persian capital, could hardly be established on firmer and more durable foundations. CHAPTER VI RUSSIAN ASCENDENCY IN TEHERAN : THE POWER OF THE PURSE BESIDES the power of the sword Russia wields at the present moment in Teheran with at least equal might the power of the purse. The methods by which she has acquired it are similar to those which she has employed with so much success in China, and they aptly illustrate the intimate connection which exists between the Far Eastern and the Middle Eastern ques- tions. The activity of Russian diplomacy in Teheran during the last few years has constantly kept time with, and in many instances assumed exactly the same shape as, the activity which it has displayed during the same period in Peking. In both cases its guiding principles are the same, namely, that by bolstering up a weak and corrupt Oriental monarchy, and securing its com- plete subserviency by a judicious combination of force- ful pressure and pecuniary suasion, the ends of Russian policy can be, perhaps more slowly, but more surely attained, and at infinitely less cost and risk than by open and violent aggression. Nothing can be more instructive than the way in which history has been repeating, or rather duplicating, itself in Peking and in Teheran. In Peking the first manifestation of the ascendency E 49 5© TllK POWKR OF THK PTRSK slu" had gained over the Chinese Government hy her intervention at the close of the Japanese war, when, with the help of France and Germany, she ousted Japan from the Liaotong Peninsula for her own ulterior pur- poses, was the loan which she compelled China to accept in June, 1895. The Customs revenue of China was still intact, and being practically under Western administration, it ofTered ample security for a loan concluded on ordinary business lines, which would have enabled her to meet the Japanese war indemnity. Ne- gotiations were actually proceeding with the representa- tives of leading European firms, whose joint co-opera- tion would have safeguarded the financial independence of China. Russia peremptorily vetoed the acceptance of those proposals and thrust the Franco-Russian loan upon the Chinese, as it were, at the point of the bayonet. It was a Franco-Russian loan in this sense, that Paris supplied the money, but it was the Tsar's signature which constituted the guarantee. It was towards Russia and not towards France that China found herself placed in a position of financial depend- ence, whilst Russia at the same time obtained a first lien up(jn the revenue of the Chinese Customs, to which no great power contributes a smaller fraction than Russia herself. The inevitable results were not slow to follow. A Russian bank — euphemistically called the Russo- Chinese Bank — was established in China, which speedily developed into a regular branch of the Russian Ministry of Finance, and the Russians obtained in the following year a concession for the construction of the "Eastern Chinese Railway" to be connected with the vSiberian Railway, which from those modest beginnings has ex- panded into a (barter for the occupation of the whole of Manchuria and the creation of a great Russian THE PENURY OF THE SHAH'S TREASURY 51 Viceroyalty firmly entrenched behind the guns of Port Arthur. I have thought it necessary briefly to recall these circumstances because Russia is so clearly applying in Persia the methods which she has found so successful in China. Into the causes which have driven Persia to have recourse to foreign loans I shall have occasion to refer later on. Suffice it for the present to say that when Muzaffer-ed-Din succeeded to the throne, he found the Treasury at a much lower ebb than he had expected, and the enormous expenditure which a succession always involves in Persia very soon depleted it. In 1898 the Persian Government began to feel the pinch of poverty so severely that, when the Shah proposed to undertake a journey to Europe, there were no funds available for the purpose, and still less to meet heavy arrears of payment he could hardly leave the country without discharging. It was therefore decided to try and raise a considerable loan abroad. The Treasury had al- ready, in 1892, borrowed ;i^50o,ooo on the security of the Customs of the Persian Gulf from the Imperial Bank of Persia, a British institution founded with a great flourish of trumpets when Sir Henry Drummond-Wolff was at Teheran, for the purpose of fulfilling some at least of the functions of a state bank. The proceeds of that loan had gone to the payment of compensation for the abolition of the Persian Tobacco Monopoly — an ill-starred undertaking which, like the Persian Mining Corporation, had served mainly to give Persia a bad name in English financial circles. Unfortunately the Imperial Bank had also suffered, quite unfairly, from the discredit into which all Persian ventures had fallen, and as soon as, at the request of the Persian Govern- ment, it began to feel the pulse of the London money 52 THi: POWKR OF THK PURSK market, it became clear that without energetic support from the British Government there was little prospect of success for a Persian loan ; but in spite of the urgent advice of Sir Mortimer Durand, then British Minister at Teheran, oflicial circles in London hesitated and procrastinated. The security offered was unques- tionably adequate, namely, the Customs revenues of Southern Persia ; and in view of our important com- mercial and political interests in that region, it was eminently desirable that their control should not pass into other hands than ours. Whether it was necessary to insist upon immediate control of the Custom Houses, as the British capitalists demanded, instead of the eventual control which the Persians were ready to concede in case of default, is a disputable point. It was ostensibly on this rock that the negotiations were shipwrecked, though in return for a small advance of jC^o,0(X> to meet its most pressing requirements, the Persian Government had in the meantime consented to the Imperial Bank placing its own agents in charge of the Custom Houses at Bushire and Kermanshah. The delay caused by discussions on this point at any rate gave time for other influences to be exerted to deftiat the negotiations. Whether Russian diplomacy went to the length of explicitly vetoeing the loan in the same way as, a few months before, it had vetoed at Peking the loan which was offered to China in January, 1898, under the auspices of the British Government, it is diflicult to say. The pressure that Russia was able to bring to bear indirectly upon the Shah through her own friends at Court was possibly sufficient for her purposes. The neg()tiatif)ns were broken off. The penury of the Persian Treasury went on increasing. The Amin-ed-Dowleh, who was suspected of British THE FIRST RUSSIAN LOAN 53 leanings, fell into disgrace, and the Atabeg-Azam became once more Prime Minister in his stead under the powerful patronage of Russia. On the model of the Russo-Chinese Bank, and destined to become quite as undisguisedly a branch of the Russian State Bank under the immediate control of the Ministry of Finance at St. Petersburg, a Russian bank— the Banque des Prets, now called the Banque d'Escompte de Perse — had been opened at Teheran, and through its agency Russia, who had in the mean- time rejected a suggestion for a joint Anglo-Russian loan to Persia, agreed in 1900 to give the Persian Government a loan of ;^2,40o,ooo, represented by bonds guaranteed by the Russian Government and bearing interest at 5 per cent., with a sinking fund — capital and interest secured on the revenue of the Persian Customs generally, with the exception of the Persian Gulf ports. Whilst the Russians waived, except in the event of default, the right of control over the Customs upon which the British negotiators had insisted, they made it a condition that the proceeds of the new loan should be devoted, in the first instance, to the repayment of the balance of the British loan con- tracted in 1892 to provide compensation for the with- drawal of the ill-starred tobacco monopoly, and to redeeming the indebtedness of the Persian Treasury to the only two foreign banks in Teheran — the Imperial Bank of Persia, a British institution, and the Inter- national Bank of Commerce of Moscow, a private Russian firm, which could not attempt to compete with M. Witte's Bank. Further stipulations provided that Persia should contract no financial obligations in the shape of a new loan from any foreign power for a period of ten years, and also that she should not 54 THE POWRR OF THE PURSE lower her Customs duties, except with the consent of Russia. This loan, I should add, has never been publicly issued, nor has any information been made public as to the purposes, bt-yond those I have already mentioned, tt) which it has been applied. The relief that it afforded to the Persian Treasury was of short duration. It was issued nominally at SGr;, with a commission of i :; percent. Probably, therefore, when the outstanding balance of the Tobacco Monopoly loan, amounting to ^^400,000, and the other bank debts had been paid off, and commission and other charges deducted, the Treasury was left with little more than one million sterling to meet its most pressing needs. That sum was, at any rate, very soon exhausted, and towards the end of 190 1 a further loan was contracted on the same security and through the same agency for another 16,000,000 roubles, or over one and a half million sterling. Even less is known as to the terms upon which this second loan was made, but the period during which Persia undertakes to contract no loans from other powers than Russia, without the consent of the latter, was extended to 191 2, and, as a condition precedent, an agreement had been arrived at between Persia and Russia for a revision of the Persian Customs tariff. The proceeds of the second loan have not perhaps been quite so rapidly exhausted as those of the first, but in neither case has a penny been applied to any visibly useful purpose. It was stated in native circles at Teheran in the autumn of 1902 — and the report was generally credited — that, on his way back from Europe, the Shah had obt^iined the promise of another loan from Russia, and that it was in acknow- ledgment of tiiis fresh favour his Majesty had spoken in such warm terms, at an oiricial banquet giv«Mi to him PERSIA'S INDEBTEDNESS 55 at Kursk, of the close ties which bind Persia to Russia, and which he hoped would bind the two countries still more intimately in the future. The promise, if it was given, does not however appear to have been yet ful- filled, or, at least, only very partially. The Persians, at any rate, only admit a total indebtedness to Russia of 20,000,000 tomans, or ^^4, 000,000, which is the amount represented by the two above-mentioned loans. Even so, the significance of the financial dependence in which Persia has placed herself towards Russia in the course of such a very few years can hardly be over- rated. It cannot be fully appreciated until we have taken a survey of the economic and financial position of Persia as a whole ; but when a weak Oriental state, whose annual revenue only amounts to about one and a half million sterling, borrows from a powerful European neighbour, and spends within the short space of three years, sums which almost equal the whole of its revenues during the same period, and has absolutely nothing to show in the way of remunerative expenditure for the debt which it is piling up, the ultimate result must spell ruin. It is often assumed in England that the financial policy by which Russia has reduced Persia to this state of dependence upon the Russian Treasury is directed solely towards building up her political ascendency. If that were so, those who contend that her political ascendency is not detrimental to British interests w^ould be justified in regarding it with indifference. But this assumption ignores another equally important aspect of the situation. The financial policy of the Russian Government in Persia certainly promotes the ends which the Russian Minister of Foreign Affairs may be specially supposed to have in view, but it is immediately 56 THE POWER OF THE PURSE inspired and controlled by the Russian Minister of Finance, and it is directed towards building up the commercial supremacy quite as much as the political! supremacy of Russia in Northern Persia. It is, in fact, merely part of the comprehensive system of policy to which M. Witte devoted his great abilities and untiring energy throughout his tenure of oftice. The impetus which he had given to the development of Russian industry by intensified methods of protection made it absolutely necessary for him to find new markets for the products of Russian industry. The severe crisis through which Russia was passing as a con- sequence of overproduction under artificial conditions only served to stimulate his activity. In Persia he discovered a market in which the advantage of geo- graphical proximity goes far to counterbalance the disadvantage at which su(-h a hothouse growth as Russian industry is apt to find itself placed when in competition with the industry of other countries, and especially with British industry. If to geographical proximity he could superadd other advantages, he might well hope to turn the scales so completely in favour of Russian industry as to drive its competitors altogether out of the field. That its chief competitor happens here to be British industry, and that commercial rivalry therefore runs on the same lines as political rivalry, is merely an incident which no doubt adds zest to the game. What is the position, and what are the trvmip cards which Russia appears to hold? The chief routes by which British trade reaches Teheran are, by the Persian Gulf, the Bushire-Shiraz-Isfahan route, the Baghdad- Kermanshah route, and the new route 77V/ Muhammerah, tin- Karun river, and the Aluvaz-Isfahan road ; and by THE RUSSIAN BOUNTY SYSTEM 57 the Black Sea, the Trebizond-Tabriz route. The time of actual transit through Persia to Teheran by these routes ranges from seventy to one hundred and twenty days, and the cost from ;^i8 to £1^ per ton. On the other hand, the shortest road for the import of Russian goods into the Teheran district is from Enzeli via Resht and Kazvin, at rates varying from £^ to ;^8 per ton, the time of transit being from fifteen to twenty days. In these figures we see at a glance the benefit which Russian trade reaps from the outlay of Russian money on the construction of the road from Resht to Teheran. Nor is this by any means the only, or even the chief, avenue Russia has for her trade with Northern Persia, which enters the western provinces from Trans-Caucasia, and Khorasan from Ashkabad on the Trans-Caspian Railway. But the advantages of geographical proximity, sup- plemented by a judicious outlay of Russian capital on improved means of communication, were not enough to satisfy M. Witte. Until he was able to secure a revision of the Persian tariff, by which the duties were to be manipulated as far as possible in favour of Russian trade, he found means to counteract the competition of British goods in the Persian market by special railway rates for Russian products intended for Persia, and by an elaborate system of bounties paid by the Russian Treasury on all Russian goods exported into Persia. Great secrecy has been preserved with regard to the precise amount of these bounties, but they are believed in most cases to work out, roughly, to from 15 to 20 per cent, ad valorem, and in some cases to much more. The Russian manufacturer, it must be admitted, has done apparently all that lies in his power to show himself worthy of the support he receives from 58 THF POWKR OP TUE TURSR the State. According to all accounts, he neglects no opportunity of cultivating the tastes of his Persian clients, and for variety, if not always for quality, he often succeeds in producing articles which are much better suited to the Persian market than his British competitor, whose intense conservatism will not stoop to any departure from time-honoured custom. Fashions vary in every province of Persia, and the Russians do their best t(j meet all their difTerent requirements, whilst we seek to impose upon the whole country our concep- tion of what ought to be the fashion all over it. -- Russia has not, however, confined herself to the ordinarv methods of promoting a state-aided industry. The Russian Bank at Teheran plays in this connection a scarcely less important part than in connection with the loans by which Russia has got so firm a grip on the Persian Treasur)-. The predominant position wliich the Bancjue d'Escompte de Perse has acquired as the creditor of the Persian State, it uses, without the slight- est disguise, for ousting British enterprise. Not only do its relations with the Persian Treasury give it special facilities for manipulating exchange on Europe for the benefit of Russian trade- -a most important factor in all commercial transactions — but the large profits which it derives from its loan operations in Persia — Russia lends to Persia at a rate which works out to about 6 per cent, money which she can herself borrow in Paris at 4 per cent. — enable it also to carry on other opera- tions which no bank, run on |)urely business lines, could possibly undertake. Loans are made to Persian customers on consignments of goods, so long as those goods come from Russia, on terms which simply set ordinary business principles at defiance, and facilities which the\ would find nowhere else are granted to new THE BATTLE OF THE BANKS 59 customers on the express condition that they shall import their merchandise from Russia, or, at any rate, not from Great Britain. It is in competition especially with the Imperial Bank of Persia, the only British institution in the North, and one of almost vital importance to British trade, that these methods are practised in the most barefaced manner. The incurable apathy of the Persians and the growth of Russian ascendency have materially reduced the Bank's opportunities of usefulness. The one im- portant privilege it enjoys is the issue of bank-notes — a privilege of which the value is much impaired by the large specie reserve it is compelled to maintain, not only in Teheran, but in its provincial branches, owing to the difficulty of making any large remittances of such a bulky currency as Persian silver in a country where transportation has to be computed, not in hours, but in weeks. Runs on the bank have already been engineered — hitherto unsuccessfully — in the hope of bringing about, by the sudden presentation of large numbers of bank-notes, a momentary suspension of specie payment, which would have furnished a pretext for procuring the revocation of its charter. From the Persian authorities, who frequently even wink at the evasion of the bank-note privilege of the bank by native corporations in the provinces, little or no assist- ance can be looked for. Beyond sundry advances, such as an impecunious Oriental treasury always stands in need of, the only service for which the Government still relies upon the Imperial Bank is the transmission to Teheran of Customs revenue collected in outlying districts where the Russian bank has at present no agents. Nevertheless, though the larger objects for which the Imperial Bank was created 6o THE POWER OF THE PURSE have been so far defeated, the industry and perseverance of its staff, and especially the tact and ability of its chief manager, Mr. Rabino, whose personal influence with the Persians and w ith foreigners of all nationalities has been a most valuable factor, have in other respects maintiiined its credit and position. But the tactics which the Russian bank has adopted are hard to contend with, for the latter, backed by the Russian Ministry of Finance, has evidenti)' made it one of its chief objects to drive its British competitor out of the field. For this purpose it is prepared to underbid it or outbid it, as the case may be, in every direction. A foreigner — not an Englishman — in an independent position at Teheran, who was in no way connected with business, told me that, when he wanted to draw upon Europe, the Russian bank was always prepared to give him a (juotation fractionally more favourable than that at which the Imperial Bank had offered to do business. The Russian bank invariably asked him what rates the British bank quoted, and gave its own quotation accordingly. It is the same thing with loans, advances, discount, etc. The British bank has to consult the interests of its shareholders, and cannot afford to work at a loss. The Russian bank consults only till' rccjuirenients of the policN" it has been created to carry out, and is quite prej^ared to incur losses in promoting it. Sut h are the agencies through which Russia hopes to h(jld the central government of Persia — and with it the whole of Northern Persia at least — financially as well as militarily, in the hollow of her hand. The position of M. Struebe, the director of the Banque d'Escompte de Perse at Teheran, is the «'xact counter- jx'irt of that which M. Pok(jtiloff made (or himself at THE CAPITAL OF PERSIA 6i Peking as the director of the Russo-Chinese Bank. M. Struebe, a financial expert of remarkable ability, is the nominee and confidential agent of M. Witte, and corresponds directly with the Russian Ministry of Finance, just as the officer commanding the Persian Cossacks corresponds directly with the Russian Ministry of War. It is not surprising, therefore, to hear it whispered that the diplomatic representative of Russia at Teheran feels his position to be somewhat over- shadowed by his two powerful coadjutors. Possibly M. Arghyropoulo, who, when I was in Teheran, had just been transferred to another post, was not the man to assert himself, and his successor, M. Vlassow, who had hitherto represented Russia in Abyssinia, may be better qualified to play the part of "the masterful Resident," which properly belongs, according to the Russian Press, to a Minister Plenipotentiary of the Tsar at the Persian Court. Perhaps, after all, the Russian Government is wiser than the Russian Press in assigning, as it has hitherto done, to its diplomatic representative the more congenial task of supplying the siiaviter in modo whilst the fortiter in re is driven home through other channels. It has, at any rate, every reason to be satisfied with the results that have hitherto attended its threefold representation at Teheran. It would be easy to enumerate other indications of the paramount influence of Russia in the Persian capital. Teheran has grown considerably of late years, and in spite of the tawdriness of its buildings and the hollow pretence of its long line of battle- mented walls, its broad, shaded avenues and stately gardens, and, above all, the noble amphitheatre of mountains which look down upon it from the north, give it a certain cachet of stateliness. But the red 6a Tin- rOWRR OF THE PURSE Russian blouses of the* Cossacks at the ^ates of all the most important buildings and public departments, and, in the foreic^n quarter especially, the pre\alence of notices and inscriptions in the Russian language, show clearly the predominance of the Russian element. During my stay a new development specially calculated to appeal to the Oriental imagination had taken place. The right of coinage is one wiiich has always been in the East one of the chief attributes of sovereignty, and though the Persian Mint is notoriously inadequate to supply the needs of the country, the late Shah would never listen to any suggestion for having part of the silver currency struck abroad. Handsome 5-kran pieces, struck in Russia, or, more probably, for Russian account in Belgium, had just made their appearance in the bazaars of Teheran, and such is the state of the Persian silver currency that the new coins were welcomed with great satisfaction bv the trading community. But the people were not unnaturally strengthened in their fatal- istic belief that the sovereign rights of Persia were gradually passing into the hands of her mighty northern neighbour. CHAPTER VII BRITISH TRADE AND RUSSIAN COMPETITION THE foreign trade of Persia resolves itself mainly into British trade, of which the trade to and from British India forms a very important part, and Russian trade. The trade between other Western countries and Persia is relatively insignificant, and the trade carried on between the adjoining provinces of Persia and Turkey is only of local importance. Unfortunately, the statistics available for dealing with this subject have not hitherto been very trustworthy. The Board of Trade returns include only the direct trade between the United Kingdom and Persia, and thus take no account of the large indirect trade from these islands, let alone the trade of India and other parts of the Empire with Persia. The British consular reports have hitherto furnished the best information available, but they have never laid claim to absolute accuracy, as in the absence ot official data the returns they give have been necessarily incomplete in some cases, whilst in others they are apt to overlap. Nevertheless, from the more than usually exhaustive reports recently pub- lished from the British Consulates in the Persian Gulf ports, through which the bulk of our trade passes, at Kermanshah, which is the centre of the considerable trade carried on with Western Persia through Baghdad, 63 64 KRITISH TR.\DE AND RUSSIAN COMPETITION and in Meshed, which may be regarded as a terminus of the new overland trade-route from India via Quetta and Seistan, a fairly complete estimate of British trade with Persia can be compiled for 1902. Only for Tabriz, through which British goods still enter Northern Persia from the Black Sea, are the figures for 1902 not yet available, and one must fall back upon previous estimates of the value of British trade by that route : — BRITISH IMPORTS INTO PERSIA 1901-2. From United Kingdom. From India. Total from British Empire. Bushire Lingah Bunder Abbas . Muhammerah . Kermanshah Meshed £ 637,433 130,228 40,787 627,675 i8,o6o* £ 261,701 367,302 187,277 56,193 75,064 27,902! £ 899,^34 367,302 317,505 96,980 702,739 45.962 1.454,183 975.439 1 1 2,429,622 BRITISH EXPORTS FROM PERSIA 1901-2. 1 Bushire To United Kingdom. £^ 90,526 To India. To Hong* kong.J Total to British Empire. £ 85,208 £ 119,695 £ 295.429 Lingah 4,960 506,614 5>'.574 Bunder Abbas . 8,994 68,480 3,200 80,674 Muhammerah 34.879 63.472 4 ',947 140,298 Kermanshah . ^ Not set forth se parately 85,000 Meshed 6,608 6,608 >,»>9.583 » 39.359 730,382 164,842 • I'ii'i Taliriz. t Via fjucltii .iiid .Sci?.taii. I (^piun» for China. SOME UNPLEASANT STATISTICS 65 If we add ;i^200,ooo on the basis of former estimates for the British trade via Tabriz, we arrive at an aggre- gate value of over ;i^3, 700,000 for the trade of 1902 be- tween Persia and the British Empire. This would not compare unfavourably with Lord Curzon's estimate of ;^3,ooo,ooo in 1889. But it is impossible to ignore the statistics which are now forthcoming from an entirely new source, namely, the Belgian Administration of the Persian Customs, and the picture they present of our commercial position in Persia is unhappily much less flattering, both positively and relatively. According to them, British trade in 1901-2 only amounted altogether, excluding the trade of Muhammerah, which had not yet been included within the operations of the Belgian Customs, to iJ^2, 350,000, of which iJ" 1,895, 000 were im- ports into Persia, and less than half a million exports from Persia. Even if we add our own consular figures for British imports and exports via Muhammerah, the total barely reaches ;^2, 600,000 for the whole of our Persian trade, or one million less than the British official estimates. Still more unsatisfactory are the Belgian Customs statistics if we are to accept their evidence as to the relative position of British trade and of that of our chief competitor in the Persian market. Russian im- ports are set down at ;^2, 03 1,000 and Russian exports at £1,600,000, or altogether i^3, 63 1,000 — ^just one million sterling in excess of the Customs returns of British trade.* If we compare these figures with Lord Curzon's estimate of 1889, which put down the Russian import and export trade with Persia at about two millions * More detailed statistics of Russian trade with Persia, compiled from Russian sources, which have reached me too late to be noticed in this chapter, will be found in the Appendices. F 66 BRITISH TRADE AND RUSSIAN COMPETITION sterling, Russian trade has increased 80 percent, within thirteen years, whilst British trade has decreased 15 per cent. Even if we do not accept the figures prepared by the Belgian Customs Administration as absolutely conclusive — and as far as British trade is concerned it is difticult to do so in view of our own Consular reports — it must, 1 fear, be admitted that Russian competition has already wrested from us the commercial supremacy we have hitherto enjoyed, and for many years, almost unchallenged, in Persia. Considering the immense activity which Russia has displayed of recent years in Persia, the rapid strides she has made in this direction are not surprising. Russian trade already enjoys, in addition to the initial advantage of close proximity to the markets of Northern Persia, the benefit, first, of relatively easy access to them over roads the construction and maintenance of which would have been impossible without the financial and political support of the Russian Government ; secondly, of an elaborate system of special rates to the frontier and bounties on export of which the Russian Treasurv is willing to bear the burden, recouping itself the while by profitable loan transactions with Persia ; and, thirdly, of the vigorous pressure which Russia's political and financial ascendency enables her to exert through the channel of a powerful bank, which is in realitv nothing less than a branch of the Russian Ministry of Finance. Fierce as, under such conditions, the competition to which Russia subjects British trade has already become, its full pressure will only begin to be felt under the new conditions arising out of the abrogation of the provisions of the Treaty of Turkman Chai, which until early in loo;^ governed the trade relations of all fnn-ign countries (except Turkey^ with CUSTOMS REFORM 67 Persia. The sequence of events which has enabled Russia to proceed to a revision of her tariff relations with Persia is instructive. The only notable reform which has been carried out of recent years in the Persian administration is the reorganisation of the Customs service by a staff of Belgian Customs officials, lent for the purpose to the Persian Government. When the pressure of financial stringency first drove the Shah to contemplate a loan from European capitalists, it became evident that the only available security he had to offer was the revenue of the Persian Customs, and so long as the old system prevailed of farming out the different custom-houses, the security was not unexceptionable. The Persian Government was brought to realise that its value would be considerably enhanced by remodelling the Customs service on European lines ; and about five years ago application was made to Belgium as a "neutral" state for the loan of the necessary personnel. The King of the Belgians thoroughly appreciates the value to his own country of the opportunities afforded by such services, in countries where there is keen rivalry between the Great Powers, as, for instance, in China, where Belgium has been able to play an important and profitable part as the prete-novi of Russia and France for the acquisition of railway concessions in the Yang- Tsze Valley and adjoining regions, which neither of those Powers could have invaded at the time without creating a dangerous amount of political friction. That, in the light of recent experience at Peking, Russia should have welcomed the introduction of a new Belgian element into Persia was natural enough, but that the British Government should have encouraged it, is hard to understand. Credit must, at any rate, be given to 68 BRITISH TRADE AND RUSSIAN COMPETITION Kinc: Leopold for the selection of highly-competent ofticials to perform the honourable task assigned to them in Persia. M. Naus, the present Belgian Director- General of Customs, and the staff that his predecessor, who died shortly after arrival in Persia, brought from Europe, have done excellent administrative work, and the fact that thev are merely seconded for service in Persia, and can at anv time return to their own posts in Belgium, gives them a position, or, at least, an appearance, of independence here which the foreigners of all nation- alities who have from time to time drifted into the Persian service have generally lacked. Nevertheless, the success which has attended the reorganisation of the Persian Customs would probably not have been so remarkable as it has proved if, on the one hand, Russia had not, from the moment when she made her first loan to Persia, found it to her own interest to promote the improvement of the security on which she had lent her money, and, on the other hand, the Belgians had not displayed an intelligent readiness to accept Russian guidance and to deserve Russian protection. Towards the close of 1900, after a couple of years' preliminary study and probation, M. Naus was able to point to an increase of 60 per cent, in the real revenue of the Customs over the returns of the last financial year under the farming system, and to propose a complete scheme of reorganisation. Under the old system the actual duties paid on importation on the frontier were supplemented by a number of imposts levied more or less irregularly in transit into the markets of the interior, or in the shape of octroi at the place of destination. Indeed, the duties paid on importation were often considerably lower than the 5 per cent, duty sanctioned by the Treaty of Turkman Chai. NEW CUSTOMS REGULATIONS 69 Most of the custom-houses were farmed out by the Central Government, or administered by local chiefs subject to certain remittances to Teheran. The enter- prising farmer of one custom-house frequently en- deavoured to attract trade to his own port by offering to admit goods below the treaty rate, and in many places these reductions or rebates had in the course of time acquired a semi-legal sanction by mere pre- scription. On the other hand, as the foreign trader, when once his goods were landed in Persia, was to some extent protected against the exaction of transit dues and octrois, he was often placed in a better position than the Persian importer. M. Naus proposed to do away with these abuses by abolishing altogether the old transit dues and octrois on internal as well as on foreign trade, subject to a small transportation tax of 22 shahis, or less than 5^. per load on foreign goods for or from the interior ; and at the same time he undertook to increase the legitimate revenue of the Treasury by insisting upon the uniform payment of the full 5 per cent, duty at every port or land frontier station on the value of all imports and exports. The reforms laid down by M. Naus were adopted by the Persian Government with such unwonted promptitude as to suggest very powerful outside backing, and within the next twelve months the event had already justified his most sanguine prognostications ; for, while both internal and foreign trade was relieved of the old irregular imposts and benefited by the uniformity of the new system, the net revenue yielded by the Customs in 1 901 amounted to about 1,600,000 tomans, or nearly ;6^320,ooo, as against little more than three-fifths of that sum under the farming system. 70 BRITISH TRADE AND RUSSIAN COMPETITION In so far as Russian influence was exerted to promote these important reforms, it unquestionably conferred a considerable boon upon the trade of all foreign nations as well as upon the internal trade of Persia. But this was not the sole object of Russia in lending her support to the Belgium Customs administration. In Teheran and in the North, where her ascendency was too firmly established to require adventitious aid, the Belgians were careful to preserve outward appear- ances, and in spite of occasional complaints, they did not on the whole show any systematic unfairness in their dealings with foreign traders of whatever nationality. In the South and in the East, however, the part they had to plav was a very different one. Russian interests in those regions not having yet materialised, the Belgian Customs officials had to prepare the way for them, and, pending their advent in a positive shape, at least counteract the growth of hitherto predominant British interests and obstruct their consolidation. I shall show later on, in dealing with the Persian Gulf and with Seistan, how zealously they have applied them- selves to the task set before tiiem. Not that, in my opinion, we have any right to complain. It is in- evitable that Russia, to whom the Customs have been pledged, should make the most of the special interest she is entitled to take in their administration, and should insist even upon their administration being shaped in accordance with her own political aims. Unless she can rely entirely upon the devotion of the Belgians, she may easily be tempted, as the margin of her security diminishes with each additional loan, to insist upon taking the direct control of the Customs into her own hands, even in the absence of any specific default. The Belgians, too, know perfectly well that THE PART PLAYED BY THE BELGIANS 71 without strong external pressure no progressive work can be done in Persia, and that not only is Russia in a position to apply that pressure, but that it suits her to apply it with regard to the Customs. The appoint- ment of a Belgian to the directorship of the Persian Post Office shows that Russia appreciates their co-operation. Why should they, who have no political interests of their own to serve, refuse their services to those who are willing and able to requite them generously? However valuable to Russia was the control she thus acquired over an important administration, whose staff she can use, to some extent, as her agents in remote provinces of Persia, to which her own influence has few opportunities of direct access, it was only part of a much larger scheme. What she wanted was an ab- solute control of the fiscal policy of Persia with regard to foreign trade. A negative control she already pos- sessed ; for ever since 1828 the trade relations of Persia with foreign countries, except Turkey, have been practi- cally governed by the Treaty of Turkman Chai, which provided for a 5 per cent, ad valorem duty on Russian imports. Every Western country, including England, had been content, since then, to stipulate for the insertion in its treaties with Persia of a most-favoured- nation clause, under which it could claim the same commercial treatment that had been granted to Russia. Persia had, it is true, repeatedly applied to the Russian Government to modify the Treaty of Turkman Chai, so as to allow an increase of her Customs duties. But until Russia was in a position to insist upon the re- vision of the treaty being made in her own exclusive interests she always turned a deaf ear to Persian appeals. The recklessness of the Persian Govern- ment in piling up debts on the security of the ■]2 BRirrS!! TRADE AND RUSSIAN COMPETITION Customs gave her creditor the* longf-looked-for oppor- tunity. It was now Russia's turn to insist upon tariff revision. Tlie interest and sinking fund of the first Russian loan of 1900 already absorbed nearly half the net revenue of the Persian Customs, and when the Shah applied in the following year for a further loan, one of the conditions upon which it was granted was that the Persian tariff should be revised in accordance with the wishes and interests of Russia. It is very significant that when M. Naus was urging upon the Persian Government the fiscal reforms above alluded to, he recommended them explicitly as a neces- sary preliminary to the revision of the Russo-Persian Treaty and an increase of the general tariff. The Shah, having entered upon a course of profuse expenditure which could only be met by continuous borrowing, could hardly be expected to resist the exigencies of an otherwise facile creditor. It was easy for Russia to satisfy him that his own interests would be served by tariff revision, since an increase of the tariff would place him in possession of fresh security to borrow upon, and so long as she did not claim any avowedly preferential treatment for Russian products, she could safely be allowed to manijjulate the new tariff to her own advantiige \\ ithout technically laying Persia open to remonstrances from other powers. Anyhow, the Shah, being a suppliant for further pecuniary favours, was not in a position to argue with Russia. He could only obey. Russia insisted moreover upon absolute secrecy, lest England should at the last moFTient make some attempt to parry the blow which threatened her commercial interests. Again the Shah obe)ed, and his obedience on this i)()int furnishes perhaps the most striking evidence of how entirely he has ceased to A WELL-KEPT SECRET 73 be a free agent in his relations with Russia. All the conditions of an Oriental court render the maintenance of complete secrecy with regard to affairs of State, however confidential, extraordinarily difficult, and in Teheran, above all, anyone would have been laughed to scorn who contended that important negotiations could be carried through without any leakage of some sort. But on this occasion, at any rate, the Persians were made to feel the necessity of holding their tongue, and they held it, not for a few days or a few weeks, but for months, whilst they continued all the time to lend an ear to our representations on points of tariff, as if the question were still an open one. The new commercial convention was signed at Tehe- ran by the Persian and Russian plenipotentiaries, one of whom was an official of the Russian Ministry of Finance specially sent out for these negotiations, on November 9th — October 27th, O.S. — 1901, and more than a twelvemonth elapsed before the secret was divulged. In the meantime the Shah visited Europe, and came over to London in August, 1902. It was then still believed that the Russo-Persian negotiations had not passed beyond the preliminary stage, and though there was much anxiety amongst those in- terested in Persian trade, it was not for a moment thought possible that Persia would have definitely committed herself to any measure so detrimental to British commercial interests of a century's standing without communication with the British Government. In the course of a conversation I then had with the Atabeg-Azam, he was indeed good enough to intimate to me that there could be no question of Persia doing such a thing behind England's back. That would, his Highness added, be a departure from 74 HKinsH rKADH AM) RUSSIAN COMPETITION the policy of maintaining as stable an equilibrium as possible between tiie interests of her two powerful neighbours, which the wisdom of his august master and his own experience of public affairs alike realised to be the only policy Persia could safely pursue. Positive assurances had been given to that effect to the British Government. When the Persian Grand Vizier heiil this language to me with every appearance of sincerity, more than nine months had elapsed since he had appended his signature to the Russian Convention ! An Oriental potentate is no doubt always reluctant to refuse to his hosts any assurances they may ask for, especially when he anticipates receiving so coveted a distinction as the Order of the Garter has at all times been, and the assurances given during the Shah's stay in England should perhaps never have been taken for more than the usual forms of complimentary rhetoric. M. Xaus, the Belgian Director-General of Customs, who had been raised to the rank of Minister of State at Tehe- ran, in recognition of his services during the Russo- Persian negotiations, was just at that time engaged in removing the last possible obstacle to the success of the new arrangements. The Treaty of Erzeroum between Turkey and Persia was the only international engagement which still hampered the latter's freedom of action in the direction desired by Russia. So long as the special regime which governed the trade relations of Turkey and Persia had treaty force, other powers could claim the benefit of it under the most-favoured- nation clause if it was less unfavourable to their interests than the Russo-Persian tariff. M. Naus pro- ceeded to Constantinople for the purpose of coming to an agreement with the I'orte, and with the helji of some concessions from Persia on other points, and of Russian THE RUSSO-PERSIAN CONVENTION 75 suasion, which was probably still more effectual, his mission proved easily successful. By the time the Shah had returned to his capital, everything was in order. On December 27th — December 13th, O.S. — 1902, the ratifications of the Russo-Persian Convention of October 27th, 1901, were duly exchanged, and a protocol signed appointing February 14th, 1903, as the date at which the new tariffs were to come into force. CHAPTKR VIII THE NEW COMMERCIAL CONVENTION WITH PERSIA BY a coincidence, of wiiich the irony was presumably not undesis^ned, the first jiublic announcement of the conclusion of the new Russo-Persian agreement, which dealt so deliberate a blow at the old-established trade relations of this country with Persia, was made from St. Petersburg on the very day — February 2nd, 1903 — on which Lord Downe, at the head of a special mission from King Edward, was investing the Shah in his palace at Teheran with the most illustrious order that a British sovereign can confer upon the head of any friendly and allied state. The publication of the terms of the Russo-Persian agreement was not calculated to remove the apprehensions of those who had repeatedly impressed upon the British Government the gravity of the danger which threatened British commercial interests in Persia. In none of our treaties with Persia during llu* last century had we Liken any special pre- cautions to pr(jtect them, beyond the usual provision for the enjoyment by both parties of the treatment accorded by the other to the most-favoured nation. Russia was the only nation that had secured specific terms of treatment, viz. under Article 3 of the Separate Compact relative to Commerce, which was 76 ./If'f^^^^^^^^^^^^B 1 ^^^L'- ^^^^^HH^^M W'- < :"■".■ ■ J^Wl • / c PbHbIw fflB ■r . ', ■ ''' I .^v^AHHI ■ ,- fc' 1 1 H < ^^^^|HB ■ 1 MOST-FAVOURED-NATION TREATMENT 77 appended to the Treaty of Turkman Chai of February 21 St, 1828. Under that article imports and exports were to be subjected to a single duty of 5 per cent. ad valorem. This was an eminently moderate rate, and so long as British trade was assured of its per- manency there was nothing to complain of. But it never seems to have occurred to anyone that its maintenance depended not upon Persia and ourselves, but upon Persia and Russia, and that there could not therefore be any assurance of its permanency. In 1841, when we at last concluded a commercial treaty with Persia which had been foreshadowed in the preamble to the political treaty of 1814, and in 1857, when the Treaty of Peace was concluded at Paris after the Anglo-Persian war, it would have been easy enough to have procured the insertion of a clause specifying the same tariff rates for Anglo- Persian trade which had been specifically granted to Russia. But this was not done, and so we continued to allow our interests to remain practically dependent upon the maintenance of treaty provisions to which we were no party, and over which we could have no direct control. This would have been an unsound position even if we could have relied upon Persia continuing to be a free agent. But, from the moment when the Persian Government passed under the complete as- cendency of Russia and succumbed into financial bondage to her, the position became one of obvious peril, and the end was clearly to be foreseen. The new Russo-Persian agreement imposes upon Persia a tariff of which the details have been elaborated in the sole interests of Russia. It is, as far as Persia is concerned, merely a revenue tariff, and as such, it is designed to increase just those revenues which she has 78 COMMERCIAL CONVENTION WITH PERSIA mortg^a^ed to Russia, with a view, probably, to facilitate further financial operations of the same ruinous charac- ter. It confers scarcely a single advantage on Persian trade, and from a commercial point of view, contains hardly any of those features of reciprocity which char- acterise lommercial conventions between independent and equal powers. As far as Russia is concerned, it materially improves the security of the loans she has already made to Persia, and provides a margin for fresh loans should she deem it expedient to tighten her hold upon the Persian Treasury. It practically dis- criminates in her favour against the trade of her onlv serious rival in the Persian markets, viz. British and British-Indian trade, by substituting for a single ad valorem duty leviable at the same rate on all imports and exports a complicated system of specific duties, under which the chief imports and exports in which Russia is mainly interested are treated with relative lenience, whilst those which chiefly affect Great Britain and India are severely penalised. It is thus calculated to prove a powerful instrument for promoting the com- mercial ascendency of Russia in Persia, which M. VVitte set himself to establish, and it consecrates her political ascendency by stipulating that it shall never be modified without the consent of the Russian representative at Teheran, and that Russian subjects shall be jirivilL-ged to pay the duties in Russian bank- notes — a provision of which, besides the material bene- fit for Russian currency purposes, the moral effect cannot fail to be considerable in an Eastern country where the coin of the realm is an almost sacred symbol of sovereignty, and a peculiar significance will be attached to the right of legal tender in the paper currency of a foreign power. A LETTER TO THE BOARD OF TRADE 79 The technical details of the Russo-Persian tariff it is hardly within the competency of a layman to discuss. But one of the leading British firms in the Persian trade subjected it to a careful analysis immediately after its publication, and embodied some of the results in a letter to the Board of Trade, from which I cannot do better than quote the following extract: — "Under the most-favoured-nation clause British goods are subject to the provisions of the Treaty of Turkman Chai (1828), fixing the Persian duties, both import and export, at 5 per cent, ad valorem. We have endeavoured to estimate the nature of the change which would be introduced by the present tariff. For this purpose we propose to deal in the first place with imports into Persia, and next with exports from Persia. Our calculations are based upon the value of the various articles at the Karun ports : — Table I.— IMPORTS INTO PERSIA Some Leading Articles of Export to Persia from Great Britain, Continent (excluding Russia), and India. Description. Average Value at Port of Entry. Present Rate of Duty. Proposed Rate of Duty. Equivalent of Proposed Rate calcu- lated aci valorem. Increase under present Tariflf. Piece Goods (Cot- £10 5%«^ 12 krans per 9% 4% tons of various per cwt. valorem lobatmans, descriptions) . :i or 75. I Off. per cwt. Sugar — Belgian. 14s. grf. SVo^d 3 shahis per 6i% ii% per cwt. Vualorem batman, or il|c?.percwt. Sugar — French . 165. 5/0 ad 3 shahis per 6i% ii% per cwt. valorem batman, or I i|(f.percwt. Tea Id. 5«% ad I toman for i 100 % 95 % per lb. valorem batman, or yr/. per lb. 8o COMMERCIAL CONVENTION WITH PERSIA Table II.— EXPORTS FROM PERSIA Some Leading Articles ok Export from Persia to Great Britain, Continent (excludlng Russia), and India. Description. Avenge Value at Port of Exit. Present Kate of Duty. Proposed Rate of Duly. Kauivalent of Proposed Kate calcu- lated ik/ vtUarem. Increase under present Tariff. Opium 9J. SX^d 2tomansabat- «3% 8% per lb. valorem man,ori.y.2rf. per lb. Wheat 45. 9^". SVoOd I kran for 10 i3i% 8i% per cwt. valorem batmans, or 74(/. per cwt. Barley zs. 6rf. 5 % »d I kran for 10 -\=; % 20% per cwt. valorem batmans, or •;\d. per cwt. Linseed ■js. (yd. 5 % a*' 1 kran for 10 8i% 3i% per cwt. valorem batmans, or 7W. per cwt. Sesame Seed 65. S%«^ I kran for 10 >oJ% 5f% per cwt. valorem batmans, or 7i m;in\ vcars for his inhi-ritance. he was determined to deal with it, now that he had at last entered upon it, on the scale not of its meagre reality, but of the abundance he had fondly ascribed to it in his day dreams at Tabriz. The last of the ancient ^old ingots bearing the cipher of Fath Ali Shah and, 1 believe, most of the jewels and other treasures which did not constitute an indispensable part of the regalia for exhibition on state occasions, were disposed of through discreet channels in the Eurojjcan markets, and principally in Russia. Then, for a time, retrenchment, taking the usual form of deferred payments, in regard to all expenditure which did not immediately affect the Court, and the enhanced offerings of loyal oflicials anxious to ingratiate them- selves with the new sovereign, staved off the day of reckoning. But at last the moment came when these precarious devices could no longer be practised without danger of serious discontent at home. There is a limit to the patience of even Persian soldiers in the matter of deferred payments, and a Persian sovereign fresh to the throne cannot afford to suspend indefinitely the gentle flow of largess which is required to irrigate the parched soil of official loyalty. It was then that for the first time the credit of the country was pledged abroad to meet the requirements of the Court, and pledged not on business lines to private capitalists, but to a foreign Power whose political ambitions already cast their shadow over Persia. Ab