the national bank of turkey & british foreign poli

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Agent of Empire? The National Bank of Turkey and British Foreign Policy Author(s): Marian Kent Source: The Historical Journal, Vol. 18, No. 2 (Jun., 1975), pp. 367-389Published by: Cambridge University PressStable URL: http://www.jstor.org/stable/2638493Accessed: 02-03-2015 03:59 UTC

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The Historical journal, XVIII, 2 (I975), pp. 367-389. 367 Printed in Great Britain

AGENT OF EMPIRE? THE NATIONAL BANK OF TURKEY AND

BRITISH FOREIGN POLICY

By MARIAN KENT

University of New South Wales

'THE National Bank of Turkey was founded in I909 with British Government encouragement and support to further British economic enterprise in the Ottoman Empire'; so we are told in all the standard and respectable works on the subject.' This is correct in form but incorrect in substance, for one cannot accept the implications it carries with it, in some cases explicitly stated. These are that, in the first place, the Foreign Office was instrumental in actually start- ing the Bank, in the second place, that the Bank succeeded very far in its objects, and in the third place, that it ever received much Foreign Office support in what it sought to do.

The Bank had, in fact, an extremely chequered career. Founded in I909, carrying relatively small weight in Constantinople, constantly on the point of being either amalgamated or liquidated, bought up by the British Trade Cor- poration in I9I9, it finally expired with few regrets in late I93I. In the Otto- man Empire the relations between foreign banks and their governments could greatly influence their fortunes. What needs to be examined, therefore, is the nature and closeness of the National Bank's relations with the Foreign Office. The particular events which illustrate the nature of these relations are the circumstances in which the Bank was founded, its involvement in international loans to Turkey, especially the controversial I9IO loan, its attempts to amalgamate with other banks and its efforts to obtain development concessions in Turkey. How far did the Foreign Office initiate, support or dominate these activities? Was the Bank an agent of Empire?

The background to the founding of the Bank and its relations with the British Foreign Office involves the international jockeying of the Great Powers for precedence in Constantinople, and British-French relations under their new entente cordiale. As heir to this diplomatic innovation, Sir Edward Grey, British

1 See, e.g. Herbert Feis, Europe the World's Banker (New Haven, I930), p. 33I; A. S. J. Baster, The International Banks (London, I935), p. iI2; D. C. M. Platt, Finance Trade & Politics in British Foreign Policy I8I5-I914 (O.U.P., London, I968), pp. I93-4, or Jacob Viner, " Inter- national Finance and Balance of Power Diplomacy, i88-i9I4 ", in Political and Social Science Quarterly, vol. ix, I929, pp. 407-45I. Although very valuable in many ways, on the relevant sections of this article they all repeat roughly the same brief, partially inaccurate account. It is worth mentioning also, that the relevant series of the Documents Diplomatiques Franfais are likewise disappointing on this subject.



368 MARIAN KENT

Foreign Secretary from December i905, felt obliged to maintain and strengthen the entente. On the other hand, in Constantinople, French financiers were predominant, through the long established Imperial Ottoman Bank. Originally established in the mid-nineteenth century as a British bank, it had quickly been

taken over by French interests; and by the early twentieth century, although nominally Anglo-French, having Boards of Administration in both London and Paris, it had come to be dominated by the French side, and was widely

and correctly regarded as acting in French interests. The problem for Grey, therefore, from the early days of his Foreign Secretaryship, was how to reconcile his obligation to maintain and strengthen the entente with an attempt to im- prove the position of British interests at Constantinople. This problem provides

the constant thread running through the whole history of the relations between the Foreign Office and the National Bank of Turkey.

A key document to Foreign Office thinking was the Memorandum of 3 July

I906, by Mr Adam Block. Block, shortly to become Sir Adam Block, was the

former Chief Dragoman (Interpreter) at the British Embassy at Constantinople, British Delegate on the Ottoman Public Debt Administration, and shortly to become also President of the British Chamber of Commerce in Constantinople.2 The memorandum concerned 'Franco-German Economic Penetration' in Turkey, and gave detailed support to Block's apprehension that the non-

participation of British financiers in various railway enterprises and financial

operations would ultimately place Britain in a weak political position at Con-

stantinople especially when, rather than if, the day came that Turkey's financial

mismanagement rendered necessary complete international control of her

finances. Although at this stage, in mid-igo6, there was nothing the Foreign Office could do directly regarding Britain's less favoured political position at

Constantinople, Block's memorandum appears to have been instrumental in

forcing the Foreign Office to consider the problem seriously and to seek out an

alternative approach to solving it. The alternative approach was, not surprisingly, an attempt to secure Anglo-

French financial co-operation at Constantinople. Sir Edward Grey outlined

Britain's desiderata in a comment to Sir Charles Hardinge, then Permanent Under Secretary at the Foreign Office and destined to conduct most of the

Foreign Office side of the Anglo-French negotiations. These desiderata were, first, 'a general desire to act with France and by co-operation at Constantinople to avoid conflict and rivalry between our commercial interests', and secondly,

to do this by forming a French and an English group of financiers who would

2 Memo., 3 July I906, received in the Foreign Office i6 July, encl. in confid. despatch No. 452

from Sir Gerard Lowther (British Ambassador at Constantinople). These are printed in Gooch,

G. P., and Temperley, H., British Documents on the Origins of the War, 1898-1914 (H.M.S.O.,

London I928-I938) (hereafter abbreviated to B.D.), v, No. I47, pp. I74-85. The accompanying

Foreign Office commentary which is equally illuminating, is not reproduced and is located in

F.O. 37I/I52, No. 22545.



AGENT OF EMPIRE? 369

then combine to pursue joint interests with joint strength. This was to be the official explanation. More explicitly, 'the relations between the Ottoman Bank and ourselves should be an understanding that, for the reasons given above, the support of the British and French Ambassadors would be forthcoming to such a group for all the commercial operations which were in harmony with British and French policy; the prospect of this support should be the consideration which makes it worth the while of the Bank to take a hand in the business. There is no other obligation or guarantee entailed upon us'.' The Board of Trade's official opinion of the idea was that ' the British trader has little to lose and perhaps a good deal to gain.... He will have French influence exerted on his behalf as well as British and also the interest and support of the Imperial Ottoman Bank '.4

Negotiations towards this end continued from late i906 onwards.5 Progress was slow. First, the French negotiators, both for the Ottoman Bank and for the Quai d'Orsay, dragged their feet, only reluctantly joining in negotiations that they could see promised little advantage for them in their already predominant position in Constantinople. Only the intercession of Clemenceau, then Prime Minister and Minister of the Interior, brought about an agreement by the middle of I907 on the formation of the French side of the combine, to include a 30 per cent Ottoman Bank participation in order to avert that institution's bitter and effective rivalry. Next, when negotiations moved to London, where the London Committee of the Ottoman Bank was to organize an English group to work in combination with the French group, negotiations dragged here also. Basically, the London Committee was even more reluctant than the Paris Branch of the Ottoman Bank to help set up a rival concern aimed at sharing their monopoly and profits. This became more and more clear to the Foreign Office, now caught between two fires. It was blamed by the French for the English side's delays which it was powerless to prevent. As the minutes mounted up in the Foreign Office records, describing Mr Barry, Manager of the London Branch, as ' slippery', 'shifty', and 'dishonest', time continued to pass. Eventually by the middle of i908, when a year and a half had passed, through heavy Foreign Office persuasion as one of Barry's evasions after another was unveiled, the London Committee announced it had formed an English group which included Sir Ernest Cassel's and Sir Albert Stern's interests.6 As

3 Notes by Grey to Hardinge, I5 Oct. 1907, F.O. 371/350, No. 33703. The fact that this state. ment comes in late 1907 does not matter - the sentiment was the same a year earlier.

4 Memo. by A. W. Fox, Bd. of Trade, and Minute by Hardinge, ii Nov. 1907, ibid., No

37427. 5 For 1g06 see correspondence in BERTIE MSS (Public Record Office, London), Nos.

Tu/o6/2, 4-5. For 1907 see ibid., Nos. Tu/o7/7, 9-12, I4-28 & Fr/o7/41; and F.O. 371/350, file 15180. For 1908 see BERTIE, Nos. Tu/o8/I-9, 25, 28; and F.0. 371/538, file 5777; 547, file 26752; 548, file 28640; 549, file 30912.

6 For a detailed and fascinating account of Sir Ernest Cassel's background and activities see Kurt Grunwald, ' " Windsor - Cassel " The Last Court Jew. Prolegomena to a Biography of Sir



370 MARIAN KENT

a result the Foreign Office was able to irntroduce to Sir Gerard Lowther, its Ambassador in Constantinople, the newly arrived manager of the Anglo- French 'Ottoman Society', Mr Arthur Vere.

But the chief lesson of the delays in the Anglo-French negotiations was yet to declare itself. The Young Turk Revolution had by this time radically changed the political scene in Constantinople. Now Britain was hailed as the friend of the reformist, if inexperienced, Young Turk regime, France and Germany being unpopular for the dominance they had achieved by supporting the former regime. Grey wrote in late August to Lowther: 'I am of opinion that, if events in Turkey develop satisfactorily the backing ... will be found in this country and that the moment to strengthen the position of Great Britain in the Ottoman Bank will then arise, since the Bank will then be able to attract more capital and the services of more competent men.' His optimism, in the principle if not the detail, was prophetic.

On I4 November I908 the news broke in the press that a Banque Nationale de Turquie was to be formed by an Anglo-Turkish group. Most of the preliminary details were given, and it was clear to the Foreign Office, no less than to the French side of the still incompletely organized Anglo-French Ottoman Society, that the objects of the proposed National Bank were identical with those of the Ottoman Society. The Bank was to have a capital of some ?3 million, while among its initial directorate were Sir Adam Block and a prominent Constantinople businessman, Mr Edwin Whittall.8 The Foreign Office's reply to the agitated Ottoman Society's manager in Constantinople was hardly surprising: It could ' only say that it is certainly unfortunate for the Ottoman Society that better progress has not been made. We did our best and we cannot of course interfere with the Banque Nationale which has not been initiated or suggested by us, and is being carried out independently of us.' The two enterprises after all, hardly bore comparison. The Ottoman Society's capital was only

Ernest Cassel ' in Year Book XIV, 1969, of the Leo Baeck Institute, pp. 1I9-161. My article cor- rects and supplements pp. 144-147 of Grunwald's contribution. The French Ambassador to Lon- don, incidentally was M. Paul Cambon; Jules Cambon, his brother, was French Ambassador successively at Madrid and Berlin.

7 Desp. from Grey to Lowther, No. 348, 25 Aug. I908, F.O. 371/548, No. 28640.

8 In fact the nominal capital of the Bank was only XI million, called up ?250,000. Member- ship of the Board also included initially, on the Turkish side: H.H. Prince Said Halim (Young Turk, and son of the late Halim Pasha, son of Mehemed Ali, Viceroy of Egypt); Manias Zad6 Refik Bey (prominent Young Turk); General Cherif Pasha (Young Turk, and son of the late Said Pasha, Turkish Minister for Foreign Affairs); Hassan Fehmi Pasha (Minister of Justice); Reshad Sadi Bey (Young Turk, friend of Cassel); General Mahmud Muktar Pasha (son of Ghazi Muktar Pasha); Nubar Pasha (Egyptian Armenian); H.H. Said Pasha (late Grand Vizier); Djemal Pasha (Young Turk, son-in-law of the Sheikh-ul-Islam); A. Ralli (Greek banker, Ottoman subject); and on the non-Turkish side, as well as Block and Whittall, were named Mr Essayan (Armenian, British subject) and M. Bonnet (French lawyer).

9 Letter from Francis Campbell, F.O., to Mr Arthur Vere, 28 Nov. 1908, F.O. 371/547, No. 46679, and accompanying F.O. minutes. My italics.



AGENT OF EMPIRE? 37I

to be ?200,000, while as yet it was registered as only ?30,000. The National Bank's initial /T3 million was to be supplemented with a further /T2 million once it was granted the concession for a Credit Foncier (land bank) for which it would apply to the Turkish Government. Further, the National Bank's capital would be English, although the Bank was to be registered in Constantinople.

The coup de grace to the Ottoman Society came from within the Ottoman Bank itself. The Foreign Office learned in a letter of 29 December from Vere that Barry, again acting in character, had informed Cassel and Stern, once they had joined the Ottoman Society, that the scheme had been 'abandoned'. As a result of this and of other things, both Cassel and Stern refused absolutely to deal with Barry and would only co-operate with the London branch of the Ottoman Bank if Barry were removed."0 Although Barry was reportedly reprimanded from Paris, quite clearly it was as much in the Ottoman Bank's interest that a scheme for sharing its concessions with the English should fail, as it was in Cassel's interest to free himself - for whatever reason - from the Ottoman Society.

Indeed Cassel, it was becoming clear to the Foreign Office, was already becoming involved in the National Bank scheme. A confidential memorandum of 3 November, from Block, enclosing the Bank's draft statutes, told the Foreign Office that Cassel was to name three of the outstanding English members of the National Bank's board, and Block himself was to name the other three.11 Block, however, was so anxious for the scheme to succeed, that not only was he pre- pared to stand aside from the board himself if necessary, but he asked the Foreign Office to exercise for him his choice of three additional members. Sir Charles Hardinge replied for the Foreign Office: that the scheme was 'one that would naturally commend itself to Sir Edward Grey' and that he was immediately consulting both Cassel and others as to its value."2 On I9 Novem- ber Cassel informed Hardinge that he had persuaded Sir Arthur Henderson to join with him in finding the required capital."3 Lord Farringdon was a further founder member, and in due course Lord Revelstoke of Barings was to join them. By the end of December the Turkish Government had approved of the proposed National Bank. In March I909 the Turkish Ministry of Public Works was concerned with passing the Bank's statutes and on 5 April the British Ambassador at Constantinople reported that an Imperial Firman (decree) had heen issued for the establishment of the Bank."4

10 Letter from Vere to H. C. Norman (F.O.), 29 Nov. I908, F.O. 371/549, No. 42735.

11 Memo. of 3 Nov. I908, by Sir Adam Block, encl. in desp. No. 764 from Lowrher to Grey, io Nov. I908, ibid., No. 3982I.

12 Letters from Hardinge to Block, Cassel and Huth Jackson, I3 Nov. I908, ibid., No. 39083.

13 Minute by Hardinge, 20 Nov. I908, ibid., No. 40480. 14 Note by Hardinge for Grey, encl. letter from Cassel to Hardinge, 29 Dec. I908, ibid., No.

45704; letters from Block to Hardinge, 2 Mar. I909, F.0. 37I/762, No. 8682, and between Grey



372 MARIAN KENT

At the end of May I909 Grey was writing to Lowther: 'Cassel is much per- plexed as to getting a good enough man for his Bank. He aims high and I have not so far been able to help him. One cannot urge the best men to leave the public service. Nevertheless I wish his Bank could be established. It seems to me very desirable that there should be an independent British financial interest at Constantinople. We could then work with the French on equal terms.' 15

The search for a ' good man ' was complete by August. On 9 August the Times announced that Sir Henry Babington Smith had resigned from his post as Secretary to H.M. Post Office at the British Government's request in order to accept the Presidency of the Bank. Grey explained his own role in this in a memorandum of an interview with a member of the London Committee of the Ottoman Bank: ' . . . we had no interest in Sir Ernest Cassel's Bank. The Turks had taken the initiative and had arranged the matter independently with Sir Ernest Cassel .. . I had certainly supported the scheme to the extent of encouraging Sir Henry Babington Smith to accept Sir Ernest Cassel's offer. The selection had been made by Sir Ernest Cassel himself.' When asked whether the Foreign Office intended to give exclusive support to Cassel's Bank in obtaining concessions at Constantinople, Grey replied, 'that if need be, we should certainly represent to the Turks that an institution which had been brought into existence as a direct result of their own initiative and representations ought not to be excluded from concessions. But when occasion arose for me to support the Bank's claims I should do what I could to encourage co-operation with French finance.' 16 This was generosity indeed from a Foreign Secretary whose records, official and private, contained clear evidence of French Government and Ottoman Society pressure on Cassel's National Bank group either to join with them as the English group in the combine or else face the prospect of finding that they would obtain no quotations for their operations on the very important Paris stock exchange.'7

The extent of the Foreign Office ' encouragement and support,' though not initiative, in the founding of the National Bank of Turkey can thus be seen. What needs to be considered now is the extent of Foreign Office support it received in the financial ventures it sought to undertake.

International loans played a major part in the Turkish economy, chronically in deficit. They were normally mainly floated in France, the British investing public seeing a more secure and patriotic return for its money elsewhere.'8 Nevertheless, Grey was saying in September I908 that his Government was

and Lowther, Priv., 8 & I5 Mar. I909, GREY MSS (Public Record Office, London), vol. 92 (F.O. Memos., I909-II), and desp. from Lowther to Grey, No. 238, 5 Apr. I909, F.O. 37I/762, No. I3678. 15 Letter from Grey to Lowther, 30 May I909, GREY, vol. 92.

16 F.O. Memo. by Grey, i6 Aug. I9o9, ibid. My italics. 17 Evidence is contained in correspondence in BERTIE, Tu/09/I, 2, 4, 5, 8-iI; GREY, I909

France, and vol. 92; F.O. 37I/762, file 659, and F.O. 37I/766, file 2674. 18 On the activities of the Ottoman Public Debt Administration (established after the state

bankruprcy of i875), apart from brief accounts mentioned in some of the works cited above in n.




'most anxious to attract British capital into Turkey for bona fide concessions and commercial enterprises and that this should not be greatly delayed.' 19

There was, however, the important reservation that he did not consider that the British market was ready for loans to be floated there: 'H.M. Government did not wish to see Turkish credit in this country prejudiced by failure in the issue of a Turkish loan.' 20 When, to help make ends meet until the end of that year, the Turks sought an immediate advance of /i y'2 million on the large loan contract made with the Ottoman Bank, the Foreign Office not only sought out British financiers to take up the British share in this advance - not surprisingly Cassel and Stern - but inspected the draft contract before it was signed on 25 November.21 Louis Mallet, then Assistant Under Secretary at the Foreign Office, wrote officially to Cassel on i December, in a letter approved by both the Prime Minister and the Treasury, expressing the Government's ' satisfaction at [his] agreement, in conjunction with Sterns Bros., to advance the money to the Ottoman Government,' declaring in addition, that 'although it is impossible for H.M. Government to incur any financial liability in the matter, in the event of the Ottoman Government failing to fulfil their engage- ments to you, you may rely on a full measure of diplomatic support from H.M. Government through H.M. Embassy at Constantinople.' 22 Further, when Morgan's Bank, which had been approached by the Dresdener Bank to compete against Cassel's group for the English share in the advance on the loan, sought Foreign Office advice, they were told that, though the Foreign Office could not prevent their competing, they would not receive Foreign Office support since that was already pledged to Cassel's group.23 This contrasts with Feis's view, that in earlier turning down the Turkish request for help in obtaining a loan in Britain, ' no attempt was made to reverse the decision.' 24 British

i, or in Z. Y. Hershlag, Introduction to the Modern Economic History of the Middle East (Leiden, I964), the classic account is in D. C. Blaisdell, European Financial Control in the Ottoman Empire (U.S.A., I929, and repr. I966).

19 See desp. from Grey to Lowther, No. 406 confid., i9 Sept. I908, F.O. 37I/549, No. 33I86; also printed in B.D., v, pp. 26I-2, and quoted in varying degrees by the writers listed in n. i,

above. 20 Desp. from Grey to Lowther, No. 4I6, secret, 3 Oct. I908, F.O. 37I/549, No. 34I24. See

also conversation between French Charge d'Affaires and Louis (later Sir Louis) Mallet, then Assistant Under Secretary at the F.O., reported in letter from Grey to Bertie, iI Aug. I908, F.O.

37I/545, No. 27894. 21 Annual Report for Turkey for the Year I908, B.D., v, p. 280; corresp. in F.O. 37I/549, Nos.

38I55, 383I4, 39464, 403II, 4I344 and 42597; and letter from Hardinge to Bertie, priv., 5 Nov. I908, BERTIE Tu/o8/24. The Turks had contracted with the I.O.B. in Sept. I908 for a loan of some /T4,700,ooo nominal or LT4,ooo,ooo actual, but final details were not complete until mid- June, I909, the loan to be issued in July. Correspondence in F.O. 37I/579, Nos. 23941 and 23996.

22 F.O. 37I/549, Nos. 4I834 and 42200.

23 Minute for Grey from Hardinge on conversation with Messrs. Vivian Smith and Grenfell from Morgans, 20 Nov. I908, ibid., No. 457I7. On German Gvt. satisfaction at the international financial co-operation see correspondence in B.D., vi, Nos. I30, I31, I56 & Io8.

24 Feis, op. cit., p. 330.



374 MARIAN KENT

policy is revealed even more clearly when in September I909 the National Bank of Turkey did not participate in the further loan then being sought by Turkey. Grey minuted: 'While I am desirous to help the Turks and would gladly see British co-operation with the French in a Turkish loan, I cannot urge Cassel to participate in anything which he does not think financially sound or desirable in the interests either of his bank or to Turkey.' 25

I9IO saw two different tendencies interacting in the relations between the National Bank of Turkey and the Foreign Office. On the one hand, continuing efforts were made to embody Anglo-French financial co-operation in Turkey in some more tangible form than the pious hopes which were so easily and readily expressed by each side. On the other hand, there took place the negotiations over the i9io loan to Turkey, a question of political notoriety in history. These negotiations were exceedingly complex but they can now be understood more clearly, particularly the attitude and involvement of the Foreign Office and the National Bank of Turkey.26

The loan negotiations fell into several stages. First, there were the negotiations with the Ottoman Bank; beginning in July I9IO when Djavid Bey, the Turkish Finance Minister, visited Paris. But these negotiations fell through because of the ' onerous ' conditions attached to the loan, particularly the condition of making the Ottoman Bank the Treasury of the Turkish Government. This condition, according to Sir Francis Bertie, British Ambassador in Paris, was first put forward by the Ottoman Bank and taken up by the French Foreign Minister as necessary for French prestige. Further, the French Finance Minister insisted on part of the loan being spent on purchases in France.27 While the French insistence on controlling Turkish expenditure was in principle correct, commented Sir Adam Block, and Djavid Bey himself might even have agreed, the French went about it the wrong way and made agreement impossible.28

Both Block and Cassel advised Djavid Bey against quarrelling with the Otto- man Bank. This information contradicts the usually accepted interpretation that Cassel and Block sought to obstruct the negotiations.29 According to Cassel's

25 Minute by Grey, n.d., but I4 Sept. I909 or later, on P.O. 371/762, No. 33649. 26 Of the standard accounts of the general I9IO loan negotiations, Feis op. cit., pp. 323-327 is

the longest, totalling 4 pages, Baster, op. cit., pp. iIo-III and Viner, op. cit., pp. 433-434 each allow less than 2 pages, and Platt does not discuss it at all. But the accounts in Feis, Baster and Viner are short on facts while Viner also confuses the Ottoman Bank and Credit Mobilier stages of the negotiations together into a composite account. The F.O. documentation derives largely from the indefatigable Bertie, whose acute perception and well-placed sources of information were able to keep the F.O. well informed on both backstairs gossip and ' leaked ' accounts of interviews.

27 Letter from Bertie to Tyrrell (then Senior Clerk at the F.O. and Private Secretary to Grey), priv. & confid. iI Aug. I9IO, BERTIE, Tu/IO/3. See also memo. by Babington Smith and Cassel of 4 Oct. I9IO, on the I909 and I9IO loan negotiations, and minuted in the F.O. as I correct '. It was enclosed in a letter from Babington Smith to the F.O., 4 Oct. I9IO, F.O. 37I/993, No. 36803. 28 Letter from Block to Hardinge, io Sept. I9IO, ibid., No. 33484.

29 See n. 28 above, and National Bank memo. of 4 Oct. I9IO, n. 27 above. Block also mentioned how glad he was to have been away when all this was going on for the French would




memorandum, he (Cassel) advised Djavid 'to make up his differences with the Ottoman Bank if possible, and if not, to conclude as soon as possible a binding contract with another French group.' He pointed out that market conditions in London were still far less favourable than in Paris. In any case any financial help in London would be facilitated by the Turks granting British interests control over the final section of the Baghdad Railway, - a point taken by Djavid, who said he would try his best to secure this at Berlin and Constantinople. Only in the last resort, if the French negotiations should fail altogether, would the National Bank, in response to Djavid's strong appeal, do what it could to assist him.

At this point Djavid returned to Paris and proceeded with the Credit Mobilier stage of the negotiations. On 8 August he signed a contract with the group headed by the Credit Mobilier for a loan of /T6 million to be issued before I5 October with a further ,T5 million to be issued in the spring of i9ii. Security offered for the loan was the Constantinople customs revenues, which had not been offered to the Ottoman Bank, and which Cassel considered a good guarantee. The contract was not binding on the French group, however, unless the French Government allowed the loan to be listed on the Paris stock exchange. This the French Government agreed to do, subject to certain conditions.

It was in the negotiations over these conditions that the difficulties and delays arose, and eventual breakdown occurred. This was chiefly because of the intrigues of the Ottoman Bank, the Finance Minister M. Cochery, and the French financial adviser to the Porte, M. Laurent; it mattered little that M. Pichon, the French Foreign Minister, gave his political assent to the terms of the loan contract.30 The two main conditions laid down by the French Govern- ment were, first, control over the Ottoman Treasury, either by the Ottoman Bank scheme or an equivalent, and second, an undertaking to give French in- dustry a share at least equal to that of any other country in the placing of Turkish orders, both of which conditions were categorically refused by the Ottoman Government.3"

The British Foreign Office, while not deeply involved in the negotiations as

have been sure to say he was encouraging the Turks to disagree with the French conditions. The accusation is made in the German documentation and repeated in Baster, op. cit., p. iii.

30 For evidence of exactly how and how far M. Cochery was pressing the Turks to give the Ottoman Bank the Turkish Treasury, see letter from Bertie to Grey, very confid., 6 Oct., and priv. and confid. tel, ditto, 7 Oct., & priv. & confid. letter, 8 Oct. I9IO, GREY, Vol 5I. See also F.O. 37I/993, No. 36443, and Bertie's summary, I5 Oct. I9IO, of the negotiations between 7 & I5

Oct., F.O. 37I/994, No. 37848. 31 There were several other conditions, subsequently not insisted on, including recognition of

French sovereignty over Tunis and recognition of Algiers as French territory. This list is taken from the National Bank memo. of 4 Oct. as it is a later and more accurate version than that given in the documentation at this particular point - to be found in ibid., Nos. 34385 & 34627.

The gist of the French conditions was also received by the F.O. on 27 Sept., in what appears to be an authentic report from M. Pichon, the French M.F.A., to M. Bompard, French Ambassador



376 MARIAN KENT

was the French Government, was nonetheless extremely interested in them. The British and French Foreign Offices had both agreed in April that year, when a Turkish approach for money seemed likely, due to heavy Turkish military expenditure, that they would discourage the Turkish Government from its current 'reckless' spending. And when in June a Turkish approach seemed imminent the Foreign Office showed the relevant ' Very Confidential ' despatch on that discussion to Cassel.32 Further, the Foreign Office felt that a loan would ' directly or indirectly hasten the completion of the Baghdad Railway under present conditions thus excluding the participation of France and Britain....' It suggested, therefore, to its French counterpart, that any negotiations should include as a condition ' a satisfactory settlement of the Baghdad Railway question.' To help accomplish this, the Foreign Office offered to restrain London finance houses from taking up the loan if the French Government for its part refused to allow the loan stock exchange quotation except on terms about the Baghdad Railway which both the British and French Governments considered ' satisfactory '.3

This attitude explains Cassel's actions during the I9IO loan negotiations and his bitterness by the end of them. Already Cassel had agreed only to consider a Turkish loan if the French negotiations failed irretrievably and he had attached the required Baghdad Railway proviso to his discussions. Now, in mid-September the Foreign Office became aware of the rumours in the press that the Credit Mobilier negotiations had failed and that Cassel had signed a loan contract with the Turks. The Office agreed that Hardinge should write privately to Cassel that the French Government were ' a little anxious lest the Turkish Government should obtain funds from other quarters on less binding terms,' and, even more strongly, Sir Edward Grey felt ' that, after having con- curred in the course adopted by the French Government, it would be awkward if the Turks were to obtain an advance in England in place of the French lenn 34

in Constantinople, on the French negotiations with Hakki Pasha: See encl. in desp. from Grey to Bertie, No. 424, very confid., 27 Sept. I9I0, ibid., No. 35044. In any case, in the course of these negotiations, the F.O. received many such confidential documents through either a M. Maimon, agent of Mr Barry of the London Committee of the Ottoman Bank, or from Barry himself. The documents were clearly from a ' leak ' in the French Government. The F.O.'s reaction to receiving them varied from interest and gratitude to embarrassment and a request to the donors not to send any more. On Maimon, see Minute by Mallet, i8 Apr. I9I0, F.O. 37I/995, file I84, No. I3832; for examples of the ' leaked ' documents see, e.g., F.O. 37I/993, Nos. 34933, 35044,

35294, 36093, 36094, 36095; and F.O. 37I/994, Nos. 37I9I, 3750I, 38080, 38350, 3938I. 32 Desp. from Grey to Bertie, No. 225, 30 Apr. I9I0, F.O. 37I/993, No. I4472, repr. in B.D.,

vi, No. 358; also desp. from Bertie to Grey, No. I83, confid., 4 May I9I0, desp. from Lowther to Grey, No. 434 very confid., 27 June I9I0, with accompanying F.O. minutes, F.O. 37I/993, Nos. I553I & 23954.

33 Tel. from F.O. to Bertie, No. 3I5, I3 Sept., and desp. from Bertie to Grey, No. 349, confid., I4 Sept. I910, F.O. 37I/994, Nos. 32407 & 33592.

34 Draft of letter from Hardinge to Cassel, priv., I9 Sept. I910, ibid., No. 33592. Rumours reached the F.O. from all quarters and the French Charge d'Affaires in London even called per-




Cassel's reply both denied the rumours and showed a conciliatory and co- operative attitude.35 He reassured the Foreign Office that he had earlier advised the Turks to come to terms with the French, though he pointed out his moral obligation to help them if their negotiations broke down completely over the exaggerated French terms. The Foreign Office accordingly issued an official announcement to the press on 23 September, reporting Cassel's denial and of his advice to the Turks, which produced in response, an almost complete volte face in the French press over the Cassel rumours.36 The Office also telegraphed Bertie that, in view of Cassel's co-operative attitude, if the French Government did decide to quote the Turkish loan the National Bank should be given a participation. This the French Foreign Minister welcomed, and the Foreign Office took new heart. Hardinge minuted that 'this looks like the opening of a new era in Anglo-French finance, which we should do our utmost to encourage'; and British and French Ambassadors in Paris and London were told that the French Office's basic aim was Anglo-French financial co-operation, but that this could not be achieved unless the National Bank were included in any arrangements to that end.3

Despite the temporary Foreign Office euphoria it was clear that on this two- point British policy the National Bank did not have priority. Nicolson explained to a somewhat disgrunted Cassel and Babington Smith on 4 October that ' the maintenance of the entente ... [is] ... the bedrock of our policy,' sentiments which Mallet had expanded privately for the Foreign Office: 'the policy of the Committee [of Union and Progress] is so entirely against the interests of this country that the closest co-operation with the French Government is essential, and the interests of the National Bank are a minor consideration.' 38 A crisis in the relations between the National Bank and the Foreign Office was fast approaching. This crisis was triggered off by Cassel learning that, as a result of the contest between the French Ministers of Foreign Affairs and Finance, a

sonally at the F.O. to complain. He was shown Hardinge's letter to Cassel. On the rumours see: desp. from Bertie to Grey, No. 359, 20 Sept. I9I0, Note from Hardinge to Grey, 20 Sept., tel. from Lowther to Grey, No. I96 P confid., 20 Sept., and letter from Count de Salis to Tyrrell, i6 Sept., encl. memo. of conversation with Cassel, and tel. from Count de Salis to Grey, No. 55

confid., 2I Sept. I9I0, ibid., Nos 34I66, 34386, 34I4I and 34265.

35 Reported in tel. from Grey to Bertie, No. 346 P, 22 Sept., and see also Note from Hardinge to Grey, 2I Sept. I910, F.O. 37I/993, No. 34385. This account is substantiated in the Cassel/ Babington Smith memo. op. cit. See also lerter from Cassel to Hardinge, 22 Sept., tel. from Grey to Bertie, No. 329 P, 22 Sept., tel. from Bertie to Grey, No. 67, 23 Sept., and F.O. minutes, ibid., Nos. 3439I and 34402.

36 See desp. from Bertie to Grey, No. 363, 23 Sept. I9I0, ibid., No. 345I9. He quoted Temps, Figaro, Echo de Paris, and Journal des Debats, although the larter did not entirely believe Cassel's

d&menti ". 37 Tel. from Grey to Bertie, No. 355 P, 26 Sept. I910, tel. from Bertie to Grey, No. 70 P, 28

Sept., with F.O. minutes, tel. from Grey to Bertie, No. 344 P, 30 Sept., ibid., Nos. 34627 & 35203, and letrer from Grey to Bertie, priv., 30 Sept. I9I0, GREY, vol. 5I.

38 Note by Nicolson for Grey, 4 Oct. I910, and minute by Mallet (n.d. but written on or about 3 Oct.), F.O. 37I/993, Nos. 36I87 and 35643.



378 MARIAN KENT

compronmise over the participation of an ' English group' in the Credit Mobilier negotiations had been made - including Cassel in his capacity as an independent British financier but not as a representative of the National Bank of Turkey. This he refused flatly. On 7 October Babington Smith wrote a long and aggrieved account of the National Bank's views.39 He pointed out that, despite Foreign Office encouragement at the Bank's inception, yet it was the Foreign Office's wish that caused it to withdraw from the loan negotiations. He felt that the Foreign Office had changed its policy, presumably on political grounds, and that therefore in similar future circumstances the National Bank would not be able to maintain an independent position and the Turks would soon come to see British policy as tied to the coat-tails of the French. The Bank would thus not be in a viable position to carry out its business successfully and might as well go into liquidation. 'The result of the appeal to the entente cordiale', wrote Babington Smith, 'would have been to efface British financial groups as an independent force.'

Foreign Office minutes admitted there had been some modification in their policy over financial competition, but justified this by ' changing circumstances in the Young Turk rule'. When the National Bank was started, it had scened that Turkey was entering on a period of regeneration which British finance might further; now, although Britain had done so much for them two years ago, the Turks seemed determined to work against British interests, while at the same time indulging in extravagance which must end in bankruptcy. 'The whole reason for our intervention in this loan question was that we wished not to compete with the French in facilitating a continuance of extravagant expenditure in Turkey - but if proper safeguards against such expenditure are devised, we do not presumably wish to stand in the way of the National Bank doing the loan business, though we should prefer them to do it in co-operation rather than in competition with the French.' 40

The Credit Mobilier negotiations limped on crippled by the machinations of the Finance Minister M. Cochery, and came to a head in mid-October. By then the French Foreign Minister, in the absence of the Finance Minister, had proposed compromise terms acceptable to the Turks and incidentally, Bertie thought, providing better security than the Treasury control. But the Finance Minister, who was closely involved with the Ottoman Bank, and whose pride was now offended, turned down the contract terms. With the contract about to

39 Tel. from Bertie to Grey, No. 73 (' By Bag '), Oct. 6/7, ibid., No. 36312, and minute by Nicolson for Grey, 7 Oct. I9I0, F.O. 371/994, No. 368I9; and letter from Babington Smith to Nicolson, 7 Oct. I9I0, F.O. 37I/993, No. 36804.

40 Minute by Alwyn Parker, io Oct. on Babington Smith's letter n. 39 above. Parker was then only Junior Clerk in the F.O. (in I912 he rose to Assistant Clerk, and in i9I8 to Librarian) but he played a major role in all the pre-war Turkish negotiations. Lowther, in a private letter to Nicolson on ii Oct. I910, agreed with Babington Smith: ' Our position is somewhat ridiculous if we urge Cassel at great expense to establish a bank here and when he wants to do business we oppose him.' NICOLSON MSS (Public Record Office, London), I9I0, ii, F.O. 800/344.




expire, the Credit Mobilier group brought great pressure to bear on the Finance Minister, issuing him with an ultimatum that, if he did not desist from blocking the contract, they would make public all the circumstances. After the Foreign Minister had agreed to some verbal amendments to the contract in order to save the face of the Finance Minister, M. Cochery climbed down. But it was too late. Now Turkish pride was wounded and Turkey turned down the contract.4'

At this point in the loan negotiations there is usually said to be a ' Cassel stage', abortive because of British Government intervention at the request of the French Government. But, as the evidence already demonstrates, Cassel had been involved in the negotiations on the sideline from the start; he had volun- tarily advised the Turks that their best interests lay in a French loan; and such Foreign Office pressure as had been applied had been gentle and continuous and was certainly not evident at this point. Telegrams were exchanged between Cassel and Djavid Bey at the end of October over the possibility of the National Bank taking up the loan, but while Cassel was keeping the Foreign Office constantly informed of them, pointing out that he would only take up a loan at the request of the Foreign Office, and meantime making non-committal replies, Djavid telegraphed that he was waiting for first proposals to come fronm the National Bank. The Foreign Office was not distressed at the negative results, and four days of what amounts to mutual stalling hardly constitute a noteworthy ' stage ' in the negotiations.42 Besides, the Turks had already long been in contact with German bankers, even if not seriously until the final breakdown of the French loan negotiations. By the time of the Cassel/Djavid telegrams, the negotiations with the Germans (thirty-two different German and Austrian interests were involved) had been well in train, press reports detailed the negotiations from 25 October onwards and the definitive agreement was signed with the Turks on 9 November. This was for a loan of fTii million, secured on the Constantinople customs revenues.43 The financial terms were

41 For details of the following summary see: Bertie's ' summary ' op. cit., also correspondence in F.O. 371/994, Nos. 37443, 37498, 376I8, 37752, 38227, 38243, 38329, 38330, 38332, 38438, 38477, 38625, 38664, 38748, 38775, 38913, 39035, 39473.

42 Lowther to Grey, No. 235 confid., 27 Oct. I9IO, Nicolson to Grey, 29 Oct. I9IO, Cassel to Nicolson, confid., 30 Oct. I9IO, ibid., Nos. 39159, 39724 & 39656. Nicolson to Bertie, priv., 3 Nov. I9IO, BERTIE, Tu/IO/I3, and NIC., I9IO, ii, F.O. 800/344.

43 F.O. documentation on this stage may be found in F.O. 371/994, Nos. 3907I, 39035, 39488, 39159, 39840, 43064; the best description of the terms of the loan are in Nos. 40350 and 41560. See also B.D., vi, No. 407, and encl. in No. 4I4; X2, No. 4. Letters from Goschen to Nicolson, Berlin, 28 Oct., priv., and Marling to Nicolson, 2o Dec. I9IO, NIC., I9IO, iI, F.O. 800/344. The tentative statement by Feis, op. cit., p. 326 that ' the French Government appears at the last moment to have made a conciliatory gesture through the French representatives on the Debt Council, but without effect', is correct. On 27 Oct. Lowther reported to the Foreign Office that Djavid said that France had ' now indirectly proposed to him here to give a loan on the surplus tithes of the Ottoman Debt without any other conditions, but that Djavid refused the offer ', desp. from Lowther to Grey, No. 235 confid., 27 Oct. I9IO, F.0. 37I/994, No. 39I59.



380 MARIAN KENT

harder on the Turks than the French terms, but this was considered, at the time anyway, a cheap price to pay for having no political strings attached - a fact that was well emphasized in the German and Turkish press releases.

One further point of interest concerning the National Bank of Turkey and the last phase of the loan negotiations was the closely related but separately conducted negotiations over a possible bank fusion. In their despair at the seeming impossibility of achieving either a strong independent position at Constantinople or a fair participation in joint Anglo-French enterprise, Babington Smith and Cassel suggested a radical alternative. This was that the Ottoman Bank should be re-organized and absorbed into the National Bank of Turkey.44

What is only more surprising in hindsight than the cheekiness of such a proposal, is the fact that although Cassel was dubious - and rightly - about its acceptability, it was taken up seriously and enthusiastically by the two Foreign Offices and their Ambassadors.45 From October till the end of the year the Foreign Office was greatly pre-occupied with these negotiations, but it became increasingly clear that the Ottoman Bank was not serious.46 It was almost a repetition of earlier Anglo-French combination negotiations. Both Foreign Offices were anxious for the scheme to succeed, and the negotiations limped on, at first in Paris, where the Foreign Office wanted them to continue for fear of the London Committee's procrastinating expertise, and then in London, at the insistence of both branches of the Ottoman Bank. The Foreign Office repeatedly warned the French Foreign Minister that if negotiations failed it could not restrain the National Bank any longer from acting independently, and would have to support it, both of which would lead to Anglo-French conflict, not co-operation.47

On 3 November Cassel and Babington Smith called at the Foreign Office to announce that they had given up hope of coming to any arrangement with the Ottoman Bank. They considered the negotiations as closed, and had written a letter to the President of the Ottoman Bank, M. R6voil, to that effect. They now expected to receive from the Foreign Office complete liberty of action. This they received on 9 November, confirmed again on I0 December, although it was stressed that the Foreign Secretary was ' still most anxious to secure Anglo- French financial co-operation and would use any influence he had to support

44 Letter from Cassel to Nicolson, 8 Oct. igio, ibid., No. 37I90.

45 Letter from Nicolson to Cassel, confid., IO Oct., and to Bertie, priv., ii Oct., and desp.

from Bertie to Nicolson, 9 Oct. (also derailed in Bertie's ' summary ' No. 37848, but there dated

io Oct.), and ditto, ii Oct. I9IO, ibid., Nos. 37007 & 37082.

46 Apart from those documents specifically quoted, evidence for this section comes from: F.O.

37I/994, Nos. 37499, 37752, 37779, 37848, 38036, 38084, 382I7, 382I8, 3833I, 39724, 39792, 39901,

40I74, 4I283, 44I72; BERTIE, Tu/io/9, IO-I5; and correspondence in NIC., I9IO, Ii, F.O.

800/344. 47 See private letter from Nicolson to H. J. O'Beirne (Councillor and sometimes Charge

d'Affaires at the St. Petersburg Embassy), 26 Oct. I9IO, NIC., I9IO, iI, F.O. 800/344; Nicolson

to Bertie, Priv., 3 Nov. I9IO, BERTIE, Tu/Io/I3, and NIC., I9IO, iI, F.O. 800/344.



AGENT OF EMPIRE? 38I

any reasonable proposals which might come from the French side.' Thus, while he hoped the National Bank would keep the door open for such proposals, he could not depreciate their taking independent action.48

What were the lessons to be learned from the I9IO loan negotiations? First and most basic for the National Bank was that so long as its own Foreign Office saw a glimmer of the possibility of Anglo-French financial co-operation in Constantinople the National Bank would never receive Foreign Office support other than to come to an accommodation with the French interests. Secondly, the sorry story confirmed that the National Bank could not compete on the same terms as the Ottoman Bank, particularly not for loan contracts. Throughout the whole of the I9IO loan negotiations the Ottoman Bank intrigued and forced delays and complications, in the hope of forcing its own terms on the Turks. It was able to do this because of its powerful friends, particularly the French Minister of Finance with his power to allow or prevent quotations on the Paris stock market, the major and essential market for Turkish loans. The French financial adviser to the Porte was M. Laurent, who was at the very core of the Ottoman Bank's intrigues, as the Ottoman Bank's terms for the i9io loan were his own scheme and he stood to lose much face by failure to achieve them.49

Throughout i9iI the National Bank's fundamental difficulties were to remain the same: intense opposition from the Ottoman Bank, to be countered by only lukewarm backing from its own British, Foreign Office. Indeed, so bitter were the National Bank's directors after their i9io failures that they were almost tempted to wind the Bank up. Business in Turkey had been thin. There had been no Government accounts and only one semi-official account. The 5 per cent Constantinople Municipal loan of i909 had taken months of competition to secure, though its profits had covered the Bank's expenses for one year at any rate. Acquiring the i9io loan would have covered the Bank's expenses for at least two to three years, pointed out the Turkish Grand Vizier in a December i9io discussion with Babington Smith on the Bank's prospects.50 If the British Government did not 'blunder' again, in blocking the Bank's quest for further loans and concessions, then, he said, there was a profitable field open for the Bank and British capital. He agreed to press for approval for the Baghdad

48 Note from Nicolson to Grey, 3 Nov. I9I0, F.O. 371/994, No. 45474; tel. from Grey to Bertie, 12.30 p.m., 9/I0 Nov., ibid., No. 40867; priv. letter from Nicolson to Bertie, 5 Dec. IgIo, BERTIE, Mis/io/i8.

49 Correspondence over the appointment of a French financial adviser to the Turks is in two private letters from Bertie to Hardinge, i6 & 28 Sept. I908, BERTIE, Fr/o8/36 & Tu/o8/14, and one from Bertie to Grey, No. 369, 29 Sept. I908, F.O. 37I/546, No. 33796.

50 Letter from Babington Smith to Nicolson, Constantinople, 30 Dec. I910, encl. ' Memoran- dum of interview with Hakki Pasha, Grand Vizier, on Dec. 29 I910', F.O. 37I/I240 No. 636. The interview, but not the letter, is reprod. in B.D. op. cit., X2 with a covering desp. from Marling to Grey, No. I4 Secrer, 4 Jan. i9ii, ibid., No. 6. See also letter from Nicolson to Hardinge, priv., I2 Jan. I9II, HARDINGE MSS (Cambridge University Library) 92/I/24 or NIC. I9II, I,

F.O. 800/347.



382 MARIAN KENT

Municipal loan which the Bank was seeking to issue: it eventually obtained the loan, at 6 per cent, but not until I9I2.

One further possibility of improving its position helped the National Bank's directors settle their differences over the future of the Bank and decide to carry on. In addition to the likely Baghdad loan issue and the freedom of action granted the Bank by the Foreign Office, the Bank saw the prospect of a merger with another organization, this time the Banque de Salonique or Salonica Bank. The merger negotiations lasted throughout I9II and resumed again in early I9I4. The French-controlled Salonica Bank initiated the negotiations late in I9IO and they were first discussed with the Foreign Office in January i9ii.51

Under the proposals the British interest would be predominant in the combine, which would retain the title, National Bank of Turkey. The combine would then seek to make arrangements with the Ottoman Bank to form a 'cartel', dividing up territory and business in the Ottoman Empire.52

The attitude of the Foreign Office towards the merger was basically approving. The only alternative to the merger was the sale of the National Bank to the Ottoman Bank, on the latter's terms, and Grey considered that would be ' an abdication of British interests.' 5 Nicolson, who largely conducted the Foreign Office side of the negotiations, preferred that the British Govern- ment should hold itself aloof from Banks and financiers as far as possible, although he admitted privately that the Foreign Office was ' in a sense, somewhat bound to help the National Bank,' and the merger proposals ' appear to offer a good means whereby such [Anglo-French] co-operation could be achieved.' 5

Despite Foreign Office approval, the National Bank's I9II negotiations were no more successful than its I9IO efforts, and for exactly the same reason. This was the obstructionism of the Ottoman Bank and the pressure it was able to exert on the French Government, which would not sanction the agreement made between the National and Salonica Banks until they had come to a 'satisfactory' accommodation with the Ottoman Bank. The obstructionism manifested itself in a number of ways. For example, the French Government held to the line that, since the share capital of the Ottoman Bank was so different from that of the National/Salonica Bank combine (some /8 million as compared with under XI million), the only basis for cartelisation acceptable to the Otto- man Bank would not be acceptable to the combine. Therefore the only feasible

51 Letter from Mr L. D. Carnegie (Councillor and sometimes Charge d'Affaires at the Paris Embassy until i913) to Nicolson, i6 Dec. I9I0, NIC. I9I0, ii, F.O. 800/344; Letter from Nicol- son to Lowther, priv., 23 Jan. I9II, NIC. I9II, T, F.O. 800/347.

52 Memo. encl. in Minute from Nicolson for Grey, ii Feb. I9II, F.O. 371/1240, No. 5126.

53 Minute by Grey on letter from Marling to Nicolson, ii Jan. I91I, NIC. I91I, I, F.O. 800/347. See also letter from Lowther to Nicolson, priv., 31 Jan. I9II, ibid., and n. 54 below.

54 Letter from Nicolson to Lowther, 23 Jan. I9II, NIC. I9II, i, F.O. 800/347; and letter from Nicolson to Cassel, 14 Feb. I9II, F.0. 371/1240 No. 5126.




solution was a strengthening of the English directorate of the Ottoman Bank. The National Bank and the Foreign Office disputed this principle, stating that it was not capital that counted, but financial power as supported by the two governments.55 Further the rumour persisted in Constantinople and Paris that the British Government was totally disinterested in either the fusion of the two banks or the disappearance of the National Bank.56 The Foreign Office telegraphed its firm denial of the rumour to Constantinople: Sir Edward Grey would 'view fusion with pleasure and . . . impression prevailing at Con- stantinople is totally false. I shall continue, when necessary, to support National Bank acting independently, if attitude of Ottoman Bank makes Anglo-French co-operation impossible, but I desire to see schemes for its realisation carried out. 57

On 4 May Babington Smith told the Foreign Office that the National and Salonica Banks had now come to terms. What was needed now was an accommodation with the Ottoman Bank in order to obtain French Government sanction. Efforts continued unsuccessfully throughout the month but, as Nicol- son predicted, there was not much likelihood of terms being reached: ' the fact is that the Ottoman Bank consider that the National Bank is not of sufficient importance ... to make it worth their while to make any greater concession than strengtllening the Ottoman Bank's London Committee towards working in co-operation with it. I rather expect, therefore, that the end of the matter will be that the National Bank will continue to work out its own salvation.' 58

But for a time it looked as if the French Government might put heavy pressure on the Ottoman Bank to be more accommodating to the rival combine. This was because, in the atmosphere of rising Franco-German tension over Morocco, France was acutely aware of the degree of German influence at Constanti- nople.59 The French Government appeared to be basically worried that Cassel, who was known to favour a triple understanding of British, French and Germans, would work too closely with German interests. But this worry was diverted by Bertie making the embarrassing revelation to the French Foreign Minister,

55 Minute by Nicolson for Grey, 24 Mar., and letters between Nicolson and Cassel, 29, 30 & 3I Mar. i9ii, ibid., Nos. II563, II652, II7I2 & II986.

56 Tel. from Lowther to Grey, No. go P., I3 Apr. I9II, F.O. 37I/I240, No. I3894, and letter from Babington Smith to Nicolson, I3 Apr. (rec. 20 Apr.), i9ii, ibid., Nos. I3894 & I4721; and letters from Lowther to Nicolson, priv., I4 Apr., 24 May & 7 June I9II, NIC., I9II, ii, F.O. 800/348.

57 Tel. from Grey to Lowther, No. I02, P., I5 Apr. I9II, ibid., No. I3894: See also letter from Nicolson to Babington Smith, 27 Apr.; desp. from Bertie to Grey, No. I77, 20 Apr., & Minute by Nicolson, 4 May, ibid., Nos. I472I, I4804, & i6o5I.

58 Minute by Nicolson, 4 May, Memorandum of Interview, by Babington Smith, 6 May, and accompanying minute by Norman, ii May, ibid., Nos. I605I & I7728; letters from Nicolson to Bertie, ii May I9II, Tu/iI/4, and to Lowther, i6 May I9II, NIC. I9II, II, F.O. 800/348.

59 Desp. from Bertie to Grey, No. 2I4, I4 May I9II, F.O. 371/1240, No. I8529, repr. in B.D., X2, No. 28; see also letter from Bertie to Nicolson, priv. & confid., I4 May I9II, Tu/II/5 or NIC. I91I, ii, F.O. 800/348.



384 MARIAN KENT

now M. Jean Cruppi, that the Ottoman Bank, which had until recently denied the fact, had a long-standing agreement with the Deutsche Bank to give each other a 30 per cent participation option in all their Turkish undertakings.60 The accession of a new French Foreign Minister, M. Justin de Selves, came just five months after the accession of the previous one. Although both Foreign Ministers were inexperienced and ill-informed,6" Bertie at least described de Selves as sensible, not politically extreme, and apparently truly seeking Anglo- French co-operation. But, predictably, he was not able to achieve anything and by late in the year the matter had still reached no conclusion.62

One of the features of the National Bank's attitude which created difficulties for its relations with the Foreign Office, lay in the type of concessions it sought to obtain. A comment of Sir Arthur Nicolson aptly sums up this relationship: ' We cannot rely with certainty on any of these financiers being animated by disinterested and patriotic motives. They look solely and simply at the profits which they may derive from their enterprises and leave entirely on one side the political character of the questions with which they have to deal. It is a matter of perfect indifference to them ... whether the ends which they pursue are or are not in harmony with the interests of this country.' 63

Matters which sparked off such a Foreign Office reaction from i9ii on were the National Bank's pursuit of concessions for railways in North-Eastern Anatolia, and for enlarging the ports of Samsoun and Trebizond on the Black Sea coast of the same area and for the Mesopotamian oil concession. By the Black Sea Basin agreement of i9oo Russia had been given priority in any development in which Turkish interests did not wish to become involved. Russia was Britain's entente partner, and consequently the British Government, which already had its own recognized sphere of interest in Mesopotamia, felt unable to oppose the Russian Government in supporting any British nationals seeking to compete with Russian interests supported by their own Government.

In the case of the projected railway in North-Eastern Anatolia, the French were also interested, and to the Turks, who were anxious to have the French money market opened up to them again after the debdlcle of the i9io loan, the solution seemed to lie in a Franco-Russian group. When the National Bank sought to persuade the Foreign Office to support a competing plan for an Anglo-French scheme, the Foreign Office response was hardly surprising in view of its entente preoccupations. This response was that since part of the area

60 Letters fromm Nicolson to Bertie, I7 May I9II, TU/II/7, or NIC. I9II, ii, F.O. 800/348,

and from Bertie to Grey, No. 6o, i8 May i9ii, F.O. 37I/I240, No. I9007.

61 See, e.g., K. Eubank, Paul Cambon, Master Diplomatist (USA, I960), pp. I35-6. 62 Letter from Nicolson to Bertie, priv., 28 June I9II, NIC. i9ii, iII, F.O. 800/349; desp.

from Bertie to Grey, No. 329, I7 July 191I, F.O. 371/I240, No. 28548 & also repr. in B.D., X2,

No. 33; Letters from Lowther to Nicolson, priv., I5 Nov., and from Babington Smirh to Nicolson, 20 Nov., I9II, NIC. I9II, VI, F.O. 800/352.

63 Letter from Nicolson to Lowther, 23 Jan. I9II, NIC. I9II, i, F.O. 800/347.




in question was undoubtedly Black Sea littoral, and since some of the lines were undoubtedly strategic, running towards the Russian frontier, the British Govern- ment, if asked formally by the Bank for support, must first consult with the Russian Government; but if the Bank wished to participate in them without Foreign Office support, it was quite free to do so. The Foreign Office could not support competition with the French or Franco-Russian groups, but if the Bank could persuade them to let it join in the Foreign Office would have no objection.64

The same principles applied to the other big concession sought by the National Bank in I9II, for a construction contract for the ports of Samsoun and Trebizond. The contract was to be for preliminary studies with an option to receive a construction and operation contract. Here, however, the Foreign Office could be more helpful since the Turks clearly wanted to give the contract

to the National Bank, and the Bank was eventually successful in its application to the Turkish Government, the contract being signed in August i9ii.65 The Black Sea Basin agreement was still the obstacle to full Foreign Office support, but the Bank turned down the Office's suggestion that it might consult with

the Russian Government, since the Bank could end up in a far worse position

than if it had not sought such support. Informally it could still receive some limited assistance, and this was necessary in view of the tactics of the Ottoman

Bank which wanted the concession for itself. In an effort to help the National Bank Foreign Oflice policy was enunciated to the Turks: 'His Majesty's Government would certainly do nothing to hamper the Bank and are anxious for its success generally.

We should in fact be glad if the Bank were successful in obtaining any of the concessions it is working for, and, subject to the concurrence of the Russian Government, we would be ready to support it officially concerning Black Sea

ports. The Bank, however, has not asked us to approach Russian Government on their behalf in connection with these ports.' 6

These attempts of the National Bank, especially over the railway concession, clearly caused irritation in the Foreign Office and produced the sort of com-

mnent as that quoted above. But there was one concession sought by the Bank, which really put the seal of Foreign Office disapprobation on it. This was the

Mesopotamian oil concession.67 The concession had been sought since early in the century by W. K. D'Arcy, who held the monopoly concession in South

64 See correspondence between Babington Smith, Cassel, and Nicolson, Mar.-May I9II, F.O.

37I/I240, Nos. II288, II682 & I472I.

65 See F.O. correspondence with Babington Smith, Lowther and Marling, and Cambon, Apr.- Aug. I9II, F.O. 37I/I240, Nos. I472I, 27007, 26743, 27548, 27460, 27459, 28257, 28884, 29298, &

33200; also NIC. I9II, II, III, IV, F.O. 800/348, 349, 350.

66 Tel. from Grey to Marling, No. 269R confid., F.O. 37I/I240, No. 26743.

67 For details and documentation on this section see my forthcoming book, Oil and Empire.

British Policy and Mesopotamian Oil, I900-I920 (Macmillan, London, I975).

H .J.-6



386 MARIAN KENT

Persia. He had early received Foreign Office assistance in competing against the claims of his main rival, the Deutsche Bank. When other, British, rivals appeared and sought British diplomatic assistance, the Foreign Office's attitude was that it must be impartial towards such competitors of good character although it always pointed out that it had for many years supported the D'Arcy group whch had long been on the point of successfully obtaining the concession. In mid-i9I2 the Foreign Office was surprised to be approached by the National Bank of Turkey. The Bank was seeking diplomatic assistance for its own efforts to obtain the Mesopotamian oil concession through a company in which it held a 50 per cent interest, the Turkish Petroleum Company. Although initially impressed by the strength and largely British character of such a company, whose two other major shareholders were Royal Dutch-Shell interests and the Deutsche Bank, with 25 per cent each, the Foreign Office turned down the request for assistance. It was strongly pressed to do so by both the D'Arcy group's parent company, the Anglo-Persian Oil Company, and by the Admiralty, Britain's chief defence department, oil consumer and protagonist of the Anglo-Persian Oil Company. The resulting increased rival diplomatic pressure on the Turks by Britain and Germany threatened to perpetuate the virtual stalemate over the award of the concession. It was not surprising, therefore, that a compromise was sought. Following the pattern of their other negotiations with Turkey over the Baghdad Railway and associated matters the British and German Governments now brought strong pressure to bear on their prot6ges to amalgamate their interests and receive the concession jointly. This amalgama- tion was achieved in March I9I4 in a settlement whereby the D'Arcy group obtained 50 per cent and the Shell and Deutsche Bank 25 per cent each in the reorganized Turkish Petroleum Company: the National Bank of Turkey was to drop out altogether.

The National Bank had become by this point so disheartened by the lack of Foreign Office support that it had decided to withdraw altogether from the proposed oil concession arrangements. It felt it had just as much moral right as the D'Arcy group to the support of its own Government and it had never foreseen that the oil negotiations would become so soured. But long before the Bank decided to withdraw from the oil concession participation it had already decided to withdraw from all its other operations in Turkey apart from that one. The Bank's attitude was made clear to the Foreign Office in another bomb- shell dropped by Sir Henry Babington Smith. He sent the Foreign Secretary in June I9I3 a long indictment of the British Government's attitude towards his Bank. He included in his list of grievances the Foreign Office's attitude towards the i910 loan and over the Mesopotamian oil concession. While acknow- ledging that the course of events in Turkey had undoubtedly affected the success of the Bank's operations and would continue to make them uncertain in the future, what was also essential, declared Babington Smith, was British Govern- ment support and confidence. The Bank had been sadly disappointed in this,




despite the circumstances of its founding, and reluctantly had to acknowledge that: our conception of the position which the bank was intended to occupy in relation to the British Government and its economic policy in Turkey is widely different from the position which has in fact been assigned to it. The impression has been produced in the minds of our competitors and of the Ottoman Government, that we are not trusted by the British Government or regarded as the appropriate agency for taking the lead in British enterprises . . . Under the circumstances . . . we propose, at the first suitable opportunity, ... to relieve ourselves of a task which we cannot satisfactorily perform.68

While the Foreign Office by no means agreed with the National Bank on the validity of its grievances, the main effect of the Bank's letter was to inspire discussion again on whether or not this bank - or any British bank - should be encouraged to operate in Turkey. Opinion was divided in both the Foreign Office and the Constantinople Embassy and, indeed, among the independent British commercial interests operating in Turkey whose opinion was canvassed or volunteered.69 In the event the official Board of Trade advice of io November i913 fitted closely with the consensus of Foreign Office opinion. In view of the definite intention of the National Bank to withdraw, the Board of Trade would generally welcome the establishment of a replacement British bank in Turkey, but it recognized that in view of the limited commercial trading opportunities there it would again be chiefly involved in obtaining and financing concessions. Unless, however, it was firm Foreign Office policy and intention to encourage and support such efforts and match such action by other Govern- ments supporting their nationals, the Board of Trade advised against the Foreign Office committing itself by giving any definite opinion except that such a bank would receive the same measure of diplomatic assistance as any British enterprise might expect to receive.70

But the question did not arise in material form after all. Within three months of the Board of Trade's letter, on 26 January I914, the National Bank told the Foreign Office it was going to remain in Turkey.7" It would sell out to the Salonica Bank and receive in exchange a 25 per cent holding in a new combine, still to be called the National Bank. France would have 50 per cent of the capital and a Russian group 25 per cent, with the English shares being held by Cassel, Henderson, Messrs Baring and Messrs Schroder. By the end of March

68 Letter from Babington Smith to Grey, confid., ii June 1913, F.O. 371/I826, No. 26928. 69 See correspondence etc. in F.O. 371/I826, Nos. 26928, 27272, 28201, 29346, 30276, 30277,

30628, 31358, 41942, 44357, and letter from Block to Grey, I5 July I9I3, GREY, F.O. 800/I04.

70 Letter from Stanley, Board of Trade, to F.O., confid., Io Nov. 1913, and accompanying F.O. Minutes and letter from Nicolson to Lowther, 25 Nov. 1913, F.O. 371/i826, No. 51234.

1 Correspondence between Maller and Grey, 21 Jan., 23 Feb. and 30 Mar., and Memo. by Crowe, 30 Mar. 1914, F.O. 371/2127, Nos. 3544, 7329, 12684 and 14256. In 1913 Mallet replaced Lowther as Ambassador in Constantinople, even Grey, in private correspondence, making such comments about Lowther as: ' I cannot say he has done splendidly and been very helpful ...', letter from Grey to Nicolson, 12 Apr. 1913, NIC. 1913, iv, F.O. 800/365.



388 MARIAN KENT

the arrangements were reported practically complete. But, like so many other arrangements, they were overtaken by the war before they were completed, and the National Bank was left in limbo, unable either to settle its problems or to detach itself from them.

The First World War destroyed any realistic prospects the National Bank had of making a large success of its activities in Turkey. Its pre-war business had not been large - in addition to the contracts already discussed it had acquired in I9II the financing of the first stages of the Mesopotamian irrigation scheme and the contract for the purchase of warships in England, covered by 5 per cent Treasury Bonds, and in I9I3 it obtained the 5 12 per cent loan for docks, arsenals and naval construction.72 In I919 the British Trade Corporation had bought up virtually all of the National Bank's shares, but a number of factors made the Bank's success highly unlikely. In addition to the perennial competition and strength of the Ottoman Bank, the Turkish situation was fraught with difficulties and disturbances. Most fatal was the extent of the financial disaster brought by the war. The Bank was faced with the loss of considerably more than its paid-up capital. Despite its continued operation at a profit, since I9I9

?325,ooo had had to be set aside to meet the drastic depreciation of its assets.73 The end nearly came in I925 when Lord Farringdon of the British Trade Corporation wrote to the Foreign Office that the Corporation could not continue to operate the Bank at a loss, merely on patriotic grounds, and unless it received a subsidy it would have to liquidate the Bank. But Sir Austen Chamber- lain was now Foreign Secretary. His opinion on the National Bank was that it was ' politically a mistake from the first and quite useless now ', and Lord Farringdon was given no encouragement.74 The Bank still limped on, however, hopeful to the end of its long drawn-out demise. This occurred relatively quickly in 193I. On ii April it was announced from Ankara that the regulations for creating the new State Bank were now complete and all principal banks and firms operating in Turkey would have to subscribe to its capital, in proportion to their own share capitals, or wind up their businesses in Turkey

72 On irrigation, see correspondence etc., I7 and 28 Mar., Io Apr., 3 July I9II, F.O. 371/1240,

Nos. 9962, II682, II986 and 27007. On the warships contract, see letter from Babington Smith to F.O., 2I July I9II, ibid., No. 29298. A list of loans, including the warships and the docks, arsenals and naval construction loans, is in a letter from F.O. to Lord Farringdon, 24 Mar. 1925, F.O. 371/IO867, No. EI700.

73 For discussion on these points, see memoranda and correspondence of June I920 in F.O. 37I/5213, No. 778I. According to this documentation the Bank held important balances in Ger- man marks and Austrian crowns, remitted to Berlin and Vienna at pre-war rates, which, owing to official regulations and restrictions, it was prevented from realizing. It had taken a considerable participation in rhe 19I4 5 per cent Turkish loan which in I925 stood at about io per cent of its nominal value, and, above all, it was a creditor to the Turkish Government for important advan- ces which had subsequently to be most drastically written down.

74 Letter from Lord Farringdon to Sir George Lloyd, 2 Feb. I925, and encl. ' Memo. Regard- ing the National Bank of Turkey ', 30 Jan. I925, and associated F.O. Minutes and correspondence, F.O. 371/IO867, Nos. EIO45 and EI700.




within a year. On 28 December an extraordinary general meeting of the National Bank in Istanbul resolved to liquidate the Bank as from that date.75

The end of the National Bank of Turkey was unmomentous and unregretted. The Bank had sought, within the limitations of financiers' viewpoints, to act as an agent of Empire, and in doing so had tried quite genuinely to follow its Government's wishes. Government backing meant, after all, better business. But its Government was not over-interested in commercial activities in such imperial outposts, except in so far as they helped strengthen the British position in an area of strategic importance. Mesopotamia, at the head of the Persian Gulf, guarding a major route to India, was such an area, and British interests in Mesopotamia were upheld. Outside that area the British Government did not care to risk antagonizing its entente partners by strongly supporting claims of its own nationals against claims of theirs. And after the war, with a different political and investment situation in the fragmented Ottoman Empire, where Britain in any case held the Mandate over Mesopotamia, there was even less incentive to support the National Bank. As an agent of Empire the National Bank of Turkey was an embarrassing failure. The political and economic situation in Turkey was too unstable, the position of the Ottoman Bank was too entrenched, the inability of the National Bank to see the political implications of so many of the financial ventures in which it became interested, disappointed the Foreign Office and made it wary of supporting any other such propositions for British financial houses in Turkey. At the one time, during the newly instituted Young Turk regime, when the Bank might have been able to ride to the crest of the wave, it was frustrated by its loyalty to the British Government. Apart from a small deviation in encouraging the Bank at its inception as a counter to French influence, the British Government's firm attachment to the policy of Anglo-French co-operation meant that the Bank received neither leadership nor true independent support from the Foreign Office, but a vacillating and half-hearted toleration.

75 A. G. M. Dickson (Chairman, London Committee), National Bank of Turkey, to F.O., I8 May I925, and desp. from R. C. Lindsay to Chamberlain, No. 51I, 22 May I925, ibid., Nos. E2903 and E3336. See also The Times (London), I2 Apr. 1930, I7g; 7 Jan. 1932, I7d.

