'File 73/7 II (D 22) Status of Koweit [Kuwait] - Baghdad railway, Anglo Turkish negotiations' [‎190v] (386/540)

(/) As a financial proposition, it is to be feared that 20 per cent, in an inter
national railway 350 miles long, costing less than 3,000,000 I. to
construct, will not be considered worth looking at. On the other
hand, the facts that (1) the German company has first of all to be
compensated ; (2) rolling stock has to be provided and ports to be
built; (3) the expense of international management will be unneces
sarily heavy ; (4) the railway will have no prospect of paying for
many years (until, in fact, Mesopotamia is irrigated and developed) ;
(5) in the meantime there will be no guarantee (for it may be taken
as certain that the Government of India, at all events, will give no
guarantee), will be further disastrous to its flotation. The British
share will simply not be taken up, and where is the Russian share to
come from, when the Russian Government cannot find money for
its favoured project, the Trans-Persian Railway, and Russian
unofficial finance is concentrated on that enterprise ?
{g) If, therefore, participation on these terms is of no value as a financial
proposition, and if we have not sufficient control to prevent the Bagh
dad Railway interest from preponderating, there is no apparent com
mercial advantage in participation over non-participation.
(h) The Gulf section would be a most valuable political asset if it were all
British. It would still be valuable if it were British controlled, but
it loses in value by leaps and bounds as British participation dimi
nishes, until a point is reached where prestige will suffer less and dig
nity be better consulted if the country which owns 70 per cent, of
the trade and 85 per cent, of the shipping stands aloof altogether,
rather than participates on an equality with three other Powers who
have practically no material stake in the country at all.
{i) No attempt has been made to show how the joint arrangement is to work
in practice, e.g., is the actual working agency An office of the East India Company and, later, of the British Raj, headed by an agent. to be international,
and is it seriously thought that that would be workable ?
Again, in order that the commercial interests of the line may be effectively
safeguarded, it must be worked independently of, and to some extent
in opposition to, the Baghdad Railway, but it is extremely doubtful
whether any arrangement with this object would be found workable
in practice.
III. The view, therefore, supported is that of the Board of Trade in their letter
of the 7th April, 1911, that the only alternatives are to participate on a 50 per cent,
basis (to which it should be added that, in that case, the chairman must be British),
or not to participate at all.
{a) The view that British control on the Gulf section is useless without a
convention to prevent differential rates on the rest of the system has
already been dealt with. It has also been pointed out that by control
ling the shortest section we should, in fact, control the rates over the
German section. It may further be urged that the sole effect to the
Baghdad Railway Company of imposing differential rates against
British goods between Alexandretta and Baghdad would be to send
British trade round to the Basrah-Baghdad line. With 50 percent.,
the casting vote on the board, and a free hand as regards rates, our
position would, therefore, be impregnable.
(h) What would it be if we did not participate at -all ?
It must be premised that from the British and Indian point of view it is better
that the railway should not be built. It must be remembered that
there is no analogy between the position now and the position in
1903. Then we might have had substantial participation in the
whole length of the railway, which would, besides have admitted us
to the exploitation of a new country. Now we are offered 20 per
cent, in a branch 350 miles long, which will admit other Powers on'
equal terms with us to the exploitation of a country of whose 'trade
we already have 70 per cent.
Politically. —The construction of the railway means the military, and adminis
trative consolidation of Turkey in Mesopotamia, with an increased tendency to seek
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