'P. 1. 2410/1903. Persia:- Financial Situation. Loans.' [‎12r] (28/1056)

Note by Sir W. Lee- Warner.
I would not abate one jot of the onerous terms upon which the
Government of India would advance a further loan to Persia, and I should
regard without regret Persia’s refusal of the loan. For I cannot entirely
agree with Sir Hugh Barnes that “ greater friendliness is likely to follow
financial assistance,” or that “ we need not fear that we shall be forced into
further loans.”
These loans which are not productive and are wasted upon Court
extravagance do not, I think, make for friendliness. On the contrary, we
have it on record that a strong, popular, and priestly influence in Persia is
bitterly hostile to foreigners, et dona ferentes. The friendliness of the
nation is not secured by them, nor are the Shah and his Ministers made by
these means more friendly to us. Since we advanced our first loan they
have shown greater opposition to our wishes. They have rejected the
Seistan award, refused telegraph concessions, raised customs difficulties, and
in no single respect shown even proper regard for our rights. A creditor
is rarely the friend of an embarrassed debtor. Then as to our being
forced into further loans. The real fact is that we have so far lent
on an inferior security to that which we asked for and intended, and we
have been already forced into further loans in order to try and make
good that security. It is a matter of ordinary experience that one mistake
leads to another, and one loan to another.
The real issue, however, is, whether another loan will serve our
policy. What is our policy towards Persia ? So far as I can form
an opinion it is this. The exclusion of Russia from Afghanistan
whether in the form of invasion or pacific penetration is, I think,
vital. We must go to war if Russia crosses the Afghan borders.
But if Russia should cross the Persian borders we should not, I think,
resist by force of arms, first because the Persians, unlike the Afghans,
could offer no resistance, secondly, because the field of action would
be too far off. Hence our policy is not to commit ourselves to even the
threat of an immediate conflict with Russia should she invade Persia.
But bearing in mind that the Afghan western border is open on the
Persian side and would be threatened by a Russian occupation of Persia,
we should have to be prepared for war so as to prevent the Afghan
border being crossed, and if Russia should invade Persian territory we
should protest and encourage other nations to join us in protesting against
violation of the independence of Persia. Have we already got the right to
employ diplomatic weapons against Russia in defence of Persian integrity ?
We have acquired the right, for we have publicly declared that we can
consent to the establishment of no fortified places on the Gulf; we have
lent money to Persia and obtained some sort of security; we have settled
differences between Persia and our ally Afghanistan, and we have
established consulates and supported British companies trading in Persia.
This being so, and military resistance for the defence of Persia being beyond
S. 37. D