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File 2764/1904 Pt 2 'Baghdad Railway: General negotiations 1908-10.' [‎107v] (223/799)

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The record is made up of 1 volume (391 folios). It was created in 1908-1910. It was written in English. The original is part of the British Library: India Office The department of the British Government to which the Government of India reported between 1858 and 1947. The successor to the Court of Directors. Records and Private Papers Documents collected in a private capacity. .

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i
Sir James Mackay at the Bagdad Railway Committee of 1907, and subsequently
submitted to the Cabinet. Assuming the distance from Bagdad to the Gulf to be
450 miles, and the cost of construction with rolling stock 8,000L a-mile, the cost would
be 3,600,000k, and the annual guarantee 108,000k, the latter to be shared by the
I Imperial and Indian Exchequers. It has been stated as an objection to this proposal
that the Turks would regard it as a dereliction of their sovereign rights. It would,
however, if that were so, be a dereliction for which they would receive good money
value, since they would be relieved of some of the onerous conditions of the convention
of 1903. I think it not unlikely that they would in the end accept a proposal on these
lines if it were put before them, as it undoubtedly could be, in an attractive form.
The other alternative which might be suggested to the Turkish Government is
that they should themselves give a guarantee. In their case it would have to be one
of 5 per cent, on the capital actually expended on the Bagdad-Gulf section, and in
return article 35 of the convention of 1903 might, in so far as it relates to this portion
of the line, be modified so as to relieve Turkey of both the construction annuity and
working expenses guarantee. The gain to the Turkish Exchequer would be consider
able, for the following reasons :—
The construction annuity, when capitalised, gives a cash yield of about 8,500k per
kilometre. From Bagdad to Koweit the distance is about 716 kilom., making the amount
payable as interest by Turkey (viz., 5 per cent, on 8,500k X 716, or on 6,086,000/.)
304,300/., and this amount of interest would be subject to reduction only by the
operation of the sinking fund, which is spread over the whole duration of the
concession.
The working expenses guarantee is not a fixed charge, but it might at its maximum
amount reach 4,500 fr. per annum per kilometre, which, for 716 kilom., works out
at 128,880/. a-year.
The liability of Turkey in respect of the 716 kilom. from Bagdad to Koweit would
thus, under the concession of 1903, be a sum not exceeding 304,300/. a-year in respect
of construction guarantees, and, if the working expenses guarantee were added, it
might reach 433,180/.
On the other hand, the 5 per cent, guarantee on the capital of 3,600,000/. (which,
assuming 5,000/. per kilometre, would be the approximate cost of constructing and
financing rolling stock for 716 kilom.) would be only 180,000/., plus, say, 20,000/. for
bankers’ charges, &c., if that were necessary, making 200,000/. in all—the maximum
annual liability of Turkey, and, which is an important point, this liability would not
continue for 99 years, but it would cease as soon as the railway realised a net profit
of 5 per cent., while Turkey would share equally in any profits over and above this
5 per cent. It would be almost incredible that she should refuse a modification in
this sense.
There yet remains the point of the 2,000/. per kilometre which Gwinner demands
should be paid to the Bagdad Railway Company from the construction guarantee for the
Bagdad-Gulf section. We need not trouble about this, as it should form a subject of
agreement directly between Gwinner and the Turkish Government, and need not be in
any way connected with our own negotiations with the latter.
I he Foreign Office memorandum of the 4th June, 1907, of which copies were
given to the French and Russian Governments, represents the attitude which we should
now uphold as regards our participation in the Bagdad Railway. There are one or two
points in it which might be modified, but, as a wdiole, our policy should remain
unchanged.
I have noticed in Sir E. Cassel’s memorandum that no mention is made of the
ports which are to be constructed at Bagdad, Bussorah, and Koweit. It may be
presumed that, if the Gulf section is to be under our construction and control, the
building of the ports on that section would be naturally included. It is very desirable
that there should be no doubt upon this poiut, and the fact must not be overlooked
that we are paying 4,000k a year to the Sheikh of Koweit, precisely in order to control
the terminus of the line. It might therefore be as well to stipulate that the terminus
should actually be there and under our control.
Sir E. Cassel s proposals contemplate a certain proportion of the share capital
being in Butish hands ; but no attempt is made to show how this proportion should be
pei manently so secured. Ihe following is a suggestion which has been made to me,
and which, I think, is worth considering: —
Ihe bonds for the Bagdad—Gulf section may be issued to the investing public at,
P&r* W e could stipulate that the Bank of England should have the right to buy
ti fK
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About this item

Content

The volume comprises telegrams, despatches, correspondence, memoranda, newspaper cuttings, maps and notes, relating to negotiations over the proposed Berlin to Baghdad Railway in the period 1903-1907.

The discussion in the volume relates to the economic, commercial, political and military considerations impinging on British strategy for the international negotiations over the development of a railway to Baghdad in particular.

Further discussion surrounds the motivations and strategies of British competitors in the area; included in the volume are four maps.

The principal correspondents in the volume include the Secretary of State for Foreign Affairs (Lord Lansdowne, Sir Edward Grey), His Majesty's Ambassador at Constantinople (Sir Nicholas O'Connor), the Under Secretaries of State for Foreign Affairs (Sir Charles Hardinge, Sir Thomas Henry Sanderson), and for India (Earl Percy, Sir Arthur Godley), the Viceroy of India (Lord Curzon of Keddleston), the Secretary to the Political and Secret Department of the India Office The department of the British Government to which the Government of India reported between 1858 and 1947. The successor to the Court of Directors. (Sir Richmond Richie) and the London Manager of the Imperial Bank of Persia (George Newell).

Extent and format
1 volume (391 folios)
Arrangement

The papers are arranged in approximate chronological order from the rear to the front of the volume.

The subject 2764 (Bagdad Railway) consists of five volumes, IOR/L/PS/10/56-60. The volumes are divided into five parts with each part comprising one volume.

Physical characteristics

Foliation: the main foliation sequence (used for referencing) commences at the first folio with 1 and terminates at the inside back cover with 392; these numbers are written in pencil, are circled, and are located in the top right corner of the recto The front of a sheet of paper or leaf, often abbreviated to 'r'. side of each folio. An additional foliation sequence is also present in parallel between ff 329-358; these numbers are also written in pencil, but are not circled, and are located in the same position as the main sequence. A previous foliation sequence, which is also circled, has been superseded and therefore crossed out. The foliation sequence does not include the front cover.

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English in Latin script
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File 2764/1904 Pt 2 'Baghdad Railway: General negotiations 1908-10.' [‎107v] (223/799), British Library: India Office Records and Private Papers, IOR/L/PS/10/57, in Qatar Digital Library <https://www.qdl.qa/archive/81055/vdc_100026492732.0x000018> [accessed 28 March 2024]

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