'Report and Proceedings of the Standing Sub-Committee of the Committee of Imperial Defence on the Persian Gulf' [‎38r] (80/94)

1. To participate in the working of the southern section on terms of equality with
Germany, but to the exclusion of all third parties as regards control.
2. To refuse participation altogether.
Of these alternatives the Board strongly recommend the former, if practicable.
They consider that, for the purpose of maintaining legitimate British trade interests,
50 per cent, of the board of directors is sufficient, if coupled either with a British
chairman or, if this cannot be secured, an alternating British and German chairman in
successive years. Possibly the question of the control and administration of the actual
terminal harbour on the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. would need separate consideration.
It would be absolutely necessary, and appears to the Board quite possible, to
devise effective means of securing that the British portion of the capital of the
company, or any part thereof which carries voting power, shall always remain in
British control. The Board do not think it necessary to enter into details on the
technical financial point, but 'they have under their consideration several alternative
methods of arriving at this object, and they will be prepared, if desired, when the
question of principle is settled, to discuss these methods with financial experts, such,
for example, as the authorities of the National Bank of Turkey, should Sir Edward Grey
contemplate utilising that bank for the present purpose.
The second alternative policy is that recommended by 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. in their
letter of the 29th March, viz., to refuse the Turkish proposals, to make no counter
proposition, and to refuse consent to the 4 per cent, increase of duty.
The Board of Trade, as at present advised, are strongly opposed to the adoption
of this policy, if it can be avoided. They are not directly concerned as a department
with its probable effect upon the political relations between this country, Germany, and
Turkey, but it appears to them that it is not unlikely that its adoption might lead to a
Turkish boycott of British ships and commerce, which would react chiefly upon the
trade of the United Kingdom, and would cause grave dissatisfaction in commercial
quarters. It is even within the bounds of possibility that we might have to face the
repudiation by Turkey of her obligations as regards customs duties under the Capitula
tions, and the unilateral enforcement of the 4 per cent, increase without our consent.
If such an extreme step should be taken and receive the support of Germany, and if it
could be plausibly represented that it had been directly caused by our unreasonable
refusal to consent to a measure required by the financial circumstances of lurkey, the
Board do not see what effective means of resisting it would be open to us. and in that
event our control over the rates of Turkish customs duties would be gone for ever.
The Board of Trade therefore submit, for Sir Edward Grey’s consideration, the
desirability of taking some such steps as the following: —
1. An immediate confidential conference with the authorities of the National Bank
of Turkey (or of any other financial institution through which Sir Edward Grey may
contemplate working) to ascertain definitely whether, if desired, they would be disposed
to take up the matter on lines satisfactory to His Majesty’s Government both as to the
security of British control of the capital and as to the financial arrangements to be
made between the new Company and the Turkish Government. In this matter the
Board of Trade will be glad to give any assistance that may be desired.
2. A confidential conference with the authorities of the Bagdad ftailway, to
ascertain if that Company would be prepared, subject to Turkish consent, to co-operate
in a scheme on the basis of forming a new Company for the southern section, financed
equally by that Company and the National Bank of Turkey, subject to a satisfactory
working agreement among the Bail way Companies for through^ traffic, the admission of
one or two British directors on the boards of the existing railways, and (if thought
necessary) a separate arrangement for the construction and control of the terminal
harbour on the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. . . „ .
3. A reply to the Turkish note on lines to be decided when the result oi tnese two
conferences is known.
1 HTTl &C.
H. LLEWELLYN SMITH.
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