‘Bagdad Ry’ [‎19r] (37/129)

The Baghdad Railway.
The General Staff, in a memorandum of the 15th November 1904 (45 B),
has noted the military aspects of the Convention of 1902 (section 3), and has*
pointed out the disadvantages, political, commercial, and strategic, which the
control by Germany of a line to the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. would entail upon Great
Britain (sections 7 to 9).
2. The history of the proceedings in regard to this railway down to the
end of 1904 is summarised below (see Appendix), and it will be seen that the
line has now reached Eregli. Further progress depends upon the arrangement
of a kilometric guarantee embracing the next two sections, which prolong the
line through the Taurus range as far as Tell-Habesh. The crossing of the
Taurus is estimated to involve about 100 miles of blasting and tunnelling.
3. Under the Convention, the German Anatolian Railway can be
extended to the Persian Gulf The historical term used to describe the body of water between the Arabian Peninsula and Iran. , and Article 29 provides that no section of the
line between Baghdad and Basrah may be worked before the completion of
the portion between Konia and Baghdad. This provision was intended to
prevent the construction of a British line from the Gulf to Baghdad, which is
now possible only as part of the German scheme, or on condition of the grant
by Turkey of a separate concession to this country.
4. When British co-operation was sought, on terms which could not be
granted, political considerations were probably in the ascendant. The German
Government was apparently anxious not to stand alone in the prosecution of a
scheme which Russia viewed with dislike, and British support was, therefore,
desired in view of eventualities. Now that the war in the Par East has
disclosed inefficiency throughout the Russian army, and will probably have
the effect of curbing Russian activities for some years, the desire for British
co-operation in the Baghdad Railway scheme from the purely political point
of view only may be somewhat abated.
5. The main question at the present moment is whether the German
Government can secure sufficient financial support to complete the railway
to the Gulf, even if the Turkish Customs duties are not raised sufficiently to
serve as a security for the kilometric guarantees. In other words, can Germany
complete the line without British co-operation ?
6. The financial arrangements made by the German promoters of the
railway with the Turkish Government are somewhat remarkable. That Gov
ernment is to issue its own bonds at the rate of 10,700/. per kilom. (equivalent
to 17,186/. per mile), in respect to each section of 200 kilom. Such bonds are
to bear interest at 4 per cent, with a sinking fund providing for their redemp
tion during the period (99 years) of the concession. They are to be secured
by the particular section of the line in regard to which they are issued, and
in addition by such other special security as may be agreed upon between the
Railway Company and the Government. Thus, in the case of the Konia-
Eregli section, the special security—up to the value of £T. 36,000— is an
assignment of the tithes in certain cases of the Vilayets of Baghdad, Aidin,
Mosul, and Diarbekr. As the total annual amount so hypothecated is 50,000/.,
the margin of security is ample. In a letter to Mr. Townley of the 26th
November 1904, Vice-Consul Townsend states that the Company is only
spending about 50 per cent of the guarantee, and is thus getting 9 or 10 per
cent interest on its actual outlay. As a single 5 feet 6 inches gauge line in
India costs about 10,000/. per mile, this statement is probably correct. The
expenditure on the Taurus section will, however, be largely in excess of the
average.
7. It appears, therefore, that bond-holders are fully secured in so far as
Turkish credit is to be trusted, and that the raising of the Customs dues is