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Gentlemanly Capitalism and the Baghdad Railway, 1888 –1914: ‘Cosmopolitanism’ vs. ‘Patriotism’

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Gentlemanly Capitalism and the Baghdad Railway, 1888 –1914: ‘Cosmopolitanism’ vs. ‘Patriotism’

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Gentlemanly Capitalism and the Baghdad Railway, 1888 –1914:Cosmopolitanism’
vs. ‘Patriotism’1
Centilmen Kapitalizm ve Bağdat Demiryolu, 18881914: ‘Kozmopolitanizme’ Karşı
Vatanseverlik
Submission Type: Research Article Received-Accepted: 05.10.2021 / 22.11.2021 pp. 118-140
Journal of Universal History Studies (JUHIS) 4(2) December 2021
Christian Lekon
Ankara ldırım Beyazıt University, Assist. Prof. Dr., Department of International Relations, Ankara, Turkey
Email: Christian.Lekon@gmx.de Orcid Number: 0000-0002-5127-1076
Cite:
1 This article is analyzed by two reviewers and it is screened for the resemblance rate by the editor/ Bu makale iki hakem tarandan
incelenmiş ve editör tarandan benzerlik oranı taramandan girilmiştir.
* In this article, the principles of scientific research and publication ethics were followed/ Bu makalede bilimsel arrma ve yayın eti
ilkelerine uyulmtur.
* This work is licensed under a Creative Commons BY-NC-SA 2.0 (Attribution-Non Commercial-Share Alike).
Journal of Universal History Studies (JUHIS) • 4(2) • December • 2021 • pp. 118-140
119
Abstract
According to the interpretation of Cain and Hopkins, British imperialism was driven by a social stratum
they dub ‘gentlemanly capitalists’. This refers to the financial and service sector based in south-eastern
England. This article aims to contribute to the ongoing discussion on Cains and Hopkins’s approach by
exploring how far it can shed light upon the stance of British business and political elites towards the
German-dominated Baghdad railway project in the Ottoman Empire. Represented by Deutsche Bank,
German interests started to construct railway lines in Anatolia from 1888 onwards. In 1903, they secured a
concession to build a railway connecting Ankara with the Persian Gulf (the Baghdad railway). For the
British, this raised the question of whether it was better to oppose or participate in that project. The latter
option was pursued by a group of London-based financial interests. However, a competing group consisting
of British railway and shipping interests vociferously opposed the plan of a German-French-British joint
venture as inimical to British interests, thereby forcing the British government to reverse its previous support
for the project. This was followed by years of abortive British-German-Ottoman negotiations. In 1913-14, a
compromise was found: The British traded their acceptance of a German-controlled Baghdad railway
against a number of concessions involving the Persian Gulf, railways, shipping and, crucially, oil. On the
British side, the main winners of this agreement were the very same railway and shipping interests that had
wrecked the previous plan. All the financial, railway and shipping interests involved in this affair can indeed
be characterized as ‘gentlemanly capitalists in the vein of Cain and Hopkins. However, the findings of this
article also show that thegentlemanly capitalists were not as coherent a group as Cain and Hopkins would
have it: There was a deep split between the ‘cosmopolitanism of some financial circles and the more
narrowpatriotism of the railway and shipping interests.
Keywords: British Imperialism, Gentlemanly Capitalism, British-German Relations, British-Ottoman
Relations, Baghdad Railway.
Gentlemanly Capitalism and the Baghdad Railway, 1888 1914: ‘Cosmopolitanism’ vs. ‘Patriotism’/
Christian LEKON
120
Öz
Cain ve Hopkins’in yorumuna göre İngiliz emperyalizmi, “centilmen kapitalistler” olarak adlanrdıkla bir
toplumsal mre tarafından gerçekltirilen bir olguydu. Bu ibare Güneydu İngiltere merkezli bir mal ve
hizmet sektörüne nderme yapmaktadır. Elinizdeki makale, Cain ve Hopkins’in yaklımının Osmanlı
İmparatorlu’nda Almanya’n yürütğü Bağdat demiryolu projesine kaı İngiliz ticari ve siyasi
elitlerinin takınğı tutumu ne öüde aynlatabildiğini irdelemek suretiyle,z konusu tartışmaya katkıda
bulunmayı amlamaktadır. Deutsche Bank tarafından temsil edilen Alman girişimi, 1888’den itibaren
Anadolu’da demiryolu iaana başlamış durumday. 1903’e gelindiğindeyse Almanlar, Ankara’ Basra
rfezi’ne bağlayacak olan Bağdat demiryolu projesi in gereken imtiya temin etmlerdi. Bu durum
İngilizler’i bu projeye kalmak ile ona muhalefet etmek arasında bir tercih yapmaya zorladı. Londra
merkezli finans çevrelerinin oluşturduğu bir grup, projeye kalabilmenin peşine düş. Fakat İngiliz
demiryolu ve taşımacılığı sektörünün önde gelen temsilcilerinden olan rakip bir grup, Alman-Fransız-
İngiliz ortak girişimi plana İngiltere’nin çıkarlarına ay oldu gerekçesiyle sert biçimde karşı çıktı ve
İngiliz hükümetini projeye verdi desteği durdurmaya zorla. Devam eden yıllar, sonuçsuz kalan İngiliz-
Alman-Osmanlı şmelerine şahitlik etti. Nihayet 1913-1914’te bir uzlı sağlandı: İngiltere, Basra
rfezi’nin kontro, demiryolları, nakliye ve en önemlisi petrol gibi çeşitli alanlarda aldığı tavizler
karşılığında Almanya’nın yürüteceği Bdat demiryolu projesine zasterdi. İngiltere taranda bu
anlaşmadan al kazançlı çıkanlar tam da önceki planı baltalayan demiryolu ve taşımak sek
temsilcileriydi. Bu meseleyi tkil eden demiryolu, taşımacılık ve finans sektöründeki çıkarların tümü, Cain
ve Hopkins’in yaklımla zemininde geekten de “centilmen kapitalistler” olarak nitelendirilebilir.
Gelgelelim bu makalenin ulğı sonlar, “centilmen kapitalistler”in Cain ve Hopkins’in sandığı kadar
insicamlı bir grup olmağı göstermektedir: Ba finans çevrelerinin “kozmopolitanizmiile demiryolu ve
taşımak sektörünün daha sınır çıkarlan “vatanseverli” arasında ciddi bir yarılma vardı.
Anahtar Kelimeler: İngiliz Emperyalizmi, Centilmen Kapitalistler, İngiliz-Alman İlişkiler, İngiliz-Osmanlı
İlişkiler, Bağdat Demiryolu.
Journal of Universal History Studies (JUHIS) • 4(2) • December • 2021 • pp. 118-140
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Introduction: Gentlemanly Capitalism
In their two landmark volumes on British Imperialism (1993), Peter J. Cain and Antony G.
Hopkins link the dynamics of Britain‘s domestic level with those of her formal and informal overseas
dependencies. They assert that the British Empire really started to come into its own from the mid-19th
century onwards. Far from being a defensive reaction to the activities of Continental European powers or
local political crises, the subsequent expansion of this empire was a symptom of the City of Londons
finance/service nexuss global dynamism. London was the most prominent one among the financial centres
of the world economy during the 19th century. This meant that, even as Great Britain‘s industries started to
lose the competitive edge against Germany and the USA, its global power position remained intact. Britain
finally lost her financial pre-eminence to the Americans due to World War I. Still, the British made valiant and
not unsuccessful efforts to maintain or even expand their power in different parts of the non-European world
during the interwar period. It was only World War II that finally cut Britain down to size. Subsequently,
decolonization was the result of changing geographical priorities on the part of the City-based investors.
The core of Cains and Hopkinss argument is that in terms of political influence and social esteem
Great Britains provincial manufacturers generally took a backseat compared to an elite based upon Southeast
England and especially the City of London: the gentlemanly capitalists. This stratum was composed of the
financial sector together with other services, namely trade, shipping and insurance. While being capitalist in
the sense of pursuing a never-ending quest for profit through the handling of money and goods, this group
simultaneously cultivated a gentlemanly status ethos. The British Empire was thus run on lines that
represented the values and economic interests of the City’s finance-cum-service complex. Whether as
colonies or as parts of the informal empire, Britain’s dependencies were primarily valuable as outlets for
investments by the gentlemanly elite. Besides banking, such investments went into infrastructure and mining.
The export of industrial goods to the Empire followed on the coat-tails of these investments but the interests of
British industrial and gentlemanly capitalists did not always coincide.
The gentlemen of the City were closely tied to their fellow gentlemen of Whitehall. Cain and
Hopkins argue that Great Britain’s bureaucratic and military elites shared the same social background,
education and values with the gentlemanly capitalists. Sound monetary and frugal fiscal policies were given
pride of place; whatever smelled of industrial mass society was kept at arm’s length. There was a close
collaboration between the Foreign, India and Colonial Offices together with their local representatives on the
one hand and City-related financial interests on the other hand (Cain and Hopkins, 1993a; Cain and Hopkins,
1993b). The Middle East was somewhat of a special case in being at the bottom of the City investors‘
priorities list. In contrast, Whitehall was keen on a British presence in the region due to its strategic importance
of lying astride the road to India. Thus, the Foreign Office tried, not always successfully, to encourage a rather
unenthusiastic financial sector to invest in the region (Cain and Hopkins, 1993a, pp. 397-421).
No general account of Britain‘s position within the Middle East during the quarter-century before
World War I can ignore the Anatolian and Baghdad railways. As these railway ventures went together with
the strengthening of Germany‘s political and economic influence in the Ottoman Empire, they inevitably
Gentlemanly Capitalism and the Baghdad Railway, 1888 1914: ‘Cosmopolitanism’ vs. ‘Patriotism’/
Christian LEKON
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touched British imperial interests there as well. In the following, we will discuss British policies towards the
Baghdad railway from the perspective of Cains and Hopkinss work. Particular attention will be paid to the
following issues: Was Great Britain still an expanding power on the eve of the war? Did the major British
economic actors involved with the Baghdad railway belong to the gentlemanly capitalism stratum? What was
the relationship between the economic actors and the responsible British officials over the Baghdad railway
issue?
The Saga of the Baghdad Railway
The railway age in the Ottoman Empire started in 1866 with the opening of a line connecting İzmir
with Aydın. This pattern of connecting a port town with its immediate hinterland also characterized all
additional railways operating in the Empires Anatolian provinces during the following two-and-a-half
decades. In the meanwhile, railway lines were also built in the Balkans and a connection between İstanbul and
Vienna opened in 1888.
It was in that year that the Germans entered the fray in the shape of Deutsche Bank. It led a group of
investors setting up the Anatolian Railway Company (ARC), which built a line connecting İstanbul with
Ankara in 1893 and Konya in 1896. Next emerged the Baghdad railway project, which was to extend the
İstanbul-Konya line through Mosul and Baghdad to the Persian Gulf. In contrast to the earlier, port town-
oriented lines, the Anatolian and Baghdad railways were to link the capital city with the Ottoman Empires
Anatolian, Syrian and Iraqi provinces.
In 1899, Deutsche Bank teamed up with the French-dominated Imperial Ottoman Bank (IOB) to
found the Baghdad Railway Company (BRC). Four years later, the Ottoman government granted the BRC as
concession including a profit guarantee per kilometre built and mining rights on both sides of the railtrack. Not
everyone was happy with the new venture. Already in 1900, Russia had forced upon the Ottomans an
agreement reserving railway rights in northern Anatolia for herself. In 1903, opponents in France prevented
the BRC, despite being partially French, to raise capital at the Paris stock exchange. Likewise, negotiations
about British capital entering the BRC were cut short by a hostile press campaign.
After the BRC had extended the railway links from Konya to the gate of the Taurus Mountains in
south-eastern Anatolia in 1904, technical and financial issues brought the construction to a grinding halt. There
also emerged a new competitor in the shape of U.S. business interests represented by Admiral Chester and
backed by the American Department of State. Launched in 1908, Chester’s application for a railway
construction concession in Eastern Anatolia fell foul of German obstruction and was effectively shelved three
years later. Construction of the Baghdad railway resumed full speed once the original contract was revised in
1911, with the BRC renouncing construction rights beyond Baghdad and some financial guarantees.
Furthermore, international competiton over Ottoman railtracks was lessened by a number of agreements: In
1910-11, Russia gave up its opposition to the Baghdad railway against a German promise not to do any
infrastructural construction in northern Persia. Likewise, a German-French deal led to the withdrawal of
French capital from the BRC and a mutual agreement on respective spheres of railway construction in the
Asiatic regions of the Ottoman Empire in 1913-14. During the same two years, the British traded their
acceptance of the Baghdad railway for a recognition of their dominant position in the Persian Gulf and
Journal of Universal History Studies (JUHIS) • 4(2) • December • 2021 • pp. 118-140
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additional railway, navigation and oil concessions through a number of agreements with the Ottomans and the
Germans.
Once the construction of railtracks crossing the Taurus and Amanus mountains had finally been
completed, Aleppo was connected by train with İstanbul in 1918. But the end of World War I also meant the
expropriation of the ARC and the BRC. Their railtracks were partly taken over by the new nationalist
government in Turkey and partly by the French and British (Earle, 1924; McMurray, 2001; Ortyalı, 1984;
Özyüksel, 2013; Özksel, 2016; Soy, 2004; Wolf, 1973). Between the 1930s and 1950s, Turkey, Syria and
Iraq step by step nationalized the remaining foreign-owned parts of the Baghdad railway. In the meantime,
with the last gaps in the tracks having been closed, the first train from İstanbul reached Baghdad in 1940
(Bickel, 2003, pp. 161-162).
From the Anatolian to the Baghdad Railway
Under Sultan Abdülhamit II (r. 1876-1909), the previously warm British-Ottoman relations entered
a more difficult phase. Their main strategic interests being secured through the occupation of Egypt and
discontented by the Sultan’s autocratic rule and especially his handling of the Armenian troubles, the British
lost their enthusiasm for preserving the Ottoman Empire. By the mid-1890s, Prime Minister Salisbury
seriously considered a partition of the Ottoman realms. In turn, Abdülhamit did not value the British much as
a potential support against Russia, resented their occupation of Egypt, and believed that they were supporting
oppositional and separatist movements in his empire (Hanioğlu, 2008, pp. 131-132; Heller, 2014, pp. 1-2;
Özyüksel, 2016, pp. 18-19; Wilson, 2003, pp. 127-129, 139-140, 141-142, 145-146). Cains and Hopkinss
claim that Whitehall was for geostrategic reasons keen on a British presence in the Ottoman Empire thus need
to be qualified as far as this period is concerned.
Despite cool political relations, the miniscule railway system in the Asian provinces of the Ottoman
Empire was yet dominated by British capital when the Germans arrived on the stage in 1888. There was the
İzmir-Aydın railway; the İzmir-Kasaba line; the short railway connecting İstanbul with İzmit; and the Mersin-
Adana line, which had just started operating as a British-French joint venture. Now, however, Britains
predominance was challenged not only by Deutsche Bank but also by French interests starting to gain railway
concessions in the Syrian provinces. Furthermore, the company leasing the İstanbul-İzmit line was due to lack
of capital unable to comply with the Ottoman desire to extend it to Ankara and ultimately to Baghdad. Its
lease was cancelled and the railtracks handed over to the ARC (Earle, 1924, pp. 29-31; Özyüksel, 2016, pp. 9-
10, 25-26, 78).
A railway scheme that initially competed with that of Deutsche Bank was advanced by Sir Vincent
Caillard (1856-1930), who served as British representative on the Ottoman Public Debt Administration
(PDA) between 1883 and 1898. In the estimation of Cain and Hopkins, even though Caillard can be
characterized as a representative of the financial and service class, his inclination for intrigues and speculation
prevented him from being accepted at the highest level of the gentlemanly stratum (Cain and Hopkins, 1993a,
pp. 406-407, 406 n. 38, 419-420). In 1888, Caillard attempted to set up an Anglo-Italian or Anglo-American
venture to build a railway between İstanbul and Baghdad. This was a move directed against the IOB, which
also applied for a concession. He then scuttled these plans as result of a deal with Deutsche Bank, through
Gentlemanly Capitalism and the Baghdad Railway, 1888 1914: ‘Cosmopolitanism’ vs. ‘Patriotism’/
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which he joined the ARCs board of directors. Caillard however desisted from any investment into the ARC
once it was clear that the IOB was out of the picture. Besides taking a British citizen on its board, the ARC
was also permeated by British capital: the latter covered no less then one quarter of the first loan raised by the
company (Earle, 1924, pp. 31-32; Özksel, 2016, pp. 11, 27; Wolf, 1973, pp. 12-13, 15).
But already in 1890, the British shares were bought by the Germans within the context of credit
shortages in the City, probably related to the Barings Crisis (Cottrell, 2016, p. 82; McMeekin, 2011, p. 39).
The only British investor who did not withdraw was Ernest Cassel (Wolf, 1973, pp. 14-15), a rich City
financier. Around 1892, he declined an offer by Deutsche Bank to invest further into its railways (Allfrey,
2013, p. 246; Grunwald, 1969, pp. 142-143). In 1893, there were abortive negotiations between the Smyrna
Aidin Railway Company (i.e. the İzmir-Aydın line) and Deutsche Bank concerning the former’s participation
in the Baghdad railway venture. Once the ARC had started construction, the first attempt by British officials to
reassert Britain’s position in the Ottoman railway sector was the ambassador’s support for the project of an
entrepreneur to link Ankara and Baghdad by rail in 1891. And in 1892-93, backed by Foreign Secretary
Rosebery the British ambassador protested against the Ottomans giving the concession to Konya to the ARC
and even threatened to send in the Royal Navy. These threats were neutralized by German diplomats raising
the counter-threat of creating troubles for the British with respect to the public debt issue of Egypt. In the
meantime, a French group acquired a majority of the previously British-controlled İzmir-Kasaba railway in
1893 (Özksel, 2016, pp. 29-30, 35-37, 59; Wolf, 1973, pp. 16-17, 21).
These diplomatic disharmonies occured in the years after the 1890 Anglo-German agreement on
Heligoland and Zanzibar. Despite that agreement, German hopes for an alliance with the British faded and a
number of minor conflicts over colonial issues in Africa and the Pacific emerged. Indeed, the temporary
British resistance to the Konya railway together with issues related to Cameroon and New Guinea provoked
the Germans into a more confrontational attitude towards colonial matters affecting the British (Kennedy,
1987, pp. 205-222). The latter, in turn, also became assertive: in 1899, Kuwait was put under British
protection’, even though it remained nominally a part of the Ottoman Empire (Earle, 1924, pp. 197-198;
Kumar, 1962, p. 71; Özyüksel, 2016, p. 73). Originally, that move happened in response to assumed French
and Russian rather than German activities. However, the Gemans backed unsuccessful Ottoman attempts to
make the British give up their foothold at Kuwait (Wolf, 1973, pp. 36-37, 36-37 n. 5).
Among the projects competing with Deutsche Bank, one was proposed by Ernest Rechnitzer, the
London-based son of a Hungarian businessman who had grown rich through road construction („Rechnitzer
Family Tree“, 2020). In 1899, he represented a group of British financiers - including the London branch of
the Rothschilds - which proposed to construct a railway connecting Iskenderun through Baghdad with the
Persian Gulf. However, even though it included the option of adding a connection with Konya later on,
Rechnitzer’s scheme did not meet the Sultans desire to link the Arab-speaking provinces with İstanbul.
Furthermore, it seems that it did not convince enough investors and was considered to be more Austrian than
British (Earle, 1924, pp. 60, 62-63, 85 n. 7, 86 n. 9, 86-87 n. 12; Özyüksel, 2016, p. 61; Wolf, 1973, p. 24).
However, one alleged member of Rechnitzer‘s would-be consortium, i.e. the British Rothschilds, was an
important merchant banker with investments all over the world and especially prominent in doing business
with Brazil and Chile (Cain and Hopkins, 1993a, pp. 120, 150, 157, 295, 299, 300, 303, 305, 310, 357, 366,
Journal of Universal History Studies (JUHIS) • 4(2) • December • 2021 • pp. 118-140
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375-379, 401, 434, 435; Cain and Hopkins 1993b, pp. 162-166). Rechnitzer duly emphasized the benefits of
his project for British political and economic interests in the Persian Gulf. Initially, he was backed by the
British ambassador in İstanbul, who advised his German counterpart that Deutsche Bank and the IOB should
make a deal with the Rechnitzer group. According to Rechnitzer’s own account, this support was
subsequently withdrawn by the British government, which dropped his scheme in order to buy German non-
interference at the outbreak of the Boer War. He particularly blamed Colonial Secretary Chamberlain, who
indeed then expressed his preference for a German presence in Anatolia over a French or Russian one (Earle,
1924, pp. 60-61, 67, 86 n. 9, 87 n. 12; Özyüksel, 2016, pp. 61, 72; Wolf, 1973, p. 24).
It is true that, due to their relative isolation during the Boer War, the British saw the need to be on
good terms with Germany. And even though Germany had made the decision to expand her navy, there were
some tentative but ultimately futile talks about an Anglo-German alliance in the years around the turn of the
century. Some British statesmen, foremost among them Chamberlain, openly favoured this option (Kennedy,
1987, pp. 223-250; Rose, 2011, pp. 145-155). But in view of all the other hindrance his scheme faced,
Rechnitzer’s charge that he was sacrificed on the altar of British-German relations seems to be somewhat
overblown.
There was another political issue connected with the Rechnitzer application. In 1899, the Sultan’s
brother-in-law Damat Mahmut Paşa went into exile in Paris. He asked the British for support in overthrowing
the Sultan and promised to help them getting economic concessions in return. Shortly before taking this
dramatic step, Damat Mahmut had spoken in favour of the Rechnitzer venture. Consequently, there were
allegations that the latter was behind the Paşas escape. Be that as it may, the British officials refused to
become involved (Earle, 1924, p. 60; McMeekin, 2011, pp. 57-58, 58 n.; Özksel, 2016, pp. 61, 71-72).
In 1900-01, Deutsche Bank advanced the proposal of British capital joining the venture. Being
prodded by Caillard, it approached the London Rothschilds, who declined as they considered the project to
have an overtly political character. The financier Cassel proposed a 20% participation of London-based capital
in the project or, alternatively, its merger with the British-owned İzmir-Aydın railway. Both schemes failed
due to the lack of backers. Contacts with Barings, J.S. Morgan as well as bankers dealing with Persia likewise
failed to bring results while the Foreign Office (FO) maintained a friendly but reserved attitude (Allfrey, 2013,
p. 247; Francis, 1973, p. 169; Grunwald, 1969, p. 143; Wolf, 1973, pp. 29-30).
The Talks on a British Participation in the Baghdad Railway
By 1902-03, Foreign Minister Lansdowne and the new Prime Minister Balfour had came round to
the conclusion that, as the railway would be built anyway, it was in Great Britains best interest to participate in
the project. Such a participation was hoped to improve relations with Germany and to contribute to checking
Russian designs upon the Persian Gulf (Earle, 1924, pp. 93, 181-182; Francis, 1973, pp. 169, 175; Kumar,
1962, pp. 71-72; Mejcher, 1975, p. 458; Rose, 2011, pp. 301-302; Wolf, 1973, pp. 39-40, 40 n. 22, 42). The
stage was now set for serious negotiation between Deutsche Bank, represented by its chairman Arthur von
Gwinner, and a trio of British financiers: Lord Revelstoke from Barings, Clinton Dawkins from Morgan, and
Ernest Cassel.
Gentlemanly Capitalism and the Baghdad Railway, 1888 1914: ‘Cosmopolitanism’ vs. ‘Patriotism’/
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Baring Bros. was one of the oldest and most prestigious merchant banking houses of the City.
Having come to London as German-origin traders in the 1760s, Barings increasingly focused upon financial
services, namely dealing with bills of exchange as well as issuing bonds and stocks. During the second half of
the 19th century, the house was particularly involved with investments into Canada, the USA, Argentine and
Russia, among which railways loomed large. Being saddled with unsound loans to Argentine, the bank faced
the threat of insolvency in 1890. As Barings’s fall might have pulled down the whole City, it was rescued by
other financial houses under the guidance of the Bank of England. Under its new head John Baring aka Lord
Revelstoke (1863-1929), Barings soon recovered its former prestige, if not its market share. From the interwar
period onwards, it redirected much of its business into British industries (Ziegler, 1988). For Cain and
Hopkins, Barings and especially the operation saving it is a showcase for gentlemanly capitalism and its
informal networks (Cain and Hopkins, 1993a, pp. 120, 126, 150, 153-158, 174-175, 263-264, 268-269, 289,
292-296, 408, 435, 439, 443; Cain and Hopkins, 1993b, pp. 16, 42, 45, 65, 156, 159, 160, 163).
The second component of the 1902-03 trio was J.S. Morgan. Having been founded by an
American merchant in 1838, J.S. Morgan joined Barings as one of the City‘s most reputable merchant
banking houses. Its core business became the management of government loans (to Continental Europe, the
USA and Latin America) and of corporate loans (especially in the US railway sector). After WWI, it
pioneered the increasing involvement of merchant banks with domestic industy. What set J.S. Morgan aside
was its Anglo-American character (Burk, 1990). In the negotiations with Deutsche Bank, J.S. Morgan was
represented by Sir Clinton Dawkins (1859-1905) (Earle, 1924, pp. 186, 209 n. 11; Francis, 1973, pp. 170,
174, 176, 177-178), who was an example of a former civil servant joining the financial sector: Before
becoming partner at the bank, Dawkins had been an official in charge of the financial affairs of British-
occupied Egypt and then British India (Burk, 1990, pp. 57-58; Cassis, 1994, pp. 39-40). Morgan is another of
the City institution that frequently appear in Cain’s and Hopkins’s narrative. They emphasize that its ability to
do much business while having limited capital resources on its own was typical for gentlemanly capitalism
(Cain and Hopkins, 1993a, pp. 126, 129, 129 n. 95, 464; Cain and Hopkins 1993b, p. 17).
The third within the trio was Sir Ernest Cassel (1852-1921). Of German (and Jewish) origins,
Cassel was a self-made City financier, whose activities included organizing investments in Great Britain
(banking, armaments, underground line), Austria (banking), Sweden (iron and steel, railways), the USA
(railways, copper), Mexico (railways, government loans), South America (government loans), Morocco
(banking), Egypt (the first Asswan dam, sugar, banking, government loan), the Ottoman Empire (banking,
oil), Russia (government loans) and China (government loan). He was friends with the Prince of Wales and
later King Edward VII, whose financial affairs he managed, and also acted as an informal advisor to the
Treasury. While being neither partner nor director in any bank, Cassel formed around himself an informal
group of business associates representing his interests (Allfrey, 2013, pp. 139-152, 160-166, 169-170, 173-
179, 183-204, 212, 214-219, 221-227, 232-237, 240-241, 243-269, 271-272, 275-318; Cassis, 1994, pp. 38-
39, 181; Grunwald, 1969; Thane, 1986). For Cain and Hopkins, Cassel is an example of a noveau riche
climbing to the top of the gentlemanly elite through personal connections and supporting British interests in
risky ventures shunned by the more established banking houses (Cain and Hopkins, 1993a, pp. 130, 407-408,
408 n. 44).
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The first two members of this trio belonged to the category of merchant banks, which can be
juxtaposed to the other main segment of the Citys financial sector, the joint-stock banks. While the latter held
deposits and handed out short-term loans, the merchant banks specialized upon acceptance of bills of
exchange, the issue of foreign loans, and some direct investments. They were owned and to a large extent
managed by members of their founding families (Cassis, 1994, pp. 5, 32, 39, 73, 148).
In line with Cain’s and Hopkins’s interpretation, Whitehall and City worked hand in hand. After
having been approached by von Gwinner concerning British participation in the BRC, Dawkins of Morgans
in turn contacted Lansdowne. After the Foreign Secretary had given the green light for the venture, Dawkins
teamed up with Cassel and, on Lansdowne’s request, Revelstoke of Barings, who subsequently led the
negotiations with von Gwinner (Allfrey, 2013, pp. 248-249; Cottrell, 2016, pp. 82, 87; Earle, 1924, p. 184;
Francis, 1973, pp. 170, 173, 176-177; Wolf, 1973, p. 40). Revelstokes inclusion seems to have been in order
to compensate for perceived liabilities of the other two participants: Cassel was a former Prussian citizen; and
Dawkinss banking house was in the process of organizing a transatlantic shipping combine that was frowned
upon by many politicians and press organs as an American takeover of British shipping lines (Burk, 1990, pp.
105-111; Cottrell, 2016, pp. 80, 85; Grunwald, 1969, p. 143 n. 120; Wolf, 1973, p. 40). Indeed, Revelstoke
was directly asked by Lansdowne to involve Barings in the venture. As Lansdowne turned down
Revelstokes request for an official guarantee of the railway bonds, both men decided to further broaden the
venture’s financial base by inviting Rothschilds to join. The latter, however, declined to become involved. The
subsequent negotiations between the British trio, overseen by Lansdowne, and Deutsche Bank achieved a
draft that envisaged British capital interests to join the Germans and the French in the BRC (Allfrey, 2016, p.
249; Cottrell, 2016, pp. 83-89, 91; Francis, 1973, pp. 169-171; Wolf, 1973, p. 41).
Alas for further negotiations, British public opinion had become hostile to Germany, among other
things because of her naval ambitions and her stance during the Boer War. Now, the bulk of the press -
including the prestigious Times - unleashed a torrent of negative reporting about the scheme, seconded by
parliamentary criticism and letters to the editors by business representatives equally hostile. The critics argued
that the Baghdad railway was a German project harmful to British interests and thus did not deserve any
financial support (Cottrell, 2016, pp. 89-96; Earle, 1924, pp. 179-183; Özyüksel, 2016, pp. 94-101; Wolf,
1973, pp. 42-43). Let us now also have a look at a counter-trio of vested business interests which also opposed
the attempts of the financiers. All of them were involved in transport and thus rightfully considered the
Baghdad railway a competitor.
The first member of the counter-trio was the original pioneer of Ottoman railways: the Smyrna
Aidin Railway Company, whose interests found in the Conservative MP Gibson Bowles an enthusiastic
backer in the House of Commons (Earle, 1924, pp. 189-190; Özksel, 2016, pp. 94-95, 105). In the 1914
agreement with the BRC (see below) it was represented by its chairman David Plunket aka Lord Rathmore
(1838-1919) (Earle, 1924, p. 260; McLean, 1976a, p. 524). The second part of the anti-Baghdad railway front
in 1903 was the Euphrates and Tigris Navigation Company, commonly known as Lynch Bros. It had been
providing steamboat services on the Mesopotamian rivers since 1831 and, despite competition from a state-
owned Ottoman line since 1881, maintained a dominant position in the business there (Earle, 1924, pp. 190-
191; Özyüksel, 2016, pp. 88, 97, 103-104; Wolf, 1973, p. 23 n. 22). The third member of the anti-German trio
were the shipping interests. Foremost among them was Thomas Sutherland (1834-1922) of the Peninsular
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and Oriental Steam Navigation Company (P&O). That company had been connecting the Mediteranean with
India since the 1840s (Earle, 1924, pp. 191-193; Özksel, 2016, pp. 99, 105).
In this context, some thought was also given to the interests of British manufacturing. The shipping
representatives claimed that increased Ottoman customs duties used to finance the project would harm British
commerce, among which textile exports were prominent. Against this, it could be argued that the harmful
effect of the customs would also have hit Britain’s competitors and would have been offset by a greater
market provided by the railroad. The latter part of the argument was indeed advanced by the British
ambassador in İstanbul while Balfour stressed the opportunities that a participation in the Baghdad railway
would bring to British industry. In 1904-05, however, the Liverpool and Blackburn Chambers of Commerce
argued that German control of the Baghdad-Persian Gulf section would be inimical to British commercial
interests (Earle, 1924, pp. 192-193; Francis, 1973, p. 178; Kumar, 1962, pp. 73-74; Özyüksel, 2016, p. 105). It
was different with construction, as Deutsche Bank was willing to give contracts to British companies. One
potential contractor whom the financiers had in mind in 1903 was John Aird, (Cottrell, 2016, p. 90; Mejcher,
1975, p. 458), with whom Cassel had previously cooperated over the Asswan dam (Allfrey, 2013, p. 184;
Grunwald, 1969, p. 135).
Among the politicians, a crucial antagonist of British participation in the BRC was Colonial
Secretary Chamberlain, who was about to launch his crusade for Tariff Reform (1903-1906), which looms
large in Cains and Hopkins’s narrative (Cain and Hopkins, 1993a, pp. 209-221). Only four years earlier,
Chamberlain had viewed the Baghdad railway project with equanimity. Now, he became its most vigorous
opponent in the cabinet and ultimately forced the Prime Minister to back down on this issue. Besides scoring
points with the press and against his intra-party rival Balfour, Chamberlain’s stance was in line with his
newly-found protectionist agenda, which was directed against continental powers and throve upon increasing
Germanophobia (Allfrey, 2013, p. 250; Cottrell, 2016, p. 90; Earle, 1924, pp. 67, 185; Francis, 1973, pp. 172-
173). It should be noted that this was not the first time that Chamberlain opposed a multinational venture.
Already the year before, he had been a vociferous critic of the Morgan-led transatlantic shipping combine
(Burk, 1990, pp. 108-109).
As a result of these developments, the trio of financiers was presented with an extremely lukewarm
official statement by the British government towards the participation issue. Dawkins and Cassel persuaded
Revelstoke to refuse conveying this statement to their German negotiation partners. The three were not legally
obliged to withdraw from the scheme but did so in view of the presss hostility combined with the absence of
unambivalent government support. Dawkins took the matter rather badly. Claiming that he had never been
keen on the whole scheme in the first place and that he and Cassel merely acted as the government’s agents,
Dawkins blamed the Balfour cabinet for having given in to Chamberlain and to a vituperative press campaign
possibly instigated by Russia. Revelstoke voiced similar complaints. The ill-feeling was mutual as
Lansdowne blamed the financiers for having scuttled the project out of fear of the press (Allfrey, 2013, pp.
250-251; Burk, 1990, p. 124; Cottrell, 2016, pp. 94-95; Earle, 1924, pp. 186-187, 209-210 n. 11; Francis,
1973, pp. 173-174, 177-178; Grunwald, 1969, p. 144; Wolf, 1973, p. 44; Ziegler, 1988, p. 317). Dawkinss
lamentations provide supporting evidence for Cains and Hopkinss claim that the gentlemanly capitalists
were cool towards investment opportunities in the Ottoman Empire and had to be dragged in by Whitehall.
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Years of Deadlock
The domestic dispute over the Baghdad railway had been preceeded by one over the Anglo-
German blockade of Venezuela (1902-03). In very much the same vein as in the case of the Baghdad railway,
widespread opposition including a press campaign had forced the Balfour government to cancel its
cooperation with Germany over Venezuela. Events like these were symptoms of a larger shift of British
official and public opinion towards considering Germany, rather than France and Russia, as the main
antagonist. Although Balfour and Landsdowne still strove for good relations with Germany, others in the
cabinet (including now Chamberlain) tended to be antagonistic towards the new rival. That antagonistic
position was shared by Lansdownes Liberal successor Grey as well as by many of his high-lelvel staff in the
FO. While the British and the French came to a rapprochement in 1904 and subsequently cooperated over
Morocco, Great Britain and Germany were drifting more and more apart (Kennedy, 1987, pp. 251-288; Rose,
2011, pp. 279-300, 312-319, 330-341, 347-385). It is thus not surprising that the Baghdad railway remained a
bone of contention. Immediately after the breakdown of the negotiations between the financial trio and
Deutsche Bank, Lansdowne set the tune by stating in the House of Lords that Great Britain would strongly
oppose the establishment of a naval base in the Persian Gulf by any foreign power. However, this statement
was not directly aimed at the Baghdad railway but, probably, rather at Russia (Earle, 1924, pp. 197, 212 n. 25;
Rose, 2011, pp. 252-253).
In 1905, the Balfour administration first considered holding talks with Berlin over the Baghdad
railway issue but then dropped this idea out of concern for public opinion. Instead, it adopted a negative
attitude towards Deutsche Bank’s continuing negotiations with British financial circles and prohibited the
British co-chairman of the PDA to accept the offer of a seat on the BRC’s board of directors. In retaliation, the
German diplomats encouraged the Ottomans to reject an additional concession for the Smyrna Aidin Railway
Company because it would allegedly violate the rights of the ARC. In the same year, the shipping magnate
James Mackay expressed interest in building a railroad between Baghdad and Basra. Although von Gwinner
showed his readiness for an agreement, nothing came out of this at that stage. Then, the BRC bought the
previously Anglo-French Mersin-Adana railway in 1906. This left the İzmir-Aydın line as the remaining
British railway in the Asian parts of the Ottoman Empire. In 1907, the Germans suspected that Cassel was
secretly trying to acquire a majority of the ARC’s shares. This assumed danger was countered by getting for
the ARC over the opposition of the British ambassador a concession for irrigating the Konya plain and for this
purpose doubling the company’s capital stock (Earle, 1924, p. 109; Kennedy, 1987, p. 278; Özksel, 2016,
pp. 109-110, 112; Wolf, 1973, pp. 48-52).
In the years following the 1903 debacle, high-level officials repeatedly emphasized that an
extension of the Baghdad railway to the Persian Gulf would negatively affect British political, strategic, and
economic interests. In addition, the issue became entangled with Britain’s new foreign policy orientations.
Throughout 1905-07, under Lansdowne and his successor Grey, France and then also Russia were being
briefed on British moves concerning the Baghdad railway (Bilgin, 2004, p. 121; Kumar, 1962, pp. 75-78;
Özyüksel, 2016, pp. 110, 113-115; Wolf, 1973, pp. 70-71, 73, 75-76). Then, in 1907, Great Britain buried its
long rivalry with Russia through an agreement, thereby establishing an informal Anglo-French-Russian Triple
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Entente confronting Germany and Austria-Hungary. It thus became a key point of British foreign policy not to
do anything which might endanger these new friendships. At the same time, the British-German naval race
started to heat up (Kennedy, 1987, pp. 441-452; Rose, 2011, pp. 429-459, 475-501, 509-557).
These new alignments inevitably affected the Baghdad railway issue as well: When Emperor
Wilhelm II visited Great Britain in the same year, he expressed to his hosts his willingness to accept British
control over the gates to the Persian Gulf. But there was no agreement on another point: Following the model
of the First Morocco Crisis, Grey wanted to involve the whole Triple Entente into the talks but this procedure
was not acceptable to the German government. A further complication was that the Baghdad railway issue
became connected with the naval race between both powers: While Grey wanted an agreement on the
Baghdad railway as precondition for one about the naval issue, the Germans preferred to use the railway issue
as bargaining chip for better conditions in such a naval agreement (Earle, 1924, p. 198; Mejcher, 1975, pp.
473-474; Özksel, 2016, pp. 116-118; Wolf, 1973, pp. 74-78, 89).
In its negotiations with the Germans and the Ottomans throughout these years, Great Britain had
one ace in the game. The Ottomans were keen on increasing their customs dues, the more so as this step
would have provided additional funds for financing the Baghdad railway. To do this, however, they needed
the approval of the great powers. Consequently, the British used their option to veto increased duties in order
to put pressure upon Ottomans and Germans with respect to the Baghdad railway issue (Bilgin, 2004, p. 127;
Earle, 1924, pp. 95-96, 111, 226-227, 228, 252, 256, 262; Heller, 2014, pp. 32, 44, 45, 46-47; McMurray,
2001, pp. 58-59; Özyüksel, 2016, pp. 113, 125, 147, 152, 155, 176, 184, 190; Wolf, 1973, pp. 50-51, 57, 88).
On the eve of the 1908 revolution in the Ottoman Empire, the FO did not have much hope for more
extensive British investments there as long as it was ruled by Abdülhamit (Hamilton, 1975, p. 59). The
constitutional regime that came to power through this revolution was initially very positively inclined towards
Great Britain. There were even voices that proposed taking the Baghdad railway concession out of German
hands and transferring it to the British (McMeekin, 2011, p. 77). But the momentum for a new page in Anglo-
Ottoman relations was not maintained. The British soon became disappointed with the increasingly autocratic
and perceived nationalist-cum-Pan-Islamic’ tendencies of the dominant Ottoman party, the Committee of
Union and Progress. Furthermore, both the FO in London and the embassy in İstanbul had their fair share of
officials with anti-Ottoman inclinations. An additional, and perhaps crucial, factor was that the British gave
priority to their new friendship with Russia, even at the expense of their relations with the Ottomans. Thus,
several Ottoman offers for a formal alliance were rebuffed (Heller, 2014). Still, there was a renewed drive to
increase Britains economic presence in the Ottoman Empire. In 1909-10, the FO pressed for a railway
concession between Baghdad and the Persian Gulf. The alternative would be a British participation in the
Baghdad railway under the condition of full control over the Baghdad-Basra section. Ottoman
counterproposals that they would construct the Baghdad-Basra railway themselves were only guardedly
accepted (Earle, 1924, pp. 226-227; Heller, 2014, pp. 45-48; Özyüksel, 2016, pp. 147-149, 154-156, 158;
Wolf, 1973, pp. 56-60).
Another expression of this renewed drive was the National Bank of Turkey (NBT). Despite its
name, the NTB was almost completely controlled by British capital, namely Cassel, Revelstoke and
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Henderson (another financier). There were some minor Ottoman shareholders, including finance minister
Mehmet Cavit. The NBT received the FOs blessing as a potential instrument to increase British influence in
the Ottoman Empire and was consequently favoured over those of competing British groups. Nevertheless,
the FO failed to give support whenever the NBT’s activities threatened to contradict larger British geopolitical
concerns, especially the rapprochements with France and Russia (Allfrey, 2013, pp. 254-266, 298-299;
Burman, 2009; Conlin, 2016; Kent, 1975; McLean 1976b, pp. 294-297).
Having gained a foothold in the Ottoman Empire through the NBT, Cassel developed plans to lease
the Haifa-Damascus railway, extending it to Baghdad and adding a navigatory link from there to Basra, all
this accompanied by large-scale irrigation schemes. While incompatible with French railway interests in
Syria, the project envisaged a share for German capital. This updated version of the Rechnitzer scheme was
seriously contemplated by the FO, except for its head, Grey. Cassel finally abandoned the scheme in 1911 in
order to facilitate a British participation in the Baghdad-Basra line (Allfrey, 2013, pp. 257-258).
In 1909-10, Cassel pursued another round of negotiations with von Gwinner concerning a British
participation in the Baghdad railway, thereby keeping in touch with the FO. There was agreement that the
Baghdad to Basra section of the railway should be built by a multinational company separate from the BRC;
the bone of contention remained whether British capital would hold a majority or just half of that companys
shares. While the NBT was inclined to accept Deutsche Banks proposals, the FO was not. Both the British
and German government reserved for themselves the right to refuse any agreement between Cassel and von
Gwinner. In addition, the FO stressed that such an agreement also needed to be acceptable to France and
Russia. In turn, the German government wanted the Baghdad railway agreement to be part of a general
Anglo-German political settlement, a stance that was not acceptable to the FO as it might cause a rift within
the Triple Entente (Earle, 1924, pp. 221, 227, 252; Heller, 2014, pp. 46, 47; Özksel, 2016, pp. 151-154;
Wolf, 1973, pp. 58, 59 n. 52, 78-81).
When the Ottomans negotiated with the French over a loan in 1910, the NBT was believed to be
potentially an alternative source. Indeed, Cassel toyed with the idea of providing such a loan through a
consortium consisting of the NBT, the German Warburg bank, and U.S. financial circles or, alternatively, as a
joint venture of the NBT and Deutsche Bank. Nevertheless, Cassels willingness to step in was heavily
circumscribed - the more so as he was informed by the FO that, in view of the Anglo-French entente, it would
not welcome such an action. When the Ottomans failed to come to an agreement with the French, the
Germans were only too happy to provide the loan instead. The Baghdad railway clearly left its mark on this
episode: the FO feared that a loan to the Ottomans would benefit the building of the Baghdad railway. It thus
proposed to the French that both governments would discourage financiers in London and Paris from offering
a loan to the Ottomans unless the Baghdad railway issue was settled in a satisfactory way. Furthermore, the
FO bluntly told Ottoman Finance Minister Cavit that the British government discouraged a loan because the
planned railway was a threat to British trade in Mesopotamia. Putting the same point in more polite terms,
Cassel advised Cavit that giving the British control over the final section of the railway would improve the
chances of getting a loan from a City source (Allfrey, 2013, pp. 159-164; Bilgin, 2004, p. 123; Burman, 2009,
pp. 229-231; Conlin, 2016, pp. 531-534; Earle, 1924, p. 225; Grunwald, 1969, p. 146; Kent, 1975, pp. 374-
380).
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It was a similar story with the NBTs attempt to get a railway concession in northeastern Anatolia in
1911, preferably in partnership with French circles and in competition against a French-Russian combine. The
FO refused to give active support to this project because it would step upon the toes of the Russians (Kent,
1975, pp. 384-385). The following year, the NBT planned to bring together a consortium for Mesopotamian
river transport with Deutsche Bank, a Belgian group, and, of all the people, Lynch. This combination was
rejected by the FO, not least because it might upset the Russians. That Lynch was now cozying up with
Deutsche Bank cost him official support (Heller, 2014, pp. 92-93, 106 n. 93).
The NBT also became involved in the potential oil resources of the Mosul and Baghdad provinces.
The BRC held a preliminary concession for the exploration and exploitation of these resources between 1904
and 1907. In 1911-12, renewed talks between Cassel and von Gwinner led to the combination of NBT,
Deutsche Bank, Royal Dutch-Shell, and the Ottoman financier Gulbenkian in the shape of the Turkish
Petroleum Company (TPC). The TPC met the competition of another British interest, the Anglo-Persian Oil
Company (APOC, today BP), which was openly favoured by the FO. Consequently, the NBT and Cassel
sold their shares in the TPC in 1914 (Allfrey, 2013, p. 298; Conlin, 2016, p. 537; Ediger and Bowlus, 2020,
pp. 201-203; Grunwald, 1969, p. 147; Heller, 2014, pp. 91-92; Kent, 1975, pp. 385-386; Özyüksel, 2016, pp.
210, 212-214).
In their brief discussion of the NBT, Cain and Hopkins argue that the British government actually
hampered the bank through subordinating commercial concerns to political ones. For them, this case
demonstrates the difficulties of the British governments attempts to instrumentalize financial circles for its
own agenda in the Middle East (Cain and Hopkins, 1993a, p. 408).
The British-German-Ottoman Agreements on the Baghdad Railway
If diplomatic considerations made a solution of the Baghdad railway issue difficult, they also
provided the eventual stimulus for this solution. The game changer here was the German-Russian deal of
1910-11. Despite British insistence that nothing would be agreed over the head of Russia, the latter had been
distrustful of the Cassel-von Gwinner negotiations and consequently decided to approach Germany. The
British, in turn, became upset as the deal seemed to imply a breach of the Triple Entente. In any case, it now
freed the French to make their own arrangements with the Ottomans without having to fear alienating their
ally. It can be assumed that the same factor also helped to bring about the Anglo-Ottoman and Anglo-German
agreements of 1913-14 (Earle, 1924, pp. 243-244; Kiling, 2002, pp. 176-177; Özyüksel, 2016, pp. 170-
172, 174-175; Wolf, 1973, pp. 83-86).
The last agreement was also a result of the rapprochement of Great Britain and Germany during the
interval between the Second Morocco Crisis and World War I (1911-14). Putting their controversy over the
naval race on ice, both powers cooperated on a number of other issues. Thus, the emerging deal on the
Baghdad railway was accompanied by Anglo-German collaboration in de-escalating international tensions in
the wake of the Balkan Wars and by an agreement on how to potentially divide Portugals African colonies
between themselves. But while trying to improve their bilateral relations, both powers simultanously had to be
careful not to appear to be deserting their respective allies (Kennedy, 1987, pp. 452-456; Kiling, 2002, pp.
64-71, 95-108, 224-235; Lynn-Jones, 1986, pp. 126-148; Rüger, 2011, pp. 608-609).
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Throughout 1911, there were negotiations between the FO and Ottoman diplomats, interrupted by
the Second Morocco Crisis and the outbreak of the Ottoman-Italian War. There were again critical press
articles as well as a public campaign (including the unavoidable Lynch) warning the government of being too
soft on the issue. Despite that, negotiations resumed in mid-1912 and, after a further interruption due to the
First Balkan War, finally succeeded. The same went for the parallel Anglo-German talks (Bilgin, 2004, pp.
124-127; Earle, 1924, pp. 227-228, 252-255; Heller, 2014, pp. 49-52, 60-62, 93-95; Özyüksel, 2016, pp. 180-
186, 187-191, 203-204; Wolf, 1973, pp. 83-86, 90-94).
In the agreement of 1913, the Ottomans recognized Great Britain’s paramountcy in the Persian
Gulf and especially over Kuwait, even though the sheikhdom technically remained a part of the Ottoman
Empire. An Anglo-Ottoman commission was to regulate shipping at the Shatt al-Arab. Furthermore,
supplementing the already existing British domination of steamboat transportation in what is today Iraq, a
new Ottoman River Navigation Company jointly controlled by British and Ottoman interests but headed by
the British shipping magnate Lord Inchcape was given a concession for steam navigation on the Tigris and
Euphrates. Finally, the British were guaranteed that no discriminatory rates would be applied against them by
the Baghdad railway. In return for these privileges, the British made some substantial concessions: They
accepted that the BRC would build their tracks up to Basra after all, as long as two British citizens would be
admitted to the company’s board of directors. Furthermore, the British now permitted the increase of Ottoman
customs duties.
A number of subsequent Anglo-German agreements of 1913-14 confirmed the Anglo-Ottoman
convention while adding some more points. In particular, the Germans confirmed that they would not
construct any railway or harbour facilities beyond Basra without British permission. The BRC would transfer
all rights for terminal and port construction at Baghdad and Basra to a new German-dominated ports
company, in which British shipping interests (Inchcape and Lynch) would hold a minority share; in return, the
BRC was given a minority share in the British-dominated Ottoman River Navigation Company, of which
Lynch Bros. were also to become a part. The British-controlled İzmir-Ayn railway was through additional
railtrack to be connected to the Baghdad railway network and given navigation rights on some Anatolian
lakes.
Parallel with settling the railway and river navigation issues, the British and Germans also divided
the Ottoman Empires potential oil resources between each other. It was now agreed to combine their interests
under the umbrella of the TPC for the purpose of exploiting the oil of the Mosul and Baghdad provinces. Half
of the shares were to be held by APOC, one quarter was given to Royal Dutch-Shell, and the remaining
quarter to Deutsche Bank. As for the oil of Basra province (as well as the Persian oil), the Germans
recognized the claims of APOC there (Earle, 1924, pp. 255-265; Özksel, 2016, pp. 187-196, 204-209, 214-
215; Wolf, 1973, pp. 91-96).
On the British side, the big winner of these agreements was James Mackay aka Lord Inchcape
(1852-1932). Of Scottish origins, he had worked his way up from the position of clerk through high-level
managerial posts in India to become the London-based chairman of the British India Steam Navigation
Company (BI) in the 1890s. The BI was the leading shipping line in the Indian Ocean. In 1914, Inchcape
merged the BI with P&O. The businesses he invested in or was involved with included Australasian shipping,
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Indian coal mines, tea plantations and textile mills, and British banks. Inchcape was a member of a number of
official bodies during his stay in India. After his move to London, he belonged to a multitude of departmental
committees. A major exercise in business diplomacy was the trade treaty Inchcape negotiated with China in
1902 (Jones, 1989). Last but not least, he was also a director of the APOC (Earle, 1924, p. 259).
This was the stuff out of which a gentlemanly capitalist was made, and Cain and Hopkins duly
mention Inchcape, if only in connection with British India (Cain and Hopkins, 1993a, pp. 340-341).
Furthermore, these agreements were hammered out by Ottoman diplomats, by both diplomats and Deutsche
Bank/ARC/BRC on the German side and by the FO as well as Inchcape and the other concerned business
interests on the British side (Earle, 1924, pp. 254-255, 259-262; Heller, 2014, pp. 93-95, 124, 126-127; Jones,
1989, pp. 84-85; McLean, 1976a; Özyüksel, 2016, pp. 190-191, 194, 204-207, 214; Wolf, 1973, pp. 91, 93-
94). This fits very well into Cain’s and Hopkins’s assertion of a close collaboration between the City and
Whitehall.
Taking Stock
The case of the British approach towards the Baghdad railway in many respects confirms the
interpretation of British imperialism as advanced by Cain and Hopkins, although it also suggests some fine
tuning. First, let us start with their assertion that during the decades preceeding World War I, the formal and
informal British Empire was not declining but remained a vigorous and expanding force. If we narrow this
issue down to the transport facilities of the Asian regions of the Ottoman Empire, the British presence
contracted during most of the period discussed here. However, the British encounter with the Baghdad
railway was not a rearguard action. On the contrary, had the 1913-14 agreements been implemented, the
British presence in the Ottoman transport sector would have substantially increased. Most importantly for the
future was a by-product of the railway construction competition: through the TPC, the British laid claim to the
lions share of Mesopotamian oil. In this instance, Cain and Hopkins are indeed right in claiming that, on the
eve of World War I, the British Empire was alive and well.
Second, the same verdict may be issued with respect to Cain’s and Hopkinss core point: the
dominance of the Southeast England-based financial and service elites over Britain’s imperial activities,
especially if compared to the provincial manufacturers. Those British business interested in the Baghdad
railway issue, i.e. banks as well as railroad and shipping companies, would qualify as gentlemanly capitalists
while industrial interests did not play much of a role. Indeed, some prominent businessmen discussed by Cain
and Hopkins (Caillard, Revelstoke, Cassel, Inchcape) also loom large in the narrative presented here.
However, Cain’s and Hopkins‘s account very much tends to portray the finance/service nexus as a coherent
group. But as far as the Baghdad railway saga is concerned, British businessmen were divided into two
camps: the banking interests and the transport interests. Having contributed in blocking the way for the first
group in 1903, the second group gained from the Anglo-Ottoman and Anglo-German agreements in 1913-14.
This is a configuration which is not accounted for by Cain and Hopkins and which indicates a more fractious
character of the gentlemanly capitalist stratum than their interpretation allows.
Third, Cain and Hopkins stress that the gentlemanly capitalists of the City shared the same social
background and values with their fellow gentlemen working in Whitehall or acting as diplomats and
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proconsuls abroad. Geostrategic considerations made Whitehall try to encourage nilly-willy gentlemanly
capitalists to invest in the Middle East. In the case of the Baghdad railway issue, strategic motives indeed
topped purely economic ones as far as the FO was concerned. It is however doubtful that those British
business interests involved with the Baghdad railway issue were really as unenthusiastic about investing in the
Ottoman Empire as Cain and Hopkins indicate. Neither Rechnitzer nor Inchcape needed much prodding to
enter business in the Ottoman Empire; the difference was that the latter got official support and the former did
not. The closest supporting evidence for Cains and Hopkins’s interpretation of the City being
instrumentalized by Whitehall in the Middle East is the case of the financial trio of Barings, Morgans and
Cassel in 1903. But, as especially the subsequent experiences of the latter show, the FOs role consisted in
holding them back rather than pushing them forward. Thus, while gentlemanly capitalists and government
officials frequently marched side by side, they did not always do so and thus should be seen as allied but
separate forces.
Cosmopolitanism Meets Patriotism
Cain and Hopkins emphasize the character of the City as both British and cosmopolitan. They see
this duality best represented in the case of the Jewish merchant bankers, who combined imperial loyalties with
global personal and economic networks (Cain and Hopkins, 1993a, p. 127). Indeed, ῾cosmopolitan(ism)’ and
international(ist/ism)’ are among the most frequently used terms in the two books. In the case of the British
involvement with the Baghdad railway, there were certainly important instances of a ‚cosmopolitan‘
approach. But there were also tendencies which can be characterized as anti-cosmopolitan and which,
crucia