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 Ruble imperialism
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Russo-Persian commercial relations, 1828-1914
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Title: Russo-Persian commercial relations, 1828-1914
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Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Preface
        Preface 1
        Preface 2
    Table of Contents
        Table of Contents 1
        Table of Contents 2
    Business conditions and treaty relations
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
    Economics and politics in the mid-century to 1890
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
    Ruble imperialism
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
        Page 55
        Page 56
        Page 57
        Page 58
        Page 59
        Page 60
        Page 61
        Page 62
        Page 63
        Page 64
        Page 65
        Page 66
        Page 67
        Page 68
        Page 69
        Page 70
        Page 71
        Page 72
        Page 73
        Page 74
        Page 75
        Page 76
        Page 77
        Page 78
        Page 79
        Page 80
    Back Matter
        Back Matter
Full Text




















RUSSO-PERSIAN COMMERCIAL
RELATIONS, 1828-1914


by Marvin L. Entner


University of Florida Monographs
SOCIAL SCIENCES
No. 28, Fall 1965
UNIVERSITY OF FLORIDA PRESS / GAINESVILLE, FLORIDA




17 72-
oY.- -/ J.


EDITORIAL COMMITTEE


Social Sciences Monographs


ARTHUR W. THOMPSON, Chairman
Professor of History

RALPH H. BLODGETT
Professor of Economics

ARTHUR W. COMBS
Professor of Education

MANNING J. DAUER
Professor of Political Science

T. LYNN SMITH
Professor of Sociology

WILSE B. WEBB
Professor of Psychology


COPYRIGHT @ 1965 BY THE BOARD OF
COMMISSIONERS OF STATE INSTITUTIONS
OF FLORIDA

LIBRARY OF CONGRESS
CATALOG CARD No. 65-64001

PRINTED BY THE DOUGLAS PRINTING
COMPANY, INC., JACKSONVILLE, FLORIDA





















PREFACE



This is no econometric study. Though the data
for Russian trade are a long statistical series
undoubtedly susceptible of time series analysis, that
segment of Russia's trade occasionally here ex-
amined is not important enough to warrant the
expense and effort of constructing sophisticated ana-
lytic tools, tools that would not be useful for the
purposes of this monograph. The comparisons made
here are crude--all that is required is rough
estimation.
What then is this study? I attempt a once-over-
lightly synthesis of about ninety years of data that
have never been put together and analyzed sequen-
tially in both their economic and political contexts.
Studies of segments of the period are available,
some of them scholarly, most notably for the years
1820-1850 (Rozhkova), 1880-1895 (Tomar), and
1904-1914 (Ter-Gukasov, Sobotsinskii, Sventitskii,
Ostapenko, and others). These I have used, linked
together with excursions into the sources, and tested
by reference to the sources and to studies of particu-
lar problems. The bulk of both source and secondary
material used dates from before World War I. Very
little has been done since-less has been Englished.







RUSSO-PERSIAN COMMERCIAL RELATIONS


This is also the first leg of a long trek I plan to
take along Russia's nineteenth century Asiatic fron-
tiers, analyzing and describing as I move eastward
Tsarist Russia's economic relations with those lands
lying over the border. It is a preliminary testing of
some of the source material available and a trial
balloon to assay potential interest in such studies.
It is also a labor of love, undertaken for no other
reason than a simple, and simple-minded, interest in
the trivia that are the skeleton and flesh of posi-
tivistic economic history.
The fortunate child knows its own father. Brain
children, however, have a difficult time sometimes
tracing their lineages-and their ancestors do not
always desire to acknowledge them. Be that as it
may: The inspiration for this study came from my
friend and respected mentor, George W. Anderson.
Herbert Heaton and L. D. Steefel deepened my
appreciation of history and love of source analysis.
Their stern images drove me to excesses in the
search for documentation-but the reader should
not blame them for my pedantry. Ray Jones, of the
University of Florida Libraries, is to blame for most
of my footnotes-he literally scoured the world to
obtain little-known and less-cared-about works from
the dust of the obscure corners of their loaning
libraries. The McKnight Foundation and the Re-
search Council of the University of Florida provided
funds at crucial points of the research, and the
Graduate School of the University of Florida made
possible the publication of the monograph.
My wife more than anyone has to suffer the trivia
that excite me. I cannot express the depth of my
appreciation.

MARVIN L. ENTNER
GAINESVILLE, FLORIDA
APRIL, 1965






































CONTENTS



1. Business Conditions
and Treaty Relations 1

2. Economics and Politics in
the Mid-Century to 1890 17

3. Ruble Imperialism 39












1. BUSINESS CONDITIONS
AND TREATY RELATIONS



foreigners trading in Persia in the middle years of the nineteenth
century faced such natural, cultural, and legal obstacles that almost
none went there. Fewer Russians did so. Instead, several hundred Rus-
sian Muslims and Armenians, both groups based in the Caucasus, both
using the most elementary techniques, and both at best semi-literate,
carried on what active Russian trade there was. More typically, Persians
went to Russia-and they retained the bulk of Russo-Persian trade until
the twentieth century.
The construction of a caricature will elucidate more specifically why
this was the case, why Russians had a relatively more difficult time, and
what the impediments were. Let us assume that a Moscow merchant has
decided to trade in Persia. He cannot possibly be in earnest, but whether
this is a lark or serious business he travels to Nizhnii Novgorod, a flesh-
pot but also the great emporium for Russo-Asiatic trade and one of the
world's great markets. There, if he is lucky, he persuades an over-
enthusiastic manufacturer's representative to consign goods to him or
let him have them on open account or sight draft (documents against
acceptance); more likely it is he who extends the credit, giving a time
draft (documents against payment) or letter of credit, or paying cash
on delivery or with the order. Any credit he receives is for a term that
runs out before he can sell his potpourri of purchases.
Once he has the merchandise on order, he faces a number of equally
formidable choices. He may consign the goods to a dishonest Armenian
or Russian agent in Persia; but for the sake of a longer tale this latter-
day Sadko himself adventures beyond only one sea to Persia. If, as is
common until the end of the century, he buys his goods on physical in-
spection and not by sample, he has bales, boxes, and bundles in hand
that he must ship down the Volga. Not until the 1870's will railways be
sufficiently developed for him to make use of faster shipment, and in
any event he must use the Caspian water route or rail and caravan
through the Caucasus to the very end of the period here considered.
The Nizhnii Novgorod fair is in late summer; if his carrier on the
Volga lags, the merchandise may arrive at Astrakhan at the very end,
or after the closing, of the May-to-November shipping season. Sadko's
goods suffer through the winter in the open, and four months are lost.
1







RUSSO-PERSIAN COMMERCIAL RELATIONS


If he is really an adventuresome type, Sadko persuades a madcap skip-
per to risk the spreading ice and the great winter storms, the northerlies
of which drive tremendous waves across the Caspian's shallow waters
onto shelving shores: The insurance rate on his goods doubles.
At Astrakhan Sadko learns that he cannot take his goods directly to
Persia; no single ship out of the port carries enough Persia-bound mer-
chandise. He may arrange shipment either to Baku or Astara (Persian
or Russian). From Astara goods go by land into Azerbaijan. Ordinarily
his shipments go to Baku, where bulk is broken, and they may languish
in the open for months before transport to a Persian port. Until the
1860's transport on the Volga will remain disorganized, and freight
service on the Caspian will be irregular, particularly to Persia, until the
1890's.
Sadko and his goods eventually depart Baku. His ship finally arrives
at a Persian port; there it dances on the surf just off the shallow shore
for several hours, perhaps several days, then turns back to Baku to wait
for better weather. Days later it returns; the seas are relatively quiet,
the ship edges as far in as possible, then in an orgy of carelessness the
crew drops the cargo over the sides into the bottoms of coastal lighters
that bound over the surf to the port-Astara, Enzeli, Meshed-i-Sar, or
Bandar Gez-called ports only in default of anything better.
Enzeli-Pir-i-Bazaar-Resht is the best port and the major transship-
ment point to the Tehran region or along the Caspian littoral. Lighters
carry Sadko's loads to the small town Enzeli. Hence they are hauled
over an abominable road or barged across a lagoon to the tiny Pir-i-
Bazaar, a town whose character gives rise to the obvious pun "c'est
le bazar le plus pire du monde." They then sometimes move on to Resht
to wait further shipment. In any case, bulk breaks at least four times,
Sadko's mangled miscellany risks rot in the miasma that permeates the
unbonded warehouses and the muddy quays until he makes sales or ar-
ranges to ship it with the muleteers or camel drivers who will be prob-
ably the only honest men he encounters in this strange new world.
Meshed-i-Sar, the port of entry for Barfurush, a town of 25,000 to
50,000 that services the eastern Caspian provinces, is, if anything, worse
than Enzeli. Bandar Gez serves Astarabad, around 25,000 inhabitants,
in the same way. Both entrepots connect with the interior by pack trails.
Astarabad is, until the late 1880's, the major transshipment point for
Russian goods risking the Turkoman land pirates infesting the caravan
routes into Khorasan. Facilities at these two points are exceedingly primi-
tive-the open air. In the middle years of the century a government-







BUSINESS CONDITIONS, TREATY RELATIONS


aided Russian trading company attempted to establish a warehouse at
Bandar Gez. The local officials regarded the enterprise as a marketplace
for spies, harassed Russian merchants who attempted to use it, made
sure exorbitant charges were levied at the local caravanserais, and one
suspects may have connived at the fire that destroyed it.1
So Sadko is finally in Persia. His problems before were merely rou-
tine. There may not be a Russian consul present to verify his bills of
lading; he loses time in clearing customs; he soon learns firsthand about
Persian semi-official obstructionism; he has his introduction to the in-
famous pishkash system; and he learns that if he had landed at another
port his customs payments would have been lower, for the customs
farmer there is trying to draw trade. If, as often occurs, he is con-
strained to pay all fees immediately, his capital is drained another 6 or
7 per cent before he even has sales prospects.
Sadko visits Oblomov, the Russian consul, for commercial intelligence,
information about his potential customers, or help in drafting docu-
ments, and finds that the consul is ignorant about commerce and busi-
ness, regards it as demeaning to have to associate with compatriots of a
lower soslovie, and is so caught up in the intrigue of local and interna-
tional politics that he cannot or will not help. If instead the consul is
Rutersdorff-Ippolitov, an active Pan-Slav type, and does actively aid his
country's merchants and promote their trade, the Russian minister at
Tehran may regard him as an embarrassment to efficient conduct of
high policy, may resent him for what the minister regards as unwar-
ranted interference with, or pressure on, local Persian politicos, and
may rap his knuckles for not being Oblomov. Sadko soon sees, too, that
the government officials acting on behalf of Russian commerce are com-
peting with each other and maintaining mutual ignorance about their
policies and programs, while St. Petersburg is failing to coordinate their
activities or to discipline them.
Receiving little help from Russian officials, Sadko turns to the Rus-
sian trading houses to obtain short-term credits, perhaps to sell his goods
or draw bills of exchange or letters of credit. There are none. Both the
Persian and Russian governments distrust such enterprises. There re-
main to him the tender mercies of the British and Greek houses. They
are most difficult. Because they have found Russians untrustworthy in
the past, they distrust him. They offer high discount rates, for bills
drawn in rubles or on Russian banks fluctuate wildly. Because of Rus-
1. For this point see G. Mel'gunov, "0 iuzhnom berege Kaspiiskogo moria,"
Zapiski Akademii Nauk, III (1863), prilozhenie 5, 73-77.







RUSSO-PERSIAN COMMERCIAL RELATIONS


sia's ordinarily favorable merchandise balance with Britain, they can
usually sell such paper in the West, but the length of time involved
means that the discount rate increases.
If he tries to sell to the European houses, tries to persuade them to
take the merchandise on consignment (by now the flush of enthusiasm
has gone), or tries to turn it over to a trading house on open account,
even though it is he who extends the credit, he finds the terms very
hard. They simply do not care. Their sources of supply are in Europe
whence they receive better goods at more than competitive prices.2
Sadko cannot compete. He is a merchant-venturer battling against
brummagem goods. His country's industrialization lags too far behind
that of western Europe. Though Russia is closer to Persia than the rest
of Europe, distance in economic terms is a matter of expense and time;
in these terms the Central Industrial Region and Lodz-Warsaw are
farther from Persia than Manchester or Birmingham, which have
cheaper access to northern Persia (by way of the Black Sea and the
Batum-Tabriz trade route) than Nizhnii Novgorod. He finds also, to
his dismay, that the very goods competing with his are permitted (1821-
31 and 1846-83) to pass through the Caucasus free of Russian duty and
enter Persia on the same basis as his merchandise, except that Persian
officials treat those goods more gingerly in every way because they are
destined for the politically powerful European trading houses.
So, the European houses will not support him. He must fight his own
battles-market or perish. How may he do this? Obviously he cannot
dump all his goods at once with one person, but must enter into relations
with a number of middlemen. This enmeshes him-the business is tan-
gled beyond his wildest or gloomiest dreams. Whom to trust? He is
dealing with Armenians and Caucasian Tatars or small-scale Persian
wholesalers and retailers. To these, the highest act of business statesman-
ship may be a fraudulent bankruptcy, a change of firm name, and a
move to a new city. Entrepreneurship is the sharp deal, the quick kill-
ing; merchandising, the art of invective and haggling.
Yet he must use them, and soon he talks with one Ter-Avvakumianov,
an improbable but not altogether impossible representative of Caucasian
miscegenation. Ter-Avvakumianov and others will sell Sadko's miscel-
lany; the trunks of trade goods, samovars, and glassware, the bales of
cloth and spices, the bars and sheets of iron, copper, and brass will reach
the consumer. Several more middlemen intervene, and potential effective
2. The question of transit trade through Russia and the Caucasus will be dis-
cussed later.
4







BUSINESS CONDITIONS, TREATY RELATIONS


demand may drop. Prices of Sadko's goods to the consumer thus may
rise. Again, they may not. For Ter-Avvakumianov and his compatriots
do not help Sadko out of charity, and less out of patriotism. Their
terms are stringent: They take Sadko's goods at such prices that he sus-
tains a loss. This they offset by permitting him to purchase Persian
merchandise from them. If he buys enough, the gains when he resells
Persian silks, nuts, sweetmeats, cottons (!) and small manufactures at
Baku, Tiflis, or Nizhnii Novgorod will turn loss to profit. Ter-Avvakumi-
anov demands credit for up to six months.
Sadko must either accept or undertake extensive peregrinations him-
self. He prefers the former, but if he chooses the alternative, he finds
that Ter-Avvakumianov was justified. In order to get Persian peasants
or landlords to take their Russian goods, the Caucasian peddlers and
merchants must take a loss; to make this up they extend credit in return
for options to purchase raw materials or semi-manufactures at given
rates and in certain quantities from their customers. Because they are
short of capital, the larger merchandiser or unlucky Sadko must finance
them. In any event, most of the Russian's profits are in the export of
Persian goods to Russia, and he must pass back through all of the bar-
riers he crossed in taking or sending his merchandise to Persia while
transferring Persian goods home.
Sadko returns to Russia just in time for the Nizhnii Novgorod fair.
He sells. He can do it all over-or he can decide, if he turns a profit,
that his talents are too vast to waste on such a business. And, quite cor-
rectly, he uses his increased capital in trade conducted inside Russia.
The Persian trade was for failures, fools, fly-by-nighters, gamblers, or
Caucasians and Persians.3
3. This caricature is based on materials published at various times all the way
through the nineteenth century and into the twentieth. Some of the items used
are: General Andrenin, "0 sostoianii promyshlennosti i torgovli Persii 1884 g.,"
Sbornik geograficheskikh, topograficheskikh i statisticheskikh materialov po Azii,
XXIII (1886), 130-52; L. D. Artamonov, "0 sovremennom polozhenii Khorosana,"
Izvestiia Kavkazskago otdela Rossiiskago geograficheskago obshchestva, X (1898),
no. 2, 55-75; F. A. Bakulin, Ocherki torgovli s Persiei (SPB, 1875); F. A. Baku-
lin, "Ocherk vneshnei torgovli Azerbaidzhana za 1870-71 gg.," Vostochnyi sbornik,
I (1877), 205-66; F. A. Bakulin, "Ocherk russkoi torgovli v Mazanderane i Astera-
bade v 1871 godu," Vostochnyi sbornik, I (1877), 269-327; I. F. Blaremberg,
Statisticheskoe obozrenie Persii v 1841 godu, in Zapiski Imperatorskago russkago
geograficheskago obshchestva, 1853, kn. 7; Inzhener Dunker, "Ob oblegchenii
uslovii torgovli v Persii," Trudy vysochaische uchrezhdannago vserossiiskago
torgovo-promyshlennago s'ezda 1896 g. v Nizhnem Novgorode, IV, vyp. viii, 63-72;
M. P. Fedorov, Sopernichestvo torgovykh interesov na vostoke (SPB, 1903); K. V.
Ivanov, "Zapiska po voprosu ob organizatsii izucheniia Blizhniago Vostoka,"
Materialy po izucheniiu vostoka, I (1909), 63-118; Baron F. Korf, Vospominaniia
5







RUSSO-PERSIAN COMMERCIAL RELATIONS


The Persian trade was also unimportant; let there be no mistake.
However, though a mere trickle of goods and payments, it was closely
bound up with Tsarist Russia's imperial policy in the Middle East and
Central Asia. It was a small stream carefully nurtured for the political
instability it created, the interests favorable to Russia that it built up in
Persia, and the excuse it gave for Russian political pressure on the Land
of the Lion and the Sun.
Thus it was that as a consequence of her victory in the Russo-Persian
War (1826-28) Russia imposed on the defeated power a relatively small
indemnity and a very important treaty, the Treaty of Turkmanchai,
making an effort to push her commerce with Persia by official interven-
tion on behalf of her merchants.
A symbol of Western aggression, Russian expansionism, Persian weak-
ness, British indifference, the greed of merchants, and the capitulatory
regime-the Treaty of Turkmanchai of 1828 and its commercial proto-
col is all of these. Decried by friends of Persia, Persian nationalists, and
enemies of Russia, it is regarded as the basis for Tsarist Russia's com-
mercial as well as political ascendancy in Persia during the nineteenth
century. Agreement on this point seems nearly unanimous. The privi-
leges granted are taken to operate automatically on Russia's behalf and
the literature is redundant with statements that Russian trade with Persia
steadily increased after the treaty's conclusion up to World War I. One
man, for example, argues that the commercial agreement placed Russia
o Persii, 1834-1838 (SPB, 1838); S. Lomnitskii, Persiia i Persy (SPB, 1902);
A. I. Medvedev, Persiia. Voenno-statisticheskoe obozrenie (SPB, 1909); G. Mel'-
gunov; P. Miller, "Russkaia tranzitnaia torgovlia v XIX veka," Russkoe ekonomi-
cheskoe obozrenie, 1903, no. 3, 79-118; 1903, no. 6,66-100; P. I. Ogorodnikov, Na puti
v Persiiu (SPB, 1878); P. I. Ogorodnikov, "Po Persii," Vestnik evropy, VI (1876),
no. 11, 135-78; no. 12, 557-87; P. I. Ogorodnikov, Strana Solntsa (SPB, 1881);
I. Ogranovich, "Poezdka v Persiiu v 1863 g.," Voennyi sbornik, LII, part 9, no.
11, otd. ii, 149-84; no. 12, otd. ii, 353-85; I. A. Ogranovich, "Provintsii Persii
Ardabil'skaia Serabskaia," Zapiski Kavkazskago otdela Rossiiskago geografiches-
kago obshchestva, 1876, kn. 10, no. 1, 141-235; F. A. Rasinskii, "Nashi torgovye
snosheniia s Persiei," Russkoe ekonomicheskoe obozrenie, 1903, no. 11, 81-111;
P. A. Rittikh, Otchet o poezdke v Persiiu i Persidskii Beludzhistan v 1900 g.
(SPB, 1901); P. A. Rittikh, Politiko-statisticheskii ocherk Persii (SPB, 1896);
P. A. Rittikh, Zheznodorozhnyi put' cherez Persiiu (SPB, 1900); P. M. Romanov,
Zheleznodorozhnyi vopros v Persii i mery k razvitiiu russko-persidskoi torgovli
(SPB, 1891); K. N. Smirnov, "Perevozochnye sredstva Persii," Izvestiia shtaba
Kavkazskago voennago okruga, 1909, no. 24, 23-54; L. S. Sobotsinskii, Persiia.
Statistiko-ekonomicheskii ocherk (SPB, 1913); N. K. Zeidlits, "Ocherk iuzhno-
kaspiiskikh portov i torgovli," Russkii vestnik, LXX (August, 1867), 479-521;
A. M. Zolotarev, "Kratkii ocherk sovremennago sostoyaniia Persii," Voennyi sbor-
nik, 1889, no. 3, 191-208; Graf V. A. Zubov, "Obshchee obozrenie torgovli s
Azieiu," Russkii arkhiv, XI (1873), cols. 879-94.
6







BUSINESS CONDITIONS, TREATY RELATIONS


in first place in Persia's trade, but offers as rather astonishing proof
Russo-Persian trade returns between 1890 and 1904.4 One might cite
numerous other examples.
On the face of it, the Commercial Treaty gave Russia great advan-
tages, and it seemed a major break in the barriers to large-scale trade.
But the great expectations did not materialize. Russo-Persian trade re-
turns failed to respond to the more favorable legal conditions for Rus-
sian commerce. In the short run (1828-30) they increased, rising to
more than 27 million assignat rubles in 1830. This increase of volume,
however, resulted from the Russo-Turkish War and the consequent break-
down of European trade with Persia by way of the Caucasus and the
Batum-Tabriz or Trabzon-Tabriz trade routes. Soon Russo-Turkish ten-
sion relaxed; by 1839 the returns tumbled precipitously to less than
half the total of 1830.5 Most disastrous was the decline of Russia's ex-
ports to less than 20 per cent of the total of 1830; imports from Persia
fell by about 29 per cent during the same decade.6
Table 1 reveals the rest of the story. The returns hovered on a plateau
from 1840 to 1871, increasing from 4.2 million to 5.4 million silver
rubles, and not rising to the gold equivalent of 1830 until 1880. After
1871 the totals turned sharply upward, reaching a figure double that of
1840 in 1882 and double that of 1830 in 1890. Fifty years passed before
Russo-Persian trade again reached the level immediately following the
Turkmanchai Treaty. Not only was this the case, but in terms of the
4. Hossein Nava', Les relations economiques irano-russes (Paris, 1935), p. 54.
5. Contributing factors were the Persian and Russian cholera epidemics of
1832-35, crop failures in 1833, unrest and banditry in northern Persia in 1831,
and the failure of a number of major trading companies at Tabriz in the early
1830's. The value of Russian goods sold at Tabriz, for example, fell from an esti-
mated 1,680,000 rubles in 1834 to about 160,000 in 1839. After 1837 a large Greek
firm, that of Ralli, opened business. Other foreign houses followed suit, and the
Russians were shut out by 1841, when the British obtained the same treaty rights
in Persia as the Russians possessed. F. A. Bakulin, Ocherki torgovli s Persiei,
p. 38; I. F. Blaremberg, Statisticheskoe obozrenie Persii, pp. 88-90, 99, 137 ff;
Russia, Departament Vneshnei Torgovli, Gosudarstvennaia Vneshniaia Torgovlia
v Raznykh eya Vidy (SPB, 1812-65), 1831, "predislovie"; 1833, "predislovie"
(hereafter cited as OVTR).
6. Particularly hard hit were exports of Russian textiles. Between 1830 and 1831
their value fell by half; in 1833 cottons totaled only 1.1 million assignat rubles,
and by 1839 fell to .34 million; OVTR, 1830, 1831, 1833, 1839. Blaremberg, pp. 88-
93, reports that Russia had a virtual monopoly of the sale of cottons in Azerbaijan
until the early 1830's. Then goods from Leipzig and Britain cut into the market.
For a more complete story, partially based on archival researches, see the solid
work of M. K. Rozhkova, Ekonomicheskaia politika tsarskogo pravitelstva na
Srednem Vostoke vo vtoroi chetverti XIX veka i russkaia byrzhuaziia (Moscow,
1949).







RUSSO-PERSIAN COMMERCIAL RELATIONS


TABLE 1

RUSSO-PERSIAN TRADE RETURNS, 1830-1914
(Millions of Rubles)
ACCOUNT RUBLES* GOLD RUBLES (1896)
Year From Persia To Persia Total From Persia To Persia Total


1830
1831
1832
1833
1834
1835
1836
1837
1838
1839
1840
1841
1842
1843
1844
1845
1846
1847
1848
1849
1850
1851
1852
1853
1854
1855
1856
1857
1858
1859
1860
1861
1862
1863
1864
1865
1866
1867
1868
1869
1870
1871
1872
1873
1874
1875
8


14.1
12.8
7.3
7.4
6.0
6.7
8.4
7.9
10.3
9.9
3.3
3.1
3.4
3.2
2.9
3.3
3.1
3.8
4.0
4.0
3.8
3.9
2.8
3.0
3.6
4.2
4.2
4.0
4.1
3.8
3.8
3.8
4.1
4.6
6.5
4.8
5.2
5.3
3.9
4.9
4.3
3.9
4.9
4.3
4.9
5.2


13.3
10.1
8.4
3.0
2.3
2.3
3.4
4.1
3.6
2.4
0.9
0.8
0.9
0.8
0.8
0.6
0.5
0.7
0.7
0.7
0.9
0.9
0.9
0.8
0.8
1.0
0.9
0.9
1.2
1.2
1.1
1.2
1.1
1.1
1.4
1.7
1.7
1.3
1.4
1.4
1.7
1.4
1.7
1.8
1.8
1.9


27.4
22.9
15.7
10.4
8.3
9.0
11.8
12.0
13.8
12.3
4.2
3.8
4.3
4.1
3.7
3.9
3.6
4.5
4.6
4.7
4.7
4.8
3.7
3.8
4.4
5.2
5.1
4.9
5.3
5.0
4.9
5.0
5.3
5.7
7.9
6.5
7.0
6.6
5.4
6.3
6.0
5.4
6.6
6.1
6.7
7.1


5.6
5.1
3.0
3.0
2.5
2.8
3.4
3.3
4.2
4.3
5.0
4.7
5.0
4.7
4.3
4.8
4.6
5.7
5.6
5.7
5.6
5.7
4.1
4.5
5.1
5.9
6.3
5.7
5.8
4.8
5.3
5.1
5.3
6.7
7.5
5.9
5.3
7.2
5.1
5.6
5.0
5.0
6.3
5.4
6.3
6.8


5.4
4.1
1.2
1.2
0.9
0.9
1.4
1.7
1.5
1.0
1.3
1.1
1.3
1.1
1.2
0.9
0.8
1.0
0.9
1.0
1.3
1.3
1.3
1.2
1.1
1.4
1.3
1.3
1.7
1.5
1.6
1.6
1.4
1.6
1.6
2.1
1.8
1.8
1.8
1.6
1.9
1.8
2.2
2.3
2.4
2.4


10.9
9.1
4.2
4.2
3.4
3.7
4.8
5.0
5.6
5.3
6.3
5.8
6.3
5.8
5.5
5.7
5.4
6.7
6.6
6.7
7.0
7.0
5.5
5.7
6.3
7.3
7.6
7.0
7.6
6.3
6.9
6.7
6.8
8.3
9.1
8.0
7.1
9.0
6.9
7.2
7.0
6.9
8.4
7.7
8.8
9.2








BUSINESS CONDITIONS, TREATY RELATIONS


TABLE 1-Continued


Year

1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914


--


From Persi

5.1
4.9
7.0
7.2
6.9
7.6
8.5
7.7
8.9
9.0
10.3
9.1
11.3
11.6
10.8
9.9
11.3
13.9
11.3
19.0
17.5


Source: Russia, Departament tamozhennykh sborov, Gosudarstvennaia torgovlia
v raznykh eia vidakh (SPB, 1812-62); Gosudarstvennaia vneshniaia torgovlia v
raznykh eia vidakh (SPB, 1863-64); Vidy gosudarstvennoi vneshnei torgovli (SPB,
1865-66); Vidy Rossiiskoi vneshnei torgovli (SPB, 1867-69); Vidy vneshnei torgovli
Rossii (SPB, 1870-72); Obzor vneshnei torgovli Rossii po Aziatskoi i Evropeiskoi
granitsam (SPB, 1873-1915); henceforth all will be cited as OVTR.
*1830-1839 figures are in assignat rubles. 1840-1895 figures are in silver rubles.
1896-1914 account rubles are gold rubles at 1/15 of an imperial. Discrepancies in
totals owe to rounding.
9


TABLE lmContinued


ACCOUNT RUBLES*
a To Persia

1.7
3.2
2.6
3.4
3.9
3.9
4.4
3.6
3.9
3.9
6.1
7.9
9.0
8.8
10.9
10.0
9.3
11.9
12.2
14.2
14.5


Total

6.8
8.1
9.7
10.6
10.8
11.5
12.9
11.3
12.8
12.9
16.4
17.1
20.3
20.5
21.7
19.9
20.6
25.9
23.5
33.1
32.0


From P

6.1
5.0
6.8
6.8
6.6
7.5
8.0
7.1
8.4
8.5
9.3
7.6
10.1
11.5
11.7
9.9
10.7
13.7
11.3
19.2
17.5
18.6
21.6
21.7
20.4
25.5
23.5
26.5
23.9
22.3
24.5
25.3
28.5
31.6
36.7
35.4
35.4
43.6
41.3


GOLD RUBLES (1896)
ersia To Persia

2.0
3.2
2.6
3.2
3.8
3.8
4.2
3.3
3.7
3.7
5.6
6.6
8.0
8.7
11.9
10.0
8.8
11.7
12.3
14.4
14.5
16.0
17.0
17.9
20.6
23.5
24.0
27.4
27.3
26.1
31.8
28.3
26.7
32.3
37.9
44.6
53.0
57.7
52.9


Total

8.2
8.2
9.4
10.0
10.4
11.3
12.2
10.4
12.2
12.2
14.9
14.3
18.1
20.2
23.6
19.9
19.5
25.4
23.6
33.6
32.0
34.7
38.6
39.6
41.0
49.0
47.5
53.9
51.2
48.4
56.3
53.6
55.1
63.9
74.6
80.0
88.4
101.3
94.2


- ---







RUSSO-PERSIAN COMMERCIAL RELATIONS


usual definition of "imperial, exploiting Power" Persia must be re-
garded as the "economic aggressor." Until 1900 the merchandise balance
of Russo-Persian trade was against Russia. Russia, certainly for about
forty years after 1840, played the "passive" role. Examination of a
couple of random years (see Tables 2 and 3) reveals this, and reinforces
the suggestion that we must readjust any a priori evaluation of the
Treaty of Turkmanchai as an unequal arrangement in favor of Russia.
Persia traded both raw and finished materials with her northern neigh-

TABLE 2
EXPORTS FROM PERSIA TO RUSSIA IN 1844 AND 1870
(Thousands of Rubles)

GooDs 1844 1870
Sugar and sweetmeats 17.9 *
Fruits and nuts 169.5 1,030.3
Cotton 19.2 844.2
Cotton yarn 62.0 51.3
Silk 180.9 88.3
Leather 22.5 *
Cotton goods 1,456.3 1,037.1
Silk goods 510.1 264.2
Woolens and rugs 103.9 69.6
Cattle 26.2 30.0
Peltry 96.4 158.2
Grain 144.6
Fish and caviar 127.6
Hides 114.0
Dyestuffs 121.0
Wool 4.0
Other goods 236.8 351.0
Total 2,901.7 4,296
Source: OVTR, 1844, 1870.
*No data.
bor, and for a long time she sold more manufactures to Russia than she
bought. Thus in 1840 Persia sold 19 times more cottons to Russia than
she purchased;7 in 1844 the ratio was 140 to 1 and in 1870 it was still
favorable to Persia (Tables 2 and 3). During the years 1840 to 1870
the two countries sold one another light manufactures, semi-manufac-
tures, and raw materials. Russia's exports to Persia rose more rapidly
than imports, but this after falling to a low in 1846. The ratio of Per-
sia's exports to Russia to her imports from Russia changed only from
3.8 to 1 (1840) to 2.6 to 1 (1870) (Table 1). Taken in any form, the
7. OVTR, 1840, p. 48.
10







BUSINESS CONDITIONS, TREATY RELATIONS

figures are unimpressive and do not warrant statements that Russian
trade with Persia rose steadily after Turkmanchai nor the connotations
of such statements.
Non-enforcement of the treaty is partly responsible for Russian com-
mercial failure. A discussion of the treaty and the problems that rose
regarding it will illustrate this.8
Russian merchant vessels were to have free access to the Persian coast

TABLE 3
IMPORTS FROM RUSSIA TO PERSIA IN 1844 AND 1870
(Thousands of Rubles)

GOODS 1844 1870
Breadstuffs 32.4 58.9
Iron 169.2 227.0
Copper 63.9 126.0
Metalware 49.1 106.6
Russian leather 0.4 2.0
Leather goods 0.9 2
Raw hides 14.1 20.0
Dyestuffs 17.7 91.9
Cottons 10.7 225.0
Linen and hemp 11.7 50.3
Raw silk 135.5 31.0
Drygoods 24.2 219.0
Peltry 4.6 *
Silk goods 35.2 41.8
Woolens 13.4 365.9
Tea 7.0
Chandlery 42.7
Sugar 11.1
Liqueurs 5.9
Others 236.3 36.9
TOTAL 819.3 1,669.0

Source: OVTR, 1844; 1870.
*No data.

and Russia's naval vessels were the only warships permitted on the Cas-
pian Sea (Peace Treaty, Article VIII). Russia had the right to appoint
consuls and commercial agents "wherever the good of commerce will
demand it." Such agents were to receive "the protection, the honors and
privileges belonging to their public character," and the Russian diplo-
8. The Treaty of Peace and Commercial Treaty are available in a number of
collections. The English translation used here is that in J. C. Hurewitz, Diplomacy
in the Near and Middle East, A Documentary Record (Princeton, N. J., 1956),
I, no. 38, 96-102.
11







RUSSO-PERSIAN COMMERCIAL RELATIONS


matic representative at Tehran could suspend them upon receiving a
justified complaint against them (Peace Treaty, Article X). This right
was variously interpreted. The Persian government held to a narrow
interpretation, resisting the appointment of each new consul most vigor-
ously because the scanty Russian trade did not demand new agents.
Thus it was not until after 1881 that Russia placed commercial agents
in northeastern Persia, and she could not place a consul-general at
Meshed until 1889.9
Russian and Persian subjects, equipped with proper passports, could
trade and travel freely within the confines of the other power. A rigid
interpretation of the Commercial Treaty would indicate that Russia gave
Persians the right to "enjoy all the rights and prerogatives accorded in
the States of His Majesty to the subjects of the most favored friendly
power," but Persia did not reciprocate (Commercial Treaty, Article I).
Persia got at least the advantage of a favorable wording on this count,
and as a matter of fact, had the most favored nation privilege openly
been granted to Russians, the Persians would still have won the greater
benefits.
The treaty also provided for the registration and enforcement of writ-
ten instruments. Parties to documents were to register them with the
Russian consul and the hakim (judge), or, in the absence of a consul,
solely with the hakim. Unless the defendant in an action acknowledged
the legality of such evidence, other proofs for the contents of instru-
ments were not admissible. When failure to observe a legal agreement
resulted in loss to one party, the other had to indemnify him (Commer-
cial Treaty, Article II). This article was also more honored in the breach
than in the observance. It made the registration of documents such a
complicated and time-consuming procedure that merchants drew their
bills without proper formalities. Thus, the only documents ordinarily
registered properly were wills, loans, and mortgages. Most bills of ex-
change and other contracts were therefore not subject to the clauses of
the treaty relating to consular jurisdiction-Russians party to such paper
had to take their chances in Persian courts. The disadvantages for Rus-
sians are manifest: long periods of time were required, judges were
prejudiced, and, worse, there simply was no law relating to bills of ex-
change. Since the injunctions in the Koran against usury are fairly
clear, many documents were regarded as being in spirit contrary to
religious law, even though they labeled the interest payments stipulated
9. George N. Curzon, Persia and the Persian Question (2 vols., London, 1893),
I, 171, 193.
12







BUSINESS CONDITIONS, TREATY RELATIONS


in them as payment for use or rent. The unclear status of credit instru-
ments restricted their use and limited the extent to which Russians would
grant credit to Persian clients.10
The Commercial Treaty set the customs rates between the two coun-
tries at 5 per cent ad valorem. Each state was to collect the duties once
and for all at the border, and Russia agreed not to increase her Russo-
Persian customs (Article III). The benefits of this clause were mixed.
Persian goods entered Russia at a low rate, but European goods con-
cealed under a Persian rubric often entered Russia at the lower Persian
customs rate to compete with Russian manufactures. For a long time
Tabriz thrived on its re-export business into the Russian Caucasus. The
benefits Russian merchants derived from the 5 per cent customs rate
were illusory, for soon it became the standard rate for all countries doing
business with Persia, and those countries actually had advantages over
Russia because the system of collection did not favor small traders who
carried on the bulk of Russia's trade. Tariffs varied in different locali-
ties because the tax farmers competed with each other to draw trade
through their collection points. Small-scale traders imported Russian
goods as individuals, and the customs farmers were able to charge the
full 5 per cent legally due. In lieu of the legal rate the great trading
houses paid the farmers annual sums considerably lower than the
amount nominally due. In addition, the Persian customs collectors often
had the habit of treating the small-fry handling Russian goods rather
badly."
Particularly aggravating to Persian patriots were the treaty clauses
establishing extraterritoriality and consular jurisdiction:
All suits and litigations between Russian subjects will be subject ex-
clusively to the examination and decision of the Russian Mission or
Consuls in conformity with the laws and customs of the Russian Em-
pire; as well as the differences and suits occurring between Russian
subjects and those of another Power where the parties shall consent
thereto.
When differences or suits shall arise between Russian subjects and
Persian subjects, the said suits or differences will be brought before the

10. G. I. Ter-Gukasov, Ekonomicheskie i politicheskie interest Rossii v Persii
(SPB, 1916), pp. 87-91.
11. M. L. Tomar, Ekonomicheskoe polozhenie Persii (SPB, 1895), pp. 80-81;
A. A. Zonnenshtral-Piskorskii, Mezhdunarodnye torgovye dogovory Persii (Mos-
cow, 1931), p. 179; France, Ministere des Affaires Etrangeres, Documents diplo-
matiques frangaises, 1871-1914 (Paris, 1929-60), Ser. 2, III, no. 107, 140-43 (here-
after cited as DDF).
13







RUSSO-PERSIAN COMMERCIAL RELATIONS

Hakim or Governor and will be examined and judged only in the
presence of the Dragoman of the Mission or the Consulate.12
If the Russian government could make these clauses effective, its subjects
would be freed of some of the restrictiveness of Muslim law and the Per-
sian Empire would have to adopt to some extent the standards of the
commercial law of the Russian Empire.
Consular jurisdiction meant veiled interference with the ordinary
course of Muslim justice and gave rise to much friction. Persian na-
tionals fearing the operation of the sharia (religious law) or urf (cus-
tomary law) often adopted Russian nationality or obtained the protection
of Russia's diplomatic representatives. Among the Russian subjects who
traded in Persia were numbers of Sunnites from the Caucasus and, later,
Central Asia. Being Sunnite, they preferred to remain under the juris-
diction of the Russian consuls; but the Persian ulama (religious intelli-
gentsia) tended to interpret extraterritoriality as being applicable only
to Christians, arguing that obedience to the sharia was incumbent on all
believers, and tried to influence the Persian government to resist Russia's
claims to jurisdiction over Russian Muslims.13 The incessant haggling
over individuals of mixed status troubled relations between the two gov-
ernments throughout the century and made Russian Muslims more wary
about doing business in Persia.
The treaty attempted to remove another major impediment to com-
merce, the barriers the sharia erected against the ownership and hold-
ing of immovable property by infidels:
In case of the decease of a Russian subject in Persia, his movable and
immovable property, as belonging to the subject of a friendly Power,
will be turned over intact to his relatives or associates, who will have
the right to dispose of the said property as they may judge fitting. In
the absence of relatives or associates the disposition of the said property
will be confided to the Mission or to the Consuls of Russia without any
difficulty on the part of the Persian authorities.14
This implicitly recognizes both the right of Russians in Persia to own
property and consular jurisdiction over the execution of their wills.
Article V of the Commercial Treaty made these rights explicit:
Seeing that after existing usages in Persia it is difficult for foreign
subjects to find for rent houses, warehouses, or premises suitable as
12. Article VII, Hurewitz, I, no. 38, 101.
13. A. Miller, "Russkoe zemlevladenie v Azerbaidzhane," Izvestiia ministerstva
inostrannykh del, 1913 (no. 3), 161; Tomar, p. 12; L. A. Sobotsinskii, Persiia.
Statistiko-ekonomicheskii ocherk, p. 22. 14. Hurewitz, I, no. 38, 100.
14







BUSINESS CONDITIONS, TREATY RELATIONS

depots for their merchandise, it is permitted to Russian subjects in Per-
sia not only to rent but also to acquire in full ownership houses for
habitation and shops as well as premises to store therein their mer-
chandise.
The employees of the Persian Government shall not be able to enter
by force in the said houses, shops or premises, at least without having
recourse in case of necessity to the authorization of the Russian Min-
ister, Charge d'Affaires or Consul who will delegate an employee or
dragoman to assist in the visit to the house or the merchandise.15
The ulama detested this infraction of the sharia fully as much as they
did their foreign Qajar dynasty and constantly harassed the govern-
ment for its concession. Under this pressure the Persian government
consistently opposed Russia's attempts to broaden the application of the
treaty to permit Russians to own landed property, and maintained the
principle that Russian subjects could own only homes, shops, and ware-
houses. It even encouraged local officials to prevent the exercise of
the limited rights it had recognized. Consequently, it was not until the
early twentieth century that Russian subjects established such premises
on any but a most limited scale, and even as late as 1911 the Persian
government circulated provincial officials to the effect that foreigners
did not have the right under the sharia to own immovable property.
Russians doing business in Persia often found it necessary to own land
by subterfuge, either through Persians whom they trusted or by bribing
officials not to notice their involvement in real estate dealings. Land
ownership as such was not the entire issue. Insecurity of title to real
property acted to limit the extent to which Russian merchants would
extend credit or make loans-thus cutting into the potential volume of
trade.
Russian Muslims had more opportunity to own or hold immovable
property, for though they were Sunnites they enjoyed property rights
under the sharia. Many came into possession of landed estates either by
inheritance or purchase. But, though they used the Muslim code to
justify their owning of property, they tried to enjoy the best of two
worlds, preferring often to have their property disputes adjudicated
either under the Russian code or the local property codes of the Cau-
casus or Turkestan. Moreover, many of these "Russian subjects" were
actually Persians who gave allegiance to the Tsar to escape either the
Shah's confiscation of their property or the working of Persian property
law. This meant, naturally, that there was incessant haggling between
15. Hurewitz, I, no. 38, 101.
15







RUSSO-PERSIAN COMMERCIAL RELATIONS


the two governments, especially when such property holding became more
widespread during the early twentieth century, and the nationalist gov-
ernment, urged on by the influential religious community (which had
supported the Persian revolution in the name of justice conceived in the
Muslim sense), took a stronger stand.
That many Russians, Russian Muslims, or Russian proteges deliberate-
ly broke the sharia and urf in their dealings in real estate made the
problem more complex. Sometimes sales of villages, for example, were
concluded without consultation with those who, under the complex Per-
sian tenurial systems, shared certain rights in the village, or without ref-
erence to the peasants or the state (which had to give permission for such
transactions). Afterward, the new "owner," who had really only pur-
chased certain rights, would attempt to exercise rights of full ownership,
supporting his position by reference to Russian law.
Tangling the problem even more was the equivocal status of all of the
cases and situations mentioned and of the wills that Russian subjects
drew up in Persia relating to their property there-under the Russian
codes relating to wills. So few such cases came up for adjudication in
Russian courts or came before the Senate that no guidelines were estab-
lished for the Russian consulates to observe; each quarrel, each transfer
of property, and each will that came to the attention of the consulate
dragomans represented at least a minor crisis and often more.16
So it was that the fundamental legal and cultural barriers against
Russian enterprise remained in existence until the Tsarist government
took further action on behalf of its nationals. Such action was slow in
coming, for it was not until she was fully engaged in a rivalry with
Britain for control of Persia (having lost the upper hand after the
Crimean War) that Russia began to push her commercial interests in
that country with any vigor.
16. This discussion is based upon Miller, "Russkoe zemlevladenie v Azerbaid-
zhane"; P. P. Vvedenskii, "Ob utverzhdenii k ispolneniiu dukhovnykh zavesh-
chanii russkikh poddanykh prozhivaiushchikh v Persii," Izvestiia ministerstva
inostrannykh del, 1912 (no. 4), 157-70; Ter-Gukasov, pp. 83-86; K. V. Ivanov,
"Zapiska po voprosu ob organizatsii izucheniia Blizhniago Vostoka," Materialy po
izucheniiu Vostoka, I (1909), 80-84.


16









2. ECONOMICS AND POLITICS IN
THE MID-CENTURY TO 1890



Though the Tsarist government for the most part let Russian mer-
chants and manufacturers fight their own battles for Persia's mar-
kets up to the 1880's, it did, meanwhile, alleviate some of the physical
obstacles to commercial penetration. Already by the 1860's the distances
between Russia's industrial and political centers and the borders of
Persia were becoming less formidable. The smashing of Muridism made
trade over the Caucasian frontiers safer. In the early 1860's the Cau-
casus and Mercury steamship line began to make subsidized voyages
(postal and passenger) from Baku to Persian Caspian ports, and during
the late sixties and early seventies railheads advanced through the Cau-
casus to Tiflis. In addition, the Russian Empire advanced toward Per-
sia's northeastern frontiers. The first steps were to establish forts on the
Ili, Amu Darya, and Syr Darya Rivers. In 1864 came the conquest of
Chimkent, followed in 1865 by the fall of Tashkent. In the next year
Bukhara became a protected state, and in 1868 Samarkand fell. In 1873
there was a campaign against Khiva; the Khan of Khiva became a Rus-
sian vassal, and half the Khanate was annexed outright. In 1876 it was
the turn of Khokand to become part of the Russian Empire as the prov-
ince of Fergana. Only a strip of territory between the Amu Darya and
Persia's present frontier remained; of this a narrow band, the Akhal-
Tekke oasis, was the only populous part.
The Russian advance revived or reinforced British fears that Russia
had ultimate designs on India. Since Persia offered an invasion route
toward India, Britain's obvious counter to the Russian threat was rail-
way construction to give her army access to positions from which it
could outflank the possible lines of Russian advance. A British railway
also would threaten Russia's hold on Central Asia and break her pre-
carious commercial position in northern Persia. Thus, when in July,
1872, Baron Julius de Reuter received from Persia's Shah a sweeping
railway concession, Russia's diplomats became active in support of her
commercial and political interests.1
1. Reuter's project was the climax of a long series of concessions given to
Europeans. He received a charter granting exclusive rights to all railway construc-
tion not already given to foreigners, including extensive rights to build branch
lines from the main route (Enzeli-Persian Gulf) to Persia's borders. He also re-
ceived exclusive rights to build tramlines, to work all coal, iron, lead, and petro-

17







RUSSO-PERSIAN COMMERCIAL RELATIONS


It was generally believed that the Reuter concession had been engi-
neered as a British counterstroke to the steady advance of Russian rails
through Transcaucasia. St. Petersburg instructed its minister and diplo-
matic staff at Tehran to agitate against the concession. At the same time
Russian diplomats tried to discourage European financial circles from
supporting Reuter. Consequently, on his journey through Europe in
1873, the Shah found a definitely cool attitude toward his gigantic give-
away; and if he found Western circles cool, Prince Gorchakov, Russia's
Foreign Minister and Chancellor, was absolutely frigid, giving the Shah
a severe dressing-down at St. Petersburg late in May, 1873. During
his absence, the ulama went into open opposition, and on his return to
Persia the Shah had no choice but to abrogate the contract, using the
specious argument that construction was not as far along as required.2
Britain, as a matter of fact, had not supported Reuter's efforts to ob-
tain the concession, and letters he sent to Whitehall in October, 1872,
and October, 1873, met refusals to extend him official support. He next
made overtures to Russia and threatened Whitehall that he might accept
Russian offers for a transfer of his rights.3
Meanwhile, Russia was mounting a counteroffensive against the Brit-
ish advance. Russian railroad circles had earlier considered Persian
projects, and shortly after the Reuter concession an adviser to the Rus-
sian Council of Ministers sent a note to it in support of the construction
of a railway from the Caspian Sea to the Persian Gulf, arguing that
"Persia should be exclusively indebted to Russia in the railway ques-
tion," and that participation of non-Russian capital in Persian railways
would lead to "foreign" interference in Persian affairs.4 Because a proj-
ect for a simple north-south line might provide access to the Caspian
and open the north even more to European goods, the Russian govern-
ment did not adopt the suggestion. Instead it put forward a project that

leum resources, to manage and construct works for irrigation, dams, dikes, wells,
reservoirs, and canals, and to sell all the water thus stored. He had the right of
first refusal of a bank, gas works, street paving, road building, post and telegraph
systems, and mills and factories. He also received the privilege to collect the cus-
toms for twenty-five years. Sir Henry Rawlinson, England and Russia in the East
(London, 1875), pp. 373-76.
2. A. Popov, "Stranitsa iz russkoi politiki v Persii," Mezhdunarodnaia zhizn',
I-IV (1924), 134; Henry M. Collins, From Pigeon Post to Wireless (London,
1925), pp. 169-71; L. E. Frechtling, "The Reuter Concession in Persia," Asiatic
Quarterly Review, XXXIV (1938), 572.
3. Collins, pp. 170-75; Frechtling, pp. 525, 529.
4. Quoted in A. Popov, "Anglo-Russkoe sopernichestvo na putiakh Irana,"
Novyi Vostok, XIII (1926), 133; see also Popov, "Stranitsa," p. 134.
18







ECONOMICS AND POLITICS


would accord more with its commercial objectives and avoid opening
the Caspian basin. In 1874 it encouraged Major General Falkenhagen,
a retired officer involved in Caucasian rail concessions, to apply for a
concession for a railway from Julfa to Tabriz, to join the Poti-Tiflis
railway at Tiflis. The Persian government would pay 5 per cent interest
on the capital, would grant no other concession within a hundred miles
of the route, and the concessionaire would receive extensive mining
rights and control of the customs at Tabriz.5
British reaction was immediate. Reuter protested that his rights were
being violated and Whitehall decided to use his concession as a lever
against Falkenhagen, informing the Persian government that London
considered the concession still in force and reserved the right to take
action. The British minister at Tehran was told to encourage the Shah
to resist further Russian pressure. The Shah was disposed to rescind
the general's concession, but it appears his ministers had so compromised
his position by agreeing prior to submitting the proposal to him that he
could not refuse to ratify it if Russia should prove stubborn. He tried to
discourage Falkenhagen by confirming only part of the charter, rejecting
the interest guarantee and the turnover of the customs. Falkenhagen
pressed for the original terms, but the British again pointed out that the
Russian's project compromised Reuter's rights. If it were accepted they
might intervene more directly.6
The question was whether the Russian government would now restrain
itself. It held divided opinions. Gorchakov was one of the few who was
strong in support of the railway. The military looked at the matter with
mixed feelings, for it seemed to them that it might threaten the defenses
of the Caucasus. St. Petersburg instructed the Russian minister at
Tehran to avoid lending Falkenhagen open support; it would parallel
Whitehall's attitude toward Reuter. The Shah then declared that he
would ratify the concession, but would guarantee only 3 per cent inter-
est and refused to turn over the customs; he must also control the
expenditures and receive 40 per cent of the profits. This action suffi-
ciently joined the issue: The railroad could be constructed, but on un-
favorable conditions. When Gorchakov submitted the question to a
ministerial council in February, 1875, the arguments weighed equally
for and against the project, and the bureaucrats who were at the

5. Curzon, Persia, I, 615-16; Sobotsinskii, p. 114; Ter-Gukasov, p. 118; Popov,
"Stranitsa," pp. 135-36.
6. Collins, pp. 176-77; Frechtling, pp. 530-31; Curzon, Persia, I, 616; Rawlin-
son, p. 340.
19







RUSSO-PERSIAN COMMERCIAL RELATIONS


discussion rejected the scheme. The British won a notable victory.7
The railway question embarrassed both powers. The years following
the Russo-Turkish War were a period of crisis for Russian state finance
that paralyzed initiative and left no funds to devote to projects of dis-
puted merit: A north-south railway might open the north to a flood of
European goods from the Persian Gulf. It would also seem a threat to
India, a threat that would bring about the construction of either flank-
ing railroads from India or British-controlled routes from the Persian
Gulf. Either would nullify any advantages Russia might gain. Russia
followed Britain's negative lead and cooperated, therefore, with her in
preventing railway construction in Persia until the end of the 1880's.8
Meanwhile, Russia continued to advance in Central Asia. In 1879
General Lomakin moved against the Akhal-Tekke Turkomans, only to
meet a disastrous defeat. Russia's prestige in Southwest Asia plum-
meted. Skobelev, the hero of the Turkish war, took over military com-
mand in Central Asia and assaulted the Turkoman stronghold at Geok
Teppe in January, 1881, taking it and thereby completing the conquest
of the Akhal Oasis.9
In spite of British pressure, covert British efforts to tempt him with
Herat, and the obvious danger the annexation of the Akhal Oasis posed
for Persia, Nasr-ed-Din Shah refused to forestall Russia's action by as-
serting his sovereignty over the area.10 That he had fallen into Russian
arms seemed symbolized by the publication of the Russo-Persian Bound-
ary Convention of December 21, 1881, which made the Atrek River
from the Caspian Sea to Chat and a line roughly from Chat to Baba
Dormuz the new boundary-Russian territory now directly impinged on
Persia in the north and northeast."1 That further Russian advance would

7. Popov, "Anglo-Russkoe sopernichestvo na putiakh Irana," p. 134; Popov,
"Stranitsa," pp. 134-36; Curzon, Persia, I, 616; Frechtling, p. 531; Ter-Gukasov,
p. 118; P. A. Zaionchkovskii (ed.), Dnevnik D. A. Miliutina (4 vols., Moscow,
1950), I, 176.
8. A. Popov, "Stranitsa," pp. 135-39; Popov, "Anglo-Russkoe sopernichestvo na
putiakh Irana," pp. 133-34.
9. For the campaigns in Central Asia see M. A. Terentev, Istoriia zavoevaniia
Srednei Azii (4 vols., SPB, 1906), and N. I. Grodekov, Voina v Turkmenii (4
vols., SPB, 1883-84).
10. For these tangled negotiations see James G. Allen, "Sir Ronald Thomson
and British Policy toward Persia in 1879," Journal of the Royal Central Asian
Society, XXII (1935), 608-14; A. P. Thornton, "British Policy in Persia, 1858-
1890," English Historical Review, LXIX (October, 1954), 568-71.
11. Edward Hertslet Compp.), Treaties, etc., Concluded between Great Britain
and Persia, and between Persia and other Foreign Powers Wholly or Partially in
Force on the 1 April, 1891 (London, 1891), pp. 136-40.
20







ECONOMICS AND POLITICS


be in the direction of Merv was clear. In spite of bold bluster, British
overtures toward the making of a frontier agreement, and a spate of
"Mervousness" in Britain, Giers announced on February 15, 1884, that
the Tsar accepted the conveniently proffered allegiance of the Merv
Turkomans, perhaps taking advantage of the Sudan crisis to undertake
a move to which opposition might be expected. After token protests,
London accepted the fait accompli. In the following year, during the
delineation of the Russo-Afghan boundary, the Russians tried to strike
into Afghanistan and seize Penjdeh. This affair nearly precipitated a
major crisis, but eventually the two foreign offices worked out a com-
promise by which Russia gained Penjdeh and the present boundary of
northeastern Persia, while Abdur Rahman Khan, the ruler of Afghani-
stan, retained what Russia really wanted: the Zulficar Pass, which con-
trolled a number of routes into Persia and to Herat.12
Russia both stole commercial predominance in Khorasan from the
British and consolidated her gains in Central Asia when she constructed
the Transcaspian railroad. Initiated in June, 1885, it reached Mary
(Merv) in July, 1886, the Amu Darya in June, 1887, and crossed the
Amu Darya in January, 1888; Samarkand was joined to the route in
May, 1888, Tashkent shortly after.13
The building of the Transcaspian railway, in conjunction with a
number of other actions, finished the closing of Persia's northern bor-
ders to non-Russian commerce, completing in the northeast a process
under way in the northwest since the early 1880's.
A vexing problem to Russian commercial and manufacturing circles
interested in Persia was European competition admitted to northern,
Persia by way of the Caucasus-by the Poti-Tiflis-Erevan-Tabriz and
the Batum-Erevan-Tabriz routes. Policy on this question fluctuated be-
tween the early part of the century and the final closing of the Caucasus
in 1883. During the 1820's the Viceroy of the Caucasus, Ermolov, was
able fo stave off the demands of Kankrin, the Minister of Finance, to
rescind freedom of transit. Ermolov argued that there would be no

12. The literature on the seizure of Merv, the Penjdeh incident, and the Afghan
boundary commission is both extensive and interesting. Among the better titles
are A. C. Yate, England and Russia Face to Face in Asia: Travels with the Afghan
Boundary Commission (Edinburgh, 1888); E. Yate, Northern Afghanistan or
Letters from the Afghan Boundary Commission (Edinburgh, 1888). For the most
recent analysis see Rose Louise Greaves, Persia and the Defence of India, 1884-
1892 (London, 1959), pp. 70-80.
13. George Dobson, Russia's Railway Advance into Central Asia (London,
1890); George N. Curzon, Russia in Central Asia in 1889 (London, 1889).
21







RUSSO-PERSIAN COMMERCIAL RELATIONS


benefit if the Caucasus were closed; European goods would still enter
north Persia. When the dispute went to the State Council, Ermolov had
the support of the Minister of Foreign Affairs, Nesselrode, and until
1831 transit was free. Between 1831 and 1846 European goods passing
through the Caucasus had to pay Russian customs. In 1846 Viceroy
Vorontsov prevailed upon the government to reopen passage, and in
1865 the conditions under which European goods were admitted were
greatly liberalized and a postal service from Tiflis to Julfa was created.
In 1877 conditions were made more difficult-Russia required the pay-
ment of deposits equal to the amount of customs that would have to be

TABLE 4
VALUE OF EUROPEAN GOODS TRANSPORTED TO PERSIA THROUGH
THE CAUCASUS, 1862-1885
(Thousands of Rubles)

1862 70.7 1874 3692.1
1863 34.7 1875 3486.2
1864 902.3 1876 3898.5
1865 1540.0 1877 1651.2
1866 2128.5 1878 2073.6
1867 1743.7 1879 4664.1
1868 1578.0 1880 4574.6
1869 1683.5 1881 7772.1
1870 1810.3 1882
1871 1348.5 1883 5643.1
1872 1977.9 1884 295.2
1873 2643.2 1885 50.0

Source: OVTR, 1872-1881, 1883-85; the writer has not had access to the volume
for 1882.

paid on imports into Russia; these were repaid when passage of the
goods into Persia was verified by customs. In 1883 free transit was
abolished altogether. In 1881 Russia's exports to Persia totaled 3.9 mil-
lion rubles; during this same year European goods to a value of 7.8
million rubles entered Persia through Russian territory. This seemed
grossly wrong. So it was stopped, and by 1885 the value of such transit
goods fell to 50,000 rubles (see Table 4).
The transit problem might be dismissed with this in order to make
the narrative more efficient. But it has enough intrinsic interest that an
extended parenthesis is justified. What happened essentially is this: Mos-
covian and Kievan interests won out over those of the Caucasus. The
Caucasians involved in the Persian trade dealt in goods from all coun-
22







ECONOMICS AND POLITICS


tries; often it was the profits from their European goods that kept them
in business (this was particularly true between 1820 and 1831). The
Caucasus transport industry had earned about 800,000 to 1,000,000
rubles annually from charges on the goods they formerly carried. As a
matter of fact, the liberalization of transit policy in 1865 had been
undertaken with a mind to strike at the Trabzon-Tabriz route and en-
sure heavier traffic for the Poti-Tiflis railroad, while at the same time
increasing the prosperity of the Caucasus.
However, Moscow textiles and Ukrainian sugar squealed "unfair!"
The Moscow Bourse Society in November, 1882, implored the Ministry
of Finance to hear its arguments. A conference that discussed the matter
claimed that (1) free transit encouraged the contraband trade, (2)
foreign goods were shutting out Russian trade in northern Persia and
were entering Central Asia by way of the Caspian route, (3) closure of
the Caucasus would not increase the Trabzon trade, and (4) that Persia
was going to become a source of raw materials and a first-rate market.
The Ministry of Finance decided against closure, arguing that free tran-
sit would (1) keep people employed in the Caucasus and help finance
the Poti-Baku railroad, (2) not end smuggling, because poor customs
administration was the real cause, and (3) damage Russian trade by
ruining trading companies dealing in both European and Russian goods
and by shifting European trade to new routes (either Trabzon or the
Suez-Persian Gulf route). There the issue rested; but during the next
year the Ministry of Finance changed its views, and immediately after
the coronation of Alexander III an imperial ukaz settled the issue in
favor of Moscow and Kiev.4
The closing of the Caucasus taken by itself did not produce the re-
sults hoped for. The Trabzon-Tabriz trade route did not become as
active as the Ministry of Finance had direly predicted. In fact, contrary
to much of the literature, traffic along the route remained stationary in
volume. Imports along it into Azerbaijan stood at around 5 million
rubles between 1882 and 1889 and around 7.2 million at the turn of the
century, a change that may have resulted from simple price increases.
An estimated 15,000 pack animals made three round trips annually on
14. This section is based on P. Miller, "Russkaia tranzitnaia torgovlia v XIX
veka," Russkoe ekonomicheskoe obozrenie, 1903 (no. 5), 96-105; (no. 6) 69-79;
N. A. Notovich, Russko-persidskie zheleznye dorogi (SPB, n.d. [1914?]), pp. 5-7;
N. Podderegin, Nuzhna li nam Transpersidskaia doroga? (Moscow, 1912), pp. 19-
21; John F. Baddeley, Russia in the Eighties (London, 1921), p. 162; P. M. Rom-
anov, Zheleznodorozhnyi vopros v Persii i mery k razvitiiu russko-persidskoi
torgovli, pp. 3-4; Curzon, Persia, I, 526, II, 565.
23







RUSSO-PERSIAN COMMERCIAL RELATIONS


the route to deliver about 500,000 puds of goods.'1 What did happen
was a shifting away from the Batum-Tabriz and Trabzon routes to the
Suez-Persian Gulf route of much of the goods that had been redistrib-
uted to Khorasan or the Hamadan-Kermanshah regions from Tabriz.
The closing of the Caucasus thus strengthened British trading houses in
southern Persia and Baghdad.
More important, and again contrary to the literature, the closing of
the Caucasus did not have a favorable impact on the flow of Russian
goods either into Azerbaijan or the rest of Persia. In the short run Rus-
sian exports declined because the end of free transit forced a number of
firms to relocate and drop the lines of Russian merchandise they had
formerly handled. The recovery was slow. In 1886 Europe's exports to
Azerbaijan totaled nearly 6.4 million rubles. Of the European total about
1,000,000 rubles was French sugar; Russian sugar stood at only about
123,000 rubles. Most of the remainder of European products were wool-
ens and cottons; Russia's woolens and cottons totaled only about 400,000
rubles. These figures pleased neither Kiev nor Moscow, especially since
they represented an improvement for Europe over those of 1883.10 Total
exports from Russia to Persia in 1882 stood at 4.4 million rubles, in
1883 at 3.6 million, in 1884 at 3.9 million, and in 1885 at 3.9 million.
In 1886 the total leaped to 6.1 million (Table 1). The great leap upward
resulted from a sudden and expanding influx of Russian sugar starting
that year. On May 1, 1886, the Russian government established a bounty
of 80 kopeks a pud on the export of sugar. In 1884 sugar constituted
15 per cent of Russia's exports to Persia; by 1889 its share rose to 61
per cent; the proportion of foodstuffs in Russia's exports rose from 26
per cent in 1885 to 70 per cent in 1890.17 With these data in mind, it
cannot be said the closing of the Caucasus was more than a mildly con-
tributing cause to the sudden increase of Russian commerce at the close
of the 1880's.

15. Romanov, p. 27; Curzon, Persia, II, 565; K. N. Smirnov, "Perevozochnye
sredstva Persii," Izvestiia shtaba Kavkazskago voennago okruga, 1909 (no. 24),
38; Great Britain, Accounts and Papers, "British Trade in Persia: Conditions and
Prospects" (Cd. 2146, 1904), p. 12; N. Schelkunov, "Torgovoe dvizhenie portov
Trapezonda, Kerassunda, Tireboli i Ordu v 1901 godu," Russia, Ministerstvo
Finansov, Sbornik konsul'skikh donesenii, V (1902), no. 5, 401-3 (hereafter cited
as SKD); M. P. Fedorov, Sopernichestvo torgovykh interesov na vostoke (SPB,
1903), p. 227.
16. Vestnik finansov, 1887 (no. 18), 279-81 (hereafter cited as VF).
17. VF, 1887 (no. 9), 537; 1888 (no. 35), 542; Romanov, p. 32; S. S. Osta-
penko, Persidskii rynok i ego znachenie dlia Rossii (Kiev, 1913) pp. 69-70, 110-11.
Even with the bounty, Russian sugar did not drive out Marseilles sugar until 1890.
24







ECONOMICS AND POLITICS


Other factors ignored while attributing all expansion after 1883 to
the closing of the Caucasus are the sealing of the Caspian Sea and the
commercial penetration of Khorasan. Russia stopped much smuggling of
European transit goods across the Caspian into Central Asia in 1883 by
strengthening the coast guard and border patrols on the Russo-Persian
Caspian border areas. The completion of the Transcaspian railway as
far as Merv, in conjunction with the other measures, finished the closing
of the borders of northern Persia to non-Russian commerce. The Batum-
Baku railroad and the Volga-Caspian water route provided relatively
cheap access to the Transcaspian area and the needs of the Russian
garrisons in Turkestan stimulated the economy of Khorasan. As early
as mid-1884 the flow of trade in Khorasan was turning north, passing
into Russia by way of Ashkhabad, Kizyl-Arvat, and Krasnovodsk. A
Russian trading company opened a branch at Barfurush early in 1885
and by 1892 there were four such firms in Khorasan, two of which
established contacts with Herat and had branches close to the Afghan
border. Russian consuls, once they were established, showed great initia-
tive, acting as sales agents for Russian manufacturers and displaying
samples of Russian goods. Combined with differential rates over the
Russian railways and subsidization of Russian exports, this activity
paid off: By 1890 half of the imports of Khorasan came from Russia
and more than half of the region's exports went there.1s
Russia's intensified activity and her closer propinquity to the north-
eastern provinces had a profound total impact on Russo-Persian trade.
From 3.6 million rubles in 1883, Russian exports rose to 10.9 million in
1890; imports from Persia rose from 7.7 million rubles to 10.8 million;
total returns rose from 11.3 million rubles to 21.7 million. The recorded
merchandise balance became less unfavorable to Russia (Table 1).
The intensification of Russia's commercial penetration paralleled, per-
haps was part of, plans to gain political domination. Early in 1886 the
British obtained two sets of secret Russian documents, one involving the
cession to Russia of large pieces of Khorasan, the other was probably
Kuropatkin's famous plan for the invasion of India. In September, 1887,
the British received a copy of a secret draft convention submitted to
someone in the Persian government: Russia would support Persia against

18. Curzon, Persia, I, 110, 170-71, 193, 201-2, 205, 207, 211-15, 283; II, 568-69,
581, 595; VF, 1883 (no. 12), 315; 1884 (no. 32), 395; 1885 (no. 17), 235; 1892
(no. 22), 492; 1901 (no. 10), 573; L. K. Artamonov, "O sovremennom polozhenii
Khorasana," Izvestiia Kavkazskago otdela Rossiiskago geograficheskago obsh-
chestva, X (1898), no. 2, 64.
25







RUSSO-PERSIAN COMMERCIAL RELATIONS


Turkey if Persia would permit Russia to use Khorasan as a base in the
event of an Anglo-Russian war.19
Though nothing came of the plots, the atmosphere at Tehran remained
tense; for early in 1887 Russia sent a new diplomatic representative,
Prince Nicholas Dolgoruky. Very obviously he was to initiate a more
active policy. His reputation confirmed this. The prince, a most ambi-
tious, unscrupulous, and arrogant man, had previous experience in the
country, and his connections with the royal family of Russia assured
that he would have strong influence in Persia and upon his government.
His appearance at Tehran initiated two running feuds: one between
him and the British diplomatic personnel, and another between him and
I. A. Zinoviev, a former Persia hand and Director of the Asiatic Depart-
ment of the Ministry of Foreign Affairs. Dolgoruky was a flamboyant
braggart, Zinoviev a representative of the school of Giers and Lams-
dorff-cautious and pacific.20
R. L. Greaves points out that British policy at this point had before
it two apparent alternatives. In view of Russia's evident desire to use
Persia, if necessary, as a springboard to India, the Foreign Office could
try to arrive at an agreement with Russia to exploit the country jointly
and cooperatively; or they could retaliate by obtaining equivalents for
every gain Russia won. Success of either policy would guarantee Brit-
ain's primary goals: Persia would remain a buffer between Russia and
the Indo-Afghan frontiers.21
To explore and carry out these policy alternatives Whitehall replaced
Arthur Nicolson, who had been charge d'affaires at Tehran for three
years, with Sir Henry Drummond Wolff. If anything, Wolff was as
flamboyant as Dolgoruky; he was a descendant of the famous Joseph
Wolff, and one of the founders of the Primrose League. He had eastern
experience and political power-a perfect counter to Dolgoruky. It was
as though the two governments were deliberately setting the stage for a
veritable opera bouffe to be played out between these two men who
could most cordially detest each other.22
Wolff could not make the policy of cooperation work. He did obtain

19. Greaves, pp. 106-7.
20. V. N. Lamsdorf, Dnevnik V. N. Lamsdorfa, 1886-1890 (Moscow, 1926),
passim; Firuz Kazemzadeh, "Russian Imperialism and Persian Railways," Harvard
Slavic Studies, IV (1957), 359-61, says the two men were friends, but the Lams-
dorff diary has left the writer with the opposite impression.
21. Greaves, pp. 122-23.
22. Thomas P. Brockway, "Britain and the Persian Bubble, 1888-1892," Journal
of Modern History, XIII (1941), 36 ff.; Greaves, pp. 120-21.
26







ECONOMICS AND POLITICS


Russia's renewal of pledges made several times earlier to respect the
territorial integrity of Persia. But Russia's Ministry of Foreign Affairs
looked on the progression of such agreements as mere temporary expedi-
ents relating to the peculiar circumstances of the moment; it did not
deem them binding. Wolff also broached the question of railway con-
struction and was told that this matter was for each of the respective
governments to take up. When Sir Henry referred to the delineation of
the borders of Khorasan, de Staal, Russia's ambassador, indicated that
this concerned only Russia and Persia. Thus, Wolff's London conversa-
tions had no positive results, and when it became manifest that the Rus-
sian military party interpreted schemes of cooperation as preparatory to
actual division of Persia between the two countries, Wolff's ideas along
this line began to look treasonous.23
This left the policy of retaliation, which would, if successful, coerce
Russia into reappraising her policy; for substantial British gains would
bolster Persia against Russia, invite extensive foreign investment, and
lead other parties to take an interest in the preservation of Persia's in-
tegrity.24 The Persian Question, like the Straits Question, might be
internationalized.
It was Russia herself who made the policy of retaliation possible.
Prince Dolgoruky was a most unpleasant and importunate man. And the
Shah's government did not exult at the flood of cheap Russian sugar
and cottons; it understood the implications of that flood in the same
terms as Curzon, who wrote a few years later that, "It is now a cardinal
axiom of Russian politics in the East that commercial must precede
political control; and the institution of mercantile agents and middle-
men, the opening up of means of communication, and the granting of
special exemptions and preferences to goods on their way to or from
oriental markets are invariable features of their Asiatic diplomacy."25
Before long the Persians solicited the British for help. They reported
that- Russia was justifying her actions in preventing the construction of
railways by referring to her interests in Central Asia: Persia must not
allow her internal affairs to clash with Russian objectives in Central
Asia, and Russia's interests to a certain degree limited the rights of
23. Sir Henry Drummond Wolff, Rambling Recollections (2 vols., London,
1908), II, 338-39; A. Popov (ed.), "Tsarskaia Rossiia i Persiia v epokhu russko-
iaponskoi voiny," Krasnyi arkhiv, LIII (1932), 16 (hereafter Krasnyi arkhiv will
be cited as KA); Baron A. Meyendorff (ed.), Correspondance diplomatique de M.
de Staal (2 vols., Paris, 1929), I, 402-3; Greaves, p. 133.
24. Greaves, p. 122.
25. Curzon, Persia, I, 205.

27







RUSSO-PERSIAN COMMERCIAL RELATIONS


Persia to conduct an independent policy. Russia could not permit the
British to build roads or lay rails that would threaten Russia. Persia
should favor Russian trade, not British; and Russia should have prac-
tical veto power over government appointments in northern Persia. The
Shah apparently was fishing for a guarantee of Persia's integrity. Nicol-
son, waiting for Wolff's arrival and aware of the line Wolff was to
pursue, evaded the issue. The Foreign Office could not commit itself with-
out reference to public opinion. If the Shah introduced reforms or
opened the country to British enterprise, a favorable attitude might re-
sult.26 In less mellifluent terms: If the Shah would accommodate British
concessionaires, he might expect support.
The last vestiges of Anglo-Russian cooperation resulting from their
joint resistance to railway projects had disappeared. The last instance
of mutual support was their joint effort against a railroad concession
acquired by Winston, a former United States Minister to Persia. Al-
ready, while dishing Winston, Nicolson broke the truce, on instructions
from the Foreign Office, by reviving the Reuter claims and talking rail-
ways with the Shah. Negotiations stretched out over a year, for Prince
Dolgoruky arrived waving the unresolved claims of another defunct
concession (the Boital concession of 1881 and 1883), the rights of which
had been purchased by the railway king Lazar Poliakov. During 1887
the opposing negotiations canceled each other out.27
The British negotiations died; Dolgoruky won a victory. Persistent
hectoring drew from the Shah a promise to Russia that he would not
grant concessions for the construction of railways or waterways to for-
eigners without prior consultation with her.28
Such was the situation when Wolff arrived at Tehran in the spring of
1888. Truce had changed to stalemate. Preaching cooperation while
pursuing retaliation, Wolff converted stalemate back into rivalry, ruin-
ing Dolgoruky's diplomatic reputation with three stunning coups. Within
weeks of his arrival he persuaded the Shah to promulgate a decree that
all Persian subjects were free from arbitrary judgment; they would be
secure in their lives, liberties, and possessions until they had received
due process before competent judges. The Shah suddenly was a Tory
democrat if not a Liberal.29 Then Wolff negotiated a decree that opened
26. Thornton, "British Policy in Persia," Eng. Hist. Rev., LXX, 56; see also
Harold Nicolson, Portrait of a Diplomatist (New York, 1930), pp. 50-51.
27. Popov, "Stranitsa," pp. 136-37; Popov, "Anglo-Russkoe sopernichestvo na
putiakh Irana," p. 133; Sobotsinskii, p. 114; Greaves, pp. 144-50.
28. Greaves, p. 149.
29. For the negotiations see Greaves, pp. 158-60; for the text see C. U. Aitchi-
28







ECONOMICS AND POLITICS


the Karun River to foreign ships, the announcement being made on
October 30, 1888, while Dolgoruky was with the Tsar's suite on a tour
through the Caucasus.30 Finally, he opened and successfully concluded
the negotiations that squared the claims of Reuter against the Persian
government and opened the British-sponsored Imperial Bank of Persia.
Most Persia hands, including the Russian experts, thought that the
opening of the Karun River guaranteed British commercial and political
domination of central, and possibly northern, Persia.31 Consequently,
the Shah's decree on the river seemed tantamount to a concession to
Britain. He seemed ready to tear himself from the arms of the bear to
try the claws of the lion: "Unfortunately, we well know that the shah
has fallen into the arms of the English and takes no action without their
advice," wrote the Russian charge d'affaires, M. de Poggio.32 Giers,
however, was more philosophical; he had seen many reversals and
counter-reversals in Central Asia. Russia's turn would come: "In reality
we are nowhere near the end of our resources in obtaining a number of
equivalents for the advantages which have been given the English gov-
ernment."33 Russia was prepared to retaliate against the rise of British
prestige.
Giers' first step was to inform the British that Russia did not think
they were playing according to the rules, but when he protested, Sir
Robert Morier, the British ambassador at St. Petersburg, casuistically
rejoindered that the Karun had been, after all, opened to everyone.
Giers, a diplomatic purist, perhaps ruefully smiled at Dolgoruky's dis-
comfiture fully as much as at Sir Robert's adroitness, but loyally retorted
that this was not at all the case, for only Britain could profit from the
route.34
We may be sure that most of the professionals joined in Giers' smiles
at the expense of the amateur, Prince Dolgoruky. Nevertheless, Russia's
honor seemed to demand a quid pro quo. The problem was to find one

son Compp.), A Collection of Treaties, Engagements, and Sanads Relating to India
and Neighboring Countries, XIII, The Treaties, etc., Relating to Persia and
Afghanistan (Calcutta, 1933), Appendix XX, pp. lxxvi-lxxvii.
30. For the negotiations see Greaves, pp. 161-67; the text is in Aitchison, The
Treaties Relating to Persia and Afghanistan, Appendix XXI, p. lxxviii.
31. W. F. Ainsworth, The River Karun: An Opening to British Commerce
(London, 1890); G. N. Curzon, "The Karun River and the Commercial Geography
of South-West Persia," Proceedings of the Royal Geographical Society, XII
(1890), 505-32.
32. Popov, "Stranitsa," p. 138, quotes the dispatch.
33. Meyendorff, I, 448.
34. Meyendorff, I, pp. 443-44.

29







RUSSO-PERSIAN COMMERCIAL RELATIONS


that would restore the apparent stalemate, the status quo ante Wolff. An
adequate red herring was the railway question, and soon Russia's diplo-
mats were fishing for railroads. This seems to be the best explanation at
this time for Russia's actions during 1889. Certainly she was not in a
position to build a railway in Persia when she had not yet built one to
the Far East. The British Foreign Office was probably quite correct in
assuming that the Russian Foreign Ministry did not favor a railway,
but had to throw a sop to Prince Dolgoruky, the military, and Alexander
III. As Russia began to probe the Persian government, Whitehall ac-
cordingly put up only token resistance, preferring that Russia should
obtain useless railway concessions rather than concrete advantages.35
At the same time the Foreign Office had to prevent Russia's paper
gains from touching the south even in theory: London permitted Reuter
to revive his claims. Early in 1888 a Belgian railway group had made
an advantageous offer to the Shah which Nasr-ed-Din was about to
accept when the enraged prince returned, reminded the Shah of the
promises of September, 1887, and threatened to break relations and
leave Persia in twenty-four hours. Caught between the Russians and
British, Nasr-ed-Din gave Drummond Wolff a copy of the agreement
with Russia, which had been kept secret, and on October 28 said that
he would not discuss the railway question for the moment with anyone.36
The Shah's renunciation of his agreement put Russia in a bad posi-
tion. She could do little about the revival of the Reuter claims, because
now they did not touch on the railway question, in which Russia had
a legitimate interest. The Reuter group would content itself with a bank,
but worried whether the Foreign Office would lend it full support-too
many victories for Britain might lead Russia to violence-so Reuter told
de Staal in December, 1888, that perhaps a modus vivendi was possible.
Reuter would lay a railway to Tehran from any point Russia should
indicate, trying to raise the capital himself, though he would not object
to Russian participation. Reuter's proposition struck a responsive chord;
soon Prince Dolgoruky was cultivating George de Reuter, the baron's
son, and talking about a conference between the baron and Russian
officials. Despite his arrogance, Dologruky was no fool, and his power
made him an effective, if high-handed, negotiator. At the same time he
suddenly started to talk again of joint railway projects with Wolff.37

35. Thornton, "British Policy in Persia," Eng. Hist. Rev., LXX, 62-63.
36. Greaves, p. 149n5; Popov, "Stranitsa," p. 138.
37. Ter-Gukasov, pp. 119-20; Greaves, pp. 170-71; Popov, "Stranitsa," p. 139;
Meyendorff, II, 13.
30







ECONOMICS AND POLITICS


Wolff, however, had already closed Russia's option with Reuter. In
January, 1889, the Shah signed a concession enabling the baron to
establish a bank. Russian opposition, though bitter, proved futile. The
Rothschilds would not support the proposal, but Reuter was able to in-
terest other powers in the City, and the bank received a British charter
in August, 1889, timed to correspond with Nasr-ed-Din's European
visit.38
The grant of the bank concession removed the last legal barrier to the
acquisition of railway concessions. It also was another advance to be
chalked against the Russian ledger, and the increase of British prestige
called for a Russian demand for compensation, a demand to which in
all fairness the Foreign Office would have to give way, particularly as
the reluctant consent of Persia to permit the establishment of'a Russian
consulate at Meshed had been matched by a similar privilege given to
the British.39 Whitehall was probably relieved when Dolgoruky won a
railway coup in March, 1889.
The Ministry of Foreign Affairs had a negative attitude toward Per-
sian railways, but it had to temper its opposition to the hopes of the
military party and Russian capitalists. During February, 1889, it de-
cided to obtain the Shah's agreement to refrain from granting railway
concessions in Persia for a four-year period, time which would calm
ruffled feelings and permit research on the possible routes eventually to
be built. To Prince Dolgoruky this perhaps seemed too much like pro-
posals the British had occasionally put forward for a moratorium, and
he either misunderstood or interpreted his instructions, particularly
since they came from the Zinoviev circle. In any event, it appears he
wanted his diplomatic victory, and asked the Shah for five years instead
of four. This caused Giers and Lamsdorff much worry, but eventually
they decided the prince was demanding five years to have a better bar-
gaining position-he could gracefully reduce the term to four years as
the negotiations progressed. Nothing could have been farther from
Dolgoruky's mind, for early in March he bullied Nasr-ed-Din into agree-
ing orally not to permit railway construction for five years except by
Russia or Russian concessionaires.40
Here was a breakthrough that opened prospects of unlimited opportu-
nities, but the Foreign Ministry did not want opportunities; it wanted
the question postponed. It knew that Nasr-ed-Din had earlier given Brit-
38. Meyendorff, II, 17, 28, 31-32, 39-40, 47-48.
39. Greaves, p. 171.
40. Lamsdorf, pp. 151, 154-56; Popov, "Stranitsa," p. 140.
31







RUSSO-PERSIAN COMMERCIAL RELATIONS


ain an oral assurance that she would have rights of first refusal on rail-
way construction in the south. It also knew, from an intercepted and
decoded telegram from Sir Henry to London, that the Shah had kept
the British informed and that they would demand the right to build in
the south if Russia built in the north; London also was prepared to ex-
ercise its right to undertake the construction of the southern portions of
any proposed trans-Persian or Indo-European line.41
It would not do, however, to reverse Dolgoruky's position. Instead,
Giers increased the pressure, deciding to keep the Shah in doubt as to
whether he could pass through Russia on his way to Europe and as to
whether the Tsar would receive him. Dolgoruky was to let Nasr-ed-Din
know that Russia had discovered the true value of his solemn promises.
She must have a clear and exact declaration giving her a five-year
monopoly of all railway construction in Persia, a declaration that would
not require her to commence construction before the term expired.
Toward the end of March the Shah signed. The Ministry of Foreign
Affairs thought it had thus nullified British rights.42
I. A. Zinoviev, however, questioned the value of Dolgoruky's achieve-
ments, for unless the Shah withdrew the promises to Great Britain those
to Russia meant nothing. He wanted Dolgoruky to cause Nasr-ed-Din to
retract his assurances to the British, but Lamsdorff interceded, observ-
ing to Zinoviev that it would not work; would it not be better to let the
Shah know that Russia interpreted the document in a certain way, and
then negotiate when difficulties arose?
Lamsdorff's caution was justified, for the Shah shortly renewed his
commitments to Britain.43 Zinoviev appears to have wanted railways in
the north, while Dolgoruky was thinking of a more general program.
Nasr-ed-Din's adroit maneuver signified that no railway would be con-
structed in Persia. This is the meaning the Russian Foreign Ministry
attached to the affair, and all except Zinoviev were satisfied. But the
Ministry had still to reckon with the power of Dolgoruky and the mili-
tary and the persistence of Russian financial circles whose appetites two
years of negotiation had only whetted.
Lazar Poliakov was not discouraged that he had been merely a front
against Reuter in 1886-87. During 1888 he approached the Ministry of
Foreign Affairs with a project for a railway from Resht to Tehran.
Other Russian groups were interested. Soon Konshin and Osipov,
41. Lamsdorf, p. 169; Popov, "Stranitsa," pp. 141-42.
42. Lamsdorf, pp. 169, 177; Popov, "Stranitsa," p. 140.
43. Lamsdorf, pp. 183, 187, 191, 194, 202.
32







ECONOMICS AND POLITICS


bankers and traders with extensive interests in the Caucasus and Turke-
stan, appeared in the Tehran scenario. The Poliakov and Osipov-Konshin
schemes foundered. The Ministry of Foreign Affairs hoped they would
never be salvaged.44
Events of late 1889, however, indicated that the Shah was restive.
The opening of the Imperial Bank was one symbol. The bank soon an-
nounced that it had purchased a concession for a metaled road from
Ahwaz to Tehran. It was apparent that road concessions could vitiate
Russia's monopoly. This made it an awkward matter, for as Curzon
remarked: "Russia, in fact, had it placed in her power either to promote
railway enterprise in Persia tomorrow by starting a company or apply-
ing for a concession herself, when she would certainly not long remain
alone in the field; or absolutely to close the door for five years against
any railway enterprise at all by declining to exercise her own prefer-
ential right.'45
Decisions were necessary: Should Russia risk British action in the
south by construction in the north? should she cast dice for a trans-
Persian railway? or should she exercise her power of prohibition, and
if so, what should she do to counter the proposed roadbuilding? Giers
and Vyshnegradsky were skeptics about things Persian-there was the
Far East to worry about. Zinoviev, who was interested in schemes for
construction in the north, particularly in Khorasan, opposed the exten-
sion of a system toward the Gulf; when faced with the probability of
retaliatory British construction from the Gulf toward central Persia, he
capitulated to Vyshnegradsky's and Giers' views to become a fervent
opponent of railways in Persia on principle.46
Thus, in 1889, when a new Russian group approached the Grand
Vizier with a request for a concession for a railway from the Caspian
Sea to the Indian Ocean at Chahbar, there was strong opposition within
their own government. The British, when they learned of the pour-
parlers, reminded the Shah of their prior rights in the south. He asked
the two powers to agree on the railway question, but Russia failed to
respond, feeling that Britain would try to press for a general arrange-
ment on the Central Asian Question. The officials believed they could
not obtain a favorable settlement and preferred to leave the problem in
abeyance, though they had already decided to cease all but minor
probing in Central Asia.47
44. Popov, "Stranitsa," pp. 138-39; Ter-Gukasov, p. 120.
45. Curzon, Persia, I, 623. 46. Greaves, pp. 171, 178; Lamsdorf, p. 221.
47. A. Popov, "Anglo-Russkoe sopernichestvo v Persii v 1890-1906 gg.," KA,

33







RUSSO-PERSIAN COMMERCIAL RELATIONS


In November, 1889, the syndicate appealed to their government. Some
months earlier the concerned officials had decided upon a ministerial
council to make a final decision. Zinoviev was delaying the meeting
while he canvassed support for the position of Giers and Vyshnegradsky.
The new syndicate, however, had resourcefulness and power. Zinoviev's
enemy, Dolgoruky, had been recalled from Tehran in July (he was re-
placed by Butzov), and was now attached to the Imperial Suite. The
syndicate's members were Osipov, Tretiakov, Baron Korff, N. A. Khom-
iakov, Boris and Lazar Poliakov, and Leo Raffalovich-all wealthy men.
They had connections with Pobedonostsev and obtained the support of
von Hubbenet, the Minister of Communications. Dolgoruky and von
Hubbenet interested Tsar Alexander III in the problem. Alexander in-
sisted upon the meeting, and was severe in his attitude; Giers was forced
to schedule it for early February, 1890.
This was sufficient delay. During December Zinoviev denounced the
project vehemently: The Shah's inability to control the Baluchi made
the concession a chimera. The construction of any railway whatsoever
was undesirable. The present agreement with the Shah ought to be
lengthened; a new one could be drafted that would completely prohibit
railway construction in Persia for a fixed period of time.48
When the council met on February 16, 1890, Zinoviev and his col-
leagues won their point.49 The meeting marked a policy turning point.
The bureaucrats weighed Persia and the possibility of increased tension
with Britain against the need for consolidation in the Far East: They
could not build Transpersian and Transiberian railways at the same
time. The argument was almost unanimously against a forward policy.
Privy Councillor Abaza (Chairman of the Department of State Econ-
omy of the State Council) opened the discussion and set its tone.
Would the proposed railway be viable? Should an Indo-European rail-
way traverse Russia? Would a railway through Persia further Russian
interests? Would it earn its way? Vyshnegradsky opened the attack:
The Poliakov-Tretiakov-Korff-Khomiakov Syndicate had adequate back-

LVI (1933), 35-36; Popov, "Stranitsa," pp. 139-40; Sobotsinskii, pp. 95-96;
Lomnitskii, Persiia i Persy, pp. 209-12; Medvedev, Persiia: Voenno-statisticheskoe
obozrenie, pp. 225-26; P. A. Rittikh, Zheleznodorozhnyi put' cherez Persiiu (SPB,
1900), p. 13.
48. Lamsdorf, pp. 221-22, 224, 240; K. P. Pobedonostsev, K. P. Pobedonostsev,
i ego korrespondenty; pis'ma i zapiski; Novum Regnum (Moscow, 1923), pp.
694-97, 705-10, 734-35, 844-46.
49. The following account is based on Popov, "Anglo-Russkoe sopernichestvo
v Persii v 1890-1906 gg.," pp. 37-49.
34







ECONOMICS AND POLITICS


ing from the Comptoir d'Escompte, but it appeared that only France
would profit; the bank would control all orders for construction material
and place them with French firms.
Vannovskii, Minister of War, said the project threatened Russian
hegemony over the Caspian Sea and its basin. The idea might be ac-
ceptable if the route were to extend from Julfa, on the Persian border,
to Tehran by way of Tabriz, and thence to Chahbar. This would put
pressure on Turkey and screen the route from the Caspian Basin. Van-
novskii's colleagues, Obruchev (Chief of the General Staff) and von
Hubbenet, did not quite agree: It was desirable to act quickly to fore-
stall the British and to maintain Russia's prestige.
Giers brushed aside their implied criticism, saying that in 1873 the
railway question had been more important. The positions of Russia and
Great Britain had now reversed, and the question had lost its urgency.
Insisting on the construction of a railway might drive the Shah into
British arms, Giers did, however, concede the importance of a railway
to Tabriz. The general problem had two parts: (1) Should they con-
strain the concessionaires to build merely the railway from Julfa to
Tabriz, or press Persia for the whole project; and (2) how could Russia
prevent Britain from constructing railways in Persia? The matter was
not only one of finance and economics, but one of high policy.
Abaza supported Giers: While Russian influence in Persia had fluctu-
ated during the previous seventeen years, they could not say it had
declined. The construction of the railway in Central Asia had achieved
the ends sought in the Persian railway projects proposed from time to
time during the years of expansion toward Merv. The problem was how
to prevent the British from increasing their influence; Russia's position
in the north was not involved, for it was impregnable.
The arguments on the political side were evenly weighted. The ques-
tion now hinged on the financial pros and cons, and Abaza began the
major attack. Before deciding whether a railway to Tabriz would have
any commercial value, he said, they must learn whether the railroads
in the Caucasus and the opening of the Suez Canal had diverted the
flow of trade into Persia away from Tabriz. Abaza pointed out the diffi-
culty of tying Caucasian railways to the Russian system, a connection
that would be necessary both for the completion of the Indo-European
railway and for the commercial utility of the proposed Julfa-Tabriz
road. The expenses would reach the neighborhood of 34,250,000 rubles.
Vyshnegradsky thought Russian trade would be aided more and with
less expense by improvement of Persia's northern ports and warehouses,
35







RUSSO-PERSIAN COMMERCIAL RELATIONS


improvement of transport on the Caspian Sea, and the construction of a
metaled road from Resht to Tehran. The railway, he added, might
charge high rates because of the tremendous costs and not aid trade
with Persia at all. He noted that it would terminate at Chahbar and
would therefore cross part of Persian Baluchistan where there were
tribes that did not acknowledge the Shah's sovereignty. The route of
the southern portion would have to change in the direction, probably, of
the Karun River. This meant difficulties, because of the British position
on southern railways and the inevitable conflict with British interests
in the Persian Gulf. He said he was worried about the terms of the con-
cession, which were apt to give rise to vexing problems. The concession-
aires had promised him that these would be settled in accordance with
the requirements of Russia, but the problem still disturbed him. Prefer-
ential attention should be given railways in northern Persia. The con-
nection of Tabriz with the Russian rail system was strategically and
politically desirable, and sooner or later it must be made. But, having
given with one hand, he took with the other: Construction in the north
must wait upon the availability of finances.
Giers, hardly able to disguise his satisfaction, piously acknowledged
that economic penetration must continue, but questioned the value of a
north-south railroad for this purpose. If it spread Russian goods and
influence in the south, it would do the same for the British in the north.
Improving the existing means of transit would be more advantageous
than building a railway. The political risks, he argued, were too great.
In Persia civil war was always possible. While Russia could defend the
route's northern portion, the safety of its southern part would at best be
uncertain. Moreover, Britain's interests in the south and her probable
disposition to defend them deserved further consideration. To forestall
countermeasures, Russia must obtain a naval base on the Persian Gulf.
In view of these complications they must weigh their decision carefully.
Zinoviev clinched the argument for the opposition. For the same
amount of money as would be spent on a railway, Russia would obtain
better results if she improved the Resht-Tehran, Astara-Ardabil-Tabriz,
Julfa-Tabriz, and Meshed-Ashkhabad roads. It was most important to
prevent the construction of railways in the south by Great Britain.
Prince Dolgoruky's faction was defeated. He concluded the meeting
by agreeing that the Julfa-Tabriz route deserved priority. When built,
it might be extended into the south at some more propitious future date.
An Indo-European route might improve Russia's position in Persia, but
the accompanying difficulties required further deliberation. He com-
36







ECONOMICS AND POLITICS


mented that after Russia's announced intentions to sponsor a railroad
project, it might prejudice her interests to drop the plan completely, and
bitterly remarked that although Russia enjoyed a strong predominance
in northern Persia, she must still consider means of increasing her in-
fluence in the south-though this might require significant sacrifices.
The Ministerial Council then formulated the basis for future policy:
(1) For the implementation of the project for Indo-European transit
through Persia, it would first be necessary to conduct preliminary sur-
veys from the Caucasian frontier to the Persian Gulf. The Russian min-
ister at Tehran should discuss running surveys through the country
with Nasr-ed-Din's government, Russia to pay the expenses and supply
the personnel. (2) To improve Russian trade, the caravan tracks be-
tween the cities of northern Persia should be improved to accommodate
wheeled traffic, and the ports on the Caspian Sea should be joined to the
proposed road system. (3) A railway should be built from Julfa to
Tabriz, but the problem of linking it with the Russian rail system must
require the Russian government to await further surveys in the Caucasus
and the extension of a railhead to the Persian border.
Thus Russia put off the railway question and continued the policy of
quiet economic penetration. What remained was to prevent Great Brit-
ain from commencing construction in the south; if this occurred the
February decisions would have to be reversed.
During the next nine months the legation at Tehran worked to per-
suade Nasr-ed-Din to extend the prohibition and monopoly to the end
of his lifetime, or for at least ten years. At the end of the term the two
governments would consult about the future. The British asked for a
tripartite arrangement by which all three parties would agree to a post-
ponement of the question for a decade. When Morier broached the sug-
gested agreement to Giers, the Russian could not conceal his delight;
for he knew then that Britain would accept a fait accompli of just sev-
eral days before.50 Russia had concluded her agreement with Persia.51
Britain's tacit acquiescence signified to her the conclusion of a gentle-
men's agreement to neutralize Persia for a decade. To Russia it meant
nothing of the sort; perhaps out of deference to Nasr-ed-Din and his
consummate skill in maneuvering between his two tormenters she was
willing to put off the construction of railways in Persia-along with the
political questions it would involve-until her position improved. Far
50. Greaves, pp. 180-81.
51. Hurewitz, Diplomacy in the Near and Middle East, I, no. 95, 207. This
agreement was later extended to 1910.
37







RUSSO-PERSIAN COMMERCIAL RELATIONS


from being a series of meaningless resolutions, the decisions taken in
the ministerial conference earlier in the year were the basis for a far-
reaching program of economic penetration designed to make Russia
paramount in Persia. The political and diplomatic battles of the troubled
generation, 1870-90, were transformed into economic competition.


38









3. RUBLE IMPERIALISM


The decisions of February, 1890, were for some time mere pious
wishes. Russia and Britain both were willing to relax political pres-
sure on Persia until at least the death of Nasr-ed-Din Shah. Maintain-
ing the program of state-supported commercial penetration, Russia edged
out most of her trade rivals except Britain; the British let Russia pursue
what seemed to be non-strategic interests, allowed execution of their pol-
icy to weaken, drifted gradually into isolation, and were burdened at the
end of the 1890's with the Boer War. Toward the end of the nineties
Russian economic penetration accelerated and took on a more obviously
political cast. This resulted in part from the generally frenetic activity
of Russia in the Orient, which the Central Asian specialists wished to
share with the Far Eastern adventurers, but local circumstances were
equally important. These were the threat of the Baghdad Railway, which
suddenly loomed ominous in 1899; the possibility of reaping gains from
the Boer War; the imminent termination of the railway agreement of
1890; the construction of Indian railways toward the border of Afghan-
istan and the consequent rejuvenation of the Nushki-Sistan trade route;
and the appointment of the redoubtable imperialist Russophobe, Curzon,
as Viceroy of India. The assassination, consequently, of Nasr-ed-Din on
May 1, 1896, initiated a Tsarist Point Four program.
The decisions of 1890 suddenly became important: Russian roads,
loans, port concessions, a bank, insurance companies, transport compa-
nies, cotton gins, colonization projects, railway surveys, a cigarette fac-
tory, warehousing and wholesaling establishments-all reflected the
"Witte System" in action, all helped to improve Russia's position so
considerably that on the eve of the Russo-Japanese War she dominated
Persia economically and militarily, and barely missed dominating her
politically.
One of the more spectacular Russian involvements in Persia's econ-
omy was a bank variously known as the Russo-Persian Bank or the
Loan and Discount Bank of Persia. The Imperial Bank of Persia had
been a victory of British diplomacy. It monopolized the printing of
paper money. Serving as the state depository, it identified itself with
Persian interests. After 1893-94 its careful management won it great
respect and, since it was a British institution, the representatives of
Great Britain in Persia were somewhat warmed by its reflected glory.1
1. Because the decline of silver in the early 1890's had hurt the bank badly,
39







RUSSO-PERSIAN COMMERCIAL RELATIONS


The establishment of the British bank disturbed Russia, being a pre-
cipitant of the near-crisis of 1890. Demands for a quid pro quo led to
Lazar Poliakov's being rewarded for not getting a railroad by the grant
of a bank concession. Thus, he and Reuter obtained exact equivalents.
The enterprise was to be a sort of monte de piete. Of the founding capi-
tal (around 2,000,000 francs) about half went for the usual perquisites
to Persian officials; the fall of silver and Poliakov's peculations ate away
most of the remaining funds, and the venture degenerated into a mere
pawn shop by 1895.2
In 1897 Poliakov was about to liquidate, take his losses (if any), and
merge his operation with the Imperial Bank when Witte learned of the
situation. Immediately the State Bank of St. Petersburg made advances
on the shares, and soon the Ministry of Finance controlled the enter-
prise. Poliakov became a figurehead and the bank took on an entirely
different role. Its activities by 1914 spread all over northern Persia with
the establishment of branches at Tehran, Astarabad, Meshed, Resht, and
Tabriz; of agencies at Barfurush, Kashan, Nishapur, Kazvin, Bandar
Gez, Isfahan, Kuchan, Sebzawar, Mohammedabad, Urmia, Hamadan,
Birjand, and Enzeli; a Russian branch at Nizhnii-Novgorod; Russian
agencies at Astara, Ashkhabad, Baku, Julfa, Merv, and Moscow; and
correspondents in Kermanshah, Mazanderan, Khorasan, Sistan, Torbat,
and Shiraz.3

this reflection was from a tarnished surface. The bank's directors, aware of the
vagaries of Persian finance, mistakenly invested over 250,000 in Indian gov-
ernment bonds, redeemable in silver rupees. The bank's reserve fell to around
600,000 when silver fell. It weathered the reverse, and superb management
brought it back to a strong position by 1900. Through manipulation of the money
market the bank held the value of Persian coin above that of its silver content,
purchasing silver coin and smuggling it into Central Asia, where it was over-
valued. The flow of Persian krans into Central Asian hoards slowed the decline of
Persian coin by creating a shortage. Russia thus helped finance an institution she
hated. See M. L. Tomar, Ekonomicheskoe polozhenie Persii, pp. 116-25; Esfandiar
Bahram Yaganegi, Recent Financial and Montetary History of Persia (New York,
1934), pp. 61-62; L. M. Kulagina, "Iz istorii zakableniia Irana Angliiskim Kapi-
talizmom (Shakhinshakhskii bank v poslednee desiatiletie XIX v.)," Kratkie
soobshcheniia institute vostokovedeniia, XIX, (1956), 3-13; Parviz de Peyamiras,
Methodes d'interventionnisme economique en Iran (Geneva, 1945), pp. 160-69;
Lomnitskii, Persiia i Persy, pp. 195-96; VF, 1907 (no. 24), 413; Henry James Whig-
ham, The Persian Problem (London, 1903), p. 360; N. I. Shavrov, Vneshniaia
torgovlia-Persii i uchastie v nei Rossii (SPB, 1913), p. 82; D. D. Beliaev, "Ot
Ashkhabada do Mesheda," Istoricheskii vestnik, XCVI (May, 1904), 564-65.
2. Tomar, pp. 105, 125.
3. P. A. Rittikh, Otchet o poezdke v Persiiu i Persidskii Beludzhistan v 1900 g.
(SPB, 1901), p. 76; A. Henry Savage-Landor, Across Coveted Lands (2 vols.,
New York, 1903), II, 143-44; Popov, "Tsarskaia Rossiia i Persiia," p. 17n3.
40







RUBLE IMPERIALISM


E. K. Grube, of the Ministry of Finance, became the bank's first
manager. He was a member of Witte's personal staff, and his connec-
tions with the Imperial Suite cause one to suspect that the finances of
the Russian royal family were involved in the enterprise. Grube's con-
trol over the bank was absolute, and the bank became pure and simple
an instrument of Russian policy.4
Russian economic policy was a corollary of Witte's program for the
economic absorption of Russia's borderlands and oriental neighbors. A
contemporary comment will serve to illustrate the results: "The history
of Mozaffer-ed-Din's reign had been that of a long absorption, military,
financial and commercial of the ancient realm of Iran by Russia; and
Persia's other neighbors, Great Britain and Turkey, had seemed to stand
helplessly aside and to make no real effort to save her."5 The implica-
tions were clear: "Russia prefers a feeble and bankrupt Oriental neigh-
bor to an annexed dependency. She has learned the secret of ruling an
Eastern State through its nominal owners, if only they are weak, cor-
rupt, and in her pay. It is a device which can be combined with all the
external forms of respect for existing treaties; it does not conflict with
the technical maintenance of the status quo; it spares the susceptibilities
of other powers; it minimizes the danger of international complications;
it gives a maximum of power with a minimum of responsibility."6
If Russian words are needed to prove that economics was only one of
the tools of diplomacy, then the statement of Lamsdorff in his instruc-
tions to a new Russian minister to Persia in 1904 will suffice:

The main object that has been pursued by us ... in the course of a
long contact with Persia, may be defined in the following manner: To
preserve the integrity and inviolability of the Shah's domains, not seek-
ing territorial increases for ourselves and not permitting the dominance
of a third power, gradually to subject Persia to our domination without
the violation, however, of either the external signs of Persia's independ-
ence or her internal structure. In other words, our task is: politically to
make Persia obedient and useful; that is sufficiently strong to be a tool
in our hands-economically, to preserve for ourselves the major share
of the Persian market for free and exclusive exploitation by Russian
efforts and capital. This close relationship and its consequent economic
4. United States Department of State, Despatches from United States Ministers
to Persia (12 vols., Washington, D. C., National Archives, 1957), XI, no. 25, Gris-
com to Hay, November 25, 1902, p. 5; DDF, Ser. 2, IV, no. 17, 27; Graf S. lu.
Vitte, Vospominaniia (3 vols., Berlin, 1923), I, 169-71.
5. Sir Arthur H. Hardinge, A Diplomatist in the East (London, 1928), p. 345.
6. Sir Valentine Chirol, The Middle Eastern Question (London, 1903), p. 298.
41







RUSSO-PERSIAN COMMERCIAL RELATIONS


and political results, when attained by us, will result in a substantial
foundation upon which we can carry on fruitful activity. . 7

Thus, the activities of the Russian bank were directed toward only semi-
economic goals, to control a market in order to control a nation. To con-
trol a market one drives out competition. Grube was practically sworn
to ruin the British bank and adopted ruthless means, turning his insti-
tution into a bank in name only.
On the financial side, the Loan and Discount Bank loaned and dis-
counted in peculiar ways. If a man wanted to borrow money it would
provide, "a quotation fractionally more favourable than that at which
the Imperial Bank had offered to do business. The Russian Bank in-
variably asked what rates the British Bank quoted, and gave its own
quotation accordingly."8 It sold drafts and discounted bills at less than
the market rate-provided the client was dealing in Russian goods.
Since it could borrow in Paris at 4 per cent and loaned to its clients at
a minimum of 6 per cent, usually more, the purely financial end of its
business was probably profitable.
Between 1899 and 1905 it carried on rather curious business opera-
tions. It became a commission agency, export commission house, export
broker, confirming house, and general export-import merchant-all in
one. It received indents from local clients and placed orders through its
branches and agencies at Baku, Nizhnii Novgorod, and Moscow. It ex-
tended most favorable credit terms, and often bought goods from Rus-
sian manufacturers on its own account. It opened a warehouse in
Tehran, and its provincial branches and agencies displayed exhibitions
of Russian goods which they were prepared to purchase on indents.
Branch managers collected samples of local printed textiles, sent them to
Moscow, and had lots made up for the bank to buy and sell on its own
account. In 1902 it even sent a caravan of Russian goods (40,000 to
50,000 rubles worth) to Sistan to be sold by its newly opened agency
there. It bought tea in the Indies for clients in northern Persia.9
Details of its techniques are not, unfortunately, clear in the Russian
literature, but enough is at least hinted at to confirm the exposures in
several British reports, which were not bound by official reticence. A
transaction in Tabriz appears to be typical:
7. Popov, "Tsarskaia Rossiia i Persiia," p. 18.
8. Chirol, p. 60.
9. A. H. Gleadowe-Newcomen, Report on the British Indian Commercial Mis-
sion to South-Eastern Persia during 1904-1905 (Calcutta, 1906), pp. 17, 77; Great
Britain, Accounts and Papers, British Trade in Persia: Conditions and Prospects
42







RUBLE IMPERIALISM


The client lodged a margin (his own promissory note) with the in-
dent. On arrival of the goods the bank debited him with invoice cost
and charges in roubles, plus 2 per cent. commission, and interest ran at
8 per cent. from date of arrival. The client paid 33 per cent. of the
amount in krans, for which he was granted a rate of exchange 1 to 11/2
per cent. better than the ruling market rate of the day, and received de-
livery of the goods. The balance was payable within six months at
clients' option. The client at the same time obtained a three-months
option at the same favourable rate of exchange for any payments to ac-
count of the balance due in roubles (being thus at liberty during these
three months to pay at the current rate of exchange if rates turned in
his favour). The option in exchange was probably an exceptional condi-
tion, but the bonus of 1 to 11/2 per cent. on the market rate of the day
was for a time constantly granted to applicants for drafts able to prove
such remittances were in payment of merchandise purchased in Russia.
The purchaser of a fair consignment (say 100 bales) could leave the
goods with the bank for any period up to six months, paying interest at
6 per cent. only.10

The bank assisted Persian importers in other ways: It advanced the
money, at 4 to 6 per cent less than market rate, for payment of customs
dues, and cleared goods through customs and warehoused them (at only
a 2 per cent commission). It permitted customers to take only partial
delivery of their orders, charging lower interest rates on the value of the
goods left in its warehouses-provided, of course, the clients were deal-
ing in Russian goods."
The Loan and Discount Bank helped develop certain Persian re-
sources, the exploitation of which would prove advantageous for Russia.
By 1904 its activities were so intensive that the Ministry of Finance
increased its investment to 21,350,000 rubles and opened an additional
credit of 10,000,000 rubles with the State Bank, of which 4,800,000
were in use. It monopolized loans on security in Tehran, probably taking
a loss because the rates were around 12 per cent, which is too low for a
pawning business (30 to 40 per cent is more normal); and it appears
(Cd. 2146, 1904), p. 5; L. F. Bogdanov, Persiia v geograficheskom, religioznom,
bytvom, torgovo-promyshlennom i administrativnom otnosheniiakh (SPB, 1909),
pp. 101-4; Rittikh, Otchet, pp. 77-80; A. Miller, "Torgovlia Seistana v 1903-1904
godu," SKD, VII (1904), no. 4, 254; Fedorov, p. 241; A. Bogdanovskii and L.
Ruma, Ocherki i issledovaniia, ch. II, Persidskaia torgovlia, pp. 15-19; Naoroz M.
Parveez, "Indo-British Trade with Persia," Asiatic Quarterly Review, 3rd Ser.,
XXIII (January, 1907), 26.
10. British Trade in Persia, pp. 50-51.
11. Gleadowe-Newcomen, p. 17.
43







RUSSO-PERSIAN COMMERCIAL RELATIONS


that the pawn shop was a political measure designed to create good will.
The bank's low interest rates drove bazaar rates to a minimum (thereby
earning ill will from the moneylenders). It construed the right to loan
money on security as a privilege to mortgage property, and by 1914 it
has placed an estimated 48,000,000 rubles in mortgages. Nor were these
the only ramifications of its activity: One expert claims it financed
about 80 per cent of Russia's sugar export to Persia. It owned several
industrial establishments and was the financial agent of most of the
Russian concessions in Persia.12
The Russian bank was itself an exporter of Persian goods to Russia.
In the provinces it opened credits to local landlords, or through inter-
mediaries to peasants, obligating them to give the bank options to pur-
chase their silk, rice, dried fruit, sheep fells, carpets, cotton, or other
raw materials. In Gilan it brought about a revolution in the financing
of the production of raw silk, virtually expelling the French and Greek
middlemen and replacing them with Persians, Armenians, and Rus-
sians.13
This, however, is only one side of the story. Even with state support
Grube failed to ruin the British bank, the position of which as state
depository and holder of the privilege of printing paper money doubled
its capital. Manipulation of its note issue and the silver market earned
the Imperial Bank large paper profits and depreciated the resources of
the Russian bank, so much of whose funds were loaned out to Persian
merchants who would pay their loans in silver coin when it was cheaper
than usual.14
On the other hand, the Russian bank could hold the Imperial Bank's
notes and release them to cause a run. This was done several times, and
once the Russian bank could have caused its rival to close. In 1898
there was a sudden run engineered probably by moneylenders in the
bazaars; it lasted several days and the British manager rushed around
Tehran trying to find gold to meet the sudden demand. Grube had about
700,000 rubles worth of the British bank's notes in his vaults; simply
12. Popov, "Anglo-Russkoe sopernichestvo v Persii," pp. 50, 61; Lomnitskii,
p. 197; Ter-Gukasov, Ekonomicheskie i politicheskie interest Rossii, p. 111; V. M.
Gur'ev, "Poezdka v Tavriz," Istoricheskii vestnik, CXXVII (June, 1912), 990-91,
13. A. Miller, "Torgovlia Seistana v 1903-1904 godu," SKD, VII (1904), no. 4,
256-57; M. Nikol'skii, "Torgovlia Giliana v 1908 godu," SKD, XII (1909), no. 2,
p. 121; S. Olferev, "Shelkovodstvo v Giliane," SKD, VII (1904), no. 4, 322-26;
S. Olferev, "Shelkovodstvo v Giliane v 1904 i 1905 godakh," SKD, VIII (1905),
no. 6, 454; A. Shtritter, "Shelkovodstvo v Giliane v 1906 godu," SKD, X (1907),
no. 4, 316-18.
14. Ter-Gukasov, pp. 114-17.
44







RUBLE IMPERIALISM


by releasing them he might have ruined his competitor. He did not act,
for Russia needed the Imperial Bank. British and foreigners in Persia
discounted bills of exchange as part of their normal business. Persia's
balance of trade with Russia was favorable, and Persians dealing with
Russians trading in Persia therefore got better terms from the Imperial
Bank, which could get favorable prices for both rubles and krans in
western Europe. Accordingly, they carried on most of their discounting
through the Imperial Bank, which was consequently as valuable an agent
of Russian economic penetration as the Russian bank, especially at this
early date. Grube, therefore, not only refrained from releasing his
supply of notes for conversion, but actually loaned specie to the Imperial
Bank to tide it through its crisis.15
The Russian bank's commercial activity was not beneficial in the long
run and may have damaged the prospects for Russian trade expansion.
In 1901 a government-sponsored trade mission went to Persia. The
members traveled through the country to assess the tastes of the popula-
tion and the needs of the markets, to establish competition in areas
where non-Russians held the market, to learn to conduct their rivalry in
ways conducive to success, to develop wholesaling of Russian goods, and
to open warehousing facilities. In 1903 a syndicate of firms, a Who's
Who of the Russian textile industry (Zindel, Iasiuninskii, Baranov,
Morozov and Family, Thornton, A. Ia. Poliakov), concluded an agree-
ment to open a wholesaling establishment at Tehran. The Russian bank
competed with them; because of its access to cheaper money, it drove
their syndicate out of business, but took such losses that by 1905 it com-
menced only to take orders for Russian goods on commission. The affair
was widely known and dampened the enthusiasm of Russians who would
otherwise have developed direct contacts with the Persian market. Trade
with Persia continued to be carried on primarily through Baku, Nizhnii
Novgorod, and Ashkhabad; few Russians firms established offices in
Persian cities.16 The bank thus sometimes worked at cross purposes to
the general policy and squandered the resources that the Ministry of
Finance pumped into it.
15. Lomnitskii, p. 194, reports the incident.
16. Sobotsinskii, Persiia. Statistiko-ekonomicheskii ocherk, pp. 166-82, tells this
and other stories. He argues that the bank's activities had little influence on Russo-
Persian trade returns. See also Fedorov, p. 241; Ter-Gukasov, pp. 77-79, 114; and
Shavrov, p. 91. Shavrov, p. 58, hints that there may have been good reason to dis-
courage such enterprises. Heavy premiums paid on sugar and cotton goods ex-
ported from Russia to Persia made them cheaper in Persia than in Russia. The
result was the smuggling of these goods back into Russia. He states that the bank
tried to capture the cotton trade to prevent this.
45







RUSSO-PERSIAN COMMERCIAL RELATIONS


Other Russian enterprises appeared during the 1890's. Lazar Poliakov
owned another bank, Banque Internationale de Commerce de Moscou,
established in 1890 to service his commercial and financial operations
in Persia and Central Asia, among which were ownership of the only
railroad in Persia (Tehran-Abdul Azim, a local shrine), a match com-
pany (which went bankrupt), the Insurance and Transport Society of
Persia (later controlled by the Ministry of Finance), and a company to
carry on trade in Persia and Central Asia (headquarters at Bukhara).
Several Russian firms did business in Khorasan and Azerbaijan, and
developed contacts with southern Persia through German and English
trading houses, notably Ziegler and Hotz, and Hope (who was married
to a Russian).17
The bank did not restrict itself to commercial penetration. One of the
axioms of Persian political mythology is that anyone can be bought, a
Russian myth, too. The bank became the medium through which Russia
gave douceurs and loans to Persian politicos and court luminaries. It
extended large sums to Muhammad Ali, the heir apparent to the crown,
consolidated his debts on favorable terms, and promised to loan him
more when he should leave Tabriz because of Muzaffar-ed-Din Shah's
death. Such advances reached 1,627,000 rubles by 1906. Others received
similar favors.s8
The bank earlier had purchased the government itself; the loans to
Muhammad Ali were designed to protect its investment. The assassina-
tion of Nasr-ed-Din on May 1, 1896, changed momentarily the align-
ment of the court political constellation. As governor of Azerbaijan the
new Shah, Muzaffar-ed-Din, had distinguished himself by abject sub-
servience to Russia, and, in truth, there was some doubt whether he or
the Russian consul-general at Tabriz really ruled that province. The new
Shah attempted to become independent, replacing Russian creatures
with British-changes that seemed to signify that he was placing him-
self in the hands of Great Britain. To Russia this meant the end of the
truce in the Anglo-Russian struggle for influence, and she purchased the
Poliakov bank and pushed ahead with concessions gained earlier.19
17. Ter-Gukasov, pp. 100-102; Rittikh, Otchet, pp. 73-77; Tomar, pp. 102,
104-6, 125; Hassan Djourabtchi, La structure economique de l'ran (Geneva,
1955), p. 99.
18. Popov, "Tsarskaia Rossiia i Persiia," pp. 19-20; Popov, "Anglo-Russkoe
sopernichestvo v Persii," pp. 56, 61.
19. Edward G. Browne, The Persian Revolution of 1905-1909 (London, 1910),
pp. 98-99; Stephen Gwynn (ed.), The Letters and Friendships of Sir Cecil Spring
Rice (2 vols., Boston, 1929), I, 288; Sir Percy Sykes, Sir Mortimer Durand (Lon-
don, 1926), pp. 241-42.
46







RUBLE IMPERIALISM


The overtures toward Great Britain were not entirely altruistic. The
fact was that the fall of silver had badly hurt the Persian treasury; the
value of its revenue, paid in silver, declined by half during the 1890's.
The continued power of the new clique depended on whether it could
persuade Britain to make a loan. In 1897 the new Persian foreign min-
ister approached the French and British. The French did not respond,
and the British conditions were too hard. The memories of the Reuter
concession, the annulment of a lottery concession, and the abrogation of
a tobacco monopoly made the City wary.
Early in 1898 probing resumed, this time of France, Germany, and
Britain. The French demanded too much, the Germans were cold, the
British warmed up. British conditions, however, were harsh, and the
Russians caught wind of the negotiations. The Banque Internationale de
Commerce de Moscou offered a loan at 4 per cent. Amin-ed-Douleh, the
new Grand Vizier, refused and received an advance of 50,000 from
the Imperial Bank in March to tide the government through.20
With the time thus gained Amin-ed-Douleh tried to persuade his col-
leagues to accept the British terms; but the Russian offer probably im-
pressed them. Failure to convince the cabinet to accept the British
proposals forced Amin-ed-Douleh to resign on June 5. His successor's
importunities made British Minister Durand almost frantically beg the
Foreign Office to guarantee the loan. Whitehall apparently felt that it
was in command of the situation and probably wanted to gain control
of the southern customs. Since the security offered for the loan (the
customs) was adequate, the groups interested in the project were, how-
ever, ready to abandon their harshest demands, when the issue changed:
The Persian government suddenly asked for double the original sum
without a corresponding increase in the security. The negotiations were
dropped late in July, 1898. Meanwhile, the Shah became infuriated at
the failure to get money. Early in July he recalled the former Grand
Vizier, Amin-es-Sultan, promoted to sadri a'azam in August, 1898. The
failure of the Tobacco Regie had caused the new Grand Vizier to lean
toward Russia, but Amin-es-Sultan was a shrewd bargainer and desired
to maintain some flexibility. For the time being the Shah had to finance
his court himself.21
20. Kulagina, p. 12; Sykes, p. 244; M. V. Grulev, Sopernichestvo Rossii i Anglii
v Srednei Azii (SPB, 1909), p. 242; Bradford G. Martin, German-Persian Diplo-
matic Relations (The Hague, 1959), pp. 68-71; Chirol, pp. 51-52, 207.
21. Sir Lepel Griffin, "Persia," Asiatic Quarterly Review, 3rd Ser., IX (April,
1900), 87; Sykes, p. 244; Chirol, pp. 52-53, 101-02; Browne, pp. 55-56; Gwynn,
I, 285, 289, 302-15.
47







RUSSO-PERSIAN COMMERCIAL RELATIONS


In the interim Amin-es-Sultan improved Persia's sole guarantee for
a loan, the customs. In March, 1899, he staffed the customs houses of
Kermanshah and Azerbaijan with Belgian officials. The results were so
rewarding that in 1900 the Belgians took over the entire system. The
customs revenues increased by 60 per cent within the year. Naus, the
head of the new administration, soon proposed reform: the elimination
of all transit dues and internal duties and tariffs, the substitution of a
flat duty, levied by weight, on all goods passing through the border sta-
tions, and the equalization of all the customs rates at all ports of entry.
The tax farmers and their varying rates would go; the Belgian officials
would levy uniform rates. The result was a substantial increase of
revenue.22
With improving security, Amin-es-Sultan tried again to bargain.
Again he approached the French; the Russians warned him not to take
a loan from France. Again he approached London; again London's
views differed from those of the Persian government. British financial
circles would loan the original 1,250,000 with control of the customs
passing to them only in the event of default of payments; they de-
manded more security for a larger sum. The sadri a'azam began to
look to Russia; Muzaffar-ed-Din still held back, but the British remained
adamant, so Persia took a loan from the Russian bank on January 30,
1900.23 Sir Mortimer Durand had to write: "The Russian loan is an
accomplished fact, and for a time at least, probably for good, we shall
suffer in consequence. Sadr-i-Azam has simply sold himself, and I have
no doubt he has made various engagements which will militate against
us. It is very unlucky we did not find money for Mushir-ed-Dowleh, as
I tried to do."24
Russia loaned Persia 22,500,000 rubles at 5 per cent, issued at 86% per
cent, less 12/3 per cent for commissions and charges-considerably bet-
ter terms than those the British demanded. Of the nominal capital Persia
received 19,125,000 rubles. Russia borrowed the money in France at 95
per cent and 3 to 4 per cent interest, showing the bank a tidy profit. The
bonds were secured on all Persian customs with the exception of those
of Fars and the Persian Gulf, and the loan, plus interest, was repayable
over seventy-five years with no obligation to pay on the principal during
the first ten. The customs houses of the south were excluded because the
22. Chirol, pp. 69, 101-02.
23. Gwynn, I, 285, 288-89; Chirol, pp. 52-53.
24. Quoted by Sykes, p. 245; see also G. P. Gooch and H. Temperley (eds.),
British Documents on the Origins of the War, IV, no. 326, 379; no. 358, 402 (here-
after cited as BD).
48







RUBLE IMPERIALISM


British had obtained a promise in 1897 that they would never come
under foreign supervision.25 Possibly Russia also won the renewal of the
railway prohibition.
Fears in British circles that this was the first step toward the Gulf
proved inaccurate. Nevertheless, there were several political conditions.
Persia had to pay her debts to the Imperial Bank and Poliakov's Banque
International de Commerce de Moscou. She could not borrow from for-
eign powers without consulting Russia. If Persia defaulted, Russia had
the right to appoint collectors to the northern customs.26
The Persian treasury had 10,000,000 rubles left, a sum inadequate to
cover the costs of the government and Muzaffar-ed-Din's trip to Europe
in 1900. The Persians applied to Russia again, and in 1902 received
12,000,000 rubles at 85 per cent, less charges, and at 5 per cent interest;
the security remained the same.
The conditions for this loan were more onerous. In the event of de-
fault, collection of customs passed to the Russian bank. The bank would
choose the personnel of the customs department, all but twenty-five of
whom were to be Persians. However, the bank would not be able to
alter the tariffs, and Persia would periodically audit the accounts. Rus-
sian officials would be placed in the treasury. Persia could contract
future loans only with Russia. In addition, the Persian government
granted Russia a number of concessions, most notably for a road from
Tabriz to Tehran.27
The Tabriz-Tehran road concession was only part of a sprawling net-
work that Russia constructed. The decision of 1890 against railways did
not preclude roads; the protocol of the meeting specifically provided
for their construction. Hopes from as early as the 1860's28 were to be
realized.
In 1890 the ubiquitous Lazar Poliakov obtained a concession for a
transport and insurance company. In June, 1893, the company received
a concession for a carriage road from Enzeli to Kazvin; in 1897 it pur-
chased the road from Kazvin to Tehran, which a Persian had improved,
and obtained a concession to improve Enzeli. Poliakov's ventures were

25. Chirol, p. 53; Mahmoud Afschar, La politique europeenne en Perse (Berlin,
1921), p. 70; Ter-Gukasov, p. 113; Fedorov, p. 240; BD, IV, no. 321 (a), 370.
26. Browne, pp. 99-100; Gwynn, I, 285; Afschar, pp. 69-70; Fedorov, p. 240.
27. Browne, pp. 100, 104; Gwynn, I, 312-13; Whigham, p. 267; Chirol, pp. 54-55;
Fedorov, p. 240; Despatches of United States Ministers to Persia, XI, Griscom
to Hay, April 1, 1902, no. 9; Hossein Naval, Les relations economiques irano-
russes, pp. 42-43.
28. N. K. Zeidlits, "Ocherk iuzhno-kaspiiskikh portov i torgovli," Russkii
vestnik, LXX (1867), 518.
49







RUSSO-PERSIAN COMMERCIAL RELATIONS

of questionable honesty; the Transport and Insurance Company of Per-
sia and the road companies were no exception. The capitalization of the
road complex was quite involved. The first section (Enzeli-Kazvin) cost
about 3,000,000 rubles, of which 1,000,000 were subscribed in Moscow;
the Ministry of Finance took another million and promised to take
500,000 more if private individuals subscribed for another 700,000-
which they did. Construction commenced only in 1896, and ended in
August, 1899. Poliakov's company revealed a pattern basic for Russian
enterprises in Persia. It encountered financial difficulties and the road
company and the Transport and Insurance Company passed under the
Ministry of Finance. Accordingly, the Russian government had to com-
plete still another venture, the Kazvin-Hamadan route in 1906,29
Thus, by 1899 Russia owned a good road from the Caspian to Tehran
and soon owned others. Whether she really benefited may be debated.
A British traveler commented about the Caspian-Tehran road: "Any
fair minded person cannot help admiring the Russian Government for
the insight, enterprise, and sound statesmanship with which it lost no
time supporting the scheme . by supplying capital in hard cash, for
the double purpose of enhancing to its fullest extent Russia trade and
of gaining the strategic advantages of such an enterprise. .. ."3o The
road seemed valuable. Observers thought it strengthened Russia's trad-
ing position, lowered transport costs, increased Russia's prestige, and
symbolized her dominance: "Russian occupies the place of honor in
every document drawn up in connection with transportation on the
road. The names of all the stations figure in Russian characters. The
barriers at which the Russian company levels its tolls are in the hands
of Russian overseers. The Russians have the maintenance of the road,
and all gangs employed in repairs are under the orders of Russian over-
seers. Not only, therefore, is every Persian travelling along the main
road from the North to the Capital made to feel that the Russians hold
the right of access to it, but the inhabitants of all the adjoining districts,
who provide the requisite labour, are taught to look up to the Russians
as their employers and their masters."31
But some Russians had a far more intelligent point of view. In an age
29. Aitchison, Treaties, etc. Relating to Persia, 24; Ter-Gukasov, p. 122;
Fedorov, p. 233; Rittikh, Otchet, pp. 102-3; Savage-Landor, II, 48, 52; Popov,
"Anglo-Russkoe sopernichestvo v Persii," p. 50; A. F. Shtal', "Gorod Khamadana
i ego okresnosti," Izvestiia Rossiiskago geograficheskago obshchestva, LII (1916),
no. 5, 397.
30. Savage-Landor, II, 52-53.
31. Chirol, p. 32.
50







RUBLE IMPERIALISM


of nationalism, the Tehran road, its employees, and its management
were a reproach to the budding popular leaders of the country-symbols
of dependence, inferiority, and exploitation, none of which they could
forgive. Nor was the road profitable. Because the Poliakov company had
a railway in mind, it had cost too much. In 1895 the Ministry of Finance
had warned that it should not be more than two meters wide, arguing
that a full-scale route with adequate grading for wheeled vehicles would
be prohibitively costly in view of the volume of trade to be expected.
Warnings were ignored. The completed road was a superb military high-
way along which supercilious camels and harried horses continued to
plod with their packs. The caravan trek was not a day shorter. The tolls
barely covered the interest on the 10,081,000 rubles which Russia in-
vested. But they were so high (transportation costs increased 10 per
cent) that many traders preferred the mountain trail from Meshed-i-Sar.
The Persian Road and Transport Company organized a carrying service,
but a Persian boycott caused it to fail. The fiasco was soon known and
the Poliakov company became a matter of newspaper and pamphlet
polemics.32
In 1902 the company obtained the concession for a road from Julfa
to Tabriz and thence to Tehran by way of Kazvin. Now controlled
by the Ministry of Finance, it drew on the Russian government for
4,690,000 rubles and built an excellent road, intended to serve as a
railway bed, to Tabriz. It, too, ran into difficulties. The population tried
to boycott it and resisted the imposition of tolls, sometimes with force.
In spite of this resistance, the Julfa-Tabriz road proved a success. It was
motorable and provided a fine connection with Julfa, soon to be attached
to the Caucasus rail system. From 1910 to 1914 well over 2.5 million
puds of goods passed over it a year. It showed a profit and shortened
the time for caravans to around four days.33
32. Whigham, pp. 396-97; Tomar, pp. 65-66; N. P. Mamontov, Ocherki sovre-
mennot Persii (SPB, 1909), pp. 33-34; Rittikh, Otchet, pp. 74-75nl, 102-3;
P. A. Rittikh, "Poezdka v Persiiu i Persidskii Beludahistan v 1900 g.," Izvestiia
Rossiiskago geograficheskago obshchestva, XXXVIII (1902), no. 1, 54-55; S. P.
Olferev, "Torgovlia Giliana v 1906/07 g.," SKD, XI (1908), no. 1, 64; Popov,
"Anglo-Russkoe sopernichestvo v Persii," p. 61; V. F. Minorskii, "Kazvin-Kham-
adanskaia doroga," Materialy po izucheniiu vostoka, I (1909), 181, 184. Minorskii
says that the profit on the road was only 29,000 rubles in 1905, or about of 1
per cent.
33. Yaganegi, p. 22; Ter-Gukasov, pp. 98, 122; Aitchison, Treaties, etc. Relat-
ing to Persia, p. 24; Popov, "Tsarskaia Rossiia i Persiia," p. 34n1; Popov, "Anglo-
Russkoe sopernichestvo v Persii," p. 61; Accounts and Papers, Correspondence
Respecting the Affairs of Persia (Persia, no. 1, Cd. 4581, 1909), no. 18, enclosure,
17; Djourabtchi, p. 94, says that around 50,000 people passed through Julfa both
51







RUSSO-PERSIAN COMMERCIAL RELATIONS


Another scheme was to improve the ferocious trek between Astara and
Ardabil. Such improvement would provide far easier access from the
interior of Azerbaijan to the Caspian-Volga route and the Moscow in-
dustrial region. Projects to improve the trail started in 1888, when a
Russian-supported Persian received a concession. His enterprise failed
and reverted to the Persian government in 1893. In 1903 the idea re-
vived. Following the general pattern by which Russian entrepreneurs
exploited their government, the concessionaire went bankrupt and the
Ministry of Finance completed the project.34
Persian entrepreneurs improved the roads between Meshed and
Ashkhabad and Tehran and Meshed-i-Sar.35 The roads expected to show
the best results were those from Astara to Tabriz and Enzeli to Tehran.
They perhaps helped increase Russo-Persian trade (the companies at
least spent money in Persia), but they neither showed an adequate re-
turn on the investment nor came close to their actual potential. Part of
this may be explained by corruption and Persian obstruction; but there
was another fault.
The fault was poor planning. The two routes terminated on the Cas-
pian, where ports were atrocious and shipping services worse. From the
1860's the Russian government had subsidized the Caucasus and Mer-
cury line for its Persian runs, but its service was inadequate. The com-
pany had far better business between Baku and Astrakhan in the sum-
mer; it was during the winter, therefore, that it preferred to carry loads
to Persia. Thus, merchandise piled up at Baku, sometimes for as long
as six months. During the winter, with its driving northerlies, the goods
were gradually carried to Persian ports. Since they arrived in winter,
the cargoes were again left in the open for long periods before they
were finally carried inland. Consequently, turnover of inventory was

ways each year by means of the road; Sobotsinskii, p. 83; Shavrov, p. 79; A.
Miller, "Donesenie Imperatorskago Rossiiskago general'nago konsula v Tavriz ..
Torgovlia i promyshlennost' Azerbaidzhana," Russia, Ministerstvo Torgovli i
Promyshlennosti, Otdel Torgovli, Doneseniia Rossiiskikh konsul'skikh predstavi-
telei za-granitsei po torgovo-promyshlennym voprosam (SPB, 1912-16), no. 12
(1912), 3 (henceforth this publication is cited as DRK); N. M. Chaev, "Zapiska
sekretaria Imperatorskago Rossiiskago vitse-konsul'stva v Soudzhbulage. ..
Torgovo-promyshlennoe sostoianie Azerbaidzhana," DRK, no. 38 (1912), 50-52.
34. Tomar, p. 58; Fedorov, pp. 231-32; Ter-Gukasov, pp. 13, 125; B. Pre-
obrazhenskii, "Astara-Ardebil'skii karavannyi put'," SKD, X (1907), no. 4, 286-
87; P. P. Vvedenskii, "Torgovlia porta Astary," SKD, X (1907), no. 6, 472;
V. M. Pisarev, "Donesenie Imperatorskago Rossiiskago vitse-konsula v Ardebile
. . Geografichesko-torgovyi ocherk Ardebil'skago okruga," DRK, no. 54 (1915),
15-18.
35. Ter-Gukasov, p. 13.
52







RUBLE IMPERIALISM


slowed, and the increase of storage, carriage, and opportunity costs
meant a higher price level. One of the measures proposed in the con-
ference of 1890 was the improvement of the Caspian ports. Again, in
1895, the Ministry of Finance urged that something be done, but noth-
ing was attempted until 1905, and the results were ludicrous. Between
1905 and 1913 Russia invested 1.3 million rubles in improvements at
Enzeli. The main problem was the vast amount of matter brought into
the lagoon by the Murdab River and the winter storms. Russian engi-
neers constructed two moles that only made things worse, for the quiet
water behind them filled with sand within several seasons. On the eve
of World War I, Russia was contemplating the expenditure of another
2 to 5 million rubles for a full-scale project that included extensive
dredging operations. What had been done up to that time was inade-
quate, poorly planned, and actually damaging to the effectiveness of the
road to Tehran.36
On balance, then, the value to Russia of her road system was as mixed
as that of the bank. It is hard to believe that the roads gave more than
superficial aid to Russian trade, and their strategic value was offset by
the antagonism they aroused and the political instability that resulted.
Another political liability, but an economic success for Russia, was
the Russo-Persian Customs Treaty that went into effect in 1903. Because
of the vested interests they damaged, because foreign control of the cus-
toms seemed to symbolize national degeneracy, and because Russia ob-
viously supported the Belgians, they were universally hated. Some
thought it only natural that the Belgians worked on Russia's behalf;
others simply felt, as E. G. Browne, that they were the "Jackals of
Russia.""37 Consequently, it was easy to blame the Belgians for the cus-
toms agreement. The story still comes down in the western literature
that Naus, subservient Director of the Customs, sold his employer's
birthright to gain Russian favor.
The fact is that Russia did not force Persia to revise her customs in
return for the loans, nor did Naus betray his employer. The initiative
for revision came from Persian officials who wanted to increase rates on
imports into Persia as a revenue measure. Russia and Turkey were
favored nations with special tariff arrangements with Persia, and such
36. Shavrov, p. 78; Ter-Gukasov, pp. 36-37; Rittikh, Otchet, p. 42; Fedorov,
p. 233; Sobotsinskii, pp. 75-78. The ships using the port had to pay dues to Rus-
sian port authorities for the use of the facilities. Even ships that were of too great
draft to use the harbor and stayed on the open roadstead to unload into lighters
had to pay; Shavrov, p. 95.
37. Browne, pp. 100 if; Chirol, p. 70.
53







RUSSO-PERSIAN COMMERCIAL RELATIONS


changes would require their acquiescence. Once this had been won, all
other foreign powers would have to follow suit. Independently of Naus,
the Persians offered to revise the schedules in such a way as to benefit
Russian trade. The Ministry of Finance was glad to receive their over-
tures. Russia had wanted the customs revised for at least several dec-
ades. Tariff revision offered an opportunity to work out set duties that
would fall on European goods more heavily than on Russian goods.
Russia might also be able to press for even closer administration of col-
lection and see the remnants of discrimination against small traders
removed.38
The negotiations that ensued were bitter. The Persians had made a
tactical error; Naus had to redress it and was not successful. The reality
of power, combined with the negotiations for the second loan, the suc-
cess of which might be tied up with the outcome of the tariff negotia-
tions, made it necessary to give way. Far from being the "Jackal of
Russia," he fought courageously. V. Ia. Golubev, who carried on the
negotiations for the Ministry of Finance, wrote: "In the interests of our
exports, petroleum and petroleum products stand almost in the first
rank. . The negotiations concerning this item of import and the
question of rates were very difficult and raised innumerable problems.
To the great dissatisfaction of Mr. Naus I insisted on lowering of the
customs. .. .39 Naus objected to lowering the rates on certain cottons--
to this Golubev retorted that the loss could be made up by raising the
tariff on others, "though not at the expense of the Russian pocket."40
In October, 1901, the negotiations resulted in a treaty that went into
effect on February 13, 1903. The British signed a virtual copy; most
other nations followed suit.41
The new tariff replaced the 5 per cent ad valorem duty established in
the Treaty of Turkmanchai by specific imposts. There were three sched-
ules. The first was a table of rates against imports to be levied by
weight. This schedule reduced the ad valorem customs rate against Rus-
sian sugar to 2 per cent, petroleum to 4 per cent, and matches to 4 per
cent. The ad valorem value of the specific rates established against cer-
38. A. A. Zonnenshtral-Piskorskii, Mezhdunarodnye torgovye dogovory Persii
(Moscow, 1931), pp. 177 ff.
39. Quoted by Zonnenshtral-Piskorskii, p. 181.
40. Zonnenshtral-Piskorskii, p. 182.
41. The British treaty and tariff schedule are available in Hertslet's Commer-
cial Treaties, XXIII, 1213-39, XXIV, 819-926. The Russian treaty and schedule
may be seen in Ministerstvo Torgovli i Promyshlennosti, Otdel Torgovli, Sbornik
Torgovykh Dogovorov i drugikh vytekaiushchikh iz nikh soglashenii (Petrograd,
1915), pp. 442-81.
54







RUBLE IMPERIALISM


tain heavy cottons (primarily imported from England) increased to 8
per cent, and on tea to 100 per cent. The other schedules consisted of a
series of specific duties on exports to Russia.42
While goods figuring primarily in Russo-Persian trade were seldom
taxed over the previous 5 per cent, the customs collected on imports
quickly rose. Russian trade with Persia was in the various necessities
and minor luxuries, and the whole scheme can be construed as being
aimed against luxuries. Though the treaty damaged non-Russian enter-
prise, this was not necessarily its sole purpose; it redressed to some ex-
tent Persia's traditional unfavorable trade balance, lowering or abandon-
ing duties on exports of raw materials and foods. This reduction tended
to benefit Russia, for she received 61 to 70 per cent of Persia's exports.
The favorable tariff was perhaps the most efficient of the devices adopted
to increase Russian trade with Persia.43
To those interested in the economics of Tsarist Russia one of the most
irritating matters is the plethora of inadequate statistics that its over-
worked officials produced or manufactured for their superiors. In this
as in so many other things the problems of Tsar and commissar are
alike. Though more often than not such figures represent educated
guesses, they do exist, and not to use what is available, not to attempt
to derive from them some notion of empirical reality, would be indeed
to enter a plea for statistical nihilism.
The writer holds the opinion that the customs returns of the Russian
Empire for its Persian trade are relatively reliable. In the first place the
tariffs were low enough that the risks of smuggling into Persia would
not earn an adequate return. More important, the author has read sev-
eral hundred travel accounts spread through the century; the travel
accounts, independent consular reports, and the scanty numerical data
available confirm the trends that the official figures reveal. Most of the
individuals writing these accounts were not acquainted with the Russian
customs system publication and can be regarded therefore as independ-
ent witnesses.
The writer also believes that after the mid-1880's the Russian figures
for exports to Persia are particularly accurate because of the heavy sub-
sidization, to collect which required statements prepared at the customs
42. See preceding note; also, Shavrov, p. 39; Peyamiras, pp. 126-27; Yaganegi,
p. 50.
43. Royaume de Belgique, Le minister des affaires itrangeres, Recueil con-
sulaire (Brussels, 1855-1914), CXXXIX (1907), 54-55; Ter-Gukasov, pp. 37-38; A.
Sventitskii, Persiia: Ocherk ekonomiki i vneshnei torgovli (Moscow, 1925), pp.
52-53.
55







RUSSO-PERSIAN COMMERCIAL RELATIONS


houses. However, though accurate, the figures are spurious, for huge
quantities of Russian goods were smuggled back into Russia. The spec-
tacular increase of Russia's exports is consequently less rapid than the
figures indicate-though to what degree is indeterminable.
The figures for Persian exports to Russia are of questionable quality.
Probably they are fairly accurate for the value of bona fide Persian
goods, but European wares smuggled into the Caucasus and Central
Asia from the Persian side of the frontier must have been, at least up
to the end of the 1880's, nearly as valuable as the Persian goods ex-
ported legitimately. This may not be important in trying to analyze the
nature of strictly Russo-Persian trade, but should be taken into consid-
eration if any attempt is made to compile a payments ledger for Persia
or Russia. Improvement of the system of border controls cut down the
volume of the smuggling of European goods from the end of the 1880's
but never entirely arrested it.
After 1903 the Russian returns, changing as they did from an ad
valorem basis to the weight system of the new customs treaty, are less
accurate than before for monetary value and more accurate for quanti-
ties. Importers naturally tended to overdeclare the value of goods in
order to justify later overpricing, and exporters from Persia went along
with this, but both tempered their estimates because of special fees the
customs collected (on the basis of declared value) for official verification
of the invoices.
An independent series of returns that the Persian customs system col-
lected and published after 1901 offers a valuable check on the Russian
figures.44 As might be expected, there are differences of magnitude be-
tween the two so great that the immediately preceding discussion only
partially explains them.
Again, the writer is convinced that the differences do not invalidate
either series, though on first glance (see Table 5), one does indeed ask
if they measure the same thing:
1. From 1903 to 1913 the Russian figures are consistently and signifi-
cantly lower than the Persian.
2. The Persian total returns show a steady increase of trade with
Russia; the Russian figures break from the steep increase between 1891-
1901 and have a flatter rate of increase than the Persian between 1903
and 1908. After 1908 the Russian figures turn sharply upward and move
relatively closer to the Persian data.
44. Persia, Administration des douanes, Tableau general du commerce avec les
pays strangers (Tehran, 1902-14).
56







RUBLE IMPERIALISM


3. The Russian figures show that Persian exports to Russia remained
stable between 1901 and 1907, with a slight decline between. The Per-
sian figures show a constant and sharp increase, with breaks in 1904,
1907, and 1910. The Persian figures show an increase in 1911 and 1912,
but the Russian series breaks downward to turn up sharply in 1913.
4. The Persian figures indicate that imports from Russia increased
rapidly between 1901 and 1906; the Russian figures gave a flatter
curve. Both series turn downward in 1907 and 1908 and then sharply
upward, but the Russian figures increase faster than the Persian.

TABLE 5
COMPARISON OF RUSSIAN AND PERSIAN OFFICIAL RETURNS FOR
RUSSO-PERSIAN TRADE, 1901-1913
(Millions of Rubles)

FISCAL YEAR EXPORTS TO RUSSIA IMPORTS FROM RUSSIA TOTAL TRADE
Pers. Russ. Pers. Russ. Pers. Russ.
Russian Persian Figure Figure Diff Figure Figure Diff. Figure Figure Diff.

1901 1901/02 15.9 25.5 9.5 20.5 23.5 3.0 36.4 49.0 12.6
1902 1902/03 22.2 23.5 1.3 21.6 24.0 2.5 43.8 47.5 3.7
1903 1903/04 28.0 26.5 -1.5 33.3 27.4 -5.9 61.2 53.9 -7.4
1904 1904/05 26.6 23.9 -2.7 30.6 27.3 -3.3 57.2 51.2 --6.0
1905 1905/06 35.5 22.3 -13.2 35.0 26.1 -8.9 70.5 48.4 -22.2
1906 1906/07 40.6 24.5 -16.1 40.0 31.8 -8.3 80.6 56.3 -24.3
1907 1907/08 36.5 25.3 -11.2 34.4 28.3 -6.1 70.9 53.6 -17.3
1908 1908/09 41.4 28.5 -12.9 32.2 26.7 -5.5 73.6 55.1 -18.4
1909 1909/10 47.3 31.6 -15.7 40.6 32.3 -8.3 88.0 63.9 -24.1
1910 1910/11 47.2 36.7 -10.5 39.5 37.9 -1.6 86.7 74.6 -12.1
1911 1911/12 51.2 35.4 -15.8 48.2 44.6 -3.7 99.4 80.0 -19.4
1912 1912/13 54.2 35.4 -18.7 59.2 53.0 -6.2 113.4 88.4 -25.0
1913 1913/14 54.4 43.6 -10.7 64.1 57.7 --6.4 118.4 101.3 -17.1

Sources: Table 1, above; Ter-Gukasov, pp. 37-38; Sventitskii, pp. 52-53

What accounts for these differences, then, if the two series do, indeed,
measure the same thing?
The Russian fiscal year was a calendar year; the Persian accounting
year ran from March 1 to February 28. Consequently minor differences
between the series are inevitable. In general the Russian figures agree
more with the course of industrial expansion in Russia: The growth
rate of Russian industry decelerated between 1900 and 1908, after
which it turned sharply upward.45 Increased efficiency of customs col-
45. Raymond W. Goldsmith, "The Economic Growth of Tsarist Russia, 1860-
1913," Economic Development and Cultural Change, IX, 464, and Table 7, p. 463.
57







RUSSO-PERSIAN COMMERCIAL RELATIONS


elections and the expansion of the Belgian administration account for the
sharp rise of the Persian figures from 1901 to 1903 and perhaps even to
1906. After 1906 the Russian and Persian trends agree more closely
with each other, the Russian figures rising slightly faster. This may
account for trend differences.
But the differences in magnitude we cannot so easily explain away.
Part of the explanation is in differences between the accounting sys-
tems. Russian totals do not include the value of goods in transit to or
from Persia. The Persian accounts credit these to Russia. Nor do
the Russian totals include the value of gold and silver exported to or
imported from Persia; the Persian figures do. An adjustment of the
Russian figures to include these items, and some readjustment of the
Persian figures when Russian data are unavailable pulls the two series
closer together, making the figures less contradictory to the well-known
fact that exporters from Persia undervalued their goods at the Persian
customs houses and overvalued them at the Russian.46 The writer has
checked the weights declared at each set of customs houses and found
them in closer agreement, thus confirming the feeling that the differ-
ences in recorded values are artificial. Other reasons for differences be-
tween the series are an understandable tendency on the part of both
customs services to be careless about the registration of goods not paying
duties, inclusion of more freight, insurance, and commission charges in
the statement of value at the point of entry to the other state, and the
addition of note discounting costs to the value of the goods when they
were declared at the point of entry.47
Consequently, the figures do represent about the same thing, and, for
the rough kinds of estimating attempted here, are adequate for our pur-
poses. For most of the discussion that follows the figures used are the
Persian, because of their convenience for derivation of Russia's share
of Persia's foreign trade and their simpler categorization than the ex-
ceedingly complex organization of the Russian customs returns.
Closely involved with the statistical enigma is one of the more inter-
esting facets of the economic side of the Persian Question, which, though
rather parenthetical to discuss in this context, is important enough to
warrant digression. Virtually all authorities and all statistical sources-
Persian, Belgian, English, Russian, and French-indicate that Persia's
46. S. S. Ostapenko, Persidskii rynok i ego znachenie dlia Rossii (Kiev, 1913),
p. 67; British Trade in Persia, p. 2.
47. A. Khashchab, "Ekonomicheskoe polozhenie sovremennoi Persii i ee tor-
govlia s prochimi stranami," Mir Islama, 1912, no. 2, 158; OVTR, 1905, "Vve-
denie," p. 2.
58







RUBLE IMPERIALISM


balance of payments was consistently "unfavorable," and certainly the
only real data we have seem to bear this out (see Table 6). Yet the
symptoms that should accompany an unfavorable balance of payments
simply did not appear. According to Yaganegi the value of Persian cur-
rency fluctuated simply with its silver base; gluts of Persian credits or
bills of exchange did not drive it downward in international exchanges.48
Minute sifting of the evidence forces the writer to conclude that the
balance of payments against Persia was spurious. Foreign investments
and loans, expenditures by pilgrims at Meshed (7 to 8 million rubles

TABLE 6
GENERAL TRADE RETURNS OF PERSIA, 1901/02 TO 1913/14
(Millions of Rubles)

IMPORTS EXPORTS IMPORTS
YEAR TOTALS LESS
Amount Percent. Amount Percent. EXPORTS
1901/02 53.7 66.5 27.1 33.5 80.8 26.6
1902/03 49.2 59.1 34.0 40.9 83.2 15.2
1903/04 69.3 60.3 45.9 39.7 115.2 23.4
1904/05 63.0 58.5 44.6 41.5 107.6 18.4
1905/06 69.6 56.9 52.8 43.1 122.3 16.8
1906/07 77.6 55.0 63.6 45.0 141.2 14.0
1907/08 73.5 56.3 57.1 43.7 130.6 16.4
1908/09 67.0 53.3 58.7 46.7 125.8 8.3
1909/10 79.6 54.4 66.9 45.6 146.5 12.8
1910/11 87.2 56.3 67.6 42.7 154.8 19.6
1911/12 102.6 57.5 75.7 42.5 178.4 26.9
1912/13 102.1 56.5 78.5 43.5 180.7 23.6
1913/14 116.5 58.7 82.1 41.3 198.5 34.4

Sources: N. Passek, "Torgovo-statisticheskii otchet torgovago oborota Persii,"
Izvestiia ministerstva inostrannykh del, 1912, no. 2, 1964-65; Ter-Gukasov, p. 13;
Sventitskii, p. 35.

a year)49 and other holy places, expenditures by foreign missionaries
and educational institutions, wages paid by foreigners to Persian workers
and servants, heavy expenditures by Russia and Britain when they sent
expeditionary forces into Persia after 1909 (by 1914 Russia had 20,000
troops in northern Persia), bribes paid by concessionaires, spending by
foreign tourists, and royalties foreign concessionaires paid to the crown,
helped offset the unfavorable merchandise balance.
At the same time the customs and other statistics ignore the value of
one of Persia's major exports: labor. The writer's data as yet are in-
48. Yaganegi, pp. 61-62; cf. Peyamiras, pp. 160-69.
49. Beliaev, "Ot Askhabada do Mesheda," 558.
59







RUSSO-PERSIAN COMMERCIAL RELATIONS

complete, but he can state that between 1876 and 1890 an average of
13,000 Persians entered Russia each year by means of expensive pass-
ports-most of these were common laborers. The establishment of cheap
short-term permits made the labor flow increase. By 1896 a total of
56,371 Persians entered Russia legally over her Asiatic frontiers.50 The
writer's data from 1900 to 1913 are complete (see Table 7). Large
numbers went also to Turkey and India. The data for Russia include
only those who applied for and obtained passports or permits. The
sources hint that these numbers were swelled by equal numbers of "wet

TABLE 7
LEGAL MIGRATION OF PERSIANS TO RUSSIA OVER ASIATIC
FRONTIERS, 1900-1913

ENTERED RUSSIA LEFT RUSSIA ENTERED RUSSIA LEFT RUSSIA
Year Passport Permit Passport Permit
1900 38,996 28,308 31,812 25,677 67,304 57,489
1901 51,158 20,751 38,030 17,419 71,909 55,449
1902 66,658 17,026 48,859 12,890 83,684 61,749
1903 74,186 19,199 52,681 16,642 93,385 69,323
1904 66,156 12,623 50,810 13,004 78,779 63,814
1905 51,550 16,416 45,786 14,245 67,966 60,031
1906 62,830 32,302 31,508 29,016 95,132 60,524
1907 56,267 38,349 41,772 36,031 94,616 77,803
1908 57,537 44,531 45,983 41,155 102,068 87,138
1909 63,899 52,357 45,464 49,990 116,256 95,454
1910 78,981 82,698 61,219 74,888 161,679 136,107
1911 82,687 108,582 61,984 95,721 191,269 157,705
1912 101,358 165,374 71,227 144,405 266,732 215,632
1913 124,966 149,589 88,238 125,135 274,555 213,373
Source: OVTR, 1900-1913.

backs"-thus, for example, Sobotsinskii says that in 1911 there were an
additional 200,000. Indeed, there were very few laborers in northern
Persia who had not spent at least a year in Russia, and by 1910 a very
substantial proportion of the common labor employed at the Baku oil
fields was Persian, perhaps 20 to 30 per cent. Returning migrants brought
back money. V. F. Minorskii estimated that the 60,000 or so returning
to Azerbaijan had around 1.8 million rubles to spend. A. Khashchab
indicates that Persians in Russia remitted around 2 million rubles an-
nually back home.51 If Khashchab, V. F. Minorskii, and Sobotsinskii
50. OVTR, 1896, Table XIII.
51. Sobotsinskii, pp. 288-90; Yaganegi, pp. 100-104; A. M. Matveev, "Iranskie
otkhodniki v Turkestane posle pobedy oktiabr'skoi sotsialisticheskol revoliutsii
60







RUBLE IMPERIALISM


are correct, then from Russia alone in 1913 there came perhaps 14 mil-
lion rubles. There is some indirect verification of these estimates. Around
1909 the Russian bank was converting about 3 million rubles annually
for returning migrants; when to this we add the probable additional
millions converted in the bazaars we have an amount approximate to
the 6 million we would expect from the use of the other estimates.52
Another credit item in Persia's balance of payments is goods smuggled
out of the country. One may assume that such trade with Afghanistan
had a favorable balance, but that the smuggling balance with Turkey
and the Persian Gulf was negative. On the other hand much of what
came in from the Gulf was transit trade to Afghanistan, the northwest
frontier of India, Russian Central Asia, and the Caucasus. Arms running
was active on the Gulf; rifles passed through Makran, Sistan, and
Khorasan into Turkestan. Smugglers in Azerbaijan and Kurdistan
regularly spirited arms into the Caucasus. A shipment of 1,200 contra-
band rifles was captured on one occasion while en route to Turkish
Armenia by way of Azerbaijan; we may only speculate about how many
shipments got through. Russians at Odessa purchased rifles, smuggled
them via Trabzon into Azerbaijan, across northern Persia, and into
Turkestan: In 1903 the price for a good Berdan rifle was around 100
rubles, for a first-rate Berdan it was 300 to 400 rubles. Yomut Turko-
man tribesmen maintained about a hundred sailboats that regularly
smuggled goods into Russia, landing them on the Caspian coast between
Chikishliar and Krasnovodsk. This was countered by the detachment of
a cruiser from the Baltic fleet to the Caspian, where it patrolled the
coast along the southeast corner of the sea, retarding but not halting
this trade by the turn of the century.53
Arms were negligible in comparison with other goods. Russian cottons
and sugar were cheaper in Persia than Russia, smuggling was well-
organized and well financed, and the reticent Russian literature hints

(1918-1921 gg.)," Sovetskoe vostokovedenie, 1958, no. 5, 120; N. K. Belova, "Ob
otkhodnichestve iz Severo-Zapadnogo Irana v kontse XIX-nachale XX veka,"
Voprosy istorii, 1956, no. 10, 112-14, 117; V. F. Minorskii, "Dvizhenie persidskikh
rabochikh na promysly v Zakavkaz'e," SKD, VIII (1905), no. 3, 211; Khashchab,
pp. 183-84.
52. Zonnenshtral-Piskorskii, pp. 162-63.
53. A. M. Matveev, "Sotsial'no-politicheskaia bor'ba v Astrabade vtoraia polo-
vina 1911-nachalo 1912 gg.," Trudy Sredneaziatskogo Gosudarstvennogo Uni-
versiteta, CIII (1957), 22, 30; V. F. Minorskii, "Otchet o poezdke v Makinskoe
khanstvo v oktiabre 1906 g.," Materialy po izucheniiu vostoka, I (1909), 33, 40,
44; D. N. Logofet, "Po Kaspiiskomu moriu i Persidskoi granitse," Voennyi sbor-
nik, 1903, no. 7, 232, 241-42, no. 8, 210.

61







RUSSO-PERSIAN COMMERCIAL RELATIONS


that as much as 10 per cent of these imports became invisible re-exports.
Other goods figuring heavily in the contraband trade with Russia were
tea, silk, and opium. Gresham's law resulted in the smuggling of Persian
krans into Central Asia-the British bank survived because of this;
several firms in Khorasan were involved on such a scale that when such
smuggling was stopped for a short time, they failed. The profits were
realized by selling krans in Central Asia, where they were overvalued,
for rubles. The rubles were taken back to Persia to be exchanged, or
often went to the Nizhnii Novgorod fair where they were converted into
goods. Mannanov estimates there was a 10 per cent profit on each com-
plete turnover, of which there might be several in a given year.54
All this forces the writer to conclude that Persia's payment balances
were considerably more nearly even than the merchandise accounts
would indicate.
Russo-Persian trade was not economically important to Russia. It
was an instrument of political policy. Between 1890 and 1913 Russia
sent 2.1 to 3.8 per cent of her exports to Persia, and took from her only
3 to 4 per cent of her imports. Persia usually ranked from around a
poor eighth to tenth among Russia's trading partners. Commerce over
Asiatic frontiers was always a minor part of Russia's total. In spite of
this, Russia encouraged her Persian trade to the extent, even, of risking
bad relations with other countries. The explanation for this is the men-
tality of power politics. Trade returns were a yardstick by which to
measure political influence. Russia should spare no pains, therefore, to
foster penetration of Russian goods. Their appearance in markets and
bazaars meant a consulate would not be far behind, and it was not for
nothing that a Russian army officer when making an intelligence report
on some part of Persia would list firms doing business with Russia. It
had always been a maxim of Russian expansionism that the flag followed
the trader, and Russians expected it to repeat itself in Persia.55
This belief to some degree was correct. If Persian trade did not count
for much in the aggregate of Russian trade, the obverse was true for
Persia: Russia bulked large in Persian economic life (see Table 8).
54. Shavrov, p. 82; OVTR, various years; Anastas Fedorovich Benderev,
Astrabad-Bastamskii raion Persii (Ashkhabad, 1904), p. 245; Beliaev, "Ot Askha-
bada do Mesheda," pp. 562-65; Zh. Ia. Kassis, Ekonomicheskoe polozhenie sovre-
mennoi Persii (Kiev, 1915), p. 4; B. S. Mannanov, "Russko-Iranskie torgovo-
ekonomicheskie otnosheniia cherez Turkestan (posledniaia chetvert' XIX-nachalo
XX v.)," in M. A. Babakhodzhaev (ed.), Vzaimootnoshenie narodov Srednei Azii
i sopredel'nykh stran vostoka (Tashkent, 1963), pp. 105-7, 125.
55. OVTR, various years, 1880-1913; Benderev, passim; Medvedev, Persiia,
pp. 382 ff., 486-514.
62








RUBLE IMPERIALISM


TABLE 8
YEARLY VALUE AND PERCENTAGE OF THE FOREIGN TRADE OF
PERSIA HELD BY RUSSIA, 1901/02 TO 1912/13
(Millions of Rubles)

1901/02 1902/03 1903/04 1904/05
Imports to Persia 53.7 49.2 69.3 63.0
From Russia 20.4 21.5 33.3 30.6
Percent. from Russia 38.0 43.7 48.0 48.6
Persian exports 27.1 34.0 45.9 44.6
To Russia 15.9 22.2 28.0 25.6
Percent. to Russia 58.7 65.3 61.0 57.4
All foreign trade 80.8 83.2 115.2 107.6
With Russia 36.4 43.7 61.2 57.2
Percent. with Russia 45.0 52.6 53.1 53.1
1905/06 1906/07 1907/08 1908/09
Imports to Persia 69.6 77.6 73.5 67.0
From Russia 35.0 40.0 34.4 32.2
Percent. from Russia 50.3 51.6 45.6 48.1
Persian exports 52.8 63.6 57.1 58.7
To Russia 35.5 40.6 36.5 41.4
Percent. to Russia 67.3 63.8 63.9 70.5
All foreign trade 122.3 141.2 130.6 125.8
With Russia 70.5 80.6 70.9 73.6
Percent. with Russia 57.7 57.1 54.3 58.5
1909/10 1910/11 1911/12 1912/13
Imports to Persia 79.6 87.2 102.6 102.1
From Russia 40.6 39.5 48.2 59.2
Percent. from Russia 51.0 45.3 47.0 58.0
Persian exports 66.9 67.6 75.7 78.5
To Russia 47.3 47.2 51.2 54.2
Percent. to Russia 70.7 69.8 67.6 69.0
All foreign trade 146.5 154.8 178.4 180.7
With Russia 88.0 86.7 99.4 113.4
Percent. with Russia 61.3 56.0 55.7 62.8

Sources: Ter-Gukasov, pp. 37-38; Sventitskii, pp. 52-53.

Not so obvious, however, was Persia's real economic value to Russia.
Persia was Russia's major customer for some manufactures and semi-
manufactures. A number of Russia's burgeoning industries, producing
in hothouse protection, may have been able to dump enough surplus
production into the Persian market to hold Russian domestic prices firm.

63








RUSSO-PERSIAN COMMERCIAL RELATIONS

According to the Persian figures, Persia imported more from Russia
than from any other country, while Great Britain and India ran second,
followed by Turkey, France, and Germany (see Table 9).
The figures for exports from Persia indicate the extent to which she
was dependent on the Russian market: Russia received far more than
half. Exports to Russia increased from about 16 million rubles in 1901/2
to more than 54 million in 1912/13. Though the inclusion of transit
TABLE 9

EXPORTS AND IMPORTS OF PERSIA BY COUNTRIES, 1906/07 TO 1913/14
(Thousands of Rubles)

COUNTRY 1906/07 1907/08 1908/09 1909/10 1910/11 1911/12 1912/13 1913/14
IMPORTS INTO PERSIA

Russia 40,032 34,411 32,187 40,625 39,521 48,203 59,216 64,060
Great Britain
and India 23,814 30,431 26,786 27,599 24,140 39,727 27,571 32,032
Turkey 2,345 2,130 2,133 3,508 2,748 3,859 4,210 4,021
France 4,295 1,794 2,281 2,419 2,748 2,067 1,985 3,533
Germany 1,500 1,280 1,040 1,793 2,516 2,993 3,849 5,468
Austria-
Hungary 2,688 868 653 1,357 1,953 1,626 1,447 1,606
Belgium 199 366 650 779 1,455 1,797 1,427 2,740
Afghanistan 1,139 779 561 705 743 1,018 748 899
Italy 631 539 194 2,498 500 387 492 1,008
EXPORTS FROM PERSIA
Russia 40,568 36.479 41,367 47,254 47,201 51,160 54,158 54,371
Great Britain
and India 6,593 6,584 6,128 5,557 6,734 9,966 10,191 10,280
Turkey 10,626 7,062 6,721 7,525 7,200 6,820 6,826 6,637
France 2,513 1,965 843 1,396 2,204 207 869 826
Germany 273 255 96 152 376 887 527 531
Austria-
Hungary ........ ........ .16 8 14 102 130
Belgium 32 77 94 13 82 121 73 41
Afghanistan 1,831 652 494 533 434 583 439 534
Italy ...... 2,376 1,140 1,671 716 1,869 1,440 2,614

Sources: Figures for 1906/07 to 1908/09 are from N. Passek, "Torgovo-statisti-
cheskii otchet torgovogo oborota Persii," pp. 167-68; figures for 1909/10 to
1913/14 are from Ter-Gukasov, pp. 15-16.
goods inflates the totals, the fact remains that they did pass through
Russia, who was in a position to stop them at any time. Until shortly
before World War I, Great Britain and India received barely 10 per
cent of Persia's exports as compared with the 60 to 70 per cent that
usually went to Russia. Even when allowance is made for goods in trans-

64







RUBLE IMPERIALISM


it to Europe, the figures are impressive, for this would still give Russia
40 to 50 per cent.
Persia's principal exports were foods and fibers. Raw cotton was fol-
lowed by dried fruits and nuts; carpets ran third, followed in order by
rice, opium, silk cocoons, fish and fish products, hides and leather, live
animals, gums, and resins. Almost all exports show a constant increase
from 1900 to 1914. The handicraft industries provided rugs, some fab-

TABLE 10
PRINCIPAL EXPORTS FROM PERSIA, 1909/10 TO 1913/14
(Thousands of Rubles)

PRODUCT 1909/10 1910/11 1911/12 1912/13 1913/14
Raw cotton 12,603 12,668 13,314 16,892 15,042
Fruits 9,573 11,251 10,396 8,534 12,670
Carpets 8,714 8,125 8,697 10,871 9,662
Rice 4,377 5,258 6,259 7,616 7,595
Opium 3,167 2,370 4,050 6,285 6,789
Bread cereals 525 1,794 3,583 1,497 720
Silk cocoons 3,030 2,951 3,218 2,122 2,350
Gums and resins 2,202 2,153 2,935 2,502 2,270
Rawhides 2,146 1,355 1,755 3,082 3,580
Silk fabrics 948 832 785 942 1,000
Raw wool 1,622 1,888 2,074 2,034 2,100
Live animals 1,291 1,355 1,755 1,509 1,800
Fish and fish products 3,828 960 1,582 1,484 1,427
Finished leather 1,040 1,120 1,120 1,245 1,437
Precious stones 351 776 548 660 300
Cotton fabrics 438 410 538 386 440
Drugs and herbs 461 652 517 655 740
Leaf tobacco 486 518 334 437 500
Animal products ...... 219 282 261 500
Woolen fabrics 437 282 183 286 240
Vegetable dyes ...... 263 226 255 308
Coin ...... 5,955 6,776 4,937 3,046
Petroleum products ...... ...... ...... ...... 3,596

Source: Ter-Gukasov, p. 21.

rics, and finished leathers, principally morocco; but exports were domi-
nated by raw materials (see Table 10).
Foods and fibers also dominated imports. In first rank were cotton
fabrics. Imports of cotton yarn rose in approximate correlation with the
fluctuating export of carpets, the yarn being used in their manufacture.
Other imports were the smaller necessities and semi-luxuries such as tea,
kerosene, haberdashery, fine fabrics, matches, kitchen utensils, and the
like. An import that was important far out of proportion to its value was

65







RUSSO-PERSIAN COMMERCIAL RELATIONS

the silk graine (eggs) from Turkey, Italy, France, and Transcaucasia.
The money invested in graine returned sixfold in the export of silk
cocoons (see Table 11).

TABLE 11
PRINCIPAL IMPORTS INTO PERSIA, 1909/10 TO 1913/14
(Thousands of Rubles)

PRODUCT 1909/10 1910/11 1911/12 1912/13 1913/14
Cotton fabrics 22,350 25,034 27,910 33,059 36,183
Sugar 19,307 21,707 22,997 24,957 30,694
Silver bullion .......... 7,644 11,916 999 1,023
Tea 4,970 4,468 6,048 7,340 6,948
Flour 617 959 2,760 4,046 3,053
Coin .......... 2,647 2,315 2,186 1,659
Cotton yarn 1,877 2,006 1,772 2,322 2,470
Woolen fabrics 1,772 1,751 1,674 1,928 2,415
Iron and steel products 1,477 984 1,612 1,060 1,184
Petroleum products 1,572 1,260 1,510 1,905 1,836
Haberdashery 769 977 1,103 1,182 1,518
Leather 520 726 998 626 932
Copper and nickel 370 1,006 883 190 507
Mixed woolens 823 815 880 765 1,012
Mixed silks 652 1,096 879 872 1,961
Other fabrics 325 620 725 806 918
Raw wool 195 427 677 586 700
Rice 893 610 650 954 1,571
Matches 613 615 635 570 720
Graine 515 465 612 469 475
Indigo and dyes 755 610 556 413 672
Scrap iron and steel 530 549 532 670 909
Hemp and linen yarns 370 518 486 524 610
Velvet and plush fabrics 345 539 484 386 500
China and porcelain products 187 349 434 484 544
Timber 710 365 430 620 922
Enameled utensils 265 287 422 461 627
Writing paper 197 302 254 204 230
Glass 290 283 311 259 234
Candles and wax ...... 130 229 222 142
Leather products 148 276 332 300 560

Source: Ter-Gukasov, pp. 18-19.

From 1876 on Russian exports to Persia increased at an exceedingly
rapid and steady rate, with a break between 1883 and 1885. Trade
rivalry with Britain was particularly intense, paralleling as it did polit-
ical rivalry, with the British holding their own until around the turn
of the century when their relative hold on the Persian market began to

66







RUBLE IMPERIALISM


slip. The principal Russian gains to the early twentieth century were
at the expense of the other western European countries, primarily France
and Germany. After the tariff of 1903, Russia's share of Persia's imports
ranged from 45 to 50 per cent, and reached nearly 60 per cent on the
eve of World War I. Imports from Russia approximately doubled be-
tween 1890 and 1900; from 1900 to 1913 they at least doubled (Russian
figures) or perhaps tripled (Persian figures). During the years of
revolution, 1907/08 and 1908/09, the value of goods from Russia de-
clined by about 7.8 million rubles, but quickly recovered, rising very
rapidly.56
Emerging Russian dominance of Persia's imports based itself on two
commodities, cottons and sugar, which together made up about 65 per
cent of Russia's exports to Persia by 1913. Improved transportation
facilities and other activities within Persia had little to do with the
success of Russian sugar and cotton. The fact was, they were cheap. The
state subsidized the export of both to such an extent that they under-
sold most competition.
In May, 1886, Russia placed a bounty of 80 kopeks a pud on sugar;
from 15 per cent in 1884, sugar's share of the value of Russia's exports
to Persia rose to 66 per cent in 1890. On May 1, 1891, the bounty
(which had risen to 1.8 rubles per pud) was removed: Russian sugar
sales fell by over 40 per cent and the bounty was soon restored. After
1900 sugar accounted for from 32 to 44 per cent of Russia's total ex-
ports to Persia. The spurt of Russo-Persian trade returns between 1885
and 1890 results from the increase of sugar exports more than anything
else. Loaf sugar, 90 to 97 per cent of which was exported to Persia,
formed the bulk of Russia's sales.7 Russian sugar was cheaper in Persia
than in Russia, selling at retail at around the same price it sold whole-
sale at Kiev or Odessa. The consequence was that sugar was smuggled
back into Russia, either to be taken through customs for another pay-
ment of the rebate (a special accounting system stopped this in 1904)
or for resale.58
Russian sugar interests relied on the rebate of excise to remain in the
56. Tables 1 and 5.
57. Romanov, Zheleznodorozhnyi vopros v Persii, p. 32; OVTR, 1890, Table II,
v, p. 6; Table II, G, pp. 16-17; 1893, Table II, G, pp. 13-24; and 1890-1914, vari-
ous tables; Tomar, p. 133.
58. OVTR, 1902, "Vvedenie," p. 32; 1904; "Vvedenie," p. 27; 1906, "Vvedenie,"
pp. 63-64, 67; Kassis, p. 93; Lomnitskii, p. 371, half jokingly suggests that some
sugar appeared in the Russian customs statistics ten times, and mentions that it
was about 35 per cent cheaper in Persia than Russia; see also Beliaev, "Ot Askha-
bada do Mesheda," pp. 563-64.
67







RUSSO-PERSIAN COMMERCIAL RELATIONS


market. Certainly they had no real interest in the export trade, which
accounted for a minor portion of their production. Consequently they
did not enter the Persian market themselves; the Russian Sugar Syndi-
cate instead sold to a group of merchants at Baku. The Baku group
dealt with the Persians. Sugar therefore passed through the hands of at
least two sets of middlemen before reaching the retailer. The organiza-
tion of the trade made it possible for merchants in Persia to form groups
that purchased en bloc and cornered local supply to hold prices high.
Anguished advice from Russian consuls to package loaf in smaller boxes
and refine it to Persian taste in order to make more sales went un-
heeded. The Russian exporter knew what he was doing-the marginal
gains might not offset the extra cost of the new packaging-and Russian
sales might even decline, for sugar packed to Persian taste could not be
re-exported undetected to Russia.59
The signing of the Brussels Sugar Convention in 1902 cut into Rus-
sia's sales to Britain and Italy, making the Persian outlet all the more
important. Russia's share of the Persian market rose a few percentage
points, then gradually declined until 1907, when she signed the Conven-
tion, whereupon her relative position again improved. The temporary
decline of sales, however, resulted from boycotts during the Persian
revolution. Russia's adherence to the Sugar Convention resulted in a 65
per cent increase in the total volume of Russian exports, and Persia's
importance declined." Russia's signature did not apply to Finland or
Persia and the Ministry of Finance and the Sugar Syndicate regularized
the system of export to those countries. The government was to set quar-
terly export totals based upon expected demand and allot quotas to the
Syndicate members on the basis of their production capacity (no mem-
ber to receive more than 1.38 per cent of the total). Payment of the
subsidy was flexible so as to establish what was in fact a basing-point
system and equalize prices." After 1900 Russia held from 77 to 82 per
cent of the Persian sugar market.
Cotton fabrics were Persia's chief import and Russia waged a brisk
59. Cf. VF, 1907 (no. 23), 376-78. Russian consuls complained about packaging
and packing even in the early 1880's and were making the same complaints twenty
years later. This is a testimony to their ignorance of the elementary economics
of trade; it is always the mark of the amateur to remark on shoddy packing of
goods; usually the exporter knows exactly what he is doing and why.
60. Ter-Gukasov, p. 42; Margaret S. Miller, The Economic Development of
Russia, 1905-1914 (London, 1926), p. 283; OVTR, 1908, "Vvedenie," p. 29.
61. VF, 1909 (no. 19), 319-25. The quotas were stringently enforced; there is a
very close correspondence between them and the actual annual export; cf. VF,
1909 (no. 33), 539; 1913 (no. 33), 640; 1914 (no. 33), 640-41.
68







RUBLE IMPERIALISM


battle for this market as well. From a mere 12,000 to 20,000 rubles per
year before 1863, Russian exports climbed to 225,000 in 1870, 1.2 mil-
lion in 1880, and around 2 million in 1891. In 1892 the state began to
pay an export premium on cotton tissues: sales to Persia rose to 3.9
million in 1893 and by 1900 to 5.3 million. Starting at 1.5 rubles per
pud for unbleached cloth, 1.7 for dyedstuffs, and 2.0 for Turkey reds,
the subsidy (rationalized as a return of customs and excises) rose by
1900 to 3.45 rubles, 3.675 rubles, and 4.20 rubles per pud respectively
for each kind of cloth. The subsidies cost the Russian treasury 530,829
rubles in 1900, or a bit more than 10 per cent of the total value of the
cottons exported. Shipments to Persia accounted for 45 per cent of Rus-
sia's textile export in 1900, and 53 per cent in 1913.62 This was perhaps
a rather small relative improvement, considering that the subsidies con-
tinued to increase, but at the same time according to the Russian cus-
toms data the weight of the goods sold increased almost 4 times and the
value 4.4 times. During the 1890's Russian sales overhauled and passed
British, but after the turn of the century Anglo-Indian competition in-
tensified and Russia's share of the market fell in 1909 to less than 30
per cent (by about one-half). In 1909 the subsidy increased a full ruble
per pud; by 1913 Russia had almost 51 per cent of the sales.63
The British retained as much as half of the market because they were
able to compete in undyed cloth and muslins. But the tariff agreements
of 1903 worked to the disadvantage of undyed cloth and favored Rus-
sia's Turkey reds and red background prints; gradually Persian prefer-
ences turned toward finished material. Russian and British experts both
claimed that their manufacturers did not produce to Persian taste, that
orders were filled too slowly, and that their governments were flagging
in their aid. It is, indeed, difficult to determine which were correct.64 It
appears the British would have been more than able to hold their own
had the Russian government not made such extraordinary efforts to
dragoon its manufacturers into the market.
62. OVTR, 1855-1890, passim; 1894, Table V, pp. 30-32; 1900, Table V, pp.
30-32; 1913, Table V, pp. 70-72.
63. OVTR, 1900, Table V, pp. 30-32; 1913, Table V, pp. 70-72; Ter-Gukasov,
pp. 46, 48; VF, 1909 (no. 23), 378. The values given in the Persian statistics for
Russian cottons are considerably lower than those in the Russian series. This re-
sults from declaration of the value of the Russian cottons to the Russian customs
at their prices before the payment of the subsidies. The goods were declared at
Persian prices to the Persian customs. The weights declared at the respective
customs houses are in closer agreement.
64. British Trade in Persia, pp. 36-41; Gleadowe-Newcomen, pp. 58, 69-71;
Fedorov, p. 216; Ter-Gukasov, pp. 48-49.
69







RUSSO-PERSIAN COMMERCIAL RELATIONS


Subsidization (return of excise taxes and customs) made tea, kero-
sene, woolens, and other goods cheaper in Persia than Russia. Tea, for
example, cost less than half the Russian price.65 The full extent of sub-
sidization is hard to get at because of official reticence, but in 1899 it
was at least 25 per cent of the value of the total exports.66 Later figures
are harder to come by, probably because subsidization became embar-
rassingly more extensive.
Tables 12 and 13 demonstrate the range of goods exported to Persia,
and Russia's share of them near the close of the period here considered.
Russia provided between 45 and 50 per cent of Persia's imports be-
tween 1902/03 and 1911/12, and 58 per cent in 1912/13. She wanted
a greater share, and her merchants and officials were particularly irri-
tated that she had virtually to subsidize a portion of the imports to
Persia from other countries.
In 1904 Russia and Persia both adhered to the international conven-
tion relating to customs-free transit for parcels up to five kilograms in
weight. This meant that goods that were expensive and light could pass
through the Caucasus despite its closure and earn profits for their ex-
porters. European parcels soon entered Persia in enough quantities to
cause concern, rising from a value of 16.7 thousand rubles in 1904 to
4.8 million in 1913, or about 4.5 per cent of Persia's total imports. Cot-
tons, silks and mixed silks, linen, and woolens formed the bulk of the
parcel trade from Europe; other goods were haberdashery, ready-made
clothing, metalwares, trade goods, chemicals and pharmaceuticals, foot-
wear, knit goods, and buttons.67 Most of the parcels (about 50 per cent)
came from Germany.
Since German penetration was particularly feared, Russian officials
were considerably troubled. As early as 1911 a representative of the
Ministry of Finance went to Tabriz to look into the growing sales of
German goods in Azerbaijan, and to examine the parcel post trade in
particular.68 Russian consuls complained about the trade in their re-
ports; Prince Dobizha, extremist consul-general at Meshed, suggested
the establishment of a special duty on parcels containing merchandise.69

65. A. M. Nikol'skii, "Proizvodstvo risa i chaia v Giliane," SKD, XII (1909),
no. 4, 316-17.
66. OVTR, 1899, Table V.
67. OVTR, 1904-13, Table VIII. The Persian figures for the parcel post trade
are almost double the Russian. The writer has not hit as yet on a satisfactory
explanation.
68. Shavrov, pp. 14, 35, 85-89; Gur'ev, "Poezdka v Tavriz."
69. A. M. Dobizha, "Donesenie Imperatorskago Rossiiskago General'nago Kon-
70







RUBLE IMPERIALISM


Opinion in Russia became so aroused that the situation was taken up in
the Duma, where it was revealed that Russia dared not protest for fear
of German reaction.70

TABLE 12
PRINCIPAL RUSSIAN EXPORTS TO PERSIA, 1909/10 TO 1913/14
(Thousands of Rubles)

COMMODITY 1909/10 1910/11 1911/12 1912/13 1913/14
Loaf sugar 13,728 17,076 16,627 17,690 20,838
Crystal sugar 1,941 2,118 2,155 2,567 2,532
Cotton fabrics 8,767 9,753 11,408 16,642 18,430
Tea 1,800 1,732 3,510 4,422 3,610
Flour 474 871 2,736 3,974 2,861
Kerosene 1,350 1,149 1,389 1,751 1,809
Linen and hemp yarns 392 514 479 516 593
Bread cereals 36 190 459 566 262
Raw iron and steel .... 485 456 637 859
Matches 364 390 449 431 470
Haberdashery 263 265 362 498 555
China and porcelain 233 305 358 436 453
Construction lumber 314 286 353 476 736
Iron and steel products 655 305 317 1 751 1,078
Enamel and iron utensils 231 217 312 1
Velvet and plush fabrics 281 372 302 232 264
Cotton yarn 225 216 299 714 850
Glass products and window glass 341 357 380 548 583
Galoshes and rubber .... 101 210 282 363
Woolen yarns 183 182 195 248 354
Writing paper 120 185 134 201 103
Graine 64 64 90 78 107
Drugs and herbs .... 67 73 .... 259
Candles and wax .... 42 66 49 59
Soap .... 81 120 152 178
Jute fiber .... 123 123 169 173
Liquors .... 45 161 249 312
Dyes and lacquers .... ... 62 95 181
Fiber goods and cordage .... 152 152 98 141

Sources: Ter-Gukasov, pp. 40-41; N. Passek, "Torgovo-statisticheskii otchet
torgovago oborota Persii," pp. 169-70.

sula v Khorasane . Torgovlia v Meshede manufakturnymi tovarami," DRK, no.
38 (1914), 69-71; A. N. Shtritter, "Donesenie Imperatorskago Rossiiskago Gen-
eral'nago Konsula v Tegerane . Torgovlia manufakturnymi tovarami v raione
General'nago Konsul'stva," ibid., pp. 76, 78; Shavrov, p. 89, makes the same sug-
gestion as Dobizha.
70. W. Morgan Shuster, The Strangling of Persia (New York, 1912), p. 315;
George W. Anderson, "Russia in Middle Asia on the Eve of the First World War"
(doctoral dissertation, University of Minnesota, 1946), p. 277.

71







RUSSO-PERSIAN COMMERCIAL RELATIONS


Examination of Persia's export trade reveals more clearly her depend-
ence on Russia. The attitude of the Russian government, the relative
success of the great fair at Nizhnii Novgorod, the Russian demand for

TABLE 13
PRINCIPAL IMPORTS INTO PERSIA AND THE PERCENTAGES OF THEM
FROM RUSSIA 1909/10 AND 1910/11
(Thousands of Rubles)

1909/10 1910/11
PERCENT. PERCENT.
COMMODITY TOTAL RUSSIAN TOTAL RUSSIAN

Cotton fabrics 22,350 39 25,034 39
Loaf sugar 16,494 83 18,314 82
Silver and gold bullion 7,323 67 7,644 8
Tea 4,869 37 4,468 39
Crystal sugar 2,813 68 3,393 62
Silver and gold coin 2,625 45 2,147 25
Cotton yarn 1,878 12 2,006 10
Woolen fabrics 1,623 11 1,750 10
Kerosene 1,443 95 1,260 95
Mixed cotton and silk fabrics 652 .... 1,096
Copper and nickel ingots 307 .... 1,006
Iron and steel products 1,477 18 984 54
Haberdashery 770 28 977 27
Flour 617 76 959 90
Mixed cotton and wool fabrics 823 .... 815
Leather 520 .... 726 5
Matches 604 60 615 64
Indigo and dyes 753 .... 610
Rice 892 .... 607 15
Raw iron and steel 538 89 549 88
Velvet and plush fabrics 345 .... 539 69
Linen yarns 394 93 518 100
Cocoons 510 .... 466 5
Lumber 411 76 365 79
Porcelain and china 255 .... 349 87
Writing paper 197 ... 302 61
Glass and glassware 290 .... 283 93
Millet, barley, and oats 418 ... 269 70

Source: N. Passek, "Torgovo-statisticheskii otchet torgovogo oborota Persii,"
pp. 169-70.
cotton, leather, rice, fruits, and caviar, and Russia's policy on transit of
Persian goods to Europe, all had to be considered by the Persian mer-
chant, peasant, or official, for these were determining factors in much of
Persia's economic life. Russia, however, depended on Persia as a source
of raw materials to supplement her own supplies. As a consequence of

72







RUBLE IMPERIALISM


this mutual dependence, Persia's balance of trade with Russia was
favorable to the former until at least 1900. The balance probably
weighed farther against Russia during the 1890's, owing to smuggling;
and during the era 1900 to 1914 the activity of the smugglers perhaps
provided the margin to make the balance about even.
As pointed out already, Russia was by far Persia's best market, tak-
ing at least one-half of Persia's exports every year after 1890 and up to
70 per cent from 1903/04 to 1913/14.71
Practically all of Persia's raw cotton exports went to Russia after
the early 1890's, about tripling in volume from 1888 to 1910, and
amounting to around 94 to 97 per cent of Persia's total cotton export
(see Table 14.)72
TABLE 14
PERSIAN EXPORT OF COTTON TO RUSSIA, 1888-1913
(Millions of Puds)

YEAR AMOUNT YEAR AMOUNT
1888 0.483 1906 1.140
1892-1896 avg. 0.619 1907 1.053
1897-1901 avg. 0.865 1908 1.051
1901 0.885 1909 1.432
1902 0.911 1910 1.516
1903 1.092 1911 1.454
1904 0.928 1912 1.643
1905 1.054 1913 1.611
Sources: Figure for 1888 is from VF, 1892 (no. 3), 163; figures for 1892-1902
are from OVTR, 1902, p. 57; figures for 1903-1913 are from OVTR, 1903-1913.
Russian interest in Persian cotton had a number of sources. Encour-
agement of commercialization, loans from the Russian bank, and the
activity of Russian agents among growers represented an extension of
Russian political influence; and after 1907, increasing acrimony over
Russo-American commercial relations and the declining export of Ameri-
can cotton, with the consequent rise of world prices caused Russia to
look to Persia as an alternative source.
Persian growers were ignorant of proper technology. They mixed long
and short staple and produced a crop practically useless for most ma-
chine processing. Russian consular agents and merchants worked assidu-
ously to improve the quality of the crop and its processing. Their cam-
71. Ter-Gukasov, pp. 37-38.
72. There is closer correspondence between the Persian and Russian figures for
the weight of Persian raw cotton exports than for the value.
73







RUSSO-PERSIAN COMMERCIAL RELATIONS


paign started in Khorasan in the early 1890's and by 1913 their efforts
extended across northern Persia and as far south as Isfahan. The con-
sular officials in Kurdistan even tried to introduce cotton cultivation to
the sedentary Kurds near Urmia and Sauj Bulagh. By 1912 the quality
improved greatly, and in spite of the poor level of technology and the
expenses of moving bulk for any distance, Persia's cotton promised to
be a positive increment to Russia's foreign supply, about 15 per cent of
which then came from Persia.73
Ranking second to raw cotton were exports of fruits and nuts, of which
Russia received from 80 to 90 per cent. Exports to Russia increased
from around a million rubles in 1870 to 5.9 million in 1900 and 10.6
million in 1913.74 Most important were sabza (dried grapes), currants,
almonds, pistachios, apricots, fruit paste, and Turkish Delight. An im-
portant influence on the development of this trade was the revised tariff
schedule, which lowered dues on the export of fruit and nuts. The Rus-
sian customs, in turn, favored fruits and nuts imported from Persia.
For example, almonds from Persia were subject to a duty of 40 kopeks
a pud, while those from Italy paid 3 to 4 rubles; tariffs on fruits and
berries imported over European frontiers ranged from 19.1 per cent ad
valorem in 1871-75 to 78.8 per cent in 1897. Persia supplied the major
portiorover 85 per cent) of Russia's import of dried grapes (used in
Poland for the manufacture of spirits), dried fruits, almonds, and
pistachios.75
Russia was involved also in the Persian carpet industry. For the most
part the rugs were produced on order for German firms, which sent
them to western Europe or the United States by way of Russia or Tur-
key. Russia, however, obtained a larger share of the rug trade after
73. For details see: Moustafa Khan Fateh, The Economic Position of Persia
(London, 1926), p. 22; Shavrov, pp. 61, 92; Ter-Gukasov, pp. 5, 63-64; Tomar,
p. 9; Benderev, p. 242; Sobotsinskii, pp. 194-95; P. Ponafidin, "K voprosu o
russkom vyvoze v Persiiu," SKD, III (1900), no. 2, 125; Polkovnik A. I. Iias,
"Khlopkovodstvo v Khorasane," SKD, VIII (1905), no. 5, 350-51; S. Chirkin,
"Khlopkovodstvo v Isfagan'skom Okruge," SKD, VIII (1905), no. 6, 438-39; A. Ia.
Miller, "Torgovlia Bakhramabada," SKD, X (1907), no. 1, 6; A. M. Dobizha,
"Donesenie Imperatorskago Rossiiskago General'nago Konsula v Meshede . .
Torgovlia Khorasana," DRK, no. 12 (1912), 51-54; Minorskii, "Otchet o poezdke
v Makinskoe Khanstvo," pp. 43, 47; Joseph Rabino, "An Economist's notes on
Persia," Journal of the Royal Statistical Society, LXIV (1901), 269; Recueil con-
sulaire, CI (1898), 87; "Khlopodovoe delo v Persii," Izvestiia Shtaba Kavkaz-
skago voennago okruga, 1907 (no. 19), 24-26.
74. OVTR, 1870, 1900, 1913.
75. Ter-Gukasov, p. 89; Benderev, p. 243; V. I. Pokrovskii, Sbornik svedenii
po istorii i statistiki vneshnei torgovli Rossii (SPB, 1902), I, 70; OVTR, 1890-
1913, passim.
74







RUBLE IMPERIALISM


1905. Russians purchased most of the production of Khorasan, where
the proximity of the Transcaspian railway put them in an excellent posi-
tion. Meshed was the major manufacturing and collection center for the
province. The Russian bank financed much of the production.76
Russia also bought most of Persia's rice. As the commercialization of
agriculture in Turkestan intensified, the cotton-producing regions be-
came dependent on the outside for their supplies of grain. The more
grain imported, the more land turned to cotton. Since rice was a staple
of diet in Turkestan and required ten times as much water as cotton,
it was obviously in Russia's interest to make Persia the granary of
Turkestan. Extensive purchases started after the completion of the
Transcaspian railway. Already in 1891 Russia purchased close to 2.5
million puds and by 1913 received up to 4.8 million puds a year, from
about 97 to 99 per cent of the export, or by value almost 14 per cent of
Persia's trade with Russia. In moist regions where the Russian bank
was not subsidizing rice production or where a more advanced agricul-
ture was developing, rice gave way to the mulberry tree.77
The rejuvenation of the Persian silk industry after years of blight : o t:e-\
deserves more attention. Despite its potential, Russian officials were late
to realize that here was another area they could penetrate, one that
might prove economically and politically profitable. The revival of the
industry was achieved through the efforts of a Greek firm, Pascalidi,
whose agent, Besanos, arrived on the scene in 1889 to introduce new,
pasteurized graine from Turkey, Italy, and France. As the industry re-
covered, more foreigners, primarily French and Italian, arrived. By 1900
the total export was valued at nearly 1.5 million rubles. Even then Rus-
sia was not very interested. Her silk industry did not need the crop, and
Persian cocoons and silks competed with those of Turkestan.
Almost against its will, the Russian bank eventually entered the indus-
try in Gilan. The Italian and French entrepreneurs earned fantastic
profits. They made loans on harvests, extending to the peasants as much
as 60 to 70 per cent of the expected value; they dealt in futures, and
exported the cocoons at their own risk to brokers in Genoa and Mar-
seilles. They also dealt in graine, extending loans to purchase it and act-
ing as middlemen between sources of graine supply and the small-scale
Armenian and Turkish traders who made direct contact with the peas-
76. Anderson, pp. 274, 278; VF, 1907 (no. 31), 136-37, 1912 (no. 40), 632.
77. Tomar, p. 8; Ter-Gukasov, p. 6; Fedorov, Izlozhenie XIII, 64; George V.
Tornovskii, "Transcaspia and Khurasan," Asiatic Quarterly Review, Ser. 2, X
(1895), 147-55; L. Tseidler, "Torgovlia Giliana," SKD, VII (1904), no. 5, 368-69;
OVTR, 1891, 1910-13.
75







RUSSO-PERSIAN COMMERCIAL RELATIONS


ants. They dealt in krans in Persia, francs at Marseilles; the conversion
rate was favorable and profits were earned from the financial side of
their operations. High profits and quick accumulation of capital enabled
the French, Italians, and Greeks to trade in other goods, primarily from
western Europe. It was this entry into other mercantile operations that
probably caused the Russian bank to take action. At first it tried to mar-
ket cocoons itself, but Russian purchasers could not be found. In 1903
or 1904 it changed tactics, turning to the financing of the industry
(from which apparently most of the profits were made) and acting as a
commission agency. This proved to be quite profitable, enabling the
bank to market graine.
The consequences of the bank's policy were a lowering of interest
rates, stabilization of prices, the increase of purchasing power in the
northern provinces, and an accelerated movement toward money econ-
omy. Politically, Russia was able to intercede between the French and
Italian merchants and the peasantry, to purchase a great deal of good
will (while earning profits for a change), and to shut out the Turks,
French, Italians, and Greeks, replacing them with Persians and Arme-
nians dependent on the bank for support. By 1909 the Russian bank
financed about a third of the cocoon crop of Gilan. Russia's own pur-
chases were not significant, never more than 16 per cent per year,
though most of Persia's export passed through Russia; significant were
the pains taken to enter this sector of the economy and make more
peasants dependent on Russian good will and money. Another section of
the fabric of Persian economic life was gathered into the hands of Rus-
sian seamsters.78
An exception to the pattern of Russian entrepreneurial timidity was
the Lianozov Fishery Concession. An Armenian, Lianozov had better luck
than most Russian subjects. Created perhaps as early as 1867,79 and
78. This section is based upon Joseph Rabino, "An Economist's Notes on Per-
sia," pp. 269 ff.; Shavrov, p. 62; S. Olferev, "Shelkovodstvo v Giliane," SKD,
VII (1904), no. 4, 322-26; S. Olferev, "Shelkovodstvo v Giliane 1904-05 godakh,"
SKD, VIII (1905), no. 6, 451-54; S. Olferev, "Torgovlia Giliana v 1906/07 g.,"
SKD, XI (1908), no. 1, 60-77; S. Olferev, "Okrug Lengeruda," SKD, IX (1906),
no. 6, 468-75; L. Tseidler, "Shelkovodstvo v Giliane," SKD, VIII (1905), no. 5,
364-73; Iu. Romanovskii, "Shelkovodstvo v Giliane v 1909 godu," SKD, XIII
(1910), no. 1, 77-82; A. Shtritter, "Shelkovodstvo v Giliane v 1906 godu," SKD, X
(1907), no. 4, 316-18; M. Nikol'skii, "Torgovlia Giliana v 1908 godu," SKD, XII
(1909), no. 2, 110-24; V. Tardov, "Persiia i eia kultura," Russkaia mysl', 1912
(no. 2), 83-84; Hyacinth L. Rabino, L'industrie sericole en Perse (Montpellier,
1910).
79. Fateh, p. 26. Though the Lianozov concessions are the ones most often dis-
cussed, the fact is that Russian subjects were in control of Persian fishing grounds
76







RUBLE IMPERIALISM


certainly by 1873,80 the Lianozov Concession was a large-scale operation
with extensive investments in processing plants and fishing stations.
Distrusting Persians, it drew all its labor and supplies from Russia. The
concession's monopoly covered the entire Persian Caspian coast and in-
land waters of the rivers flowing into it. From around 600,000 rubles in
the early 1890's the catch rose in value to between 900,000 and 1,000,000
rubles between the later 1890's and 1906. From 1907 to 1913 the value
of the catch increased to 2.25 million rubles. This in spite of terrorism
aimed at the concession by Persian revolutionaries, overfishing, and the
silting up of the Murdab River mouth resulting from the harbor "im-
provements" at Enzeli. Most of the fishery products went to Astrakhan
and Baku, but much caviar was re-exported.81
Table 15 indicates the degree to which Persian exports depended on
Russian demand by 1910. To a remarkable extent, Persia had been
drawn into Russia's economic orbit and was a functioning part of her
economy. Evaluated solely from the point of view of commercial returns,
however, the results of Russia's policies are not especially impressive.
They merely assured commercial domination in an area where she
should expect to have it-the northern provinces. And as a matter of
fact, in the area of her most intensive efforts, Azerbaijan, her hold was
tenuous. In 1909/10 she held only 59 per cent of that province's foreign
trade-she was hurt by the Trabzon route, the parcel post trade (most
of which went to Tabriz), and the Russian merchant's lack of entre-

much before the date the Lianozov company won its concession. In 1837-40 a
Russian first guild merchant from Astrakhan, one Mir Bagirov, was paying to
fish the Safid Rud and the bay of Bandar Gez. The Mazanderan fisheries were
held by an Astrakhan Armenian, Sudzhaev. From the first the boats and workers
were Russian, for the Persians considered it sinful even to touch any fish but
salmon, bream, and carp-thus Russian and Turkoman fishermen were best able
to exploit the Caspian. Much Persian nationalist animus against the concession
is thus unjustified. I. F. Blaremberg, Statisticheskoe obozrenie Persii v 1841 godu,
pp. 26-27, 173-74; see also Grigorii Pavlovich Nebol'sin, Statisticheskoe obozrenie
vneshnei torgovli Rossii (SPB, 1850), pp. 259-60.
80. P. I. Ogorodnikov, Na puti v Persiiu (SPB, 1878), p. 162. The dates for
the Lianozov concession vary greatly. It was renewed every five years up to nearly
the turn of the century, when it was extended to 1925; this may have given rise
to the confusion. The usual date given is 1886.
81. L. Tseidler, "Torgovlia Giliana," SKD, VII (1904), no. 5, pp. 369-71; Ter-
Gukasov, p. 67; OVTR, 1890, 1898-1913. There are great differences between
values declared to Persian customs and to Russian. The Persian government had
no duty on the export of fish and fish products; consequently it probably took
whatever figures the Lianozov interests provided it. The Russian customs levied
only a nominal 5 per cent duty on Persian fish, so there is fairly good reason to
believe the Russian figures are more accurate.
77








RUSSO-PERSIAN COMMERCIAL RELATIONS


preneurial spirit-a lack which Russia's efforts encouraged. It does
not appear that the intensive institutional penetration of the late 1890's
had much influence in turning the trade returns upward, for they had
increased at a steady rate since 1870, with a steep break upward occur-
ring in 1886 as a result of the adoption of subsidization. The first dec-

TABLE 15
PRINCIPAL EXPORTS FROM PERSIA AND THE PERCENTAGE OF THEM
SENT TO RUSSIA, 1909/10 AND 1910/11
(Thousands of Rubles)

1909/10 1910/11
PERCENT. PERCENT.
COMMODITYTOTAL RUSSIAN TOTAL RUSSIAN


Raw cotton
Dried fruits and nuts
Rugs
Silver and gold coin
Rice
Fish and fish products
Opium
Cocoons
Resins and gums
Leather and hides
Wool
Live animals
Finished leathers
Silk fabrics
Cereals
Tobacco
Drugs and herbs
Various cottons
Woolen fabrics
Animal products
Precious stones
Henna
Eggs
Various plants
Building materials
Source: N. Passek,
p. 172.


12,602
9,573
8,714
6,125
4,377
3,828
3,167
3,030
2,205
2,146
1,622
1,193
1,040
948
524
480
462
438
437
393
351
305
252
181
9

"Torgovo-statisticheskii


97
84
43
88
98
99
5

37
77
72
93
96
62
75


23
86
86
53
81
100
81
99
otchet


12,668
11,251
8,125
5,955
5,258
960
2,370
2,951
2,153
2,722
1,888
1,355
1,120
832
1,794
568
652
410
282
219
776
263
232
255
175
torgovago oborota


ade of intensive penetration (1890-1900) shows 7 per cent less increase
than the decade immediately preceding, and the decade 1900-1910 shows
another decrease in the rate of growth-the expansion rate for exports
shows a marked deceleration between 1890 and 1900 in spite of ever-
growing rebates to exporters. According to the Persian statistics, between
1903/04 and 1913/14 Russia's share of Persia's foreign trade rose only

78


98
86
42
85
99
96
16
6
25
86
76
87
96
78
22

17
3
72
76
1
82
100
73
89
Persii,"







RUBLE IMPERIALISM


7.5 per cent. Considering the financial sacrifices and the efforts ex-
pended, the rate of export growth indicated failure, a failure that re-
liance upon two commodities, sugar and cottons, emphasizes. More
satisfactory was Russia's hold on Persia's exports; but they would have
gone to Russia anyway.
Why had there not been greater success during the thirty years of
intensive effort? Failure to implement the Treaty of Turkmanchai is
part of the answer, failure to coordinate policy another, but the Russian
merchant failed too. His timidity, stubbornness, and ignorance were
proverbial. He did next to nothing to help himself against the ferocity
of western European competition, relying instead on a far from infalli-
ble government to fight his battles for him and refusing to follow advice.
The basic pattern of Russo-Persian trade remained unaltered with the
exception of the trade in sugar, cottons, and petroleum products. For
everything else, and often for cottons too, in 1913 Persian merchants
or their agents were still making the annual trip to the fair at Nizhnii
Novgorod. Turnover of inventories consequently remained slow, the
Russian marketer was screened from his market, and Russian trade was
often at the mercy of the course of the ruble, which the Persians watched
closely.
It was pleasing to the amour propre of Great Russian chauvinists that
Persia should be economically in the toils of Russia, but to those with a
less limited point of view Russia's hold was extremely tenuous, the re-
sult of wholly artificial expedients. Persia was not so valuable economi-
cally to Russia that she could not afford to lose the Persian market. By
the Russo-Japanese War a number of Russian officials concluded that
the weapons of finance and commerce were not reliable. As long as the
bank and other ventures were not paying their way and the government
subsidized them, economic policy must be subordinated to political ends.
From the Russo-Japanese War to 1914 Russia consistently weighed her
purely political concerns in Persia more heavily than her economic, and
acted at times in ways that damaged her economic position to maintain
even her minimum political ends. On at least one occasion, in October,
1910, Russia was willing to use her economic position as a coercive
weapon to gain political goals.82 This one incident is not sufficient per-
haps for the conclusion that Russian commercial policy toward Persia
was power-oriented. But that policy and the resulting structure of Russo-
Persian trade are in such close approximation to those Hirschman has
82. Graf Benckendorffs Diplomatischer Schriftwechsel, ed. B. de Siebert (3
vols., Berlin, 1928), I, no. 294, pp. 364-69, no. 298, pp. 374-75.
79







RUSSO-PERSIAN COMMERCIAL RELATIONS


postulated83 for a power-oriented foreign trade policy that we might
well weigh the possibility that power through commerce was Tsarist
Russia's primary motive to stay in the Persian market.
83. Albert O. Hirschman, National Power and the Structure of Foreign Trade
(Berkeley, 1945), passim.


80
















UNIVERSITY OF FLORIDA MONOGRAPHS


Social Sciences
1 (Winter 1959): The Whigs of Florida,
1845-1854, by H. J. Doherty, Jr.
2 (Spring 1959): Austrian Catholics and
the Social Question, 1918-1933, by A.
Diamant
3 (Summer 1959): The Siege of St. Au-
gustine in 1702, by C. W. Arnade
4 (Fall 1959): New Light on Early and
Medieval Japanese Historiography, by
J. A. Harrison
5 (Winter 1960): The Swiss Press and
Foreign Affairs in World War II, by
F. H. Hartmann
6 (Spring 1960): The American Militia:
Decade of Decision 1789-1800, by J. K.
Mahon
7 (Summer 1960): The Foundation of
Jacques Maritain's Political Philosophy,
by H. Y. Jung
8 (Fall 1960): Latin American Population
Studies, by T. L. Smith
9 (Winter 1961): Jacksonian Democracy
on the Florida Frontier, by A. W.
Thompson
10 (Spring 1961): Holman Versus Hughes:
Extension of Australian Commonwealth
Powers, by C. Joyner
11 (Summer 1961): Welfare Economics
and Subsidy Programs, by M. Z. Kafoglis
12 (Fall 1961): Tribune of the Slavo-
philes: Konstantin Aksakov, by Edw.
Chmielewski
13 (Winter 1962): City Managers in Poli-
tics: An Analysis of Manager Tenure
and Termination, by G. M. Kammerer,
C. D. Farris, J. M. DeGrove and A. B.
Clubok
14 (Spring 1962): Recent Southern Eco-
nomic Development as Revealed by the


Changing Structure of Employment, by
E. S. Dunn, Jr.
15 (Summer 1962): Sea Power and Chil-
ean Independence, by D. E. Worcester
16 (Fall 1962): The Sherman Antitrust
Act and Foreign Trade, by A. Simmons
17 (Winter 1963): The Origins of Hamil-
ton's Fiscal Policies, by D. F. Swanson
18 (Spring 1963): Criminal Asylum in
Anglo-Saxon Law, by C. H. Riggs, Jr.
19 (Summer 1963): Colonia Baron Hirsch,
A Jewish Agricultural Colony in Argen-
tina, by M. D. Winsberg
20 (Fall 1963): Time Deposits in Present-
day Commercial Banking, by L. L. Crum
21 (Winter 1964): The Eastern Greenland
Case in Historical Perspective, by O.
Svarlien
22 (Spring 1964): Jacksonian Democracy
and the Historians, by A. A. Cave
23 (Summer 1964): The Rise of the
American Chemistry Profession, 1850-
1900, by E. H. Beardsley
24 (Fall 1964): Aymara Communities and
the Bolivian Agrarian Reform, by W. E.
Carter
25 (Winter 1965): Conservatives in the
Progressive Era: The Taft Republicans
of 1912, by N. M. Wilensky
26 (Spring 1965): The Anglo-Norwegian
Fisheries Case of 1951 and the Chang-
ing Law of the Territorial Sea, by T.
Kobayashi
27 (Summer 1965): The Liquidity Struc-
ture of Firms and Monetary Economics,
by W. J. Frazer, Jr.
28 (Fall 1965): Russo-Persian Commercial
Relations, 1828-1914, by M. L. Entner