With Iran’s finances in the hands of their protégé, the two powers attempted to establish complete financial control over the country. On March 18, 1912, the two legations proposed to pay a sum of £200,000 to the government of Iran at the interest rate of 7 per cent a year. The advance on this loan was to be expended under the control of the Treasurer-General (M om ard), who would prepare a program of expenditures in consultation with the Cabinet and subject to the approval of the two legations. The puppet government had no choice but to accept the offer on March 20, 1912, in spite of its ominous political conditions.
There were, however, areas in which traditional Anglo-Russian rivalry reappeared. At times the Anglo-Russian friendship was considerably ruffled. This was due in no small degree to the Russian understanding with Germany in regard to the Tehran-Khanaqin railway, which constituted the heart of the Potsdam Agreement, signed on August 19,1911.
By this agreement Russia formally bound itself not to obstruct the Baghdad railway, while Germany admitted Russia’s special interests in Iran. Russia was to obtain the concession for the Tehran-Khanaqin line from the Iranian government. Then it was to begin work on the line within two years and to complete it within four years of the opening of the branch planned to join Khanaqin with Baghdad.
While the negotiations for the agreement were progressing, Sir Edward Grey expressed his disappointment by saying that Great Britain had no legal title to protest against German control of the proposed line but that such control would give Germany financial and political influence in Iran.
Germany is strengthened, England weakened. But I make no reproaches. I only ask Russia to keep exclusive control of the line in Persia. A Turkish army under German officers with the use of a railway to Tehran would be a danger. Germany must not have privileges in the Russian sphere which England did not get in 1907.
Russian Attack on Nascent Democracy in Persia
