Persian Empire 1845

Chapter 662 The Banker's Thoughts

Russia's two failed attempts to cross the Danube River had repercussions not only militarily, but also diplomatically and economically.

On May 1st, the Russian government issued another £10.5 million in government bonds with a high interest rate of 5.75%, but there was little response. Even with the help of Russian bankers, only £3 million was sold.

In order to attract banks to continue purchasing government bonds, the Russian Ministry of Finance, with the Tsar's approval, sold 30-year mineral exploration rights in the Ural region and privatized the Kharkiv-Kiev and Kyiv-Odessa railways. It is expected to receive £200 million.

After the outbreak of war, the entire Eastern Mediterranean was thrown into chaos. The impact on shipping was enormous; from February to May, merchant ships heading to Athens dropped by 88%, and those to Constantinople by 65%. Local goods such as grapes, olives, and wool could not be transported, forcing Greece to borrow from Britain, while Montenegro and Serbia had to rely on taxes and donations from others.

Following the declaration of war with France, the Ottoman Empire froze all French assets in the Ottoman Empire, including ports, trade, factories, and estates. The Ottoman Bank, a joint venture with Britain, also suspended its currency exchange services to Paris and Marseille.

This was devastating for many French businessmen, and members of parliament in Marseille called on the government to take more action to protect French property. However, France was preparing for an expedition and couldn't spare a navy to deal with the nearby Ottomans. Their only option was to support Russia to wear down the Ottomans, allowing Russia to reap the rewards later.

In recent months, Britain has been significantly less active than other countries, especially after the Russian army's first failed attempt to cross the Danube, after which it fell silent. They were also angered by Iran's shelling of the British fleet, but due to its geographical location and its protection of India, the Gladstone government decided to pursue negotiations. Iran was also willing to maintain peace with Britain.

Ultimately, the shelling incident ended with Iran issuing an apology and paying 100 million rials in compensation. Peace was maintained between the two sides, but Britain remained highly vigilant about the imbalance on the European continent and therefore provided economic support to Russia and France.

On March 2nd, the British Parliament passed a resolution to halve tariffs on goods exported to Russia and France, and conversely, tariffs on goods exported from Russia and France to Britain would also be halved. Trade between the three countries began to rise; Britain was using this method to support the two countries, provided they defeated their adversaries.

But with the Russian army's failed second crossing of the Danube, Britain had to consider the next steps. French and Russian government bonds on the London Stock Exchange saw little interest, with most buyers adopting a wait-and-see approach.

Even Rothschild Bank adopted a wait-and-see approach; after all, who would risk their money? Capital is profit-driven and risk-averse. When the fog of war looms and the future is uncertain, the wisest course of action is to remain inactive. This financial chill undoubtedly dampened the enthusiasm of St. Petersburg and Paris.

At the Rothschild residence, Lionel Rothschild spoke first, his voice steady yet carrying undeniable weight: "Gentlemen, I think we have all seen the telegrams from the Danube front. Storetov, and then Tatishev, two Russian generals, and hundreds of thousands of the finest Slavic soldiers, failed to cross that river."

His cousin, Nathaniel Rothschild, who was in charge of the French business, then added: "Mr. McMahon in Paris is urging us every day, hoping that we can take the lead in issuing a new joint bond for their great expedition. They seem to think that as long as our gold coins flow into their treasury, victory will fall like ripe fruit."

Everyone knows perfectly well that without a breakthrough in Russia, continuing to increase investment will only put them in an uncertain situation.

A representative from Oppenheimer Bank in Hamburg stated, “Gentlemen, we all know this perfectly well. The Russians are offering very tempting terms: a 5.75% interest rate, plus the minerals of the Urals and the railways of Ukraine. However, collateral depreciates on the battlefield. If the Ottoman and Iranian armies can drive the Russians back north of the Danube time and time again, who can guarantee they won't one day advance to Kiev, or even further? By then, how much will those exploration rights and railway concessions be worth?” “Internal assessments within the Ministry of Foreign Affairs suggest that the pace of the war has shifted. The Ottomans and Iran have shown resilience beyond expectations. The collapse we previously predicted has not occurred. This means that even if Russia and France ultimately prevail, it will be a long, costly, and unpredictable war of attrition. The financial costs are likely to far exceed the post-war gains, especially… well, given that some allies might try to monopolize most of the spoils.”

Baron Lionel concluded, "So, the core question we face is: do the risks and rewards still match?"

"The main Russian forces have suffered setbacks and their morale has been damaged. The morale of the Ottoman and Iranian armies is high and their defenses are solid. The possibility of a protracted war has greatly increased."

The ruble and franc are already under pressure due to military spending. A continued war will exacerbate inflation, further eroding the real value of our bond holdings. And if… I mean if, a debt default occurs, we will lose everything.

Nathaniel sighed. "I agree with my cousin's analysis. From what I've heard in Paris, their treasury isn't exactly overflowing either. McMahon's hopes of a quick victory to replenish the treasury and consolidate his power now seem slim. If we invest heavily now, we risk losing everything. Don't forget how the Fugger family fell from grace."

The Fugger family tied themselves firmly to the Spanish war machine, only to find themselves constantly at war. Their debts piled up, and all their savings were insufficient to cover them.

"Let's look at other places next. I think Brazil is a good option."

Investing in continental Europe is no longer very safe; it's better to look to the New World. Brazil, Mexico, the United States, and Canada are rich in resources and have experienced less war, so there is naturally little risk.

With the Rothschilds in such a state, other bankers are also avoiding Russia like the plague, unless they can bring about victory.

Russia is preparing to mobilize another 30 people for logistical and other tasks, sending previously support personnel to the front lines.

Although this battle was also a failure, they reasoned that the Ottoman army was already stretched thin. This time, they increased their army to 40 and charged together, believing the Ottomans could no longer stop them.

Moreover, the Russian military command plans to launch a simultaneous attack from the Danube and the Caucasus. No matter how powerful Iran and the Ottoman Empire are, they cannot withstand the onslaught of Russia's million-strong army. With the assistance of Greece, Serbia, and other countries, the recapturation of Constantinople and the crossing of the Golden Horn are imminent.

(End of this chapter)