867.77/319: Telegram

The Commissioner at Berlin ( Dresel ) to the Secretary of State

[Paraphrase]

627. Following from Coffin:

Stock in the Bank für Orientalische Eisenbahnen of Zürich is distributed about as follows: 20 to 25 per cent to Swiss interests, 25 per cent to the Deutsche Bank, 10 to 15 per cent to other German interests, and the rest to small holders in Austria, France, Belgium, the Netherlands, and other countries. The German interests have never held majority control, although no doubt they have exercised effective control. Opinion of legal advisers to the Deutsche Bank is that article 260 of the Treaty of Versailles can not be applied to a Swiss corporation. In view of certain provisions in Turkish treaty referred to below, this interpretation seems to have been adopted by the Allied Governments.

Paid-in share capital of the Anatolian Railway is about 60,000,000 francs, of which about half is owned by the Bank für Orientalische Eisenbahnen. The bank was in actual control of Anatolia Railway for some years before 1914. The bank also controls the Mersina-Adana Railway and the Haidar Pasha port concession, but not the Bagdad Railway, the stock of which is owned principally in Germany, and amounts to 15,000,000 francs. Unquestionably article 260 is applicable to these German holdings in Bagdad Railway.

It has been proposed by the Deutsche Bank that the Bagdad Railway be bought by the Anatolian Railway. It seems probable, however, that the transfer could not be made to stand, and that consent of Allied interests is essential to effective control of Bagdad Railway.

I am informed by the Deutsche Bank that the most valuable oil interest involved in the proposed transaction is the contract between the Turkish Ministry of the Civil List and the Anatolian Railway of July 4, 1904, which grants the right to exploit oil on the Sultan’s properties in the vilayets of Mosul and Bagdad.

When I sent cable no. 562, of June 4, provisions of the Turkish treaty were not known to me. Treaty of Versailles might have permitted arrangement proposed by Deutsche Bank and which was reported in my 562, but provisions of Turkish treaty appear to be a direct obstacle. Prompt action and vigorous support of United States Government are necessary if Americans hope to profit by the enterprise.

[Page 768]

Deutsche Bank has furnished me with text of article 294 of the Turkish treaty, the substance of which is as follows:

The Ottoman Government shall, on the demand of the Principal Allied Powers, take over the enterprises, property rights, and interests of any Ottoman Company holding a railway concession on Ottoman territory as constituted by the present treaty. The Ottoman Government shall transfer in conformity with the advice of the Financial Commission the said enterprises, property rights, and interests including all interests which it may itself possess in the said railways or enterprises. This transfer shall be fixed by an arbitrator named by the Council of the League of Nations. The amount shall be paid to the Financial Commission which will distribute it, together with all sums received by virtue of article 293, to persons directly or indirectly interested in the company, the proportions payable to the nationals of Germany, Austria, Hungary, or Bulgaria to be paid to the Reparations Commission simultaneously established by the treaties of peace concluded with those countries. Any portion payable to the Ottoman Government shall be retained by the Financial Commission for the purposes provided for in article 236, part VII of the present treaty.

The object of this article appears to be to enable the Allies to manipulate interests of the Bank für Orientalische Eisenbahnen. This inference is borne out by fact that British and French interests have frequently approached Deutsche Bank in this connection.

Article 239 of the Turkish treaty provides also that the Ottoman Government may not, except by consent of the Financial Commission, grant any new concessions either to Ottoman subjects or to others. And article 240 provides that all property registered in the name of the Civil List or of the Ottoman Empire, and situated in territory which has been detached from Turkey, shall be transferred gratuitously to the states acquiring such territory.

Dresel