No. 637.
Mr. Farman to Mr. Evarts.
Cairo, March 8, 1880. (Received. April 3.)
Sir: Since my return to Egypt I have not sent to the Department any dispatch on the subject of the proposed commission of liquidation, for the reason that until the last few days nothing of importance relating to such commission has taken place.
The contents of your telegram of the 28th of August, 1879, to Mr. Comanos were communicated by him to the Khedive, as reported in his dispatch No. 332 of September 1. As this communication was verbal, I thought it best on my arrival to confirm it in writing, and I did so in a dispatch that I addressed to the minister of foreign affairs on the 19th of November last, in which I also asked his excellency to inform me whether it was then the intention of His Highness the Khedive to establish such commission.
No official reply has ever been given to this dispatch, though the minister has often talked with me concerning it and the proposed commission of liquidation. In these conversations he has always stated that his government desired such a commission, but that the matter was in the hands of the European governments, and that the Khedive could do nothing until these governments agreed upon some plan. He said he knew nothing officially about the negotiations that were being carried on in Europe in relation to the commission, but that he had learned from unofficial sources that the matter was under consideration at Paris and London.
The Franco-English control was established about the 1st of December, and since then the government has been virtually in the hands of the controllers; For a long time it was evidently not their intention to have a commission of liquidation, especially so on the part of France; but various complications have arisen that now make such a commission an imperative necessity. Without it the decrees which the controllers have exacted cannot be executed, and their plans will be in a great measure defeated. It has, therefore, been decided to establish a commission, but care has been taken that it be of such a character as to be simply an [Page 1002] instrument to carry out the projects that have already been decided upon.
A week ago the French Government, through its consul-general, communicated to the Egyptian Government, for its approval, a draft of a decree drawn up in Paris establishing the proposed commission, and defining its duties and powers and fixing the time of its duration. According to this project, which has been accepted by the council of ministers, the commission is to consist of eight persons, of whom two are to be French, two English, one German, one Austrian, one Italian, and one Egyptian; four of these commissioners are to be the four commissioners “de la caisse,” who receive certain specified revenues, being the taxes of certain provinces and the railway receipts, &c., and hold them for the payment of the interest of the bonded indebtedness. Though nominally recommended by their governments, they are in fact the mere agents of the bondholders. Mr. Rivers Wilson is to be a fifth commissioner; and a private secretary of M. de Blignières, the French controller-general, is to be a sixth. So that six of the eight commissioners can be counted upon to act as a unit in carrying out the plan already agreed upon by the controllers. It is said that this plan has been reduced to writing and approved in Europe. While I have no proof of this statement, I have no doubt of its truth. The only important matters left undetermined are those relating to the Rothschilds and the Daïras Sanieh bondholders. These are open questions between the English and French themselves.
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Up to to-day no official communication has been made to the Egyptian Government except the one I have mentioned as made by France, though it is understood that Austria and Germany have given their assent to the proposed commission. The German consul-general had had no communication from his government up to this morning, and knew nothing about the negotiations. It is probable that Italy, though much dissatisfied, will also give her consent. Russia, the United States, and all the small powers are to be left out, though France promises, in submitting the plan, to ask the other governments to consent to the decisions of the commission. There are some of the smaller powers that have a larger interest in Egyptian claims and bonds than either Germany, Austria, or Italy, so that the question of representation has not wholly been determined by the amount of interest.
At the time our government asked to be represented in the commission the Egyptian Government was in the hands of the Khedive and the ministers of his choice, and I had been given to understand that such a request would not only be favorably received, but that Egypt was desirous that the United States should be represented. I am informed by the Russian consul-general that it was in pursuance of a similar understanding that his government asked a representation in the commission.
The situation has now wholly changed. Egypt is virtually in the hands of representatives of France and England, and the negotiations in relation to the commission have been carried on in Europe instead of Egypt.
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The commission is to take into consideration the resources of the country, and determine what amounts it can pay, and fix the amounts to be paid and the time of payment in accordance with such determination, and is to finish its work in three months. Its official functions and powers are to cease at the end of that period.
[Page 1003]It is evident that no examination of the resources of the country is intended, for it could not be made either in three months or in six months. The object of the commission is simply to help the controllers out of the difficulties in which they have already become involved by giving legal effect and an international sanction to the plans they have elaborated and in part attempted to execute, including the system of taxation described in my commercial report for 1879.
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The commission will undoubtedly reduce the interest on the unified debt to 4 or 4½ per cent., for this is an absolute necessity. To continue it at a higher rate would only be to increase from year to year the amount that would remain unpaid. But this is not simply four per cent. on the amount of money actually loaned, but four per cent. on the nominal amount of the bonds, on which Egypt has not received over sixty per cent., and a large proportion of this has already been paid in usurious interest. The interest on the privileged debt will be continued at five per cent.
It is the holders of the floating debt who will suffer most. France has taken care through her controller, before consenting to the commission, to have, so far as possible, her claims of this class paid. On the 15th of February, only three weeks ago, there was still owing, as a part of the floating debt of Egypt, to the grand syndicate at Paris about $17,000,000. This sum was then paid in full, including interest at the rate of eight per cent. This was done by the sale of Egypt’s right of 15 per cent. in the net profits of the Suez Canal at £700,000 and the sale of £4,583,920 of unified bonds held in pledge by the syndicate, and also £1,000,000 other unified bonds. It is true that in the purchase of these bonds the syndicate paid something over two per cent. more than their market value, but, considering the interest at the rate of eight per cent. that it had received for a number of years, this was no sacrifice on its part.
A large sum was also lately paid on the principal English floating-debt claim, that of Messrs. Greenfield & Co.
Last fall the German and Austrian Governments refused to consent to the commission of liquidation on account of the judgment liens in which they were principally interested. These, amounting to nearly $0,000,000, having now been paid, they have little further interest in this class of debts.
The remaining portion of the floating debt, amounting probably to something over $40,000,000, is largely owing to citizens of the smaller powers, particularly that of Greece, and to Egyptians. Many of these Egyptians are, however, under the protection of some foreign power.
As near as I can estimate, there are belonging to citizens of the United States and other persons under the protection of our government, who are here in precisely the same position as its citizens, Egyptian bonds and claims, most of which are undisputed, amounting to not less than $1,000,000.
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I have, &c.,