No. 547.
Mr. Wallace to Mr. Frelinghuysen.

No. 227.]

Sir: The Sublime Porte and grand council of state, having formally declined to accede to the demands of the powers to cancel or suspend the operation of the concession for the storage of petroleum in Constantinople, I have prepared a paper to be submitted to the Sultan, at his request, setting forth the grounds of objection to the grant agreed upon by the protestants, and have the honor to transmit herewith a copy of the memorandum, together with a copy of my note to the grand master of ceremonies, through whom the communication is had.

Should this appeal fail, every means of bringing about the annulment of the obnoxious measure will have been exhausted. In fact, the appeal itself is extraordinary. Seldom, if ever, is the Sultan sought to set aside a decision of the grand council of state.* * *

Hoping my course up to this point of the business will meet approval,

I have, &c.,

[Inclosure 1 in No. 227.]

Mr. Wallace to Munir Bey.

Excellency: In the conversation your august master, His Imperial Majesty the Sultan, permitted me to hold with him a few days ago (your excellency being in attendance) upon the subject of the petroleum concession recently granted to Sami Bey, he was so gracious as to request me to send him a paper setting forth my views of the matter, it doubtless being His Majesty’s desire to see and consider for himself the points of objection made by the protesting powers to the continuation of that grant. I am happy to avail myself of the privilege, and venture to inclose herewith such a paper, in trust that you will have the goodness to present it to His Majesty, together with my most respectful salutations and earnest wishes that this may go the way of easy settlement, like all the other questions which have arisen between his Government and that of my country in the fifty years and more during which they have been bound together by treaty ties.

I avail, &c.,

[Inclosure 2 in No. 227.]


In submitting this paper to His Imperial Majesty, without whose permission, graciously accorded, I should not presume upon such a liberty, my object is to try to present, for His Majesty’s calm consideration, the basis of the objections made to the petroleum concession of recent grant to Sami Bey.

The concession conferred upon Sami Bey for his individual profit the privileges, first, of establishing depots on the upper Bosphorus for the storage of petroleum imported into Constantinople, and, second, of collecting charges for such storage. Considering the great interest His Majesty is known to take in everything pertaining to the welfare of his people, it may not be doubted for an instant that the reason which moved him to confirm the concession in the solemn form of an imperial iradé was, the storage of oil in great quantities was dangerous if permitted in the limits of the city. Probably [Page 846]the best proof possible to be given to His Majesty that we are not denying the wisdom of such exclusion is to be found in the fact that a depot of the article in question existed on the Bosphorus to the perfect satisfaction of all dealers and importers prior to the grant to Sami Bey. Along with this admission, however, His Majesty is earnestly entreated to observe some essential difference between the old arrangement and the new one. Thus, the first depots were instituted and managed with no view whatever to the profit of private individuals; they were as convenient in every respect as the new ones; the charges were reasonable, which is saying they paid all expenses of peeping and left a margin over of about 20 paras the case to the city, supposed to be for repairs. On the other hand, the new depots, while they are as convenient as the old ones and are commendable on the score of public safety, are to be maintained, if the concession continues, by charges productive the first year of a revenue more than sufficient to pay the original outlay for the houses, and for each succeeding year of a net profit vastly in excess of the cost of keeping, of which excess not one para goes into the imperial treasury; I am sure His Imperial Majesty will discern the consequence of this point of derivable annual profit of the concession, and because of its importance excuse some details so needful to precision. He will probably be better satisfied with comparative tables of receipts under the old régime and the new. I venture to commend the following as very nearly if not exactly reliable:

Charges under the old régime.

Payable the first month of storage, per case 20
Payable the second month of storage, per case 5
Payable the third month of storage, per case 5
Add for lighterage and porterage 15
Total 45

Charges under the new régime.

Payable the first month of stotage, per case 90
Payable the second month of storage, per case 15
Payable the third month of storage, per case 5
Add transportation from depot to city, bachshis to guards 20
Total 130

In round numbers, the difference of charges between the old arrangement and the new is at least two piastres the case. To appreciate the prodigious disproportion between the receipts of the concessonaire and his outlay, it should be taken into account that the cost of erection of the storehouses hardly amounts to £7,000; next it is necessary to be reminded that the importation of petroleum from America last year was, as reported to me, 570,000 cases. So at two piastres the case, 1, 140,000 piastres will be realized under the new regime in excess of the amount paid by importers under the old; and this, I pray to be remembered, is the product of the levy upon the American article alone. To reach the whole sum of profit to the concessionaire, the receipts from the Russian and the Roumanian importation must also be counted. Upon the showing here given, I proceed, with a confidence which refers itself epecially to His Majesty’s capacity to consider a question with judicial impartiality even though it involves his own imperial action, to express the opinion that he will no longer wonder if the three petroleum producing countries, America, Russia and Roumania, have protested against the concession. Neither do I doubt that he will excuse me for saying in further explanation of their course in the matter, that they unite in regarding it as repressive of the importation, and in that way detrimental alike to them and to His Majesty’s Government; they see that none of the great profit will ever serve the financial interests of the Empire; they know that their commerce in this article, of vast consumption throughout the imperial dominions, is in danger of ruin for the benefit exclusively of a private person, who seems without the moderation to content himself with a reasonable compensation.

It may be the foregoing will be enough of itself to serve His Majesty’s wish for information on which to build a judgment for the just settlement of the dispute; still there is another objection, and as it is the strongest of all, I venture to give it in completion of my argument.

If His Majesty can be convinced that the concession does violence to a treaty existing between his Government and that of my country, it may not be doubted that he will have the goodness to cause such orders to be given as will best exemplify his loyalty to all such obligations.

[Page 847]

In full faith of his disposition in such cases, I beg to refer him to the following extract taken from Article V of the treaty of commerce between the two Governments of 1862:

His Imperial Majesty further engages that, save as hereinafter excepted, he will not prohibit the importation into his dominions and possessions of any article, the produce and manufacture of the United States of America; and that the duties to be imposed on every article, the produce or manufacture of the United States of America imported into the Empire and possessions of His Imperial Majesty the Sultan, shall in no case, exceed one fixed rate of 8 per cent, ad valorem, or a specific duty fixed by common consent equivalent thereto.* * * If these articles, after having paid the import duty of 8 per cent., are sold, either in the interior of the country or at the place of their arrival, neither the buyer nor the seller shall be charged with any further duty in respect to them,” &c.

The word duty, as here used, stands for imports and charges, so that there are four conclusions to be drawn from the article, which are most respectfully commended to His Majesty’s consideration.

Each Government is solemnly engaged not to prohibit the importation into its dominions and possessions of any article, the produce or manufacture of the other, from whatever place arriving, except tobacco and salt, they being the exceptions reserved in Article XIY of the treaty.
The Imperial Ottoman Government is also solemnly engaged not to impose on any article, the produce or manufacture of the United States of America imported into His Majesty’s dominions a duty (impost or charge) exceeding one fixed rate of eight per cent, ad valorem, or a specific duty (import or charge) fixed by common consent equivalent thereto.
The Imperial Ottoman Government is further solemnly engaged, that if such articles, the produce or manufacture of the United States of America, having once paid the impost duty of eight per cent, ad valorem, are sold, either at the place of their arrival or in the interior of the country, neither the buyer nor the seller shall be charged with any further duty (imposts or charge) in respect to them.
The engagements so defined, in the nature of guarantees by the Governments, respectively, have relation to the articles imported, not the citizenship or nationality of the person importing them. Enough always that the articles are the produce or manufacture of Turkey or the United States of America.

It would be presumptuous to make application of these points to the charges imposed upon petroleum from my country by the concession. The practical reason of His Majesty will discover at once that the amounts required to be paid to Sami Bey, under veil of storages, are simply charges additional to the customs charge of 8 per cent, paid upon entry into port. Nor is it thought there is any need to expatiate upon the idea that Governments bound to each other by contract of treaty cannot do indirectly what they are mutually prohibited from doing directly. It is to be hoped, however, that it may be considered perfectly proper to request that His Majesty will condescend to give especial attention to the effect of the third and fourth points above mentioned. Nor is it thought necessary to do more than remark to His Majesty that the losses consequent upon the concession will not be confined to my countrymen or the importers. No article of foreign produce enters more generally into the domestic economy of His Majesty’s subjects of all classes than petroleum, because it is cheaper than any other illuminating material—than olive oil or common tallow. Should the grant go on, it will follow that the American article, which happens to be most popular on account of its greater purity, as proven by its freedom from bad odor when burning in the lamp, must either disappear from Turkish markets or become out of reach of all except the very rich. The great body of His Majesty’s subjects must find some substitute in their houses for petroleum or pay Sami Bey the 130 paras the case for the storage charges in addition to the ordinary price of the commodity. I need not say how far more willingly they would contribute so much in support of the imperial credit and in diminution of the national debt.

It only remains to express to His Majesty what my Government would consent to in the way of friendly settlement. Reserving all rights which it may think secured to its citizens under the treaty, it would agree, I think, to such modifications of the concession as would result in a return to the charges imposed under the old regime or arrangement as given in the first of the foregoing tables, and to place its offer of compromise of the question upon a ground of liberality to the concessionaire. I think it would also make no objection, in view of his expenditures in the erection of houses, to the imposition of thirty paras the case for storage the first month, making an addition to the twenty paras of customary charge. The effect would be to authorize a levy of fifty-five paras the case for three months’ storage, which would give an ample annual compensation upon the actual investment.

The paper is submitted to His Majesty with many thanks for the condescension which permits its presentation.