The historical reasons for the foundation of Imperial bank must be sought in Reuters’ contract which was awarded to Baron Julius De Reuters in 1872 by Naseri government, directed by his reformist and pro-western chancellor Mirza Hassan Khan Sepahsalar and special...
From the Reuter’s contract to the Establishment of Iran Imperial Bank
Interview with Mozafar Shahedi
□As the first question, please tell us what was the connection between the famous Reuters contract and the founding of the imperial bank?
The historical reasons for the foundation of Imperial bank must be sought in Reuters’ contract which was awarded to Baron Julius De Reuters in 1872 by Naseri government, directed by his reformist and pro-western chancellor Mirza Hassan Khan Sepahsalar and special dealership and mediation of Mirza Malcolm Khan Nazem-al-Doleh. Awarding of this concession to Reuter occurred under Mirza Malcolm Khan’s suggestions of economic methods and commercial-financial development theories that encouraged and noted the necessity of more foreign investment in Iran to the Qajar statesmen. The Reuter’s contract which astonished different political, economic and … groups was compiled by Moein-al-Molk an even Lord Curzon believes it to be the start of the international raid and hunting of Iran concessions. Julius Reuter was Jewish and originally a German born in 1816 and his real name was Israel Byrzhvrvfat. It is said that in 1844 he left Judaism and converted to Christianity and so changed his name to Paul Julius and in 1857 he became a British citizen. Shortly after, Paul Julius was honored with the title Julius Baron Van Reuter for his services to the British capitalist society.
□Please briefly talk about the importance and the fate of the Reuter contract too.
The Reuter contract, which was realized especially through payments of large bribes by Reuters, did not only amazed the foreign politicians, especially the English, but also arouse protests of various circles at home, especially the clergymen and finally Naser-al-Din Shah was forced to annul the contract and Mirza Hassan Khan Sepahsalar had to resign his chancellorship too. Regarding the Reuter contract, Lord Curzon stated: "It was the strangest privilege rarely seen in history, whereby all the industrial benefits of a country was surrendered and assigned to a foreigner." English politician Sir Henry Rawlinson analyzed the Reuter contract as the multilateral dominance of England over Iran and wrote: "With this agreement, the future of Iran and the Englandare linked to each other ... the advantages in the contract were clear. It was easily realized that all the country’s wealth, in the industry and agriculture, was in the hands of England. No one could have thought the possibility of such a contract to be signed with an English man.”
□But how was it that the annulled Reuter contract led to the foundation of the Imperial Bank in Iran?
Despite being annulled a short time after being signed by both parties and even though the English government somehow favored the annulment at the time, a few years later Reuter proposed new claims for renewal of at least some of the content of the annulled contract the most important of which was founding of the Imperial Bank. In fact when Reuter contract was annulled all the content and conditions lost validity and the fact that Reuter represented the plan to found the Imperial Bank after a few years resorting to article 20 of the previous annulled contract was not legally valid or pursuable. But because there was a greater aim behind Reuter’s claim and English Imperialism to further expand the economic and commercial influence  in Iran, great pressures regarding this matter built up to show the Qajar government indebted by the annulled contract and so obtain concession to found the Imperial Bank. A short time after Reuter’s contract in 1875, his plan of founding the Imperial bank in Iran was prepared and presented to the English foreign ministry so that grounds and the methods of execution of the plan in Iran is investigated and surveyed through expert studies.Reuter had discussed the plan with the English statesmen while hoping on the participation and help of the Qajar statesmen. Because during acquisition of the annulled concession, Reuter had bribed a many of the courtiers and those involved in the contract with great sums of money and now that he was repeating his illusory claims regarding article 20 of the annulled contract, he hoped to be aided by his Iranian friends in his plan. Otherwise it was possible that Reuter would pressure them for returning the amounts received and this responsibility felt by the statesmen towards Reuters generosity was among the most important reasons for the success of claimants’ of the Reuter’s contract in founding the Imperial Bank. In this way, when in the middle of 1880’s England started more extensive plans to influence Iran and outrun his political-economic rivals, the old and at the same time valueless legal claim of Reuter became a suitable chance to found the most important tool for political and economic dominance over Iran. At this stage, the English consigned the initiative of expanding their influence in Iran to Sir Drummond Wolf, the new ambassador in Iran who entered Iran in 1888 and was named the founder of Imperialism for his much effective steps in expanding England’s influence in Iran. Sir Drummond Wolf had planned a consistent and fundamental program which opened the way for establishing Iran Imperial bank even after its first stages and preconditions. Actually Wolf intended on leading Iran and its economic, commercial and… programs in direction of economical Imperialism. Therefore the first and most important step at this stage was providing necessary grounds for serious and free participation of Iranian citizens in economic affairs and preparing the necessary atmosphere for more expansion of England’s commercial economy and investment in Iran. To implement this, Wolf encouraged Naser-al-Din Shah to issue an order regarding the free participation of Iranian nationals in various economic activities and support of the central government from free economy and capitalism and honoring ownership and such things to provide the necessary domestic grounds for expansion of foreign investments in Iran.
□With regard to England’s long standing invasive presence in Iran, explain the process of establishing the Imperial Bank (which was clearly an English Bank) in Iran.
The process of establishing Imperial Bank in 1889 in Iran was not normal and more than being justified and encouraged by internal political-economic necessities, it was created due to much foreign pressure and participation and alliance of a number of domestic statesmen and government authorities who had already benefitted or would benefit in the future or in other words were related to the founders and shareholders of this bank. In Normal economic and social conditions a bank could help the qualitative and quantitative development of commerce and economic performance of the country. But since the process of establishing this bank in Iran was imposed and the statesmen and even merchants and those involved in economic affairs of the country were the least informed of the features and manner of performance of this bank, the founding of this bank cannot be considered a domestic economic and social and political necessity and in fact the bank’s later performance showed that the founders did not aim at Iran’s economic-commercial conditions but more at trying to empty the country from potential and actual economic and financial capabilities and capacities which were hoped to evolve in a normal and to some extent intrinsic way in the near future.
□What process did the banking system and traditional exchange bureaus go through on the verge of the Imperial Bank establishment and how do you asses the bank’s role in preventing domestic banking development?
At least from the middle of the 19th century, Iran’s monetary and credit economy had a developing trend and great brokers and merchants of the country had notably progressed in monetary-credit transfers and facilitating commercial relations and the domain of their activities even reached corners of the world. In fact at the time of Imperial Bankestablishment, Iran Traditional banking and exchange bureaus was not very far from utilizing modern banking services and the merchants and brokers had long before announced the necessity of establishing modern banks in Iran to be run by internal investments to Naser-al-Din Shah through many letters and appeals. But with the establishment of the Imperial Bank this trend slowed down and despite efforts to found a bank and confront the Imperial Bank, the great merchants and brokers of the country failed and became bankrupt. Therefore most of the Imperial Bank’s performance was formed in the direction of continuance and further expansion of political and economic dominance of the colonizing world and especially England over Iran and preventing intrinsic and stable growth and development of the country’s economy in various fields. At a time when the Qajar government could not or would not agree to establishment of Iranian banks with the request of great merchants and brokers like Haj Hassan Amin-al-Zarb and those like him, theorizations and great pressures of people like Mirza Malcolm Khan and his like who were mostly supported by foreign circles paid off and the Qajar king was forced to grant the concession for founding of the Imperial Bank in Iran.
□We know that the two countries of England and czarist Russia followed a long and close competition in Iran; how effective were these competitions in the founding of the Imperial Bank?
The developing trend of the two countries’ competition in Iran and consequently the increasing growth of commercial and economic transactions and England’s struggle to outrun his experienced rival, the czarist Russia in various political and economic domains of Iran are among the most important reasons for establishment of the Imperial Bank. Following the expansion of the uncontrollable influence of Russia on different political, economic and commercial domains of Iran during the last decades of the 19th century, the English politicians felt that their success compared to their rival is weak and deficient. Therefore they needed to gain special points from the Naseri government to develop their influence in Iran. While the condition continued during the last years of Naser-al-Din Shah’s reign and the commercial and economic balance of that country in Iran was heavier that his rival, England.
□How effective do you think the role of bribery was in the establishment of the Imperial Bank?
Sir Drummond Wolf, then British ambassador in Tehran and the executor of political-economic plans of that country in Iran started extensive and at the same time calculated efforts to satisfy the Qajar statesmen regarding the establishment of the Imperial Bank and while severely and intensely defending Reuter’s claim he provided the grounds necessary for this plan by making overt and covert connections with the supreme Qajar statesmen. Among his most important tools was bribing the statesmen by huge sums of money. Ali Asghar Khan Amin-al-Sultan, chancellor, and Mirza Abbas Khan Ghavam-al-Doleh received the highest bribes and greatest shares.
□What role could and should the Imperial Bank have played in the development of the economic and commercial influence of England in Iran?
Obtaining the Imperial Bank concession in 1889 materialized following a few other important commercial and economic concessions the most important of which was allowing sailing in Karoon. This last action further facilitated commercial transactions of Iran and England and import of the English and their alliances’ goods to Iran. This expansion of commercial relationship was the pre-condition to the establishment of the Imperial Bank in Iran. In other words, England intended on knowing everything about Iran’s economy to the disadvantage of his commercial-economic rivals, especially Russia, through further expansion of commercial relations with Iran and final domination of monetary and credit system of the country.
□Why was the establishment of the Imperial Bank (which contrary to its name was really an English bank) was among the most important concessions of England in Iran?
England had integrated and comprehensive plans in mind to extend its influence in Iran and the establishment of the Imperial Bank could have been considered as a central point and the focus of all economic activities of these plans and contracts and also immediately after granting permit for freedom of economic activities to Iran nationals by Naser-al-Din Shah, the allowing of sailing in Karoon materializes and that is due to this association and integrated plan of the English to expand their influence in Iran. Because at that time the Russians had gained notable influence regarding various political, economic and commercial fields in the north of Iran and allowing sailing in Karoon would provide for the English purposes more than any other country who were an uncontested power in the Persian Gulf and the southern and central parts of Iran and a few countries and merchants of other countries who had commercial relations with Iran desperately needed sailing and transport services and other concessions of the English. So in such circumstances when Sir Drummond Wolf was enforcing their pre-planned programs in Iran one after the other to extend their economic and political influence of Iran against their powerful rival, czarist Russia, the Russians viewed Wolf’s entrance and his actions cynically and Russians newspapers believed Wolf’s mission in Iran to be an action against the advantages of the czarist Russia.
□How do you evaluate the Imperial Bank’s status among the extensive banking network of England’s capitalist system that was active in different parts of the world at that time?
England had expanded its banking network in different parts of the world during the second half of the 19th century and in fact the founding of Iran Imperial Bank could complete the chain and further enhance England’s influence in corners of the world. Counting the Imperial Bank in Iran, at that time about twenty different banks under the control of England’s capitalist economy worked in different parts of the world which shows England’s world-wide capitalist economy. These extensive banking systems encompassing remote parts of the world included: Bank of Australia, Bank of New Zealand, Bank of South Africa, Bank of England and Egypt, English Bank of Western Africa, Banks of Bengal, Madras and Bombay (which later united and was named India Imperial Bank), India National Bank, New Bank of the East, Hong Kong and Shanghai Banking Corporation, Ottoman Bank, bank of east (in Iraq), Iran Imperial Bank, Ionian Bank, Jewish Trust Anticline, Bank of England and Palestine, Bank of Brazil, Bank of England and South America. So by establishing Iran Imperial Bank in addition to outrunning his old rival, Russia, England’s capitalist banking network further dominated the world-wide monetary-credit commercial and economic markets. In fact, England intended on controlling Iran’smonetary, credit and commercial economy by dominating communication networks and roads in south-west, south-east and up to the central and northern parts and also by founding the Imperial Bank in Iran.
□As the last question, what is your conclusion of the process of formation and establishment of the Imperial Bank and the role it was to play in various political and financial-economic fields of Iran?
According to what happened, it is clear that the process of establishing the Imperial bank in Iran, especially occurred following England’s efforts to outrun its old rival and in between Reuter’s old claim regarding the annulled and at the same time famous contract in 1872 was a necessary ground and excuse for the establishment of this bank and the role of Qajar statesmen who were indebted to Reuter for different reasons and expected more favors in case of formation of a new contract was very effective in the success of this plan. Especially since in addition to Reuter a few of the greatest and most influential commercial, financial and credit companies of England welcomed the idea of establishing the Imperial bank in Iran and actively participated in the foundation of this bank and when all the internal and external conditions of this plan was provided for, domestic and foreign oppositions, especially that of Russia, could not cause any serious problems in the process of the foundation and later the performance of the Imperial Bank. Therefore in 1889 a bank was founded in Iran which was to control its monetary-credit and commercial economy and guide the country’s politics in a direction favored by London’s policy makers.
□I sincerely thank your participation in this interview.
And I wish you health and happiness.
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