HOW WE GOT THE SUEZ CANAL

Dominion, Volume 19, Issue 119, 13 February 1926, Page 22

HOW WE GOT THE SUEZ CANAL

DISRAELI’S BRILLIANT COUP-THE ROTHSCHILD MILLIONS

“Fifty years ago to-day,’ writes the “Times',’’ on the anniversary of the event, “there was signed in Cairo the contract by which the then Khedive of Egypt, Ismail Pasha, father of the reigning King, transferred his holding of 176,602 shares in the Suez Canal Company to the British Government. Queen Victoria, who had been appris- ■ the morning of November % 25, 1875, of the success of the negotiations by Mr. Disraeli in the vyords: "It is just settled; you have it, Madam,” wrote to her Prime Minister: “This is indeed a great and important event, which, when known, .will, the Queen feels sure, be most popular in the country. The great sum is the only disadvantage.” The great sum, which was voted by Parliament in the following I'ebiuary, was £4,080,000, to cover the whole expenses of the transfer, in connection with which Messrs. Rothschild had advanced to the Khedive on bchait of He Britisii Treasury £2,000,000 on Decern •„,ber 1, £1,000,000 on December 16, and -'-•the final £976,582 of the price on January 1, 1876, and the country thus acquired the £2O shares at about £23 Is. each. Tlie Khedive, who had, in 1*6769, hypothecated his right to draw dividehds on the shares until 189-1 m return for 30,000,000 francs (£1,200,000), agreed to pay interest at the rate of 5 per cent, on the share capital until that date, after which the shares would draw dividends in the ordinary way. In this way was obtained for the British Empire an interest second in importance only to that held in France in the control of the all-important waterway across Egypt through which British trade to and from Australia, India, East- Africa, and the Middle and Far East provides between 60 and 70 per cent, of the traffic. Its acquisition was made on the spur of the moment. The increasing financial difficulties of the Khedive, due to the cumulative effect of a long period of extravagant borrowing and reckless expenditure, had made it necessary for him to raise money on his Suez Canal holdings, and he was negotiating with two groups of financiers for the purpose. Otic of these was discussing an offer to sell outright for £3,680,000 provided that the Khedive paid 11 per cent, in lieu of dividends on the shares till 189-1; the other was proposing to advance £3,■lOO,OOO for three months at a rate of 18 per cent, on the shares, together with the Khedive’s royalty’ of 15 per cent, on the profits of the canal; in case of default, both shares and royalty were to pass to the syndicate and the Khedive was to pay 10 per cept. in lieu of dividend on the shares until 189-1.

The news that these negotiations'were in progress was imparted to Lord Derby, then Secretary of State for Foreign Affairs, on November 15 by Mr. Frederick Greenwood, of the “Pall Mall Gazette,” who had learned it at dinner from Mr. Henry Oppenheim, a man much interested in the finances of Egypt. Mr. Greenwood's information is believed to have confirmed an official dispatch received at the Foreign Office at tire same time, and his- suggestion that the- British Government -should offer for the shares was communicated by Lord Derby to the Prime Minister. Mr. Disraeli, perceiving the immediate political importance and ultimate financial advantage to the Treasury of such a transaction more clearly than his less imaginative colleague, immediately decided to take action. He was anxious to prevent the canal from becoming as entirely French in proprietorship as it was in administration, and was eager to seize an opportunity of demonstrating the importance that the British Government attached to the question of Imperial communications by way of the canal through - which the Prince of Wales

(afterwards King Edward VII) had just passed on his voyage to India There was little time to lose. The Khedive, who made no division between his Privy Purse and the Egyptian 1 reasury, had to meet the coupon on the Egyptian Debt on December 1, or follow his august suzerain, Sultan Abdul Hamid, into bankruptcy, and, apart from his Canal holdings, lie had no readily realisable assets; but, fortunately, the rival groups of French financiers were doing their best to prevent each other from raising the necessary cash. _ Accordingly, on November 16, General Stanton, the British Agent in Cairo, was instructed to inform the Khedive that the British Government could not view with indifference the transfer of so important an interest as his in the Suez Canal and to request His Highness to suspend negotiations with the financiers in order to give it an opportunity of making proposals. General Stanton reported that the Khedive welcomed the suggestion, and at the meeting of the Cabinet on November 17 the purchase of the shares was approved in principle. The Prime Minister immediately communicated his advice in this sense to the Queen, and on November 18 received a telegram from Her Majesty approving of the policy. The story goes that as soon as the Cabinet had arrived at its decision the Prime Minister opened the door and said “Yes” to his private secretary, Mr. Corry (afterwards Lord Rowton), who immediately started for New Court to ask Baron Lionel de Rothschild for 14,000,000 “to-morrow,” and that the banker, after meditatively eating a grape, asked, “What security?" “The British Government.” “You shall have it.” Mr. Buckle, in his biography of Disraeli,'repeats the picturesque details, not vouch for their scrupulous Nevertheless, the money was fortjWniing, the negotiations were success fW in spite of what the Prime Minister called “all the gamblers, capitalists, financiers of the world organised and platooncd in bands of plunderers, arrayed against us, and secret emissaries in every corner,” and the whole affair was kept so secret that when the fait accompli was announced on the morning of November 26 the Press and the public were alike taken by surprise.

The acquisition of so important a holding in the Suez Canal Company by the British Government met with a mixed reception both at Home and abroad, but whatever doubts may have been expressed as to the financial soundness of the move.have long been laid to rest, and the market value of the shares, which cost the Treasury about £23 4s. each, is now 1105 Bs., while in 1924 the Government received a tax-free dividend and bonus of 15 10s. on each of the 316,668 ordinary (110) shares into which its original purchase has been divided, and in 1923 a bonus of 15 Bs. on each of the 37,136 shares formerly held which have since been redeemed and now rank only as actions de jouissancc. Of the political consequences of Mr. Disraeli’s purchase of the shares "it is difficult to estimate the full extent, but it has been said, not without reasons in view of the financial history of the Suez Canal Company in its relations with the Egyptian Government, that the only benefit Egypt has ever repeated from the construction of the Canal, which cost so many Egyptian lives and so much Egyptian money, was due to the reforms introduced during the British occupation, towards which Mr. Disraeli made the first step 50 years ago.