SHREWD RUSSIANS

Evening Post, Volume CXVIII, Issue 121, 19 November 1934, Page 9

SHREWD RUSSIANS

SALE, OF A RAILWAY

THE CHINESE EASTERN LINE

ORIENTAL VICTIMS

In order to arrive at an understanding of the facts involved in the negotiations for tho sale of tho Chineso Eastern ' (North Manchurian) Railway to the Manchukuo Government, it is necessary to go back ■■• to tho agreement entorod into: at Mukden between the autonomous • Government of the thrco eastern provinces (Chang Tso-lin having declarod tho independence of his domain at that time) and Soviet Eussia on September 20, 192-1, says a writer in the "Sydney Morning Horald." ■

One article of this agreement provided that the future of tlie Chinese Jiastera Railway shall bo determined by tho two contracting parties, "to the oxclusion of any third party or parties." This is important, in so far as it prevents Soviet Russia from selling interests to other nations. Other articles provide that the net profits of the railway shall be held by the board of directors, and shall not be used before tho question as to how. to divide them can be settlod: that employment of railway officials shall bo in accordance with the principle of equal representation between tho nationals of the two countries; that a board of directors shall be composed of ton persons, consisting of five from each, country, seven constituting a quorum, and the consent of no less than six directors being necessary for making any decision.

The treaty provided also:—"The Union of - Soviet Socialist Republics agrees, upon the signing of this agreement, to tho redemption by China of tho said railway with Chinese capital, tho actual and fair cost of which to be fixed by the two contracting parties."

During the years immediately following, Soviet officials practically controlled the railway through a very simple, expedient. No. Russian direc-' tors would ghow^up at directors' meetings, and consequently no quorum could be attained. In the meantime, the Russian, manager carried out the 'actual management of tho railway, mainly for the benefit of tho Russians. The profits of tho railway were' placed in tho Soviet Dalbank. This state of affairs continued for some years, while Chang Tso-lin was engaged in various .intrigues and warfaro south of the Wall. Later, however, Chang Tso-lin ventured to a-ssert himsclf,with the result, that the railway was shorn of a number of important appurtenances, including all lands not directly employed for railway purposes, schools',' telephone systems, the river fleet, wharves, etc. It was also arranged that tho profits of the railway should be divided- equally between Soviet Russia and the Chinese at regular intervals. ALL COMMUNISTS. Soviet Russians continued to hold by far the greater portion of the key positions. .The Soviet;officials are now all Communists/ with records satisfactory to Moscow. When, in 1929, hostilities occurred between Soviet Russia and Manchuria, under Chang Hsueh-liang's • regime, Moscow ordered all the Russian employees of the C.E.R. to cease work. 1 Only 2000 obeyed the order, and as a consequence the railway continued to function fairly satisfactorily. After this experience, Moscow discharged the employees who had not,obeyed orders, and replaced them-with Communists of unquestionable records and loyalty.' Partly as a result of the system of division of profits every thrco months, very little has usually been left for maintenance and repairs of railway property, and this is now in a very decrepit condition. The roadbed is extremely poor;' most of the ties are rotten, most of the rails are old, and all of them are very light (the C.E.R. uses 641b rails, whereas all tho principal railways under1 the Manehukuo Stato Railway Direction have much heavier rails). The rolling-stock is, all obsolete. No new rolling-stock has been provided since 1917. Last year the Soviet management contrived to send a large number, of these locomotives and-cars into Russia, where they remain. .The rest of the locomotives and cars are of such | antiquated patterns that they would | not bo used in any modern, railway today.

If the State of Manchukuo should purchase'the railway it would,-therefore, receive'of material value only a dilapidated roadbed and equipment, of which it would bo necessary to scrap by far the greater part.

As a matter o£ fact, tho State Rail- . way Direction has already, had considerable experience with- the converting of railways formerly •.'under Chineso management to modern standards. Thus, the direction originally'took over 2950 kilometres of railway lines, and had to spend 30,000,000 yen on improvements during the 'first year, owing to past neglect, and, during the following year, a similar amount or more is being spent, i Construction of an entirely new line I paralleling the Forth Manchuria Rail-, way line, with .the new roadbed and new rolling-stock and all other necessary equipment, would cost 100,000 yea per kilometre, according to figures of j the llanchukuo State Railway Direc-I tion. The length of the North Man-1 churia.Railway is 1721 kilometre's. - It i would, therefore, bo worth, if it were ■ entirely new in every respect, 172,100,000 yen. ELEMENTS IN PRICE VALUE. , In view, of these conditions, it is in-. teresting to compare the demand made,, by Moscow and tho bids mado by Manchukuo in connection with the railway negotiations. Soviet Russia is not sell-' ing the -entire railway. All it has to sell is, in fact, only a half-interest for. twenty-two years, as the railway, under j the agreement quoted above, is to return to Manchuria in 1956, without any compensation whatever. Moscow's first demand • was for 250,000,000 - gold roubles, -which is equal to G25,000,000 yen, and in addition '30,000,000 yen for retirement allowances for the Soviet Russian employees of the railway. •

The final Soviet offer was Y160,00j000, plus Y30,000,000 for Bussian retirement ' nllowanee,and ¥29,000,000 for Manchurian retirement;allowance.' This makes a total of Y210,000,000, which, figured on the basis of YIOO,OOO per kilometre, makes a cost of Y122,000 per kilometre, which, as Bussia only has a half share to sell, actually, represents Y244,000 per kilometre. Against this we. have Mandrukuo's, last bid of Y120,000,000 for the railway, to which. must be added the 750,000,000 flue to Bussiariland Mariehurian employees, making a, total of yi70,000,000, which is about YIOO,OOO per kilometre for Soviet Eussia's half (■hare, or a total of Y200,000 per kilometre. : In other words, the.MHiichukuo Government offers to pay for the Soviet Russian, half .share in a -decrepit;and antiquated railway, which would require at least Y95,000,000 to place it on a modern operating basis, a sum equal to" that which would be required' for constructing an entirely-new railway, complete with brand-new rolling-stock and other equipment. -.--., - A factor of tlio greatest effect on future earnings of Hie N.M.Ik .will-be the competition furnished by .the new railways built- by the Manchukuo Government. Of these the Harbin-Lafa railway is already in operation, and it is taking a great volume of business away from the southern line of the N.M.B. between Harbin and Hsinking. The