The House of Rothschild (88 page)

There remains, however, a paradox. Confidential Rothschild correspondence shows that the London house participated in the 1894 loan and did not oppose the 1896 loan. Yet Münster and others had the strong impression that “the London House [would] have nothing to do with” Russian finance, an impression which was strongly confirmed five years later. To Münster, this was merely a proof of “how cunning these great Jews are. They always have a back door open.” More recently, historians have tended to argue that the British Rothschilds felt more strongly on the question of their co-religionists’ rights than the French. The archival evidence, nevertheless, suggests that more subtle considerations were involved. Essentially, the Rothschilds drew a distinction between Franco-Russian rapprochement, which they favoured, and Anglo-Russian rapprochement, which they were against. This might seem contradictory, but it was in many ways a rational application of the principle of the balance of power. In Natty’s eyes, an alliance between France and Russia might be acceptable; but its corollary was some kind of understanding between Britain and Germany. This explains the hostility he and his brothers expressed towards Russia when Witte was considering the possibility of floating a loan in London.

This initiative originated in the fatigue of the Paris market. As we have seen, the price of Russian bonds peaked in August 1898 and when Witte visited Paris later that summer Alphonse indicated that he would be unwilling to contemplate a new Russian loan in the face of rising yields across the board.
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This refusal was made after consultation with Natty, who in turn had asked Salisbury, observing that “it would neither be in accordance with the interest nor the inclination of Ld. Rothschild to encourage M. de Witte, unless Y[our] L[ordship] thought it desirable that he should do so.” In a reply which perfectly illustrates how the bond market and diplomacy interacted, Salisbury agreed:

This hint was duly taken, and in January 1899 the Russians broached the idea of a loan in London.

To understand the Rothschild response to this approach, it is necessary to bear in mind the role of Germany, whose policy towards Russia was in a state of flux at this period. Despite the anti-Russian signals of the early Wilhelmine years, the German banks had been positively encouraged by the German Foreign Office to participate in the 1894 and 1896 Russian loans, precisely in order to prevent a French monopoly on Russian finance. Indeed, by 1898 the German government was beginning to think in terms of a return to the Russo-German option. Thus, when the idea of a Russian loan in London was floated in 1899, it was closely linked to a parallel suggestion of a diplomatic deal between Russia and Germany, the implication being that, if Britain refused to lend to Russia, she should turn to Berlin. The dilemma for the Rothschilds was acute: on the one hand, they were against an Anglo-Russian rapprochement, but nor did they wish to see Berlin and St Petersburg reconciled in such a way that their own pet scheme for Anglo-German rapprochement fell by the wayside. This explains why the proposal split the London partners along lines summarised by McDonnell for Salisbury:

Natty was relieved to learn three days later that the proposed Russo-German agreement had foundered—partly, he claimed, because of the German “desire to combine with England (and possibly with America and Japan) for commercial purposes in China.” He warmed to this theme a week later, gleefully reporting that “Germany meanwhile is evidently alarmed at Russia’s recent proposal: she has sent a large order for Maxim guns and for quick firing field guns to Messrs Vickers of Sheffield.” “No one here,” he told the German ambassador in May, “would think of lending them [the Russians] money which would be used for armaments directed against England, and he regarded it as certain that all the efforts by Witte and his local agents in the city would remain unsuccessful.” Hatzfeldt attributed this “to the anti-Russian feeling by the family because of the Jewish question” (noting that this was not shared by other City houses); but diplomatic considerations were as important, if not more so. Between August 1899 and May 1901, the Russians reverted to Paris, with Delcassé’s broadening of the terms of the entente “to maintain the balance of power in Europe” reinforced by a new 4 per cent 425 million franc loan, floated by the old Rothschild-led consortium in May 1901. Again, it was symbolic of the interdependence of diplomacy and finance in the alliance system that Delcassé’s visit to St Petersburg in 1899 was followed by Edmond’s in 1901. Hatzfeldt’s report to Holstein on this loan speaks volumes for the continuing influence of the Rothschilds in international relations: “It is not easy to see how, even with the best will in the world, the French will find the necessary money, as they have already invested [so much] money in Russian bonds. But if Rothschild considers it possible, then it probably is possible.” The new German Chancellor, Prince Bernhard von Bülow, noted in the margin: “Yes.”

The alliance between Russia and France was far from being the only diplomatic development of the pre-war decades which had a financial subtext. The case of Italy—the only other power as reliant as Russia on foreign finance to fund her deficit—was not so very different. Italy had become closely tied to the Paris capital market even before her unification, thanks to James de Rothschild’s shrewd backing of Cavour and Piedmont and his ambitious schemes to link north Italy to the rest of Europe by rail. However, by the late 1880s the financial influence of France in Italy was declining relative to that of Germany. In both Paris and Berlin this tendency was seen in strongly political terms at a time when Italy was closely aligned with Germany and Austria through the Triple Alliance and at odds with France over the Mediterranean and trade policy. In July 1889, for example, the German ambassador in Rome complained that “the so-called Rothschild group” (which as usual included Bleichröder and the Disconto-Gesellschaft) had been “able to present itself as the principal group” in Italian business, despite the fact that its “relations must be called French rather than German.” His hope was that a purely German group of banks led by the Deutsche Bank and the Berliner Handels-Gesellschaft would be able to take over Italy’s bond-issuing business, and this was duly agreed with the Italian Prime Minister Francesco Crispi in September 1889. Conversely, the French government wished de Rothschild Frères to refuse any request for financial assistance from Rome. In October 1890 there was delight at the Quai d‘Orsay when Alphonse reported the following exchange between Padoa, the Rothschild agent in Rome, and the Italian Finance Minister, who had evidently been discomfited by the German group’s terms for supporting the price of Italian bonds:

Needless to say, the French Foreign Minister Ribot “enouraged M. de Rothschild to maintain this attitude. Our policy... must consist in being friendly towards Italy, not to make difficulties for her, to avoid needlessly offending her, but also not to make our bourse available to her and not to open our market to her until she has properly learnt the lesson she is learning at the moment about the benefits of the Triple Alliance.”

With the lira exchange rate and bond prices sliding sharply between 1890 and 1894, the French had good reason to gloat over the Italians’ predicament. However, it proved harder to break the link between Rome and Berlin than Ribot had anticipated. In 1891, following Crispi’s fall from power, a rather unsubtle attempt was made to woo his successor the Marquis di Rudinì. When the latter approached Padoa for a loan of 140 million lire, the suggestion was made that this would be forthcoming if Italy altered her policy over North Africa and tariffs in a pro-French sense. Rudinì recalled that his first impulse on hearing this suggestion was “to take the dirty Jew by the neck and kick him downstairs,” but he restrained himself on the grounds that such conduct “would have been unbecoming in a Marquis di Rudinì.” The Triple Alliance with Germany and Austria was renewed three months later, and in the years up until 1896 the German role in Italian finance continued to grow at the expense of the French. Partly for this reason, Alfred’s claim that Italy was about to desert the Triple Alliance in 1897 was viewed with scepticism by McDonnell and Salisbury.

If France and Russia could be brought together partly on the basis of floating Tsarist bonds on the Paris bourse, it is worth asking what economic factors might have contributed towards an Anglo-German rapprochement. An encouraging precedent seemed to be set by the 1890 agreement between Britain and Germany, which gave Britain Zanzibar in return for the North Sea island of Heligoland and a narrow strip of land affording German South-West Africa access to the Zambezi River. Nor should the failure of this and other colonial agreements to develop into an alliance be seen as leading necessarily to war.

It was over China that some form of Anglo-German co-operation seemed most likely to develop. Since 1874, the date of the first foreign loan raised for Imperial China, the Chinese government’s principal source of external finance had been two British firms based in Hong Kong, the Hong Kong & Shanghai Banking Corporation and Jardine, Matheson & Co. The British government, in the person of Sir Robert Hart, also controlled the Imperial Maritime Customs. In March 1885, however, Alphonse heard rumours of “the great master of the world”—Bismarck—“wishing to meddle in the Chinese question.” The intelligence was soon confirmed when Hansemann approached New Court and the Hong Kong & Shanghai Bank with a proposal to divide Chinese government and railway finance equally between the British and German members of a new syndicate. The Rothschilds had no objection to this: as Alphonse said, it was “much to be desired that the excessive growth of German activities and ambitions should be directed to the Far East and we shall not feel uneasy about their conquest in that direction.” The only concern at this stage was that Hansemann might aim at something more than a 50:50 partnership. Relaying information about a visit to Germany by the Chinese ambassador in London, Natty urged the Foreign Secretary Lord Iddesleigh to take “such steps as will tend to secure for English manufacturers a fair proportion of any future contracts with the Chinese Goverment.” Reassurance came, however, when Hansemann involved Wilhelm Carl in the negotiations which culminated with the creation of the Deutsch-Asiatische Bank in February 1889, a joint venture involving more than thirteen leading German banks including the Frankfurt house. When one of the younger Oppenheims travelled to China to investigate its economic prospects on behalf of this group, the London Rothschilds actually financed his trip.

The period between 1888 and 1893 saw a series of important changes of personnel in Berlin which threw German foreign policy into confusion and put the idea of Anglo-German co-operation in China temporarily on the back-burner. The first was the succession of William II as Kaiser in 1888, following the belated death of his grandfather and the premature death of his father after just ninety-nine days on the throne. For the French Rothschilds, this was nothing less than a “nightmare” given the new Kaiser’s reputation for instability and bellicosity. Indeed, Gustave went so far as to make a remarkable prediction:

In fact, as Alphonse anticipated, Bismarck’s departure was involuntary: by March 1890 the differences between the Chancellor and the new monarch on both foreign and domestic policy could no longer be bridged and Bismarck was forced to resign. “[C]apricious, adventurous and imperious, confident in his destiny,” William seemed to pose a threat to a European order of which the Rothschilds had come to see Bismarck as the custodian. “[I]n the interest of world peace,” Alphonse told Bleichröder, “we deeply regret his departure, because we are convinced that to a large extent its maintenance in the last years was his doing.” The sense of discontinuity was heightened three years later when Bleichröder himself died.

It is tempting to see these anxieties as prescient, and it is undeniable that German foreign policy after 1890 became clumsy and often self-defeating in a way that it had never been under Bismarck. In the context of the 1890s, however, it would be more accurate to say that Alphonse and Gustave were tending to idealise Bismarck—who only two decades earlier had seemed to them the personification of caprice and adventure—and to demonise the Kaiser. As early as September 1891, the French partners were admitting that their fears of William had been exaggerated; in truth, the defects of Wilhelmine foreign policy may have owed as much to the influence of the excessively devious Friedrich von Holstein—the
éminence
grise at the Foreign Office—than to the Kaiser, whose power was always a good deal more institution-ally circumscribed than he himself realised. Nor was the death of Bleichröder an irreparable loss: as we have seen, the Rothschilds had tended to rate Hansemann above him, and the essentially diplomatic function Bleichröder had played was carried on without much interruption by Paul Schwabach. It did not therefore take long for the idea of an Anglo-German overseas partnership to resurface.