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sum of £40,000 a year for public works. The Shah’s private treasure, which
was believed to have been, at his accession, over a million storling (30 millions
of francs), did not now probably amouut in cash, excluding a mass of pearls
andjowols, to £50,000, which would thus be absorbed, if devotod to the scheme,
in about a year. M. Naus’s own idea seemed to bo that'if the Government would
roally put soino money into the work and show itsolf in earnest about it, thcro
wero many moneyed Persian merchants who would bo ready to join in it, but
Sir A. Hardinge did not foel much confidence in the readiness of such
merchants to embark capital on a largo scale in any enterprise in Persia, tho
profits of which aro not in some way guaranteed by a foreign Power, or at least
by the participation of shareholders uuder foreign protection.
320. Tho financial position, however, of Persia has been recently again-
very weak. Monsieur Naus spoke to Sir A. Hardingo confidentially on tho 4th
July about the effect of tho Japanoso war and the cholera epidemic on tho
Customs receipts of Persia, and said he thought the momont had como to apply
for tho completion of tho advance of 300,000/. offered last year by llis Majesty’s
Government, but of which only 200,000/. had been drawn by the Persian Gov­
ernment. His Excellency explained that he was not yet authorised by the
Aln-od-Dowleh to negotiate with Sir A. Hardingo and was merely preparing
tho ground for the discussion which ho believod could not long be delayed.
321. Ho then showed Sir A. Hardingo tho draft agreement. It satisfied,
he oontended, the two conditions on which wc had insisted in tho spring of
1903, namely, security agaiust early repayment and the assignation of the
Customs of the Persian Gulf. Sir A. Hardinge, however, insisted that the third
instalment of 100,000/. should be secured ou tho Gulf Customs alouo without
reference to the Caspian Fisheries or Posts aud Telegraphs, and that although
the point might not seem of much practical importance, since the exhaustion of
the two former securities made tho ultimate one, that is the Gulf Customs, the
de facto guarantee, still His Majesty’s Government, as the lenders, wished that
this should be explicitly stated. It was not clear why the Persian Government
should hesitate to re*emphasize in words the assignation of security which they
were ready to grant in fact. M. Naus replied that he would bo able to get the
consent of the Persian Minister and of the Shah more easily if tho point on which
stress was laid was not emphasized. “ Le Scliah,” ho observed, " se paie
demots,” and as His Majesty lias an idea that any further hypothecation of the
Customs will affect his Civil List, which is paid out of them, it was as well to
disguise the fact from him or at least not draw his attention to it. The men­
tion of the Caspian Fisheries as the nominal first security, alboit a purely
meaningless and decorative phrase, would moreover be helpful to the Persian
Government as enabling them to wrap up what is really a foreign loan, incon­
sistent with their pledges to Russia, in the cloak of a mere discount operation
by tho Imperial Bank.
322. Monsieur Naus further informed Sir A. Hardinge that what the
Ain-ed-'Dowleh really wanted was an advance, not of 100,000/., but of 300,000/.
His Highness proposed to apply the 100,000/. to meeting the deficit which he
anticipated might accrue this year from a fall in tho Customs receipts. He
was prepared to give us an engagement that the remaining 200,000/. should be
affected to tho irrigation works in Arabistnn, which the Persian Government
desired to undertake. Monsieur Naus suggested that tho revenues accruing from
these works, as well as the domains fertilised by them, might be pledged as a
subsidiary security for the additional advance, and that this pledge might be
coupled with an undertaking that restrictions on tho export of grain from the
Karun.valley should be henoeforth abolished. He thought tho acquisition of
such a guarantee might be one not altogether to be despised by His Majesty’s
Government. He admitted that he might have a good deal of difficulty in
bringing the Shah to accept an agreement on these lines, but he did not
altogether despair of doing so.
323. Sir A. Hardinge in reporting to the Foreign Office the above facts
made certain suggestions, and concluded as follows (No: 133, dated 19th July
1904)
“ To sum up, what I would respectfully ask Your Lordship to do is this : (1) to permit
me to drop the new condition entailed in an insistence on the definition of Fare and the 1 ersion