Al-Bab al-`aliy  was chiefly concerned at his contraction, without its permission, of foreign loans at high rates of interest, on an increasingly irresponsible scale. Such extravagance, it was feared  at  Al-Bab al-`aliy, was likely to prejudice the payment of the annual tribute from Egypt, on which its own slender revenues counted, and moreover compromise its chances of obtaining much-needed European loans for itself. Above all it seemed to threaten a degree of insolvency in Egypt which could put her in the power of the foreigner, at the expense of Turkish influence, and to the detriment of the crédit and prestige of the `Uthmanliy Empire in general. 

Angry and humiliated, the Khidiwiy made a show of receiving the firman without accepting it, thus saving face, while the face of the Commissioner was saved by its public announcement. In a correct but non-committal letter of acknowledgment to the Grand Vizier, Isma`iyl foreshadowed demands which he intended to place at the feet of His Gracious Majesty at some future date. Under the moderating influence of the Ambassadors, he made certain concessions. Then he intensified his policy of bribery and intrigue at Al-Bab al-`aliy which was to culminate, three years later, in a new firman under a new Grand Vizier followed by another, which granted him much of the freedom he sought in financial and foreign affairs. After a brief period of restriction, in which he fell back on the ready financial assistance of the market, the Khidiwiy was able to resume his march to ruin, with the aid of larger foreign loans than ever.

Meanwhile the disastrous war of 1870 had brought down the French Second Empire, driving the Emperor Napoleon III and his wife the Empress Eugenie into exile, and had initiated the Third Republic. The change of regimes brought a change in official attitudes towards the Canal. Under the Empire the French Government, concerned not to antagonize Britain, generally withheld overt support fox the Canal Company, but was willing and able to support it, when needed, in practice. this trend was reversed. Under the Republic the Government, concerned to protect French investors, gave the Company overt support but was often unable, and sometimes unwilling, to implement it in practice.

Such, following France's defeat, was the measure of her loss of weight and international authority in Europe and in the Middle East, from which Britain now profited. Britain had consistently opposed the Canal as a French imperial threat, before it was made. But now that it was made she determined to convert it into a British imperial asset-a task made easier by the fact that France was no longer an Empire. Before the Canal's completion, Lesseps had declared to his shareholders: France will have subscribed the greater portion of your capital but England will pay you the largest proportion of your dividends. And as revenue now slowly mounted, year by year, with the increase in the number of ships making use of the Canal, this became even more evident. For two thirds of their tonnage was British. As the Board of Trade was soon to report: The trade between Europe and the East flows more and more through the Canal, and the British Flag covers an ever increasing proportion of this trade.'

Logically this should lead to an increasing measure of British control over the Suez Canal. But Britain's Liberal Government was moving with caution. At the end of 1870 Major-General Stanton (as he now was), the British Consul-General, reported to London an important proposal from the Khidiwiy. Alluding to the French Company's financial difficulties, Isma`iyl observed to him that of all countries Britain was the most concerned to keep the Canal open. This being so, he told the British agent that he would gladly see the Canal the property of an English Company, and that in the event of such a Company being formed he would do everything in his power to facilitate the transfer into their hands.

A few months later, in April 1871, the same proposal,  reached Granville from another quarter within Lesseps's own camp. Its author was Sir Daniel Lange, the Canal Company's representative in Britain. The Canal, Lange reported, had just been finally completed, to a uniform depth, and could now take the largest ships. But it remained to be seen how the shareholders, at their annual meeting later in the month, would react when their patriotism is again invoked, for the purpose of submitting to further pecuniary sacrifices, rather than assent to the alternative of British assistance and control in the future management of the Suez Canal. He suggested that a well defined financial proposal emanating from England might be opportune and even acceptable to the shareholders then, provided it be done with discretion and caution'. He preferred first to ascertain Lesseps's own views. For, after all, we have worked together to unite the two seas. He "for the glory of France". I for the interest of England. None the less it was surely desirable that the Suez Canal should become, by "just" means, subject to the control of this country.

Later in the month Lesseps was in London, trying to raise money for his 20 million franc loan. Lange, as he wrote to Granville, suggested such a course to him, as one likely to be permanent in its results and not exposed to the necessity of further makeshifts such as temporary loans, which would merely serve to stave off an evil for the time being. He said openly to Lesseps, Place before the shareholders the alternative of no dividends or British assistance and entire management with himself still as President in Paris. But Lesseps recoiled with aversion from this proposal and declared he never would be a party to the transfer of the management of the Canal into other than French hands. All he would accept would be the introduction on to the French Board of a few English directors.

Lange, though hardly surprised at this attitude, believed it to be based on a dangerous over-confidence. He feared, as he wrote to Granville, that the present fragile tenure of the Canal might break down for want of funds, and leave the management in the hands of persons to whom it was never intended to confide it. It was not until three years later that Lesseps learnt of this correspondence with the Foreign Office by his trusted British henchman. Enraged at such disloyalty, he secured Lange's immediate dismissal.

Meanwhile Lesseps, in so far as he was prepared to consider a sale, preferred the idea of purchase, on specified conditions, by the Governments of several maritime powers, thus giving the Canal an international character. A plan of this nature was launched in Italy, with Austrian support, and gained favor with the French Government. Granville however found it premature to give an opinion. The Khidiwiy was unimpressed by the proposal, which seemed to him to raise considerable difficulties. But he passed it over to  Al-Bab al-`aliy. The Al-Bab al-`aliy declared that Lesseps had no right to sell the Canal. And the idea was gradually dropped.

In fact, from the end of 1873 onwards, the position of the Company began to improve. Traffic increased appreciably. The settlement of the tonnage dispute, with its authorization of the surtax, brought in adequate revenue. In 1874 the Company was able to launch another bond issue, this time for 3 5 million francs, and it was fully subscribed. Thus all the rears of interest were paid, and the market value of the or ordinary shares reached a premium. Ugly rumors of liquidation receded. The Suez Canal seemed to be weathering its first lean years.

Now his Ordinary shares in the Canal Company, amounting to roughly a quarter of this total sum, were virtually his only liquid asset. In November 1875 he found himself in urgent need of three or four million pounds sterling, to meet obligations due at the beginning of December and in the early months of 1876, and thus to stave off a probable suspension of payments. It became clear that he would be obliged to sell or mortgage these Canal shares, 177,642 in number.

But meanwhile, as Edouard Dervieu soon discovered, another syndicate was in the field, with the backing of the Crédit Foncier, which was represented in Egypt by the Anglo-Egyptian Bank. Its objective was not the purchase of the Canal shares but the establishment of solvency in Egypt through the conversion of its floating debt, composed mostly of short-team obligations, into a consolidated long-term loan. For this the subscribers would demand guarantees, hence the Khidiwiy would be required to a retain his shares. The two approaches were thus incompatible, and Dervieu had to seek elsewhere, meanwhile obtaining an extension of his option until the following Friday, November 19.

Stanton, the British Consul-General in Cairo, knew nothing of these operations until Monday, November 15, when he received a cable from the Foreign Office, inquiring urgently whether the news of such an offer, by a combination of French capitalists was true. London had first got news of it over the weekend. when Henry Oppenheim, of the Paris banking house, for long an associate but later an adversary of Dervieu in Egypt, revealed it at dinner on Sunday, November 14, to Frederick Greenwood, the proprietor and editor of the Pall Mall Gazette. Oppenheim, a major creditor of the Khidiwiy, was associated with the crédit Foncier, hence opposed to the Dervieu plan and concerned to influence the British Government against it. 

The possibility of acquiring an interest in the Canal for Britain had occurred to Disraeli soon after the Tory Government came to power in 1874, and he had sent Baron Rothschild's son on a confidential mission to Paris to inquire into the prospects. But nothing came of his inquiry, since Lesseps refused any sale indicating his refusal by naming a price, £40 million, so prohibitive that it startled even a Rothschild. When, on June, 1874, Lord Derby was questioned in the House of Lords as to whether, in view of the Company's position, it would not be advisable for Britain to purchase the Canal, he replied that if a proposition for the transfer of the Canal to an International Commission were to come before us, framed in such a manner that all Governments would participate in the advantages of the Canal on equal terms, I do not say that might not be a fair proposal to entertain. But it has not been made, and I have no reason to think it will be made.

But in view of the Prime Minister's determination, the Cabinet unanimously backed him, deciding in principle that Britain should acquire the shares. A telegram was dispatched immediately to Stanton: It is of great importance that the interest of the Viceroy of Egypt in the Suez Canal should not fall into the hands of a foreign company. Press for suspension of negotiations, and intimate that Her Majesty's Government are disposed to purchase if terms can be arranged. That evening Stanton saw the Khidiwiy, who assured him, in response to this communication, that he had no present intention of selling his shares, but that if he changed his mind he would give Her Majesty's Government the option of purchase. Meanwhile he was considering a proposal for a loan, on mortgage, with the shares as security.

Next day Disraeli communicated the news to Queen Victoria: "Tis an affair of millions; about four at least; but would give the possessor an immense, not to say preponderating, influence in the management of the Canal. It is vital to your Majesty's authority and power at this critical moment, that the Canal should belong to England, and I was so decided and absolute with Lord Derby on this head, that he ultimately adopted my views and brought the matter before the Cabinet yesterday. The Cabinet was unanimous in their decision, that the interest of the Khedive should, if possible, be obtained, and we telegraphed accordingly." The Queen telegraphed her approval from Balmoral, but feared the matter might be difficult to arrange.

 No sooner was it known that the British Government was in the market for the Khidiwiy's shares than the two Pashas, Nuwbar and Shariyf, born bargainers both to say nothing of Isma`iyl himself made it their object to bid up the price. In Stanton, not well-informed as to what was afoot in the world of Egyptian finance, they found a customer ready enough to fall for their stratagems. They conveyed to him the impression that both groups of French bankers were actively in the market, competing with one another and thus now with the British Government for a deal with the  Khidiwiy-Dervieu and the Societé Generale for their purchase for 90 million francs; the Anglo-Egyptian Bank and the crédit Foncier for their retention as cover for an advance of 80 million francs, in terms of the consolidation of the debt.

In all probability the Anglo-Egyptian Bank, though interested with the Crédit Foncier in the long-term funding of the debt, made no such specific mortgage offer, being mainly concerned at this stage to prevent any purchase deal by the Societé Generale or others. But in the swift exchange of telegrams which passed between London and Cairo throughout this crucial week scarcely breathing time, as Disraeli put it, "but the thing must be done"

Meanwhile Disraeli broke the news of his masterly stroke to the Queen: "it is just settled: you have it, Madam." The French Government has been out generalled. They tried too much, offering loans at an usurious rate, and with conditions, which would have virtually given them the government of Egypt .... Four millions sterling and almost immediately .... The entire interest of the Viceroy of Egypt  is now Yours, Madam."The Queen (who was to receive him at Windsor next day) replied that this was indeed a great and important event which she felt sure would be most popular in the country. "The great sum", she added, is the only disadvantage!."

The new possession , packed in seven zinc boxes, had been deposited in the British Consulate-General in Cairo as soon as the agreement with the Khedive was signed. Stanton signed a receipt for the boxes, which were corded sealed with seals of the Finance Minister, Her Majesty's Consul-General, and the Consular court, pending a final check on the number of shares they contained. There proved to be only 176,602, not 177,642 as was supposed, and Nuwbar Pasha now recalled that a few shares had been sold in Paris some twelve years before. Thus the agreement was amended and a sum deducted from the price, bringing it down to £3,976,582.

When the task was completed the problem the British Admiralty, at the request of the Foreign Office, instructed the Malabar, a troopship passing home through the Red Sea, to make a special call at Alexandria and there receive certain cases. On the day appointed, Stanton traveled down to Alexandria, in a special train placed at his disposal by the Khidiwiy and the precious cargo was stored on board. Arriving at Portsmouth on the last day of the year 1875, the seven boxes were swiftly conveyed, under guard, to the Bank of England.

And thus, this was how Egypt's capital and vital interest in the Suez Canal were disastrously surrendered by the Khidiwiy Isma`iyl, (helped by his two Pashas; Nuwbar and Shariyf ) to the British Queen Victoria.

To be continued
 
 

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