Persian Empire 1845

Chapter 582 Diplomacy and Aid

In St. Petersburg, Rafsanjani met with Tsar Alexander II and several officials. He had little to say to his old adversary, offering only perfunctory greetings before departing St. Petersburg.

Iran has abandoned diplomatic efforts to resolve its issues with Russia; the conflict between the two countries can only be resolved through conflict. This necessitates a comprehensive military and diplomatic effort to contain and infiltrate Russia in order to achieve its own objectives.

Rafsanjani's next stop is Stockholm, the capital of Sweden. Sweden fought several wars with Russia in the 18th century and eventually lost Finland, after which its national power declined and it no longer pursued the status of a great power.

However, not pursuing status does not mean they are complacent. Sweden remains highly vigilant about Russian expansionism, especially concerned about Russia's further control of the Baltic Sea or its threat to Scandinavia.

Therefore, Sweden's policy is armed neutrality, meaning it avoids direct involvement in conflicts between major European powers, but secretly leans towards the West. Iran and Sweden share similar interests in dealing with Russia.

Not only Sweden, but Denmark shares the same anxiety. Its relationship with Russia is the most delicate, involving both cooperation and wariness, with the core objective of preserving its remaining territory from annexation by Russia or Germany. Russia has hoped Denmark would allow its fleet free passage, but Denmark has repeatedly refused under pressure from the West.

Rafsanjani will lead his diplomatic team on a lengthy visit to Northern Europe, and will also travel to Berlin to congratulate Wilhelm I. He will then travel to Austria before returning to Iran via the Black Sea.

Britain is currently undergoing a profound review of its foreign policy, which has been riddled with serious errors. It now needs to rectify these mistakes as quickly as possible.

Regarding policy toward Russia, Gladstone temporarily set aside the Russian threat and began signing trade agreements with Russia, increasing economic ties between the two countries. Russia exported grain and timber to Britain in exchange for machinery and industrial goods. At the same time, Britain agreed to provide Russia with a record-breaking loan of £3000 million.

With Russia holding off an Iranian offensive and maintaining the balance of power on the continent, Britain resumed its diplomatic activities. The rise of Germany and Iran had already made London feel threatened, and they needed to push forward with new policies as soon as possible.

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France also began to repay the reparations as quickly as possible, hoping to finish the payment sooner so the German troops could leave. They used railway assets in Alsace-Lorraine to offset 3.75 million francs. Then, the French government withdrew gold reserves from banks to pay 2.73 million francs, and another 2.39 million francs in silver. In this way, France directly paid approximately 8.87 million gold francs.

To counterbalance Germany's rise, Britain provided a low-interest loan of 20 billion francs and pressured Germany to lower interest rates. It was estimated that the loan would be fully repaid within two years. South of Paris, across the Pyrenees Mountains, lies Spain. Its debt situation was comparable to France's; Maximilian only realized how dire Spain's situation was after taking office.

Spain's low level of industrialization, with agriculture dominating and having low productivity, resulted in limited national wealth and a small tax base. Furthermore, indirect taxes impacted most of the poor, while clergy and nobles retained tax-exempt privileges.

In terms of expenditures, military spending accounted for more than half of total expenditures. Spain's political situation was extremely unstable, with civil wars such as the Carlos War draining the national treasury. Despite the loss of its American colonies, Spain maintained costly rule and military presence in Cuba, Puerto Rico, and the Philippines, where the administrative costs far exceeded the revenue generated.

Due to years of deficits, the government has accumulated a huge debt. Now, paying interest on national debt has become an extremely heavy burden on the fiscal budget, crowding out spending in all other areas.

Due to fiscal turmoil and political risks, the Spanish government has a poor credit rating in the international market and has to pay very high interest rates when issuing new bonds.

To fill the financial hole, Finance Minister Bentura Zanadoli receives three groups of people in his office every morning: the first are representatives from Rothschild Bank in Paris, who urge a debt restructuring plan in Spanish with French accents; the second are military generals, who pound on the table demanding payment of three months' worth of overdue military salaries; the third are local officials complaining about the paralyzed tax collection system, with even landowners around Madrid refusing to pay land taxes on the grounds of "priests being exempt from taxes." Zanadoli's pen has signed countless documents, but he still can't find a solution—on the international market, Spain's newly issued 5 million pesetas bonds, with an annual interest rate driven up to 18%, are still attracting no buyers; domestically, poor harvests have led to soaring food prices, and famine riots have broken out in Valencia and other places, with the military expenses for suppressing them becoming a new financial burden.

Maximilian made a risky decision: to send an envoy to Vienna to request a loan of 1 million crowns from the Austrian Empire. The envoy brought two Rubens paintings from the Spanish royal collection as collateral, but was met with a cold reception in Vienna. Austrian Chancellor von Boistl bluntly stated that the political turmoil in Spain made any investment like "throwing gold coins into the Mediterranean." To make matters worse, France suddenly tightened trade tariffs on Spain at this time, and the Thiers government, fearing the spread of the Spanish debt crisis, announced a 25% tariff on Spanish exports such as wine and olive oil, directly cutting off a vital source of foreign exchange for Spain.

More intense protests erupted in the streets of Madrid. Hundreds of workers gathered in front of the parliament building, holding signs that read "Bread and debt cannot coexist." Maximilian, hearing the commotion outside from inside the palace, was forced to urgently summon his cabinet members to discuss whether to follow France's example and use colonial assets to pay off debts. But a single sentence from the Minister of Colonial Affairs extinguished his hopes: Cuban sugar plantations had stagnated due to a slave revolt, and the garrison in the Philippines was struggling to even resupply rifles and ammunition; these colonies were already "stones from which no oil could be extracted."

At this point, Maximilian had only one last resort: the "final proposal" submitted by the Treasury. It proposed cutting military spending by 40%, abolishing the tax exemptions for clergy and nobles, and issuing "mandatory national bonds" to domestic bankers. However, as soon as the proposal was put forward, military representatives slammed their fists on the table, threatening a mutiny; church representatives, on the other hand, threatened excommunication, resolutely opposing the abolition of tax exemptions. The meeting lasted from dawn till dusk, ultimately ending in a bitter argument.

From King of Sicily to King of Spain, Maximilian's territory expanded dramatically. He also faced more problems, and financial issues once again became a major headache for the Habsburg family; it seems they will have to rely on Iran again.

(End of this chapter)