Persian Empire 1845

Chapter 669 Bank Investment
Ambassador Baslob's meaning was certainly not that simple. Bismarck was a shrewd man; why would he extend a helping hand to them just because of a few battle victories?

"My lord, representatives from the Eurasian United Bank, the Banque de l'Indochine, the Lion Bank, and the Trade Bank have arrived."

Amir went to another room to meet with representatives of the four banks. Their combined assets exceeded 25 billion rials, and besides Iran and the Ottoman Empire, the Far East and Qinistan were also significant depositors.

These banks were developed with the support and approval of the Shah, but as their strength grew, so did their influence. Furthermore, in order to deal with the economic crisis, the Shah relaxed the conditions for bank establishment, and the funds they controlled became leverage to influence the course of the national economy.

"Ah, everyone, please have a seat. I think it's clear why I've gathered you all here. The Ottoman Empire's series of projects require large-scale investment, but during the war, the government is unable to come up with any extra money to invest."

All the delegates were well aware that large-scale construction projects in the Ottoman and Egyptian regions were already underway. The only missing piece was funding. These included important projects such as the Ottoman railway network, the modernization of Constantinople and the Bosphorus Bridge, and the comprehensive Nile River irrigation project. These thirteen large-scale projects required over 10 billion euros, and with insufficient government funding, private investment was naturally needed to fill the gap.

Of course, the banks were aware of the profits involved in these projects, especially the Mediterranean railway, which was planned to start from Izmir, circle halfway around, and reach Tunis. No one dared to imagine the potential profits.

Moreover, the cost of raw materials for railway construction will undoubtedly skyrocket. This will benefit countless businesses, making it a profitable venture even if loans are provided to them.

Finally, Mirza Agasi, the most senior member and head of the Eurasian United Bank, spoke first, his voice slow and steady: "Your Excellency Amir, we deeply agree with the grand vision and strategic significance of the projects you have listed. Railways connect the lifelines, ports link the world, and water conservancy nourishes all people—these are all great undertakings that benefit the present and future generations. However…"

He then changed the subject: "The war is not over yet, and the outcome is still uncertain. Investing huge amounts of capital in a war-torn region with an uncertain future at this time carries risks far exceeding those of ordinary business activities. Forgive my bluntness, but Your Excellency, we need more robust safeguards."

That's true; they know Russia's appetite. If Iran fails, their investments will all go down the drain. And they might even have to make Iran pay reparations.

Hussein Khan of Lion Bank, however, is more focused on returns: "Even if the risks are manageable, such a large investment will inevitably have a long payback period. We need to see a clear return on investment model. The operating rights of railways and ports, the development rights of land along the route, the toll revenue sharing ratio... these specific commercial terms must be clear and sufficiently attractive."

Amir listened quietly, his face showing no displeasure. He knew all too well that when dealing with these people who controlled the flow of money, empty talk about ideals was useless; tangible benefits and guarantees were essential.

"The questions you have raised are all very pertinent," Amir said slowly, his voice clear and powerful. "Risk, reward, and model—these are the core issues we need to clarify today."

He first looked at Agassiz and Rafi: “The risks certainly exist. But the greatest risk is the Empire’s defeat, at which point all your assets in Iran and the Ottoman Empire will likely be lost. Therefore, supporting these projects and helping the Empire win the war and recover quickly is itself the best guarantee for your own wealth.” He first clarified the shared interests. “Of course, specific safeguards are essential,” he continued. “The government is willing to use the direct revenue generated by the projects in the future as the primary source of repayment. At the same time, it can be agreed that if the projects are halted or fail due to force majeure such as war, the government will use the Empire’s central tax revenue as the final repayment guarantee.”

Furthermore, the government has pledged that if any project fails to generate the expected returns due to non-operational reasons, the excess returns from other successful projects, or even Imperial Customs revenue, will be used to cross-subsidize the fund, ensuring that the overall annualized rate of return of the fund is not lower than an attractive floor agreed upon by both parties.

The representative from Crédit Agricole cautiously began, “Your Excellency, we appreciate your sincerity. However, the uncertainty of war is the biggest variable. Even if the Empire ultimately wins, the reconstruction process will take time, and the project will not generate stable returns for several years. During this ‘window of opportunity,’ our huge investments will be frozen, resulting in enormous opportunity costs. We need more liquid guarantees.”

Hussein Khan immediately chimed in: “Indeed, we need to see more specific collateral. For example, could we use certain stable and profitable assets as collateral? For instance, a stake in the Baku refinery, or the future revenue rights of the Empire’s share in the Suez Canal Company?”

This demand was extremely stringent, practically encroaching on the empire's core assets. Amir felt a chill run down his spine, but his expression remained unchanged. He knew that when seeking help, he had to demonstrate sufficient flexibility and wisdom.

“Mr. Hussein Khan’s proposal is very constructive,” Amir said, not rejecting it outright, but cleverly steer the conversation toward a more practical direction. “However, directly mortgaging core state-owned assets involves the very foundation of the nation and requires His Majesty the Shah’s approval, making the process complicated. Perhaps we can explore a more flexible approach.”

Amir leaned forward slightly and offered a carefully prepared alternative: "Directly mortgaging core assets involves far-reaching implications. But I understand your concerns about the safety of funds. We can try another approach—establishing a national development fund."

Led by the four banks present here, and in conjunction with other interested domestic and international financial institutions, this fund will be jointly established specifically to support these thirteen large-scale projects. The fund can issue bonds of varying risk levels, with the banks' funds serving as priority holders, enjoying first-come, first-served rights and relatively fixed, guaranteed returns. Higher-risk portions can be undertaken by the government guiding private capital or seeking other investors with higher risk appetites.

For land development rights along railway lines and around ports, the government can establish joint venture development companies with funds. Banks can hold a significant stake through capital investment, deeply participating in development and sharing long-term value appreciation, rather than simply collecting fixed toll fees. Simultaneously, the government will grant these projects tax breaks for up to twenty years and ensure convenience in raw material procurement and labor use, maximizing project profitability and thus guaranteeing returns for investors.

The negotiations lasted for several hours, with both sides repeatedly stalemate over the details of the fund. Ultimately, the four bank representatives agreed in principle to a framework for cooperation based on a development fund model, and agreed to each send their core teams to form a joint working group with representatives appointed by the government to immediately begin detailed negotiations.

For Amir, using vast amounts of private funds to develop the country could save a significant amount of government revenue. However, the growing power of the bankers needed to be suppressed, otherwise they might one day turn around and take control of the country.

(End of this chapter)