An Economic Ambush by the British to Speed up the Fall of the Ottoman Empire: The Treaty of Balta Liman

By the 19^th century, the Ottoman Empire was struggling under the heavy weight of military, political and economic pressure from the European states. In 1827, as the Greek uprising was raging on, the British, French and Russian fleets attacked and heavily defeated the Ottoman navy in Navarino, while Russians annexed Edirne and came dangerously close to Istanbul during the Russo-Turkish war of 1828-29. In the face of these developments, Sultan Mahmud II decided to end the war with the Treaty of Edirne of 1829. The independence declaration of the Greeks changed the course of events. During the Greek uprising, Mahmud II promised to give the governorship of Mora to Egypt's then governor Muhammad Ali Pasha if he helped suppress the uprising. However, when the Greeks declared their independence the deal was broken. When Mahmud II also refused to give the governorship of Damascus to Muhammad Ali Pasha, the so-called 'Egypt problem' ensued. French sided with Egypt, while British remained neutral. These developments prompted the Ottomans to sign a pact of non-aggression and alliance, the Treaty of Hünkar İskelesi, with the Russians in 1833.

Concerned that it might be losing the Ottomans to the Russians, the British deep state enlisted the help of France to protest the treaty. It even went as far as sending one British fleet to Izmir. With Austria's help, it managed to convince the Tsar to withdraw from the treaty and promised the Ottomans its support against the Russians and Muhammad Ali Pasha. Surely, this service wouldn't come for free. The British deep state's service was offered in exchange for a new 'free trade agreement' (the Treaty of Balta Liman) to expand the capitulations previously granted. The anglophile grand vizier Mustafa Reşid Pasha also played an important role in talking the Sultan, who was on his deathbed at the time, into signing the treaty.

This treaty, which was devised as a fait accompli by the British amidst slogans of 'westernization', 'liberalization' and 'development', in truth proclaimed the downfall of the Empire. With this treaty, Britain was basically dragging the Ottoman Empire, which was already half way to becoming a colony, into an economic pit from which it would not be able get out again. With the Treaty of Balta Liman, the Western states, particularly Britain, were given many privileges and concessions that went well beyond the limits of capitulations. This effectively made the Ottoman Empire an open market for the British and other Europeans.

The treaty was full of one-sided and binding clauses against the interests of the Ottomans. In addition to existing capitulations, subjects and ships of Great Britain were given new privileges, which would be effective 'forever'. The situation was so odd that while the Turkish merchants paid 12% taxation, British merchants paid only 5% for their domestic trade. If a British merchant or his agent bought a Turkish product for export, that merchant or agent would not be subjected to any trade limitations and could trade for free.

Henry Palmerston, the then British Secretary of State for Foreign Affairs, called the treaty Capo d'Opera (a masterpiece) due to the unheard-of advantages it offered to the British.⁴⁸ In the meantime, the British deep state continued with its classic hypocrisy and friendly façade towards the Ottoman Empire, praised the country, which it had slyly pushed to the brink of collapse, with compliments like 'the country that applies free trade in the broadest manner among all countries in the world'. Therefore, considering what happened in the past, it is crucial to adopt a cautious approach to similar praises, or promises made by modern representatives of the British deep state.

With the Treaty of Balta Liman, tariff walls against foreign markets were removed and all registrations and records in domestic trade were lifted without any protective measures. This development dealt a serious blow to young Turkish industry, unready yet for foreign competition. Industries that depended on local production like cotton, silk, wool, angora products, leather processing, mining, and agriculture were seriously affected and couldn't help but disappear. After a while, these products were no longer processed and were sold to foreigners as raw materials for very low prices. Many local industry products, which prior to 1838 easily met the domestic demand and were also exported, could be obtained almost only through import by 1850.

On the other hand, the falling tax revenues from foreign trade due to new privileges given to Westerners, coupled with the effect of deficits in the state budget, placed a heavy burden on the Ottoman Empire, leading to a major economic crisis. Already struggling with the crippling costs of the Crimean War of 1854, the Ottoman Empire for the first time in its history resorted to foreign debts in a bid to get its economy back on its feet. Britain enthusiastically supported the move. As a result, the Ottomans borrowed a total of £3 million from Palmer in London and Goldschmidt in Paris on August 24, 1854. The loan was secured against the Egyptian taxes.

This move marked the beginning of intense borrowing, which couldn't be paid off even long after the Ottoman Empire came down. In only twenty years after the first loan in 1854, the Empire declared a total default and bankrupted. In the run-up to WWI, the Ottoman Empire had borrowed 243 million Ottoman Liras, which made the total amount of foreign debt 409 million Ottoman Liras.

The inability to pay back the loans allowed the creditors to gain control of the biggest revenue sources of the Empire. The Ottoman Public Debt Administration (Düyun-u Umumiye) was established during the rule of Sultan Abdul Hamid II. Even though the name suggests that it was an Ottoman institute, it had a completely foreign administration that consisted of seven people representing the creditors: British, Dutch, French, German, and Italian among others. This commission monitoring the foreign debt of the Ottoman Empire seized the entire revenues from tobacco, salt, silk, stamp and fish taxes, which comprised more than one third of the state's budget. Another reason for the selection of these particular items was that these taxes were the easiest to collect, not to mention the most dependable.

Officers from the Ottoman Public Debt Administration under British control would go and seize the produce of farmers and collect taxes with the help of the gendarme forces. Numerous cases of cruel treatment at the hands of the Ottoman Public Debt Administration officers that used gendarme for their purposes can be found in historical accounts.

The Republic of Turkey that was born out of the ashes of the Ottoman Empire took over these massive debts that spelled the end of the Empire. However, it was only one century later when the young republic was able to completely pay them off. It should be noted that in 1838, when the Treaty of Balta Liman was signed with the British, the Ottoman Empire had no foreign debts. However, the sinister British deep state plans made the Ottomans not only heavily indebted, but turned its many previous allies into adversaries, most notably Russia.

The first foreign debt the Ottomans obtained from Britain by means of British deep state ruses marked the beginning of the end. The free trade treaty imposed on the Ottoman Empire, and the subsequent crisis and bankruptcy, clearly point to the sinister, intricate, multi-staged and long-term plans of the British deep state when it wishes to bring countries to the brink of collapse.