Baltalimanı Treaty: The Treaty That Leads the Ottoman Economy to Bankruptcy 2021
In the 19th century, the Ottoman Empire was fighting under the military, political and economic pressure of European states. While the Greek rebellion that started in 1827 continued in the same years, the British, French and Russian fleets attacked the Ottoman navy in Navarin and the Ottoman Empire was heavily defeated in this attack. In a very short time, the Russians annexed Edirne and approached Istanbul dangerously during the Ottoman-Russian War of 1828-29.
In the face of these developments, Sultan II. MahmudAsked for help from the Egyptian Governor, Kavalalı Mehmet Ali Pasha. II. Mahmud agreed to give Mehmet Ali Pasha the governorships of Mora and Crete in exchange for suppressing the Greek rebellion. However, with the independence of Greece, Morea came out of the hands of the Ottoman Empire. Mehmet Ali Pasha wanted the governorship of Syria-Damascus to replace Mora. II. When Mahmud refused to accept this request, Mehmet Ali Pasha sent the army under the command of his son İbrahim Pasha to Syria. İbrahim Pasha, who captured Syria, defeated the Ottoman Armies one after another and advanced to Kütahya.
In the face of this situation, II. Mahmud asked for help from England and France. Britain and France argued that this situation was an internal problem of the Ottoman Empire. He refused Mahmud’s request for help, moreover, France displayed an attitude that supported Mehmet Ali Pasha. These developments brought the Ottoman Empire to the Russians in 1833. Hünkar Pier TreatyHe pushed him to sign.
According to the Hünkar İskelesi Treaty, if the Ottoman Empire was attacked, Russia would help the Ottoman Empire on condition that it covers the costs. If Russia is attacked, the Ottoman Empire will close the Straits to the states where Russia is fighting; however, it would allow Russian ships to pass through the Straits.
Deeply concerned about this alliance between the Ottomans and the Russians, Britain turned to France for help. He even went as far as sending a British fleet to Izmir. After a while, Britain promised to support the Ottoman Empire. Of course, this support would not be free. In return for this support, Britain offered the Ottoman Empire a new “free trade agreement” (Baltalimanı Treaty) to expand the capitulations previously given to it. The Ottoman State signed this treaty.
What the British covered with the slogans of ‘westernization’, ‘liberalization’ and ‘development’ Baltalimanı TreatyIn reality, it caused the collapse of the Ottoman Empire. With this treaty, Britain dragged the Ottoman Empire into an economic pit from which it could never come out again. Because with the Baltalimanı Treaty, Western states, particularly Britain, were granted many concessions that went far beyond the limits of surrender. This made the Ottoman Empire an active open market for the British and other Europeans.
The agreement was full of unilateral and binding provisions against the interests of the Ottomans. In addition to current capitulations, to Great Britain in many areas ‘forever’ new privileges were granted. The situation was so interesting that Turkish merchants paid 12 percent tax while British merchants only paid 5 percent for their domestic trade. According to the explicit clause of the treaty, British and European traders would not pay more taxes than local traders, would not be subject to any restrictions, and this treaty would be valid forever.
The Baltalimanı Treaty dealt a serious blow to the young Turkish industry. Industries dependent on local production such as cotton, silk, wool, leather processing, mining, and agriculture were seriously affected and even disappeared. After a while, these products were no longer processed and sold as raw materials to foreigners at very low prices. Before 1838, many local industrial products that easily met domestic demand and were exported became available through imports.
On the other hand, when the tax revenues that fell in foreign trade due to the new privileges given to the Westerners combined with the effect of the deficits in the state budget, it created a heavy burden on the Ottoman Empire and this situation caused a great economic crisis.
The Ottoman Empire, currently struggling with the heavy costs of the Crimean War of 1854 (Crimean War), for the first time in its history resorted to foreign borrowing to boost its economy. Britain enthusiastically supported this movement. As a result, the Ottoman Empire in London on 24 August 1854 Palmers Bank and in Paris Goldschmidt Bankhas borrowed a total of £ 3 million from The loan was secured against Egyptian taxes.
This move marked the beginning of the heavy debt that could not be paid even long after the collapse of the Ottoman Empire. Just twenty years after the first loan in 1854, the Ottoman State declared default and declared bankruptcy. Until the First World War, the Ottoman Empire borrowed 243 million Ottoman liras, which transformed the total foreign debt into 409 million Ottoman lira with interest.
The non-repayment of debts enabled creditors to take control of the State’s greatest sources of income. Ottoman General Debt Administration (Düyun-u Umumiye-i Osmaniye Varidat-ı Muhassasa Administration) Sultan II. It was founded during the rule of Abdulhamid. Although its name suggests it was an Ottoman administration, the administration had a completely foreign government representing creditors: English, Dutch, French, German and Italian. This commission, which monitors the internal and external debts of the Ottoman State, seized all the revenues from tobacco, salt, silk, fishing net and stamp taxes, which made up more than one third of the state budget.
Born from the ashes of the Ottoman Empire Republic of Turkey, which spelled the end of the State it took over this enormous debts. However, only a century later the young republic was able to pay them in full. Finally, it should be noted that the Ottoman State had no foreign debt in 1838, when the Baltalimanı Treaty was signed with the British.