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Money for the Turkish War

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At Spes non Fracta

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Abstract

The accession to the throne of Empress Catherine II of Russia in 1762 heralded a resumption of the vigorous territorial expansion which had been set in train during the reign of Czar Peter the Great. The finances of the economically underdeveloped country, however, were inadequate for the waging of lengthy wars, and when, in 1768, Russian intervention in the chaotic domestic situation in Poland led to a conflict with Turkey, the empress found herself in an extremely embarrassing position. The issue of paper money in the form of assignats, for which purpose the Assignat Bank was founded in 1768, afforded a certain respite.1 In addition, Catherine succeeded during the Turkish War in obtaining a number of loans in the Republic of the Seven United Provinces through the intermediacy of the house of Raymond and Theodore de Smeth of Amsterdam. These loans carried interest at 5 %.2

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References

Chapter Three Page 93

  1. Weeveringh, Geschiedenis Staatsschulden, 11, 708 et seq.

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  2. According to Elias (Vroedschap, 11, 798 and 800), cf 4,000,000 was borrowed in 1769; cf 500,000 in 1770; and cf 1,000,000 in 1774. P.Katzenelsohn, Zur Entwicklungsgeschichte der Finanzen Russlands, I (Berlin, 1913), 104-105, quotes the following amounts: 1769, cf 500,000 at 3%; in 1773 and 1774 a total of cf 4,000,000 at 5 %.

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  3. Katzenelsohn, Entwicklungsgeschichte, 105.

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  4. Supra, 77, 83.

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Page 94

  1. Letter of 9th April 1787 from R.Voûte to Hope & Co., Amsterdam.

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  2. Grootboek 1783:219, 246, 270, 295, 314, 25, 39, 48, 84, 152, 156. Grootboek 1784: 15, 24, 37, 45, 133, 146, 197, 229, 259. Grootboek 1785: 24, 33, 34, 40, 45,47, 87, 135, 145, 192, 263, 274, 292, 354. Grootboek 1786: 7,25, 33, 55,47, 89, 134, 180, 179, 232,260,282, 318. This summary appears more impressive than it really is. The majority of these accounts consisted merely of small balances left over from earlier transactions. These ‘dead’ accounts were carried forward year after year. In fact, business of significant proportions mainly related to a few houses in St.Petersburg, e.g. Thomson Peters Bonar & Co. and William Porter & Co. In Moscow, the only connexion of importance was with Thomson Rowand & Co. Voûte advised Hope to spread his business over a number of houses, so that if one should become bankrupt the loss could be made good out of profits from the other transactions; after all, ‘the object of commission and interest on monies should be a sure profit.’

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  3. Letter of 18th December 1787 to Alexander Henry Sutherland, P.C. ′87, 351.

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  4. Journal for 1787: 384, 427, 673, 696. Decree by Alexander Nicolayvich relating to the Sutherland affair, 28th April 1794.

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  5. Journal for 1786: 1934. Journal for 1787: 694, 696, 774, 783, 794, 848, 878, 907, 909, 916, 934, 938, 989, 1001, 1005, 1047, 1062, 1082, 1089, 1109, 1125, 1144.

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  6. Infra, 432-433.

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  7. Grootboek 1788: 74, 227, 288. Grootboek 1789: 196. Grootboek 1790: 161. Grootboek 1791: 46, 275. Grootboek 1792: 46, 328.

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Page 95

  1. Letter of 9th October 1787 to Richard Sutherland, ‘Banquier de la Cour,’ St.Petersburg, P.C. ′87, 184.

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  2. Infra, 435.

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  3. Letter of 9th October 1787 to Richard Sutherland, St.Petersburg, P.C. ′87, 186.

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Page 96

  1. Letter of 9th October 1787 to Richard Sutherland, St.Petersburg, P.C. ′87, 187.

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  2. The members of the Committee for Foreign Loans in 1787 were: the Attorney General, Prince Vyazemsky; the Vice-Chancellor, Count Ostermann; the Director of the Assignat Bank, Count Shuvalov; and the President of the Board of Trade, Count Vorontsov.

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  3. The entrepreneurs were permitted to furnish their shares of the 5th December loan in three equal instalments in the months of March, April and May 1787. The names of the entrepreneurs were almost identical to those concerned with the contract of 30th July 1787 for a loan to Sweden (supra, 91). Interest payments were scheduled to commence on 1st February 1788; no capital repayments were permitted during the first six years. The debentures took the same form as those relating to the earlier loans made by De Smeth, and the securities provided were the same. Members of the public who purchased bonds from Hope & Co. received a commission of ¼%, but this was not deducted from the 1% bonus paid to the entrepreneurs. Hope commenced to accept investments on 5th December.

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  4. The conditions of the second loan largely corresponded to those of the first. The Company sent ‘plans’ of both loans to the Committee. A remarkable feature of these is that they refer to four monthly instalments by the entrepreneurs, whereas in fact the period was three months. Thus, the entrepreneurs were enabled to place both loans more quickly than was disclosed to the Committee by Hope. It may be that this stratagem afforded Hope some latitude in meeting their commitments to the Court, but whether or not this was its purpose is not known because the contracts between Hope and the Russian Court have not survived. ‘Plan’ for the first loan, letter of 6th December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 314. ‘Plan’ for the second loan, letter of 11th December 1787 to Committee for Foreign Loans, St.Petersburg, P.C.′87, 331.

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  5. Letter of 11th December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 329.

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Page 98

  1. Letter of 21 st December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 359. The loan obtained from Goll was of cf 2,500,000 and was secured by debentures issued by the Bank of Vienna (Elias, Vroedschap, 11, 1052). The first loan in this sum succeeded; a second, for the same amount, is reported to have been withdrawn owing to lack of interest. Letter of 22nd January 1788 to Beerend Roosen, Hamburg, P.C. ′88,94. In correspondence with Sutherland, Hope referred to their Swedish loan of cf 2,500,000. In fact, this loan was for only cf 1,500,000, while Hasselgreen was in the market with a loan of cf 1,000,000 (Supra, 90). This suggests that Hope was unwilling to admit to Sutherland that another house was also busy with a loan for Sweden. Letter of 21 st December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 359.

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  2. Letter of 6th December 1787 to R.Sutherland, St.Petersburg, P.C.′87, 311. Letter of 21st December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 359. Letter of 8th December 1787 to Kalichev, The Hague, P.C. ′87, 317. Letter of 11th December 1787 to the Committee, St. Petersburg, P.C. ′87, 331.

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  3. Letter of 15th January 1788 to the Committee, St.Petersburg, P.C. ′88, 53. The receipt of the approval was acknowledged in a postscript.

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  4. Letter of 11th December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 329.

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  5. Letter of 18th December 1787 to J. and F.Baring, London, P.C. ′87, 352.

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Page 99

  1. Letter of 6th December 1787 to the Committee, St.Petersburg, P.C. ′87, 319. Letter of 11th December 1787 to the Committee, St.Petersburg. P.C. ′87, 331. Letter of 11th December 1787 to Kalichev, The Hague, P.C. ′87, 334. The silence imposed on the parties to the contract will also have enabled the public subscription to the first loan to be completed smoothly, leaving minds free to concentrate on the second. Van der Meulen, Ministerie Van de Spiegel, 349.

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  2. Letter of 18th December 1787 to A.H.Sutherland, London, P.C. ′87, 351. Sutherland will also have had opponents among the members of the Committee for Foreign Loans. Vyazemsky was known to be opposed to loans from abroad. Katzenelsohn, Entwicklungsgeschichte, 106.

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  3. Letter of 8th December 1787 to Kalichev, The Hague, P.C. ′87, 317.

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  4. Letter of 6th December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 311.

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  5. Letter of 6th December 1787 to the Committee for Foreign Loans, P.C. ′87, 319.

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  6. Letter of 21st December 1787 to R.Sutherland, St.Petersburg, P.C. ′87, 359.

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Page 100

  1. Letter of 14th January 1788 to C.M.J. de Wolf, Antwerp, P.C. ′88, 44. Letter of 15th January 1788 to R.Sutherland, St.Petersburg, P.C. ′88, 50. The loan issued by De Wolf was ultimately fully subscribed. The proceeds were remitted to Hope & Co. and subsequently placed at Sutherland’s disposal. Grootboek 1788: 101, 222, 303; letter of 14th March 1788 to the Committee, St.Petersburg, P.C. ′88, 252. P J. van Winter, ‘De Amerikaanse zaken van C.J.M. de Wolf,’ Mededelingen van de Koninklijke Vlaamse Academie voor Wetenschappen, Letteren en Schone Kunsten van België. Klasse der Letteren, XXXII, ii (1970), 10, 14.

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  2. Letter of 19th February 1788 to R.Sutherland, St.Petersburg, P.C. ′88, 171.

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  3. Letter of 19th February 1788 to R.Sutherland, St.Petersburg, P.C. ′88, 171.

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  4. Letter of 15th January 1788 to R.Sutherland, St.Petersburg, P.C. ′88, 50. Letter of 15th January 1788 to the Committee, St.Petersburg, P.C. ′88, 53. Grootboek 1788:133,322. Grootboek 1789: 56,265. Grootboek 1790: 113, 312. Grootboek 1791: 90. Hope & Co. thus received a gross commission of 6½% which included 1 % on the shares taken by the entrepreneurs (whose remuneration later rose to 1¾% and, later still, to 2%), ½% on the value of public subscriptions and ¼% for the brokers. Hope’s share of both the first and second loans was cf 750,000. There are no details of the contracts for the third and fourth loans, and thus the Company’s share in these is not known.

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Page 101

  1. Letter of 14th March 1788 to the Committee, St.Petersburg, P.C. ′88, 252. The loan was for 10 years and the rate of interest 4½% The interest was to be payable from 1st July 1788 and to accrue to the entrepreneurs; they were committed to furnish their portions of the loan in three equal instalments on 15th July, 15th August and 15th September. The entrepreneurs thus enjoyed a douceur. Cf. ‘Plan’ for this loan, enclosed with letter of 14th March to the Committee.

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  2. The name of Regny was mentioned in letters addressed by the Committee in St.Petersburg to Hope & Co. on 28th August and 8th September 1808. Sutherland’s efforts to borrow money in Genoa had the approval of Hope, provided that the rate of interest did not exceed 4½%. Letter of 19th February 1788 to R.Sutherland, St.Petersburg, P.C. ′88, 171.

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Page 102

  1. Letter of 25th March 1788 to Beerend Roosen, Hamburg, P.C. ′88, 285.

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  2. Letter of 23rd November 1787 to J.Cambiasso, Leghorn, P.C. ′87, 262. Cambiasso shrank from undertaking any business in which Sutherland was involved. Hope attributed this reticence to a lack of financial strength on the part of those who had acted for Sutherland in Amsterdam. In this, he was probably referring to De Smeth.

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  3. Letter of 22nd March 1788 to Kalichev, The Hague, P.C. ′88, 280. J.Seton Watson, The Russian Empire 1801–1917 (Oxford, 1967), 46-48.

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  4. Letter of 24th March 1788 to Kalichev, The Hague, P.C. ′88, 283. In addition to occupying the office of Advocate Fiscal to the Admiralty in Amsterdam, Joan Cornells van der Hoop was a member of the Council appointed to assist the stadholder-admiral-general. He was on intimate terms with the partners in Hope & Co., and his son, Adriaan, became a partner in the Company in 1815. Nieuw Nederlandsch Biografisch Woordenboek, VI, 801-802.

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  5. Letter of 25th March 1788 to Kalichev, The Hague, P.C. ′88, 284. Letters of 25th and 28th March 1788 to J.&F. Baring, London, P.C. ′88, 287, 296. Letter of 29th March 1788 to J.C. van der Hoop, The Hague, P.C. ′88, 392. Hope was fobbed off with references to ‘the interests of the State.’

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  6. Letters of 2nd and 7th April 1788 to Kalichev, The Hague, P.C. ′88, 310, 323.

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Page 103

  1. Letters of 29th March and 1st April 1788 to De Coninck & Reyersen, Copenhagen, P.C. ′88, 301, 309; 4th April 1788 to Kalichev, The Hague, P.C. ′88, 319. A rate of 16½ shillings per ton per month had earlier been agreed in London; in the Republic this would be equal to about eleven guilders per last (of two tons). Insurance on the London market would cost ¾% per month. At the outset, when there seemed little prospect of obtaining the approval of the Netherlands government, Hope thought of proposing to De Coninck & Reyersen that they should purchase vessels in the Republic and sail them under the Danish flag. De Coninck & Reyersen supplied the Russian squadron with hardtack.

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  2. Nisbet-Bain, Gustavus III, 11, 14-16.

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  3. The fifth loan ran for 12 years from ist May 1789, and bore interest at 5%. The settlement period for the entrepreneurs commenced on 1st May and ended on 1st August. Hope undertook not to place any further loans before 1st September 1789 without the consent of the entrepreneurs.

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Page 104

  1. Letters of 25th and 29th September 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg. The entrepreneurs were thus two months in arrears according to the terms of the contract, which provided for payment in four monthly instalments in the period November to February. They received a bonus of 2%. The loan was for twelve years commencing on 1st September 1789, but provision was made for repayment after seven years. Hope’s share was cf 590,000, nearly one-third of the total sum.

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  2. Letter of 13th October 1789 from H.Hope, Amsterdam, to Baron Sutherland, St. Petersburg.

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  3. Letters of 10th and 24th November 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg.

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  4. Letter of 10th November 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg.

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Page 105

  1. Letter of 4th December 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg.

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  2. Letter of 25th December 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg. Count Vorontsov, in particular, objected to the commission paid to Hope. The contracts between Hope and the Russian Court are missing, so we do not know whether the figure of 6½% included commission on interest and capital payments. This seems probable, however, because Hope here compares the Russian commission with the Polish figure of 6 % plus 1% for interest payments and 2% for repayments of capital (the last figure is incorrect: Hope received only 1% on capital repayments). Even if the commission paid to Hope by the Russians did not include remuneration for such payments, the comparison would be unfortunate. We must assume that the total comprised 5% on the sum of the loan, 1% on capital repayments and ½% on interest payments. If a separate commission of 1 % on capital repayments had been granted, this would have been payable only from the eighth to the twelfth years-assuming that the loan was for twelve years with provision for repayment after seven years. On the basis of a five per cent loan, payment of the commission on the repayment of capital at the commencement of the loan, instead of after the eighth year, would have given Hope a profit on interest of ½%. For a 12-year loan, the half per cent on the interest payments, if paid on the principal sum, is equal to something like 1½% on the interest due if this were paid annually. The grootboeken contain no reference to commission on interest paid; capital repayments were then not yet due. Hope’s reasons for not undertaking any loans except those for Russia are self-explanatory: the Company worked with a fixed group of entrepreneurs who could only place a certain number of bonds and, as our story shows, were kept busy enough doing that.

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  3. Letter of 25th December 1789 from H.Hope, Amsterdam, to Baron Sutherland, St.Petersburg. As the preceding note shows, we have no information concerning the terms of payment agreed between Hope and the Russian Court. It is conceivable that Hope requested indulgence when the entrepreneurs got into arrears with their payments for the fifth loan. A similar indulgence in respect of the sixth loan would largely have benefited Hope because, under the relevant contract, the entrepreneurs were committed to pay interest on their shares ‘beyond the Month previously laid down, in which the monies are to be furnished.’

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Page 106

  1. Contract for the seventh loan dated 16th February 1790. The period of the loan commenced on 1st January 1790. The entrepreneurs were obliged to furnish their shares in the months of March, April, May and June. Provision was made for repayment after seven years. Hope, whose share amounted to cf 800,000, undertook not to negotiate any fresh loans before 1st July 1790.

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  2. Contract for the eighth loan, dated 13th August 1790. The period of the loan commenced on 1st May 1790. The period for settlement by the entrepreneurs ran from October 1790 to February 1791 inclusive. Hope undertook not to float further loans until 1st March 1791. Provision was made for the loan to be repaid after seven years. Hope did not have a share in this loan.

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  3. Contract for the ninth loan, dated 6th January 1791. A 12-year loan, this commenced officially on 1st August 1790, which fact reveals that it had been arranged some time before. Here, too, repayment was allowed only after seven years. The entrepreneurs had from March to June inclusive to furnish their shares. No fresh loan might be floated until 1st July 1791 without the approval of the entrepreneurs. The interest rate was 5%.

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Page 107

  1. Contract for the tenth and eleventh loans, dated 28th February 1791. Both were for twelve years, the tenth loan commencing on 1st November 1790 and the eleventh on 1st February 1791. It appears that the second portion remaining from the previous year was linked to a new loan. Repayment was possible after seven years. The entrepreneurs had from May to October inclusive to meet their commitments. The loans bore interest at 5%. No fresh loans were permitted before 1st November 1791 without the approval of the entrepreneurs. Hope’s share of these loans totalled cf 325,000.

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  2. Contract for the twelfth and thirteenth loans, dated 18th July 1791. These were for 12 years, the twelfth commencing on 1st September 1791 and the thirteenth on 1st November 1791. Provision was made for repayment after seven years. The period for settlement by the entrepreneurs ran from September 1791 to February 1792, inclusive. The interest rate was 5 %. Hope undertook not to float any new loans until 1st March 1792 without the approval of the entrepreneurs. Hope’s share was again cf 325,000.

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  3. Contract for the fourteenth and fifteenth loans, dated 21st December 1791. Both were for twelve years commencing on 1st February 1792. Repayment after seven years was provided for. The entrepreneurs had from 1st February to 30th June to meet their commitments. The loans bore interest at 4%. Any fresh loan by Hope before 1st July 1792 was made subject to the approval of the entrepreneurs. Hope’s share of these loans totalled cf 600,000.

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  4. Manger, Recherches, 69-71.

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  5. G.W.Vreede, Mr. Laurens Pieter van de Spiegel en zijne tijdgenooten (1737–1800), IV (Middelburg, 1877), 386. This reference concerns a memorandum from Henry Hope to Lord Auckland, British envoy in The Hague.

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Page 108

  1. Van Winter, Aandeel, 11, 156, 157, 161. The fact that the American diplomat Short knew about the fourteenth and fifteenth loans on 28th December 1791 (page 157, note 1) was not so surprising, since the contract had been signed on 21st December. The commencement of the official period of the loan on 1st February 1792 was not of major significance. Van Winter, ‘Zaken C.J.M. de Wolf,’ 15.

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Page 109

  1. Contract for the sixteenth and seventeenth loans dated 6th August 1792. Both were for a period of twelve years commencing on 1st June 1792, with provision for repayment after seven years. The period for settlement by the entrepreneurs was from September 1792 to April 1793, inclusive. The loans bore interest at 4½%. The minimum selling price was fixed at 99½% for these loans also. Hope did not participate financially.

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  2. 24th October 1793, Memorandum from R.Voûte, St.Petersburg, to Count Samaylov. St.Petersburg.

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  1. Rijksuniversiteit te Groningen, Groningen, The Netherlands

    Marten Gerbertus Buist

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© 1974 Martinus Nijhoff, The Hague, Netherlands

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Buist, M.G. (1974). Money for the Turkish War. In: At Spes non Fracta. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-8858-6_3

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  • DOI: https://doi.org/10.1007/978-94-011-8858-6_3

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