The Ottoman central government was next to declare bankruptcy, in 1875. In the course of twenty years, the Ottomans had contracted sixteen foreign loans totaling nearly Ј220 million ($1.21 billion). With each loan, the Ottoman economy fell deeper into European economic dominion. Between discounts to attract increasingly skeptical investors and the various commissions and fees charged to float loans on European markets, the Ottoman government only received Ј116 million ($638 million)—the greater part of which was spent to service the Ottoman debt (some Ј19 million, or $104.5 million, in repayment and over Ј66 million, or $363 million, in interest). This left only Ј41 million ($225.5 million) for the Ottomans to invest in their economic objectives out of a total debt of Ј220 million ($1.21 billion). As Abdulmecid’s advisor predicted, the Ottoman state sank, overwhelmed in debt. Over the next six years, amid the tumult of another disastrous war with Russia (1877–1878) and territorial losses confirmed in the 1878 Treaty of Berlin concluding the war, the Ottomans finally came to an agreement with their European creditors in 1881 with the formation of the Ottoman Public Debt Administration (PDA). Headed by a seven-man council representing the main bondholder states (Britain, France, Germany, Austria-Hungary, Italy, the Netherlands, and the Ottoman Empire), the presidency of the PDA rotated between France and Britain. Whole sectors of the Ottoman economy were placed under the control of the PDA, with revenues from the salt monopoly, fish tax, silk tithes, stamp and spirit duties, as well as part of the annual tributes of several Ottoman provinces, dedicated to debt repayment. The lucrative tobacco trade also fell under the PDA, though a separate administration soon was created to oversee the monopoly over the purchase and sale of tobacco. The PDA gained tremendous power over the finances of the Ottoman Empire as a whole, which the European powers used not just to control the actions of the sultan’s government but to open the Ottoman economy to European companies for railways, mining, and public works.³⁰

Although Egypt held the distinction of being the last of the Middle Eastern states to declare bankruptcy, in 1876, the government’s position would have been far stronger had it declared insolvency sooner rather than later. The parallels to the Ottoman case are striking. Between 1862 and 1873, Egypt contracted eight foreign loans, totaling Ј68.5 million ($376.75 million), which, after discounts, left only Ј47 million ($258.5 million), of which some Ј36 million ($198 million) were spent in payments on the principal and interest on the foreign loans. Thus, out of a debt of ?68.5 million ($376.75 million), the government of Egypt gained only about ?11 million ($60.5 million) to invest in its economy. Faced with increased difficulty in raising funds to cover his debts, Khedive Ismail began to sell off the assets of the Egyptian state. He borrowed an estimated Ј28 million ($154 million) domestically. In 1872 the Egyptian government passed a law granting landholders who paid six years of their land tax in advance a future discount of 50 percent on future land taxes in perpetuity. As this desperate measure failed to staunch the hemorrhage, the viceroy sold the government’s shares in the Suez Canal Company to the British government in 1875 for Ј4 million ($22 million)—recouping only one-quarter of the Ј16 million ($88 million) the canal is estimated to have cost the government of Egypt. Stripped of key assets, the treasury tried to postpone payment on the interest of the state’s debt in April 1876. This was tantamount to a declaration of bankruptcy, and the repo men of the international economy descended on Egypt like a plague. Between 1876 and 1880 the finances of Egypt were assumed by European experts from Britain, France, Italy, Austria, and Russia whose primary concern was foreign bondholder interests. As in Istanbul, a formal commission was established. One unrealistic plan followed the next in quick succession, placing terrible burdens on Egyptian taxpayers. With each plan, the foreign economic advisors managed to insinuate themselves deeper into the financial administration of Egypt. European control over Egypt was firmly established in 1878, when two European commissioners were “invited” to join the viceroy’s cabinet. British economist Charles Rivers Wilson was appointed minister of finance, and the Frenchman Ernest-Gabriel de Bligniиres was named minister of public works. Europe got to demonstrate its power over Egypt in 1879, when Khedive Ismail sought to dismiss Wilson and de Bligniиres in a cabinet reshuffle. The governments of Britain and France brought pressure to bear on the Ottoman sultan to dismiss “his” viceroy in Egypt. Overnight, the recalcitrant Ismail was overthrown and replaced by his more compliant son, Tawfiq.³¹

With the bankruptcies in Tunis, Istanbul, and Cairo, the Middle East reform initiatives had gone full circle. What had begun as movements to strengthen the Ottomans and their vassal states from outside interference had instead opened the Middle Eastern states to increasing European domination. Over time, informal imperial control hardened into direct colonial rule, as the whole of North Africa was partitioned and distributed among the growing empires of Europe.

CHAPTER 5

The First Wave of Colonialism: North Africa

Though the colonization of Arab lands was built on foundations laid earlier, European imperialism in the Arab world began in earnest in the last quarter of the nineteenth century. As was noted in the previous chapter, both the spread of European technology and the financing that allowed cash-strapped Middle Eastern governments to spend beyond their means enabled the European powers to extend their influence across Ottoman domains from North Africa to the Arabian Peninsula. Bankruptcy in the Ottoman Empire and its autonomous provinces in North Africa lowered the barriers to more direct forms of European control. As Europe’s interests in North Africa intensified, their incentives for outright imperial rule expanded accordingly. By the 1880s the European powers were more concerned about upholding their national interests in the Southern Mediterranean than to preserve the territorial integrity of the Ottoman Empire. The “self-denying protocol” of 1840 was a dead letter, and the partition of North Africa followed. France extended its rule over Tunisia in 1881, Britain occupied Egypt in 1882, Italy seized Libya in 1911, and the European powers consented to a Franco-Spanish protectorate over Morocco (the only North African state to have preserved its independence from Ottoman rule) in 1912. Before the outbreak of the First World War, the whole of North Africa had passed under direct European rule. There were a number of reasons why European imperialism in the Arab world began in North Africa. The Arab provinces of North Africa were far from the Ottoman center of gravity and, in the course of the eighteenth and nineteenth centuries, had become increasingly autonomous of Istanbul. The Arab provinces of the Middle East—in Greater Syria, Mesopotamia, and the Arabian Peninsula—were closer to the Ottoman heartland and came to be more closely integrated to Istanbul’s rule in the course of the nineteenth-century reforms (1839–1876). Places like Tunisia and Egypt had become vassal states of the Ottoman Empire, whereas Damascus and Aleppo were integral provinces of the Ottoman Empire. The very developments that enhanced the autonomy of North Africa—the emergence of distinct ruling families heading increasingly independent governments—left those states more vulnerable to European occupation.