Chapter 291: Chapter 40, Suez Canal Equity

Palace of Paris

Napoleon III, not daring to be certain, asked, “Auvergne, are you sure the Vienna Government genuinely wishes to join our lead in the canal project and not deliberately create trouble?”

Foreign Minister Auvergne confidently replied, “Your Majesty, the Vienna Government should be sincere, as they are willing to contribute funds and dig the great canal with us.

No one would joke about hundreds of millions of Francs; as long as they have invested money into the Canal Company, they will support us for their own benefit.

It’s just that Austrians have always been conservative, and they are worried that the final traffic volume will not meet the demand according to our plan, which is why they request to deepen the canal design by an additional four meters.”

Napoleon III rubbed his forehead and inquired, “As I recall, the design depth of the canal company is nine meters, which allows the largest ships in the world to navigate freely. Do the Austrians still think it’s not enough?

Don’t they know that every additional meter will increase the investment substantially? Now, increasing it by four meters means that the budget will be significantly increased.”

The plan’s budget for the Suez Canal is two hundred million Francs, a number that is already challenging the investors’ endurance. Before the canal is navigable, no one knows how profitable this Golden Waterway will be.

Currently, most people do not believe that the Suez Canal will be profitable, especially since there are free waterways to use, and the fees for the Suez Canal cannot be too high.

Such a high investment, no one can guarantee how long it will take to recoup costs. Capitalists naturally do not have much interest in such long-term investments with uncertain returns.

Auvergne explained, “We have discussed this issue many times with the Vienna Government. However, they are more concerned about strategic value, which relates to the appearance of ironclad ships.

The Vienna Government believes that the tonnage of ships is about to increase significantly. The newly established Austria Royal Shipyard is already building ten-thousand-ton freighters.

It is said that some designers have increased ship tonnage to twenty-thousand tons. The Vienna Government believes that the mainstream ships of the future will exceed twenty-thousand tons, and from a technical point of view, the problem is not significant anymore.

The Vienna Government thinks that the tonnage of warships will also greatly increase, and if investment is saved now, and the future traffic volume is insufficient, then the strategic value of this canal will no longer exist.”

Napoleon III fell into deep thought. With the arrival of ironclad ships, the keel that restricts the size of the ships is no longer a problem, and theoretically, a significant increase in ship tonnage is inevitable.

But it’s not that the bigger the ship, the better it is; market demand must also be considered. The million-ton behemoths of later generations would be pointless in this era; there simply isn’t enough cargo to fill them.

However, ten-thousand-ton behemoths are already competitive in this period; at least Austria’s agricultural exports require these large vessels.

Naval Minister Deco spoke, “Your Majesty, from a strategic standpoint, the greater the traffic capacity of the Suez Canal, the better.

If Austria joins in and the cost of digging the great canal is shared by both of us, the problem is not too big. Even if it is not possible to raise the funds privately, we can invest as governments.”

Without a doubt, the Paris Government’s scheming of the Suez Canal is also because the strategic value exceeds economic value; otherwise, they wouldn’t have invested so heavily.

After hesitating for a moment, Napoleon III boldly declared, “If we add, we add; if the Austrians dare to invest so much, we have no reason to be afraid!”

In this era, the strategic vision of the French was truly not poor; they were the first to work on both the Suez Canal and the Panama Canal, regretfully they were not able to hold onto either.

On May 10, 1858, France and Austria signed the “Suez Canal Cooperation Agreement.” The treaty stipulated that both countries would each contribute half of the funds to dig the large canal, with the French as initiators holding a 51% stake and Austria holding a 49% stake.

There was nothing much to say about this; given France’s early investment in the Suez Canal, holding the dominant position was inevitable.

With the amendment of the design plan, the budget for the canal was also raised to 340 million Francs. To this astonishing number, Franz was indifferent; not to mention 340 million Francs, even 540 million Francs might not be enough.

Of course, with the use of free labor, construction costs were significantly reduced, and Franz was not clear on what the final cost would be.

After all, it was a joint effort between two nations, and there would be no need to abandon the use of slave labor due to British sabotage later, which would have significantly increased the construction costs.

Looking at the agreement in hand, Franz smiled and said, “Urge the French to start the work as soon as possible.”

Having joined the canal project, it was no longer possible to procrastinate as the French had historically, taking more than a decade to complete the grand canal.

“Yes, Your Majesty!” Metternich replied.

Finance Minister Karl inquired, “Your Majesty, should we follow the French example and seek investment from the capital markets for the Canal Company?”

The Suez Canal was an investment guaranteed to pay off, but only a few could see that.

To most people, it appeared as a long-term investment with uncertain returns, and therefore, it wasn’t highly favored in the capital market.

Historically, the Suez Canal project had halted due to insufficient funds. If not for the support of the French government, the Canal Company would have gone bankrupt before the canal’s completion.

Accustomed to making a fortune quietly, Franz naturally wouldn’t make a fuss for the whole world to know. If others were unwilling to invest, it was an excellent opportunity for him to pick up a bargain.

Considering the dangers of monopolizing the venture, Franz decided to let the government take the lead. Otherwise, if future wealth poured into the royal purse, it might easily provoke criticism.

“The economic crisis has not yet passed, and the market’s bearing capacity is limited. The government will subscribe to half of the shares, and the rest will be released into the market.”

Without a doubt, all the traded shares would only carry dividend rights, while the voting rights would remain with the Vienna Government and the Paris Government.

History had taken a turning point; the Suez Canal, initially dominated by private capital, had now become a joint government project of the two countries, with a strong political overtone.

London

The joint venture between France and Austria to dig the Suez Canal brought a significant impact to the British Government’s railway plans, as water transport cost much less.

Once the Suez Canal was navigable, the geographical advantage of the British would diminish, as France and Austria would have a shorter route to the Indian Ocean than the British Isles.

Prime Minister Granville was not only worried about a grand canal; he was more concerned about the warming relations between France and Austria, which was very uncomfortable for the London Government.

Unlike in history, where the Russians had not yet lost their dominance over Europe, France and Austria were still just potential competitors and had not reached the point of directly vying for supremacy.

Without enough interests at stake, the two governments would naturally restrain each other. Now Austria, much stronger than in the past, had suffered a setback in the recent wars in the Near East, making the French more cautious.

“Gentlemen, the warming relations between France and Austria have brought significant shocks to our European balance of strategy. Does anyone have any thoughts?”

Finance Minister John-Russell responded, “Prime Minister, you are being overly sensitive.

France and Austria are only cooperating on the Suez Canal issue but maintain many conflicts elsewhere. The likelihood of the two truly joining forces is not great.”

Indeed, conflicts existed between France and Austria. Setting aside the struggle for dominance in Europe, they had clashed over African colonies multiple times.

However, such minor conflicts were common among all colonial empires and had not escalated to the point of hostility between the two countries.

Foreign Minister Thomas analyzed, “Under the Vienna System, France and Austria maintained good relations for decades.

It was only after the February Revolution that their relations gradually cooled. The rupture in their relationship occurred during the unification wars of Germany, and now they have come together over common interests.

However, this still does not affect our interests. As long as France and Austria harbour ambitions for European supremacy, their relationship will inevitably collapse sooner or later.

Even the currently close Russian-Austrian Alliance will part ways regarding dominant power in Europe. I do not believe the Vienna Government lacks ambition.”

This was a realistic issue; allies become unreliable in the face of interests. Unless the power balance among countries remains constant, confrontation is inevitable sooner or later.