In a previous post, we saw how Beijing attempted to suspend its Boxer Indemnity payments to Russia in December 1917, after the Bolshevik takeover. This failed in the face of Allied opposition and Ambassador Kudashev’s personal guarantee that the funds – then worth some £50,000 a month – would not fall into Bolshevik hands.
Half a year later, however, the Bolshevik regime still showed no immediate signs of collapse and, in January 1918, it informed China that Kudashev had been dismissed. Kudashev was himself in the thick of anti-bolshevik intrigues in Harbin. The Indemnity thus became an increasingly vital source of security, against which he and other pre-revolutionary diplomats could obtain funds. At the same time, their political activities – in particular, their support for Semenov’s attacks into Russia – sorely tested Chinese patience.
In April, the Finance Ministry resolved to cease making Indemnity payments to the Russo-Asiatic Bank until a Russian government was recognised. The funds would be deposited in China’s two state banks instead, and the Foreign Ministry informed Kudashev of this on 8 May. When the latter protested, Foreign Minister Lu Zhengxiang took a somewhat more unyielding approach.
Kudashev: I have come to meet you today, again on the matter of the Indemnity payments. The end of the month will soon be here. Was a definite solution reached after your meeting with Finance Minister Cao [Rulin]? Please let me know.
Lu: During the State Council meeting yesterday, I presented the matter in detail to Minister Cao. He said that he would consider it again.
Kudashev: The Indemnity payments have already been made several times. If they are suddenly stopped, I will have to make an official enquiry as to the reason.
Lu: When the Indemnity payments were first discussed, former Finance Minister Wang [Kemin] was against them from the start. Then, former Deputy Foreign Minister Gao [Erqian] discussed the matter of a guarantee with British Ambassador Jordan; Jordan asked our ministry to send a written memorandum as the basis for a reply and Gao complied. Subsequently, the Allied ambassadors verbally responded in support of the payments, but none of them in writing. Hence Wang was still not satisfied. He considered that the ambassadors’ verbal support could not be seen as sufficient proof, and was afraid that a future, internationally-recognised official government might not wish to recognise these payments due to its far eastern consular and diplomatic officials being relieved of their posts. It might then ask for the payments to be made again. Thus, he suggested that the funds could be retained for the moment to prevent future difficulties. Our colleagues hold to this line of reasoning even now.
Moreover, now the Bolsheviks’ strength still prevails for the moment. If it unfortunately comes to pass that the Bolshevik government is recognised by America – as the newspapers say – sadly, France, Britain and other countries must commit the same offence. Then China will have no choice but to follow in the footsteps of its Allied friends in recognising it. That that government will not wish to recognise these payments is absolutely certain. One presumes that this will not happen but, if it does become reality, then my government must make the payments again. My colleagues all believe that, for such an important matter, a plan must be made first. Thus it was decided that from the end of this month, the payments should be stopped and kept in the Bank of China and Bank of Communications. Once an official Russian government has been recognised, then a way to make the payments can be determined. Our government is adopting this measure purely out of caution, with no other intentions.
At the beginning I raised this matter with the State Council multiple times; only then did my colleagues agree to pay. The current decision to cease payments is reasonable and I am not in a position to maintain a dissenting opinion, lest I be suspected of partiality towards Your Excellency on this matter. Hence, when French Ambassador Boppe met with me yesterday, I told him that if the Allied ambassadors could all furnish our ministry with an official memorandum in support of these payments, I could use it as a basis for practical discussions with the Finance Ministry, that the ambassadors will share joint responsibility such that a future, recognised Russian government will not question China on why the payments were made.
Lu’s claim that China was withholding access to the Indemnity payments “purely out of caution” was disingenuous. As Kudashev pressed him further, he admitted that it was retaliation for the establishment of an anti-bolshevik administration centering around the Chinese Eastern Railway in Harbin.
Kudashev: For the various Allied ambassadors to issue a joint memorandum guaranteeing these payments – that would be a tall order. The ambassadors are all of the opinion that the payments can be made and this was previously made clear, so why is this additional measure now necessary? I have appealed to the ambassadors many times over this matter and also feel that it has been excessive and embarrassing. Now that you have come up with a compromise solution, that the funds are to be placed in the Banks of China and Communications, could the expenses for the far eastern consulates be drawn on a monthly basis from these accounts? What is your opinion on this?
Lu: As for whether this is possible, this will also be discussed at the State Council meeting with Minister Cao. But what if a future, recognised Russian government – perhaps this same Bolshevik government – were to be of the opinion that the payments should not have been made to diplomatic and consular officials whom it has already dismissed, what then?
Kudashev: Your country has not yet recognised the Bolshevik government and, in future, no matter what kind of government is recognised, you may inform it that before recognition of the new government, the payments were made to representatives of the government that had been previously recognised. Is that not so? I have arranged to meet Minister Cao today at 5 o’clock to discuss this matter. Do you approve of my meeting him? If not, I can telephone to cancel it.
Lu: Your Excellency may certainly meet him.
Kudashev: I have heard that Minister Cao is dissatisfied with me over the issue of the CER shareholders’ meeting, is this correct?
Lu: Minister Cao is indeed dissatisfied and our colleagues on the State Council are all disappointed. [Jilin diplomatic representative] Fu Jiang was there to represent Guo [Zongxi] as chairman of the meeting, but the meeting elected another temporary chair to discuss all matters; this was an unexpected usurpation of authority and Fu could not utter a word. Then, before the agreed-upon measures had been publicised, the meeting continued in Beijing and gained the support of General Horvath. Horvath then suddenly returned to Harbin and the meeting was abortive. When French charge d’affaires [Damien] de Martel protested this, you discussed with our government a way to mediate it, such that the French government has now accepted the issue. Yet China was slighted and matters were conducted without proper authority. Thus, Minister Cao and our State Council colleagues are highly dissatisfied with this unexpected turn of events. It has had an influence on the current decision to stop the payments.
Kudashev: I was not privy to the circumstances surrounding the CER shareholders’ meeting, which has led to various misunderstandings and weighs on my conscience. I regret that I knew of it only too late and could not explain things earlier. Now that I will meet Minister Cao, I will explain everything in detail and express my apologies.Dialogue between the Foreign Minister and Kudashev, 29 May 1918. Zhong-e guanxi shiliao, Minguo jiunian zhi banian (1917-1919). E zhengbian yu yiban jiaoshe (1), pp. 399-401.
Lu’s account of the shareholders’ meeting reveals the complex negotiations over its fate after November 1917. As much as Kudashev pleaded ignorance, Kolchak’s memoirs reveal him as one of the prime movers in the effort to reconstitute the Railway board as an anti-bolshevik government-in-exile. In so doing, he collided with both Chinese and French interests. The Chinese had ejected Bolshevik workers from the Railway zone in December, established an armed presence there and were keen to expand their influence. The majority of the Russo-Asiatic Bank’s capital stock was French. Since its Russian assets had been seized in the wake of the Revolution, the Bank needed both the Indemnity payments and the Railway to stay afloat, and the French did not take kindly to the Russians’ attempts to use the board for their own political ends. Martel complained about this in March but was despatched to Siberia for his pains.
China was eventually unsuccessful at this second attempt to sidestep the Indemnity. France and Japan furnished written statements guaranteeing the Indemnity payments in July; the next month, Beijing agreed to resume deposits with the Russo-Asiatic Bank. A new arrangement would have to wait until 1920, when both Allied and Chinese opinion turned against Kudashev.