Holy Roman Empire - Chapter 430

Chapter 430: Chapter 3, The Suez Canal is Open to Navigation

Egypt, the Suez Canal also reached a critical moment after a construction period lasting nine years, it finally neared completion.

This time there were no interruptions or labor shortages. France and Austria cooperated to build the grand canal, the British attempted to cause trouble but ultimately failed, causing their Egyptian cotton planting plan to collapse instead.

The construction took so long for no other reason than that the canal was designed to be four meters deeper than the original Suez Canal in another timeline.

Latter in the actual construction process, engineers from Austria demanded to ensure absolute safety, and they dug a further two meters down.

As the depth increased, the width naturally expanded as well, leading to a greater volume of work. In an era lacking machinery, dealing with the increased earthwork was no small feat.

With the increase in the volume of work, construction costs also escalated. While the Suez Canal of the original timeline experienced several setbacks before finally opening, with costs amounting to 18.6 million pounds, now the costs reached 37.7 million pounds even before it opened.

The continuously rising costs caused the Suez Canal’s stock to plummet, and many doubted whether the canal would ever break even.

This was an opportunity for Franz, who was ready to buy stocks that others sold off. Anyway, he could not lose money, turning a profit was only a matter of time.

It was because of him as a willing buyer that Suez Canal’s stocks did not fall to an extremely low level. Of course, falling below the initial offering price was inevitable.

After issuing shares twice, and seeing the stocks fall stagnant as though they were not sellable, the Canal Company directly mortgaged the canal’s property rights to banks to obtain loans.

While facing a cold market in finance, fortunately, this was a strategic project. France and Austria saw it as an opportunity to break the British monopoly on the Strait of Gibraltar.

With the guarantee of both governments, banks were willing to offer loans. Franz had initially planned to take on this business himself, but he faced opposition from the bank employees.

After all, with the canal company being viewed negatively by the outside world, issuing such a huge loan could easily trigger a chain reaction, and if it affected the Royal Bank’s deposit-taking ability, there would be trouble.

You see, most of Franz’s investments were actually made using loans. Against this backdrop, ensuring the Royal Bank’s ability to attract deposits was crucial.

Borrowing from his own bank was merely moving money from his left hand to his right hand; the cost of capital he had to pay was merely the interest rate on deposits. In reality, it was even lower than that.

He repeatedly used funds in rotation. Even when money was spent, much of the time it was merely a transfer from one account to another, without actually being withdrawn from the bank.

During this era without a unified banking network like UnionPay, transferring funds across banks required manual handling. Generally, few would undertake such a process.

This was an opportunity as banks could recirculate a sum of money multiple times. As long as there was no financial crisis or run on the banks, circulating funds dozens of times posed no problem.

Even in the case of a financial crisis, its impact on the Royal Bank would not be severe; reputation is a fine asset.

Over the years the Royal Bank had collected a fair amount of gold; some had been sold, with the majority being stored. There was a reserve of a hundred tons of gold at the Vienna headquarters.

This was the basis of the Royal Bank’s credibility. On the surface, a hundred tons of gold might seem like a lot, but its actual value amounted to only 27,322,400 Divine Shield.

It just sounded impressive, conveying a sense of wealth and security.

Of course, the most reassuring aspect was still the “Royal” brand. As long as the Royal family stood, the Royal Bank would not fall. It was tantamount to Franz’s reputation and could not be allowed to go bankrupt.

Most of the capital was used for his own investments, leaving less to be lent out. In fact, up to this point, the Royal Bank did not engage in small loans.

To put it simply, any loan services below 100,000 Divine Shield were not entertained here, even with collateral. The threshold for deposits was much lower, with an account opening limit of just five Divine Shield.

It couldn’t be helped; due to the technical limitations of the era, services were done manually. Depositing was manageable, but the problem was in loan verification, which involved very bothersome investigations.

The Royal Bank’s small loan business was reserved solely for policy loans entrusted by the government. With the government guaranteeing the clients’ repayment capabilities, such issues did not exist.

True small loans in this era were only done by small and medium banks and fetched much higher interest rates than normal commercial loans. Even without making much money, the infamy of usury came first.

The Royal Bank’s initial objective was to serve Franz’s personal needs. It wasn’t keen on lending; the businesses it engaged in were mostly conservative.

As a result, the Royal Bank’s development in the personal loan sector was mediocre at best. However, it also had minimal bad debts and generally made a small profit.

Most profits were derived from corporate loans, government loans, and international loans, sectors that small banks couldn’t handle, meaning much less market competition.

The interest rates might have been lower, but the management costs required were also lower, resulting in even larger profits.

Especially with international loans, the surface interest rates were not high, but the actual yields were quite lucrative.

Take for example: processing fees and currency exchange fees, which typically accounted for three to four percent. When making loans, banks generally deducted the principal and interest to be repaid in the first year, and in some cases, even three to five years’ worth all at once.

Banks usually also doubled as product salesmen, particularly for loans with restricted usage. Banks could bundle and sell a certain amount of goods to clients, earning a profit from the price difference.

Generally speaking, for an international loan of ten million Divine Shield, if the debtor actually received nine million Divine Shield, it would be considered a fair loan. With harsher conditions, receiving only half of the loaned amount was also not unheard of.

The worst were staggered loans where full interest had to be borne, yet the actual funds received might be less than forty percent of the total loan.

Had it not been for these exploitative clauses, international loans wouldn’t be so detested. Merely a few percentage points of interest were far too modest to satisfy a capitalist’s appetite.

…

“Mr. Lesseps, the canal construction passed the inspection, we can start the water flow now.”

Lesseps was the chief engineer of the Suez Canal, and his main accomplishment was to cheat the Egyptian people into sending workers to dig this great canal.

It should be noted that this was even more excessive than the same period in history; the Egyptians did not receive shares in the Canal Company but merely profited from dividend rights.

In reality, it was all the same; even if they had been given shares, the Egyptian Government should not expect to see any money.

In the original timeline, it was not until 1937 that the Egyptian Government secured an annual sum of 300,000 pounds, and as for their initial 44% shareholding, who would acknowledge that?

Now with dividend rights, it’s the same; either way, they would never see any money. Lesseps was able to cheat the Egyptian Government into active cooperation, naturally earning recognition from the Canal Company.

Although the Canal Company had to pay a sum of money to the Egyptian Government every year, it was negligible compared to the cost of labor.

The Suez Canal, to say it was built, is less accurate than saying it was filled with human lives. But since the Egyptian Government itself was indifferent to the casualties, the Canal Company cared even less.

Without hesitation, Lesseps gave the command, “Then let the water flow!”

With an order given, amid the “roar” of explosions, the dam was blown open. The rushing seawater surged through, merging the Red Sea with the Mediterranean.

With a loud boom, news of the Suez Canal’s opening soon spread across the European Continent, eliciting mixed reactions.

Joy, surprise, worry, disbelief… every kind of expression was there.

At the Port of Venice, Austria’s busiest commercial port, the public’s interest in the Suez Canal was much higher than in other regions.

Inside a small tavern, the discussion was already underway.

A young man bragged, “The Suez Canal is open, have you heard? They say it can accommodate 50,000-ton ships, isn’t that a joke? There’s no ship that big in the whole world; it’s simply a waste!”

A middle-aged man beside him retorted, “What do you know? That’s the maximum navigation capacity. The Suez Canal is located on the critical route between Europe and Asia—of course, there will be a lot of passing ships, and multiple channels are necessary.

Moreover, with shipbuilding technology so advanced now, there are already people developing 20,000-ton ships. If such ships appear, won’t they be perfectly timed to pass through?”

The young man argued defiantly, “Come on, the Suez Canal is toll-charged. Who will send so many ships through there? Rather than paying the toll, why not detour around the Strait of Gibraltar and take a longer route without wasting that money?

The canal’s real purpose is military. After all, we dug it together with the French. It is an apparent problem; it exists to break free from British control over the Strait of Gibraltar.

As for the Suez Canal Company, they’re likely to be losing a fortune. Building such a huge canal for just a few warships.”

Another young man entered, sat down, and said, “Philos, it seems you need to buy a map and take a good look at it instead of pretending to be knowledgeable here.

After the opening of the Suez Canal, the journey to the Indian Ocean has been greatly shortened. How can there be no commercial value? Take Venice for example; every year, there are more than a thousand ships going to and from the Indian Ocean.

After the opening of the Suez Canal, this number will increase. Perhaps just the Austrians alone will have tens of thousands of ships traveling to and from the Indian Ocean every year. Combined with all the Mediterranean countries, the total could be tens of thousands of ships.”

Even if they only charged a toll of 500 Divine Shield per ship, the Canal Company’s annual income from tolls would be over ten million Divine Shield. And this figure would only increase with international trade, perhaps reaching hundreds of millions of Divine Shield in annual tolls in the future.

As long as the toll is less than the additional cost of detouring around the Strait of Gibraltar, I’m sure everyone would be happy to shorten their sea journey.”

In this age, making a living at sea means braving the dangers; thousands of ships perish every year. Maritime navigation is risky.

Being able to shorten the journey is good news for every capitalist involved in maritime transport, as it means their cost of losses has been reduced.

Compared to the military value of the Suez Canal, ordinary people are more concerned about its economic value. Looking at the map, the canal is of the greatest use to Austria. Whether heading to the Indian Ocean or the Western Pacific, this is the best choice.

This has already impacted Austria’s economy, especially for a port city like Venice. Shortening the voyage significantly boosts trade.

For those making a living here, it’s undoubtedly a good thing. The increase in overseas trade means a higher number of passing ships, which in turn means a more prosperous local economy, with everyone’s income rising alongside.

People concern themselves with different things. In Vienna Palace, Franz was not interested in the economic impact of the Suez Canal, rather in its strategic value.

Looking at the canal’s basic parameters: a water surface width of 138 meters, a bottom width of 48 meters, a depth of 15.4 meters, accommodating ships up to 50,000 tons.

This meant that even in the Era of Dreadnoughts, the Suez Canal could be freely navigated, a strategic value that increased manyfold compared to the same period in the original timeline.

This let Franz breathe a sigh of relief; the effort had not been in vain. These numbers would suffice for the Era of Dreadnoughts, and there was no need to consider the aircraft carrier era, by which time the British would likely be in decline.

Looking at the cost of the canal, Franz also let out a sigh. It was more than double the original timeline’s—truly a high-investment project. If it were not for foresight, Franz might not have dared to invest so much.

This massive investment meant that for the next decade, the Canal Company would find it hard to recoup its investment. But this was not a major issue; the Canal Company was still a golden goose.

With the development of maritime trade, the financial future of the Canal Company looked promising. The short-term investment was completely worthwhile; perhaps in twenty or thirty years, the annual tolls could recover the construction costs.

In this respect, the audacity of Napoleon III was admirable. Without the advantage of foresight, he too dared to invest heavily.

In the matter of the Suez Canal, the strategic vision demonstrated by Napoleon III was beyond reproach.

The butterfly effect is indeed terrifying. Without the aura of victory in the Crimean War, this might have been a good thing for the French; their Emperor did not become arrogant.