Holy Roman Empire

Chapter 430: The Opening of the Suez Canal

In Egypt, the Suez Canal has reached a critical moment. After nine long years of construction, the project is finally nearing completion.

This time, there were no halts in construction, nor was there a shortage of labor. This large canal was jointly built by France and Austria. The British attempts to interfere not only failed but also caused their Egyptian cotton cultivation plans to fall through.

The reason for the lengthy construction period was nothing other than the canal being designed to be four meters deeper than the Suez Canal in the original timeline.

Later, during actual construction, the engineers sent by Austria insisted on ensuring absolute reliability, adding another two meters of depth.

With the increase in depth, the width naturally had to be increased as well, which significantly added to the volume of work. In an era lacking machinery, the additional amount of earthwork was no small task.

The increased workload also made the construction costs rise. In the original timeline, the Suez Canal faced many hurdles before finally opening, costing a total of 18.6 million pounds. Now, even before opening, the costs have already soared to 37.7 million pounds.

The ever-increasing costs have caused the Suez Canal’s stock to plummet, leading many to doubt whether the canal could ever be profitable.

This situation turned out to be advantageous for Franz. Whenever someone sold off their stocks, he would buy them up. After all, there was no way he could incur losses; profitability was just a matter of time.

It was thanks to him playing the role of the buyer that the Suez Canal stock didn’t crash completely. Of course, dropping below the initial offering price was inevitable.

After two rounds of additional stock issuance, when the stock appeared to be sluggish and unsellable, the canal company directly used the canal’s property rights as collateral to secure a loan from the bank.

Though met with a cold reception in the financial markets, this is a strategic project seen by the French and Austrian governments as an opportunity to break the British monopoly over the Strait of Gibraltar.

It was only under the guarantee of the two governments that banks were willing to provide loans. Franz initially planned to take on this business himself, but it was opposed by bank staff.

After all, the outside world did not have a favorable view of the canal company. Issuing such a large loan could easily trigger a chain reaction, which would be problematic if it affected the Royal Bank’s ability to attract deposits.

It’s important to note that most of Franz’s investments were actually made using loans. In this context, maintaining the Royal Bank’s ability to attract deposits was crucial.

By borrowing from his own bank, transferring money from one hand to the other, the cost of funds he needed to pay was merely the deposit interest rate, if not lower.

The funds were utilized in a rolling manner. Even if money was spent, it often just moved from one account to another without actually being withdrawn from the bank.

In this era, there was no interbank network like UnionPay, so transferring funds between banks required individuals to handle it themselves. Generally speaking, not many people did this.

This presented an opportunity: the bank could recycle the same funds multiple times. As long as there was no financial crisis or bank run, this could be done dozens of times without issue.

Even in the event of a financial crisis, the impact on the Royal Bank would be minimal as reputation is a valuable asset.

Over the years, the Royal Bank had collected a substantial amount of gold. While some of it had been sold, most had been stored. There were still a hundred tons of gold reserves at the Vienna headquarters.

This was the basis of the Royal Bank’s credibility. While a hundred tons of gold may sound like a lot, its actual value is only about 27.3224 million guilders. Nonetheless, it sounds imposing and provides a sense of security.

Of course, the most reassuring factor is the “Royal” brand. As long as the royal family stands, the Royal Bank will not fail. This is akin to Franz’s reputation, so he would not allow it to go bankrupt.

Most of the funds were used for his own investments, leaving fewer funds available for external loans. In fact, the Royal Bank has not engaged in small-scale business to date.

Simply put, loans under 100,000 guilders are not entertained here, even with collateral. However, the deposit limit is much lower; one can even open an account with just five guilders.

Due to the technological limitations of the era, all business had to be conducted manually. Deposits were manageable, but loan reviews were troublesome because of the need for extensive background checks.

The Royal Bank only made exceptions for small loans in the case of government-commissioned policy loans. With the government guaranteeing the repayment ability of clients, these issues naturally disappear.

In reality, small loans were only handled by small and medium-sized banks at the time, and the interest rates were much higher than ordinary commercial loans. Not much profit was made, but the stigma of high-interest loans was there.

From the start, the Royal Bank was positioned to serve Franz himself. It was not enthusiastic about lending and mostly engaged in conservative business practices.

In this way, the Royal Bank’s development in the personal loan business was quite average. However, there were not many bad debts, and overall, it made a small profit.

Most of the profits came from corporate loans, government loans, and international loans. These large loans were beyond the capabilities of small banks, so there was much less market competition.

Although the interest rates might be lower, the required management costs were also lower, resulting in more substantial profits.

International loans, in particular, appeared to have low interest rates but actually yielded very high returns.

For example, fees like processing fees and exchange fees usually accounted for three to four percent. When issuing loans, the bank would typically deduct the principal and interest due for the first year upfront, and for some loans, they would even deduct three to five years’ worth at once.

Banks often also engaged in product sales, especially for restricted-use loans. They could bundle a certain amount of goods with the loan, earning profits from the price difference.

Generally speaking, for an external loan of 1 million guilders, if the debtor received 900,000 guilders, it would already be considered a fair loan. In more stringent cases, loans that only resulted in the debtor receiving half the amount were not unheard of.

The worst were installment loans, where the debtor had to bear interest on the full amount but received the funds in stages. With such loans, the actual funds received might be less than 40% of the total loan amount.

Without these exploitative terms, international loans would not be so deeply resented. Merely a few percent in interest would be underestimating the appetite of capitalists.

…

“Mr. Lesseps, the canal project has passed inspection and is ready to be flooded.”

Lesseps was the chief engineer of the Suez Canal, and his main achievement was persuading the Egyptians to participate in the excavation of this large canal.

It’s worth noting that this time around, it was even more exploitative than in the original timeline. The Egyptians did not receive any shares in the canal company; they only got a share of the profits.

In reality, it was the same either way. Even if they had been given shares, the Egyptian government wouldn’t have seen any money.

In the original timeline, the Egyptian government only managed to secure an annual payment of 300,000 pounds by 1937. As for their original 44% share, who would acknowledge that?

Receiving dividends now was the same; they wouldn’t get any money on the shares in the end anyway. Lesseps was able to persuade the Egyptian government to cooperate voluntarily, which naturally earned the canal company’s approval.

Although the canal company had to pay a sum to the Egyptian government annually, it was negligible compared to labor costs.

One could say the Suez Canal was not so much dug as filled with human lives. However, since the Egyptian government didn’t care about casualties, the canal company cared even less.

Without any hesitation, Lesseps ordered, “Then let the water in!”

At his command, the dam was blown open with a “roar” of explosions. Torrents of seawater rushed in, and the Red Sea and the Mediterranean Sea were finally connected.

With a loud bang, news of the Suez Canal’s opening quickly spread across the European continent, eliciting various reactions.

Joy, surprise, worry, disbelief... a full spectrum of emotions was on display.

In the bustling commercial port of Venice, Austria’s busiest harbor, the public was far more interested in the Suez Canal than other regions.

In a small tavern, heated discussions had already begun.

A young man, proudly showing off, said, “The Suez Canal has opened. Have you heard? They say it can accommodate fifty-thousand-ton ships. That’s a joke, right? There aren’t even ships that big in the world. It’s a complete waste!”

A middle-aged man next to him retorted, “What do you know? That’s the maximum capacity. The Suez Canal is located at the crossroads of Europe and Asia, and there will definitely be a lot of ships passing through. Of course, there need to be multiple parallel channels.

Besides, shipbuilding technology is so advanced now. People are already developing twenty-thousand-ton ships. If such large ships appear, wouldn’t it be perfect for them to pass through?”

The young man, unconvinced, said, “Oh, come on. The Suez Canal charges fees. There won’t be that many ships willing to pay. They might as well take the longer route around the Strait of Gibraltar and avoid the unnecessary expense.

The real use of the canal is military. It was dug by us and the French. It’s obvious that it’s meant to bypass British control of the Strait of Gibraltar.

As for the Suez Canal Company, it’s probably going to lose a lot of money. Building such a large canal just for a few warships to pass through.”

Another young man walked in and sat down, saying, “Filver, it looks like you need to buy a map and take a good look. Don’t pretend to know things you don’t and show off your knowledge here.

With the opening of the Suez Canal, the journey to the Indian Ocean is significantly shortened. How can you say there’s no commercial value? Take Venice, for example; every year, we have no less than a thousand ships traveling to and from the Indian Ocean.

After the Suez Canal opens, this number will increase. Perhaps Austria alone will have tens of thousands of ships traveling to and from the Indian Ocean every year. If you add up all the Mediterranean countries, there might be another tens of thousands of ships.

Even if each ship is charged three to five hundred guilders, the canal company’s annual revenue from transit fees would be in the millions. This figure will only increase with the growth of international trade. In the future, annual revenue from transit fees could reach hundreds of millions of guilders.

As long as the transit fee doesn’t exceed the cost of taking the longer route around the Strait of Gibraltar, everyone will likely be happy to shorten their sea journey.”

In this era, making a living at sea is risky, with thousands of ships lost each year. Sailing is inherently dangerous.

Being able to shorten the sailing distance is good news for every shipping capitalist, as it means their risk of loss from shipwrecks decreases.

Compared to the military value of the Suez Canal, ordinary people are more concerned with its economic value. Looking at the map, this canal is most beneficial to Austria. Whether heading to the Indian Ocean or the Western Pacific, it is the optimal route.

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

For those making a living here, this is undoubtedly good news. Increased overseas trade means more ships coming and going, which in turn means a more prosperous local economy and higher incomes for everyone.

Different people care about different things. At the Vienna Palace, Franz was less concerned about the economic impact of the Suez Canal and more about its strategic value.

Looking at the basic parameters of the canal: a surface width of 138 meters, a bottom width of 48 meters, and a depth of 15.4 meters, it was estimated to accommodate ships of up to 50,000 tons.

This meant that even in the era of dreadnoughts, the Suez Canal could still allow free passage, significantly enhancing its strategic value compared to the Suez Canal of the same period in the original timeline.

This brought Franz a sense of relief; his efforts had not been in vain. These dimensions would be sufficient even in the dreadnought era. As for the aircraft carrier era, it wouldn’t matter; by then, the British would be in decline.

Looking at the canal’s costs, Franz couldn’t help but sigh. It exceeded the original timeline’s cost by more than double; indeed, it was a high-investment project. Without his foresight, Franz might not have dared to invest so heavily.

This massive investment meant that the canal company would find it difficult to recoup its investment over the next decade. However, this was of little consequence; the canal company was still a golden goose.

With the development of maritime trade, the canal company’s financial prospects were promising. The short-term investment was entirely worth it; perhaps in 20 to 30 years, the annual transit fees alone could cover the construction costs.

In this regard, Napoleon III’s boldness was also admirable. Without the advantage of foresight, he too dared to invest heavily.

On the issue of the Suez Canal, Napoleon III’s strategic vision was impeccable.

The butterfly effect is indeed powerful. Without the glory of winning the Crimean War, it should be considered a good thing for the French that their emperor remained grounded.