Debt and Concessions: Persia and the Ottoman Empire

Some states lost control without being formally colonized, through debt and concessions. The Ottoman Empire defaulted on its loans in 1875, and in 1881 it accepted the Ottoman Public Debt Administration, run by representatives of European creditors, which collected major tax revenues directly to repay bondholders.

In Persia, the Qajar shahs granted foreigners sweeping concessions to raise money. When Naser al-Din Shah gave a British company a monopoly over the tobacco trade in 1890, merchants and religious leaders organized a nationwide boycott, supported by a ruling, or fatwa, attributed to a senior cleric, and the shah canceled the concession in early 1892.

Discontent later fed the Constitutional Revolution of 1905–11, which created a parliament in 1906. In 1907 Britain and Russia divided Persia into spheres of influence without consulting it, and after oil was discovered in 1908, the Anglo-Persian Oil Company was founded in 1909. These cases show how financial pressure could erode sovereignty.