Chapter 194: Chapter 81: Propaganda Comes Before the Army Moves

Translator: 549690339

The Winter Palace in St. Petersburg

The military arms deal contract between Russia and Austria had appeared on Nicholas I’s desk, accompanied by documents concerning the loan blockade and suggestions from the Austrian Government for bond issuance.

Nicholas I had no objections to purchasing the weapons production lines and directly made annotations on the document.

The gap between the Russian Empire’s military industry and those of other European countries was vast, and it wasn’t something that could be bridged in the short term. Purchasing production lines was the only option to quickly close the gap.

Nicholas I asked, “Austria has proposed issuing bonds, what do you think about this?”

Finance Minister Aristander Rhodes analyzed, “Your Majesty, this is likely to be very troublesome. We have issued bonds before, but previous bonds were not well received in the capital market.

To sell the bonds now, we would need collateral, as suggested by the Austrians, and we would have to offer high-interest rates to attract capital.

This would significantly increase our financial costs. Previously, the interest rate on loans we obtained from Austria was only 0.2% per month. If we issue bonds, the rate is likely to increase significantly.

The war expenditure has far exceeded our expectations. If we were to raise the financial costs further, our future fiscal pressure would be immense.”

The Tsarist Government had not anticipated England and France sending troops directly, and all their battle plans were centered around facing the Ottoman Empire alone.

According to the original plan, with the control of the Black Sea, the Russian Army could be resupplied by sea, greatly reducing logistical pressure. The amount of troops they could deploy to the Balkan Peninsula would also increase substantially.

In theory, with sufficient advantages, the Russian Army could have defeated the Ottoman Empire by 1852 and end the war in the Balkan Peninsula by 1853. Then, they would set out in two directions to attack the Asia Minor Peninsula.

However, plans were disrupted by rapid changes, and the participation of England and France threw off their deployment. The war spiraled out of control from the very beginning, and military expenditures surged.

Nicholas I continued, “Is it possible to continue obtaining low-interest loans from the Austrian Government?”

Foreign Minister Carl-Wassell replied, “Your Majesty, if it’s a small loan, there’s no problem, but obtaining a loan of 200 million rubles in one go is unlikely.

Although Austria has not directly refused our loan, they have made it clear that the amount is too large and surpasses their capacity to provide.

Our analysis shows that the Austrian Government is capable of raising such a large sum, but it would impact their domestic development. Unless we pay a significant price, it’s not going to happen.”

200 million rubles was an astronomical sum, equivalent to one year of the Russian Empire’s fiscal revenue. Under normal circumstances, the Austrian Government would not have the financial capability.

But the situation now was different; Russians did not need to take away actual gold or silver for the loans, as all loans were to be used within Austria, meaning the money was not leaving the country.

This money would not enter the market at once, but would lie in the accounts of Austrian banks first, and slowly flow into the market through the procurement of goods.

Because of taxation, a substantial part of the funds would flow back to the Austrian Government, so the actual outlay would be much less.

For instance, for purchasing goods worth one million, the first round of trade tax, value-added tax, corporate tax, customs duty, etc., would result in the government receiving two to three hundred thousand; the second round of transactions involving raw material suppliers would also involve taxes such as trade tax, value-added tax, corporate tax, likely amounting to several tens of thousands.

As a result of this business, transport, and the surrounding catering industry were stimulated, generating tax revenue. The capitalists would profit, the workers would receive their wages, and then they would go on to consume, further boosting other industries, all of which would generate taxes.

This is just the simplest form of commodity circulation. In the actual industrial circulation system, it’s far more complex. There are very few businesses that can buy raw materials and directly turn them into industrial products for sale.

Most industries involve cycles of three, four, or more stages, during which capital returns to government finances through taxation. In fact, the funds the Austrian Government needs to pay for this loan is only half, or even less.

If it weren’t for these advantages, powers like the United Kingdom and France wouldn’t be so keen on high-interest lending based on just a few percentage points of interest.

Furthermore, by using loans to accelerate the exchange of goods between two countries, it gradually penetrates into all sectors of a country, especially the easiest to permeate, the financial sector.

Nicholas I thought for a moment and said, “Is it because of the interest? We can pay according to international standards, even a bit higher doesn’t matter, after all, it won’t be as high as the bond interest.”

Foreign Minister Carl-Wassell answered, “Your Majesty, I’m afraid it’s not a matter of interest. The Austrians haven’t asked for a higher interest rate, which probably means they have financial difficulties.

The Austrian Government places great emphasis on domestic economic development and wouldn’t disrupt it for a slight increase in interest. Unless we make significant political concessions, they won’t release the funds.”

Nicholas I nodded in agreement; the relationship between nations is very pragmatic, even allies won’t sacrifice their own interests to help.

If it means stunting domestic economic development for a few points of interest, everyone knows the correct choice to make.

“We can’t give up on the Austrian loan, we’ll take whatever we can get. The Finance Ministry should devise a plan for issuing bonds, not just in Austria, but for sale throughout Europe.

The war’s end is unforeseeable, and now the government must gather as much funding as possible, even if that means higher interest rates.”

Nicholas I was a wise man and did not continue to increase domestic war taxes.

Historically, Russia faced a joint blockade by the major powers of Europe, which prevented it from raising funds on the international capital market, forcing it to scour its own country.

The consequences of raising taxes were very severe. After the defeat of the Crimean War, the Tsarist Government’s foundation of rule was shaken.

Nicholas I, who was in good health following the war, suddenly died and most historians believe he committed suicide by poisoning, accepting the blame for the war’s failure with his death, providing an explanation to the outside world and stabilizing the Tsarist rule.

“Yes, Your Majesty!” the Finance Minister replied.

As for how Nicholas I actually died, Franz was just as uncertain, but his death definitely worsened Russian-Austrian relations.

From both a personal emotional standpoint and the nation’s interest, Franz hoped Nicholas I would live a long and healthy life.

Nicholas I was a man of good character and a reliable ally, and the administration he led still had credibility.

The longer he lived, the more delayed the Tsarist Government’s serfdom reform would be, and the greater the difficulty of the reform would become.

An ally without threats is a good ally. Having reviewed the historical data, Franz couldn’t help but feel fortunate to have arrived at such a favorable time.

If nothing unexpected happened, the next few generations of Russian Tsars would remain relatively compliant, meaning that for the next several decades, Austria’s rear would be secure.

Russians were preparing to issue bonds, and so was Franz, as one could never have too much money. Especially during a war, stockpiling ammunition was very necessary.

Unlike the Russians who attracted capital with high interest rates, Franz planned to leverage the patriotism of the citizens.

To support the Prussians in reclaiming the Two Principalities to the north, people were willing to donate tens of millions of shields, and now, for the unification of the German Region, they would surely be even more enthusiastic.

“Unity Bonds,” Franz did not prefix it with “German,” mainly to accommodate the other ethnic groups within the country. If possible, he would not mind adding “Holy Roman Empire” in the front.

This bond issue was still confidential and was set to be launched simultaneously with the initiation of the unification war. Since it was for national unification, talking about profits seemed too vulgar.

The annual interest rate for the “Unity Bonds” was only 1%; one could say it was barely better than nothing. Even with such a low-interest rate, Franz was still very confident in selling the bonds.

Under his influence, the concept of Greater Germany still dominated within Austria, and there was a significant interest in the reconstruction of the Holy Roman Empire.

To create a foundation for public opinion, in 1851 and 1852, the Austrian Government spent millions of shields on propaganda for two consecutive years.

It wasn’t just Austria; all the states of the German Region were within the scope of the propaganda.

“Rebuild the Holy Roman Empire” had become the hottest topic in the German Region; whether people supported or opposed it, the concept had been implanted into everyone’s mind.

University of Munich

A debate on the future path of the German Region commenced here.

Ever since the former King Ludwig I announced that the royal family would strive for the unification of the German Region, discussing its unification became legalized.

Greater Germany ideals, Lesser Germany ideals, a division of governance between North and South Germany, and the newly proposed reconstruction of the Holy Roman Empire, among other chaotic proposals, were all openly debatable.

Not just the Kingdom of Bavaria but many German regional states could discuss these issues. Governments also had to express support; this was a right won by the public in the revolution of 1848 and was politically correct.

Simply put, you could support any plan for the unification of the German Region, as long as you were not against the unification itself.

Supporter of the Shinra faction, an impassioned orator, Christian: “The German Region has been fragmented for too long, each Sub-State has different development models, and it’s not easy to integrate them into a grand empire immediately.

Given this, why don’t we take a middle ground? We could first rebuild the Holy Roman Empire and rally everyone within a unified grand imperial framework.

Other issues could be discussed slowly over time. If one year is not sufficient, then two; if ten years are not enough, then twenty. After several decades, the German Region will become an integrated whole.”

After the Austrian Government’s secret propaganda, many people supported rebuilding the Holy Roman Empire, even rulers of some small sub-states were proponents of this concept.

The Holy Roman Empire was not fearful; it was never truly unified before, the major sub-states all did as they wished, and the Central Government existed only in theory, exerting almost no constraining power over the sub-states.

If unification was indeed inevitable, such unification could protect their interests to the greatest extent possible.

Also, those who preferred peaceful times saw how simple it sounded to unify the German Region, but in reality, doing so would mean war was not far off.

Whether it’s Greater Germany or Lesser Germany, we must subdue everyone with our military before we can complete the great undertaking of unification.

Rebuilding the Holy Roman Empire is much simpler; everyone gathers for a meeting, casts their votes, selects an Emperor, and the Germany Region is unified.

The interests of all are not greatly harmed, each sub-state continues its own affairs, only now with stronger economic exchanges, standing united when facing the external world.

Once the Germany Region is unified again, even if it’s just a nominal unity, this great Empire will be the most powerful empire in the world.

A young student objected, “Such a unification is too slow; the countries of Europe will not grant us the time to consolidate our nation. As soon as the German Empire is unified, we will immediately face resistance from all countries.

It may even lead to a combined assault by them. Only when the Germany Region is completely unified, and we all become one entity, will we be able to defeat our enemies and accomplish the grand revival of Teuton.”

No sooner had he finished speaking than someone countered, “Don’t forget Napoleon’s lesson; any country that attempts to confront all of Europe is courting its own demise.

The current international situation simply does not allow us to complete national unification step by step. Once signs of unification appear in the Germany Region, the countries of Europe will definitely intervene.

The British, the French, the Russians, the Spaniards… none will simply watch the Germany Region unify. It is unwise to confront the European Continent on one’s own.

At this time, we must learn to take things step by step. First, unify the Lesser Germany Region; once we’ve consolidated and grown stronger, then we can set out to unify the entire Germany Region.”

Another person disagreed, “Unify the Lesser Germany Region? If that’s the case, we might as well administer North and South Germany separately.

It would similarly evade the combined attacks of the powers and accumulate strength for the ultimate national unification. Why should we care about the upstart Prussians’ feelings?”

“That won’t do, that’s dividing the nation, not unifying it. Whether it’s establishing Lesser Germany or the administration of North and South Germanic regions separately, the end result is the destruction of the Empire.

A divided Germany is no longer our Germany. The key to taking things step by step is to re-establish the Holy Rome, and to build an Empire that is nominally unified.”

Without a doubt, Franz played an immense role in the spread of these muddled thoughts. Many of these ideas came from his own machinations.

To achieve the propaganda objectives, you certainly cannot directly say: Austria wants to unify the Germany Region, and everyone should unite under the flag of the Habsburg dynasty.

If promoted in that manner, the campaign would probably be suppressed by the governments of various countries right from the start.

Now, by throwing out all sorts of messy plans for unification, we’ve obscured Austria’s presence, leading everyone to believe they are spontaneously generated by the public.

In the eyes of most, the ideas of a Greater Germany and the theory of rebuilding the Holy Roman Empire might be supported by the Austrian Government, with the latter possibly reflecting the intentions of the small German states.

The remaining concepts of Lesser Germany and the theory of administering North and South Germany separately are clearly instigated by the Prussians, these two ideologies being most widely disseminated in Prussia.

Amidst the true and false, what is the actual political stance of the Austrian Government? Franz would say, whatever political stance aligns with Austria’s interests, that is the stance of the Austrian Government.

In the face of interests, national strategy and political ideals can change. The reason they haven’t yet changed is simply that the interests aren’t significant enough.