In today’s value that is 15.7 tons of gold
Turkey’s War: How the Ottoman Empire Financed the Conflict
The Ottoman Empire’s involvement in World War I had a significant impact on its financial system. The government faced a severe budget deficit in 1914, and it needed to raise funds to finance the war effort. In this article, we’ll explore how the Ottoman Empire financed the war, the challenges it faced, and the consequences of its actions.
Budget Deficit in 1914
In 1914, the Ottoman Empire’s budget deficit was 20 million Ottoman liras. This deficit was primarily due to the cost of the Balkan Wars, which had depleted the government’s coffers. The empire needed to raise funds quickly to support its war effort.
Issuance of Bonds
To raise funds, the Ottoman government issued a 15 million Ottoman lira bond in 1915. This bond was issued to the public and was sold to the highest bidder. The government hoped to raise enough funds to support the war effort, but this was not enough.
Borrowing from Germany
In 1915, the Ottoman government borrowed 410 million German marks from Germany to finance the war. This loan had severe consequences for the Ottoman Empire as it became heavily indebted to Germany. The Germans used this debt to gain influence over the Ottoman government, and this contributed to the empire’s eventual collapse.
Loan Issuance
In 1916, the Ottoman government issued a 5 million Ottoman lira loan to the public and a 10 million Ottoman lira loan to the Ottoman Bank. This loan was meant to raise funds for the war effort, but it had limited success.
Budget Deficit in 1918
By 1918, the Ottoman Empire’s budget deficit had grown to 5 billion Ottoman liras. This deficit was primarily due to the cost of the war and the government’s inability to raise sufficient funds.
Inflation
During the war, inflation was rampant in the Ottoman Empire. The exchange rate between the Ottoman lira and the US dollar rose from 2.8 in 1914 to 90 in 1918. This inflation had severe consequences for the Ottoman Empire as it led to a loss of purchasing power and a decline in the standard of living.
Enver Pasha stole 10 million liras of national funds
When the Turkish army crumbled, and the Ottoman Empire collapsed, Enver Pasha, the Ottoman Minister of War, disappeared from Constantinople, leaving an empty treasury. The provisional government that took over reported that Enver had carried away 10 million liras of national funds and a large sum amassed in war contracts. As a result, he was charged with theft and war profiteering and was sentenced to death in 1919, along with his two chief ministers, Talaat Pasha and Djmail Pasha.
[1]https://www.loc.gov/resource/sn83045774/1922-08-19/ed-1/?sp=6&q=&st=image&r=0.148,-0.011,0.557,0.398,0Enver disappeared from Constantinople, leaving an empty treasury. The provisional government that took over the management of affairs reported that Enver had carried away 10 million liras of national funds and a large sum amassed in war contracts. The indignant government charged him not only with theft and war profiteering but also with being the author of the Armenian atrocities and the murder of princes of the royal house who stood in the way of his advancement. As a result, he was sentenced to death, along with his two chief ministers, Talaat Pasha and Djmail Pasha. Talaat Pasha was killed on the streets of Berlin, and his chief counselor, Said Ali Pasha, was assassinated in Italy. Djamal Pasha, after twice escaping assassins, was reported murdered last month in Tiflis.
No Sultan had more power over the lives of his subjects than this carpenter’s son. His story is a romance of Oriental life, belonging more to the days of the Arabian Nights than to the twentieth century. Three gallows were built in Constantinople when the death sentence was passed on him. Two of his friends were executed on them, and the third was supposedly reserved for the former War Minister. However, he died on the battlefield, as fate would have it. “Fate is all-powerful!” he is said to have exclaimed when he fled from Constantinople, , “is all powerful! Had it ruled otherwise I would have been the hero of Islam, the successor of Mohammed, and not a fugitive. Kismet.
To place this in context:
In 1913, the price of gold was fixed at $20.67 per ounce under the gold standard. Therefore, to calculate the equivalent of 10 million lira in 1913 in terms of gold prices, we need to divide 10 million by the price of gold at the time:
10,000,000 lira (in USD 17,100,000) / $20.67 per ounce = 831,712 ounces of gold
To calculate the equivalent value in today’s gold prices, we can multiply the number of ounces by the current price of gold:
831,712 ounces x $2,000 per ounce = $1,663,424
So, 10 million lira in 1913 would be worth approximately $1,663,424 in today’s gold prices which can buy you 25.8 tons of gold.
Assuming an average inflation rate of 2.5%, the value of USD 17,100,000 in 1913 would be approximately USD455,717,219 in 2023.
Conclusion
The Ottoman Empire’s involvement in World War I had a severe impact on its financial system. The government faced significant budget deficits, inflation, and had to rely heavily on borrowing from Germany to finance the war. These actions had severe consequences for the Ottoman Empire and contributed to its eventual collapse. The legacy of this period continues to impact the region today.
The authorities had constructed three gallows in Constantinople, in anticipation of Enver’s execution. While two of his confidants were hanged, the third scaffold was reserved for the former War Minister. Nevertheless, fortune had other plans for him, and he perished on the battlefield. As he fled Constantinople, he exclaimed, “Fate is all-powerful! If it had ruled otherwise, I would have become the hero of Islam, the successor of Mohammed, instead of a fugitive. Kismet.”
Below is some additional information about each of the financial transactions mentioned above:
| Financial Transaction | Year | Amount | Purpose |
|---|---|---|---|
| Budget Deficit | 1914 | 20 million Ottoman liras | This was the amount of the Ottoman Empire’s budget deficit in 1914, before the start of World War I. |
| Bond Issuance | 1915 | 15 million Ottoman liras | The Ottoman government issued a bond in 1915 to raise funds for the war effort. |
| Loan from Germany | 1915-1917 | 235 million Liras and 160 million Marks [2]In 1914, 1 Ottoman Lira = 20 German Marks | The Ottoman government borrowed this amount from Germany to finance the war. – 5 million liras at 6% interest rate (with a first installment of 250 thousand liras) in October 1914 – 120 million Marks in gold loan in September 1915 – 40 million Marks for Gallipoli campaign expenses – 20 million liras in January 1916 – 42.5 million liras in February 1917 |
| Public Loan | 1916 | 5 million Ottoman liras | In 1916, the Ottoman government issued a loan of 5 million Ottoman liras to the public to finance the war. |
| Loan to Ottoman Bank | 1916 | 10 million Ottoman liras | In 1916, the Ottoman government issued a loan of 10 million Ottoman liras to the Ottoman Bank to finance the war. |
| Budget Deficit | 1918 | 5 billion Ottoman liras | By 1918, the Ottoman Empire’s budget deficit had grown to 5 billion Ottoman liras due to the costs of the war. Inflation was rampant during the war, with the exchange rate between the Ottoman lira and the US dollar rising from 2.8 in 1914 to 90 in 1918. |
| Enver Pasha’s Theft | 1918 | 10 million liras theft | Enver had carried away 10 million liras of national funds and a large sum amassed in war contracts. |
To provide context on the extent of Germany’s financial assistance to the Ottoman war effort, we can look at a subset of loans provided by Germany. Based on this subset, the current value of the total financial value would be around USD1.4 billion.
| German Loans to the Ottoman Empire | Current Value in Millions (2023) [3]Based CPI values of of 19.6 (1917) and 273 (2021) |
|---|---|
| 5 million Ottoman Liras at 6% interest rate (with a first installment of 250 thousand Liras) in October 1914 | 25 |
| 120 million German Marks in gold loan in September 1915 (45,170 kilograms of gold) | 842 |
| 40 million German Marks for Gallipoli campaign expenses | 229 |
| 20 million Ottoman Liras in January 1916 | 114 |
| 42.5 million Ottoman Liras in February 1917 | 164 |
| Total | 1,374 |