Banking on the State: The Financial Foundations of Lebanon (Stanford Studies in Middle Eastern and Islamic Societies and Cultures) by Hicham Safieddine, Stanford University Press by Hicham Safieddine

c h a p t e r 1 
Colonial Finance
The Long Monetary Mandate
To this day I do not know how Monsieur Busson agreed to a text rendering his bank 
subject—immediately and in the future—to Syrian legislation.
—Khaled al-‘Azm, former prime minister of Syria

The Banque impériale ottomane (BIO) was a government bank of one state, 
the Ottoman empire, owned by private capital of two others, France and 
Britain.
 The French historian Jacques Thobie describes the late Ottoman 
era of its establishment as “proto-colonial,” and Emmanuel Monik, one 
of the BIO’s long-serving managers, quipped that it was “très originale.
On one hand, Ottoman decision-making was increasingly subject to the 
dictates of European interests and doctrines of state modernization. On 
the other hand, Istanbul retained a substantial margin of independence, 
lacking in regions under direct colonial rule like British India. Edicts and 
policy measures aimed at extensive restructuring of the Ottoman state and 
society issued in the course of what is called the Tanzimât (Reorganiza-

tion) period reflected this proto-colonial conjuncture.
The Tanzimât reforms are often invoked in relation to civil and mi-

nority rights, land tenure, commercial regulation, military modernization, 
and administrative organization. Ottoman historians of financial reform 
largely restricted themselves to questions of fiscal policy and public debt. 
Public debt, also referred to as sovereign debt, lay at the heart of the em-

pire’s vulnerability to European intervention. The conventional story of 
Ottoman public debt begins with the first foreign loan granted by Euro-

pean creditors to Istanbul in 1854 to help finance its participation in the 
Crimean War. The story reaches a climax with the empire’s bankruptcy 
in 1875. It concludes with the establishment six years later of the Otto-

man Public Debt Administration (OPDA), a European committee officially 
entrusted with managing the empire’s finances. The OPDA was tasked 
with streamlining revenue to prioritize foreign debt payment over other

national expenditures. Its mandate and member composition were a clear 
violation of Ottoman sovereignty.
This story seldom explores the impact of BIO policy in detail, despite 
the fact that the bank long acted as an instrument of foreign financial con-

trol and prolonged Western capitalist expansion into the empire. Well be-

fore Istanbul’s mounting sovereign debt became a crisis in the mid 1870s, 
British officials in Istanbul had envisaged an Ottoman bank as an instru-

ment of financial reform. Up until then, foreign debt had been celebrated 
as the cure for, rather than the cause of, financial disarray.
 The BIO had 
a broad financial mandate and wide economic outreach in its dual capac-

ity as state and commercial bank. Under its 1863 founding charter, it was 
granted three privileges. The first was a monopoly on issuing paper cur-

rency. The second was the exclusive right to act as the Ottoman treasury’s 
financial agent. The third was its designation as the state’s lender of first 
resort.
 Its “orderly system of short-term credit,” it was hoped, would 
replace the disorderly and chaotic dealings of the Porte with local money 
changers concentrated in Istanbul’s Galata district.
The high expectations pinned on the BIO’s role in overhauling the 
empire’s finances failed to materialize. Despite its monopoly of currency 
issuance, currency unification in Ottoman lands did not take place until 
1916. The bank failed to stem the tide of financial collapse that hit the 
empire in the mid 1870s. As the debt crisis reached its zenith in 1874, 
the bank prioritized its private interests over state demands. It adopted a 
policy of refraining diplomatically from advancing new loans to the gov-

ernment.
 This paved the way for the introduction of a more specialized 
and intrusive instrument of debt management, the OPDA.
The BIO’s waning role in financial restructuring at the state level did not 
hinder its waxing role at the market level. By the turn of the century, the 
bank’s credit relations were extended well beyond those it wove with the Ot-

toman treasury. The BIO spearheaded the financing, creation, and operation 
of large-scale projects in transportation infrastructure (railways, ports), re-

source extraction (mining), cash-crop production and distribution (tobacco), 
and maritime trade (silk).
 The BIO’s failure to “fix” the finances of the empire 
must not therefore be conflated with a failure to produce and reproduce an 
increasingly dependent capitalist economy tied to European finance.

Banking on the State: The Financial Foundations of Lebanon (Stanford Studies in Middle Eastern and Islamic Societies and Cultures) by Hicham Safieddine, Stanford University Press by Hicham Safieddine