49

28th January, 1926

CONFIDENTIAL

(Due to arrive Melbourne-27.2.26)

My dear P.M.,

Most people seem to have made up their minds that there is going to be trouble here in May, when the Coal subsidy is due to end.

[1] The 'coming upheaval', 'serious times ahead' are spoken of in all the papers. Hankey [2] tells me that the P.M. [3] is going to keep Parliament as clear of legislative business as possible in order to keep their hands free in case of a general strike, or, alternatively, the rapid passage of enabling legislation to meet the situation.

Personally I get the impression, reading between the lines, that the Coal owners are remarkably stupid and that the country is gratuitously shouldering the burden that they should be meeting-or should have faced years ago, either by modernisation of their mines, by amalgamations-in short, by 'Americanisation' of their industry.

The difficulty, I believe, is enhanced by there being no good spokesman amongst either the representatives of the coal owners or the men.

In course of several years Hankey thinks that the coal situation will right itself by modernisation of the pits, possibly low temperature carbonisation of the coal at the pit's mouth, reclaiming of by-products, and possible interlacing of the coal mining industry with the big electrification scheme. However right this prophecy may be, the immediate trouble is a big one to surmount.

2. Tom Jones [4] has seen the above reference to the coal situation and thinks that it is too gravely worded. He himself is in close touch with the situation on behalf of the Prime Minister and has discussed it with all the leading people concerned on both sides. Considering everything, he thinks that trouble will be avoided. He has told me a great deal of detail on the subject which will not interest you. In his opinion the subsidy cannot be cut off abruptly but will have to be tapered down at any rate for six months or a year.

3. You will have noticed the persistent but restrained note of cheerfulness in the reports for the last three months of the Advisory Council to the Board of Trade. In most branches of industry, it looks as if the immediate position and the prospects were brighter than they have been for some years. This is borne out by the really quite hopeful tone of the Annual Report of Barclay's Bank a few days ago. Goodenough [5], who is a very progressive but, I believe, very sound banker, is the Chairman.

You may remember some time ago I reported to you a conversation that I had had with him, in which he gave me to understand in great confidence that his bank might extend its activities to Australia. [6] He has already gone as far as creating a subsidiary organisation-'Barclay's Bank (Dominion, Colonial and Overseas)'- which is in the course of absorbing the National Bank of South Africa.

4. The Mosul affair [7] has unconsciously focussed one's attention lately on Eastern Europe, the possible Balkan Pact, Hungary's position and Italy's ambitions. Hence the predominance of these matters in my letters. It is not to say that they have suddenly become important, but rather that they are all inter-related to a certain extent with the Turks and Mosul and that one has been asking questions about them, the answers to which find place in my letters.

5. Tyrrell [8] personally has hopes that the difficulty with Turkey over Mosul may be solved by the conclusion of a British- French-Italian-Turkish Pact of non-aggression. He thinks the Turks would welcome it, as they very much want a ten-year period of assured peace to build up and consolidate their domestic affairs.

He (Tyrrell) has not yet put this suggestion up to Sir Austen Chamberlain [9] (who is still abroad) but will do so at once on his return. Lindsay [10] (H.M. Ambassador at Constantinople) has gone to Angora to see what the Turks are thinking about but without anything much to suggest. If Chamberlain and the Cabinet think well of the Pact idea, he will no doubt be telegraphed to, to sound them about it.

You will realise from another letter on the subject by this mail that there are few opportunities to bring pressure to bear on the Turk, should he prove aggressive over Mosul, other than by fighting him.

6. You may remember that Vorovski [11], a Soviet diplomat, was murdered in Switzerland a few years ago, and that, by reason of the Swiss giving no satisfaction to Moscow, relations were broken off.

His death was recently recalled by two incidents. The U.S.S.R.

based their refusal to send a representative to the Disarmament Preparatory Committee [12] on the fact that it was to be held at Geneva and that they were not in diplomatic relations with Switzerland.

The second reminder was quite amusing. An Englishman, who had been imprisoned and maltreated by the Bolsheviks, eventually got back to London with his mind a little affected. He spends his days walking the streets, carrying a sandwich board with his grievance on it. He spent a week recently in front of the Soviet Legation and every time Rakovski [13] came out, he shouted: 'After Vorovski, Rakovski', which so got on Rakovski's nerves that he asked the F.O. if they could have it stopped!

7. Duncan [14] (from Adelaide), as you probably know, has gone to Rome as Honorary Attache. I do not know him well enough to know if he will do any work there and really get into touch, or if his activities will merely be social. I understand that honorary attaches are given every opportunity to see all the work of the Embassy, but that, unless they struggle against it, they are usually regarded as A.D.C. to the Ambassador.

8. The clash between Chang and the Soviet control of the Chinese Eastern Railway has been of value in showing China that the U.S.S.R. can be just as overbearing and bullying as any of the 'Imperialist' nations. [15] One might expect to see signs of a revulsion of feeling against the U.S.S.R. in China as a result.

I am, Yours sincerely, R. G. CASEY

1 See Letters 29 and 69.

2 Sir Maurice Hankey, Secretary to the Cabinet.

3 Stanley Baldwin.

4 Deputy Secretary to the Cabinet.

5 F. C. Goodenough.

6 See Letter 25.

7 See note 3 to Letter 33 and note 14 to Letter 34.

8 Sir William Tyrrell, Permanent Under-Secretary at the Foreign Office.

9 Foreign Secretary, created a Knight of the Garter in November 1925.

10 Sir Ronald Lindsay.

11 V. Vorovsky. Formerly a Polish nobleman, he served as Bolshevik representative in Stockholm during the 1914-18 war. With the 1917 revolution, he became a member of the foreign bureau of the Bolshevik Central Committee and subsequently returned to Scandinavia as a Soviet diplomat. He was murdered in May 1923 at Lausanne while envoy to the League of Nations.

12 See note 7 to Letter 47.

13 Christian Rakovsky, formerly Ukrainian Commissar for Foreign Affairs and Soviet Charge d'Affaires in London at the time of the 'Zinoviev letter' incident.

14 Major Colin Duncan, A.D.C. to the Governor-General 1918-20 and Private Secretary to the Governor of South Australia in 1924; he served at the Rome Embassy 1925-27.

15 War lord Zhang Zuolin (Chang Tso-lin) controlled Manchuria and at times Beijing (Peking) until his assassination in 1928, when his son gave allegiance to the Nationalists under Jiang Jeishi (Chiang Kai-shek). During 1925-26 Zhang tried to take over the Russian-controlled Chinese Eastern Railway, but failed. His successors tried again more forcefully in 1929, but again failed.