Period of Transition, 1862-67

By the time the third Charter expired in 1862 the further existence of the Russian American Company, and even of the Russian colonies in America in general, became a troublesome problem for the Russian statesmen. Several factors made the drafting of a new charter extremely difficult and induced them to resort eventually to the sale of Alaska as a solution to the situation in the best interests of Russia. Some of these factors were rooted in the domestic policy, others in the financial difficulty of the Company and in the foreign policy. Still others threatened with the possibility of losing Alaska without any compensation whatsoever.

2. DOMESTIC POLICY

Among the domestic factors, the abolition of serfdom in 1861 should be mentioned in the first place. For many Russian statesmen the duty of natives to work for the Russian American Company, even with pay, appeared as a kind of bondage or forced labor for the benefit of a private enterprise, and as such it was incompatible with the new legal order. The exercise of the governmental authority by a company seemed to be just as obsolete. The monopolies of the Company were also out of tune with the spirit of the time, which leaned toward free trade.¹ Public opinion was also stirred by a number of articles and publications criticizing the Company. Official reports and private memoirs of persons who visited colonies at one time or another made known for the first time all the, present and past draw-backs of life in these remote colonies.² As a result, the privileges of the Company, as they existed, simply could not be extended. The new conditions offered to the Company by the Russian government sought to emancipate the natives from forced labor for the Company, to limit the monopoly of the Company, and to make the administration of the colony strictly governmental and independent of the Company.

But the Company was not prepared to accept these new conditions, arguing that they would threaten not only the business of the Company but also the welfare of the natives.

The Company insisted, with reason, that if the natives (Aleutians) should be freed from any duty to do the catching of sea animals for the Company, it could not be able to carry on its business because the labor of natives could not be replaced. Russians were unwilling to go to Alaska voluntarily and, besides, they did not possess the skill in hunting the sea animals. The Company argued also that if left alone the Aleutians would not be able to take care of the necessary supplies for themselves and would soon be extinct, which arguments seem to be justified by the subsequent development.

3. DELIBERATION OF NEW PRIVILEGES

By the Resolution of the State Council of May 29, 1861, approved by the Emperor, the Minister of Finance was commissioned to bring before the State Council, not later than July 15, 1863, his proposal on the future of the Russian American Company. In the meantime it was resolved "to let the Russian American Company continue the activities on the existing bases until the deliberation of the message of the Minister of Finance by the State Council and the resolution of his Majesty."³ The State Council deliberated the matter in 1865, after a study by an interdepartmental committee. In a resolution approved by the Emperor on June 19, 1865, it outlined the "basic principles" to be observed "in the compilation of the new Charter." It was, however, not a new charter but an instruction for drafting of the new charter.

With reference to the natives, the resolution reads as follows:

(10) Aleuts and generally all the dependent natives of the colonies shall be released from the duty of obligatory labor for the Russian American Company; they may select, on their own volition, any place for residence and may leave their residences freely, subject only to those police regulations which shall be established: by the colonial authorities;

(11) All inhabitants of the colonies, settled there permanently, shall be divided into natives and colonists; to this latter class shall belong the creoles, as well as the present so-called "colonists" (Colonial civilians) and the new immigrants who may arrive. The natives shall be governed by their elected chiefs (toens), the colonists by the elected elders (starshina). The Administrator-General shall confirm the chiefs and elders in their office and discharge them;

(12) The term of obligatory service by the creoles, educated at the expense of the company, shall be limited to five years;

(13) The Russian subjects, as well as those foreigners who may acquire Russian citizenship, shall be allowed to settle in any place of the colonial territory not occupied by the establishments of the Company or by the present inhabitants and land for dwellings, farming, land business premises and for cultivation shall be allotted to them;

(14) Subject to change by decision of the government, no direct taxes for the benefit of the government or the treasury shall be levied upon the inhabitants of the colonies;

(15) Any inhabitant of the colonies and any Russian subject may be allowed to engage, without discrimination or restriction in whatever industry he may prefer, except that of fur-hunting.⁴

(16) An Administrator-General of the colonies, appointed by His Majesty, independent of the Company and subordinate directly to His Majesty's government, shall be entrusted with the supreme administration of the region and supervision over Company administration; a colonial council shall be attached to him consisting of members appointed by the government and by the Company * * * the expenses for maintenance of the Administrator-General and his aids being payable from the government treasury under the budget of the Minister of Navy * * *⁵

A further discussion took place on January 5 and March 2 and 14, 1866, and a new resolution was approved by the Emperor on April 2, 1866. It was again in the nature of a mere instruction for the drafting of a new charter, amending the previous resolution. Sections (10)—(14), paragraph 1 of (15), and section (16) of the resolution of June 14, 1866, translated above, remained unchanged. The concluding paragraph of section 15 (not translated) was amended to read:

No new charter was ever drafted. The negotiations concerning the sale of Alaska were in full swing, being kept secret from the administration of the Company and those who deliberated the charter. On March 7, 1867, the sale of Alaska was decided upon.

4. EXTERNAL SITUATION

The beginning of negotiations concerning the sale dated as far back as 1854 when Mr. Gwin, the Senator from California, and Marcy, the Secretary of State, approached Stöckl, the Russian Minister, to hear from him that "Russia never had such intentions."⁷ But the hard experience of the Crimean War taught the Russians to realize their own limitations. After the war was ended, the Grand Duke Constantine, President of the State Council and otherwise an influential statesman known for his liberalism, frankly admitted in a letter to the Minister of Finance that "in case of war with a maritime power [he meant Great Britain] we would not be able to defend our colonies."⁸ He outlined also in a letter to the Minister of Foreign Affairs another possibility, as follows:

The United States must naturally aspire to possess all of North America; therefore they must sooner or later meet us there and undoubtedly they will take our colonies in their possession even without much effort, while we will never be able to recover them.

The Grand Duke suggested that the colonies be sold to the United States in order "to solve amicably, with some profit for us, a problem which otherwise shall be solved against us and, moreover, by a conquest."⁹

This anxiety was caused by the fact that the peaceful penetration of Alaska by the Americans became more and more in evidence. "Bostonians" dominated Alaskan waters and, in fact, monopolized the whaling and seal trade. They traded also with the natives of the islands and mainland offering them goods under better conditions than those of the Company. They also supplied them with firearms and liquor not available from the Company.¹⁰

There were also imaginary and real threats to the integrity of the Russian territory in America. Thus, reporting to his government in 1857 the rumor that the Mormons may select Alaska for their new settlement, the Russian envoy in Washington expressed the fear that should that be so only an armed resistance may prevent the loss of at least a part of the Russian Alaska. On that report Alexander II wrote the resolution: "this supports the idea that the problem of our American possessions must be settled right now."¹¹

Other disturbing news was the discovery of gold in Alaska. By l862 a part of Russian territory may have already been considered practically lost for this reason. The estuary of Stakhin River, which was on Russian territory, offered the most convenient route to the gold discovered further up the river on British territory. The Russian stretch of land was leased to the Hudson Bay Company previously, but the term of the lease was about to expire. The articles in the Canadian newspapers, such as the "British Colonist" in Victoria, B.C., left no doubt that any attempt to deny the renewal of the lease in the future may easily lead to a direct conflict with England.¹²

But most alarming was the discovery of gold on Russian territory. The presence of gold within the Russian boundaries was discovered in 1850-51. The deposit proved to be so poor that nothing was done about it.¹³ In 1862, gold was discovered again and reported to St. Petersburg. In the annual report of the Company for the following year, the news is related in a manner obviously designed to minimize its significance. On the one hand, it is reported that auriferous sands proved to be located 135 miles beyond the Russian frontier on the British territory and are poor. On the other hand, the report somewhat tacitly admits the presence of gold on the Russian territory but aims to impress that "according to the information received up to May 20, 1863, nothing worth exploiting was discovered."¹⁴ Thus, both the Russian government and the Company were fully aware of the presence of gold in Alaska at the time when the negotiations for its sale were under way. The same anxiety induced the Company to minimize the news and the Russian government to accelerate the sale. Both were afraid that the news of gold would attract a rush of American prospectors which the Company would not be able to control and that the penetration of Alaska by American settlers would put an end to the Russian domination over this territory. The example of California was before the eyes of the Russian statesmen.¹⁵

In view of all these circumstances it was evident that to protect the Russian colonies and enforce the Company's monopoly, there was need for a larger garrison in Alaska and larger naval units to patrol the waters. But this was beyond the means of the Company and did not appear any longer to be important for the foreign policy of the government.

As it was mentioned elsewhere,¹⁶ the Company was regarded as a convenient instrument of Russian expansion in the Far East. When the services of the Company were needed the government did not hesitate to grant financial aid in one form or another. The reason for the subvention was well formulated in 1849 by Muraviev, then Governor of Siberia, as follows:

In my opinion the existence of the Russian American Company is needed by the government at least for the time being because the taking over of the administration of the North American possessions would require considerable expenses both in a lump sum and annually. It must be also borne in mind that our administration and forces in Kamchatka and the Okhotsk Sea are still in a situation that would make our expansion to the American coast premature. I dare say, on the other hand, that the abandonment of our American possessions will not conform to the aims of the government. Both these considerations lead to the conclusion that the government is forced to render aid to the Company in its present, as is known to me, difficult financial situation.¹⁷

Among the most important services rendered by the Company to the government in the middle of the 19th century was that of the preparation of regaining from China the region of the Amur River abandoned some time before. Before taking any steps in this direction, the exploration of the navigability of the Amur River and its estuary was necessary. The Russian government was afraid that such open invasion of Chinese territory would induce Great Britain to ask from China further concessions in addition to those under the Nanking Treaty of 1842, which was undesirable from the Russian standpoint. Thus the vessels of the Company undertook the task of the exploration of the river Amur. Trade missions were sent to this region by the Company which also founded several Russian settlements in the region. These activities continued until 1858 when the region was ceded to Russia by China under the Aigun Treaty.¹⁸ Then the services of the Company were no longer needed.

Likewise, during the Crimean War, the Board of Directors of the Russian American Company, using its status of a private company, made a "neutrality agreement" with the Hudson Bay British Company, thus protecting the Russian possessions from the attack by the British Navy against which the few Russian vessels in the Alaskan waters were helpless.¹⁹ It may be mentioned in this connection that the administration of the Russian colonies, being uninformed of the "neutrality" agreement of the central Board of Directors entered in its turn into a fictitious sale contract with businessmen from San Francisco. Under this contract a fictitious sale of the property of the Russian American Company to the "Russian American Company in San Francisco" was stipulated for $7,000,000, the exact amount of money paid later for Alaska by the American Government. Although it was signed by both parties no action on its basis had been taken because it became completely superfluous in view of the above mentioned "neutrality" agreement.²⁰

Many Russian statesmen in the 1860's arrived at the conclusion that, instead of dubious attempts to penetrate the Western Hemisphere, Russia by now has a more vital and easily achievable aim of her expansion. The most lucid expression of this opinion is to be found in the letter of Stöckl, Russian Minister in Washington, to the Minister of Foreign Affairs, dated December 23, 1859 (January 4, 1860):

Our interests are on the Asiatic coast and energy should be spent in that direction. There we are on our own territory and have the produce of a spacious and rich region for our exploitation. Thus we shall participate in the extraordinary activities which are developing on the Pacific, our establishments will compete with those of other nations, and under the attention which our August sovereign pays to the maritime region of the Amur River, we should not miss to acquire on this spacious ocean the high prestige worthy of Russia.²¹

There are also strong indications that the Russian government was particularly interested in a close friendship with the United States with the hope to have them on its side in case of a conflict with Great Britain.²² Thus the Russian American Company was no longer needed as a cover for Russian expansion and, in addition, it ceased to be self-supporting and threatened to become a burden for the Russian finances, which were also in bad shape at that time, after the Crimean war.

5. FINANCIAL STATUS OF THE COMPANY

By the time the third Charter expired in 1862, the financial status of the Company was far from prosperous. Many factors contributed to the situation. China no longer bought the largest part of the Alaskan furs—in particular, fur sealskins—and it was difficult to sell them on the European market in view of the inferior quality of processing, and there was only a limited demand for them in Russia. The natural resources—sea animals—were depleted and an improvement could be observed only on the very eve of the sale of Alaska. The Company sought to find other fields of trade to offset the decline of the fur trade. In the last years before the purchase of Alaska, "the Company in fact traded more in tea, importing it by sea from Shanghai, than in Alaskan furs. From 1857 to 1861 the Company's revenue from the tea trade was twice as large as from the fur trade.²³ The Company even tried to export ice to California.²⁴

The Minister of State Domains characterized the situation in a letter to the Minister of Finance in 1862 as follows:

The principal trade of the colonies, sea otter skins, is continuously declining and in general, Canada and England began to take priority in the fur trade. Furs from these countries arrive in Europe in large quantities and at much cheaper prices. Whaling in the colonies is entirely in the American hands. Fishing barely covers the domestic demands of the colonies in spite of the fabulous abundance of various good kinds of fish in the seas and rivers of the colonies. Nothing was done in animal husbandry and crop farming. The Company practically does not touch the mineral resources. All commercial relations of the Company are on the decline. Its merchant marine is negligible and it is forced to consign its own cargo to vessels owned by others.²⁵

An interdepartmental committee stated in its report submitted after an inquiry into the status of colonies in 1863, that—

the Russian colonies in America show a complete standstill in colonization as well as in industrial, commercial and civil development. This is on the one hand a direct consequence of an unconditional monopoly excluding any kind of competition and suppressing any incentive for energetic action, but on the other hand, the cause of the present situation of the colonies must be sought in the natural climatic and geographic conditions of the country.²⁶

At an earlier period, on the occasion of its 50^th anniversary, the Company described its business affairs in the same gloomy light, as follows:

The first period of disorganization and improper use of the means and resources of the Company lasted until 1821. The second period of gradual establishment of order and accounting, coupled with the gradual exhaustion of the sources of the colonial wealth lasted until 1838. Finally, the third period when the administration of the Company was put into complete order began in 1838 and continues up to the present time [written in 1847]. However, the gradual decline of the trade and the obstacles to a profitable marketing of furs inside of Russia obviously endanger any further success of the Company.²⁷

Okun, a Soviet student of the history of the Company, sarcastically remarks: