Bearing in mind the clearly expressed will of the Emperor that all necessary measures should be taken to avoid war, and not expecting favourable results from Alexeieff’s negotiations, I submitted to His Majesty, on December 6, 1903, a second memorandum on the Manchurian question, in which I proposed that we should restore Port Arthur and the province of Kuan-tung to China, and sell the southern branch of the Eastern Chinese Railway, securing, in lieu thereof, certain special rights in the northern part of Manchuria. In substance, this proposition was that we should admit the untimeliness of our attempt to get an outlet on the Pacific, and abandon it altogether. The sacrifice might seem a heavy one to make, but I showed the necessity for it by emphasizing two important considerations. In the first place, by surrendering Port Arthur (which had been taken away from the Japanese), and by giving up Southern Manchuria (with the Ya-lu enterprise), we should escape the danger of a rupture with Japan and China; in the second place, we should avoid the possibility of internal disturbances in European Russia. A war with Japan would be extremely unpopular, and would increase the feeling of dissatisfaction with the ruling authorities.
At the end of this memorandum occurred the following passage:
“The economic interests of Russia in the Far East are negligible. We have as yet, thank God, no overproduction in manufactures, because our domestic markets are not yet glutted. There may be some export of articles from our factories and foundries, but it is largely bounty-fed, and will cease—or nearly cease—when such artificial encouragement is withheld. Russia, therefore, has not yet arrived at the pitiable necessity of waging war in order to obtain markets for her products. As for our other interests in that quarter, the success or failure of a few coal or timber enterprises in Manchuria and Korea is not a matter of sufficient importance to justify the risk of war. The railway-lines built through Manchuria cannot change the situation quickly, and the hope that these lines will have world-wide importance as arteries of international commerce is not likely to be soon realized. Travellers, mails, tea and possibly some other merchandise will go over them, but the great masses of heavy international freight, which alone can give such importance to a railway, must still go by sea, on account of the heavy railway rates. Such is not the case, however, with local freight to supply local needs. This the railroad—and especially the southern branch—will carry in increasing amount, thus deriving most of its revenue, and, at the same time, stimulating the growth of the country, and, in Southern Manchuria particularly, benefiting the Chinese population. But if we do not take special measures to direct even local freight to Dalny, that port is likely to suffer from the competition of Newchuang. Port Arthur has no value for Russia as the defence and terminus of a railway, unless that railway is part of an international transit route. The southern branch of the Eastern Chinese road has commercially only—or chiefly—local importance, and Russia does not need to protect it by means so costly as the fortifications of Port Arthur, a fleet of warships, and a garrison of 30,000 men. It thus appears that the retention of a forward position in Kuan-tung is no more supported by economic than it is by political and military considerations. What, then, are the interests that may involve us in war with Japan and China? Are such interests important enough to justify the great sacrifices that war will demand?