This unexpected change of policy alarmed both China and Japan, and there is good reason to believe that the stoppage of the evacuation of the province of Mukden was an event of supreme importance. So long as we held to our intention of withdrawing all our troops from Manchuria, confined ourselves to the protection of the line by the Frontier Guards and a small reserve at Harbin, and refrained from intruding in Korea, there was little danger of a break with Japan; but we were brought alarmingly near a rupture with that Power when, contrary to our agreement with China, we left our troops in Southern Manchuria, and entered Northern Korea in pursuit of our timber enterprise. The uncertainty as to our intentions, moreover, alarmed not only China and Japan, but even England, America, and other Powers.
In the early part of 1903 our position became extremely involved. The interests of the Pri-Amur were by this time pushed completely into the background; even General Dukhovski, its Governor-General and Commander-in-Chief, was not consulted upon the most important points concerning the Far East. Meanwhile, immense enterprises involving many millions of pounds were being created and controlled on independent lines in Manchuria, on Chinese territory. The Minister of Finance (M. de Witte) was building and managing over 1,300 miles of railway. The alignment of the northern portion was, as I have explained, fixed in direct opposition to the opinion of General Dukhovski, our chief authority in those parts, while under the orders of the Finance Minister an army corps was organized for the protection of the line. So independent, indeed, was the latter in his conduct of purely military matters that a pattern of gun for the railway guard was settled, and the gun purchased abroad without reference to the War Ministry. To assist in the economic development of the railway, M. de Witte started a fleet of sea-going merchant ships; for work on the Manchurian rivers he ran a flotilla of river steamers, some of which were armed. Vladivostok was no longer considered suitable as a terminus for a trans-continental trunk line, so, regardless of the fact that the Kuan-tung district was under the War Department and immediately under the officer commanding the troops in it (Admiral Alexeieff), Dalny was selected and created as a great port without reference to either. Huge sums were spent on this place, which adversely affected the military importance and strength of Port Arthur, as it was necessary either to fortify Dalny or be prepared for its seizure and employment by an enemy as a base of operations against us—a thing which afterwards happened. I should add that the Russo-Chinese Bank was also in the Finance Minister’s hands. Finally, M. de Witte maintained his own representatives in Peking, Seoul, etc. (Pokotiloff in Peking). It so happened, therefore, that in this year our Minister of Finance was managing in the Far East railways, a flotilla of merchant steamers, a certain number of armed vessels, the port of Dalny, and the Russo-Chinese Bank. He also had under his command an army corps. At the same time Bezobrazoff and his company were developing their concessions in Manchuria and Korea, and promoting by every possible means their timber speculation on the Ya-lu in Northern Korea. One incredible scheme of Bezobrazoff’s followed another. His idea was to utilize the Timber Company as a sort of “screen” or barrier against a possible attack upon us by the Japanese, and during 1902 and 1903 his activity and that of his adherents assumed a very alarming character. Among requests that he made of Admiral Alexeieff were to send into Korean territory 600 soldiers in civilian dress, to organize for service in the same locality a force of 3,000 Hun-huses, to support the agents of the Timber Company by sending 600 mounted rifles to Sha-ho-tzu on the Ya-lu, and to occupy Feng-huang-cheng with a detached force. Admiral Alexeieff refused some of these requests, but unfortunately consented to send 150 mounted rifles to Sha-ho-tzu, and to move a Cossack regiment with guns to the latter place. This action was particularly harmful to us, as it was taken just at the time when we were under obligations to evacuate the province of Mukden altogether. As has already been stated, instead of withdrawing, we advanced towards Korea.