Holy Roman Empire

Stockholm. Since becoming the capital of the Nordic Federation, this ancient city has once again come alive, truly deserving its title as the “Venice of the North.”

Its stunning scenery and unique Nordic charm lend a special flavor to the city, leaving a lasting impression.

No matter how picturesque the view, it could not stir Nikolay Karlovich Giers. As an official of the Russian Empire’s Ministry of Foreign Affairs, Nikolay always carried himself with an air of arrogance.

However, his so-called arrogance crumbled in the face of reality. Ever since accepting this mission, his spirit had been utterly dampened.

To secure victory in the new Russo-Prussian War, the Russian government not only sought funds from Britain, France, and Austria but also turned to the neighboring Nordic Federation.

Of course, Nikolay’s primary mission wasn’t fundraising. Instead, it was to stabilize the Nordic Federation and prevent this long-time rival from stabbing them in the back at a critical moment.

The unification of the three Nordic countries wasn’t a simple equation of 1+1+1=3. By combining their strengths and compensating for one another’s weaknesses, the Nordic Federation had become a self-sufficient system, with a comprehensive national strength rivaling that of Prussia twenty years ago.

Recalling the days of vying with Sweden for dominance in the Nordic region, the Russian government dared not underestimate this potential adversary, ultimately deciding it was best to placate this old rival.

For diplomats, this was undoubtedly a bitter task. There was no other choice as concessions were necessary in the face of harsh realities.

Having personally experienced the previous war, Nikolay was acutely aware that Russia’s advantage over the Prussian-Polish Federation was not as significant as the government’s propaganda suggested.

To a certain extent, the Nordic Federation now possessed the power to tip the scales. To win this war, the Russian government was no longer concerned about saving face.

It wasn’t just about appeasing the Nordic Federation, every neighboring country was a target for their overtures. They didn’t seek support from these neighbors. Neutrality alone would suffice.

With a heavy heart, Nikolay, as the Tsar’s special envoy, stepped into the Nordic Federation’s Ministry of Foreign Affairs. Unlike his last visit here, he no longer had the capital to act high and mighty.

…

Nikolay said, “Sir, this time we are showing great sincerity. The Russian Empire is willing to use Finland as collateral in exchange for a loan of 800 million krona.

We can make a promise that half of this loan will be used to import goods from your country. The interest rate will follow international commercial loan practices, with an annual rate of 6%, and principal and interest repaid in installments annually.”

The currencies of Denmark, Norway, and Sweden are all krona, and their values are identical (1 krona equals approximately 0.4 grams of gold). After the establishment of the Nordic Federation, there was no need to change the currency’s name.

“Sir Special Envoy, you have greatly overestimated us. The Nordic Federation is just a small country, not as wealthy as your country. We cannot afford 800 million krona, and even 100 million krona is beyond our means,” The Nordic Federation’s Foreign Minister Kara Valenti firmly refused.

Nikolay, however, did not get angry. Observant as he was, he noticed that when Valenti first heard Finland was being used as collateral, his eyebrows subtly twitched before he quickly masked his reaction.

This was within expectations. Since the establishment of the Nordic Federation, domestic calls to reclaim Finland had grown increasingly louder.

Reclaiming Finland by force was unrealistic. The Russian Empire was not a power that the Nordic Federation could challenge as the gap in strength between the two sides was far too great.

Moreover, the Nordic Federation still included pro-Russian Denmark. Recklessly provoking a war could potentially split the fragile, newly established government.

If a different approach were taken like using economic means to reclaim Finland, the situation would be entirely different.

The Danish government would not oppose Finland’s return, as only a strong Nordic Federation could help them regain the lost two duchies.

Indeed, the Nordic Federation is a union of nations born out of mutual compromise. It was established during a period of the Russian Empire’s weakness and with the support of the great powers.

Under such circumstances, the government must consider the interests of all parties when managing domestic and foreign affairs. For instance, Sweden supports Denmark in reclaiming the two duchies in exchange for Denmark’s support for Sweden in reclaiming Finland.

Of course, the prerequisite for all this is sufficient strength. While the Nordic Federation is a small country, it has historical depth, a comfortable natural environment, and a strategic preference for conservatism.

In other words: when the strength is there and the opportunity arises, reclaim lost territory; if the strength is lacking, endure and wait for the right moment!

The Russo-Prussian War presented the opportunity they had been waiting for. Oscar II’s strategy was clear: whoever loses, kick them when they’re down.

The logic is simple. If the Prussian-Polish Federation loses, the entire nation might collapse, leaving them incapable of stopping the Nordic Federation’s actions. If the Russian Empire loses the war, it wouldn’t fare much better, and it would inevitably lose Finland.

The Russian government’s willingness to use Finland as collateral is rooted in this reasoning. If they lose the war, Finland will be lost anyway. Why not use it to stabilize the Nordic Federation first?

Nikolay replied, “Sir, you are far too modest. With your country’s economic strength, a mere 800 million krona is hardly an issue.

To my knowledge, your government’s revenue this year alone reached 320 million krona, and the liquid capital in Stockholm’s financial markets exceeds 840 million krona.

Your country’s banks are fully capable of underwriting this loan.”

Eight hundred million krona is approximately equivalent to 87.43 million guilders or 43.715 million pounds. For any nation, this is an enormous sum.

Nikolay had good reason for proposing such a figure. While Finland is sizable, it is still a harsh northern land, considered desolate territory in this era.

Similar barren lands are abundant in Russia. If not for Finland’s high strategic value, the Russian government wouldn’t place such importance on it.

In this era of survival of the fittest, Europe is far from peaceful, and small countries have no sense of security. Everyone is doing their utmost to strengthen themselves.

The Nordic Federation has its sights set on Finland not only because of nationalist sentiment but also because there aren’t many better options.

Valenti shook his head and then said, Sir Special Envoy, loans require a careful assessment of risks. Your government’s financial situation has long been unstable and could break into war with the Prussian-Polish Federation at any moment.

If war does erupt, your country’s debt repayment capacity will undoubtedly face issues, and in the end, only the collateral would remain.

Finland is too impoverished and its fiscal revenue barely covers its expenditures. It lacks significant mineral resources and relies solely on selling timber. How long would it take to recoup the costs? A hundred years? Two hundred? No one can wait that long.”

Being rejected was no surprise. Just getting a negotiation started was already half the success as it meant the Nordic Federation government was tempted.

Nikolay’s mission was to stabilize the Nordic Federation, not necessarily to secure a large loan. If the Russian government wanted to raise funds for the war, it would have to rely on Britain, France, or Austria. Other nations simply didn’t have the wealth.

After the fruitless probing, Nikolay took his leave, leaving Valenti secretly troubled.

A pie in the sky is indeed tempting, but one must consider whether it’s poisoned. The Russians are not easy to deal with. Trying to take advantage of them is a risk that could easily backfire.

…

In the royal palace, upon receiving this “good news,” Oscar II’s first reaction was not joy but alarm.

After a moment of contemplation, Oscar II voiced his doubts, “What if the Russians win the war and then refuse to fulfill their commitments?”

It couldn’t be helped, such was the stellar reputation of the Russian government. If they lost the war, the Russians would undoubtedly honor the agreement because they’d neither have the money to repay the debt nor the strength to hold onto Finland.

But winning the war was another story. Even if the Russian government still didn’t have the funds to repay the loan, there was nothing stopping them from reneging on their promises!

If that happened, and the Tsar refused to pay the debt while also refusing to hand over Finland, they’d be left in a dire predicament. It wasn’t as if they could use force to collect the debt.

That tactic was reserved for strong nations demanding repayment from weaker ones. A weak nation seeking reparations from a powerful one? That was out of the question.

Foreign Minister Kara Valenti said hesitantly, “I don’t think they would… The Russian government is currently raising funds for the war, not just borrowing money from us but also seeking loans from Austria. If the Russian government were to default…”

Before finishing his sentence, Valenti himself no longer believed what he was saying. Borrowing money from Austria and borrowing from the Nordic Federation were entirely different matters.

If the Russian government wanted to default on Austria’s loans, it would have to think twice, carefully considering the political risks and potential countermeasures the Austrian government might take.

But the Nordic Federation was a different story. Defaulting on their loans would be far easier for the Russian government. Valenti couldn’t identify any effective countermeasures they could employ in response.

In short, lending money to the Russian government carried enormous risks, risks far beyond what the Nordic Federation could afford to take on.

After a long silence, Oscar II finally spoke, “Continue negotiating with the Russians. Regardless of the risks, this is still an opportunity.

If we can reclaim Finland through economic means, we simply cannot turn that down. The key now is to mitigate the risks.

Since the Russians have made this loan request, they must have measures to reassure us. For instance, having a third party provide a loan guarantee.

If the Russian government can persuade one of Britain, France, or Austria to provide a debt repayment guarantee, then it’s not out of the question to consider this proposal.”

The Russian government could afford to disregard its reputation since it was already poor to begin with but Britain, France, and Austria were different. These three nations had impeccable economic reputations, and no mere 800 million krona would be enough to tarnish them.