From the above lines it will be seen how seriously the War Department regarded such an antagonist as Japan, and how much anxiety it felt concerning possible complications with that Power on account of Korea. At the time when this report was presented, and later, in November, the negotiations that Admiral Alexeieff was carrying on with Japan not only made no progress, but became more critical, the Admiral still believing that to show a yielding disposition would only make matters worse. _Insignificance of Russia's Eastern Interests_ Bearing in mind the clearly expressed will of the Emperor that all necessary measures should be taken to avoid war, and not expecting favorable results from Alexeieff's negotiations, I presented to His Majesty, on the 26th of November, 1903 (December 9, N. S.) a second report on the Manchurian question, in which I proposed that we return Port Arthur and the province of Kwang-tung to China, securing, in lieu thereof, certain special rights in the northern part of Manchuria. In substance, this proposition was that we admit the untimeliness of our attempt to get an outlet on the Pacific and abandon it altogether. The sacrifice might seem a grievous one to make, but I showed the necessity for it by presenting 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 Yalu 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. My report was, in part, as follows: "The economic interests of Russia in the Far East are extremely insignificant. We have as yet, thank God, no over-production in manufactures, because even our domestic markets are not yet glutted. There may be some export of articles from our factories and foundries, but it is largely due to artificial encouragement and will cease--or nearly cease--when such encouragement is withheld. Russia, therefore, has not yet grown up to the melancholy necessity of waging war in order to get markets for her products. As for our other interests in the Far East, the success or failure of a few coal or timber enterprises in Manchuria and Korea is not a matter of sufficient importance to make it worth while for Russia to run the risk of war on their account.