After some initial gains the two powers came to an agreement in 1907 by which they established their respective spheres of influence, so that Persia was occupied at the two ends, north and south, by strong powers, and the middle portion was in such a chaotic state that its future seemed very doubtful. By making loans to the shah and furnishing capital for public improvements British and Russian capitalists enabled their respective countries to tighten their grips on Persia. Soon that country was in the throes of revolution, a so-called Nationalist party came into power which was not able to rule without the aid of Russia and Great Britain. So far did the foreign influence go that Morgan W. Shuster, an American financial adviser of the shah who had tried hard to place the government on a satisfactory basis, was fain to withdraw from Persia in despair. To the rest of the world it seemed that the independence of the country was near its end. A mere glance will show us what these developments meant for Germany and Austria-Hungary. Remembering that Italy was acting with the _Entente_ in her African policy, we see that the entire southern shore of the Mediterranean was passing into hands adverse to the central powers, and that the new combination stretched out a long arm to the Persian Gulf and the region south of the Caspian. In view of Germany’s hope that she would some day gain through Syria a railway route to the Far East, the trend of things in Persia threatened to close the narrow gap that was left her for such a route by completing the absorption of the kingdom of the shah. Should she allow the gap to be stopped, or should she strike while there was still time? And if she did not strike, what was there in the system of the Balance of Power that could be counted on as a guarantee that she was not a passive victim to the play of politics in the system then in use? Furthermore, it was evident that Germany’s prestige was being undermined by the progressive steps of her rivals. Three times had she rattled the saber over the Moroccan incidents, and each time with decreasing terror in the minds of her opponents. Perhaps its rattling had been one of the main facts in promoting the union of those opponents, since it always brought before them the picture of Germany embattled against the rest of Europe. To strike a blow that would teach France and Russia a lesson would restore German prestige and bring the balance back to the German side of the rivalry, if it did not do more.