2. _The Korean Question._—On July 2 the council decided that the occupation of the whole of Korea, or even of the northern part, would be unprofitable to Russia, and therefore undesirable. Our activity in the basin of the Ya-lu, moreover, might give Japan reason to fear a seizure by us of the northern part of the Peninsula. On July 7 the council called upon Acting State Councillor Balasheff, and Lieutenant-Colonel Madritoff of the General Staff, to appear before it, and explain the status of the Ya-lu enterprise. From their testimony it appeared that the concern was legally organized, the company holding permits from the Chinese authorities to cut timber on the northern side, and a concession from the Korean Government covering the southern side of the Ya-lu. Although the enterprise had lost, to a great extent, its provocative character after the conclusions of the St. Petersburg council of April 18, 1903, became known in the province of Kuan-tung, its operations could not yet be regarded as purely commercial. On July 7 the company had in its employ 9 senior agents, of whom one was an officer of the army; 97 or 98 reservists, who went down the river in charge of rafts from Sha-ho-tzu to its mouth; some 200 Chinamen (from Chifu), and about 900 Koreans. Its affairs were managed by Lieutenant-Colonel Madritoff, although that officer was not officially in the company’s service. After consideration of all the facts put forward, the members of the council came to the unanimous conclusion that, “although the Ya-lu Timber Company really appears to be a commercial organization, its employment of military officers of the active list to do work that has military importance undoubtedly gives to it a politico-military aspect.” The council, therefore, in order to deprive Japan of a pretext for looking upon the Timber Company as an enterprise of a military-political character, acknowledged the necessity of “at once taking measures to give the affair an exclusively commercial character, to exclude from it officers of the regular army, and to commit the management of the timber business to persons not employed in the service of the Empire.” On July 7 these conclusions were signed by all the members of the council, including State Councillor Bezobrazoff. I declined to go personally into any of the economic questions concerning Manchuria, and said that the proper person to do this was the Minister of Finance. State Secretary Bezobrazoff was asked to work out the following points with the assistance of experts selected by him: 1. “What action should be taken and what economic policy should be followed in Manchuria in order to reduce the deficit on the Eastern Chinese Railway.” 2. “To what extent the measures for increasing the revenue of the line and the economic policy in Manchuria, recommended by the experts, would affect the economic situation of the Pri-Amur region.”