Arbitration was suggested by Earl Granville as a step that would permit no loss of national dignity to either government. The impracticability of the submitting of the case to the Emperor Wilhelm, owing to the moral support of Russia's position by the Austro-German Alliance, having become apparent, the King of Denmark was mutually agreed upon as a referee, but as time advanced, arbitration was postponed, and the joint commission resumed its labors, though a period of extreme tension followed, succeeded by the mobilization of troops.
The belligerent attitude of Russia in Afghanistan drove the Afghans into an alliance with England and strengthened the position of the British in Central Asia, and while the Russian trans-Caspian railway was about entering Astrakabad in October, the English strategic railway was rapidly pushing its iron parallels towards Quetta, and British troops were occupying the fortifications of Herat. When the international commission was at last recalled in the summer of 1886, owing to the renewed disputations, it was found that out of the nine thousand square miles that were originally in dispute, the two thousand conceded to the Ameer comprised the most valuable portion of the territory.
During the crisis in Bulgaria, when Europe was scandalized at Russia's support of the abductors of Prime Alexander, it was reported from Vienna that the Czar, who was personally directing the foreign policy of the Empire was showing signs of hereditary insanity.
The prohibitive iron duty which went into force in 1887, the suppression of the iron-mills in Poland, the expulsion of German citizens, the expropriation of foreign landowners, and other measures, so exasperated the German bankers that they refused to finance a new Russian loan, and Russian credit received a profound shock. Money was urgently needed to meet the extraordinary appropriations sanctioned for military purposes. The plans for the building of the costly line of railway from St. Petersburg through the whole length of Siberia to Vladivostok on the Pacific, had also received government approval, and money had to be raised at any cost. Paris refused to come to the rescue, and St. Petersburg itself had finally, to issue a four percent loan of one hundred million roubles at a selling price of eighty-four percent. Active revolution rioted through the land. Conspiracies existed to an alarming extent among both the cadets at the Naval School at St. Petersburg, and the students of the military academies. The "Constitutional" Society was formed, its motto being "The people, with the Czar or against the Czar." In spite of the unusual precautions taken by Gen. Dresser—the "White Terror"—on the anniversary of the assassination of Alexander II., an accidental incident alone prevented a repetition of the act of March 13th, 1871. Three hundred students were arrested. Many persons are supposed to have been summarily tried and executed.
On April 6th another attempt was made on the life of the Czar, and during the month, four hundred and eighty-two officers of the army were banished to Siberia. No one was permitted to utter an opinion contrary to the administrative system. "Nihilism" as Curtis says, "is an hysterical remonstrance against this condition of affairs. It is the protest of enlightened reason, against the despotic tyranny of the police. It is a refusal to submit." May and November witnessed more inquisitory trials, more executions and more deportations to Siberia, the nation's charnel-house, which awaits the development of its "potentialities of wealth."