Although Nicholas II described himself as a man of peace, he favoured an expanded Russian Empire. Encouraged by Vyacheslav Plehve, the Minister of the Interior, the Tsar made plans to seize Constantinople and expanded into Manchuria and Korea. On 8th February, 1904, the Japanese Navy launched a surprise attack on the Russian fleet at Port Arthur.
The Russian Navy fought two major battles to try and relieve Port Arthur. At both Liao-Yang and Sha Ho, the Russians were defeated and were forced to withdraw. On 2nd January, 1905, the Japanese finally captured Port Arthur. The Russian Army also suffered 90,000 causalities in its failed attempt to Mukden (February, 1905).
In May, 1905, the Russian Navy was attacked at Tsushima. Twenty Russian ships were sunk and another five were captured. Only four Russian ships managed to reach safety at Vladivostok.
These defeats led to criticism of the Russian government. Bloody Sunday and the Potemkin Mutiny were both partly caused by the unpopularity of the war. The increase in revolutionary activity in Russia convinced Nicholas II that he needed to bring an end to the conflict and accepted the offer of President Theodore Roosevelt to mediate between the two countries.
Sergi Witte led the Russian delegation at the peace conference held in Portsmouth, New Hampshire, in August, 1905. Under the terms of the Treaty of Portsmouth: (i) The Liaotung Peninsula and the South Manchurian Railway went to Japan; (ii) Russia recognized Korea as a Japanese sphere of influence; (iii) The island of Sakhalin was divided into two; (iv) The Northern Manchuria and the Chinese Eastern Railway remained under Russian control.