In January 1835, the Carlists took over Baztan in an operation where the general Espoz y Mina narrowly escaped a severe defeat and capture, while the local Liberal Gaspar de Jauregi "Artzaia" ('the Shepherd') and his "chapelgorris" were neutralized in Zumarraga and Urretxu. By May 1835, virtually all Gipuzkoa and seigneury of Biscay were in Carlist hands. Opposing his advisers and Zumalacárregui's plan, Carlos V decided to conquer Bilbao, defended by the Royal Navy and the British Auxiliary Legion. With such an important city in his power, the Prussian or Russian Tsarist banks would give him credit to win the war; one of the most important problems for Carlos was a lack of funds.