The town of Atjeh was the centre of a large sultanate of the same name extending into the interior of Thailand. In Atjeh itself stood the sultan's palace. The sultans took advantage of the town's natural harbour; whenever foreign ships anchored in the harbour, the sultan put up the price of pepper, Atjeh's most important product.
The Company maintained a trading post in Atjeh from 1607 onwards. This post served primarily as a storage depot for pepper and tin. The pepper was grown in northern Sumatra, while the tin came from the mines of Perak, on the west coast of Malaysia, which at that time was part of the sultanate of Atjeh.
Atjeh had long been a centre of trade, from which diamonds, gold, pepper and tin were shipped to other countries. During the first decade of the 17th century the Company controlled the pepper trade in Atjeh. The VOC paid for the pepper with fabrics from India, ivory and rice. However, the Company quickly lost control of the pepper trade, because it tried to sell its cotton at a higher price than the Indian traders. Indeed, relations deteriorated to such an extent that the sultan of Atjeh forbade his subjects to sell pepper to the Company. It was only at the end of the 17th century that trade in Atjeh become more profitable, when the sultan granted the pepper monopoly to the VOC.
Even before the foundation of the VOC in 1602, Dutch traders had already made contact with the sultan of Atjeh. These initial meetings were far from peaceable. However, once the sultan had begun to tire of the Portuguese presence, his relations with the Company improved. He even sent two envoys to the Dutch Republic in 1602, to find out more about the political state of the Republic. These envoys were the first people from the region to visit Holland. But despite this bold overture, the Company's subsequent agreements with the sultan were not particularly successful; both parties repeatedly breached their contracts.