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Title: The World-Struggle for Oil
Author: Tramerye, Pierre l'Espagnol del la
Language: English
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THE WORLD-STRUGGLE
FOR OIL
_Some_ BORZOI _Books_
_Midwinter, 1924_
SOCIOLOGY AND POLITICAL THEORY
_Harry Elmer Barnes_
THE OLD AND THE NEW GERMANY
_John Firman Coar_
THE BASIS OF SOCIAL THEORY
_Albert G.A. Balz_
ESSAYS IN ECONOMIC THEORY
_Simon Nelson Patten_
THE TREND OF ECONOMICS
_Various Writers_
THE FABRIC OF EUROPE
_Harold Stannard_
THE WORLD-STRUGGLE
FOR OIL
_Translated from the French of_
Pierre l'Espagnol de la Tramerye
_by_ C. LEONARD LEESE
[Illustration]
NEW YORK ALFRED · A · KNOPF MCMXXIV
COPYRIGHT, 1924, BY ALFRED A. KNOPF, INC.
_Published, February, 1924_
_Set up, electrotyped, and printed by the Vail-Ballou Press, Inc.,
Binghamton, N.Y._
_Paper furnished by W.F. Etherington & Co., New York._
_Bound by H. Wolff Estate, New York._
MANUFACTURED IN THE UNITED STATES OF AMERICA
CONTENTS
PART I. The World's Oil.
Chap. I. "Who Has Oil Has Empire!" 9
II. Oil: Its Origin, Discovery, and History 21
III. Amazing Increase in Consumption:
Fears of the United States 34
PART II. The Struggle of the Trusts.
Chap. IV. The _Standard Oil Company_ 45
V. The _Royal Dutch-Shell_ 59
VI. The Oil World's Napoleon: Henry
Deterding 84
PART III. The Struggle between the Powers.
Chap. VII. The _Europeanische Petroleum Union_: a
German Trust for the Control of
European Oil which founders in
the Great World Conflict 97
VIII. The War and Oil 101
IX. An Imperialism not without Greatness 110
X. The Struggle between Great Britain and
the United States in Mexico 113
XI. A State-subsidised Company: the
_Anglo-Persian_ 129
XII. An American Balkanism: the _British
Controlled Oil-fields_ 143
XIII. Political Tendencies of the Royal-Dutch:
the British Oil Empire 147
XIV. How the United States lost Supremacy
over Oil 151
XV. The American Retort 178
XVI. From Washington to Genoa: the Struggle
for the Oil-fields of Russia 184
PART IV. France's Part in the Struggle between
Great Britain and the United States.
Chap. XVII. The Cartel of Ten 201
XVIII. The Petroleum Consortium 207
XIX. How Great Britain Succeeded in Winning
France over to Her Side in the
Struggle with the United States 215
XX. Great Britain and the Oil-fields of the
French Colonial Empire 234
XXI. The _Standard_ and France 239
XXII. Conclusion: the World in 1923 244
PART I
THE WORLD'S OIL
CHAPTER I
"WHO HAS OIL HAS EMPIRE!"
The question of oil has become one of the most vital in all countries.
Its importance is such that even the most solid political alliances
are subordinate to it. The Great Powers have all an "oil policy." The
United States, where the most powerful trust is an oil trust--the
_Standard Oil Company_--the United States, which control 70 per cent.
of the oil production of the world, have decided not to leave the
question to private initiative alone, but to start a vigorous oil
policy both at home and abroad. The American Senate recently decided
to create the "United States Oil Corporation to develop new petroleum
fields," while Mr. Bedford, Chairman of the Board of Directors of the
_Standard Oil Company_, asked the Government to lend its support to any
Americans who were soliciting oil concessions throughout the world.
This support, which even Wilson--hostile to trusts as he was--did not
refuse, was granted very energetically by Mr. Harding: three European
States have just had experience of it.
Britain, with her usual foresight, understood long ago the importance
of oil, and took the necessary action. In the work of exploration alone
she is at the present moment spending considerable sums, and she will
soon have nearly all the remaining oil-fields of the world in her hands.
France alone remains behind, hesitates, changes her mind, and allows
herself to be despoiled, not only of the region of Mosul, one of the
richest oil-fields of the world, which was formally promised to her by
the Agreements of 1916, but also of the few modest oil deposits which
she possesses in her colonies. For these are almost all exploited by
British firms; and by the Agreement of San Remo the French Government
has, in addition, promised to reserve a large share for "British
co-operation" in new companies which may be established there.
"Who has oil has Empire!" exclaimed Henry Bérenger, in a diplomatic
note which he sent to Clemenceau on December 12, 1919, on the eve of
the Franco-British conferences held in London to consider the future
of Eastern Europe and Asia Minor. "Control of the ocean by heavy oils,
control of the air by highly refined oils, and of the land by petrol
and illuminating oils. Empire of the World through the financial
power attaching to a substance more precious, more penetrating, more
influential in the world than gold itself!" The nation which controls
this precious fuel will see the wealth of the rest of the world
flowing towards it. The ships of other nations will soon be unable
to sail without recourse to its stores of oil. Should it create a
powerful merchant fleet, it becomes at once mistress of ocean trade.
Now, the nation which obtains the world's carrying trade takes toll
from all those whose goods it carries, and so has abundant capital.
New industries arise round its ports, its banks become clearing houses
for international payments. At one stroke the controlling centre of
the world's credit is displaced. This is what happened already in the
eighteenth century when, with the development of British shipping, it
passed from Amsterdam to London. And British statesmen have had, at one
time, a moment of anxiety lest it should move to New York!
Thus began the terrible struggle between Britain and the United States
for possession of the precious "rock-oil."
"The country which dominates by means of oil," said Elliot Alves, head
of the _British Controlled Oil-fields_, a semi-official, semi-private
organization, which the British Government has specially commissioned
to fight the _Standard Oil Company_, "will command at the same time the
commerce of the world. Armies, navies, money, even entire populations,
will count as nothing against the lack of oil."
The War proved it.
* * * * *
Whence does oil derive this formidable power, before which the whole
world bows down? From the fact that the fundamental basis upon which
the industrial life of modern nations rests is fuel. Before the War,
Germany, Britain, and the United States owed the whole of their power
and their wealth to coal. It would have been true to say that the
British Empire rested upon a foundation of coal.
It is essential to have control over fuel in time of peace for economic
prosperity, and in time of war to supply the navy and maintain control
of the seas.
Now oil has considerable advantages over coal. Its extraction is
remarkably easy compared with that of coal. What is the boring of a
well and the installation of some simple machinery on the surface
compared with the expensive subterranean workings which are involved
in the exploitation of a coal-mine? An oil-boring before the War
cost a few hundred thousand francs, while the simplest workings for
a colliery always necessitated an expenditure of several millions.
The installations once made, oil flows by itself into the reservoirs,
whence it is conducted by pipe-lines to the sea-ports and there pumped
into the ships. It may be refined before exportation or only on arrival
in the country where it is to be consumed. The expenditure upon
labour in these various operations is extremely small, especially in
undeveloped countries where native labour is employed. Thus, even at
the present time, in the Dutch Indies the coolies are paid a florin
a day. Now at the end of the War the employés of the _Royal Dutch_
in the Dutch Indies numbered only 1,000 Europeans and 2,906 natives
and Chinese for a production of 1,706,675 tons. A native earned only
300 gold francs a year for 80 tons of oil extracted, refined and
transported to the coast.
After the Bolshevik revolution wages at Grosny were still only seven
roubles a day, which, considering the depreciation of Russian money,
represented very little. Generally the expenses of production in
Russia did not exceed a few kopecks a pood (50 kopecks for one of the
best-known firms, that of Akverdoff).
Thus oil is bound to become in future more and more important as a
fuel, because of its peculiarity in necessitating so insignificant a
charge for labour--which protects it from the inconveniences resulting
from the social crises in the midst of which we live--and because its
net cost is so small. For half a century it was used only for lighting
purposes, and then it had to compete with gas and electricity. At one
time there was talk of limiting production!
Between 1900 and 1910 the invention of the internal-combustion engine
and the enormous development of motoring gave it new impetus. Fine oils
only had been used up to then. Under pressure of the demand, it became
customary to raise and refine poorer and poorer oils, giving from 60 to
75 per cent. of waste products.
There remained the mazut[1] or fuel-oil, which required very high
temperatures for combustion and which was very dirty in use.
Then the German, Diesel, invented the internal-combustion engine
for heavy oil. The mazut, subjected to high pressure in a cylinder,
produces an explosive mixture which, without sparking-plug or magneto,
drives the pistons in the manner of a petrol engine. The installation
is rather heavy, but no boiler is required, and it takes up much less
space than a steam engine of the same power. A vessel fitted with a
Diesel engine can sail for fifty-seven days without re-fuelling, while
with a steam engine it could only sail for a fortnight. A ship fitted
with a Diesel engine and having a speed of 20 knots could sail from
France to Suez, India, Australia, New Zealand, and return by Cape Horn
without re-fuelling. But, better than any words, the following little
table, made out for two boats of the same power, will give an idea of
the great advantages of the Diesel engine:--
--------------------------+--------------+---------------
| Diesel. | Steam.
--------------------------+--------------+---------------
H.P. | 21,000 | 21,000
Weight of engine and | |
accessories | 1,000 tons | 3,400 tons
Space required | 5,300 cu. m. | 10,000 cu. m.
Daily consumption | 100 tons | 360 tons
| (heavy oil) | (coal)
Consumption for a voyage | |
of 15 days | 1,500 tons | 5,400 tons
Bunker space for a voyage | |
of 15 days | 1,700 cu. m. | 7,000 cu. m.
Total space required for | |
engine and fuel | 7,000 cu. m. | 17,000 cu. m.
--------------------------+--------------+---------------
At first oil was used on fishing boats, then on small coasters. To-day
the biggest British cargo boats, of the type of the _Zeelandia_ or
_Sutlandia_, are fitted with Diesel engines. All German submarines
had them during the War. In 1917 Herr Ballin,[2] the great friend of
William II and the head of the _Hamburg-Amerika_ line, just before his
suicide decided on the construction of a fleet of enormous ships fitted
with internal-combustion engines. Scandinavia, Holland, Italy, all now
use the Diesel engine. France alone remains behind in this respect. It
has even been used on railways, a little-known fact. Diesel locomotives
with four cylinders, built by Sulzer Brothers of Winterthur, have
recently been run on the line from Berlin to Mannsfeld.
"The development of our metallurgy," wrote Admiral Degouy in April
1920, "will soon give us the assurance that we also shall be able to
manufacture large-bore cylinders and pistons of flawless casting,
like those made in Augsburg, Nuremberg, Stockholm, and Christiania,
which will support for long periods without change (and consequently
without leakage) the temperature of 1,000° C. which is developed by the
combustion of mazut in these engines."
Since the invention of the internal-combustion engine, mazut has been
introduced directly into the furnaces of great ships. The heating power
of this formerly despised product is almost double that of coal: 1
kilogramme of liquid fuel produces the same results as 1.7 kilogrammes
of coal. Its use allows of the reduction by five-eighths in bunker
space, and by 70 to 80 per cent. of the stokers, since a single man can
look after several boilers. The fuelling of a ship is effected cleanly
and quietly in a few hours. Hundreds of tons of oil can be pumped into
the cisterns in a negligible time, and that even out at sea and in
heavy weather. To give an idea of the difference in time and labour
required for the loading of coal and oil before the sailing of a mail
steamer of the tonnage of the _Olympic_ or the _Lusitania_, I will
quote the following figures:--
Coal 5 days 500 men
Oil 12 hours 12 men
The labour of stoking and clearing the furnaces is done away with;
there is no longer either dust or smoke. Parts of the ship which are
too restricted or too inconveniently placed for housing coal can be
used for oil. It is stored in the double bottom of the boat, and by
utilizing the coal bunkers for general cargo the available storage
space is increased by 10 per cent. On the latest _Cunard_ and _White
Star_ liners the economy of space thus realized has been as much as 33
per cent. And Admiral Lord Fisher drew attention to the fact that on
the _Mauretania_--the sister ship to the _Lusitania_--the adoption of
oil fuel allowed of the reduction of the crew by three hundred men.
The efficiency of a boiler heated by coal is not much more than 60
per cent.; that of one heated by oil reaches 80 per cent. On Japanese
steamers of the type of the _Temyo Maru_, of 21,000 tons, with Parsons
turbines of 20,000 horse-power, the consumption of oil is only 455
grammes to one effective horse-power, instead of 685 grammes of coal.
The flexibility and ease of control are extraordinary.
Since 1911 the merchant fleet of the United States has been consuming
15 million barrels annually. Nearly all the nations have followed
this example,[3] especially those which dream of the dominion of the
seas for the use of oil in their warships gives them an incontestable
superiority. The presence of a squadron sailing under coal is disclosed
at a distance of more than 10 kilometres by enormous clouds of smoke;
under oil its presence is almost imperceptible; it becomes visible
only at the moment when it is about to attack. Ease of approach is
enormously increased; and even if an enemy vessel is discovered by
marine or aerial scouts it is very difficult for the gunners of the
threatened vessel to take their aim at so vague a target as an almost
invisible horizontal silhouette. "No smoke, not even a funnel!"
exclaimed Lord Fisher in his strenuous campaign for the transformation
of the British Navy. Many years elapsed, however, before he saw the
triumph of the new fuel.
It has been objected that ships lose a little of the protection which
is conferred upon them by their belts of coal bunkers; but this
criticism is valueless. For, as they gain considerably in lightness,
it is possible to increase the thickness of the armour plate and the
size of the guns. The abolition of funnels permits of a considerable
increase in the field of fire of the artillery.
Moreover, with oil fuel fleets acquire an extreme mobility.[4] Half
an hour after receiving the order to raise steam the ship is ready to
start. Thirty-five minutes afterwards it is going at full speed. In six
minutes it can pass from normal to maximum speed. Eleven minutes are
needed to get a boiler under full pressure. A voyage at forced speed
entails no extra fatigue for the crew: with coal it is hell!
Thus, since 1912, oil has been constantly used on twenty-eight German
battleships, almost the whole of the fleets of Great Britain and the
United States, and the Russian squadrons in the Baltic and the Black
Sea. _The American Navy has completely abandoned coal for its new
units._
And France? France, which was the first to conceive the idea, had, at
the moment when war broke out, only a few small boats burning oil,
and not a single powerful modern vessel comparable with the _Queen
Elizabeth_. And yet, as early as 1864, it was France that built the
first ship, the _Puebla_, sailing under Lieutenant Farcy, to use the
new fuel, which aroused so much curiosity during the Second Empire.
But the selfish opposition of our coal-owners overcame those who were
favourably inclined, including Napoleon III himself.
No one gives a thought to these facts at the present time. France often
points the way of progress; she never profits by it.
* * * * *
The most far-reaching revolutions have begun with a technical
invention. The unknown monk who first mixed charcoal with sulphur and
saltpetre razed feudal castles and created the great modern States. And
he who balanced a magnetized needle on its pivot was the real founder
of colonial empires.
We are just entering upon an economic period which will turn the whole
world upside-down--the Revolution in Fuel, with its far-reaching
consequences.
FOOTNOTES:
[Footnote 1: "The famous petroleum wells of Baku ... yield crude
naphtha, from which the petroleum or kerosene is distilled; while
the heavier residue (_mazut_) is used as lubricating oil and
for fuel."--_Encyclopaedia Britannica_, 11th ed., vol. iii, p.
230.--TRANSLATOR'S NOTE.]
[Footnote 2: "Herr Ballin committed suicide, foreseeing that
unrestricted submarine warfare, which had then been decided upon, would
be the downfall of Germany."--_Revue des Deux Mondes_: Contre-Admiral
Degouy, "Oil and the Navy."]
[Footnote 3: Since 1920 the world tonnage of oil-burning steamers has
exceeded that of steamers built to burn coal.]
[Footnote 4: At the battle of Jutland, only the oil-burning ships
realized their trial speed.]
CHAPTER II
OIL: ITS ORIGIN, DISCOVERY, AND HISTORY
The Great Producing States before 1914 and in 1921
Oil is found naturally in different forms. Sometimes it occurs as a
volatile liquid at ordinary temperatures; it is then known as naphtha.
Sometimes the volatile principles are only given off at higher
temperatures; it is then called petroleum or rock-oil. Sometimes also
it appears in a semi-solid form, asphalt, its volatile properties
having already evaporated.
It is very rarely that oil is found on the surface or gushing up by
itself without the help of pumps. It is usually met with at a great
depth underground, in pockets in which oil and gas are found above
water. Thus, in order to detect its presence, it is necessary to make
borings. When one reaches a pocket in the neighbourhood of the gas,
the latter escapes by the outlet which is offered. If the boring first
reaches oil, and if the pressure of gas is sufficient, the oil gushes
out and forms a spring. This is what happened in the Caucasus, where
certain wells spouted up to a height of eighty metres through the
borings made by the prospectors. More often the gas pressure is not
sufficient to raise the liquid to the surface, and it is necessary to
install pumps driven by steam to empty the pocket. At the time of the
boring, when the cylindrical metal drill, driven vertically by a metal
cable and held vertical by the derrick (a sort of pyramidal framework
of metal), reaches the deposit, the gas which has been accumulating for
thousands of years escapes, driving, pushing, sucking up the oil, and
making a fountain, a gusher, a sort of artesian well. The oil is led
away in metal pipes, vertical till they reach the surface, horizontal
to the refineries, ports, or other destinations. Once the well is
capped, it is not touched again; it is alone in the desert, and only a
metre records its daily output, while hundreds of thousands of men are
obliged to work underground to wrest coal from the bowels of the earth
by the strength of their arms!
The depth of the wells varies from 200 to 1,600 metres, according to
the region. The duration of the flow is essentially variable, depending
upon the magnitude of the deposit of oil. But it goes without saying
that when a spring has flowed for seven years more or less, like the
first one exploited by the _Mexican Eagle_, it gives out, yielding
salt water. The fact is quite ordinary, and is known in all competent
circles, although it is sometimes brandished as a warning by interested
people in order to lower the value of certain oil shares. One often
hears of "pools," "rivers," or "veritable lakes of oil." These
expressions are most inaccurate. Apart from certain exceptions, such
as the famous well of the _Colombia_ in Rumania in 1913, the deposits
of oil are neither rivers nor pools. They are _actually solid layers
of sandstone, often very hard, impregnated, saturated with oil_. This
sandstone is very porous and contains thousands of cavities or pockets
enclosing the precious "rock-oil." Its thickness varies from the usual
30 or 50 metres (giving wells of a yield of 200, 500, or 1,000 barrels
a day) to _one kilometre_ in certain wells of the _Eagle_ (yielding
70,000 to 100,000 barrels a day, instead of 200 to 1,000). The _Eagle_
is lucky, it must be admitted, and its history is unique in the annals
of oil. Only its sister company, the _Mexican Oil_, which works in the
same field, but for the _Standard Oil_ group, can be compared with it.
Even a superficial examination of the chemical composition of oil,
a hydrocarbon, in which the carbon, in a proportion of 80 to 88 per
cent., is combined with hydrogen, and sometimes with a little oxygen,
reveals in this compound a marvellous source of thermal energy, which
may manifest itself in various ways. For, from the greenish-brown oil
which is lighter than water, no less than 128 chemical compounds are
obtained, which are used in forty different industries. From the retort
in which the crude oil is distilled comes an infinity of substances of
basic importance in modern industry.
* * * * *
Although the intensive use of oil and its industrial applications are
of comparatively recent date, the discovery of deposits of petroleum
goes back to remote antiquity.
The history of oil is as old as the world, since there is already
mention of it in the Book of Genesis. The wells of Baku were known long
before the Christian era. In the peninsula of Apsheron, where they
are situated, arose the cult of Zoroaster and the fire-worshippers.
According to the latter, the flames which escaped from the soil
would burn until the end of the world. They were, at any rate, famed
throughout the world nearly three thousand years ago.
The Greeks and Romans were acquainted with oil. The latter called it
_bitumen_. In Low Latin it was _petroleus_, from _petra_--stone, and
_oleum_--oil; and the word has come down to us through the scholars of
the seventeenth and eighteenth centuries who adopted it.
In ancient mythology and literature oil is often mentioned. It
is probably with oil that the Centaur--to avenge himself upon
Hercules--was obliged to anoint the famous shirt of Nessus! "It is
not without reason," says Plutarch, "that certain authors, wishing to
restore truth to legend, assert that petroleum is the substance which
Medea used to smear the crown and veil that play so great a part in the
tragedies; for fire does not issue from them of itself, but when they
are brought near a flame fire is communicated to them by some kind of
attraction with such rapidity that the eye can scarcely follow it."
Herodotus, in his works, mentions the oil-fields of Zante; Pliny those
of Agrigente in Sicily; Plutarch those of Ecbatana and Babylon. "The
land of Babylon," he says, "is impregnated with fire.... It is as
though the soil, agitated by the fiery substances which lie concealed
in its bosom, has a sort of pulse which makes it quake." When Alexander
conquered these regions he was particularly astonished, in the
province of Ecbatana, at "a gulf from which rivers of flame streamed
continually, as though from an inexhaustible source."[5] His return to
Babylon was celebrated by the burning of two parallel streams flowing
through the streets. And one of his courtiers, to amuse him, caused a
young man to be anointed with oil; scarcely had it touched his body
when he was enveloped in flames.
The Chinese have used oil for lighting from the most distant times;
Europeans since the fourteenth century. It is difficult to go further
back owing to the absence of documents during the Middle Ages. But what
was Greek Fire, if not oil? In the fifteenth century we find traces of
its use in medicine; and even at the present time the natives of Mosul
and Bagdad use some of the purer varieties, which they call "mourn,"
as a dressing for serious wounds. Oil has some fame as a vermifuge;
as, for example, the oil of Gabiau in the south of France. A curious
memoir of François Clouet, who was entrusted with the task of embalming
Francis I in 1547, mentions the use of an oil ("pétrolle") in the
colouring of a waxen mask made in the dead king's likeness.
In the eighteenth century Apsheron was again the astonishment of
British travellers seeking a route to India. "The Russians drink it
as a tonic and as a beverage," writes Jonas Hanway, who visited these
regions in 1754, speaking of petroleum. "It never intoxicates. Used
internally, it is also an excellent cure for gravel. Used externally,
it is a valuable remedy in cases of scurvy, gout, and cramp. It is very
good for removing stains from fabrics, and would be in more frequent
use if it did not leave behind it an abominable smell."
[Illustration: World Production in 1918.]
Finally, the earliest settlers found oil in America, or, to be more
exact, recognized the wells which had already been dug by the
Indians. But it was only in the middle of the nineteenth century that
the real importance of the oil-fields scattered over the globe began to
be realized.
While France about 1840 made the first trial use of shale oil, and
Germany in 1853 invented the oil lamp, later perfected by Laydaw of
Edinburgh, "the bold and inventive spirit of Young America undeterred
by a series of fruitless experiments, set itself to discover the first
springs of the precious liquid in Pennsylvania." In 1858 Colonel Edward
Drake, while boring a salt-water well near Tytusville, was nearly
engulfed with his workmen in a jet of oily liquid, the spring of which
was apparently inexhaustible, and continued to furnish several thousand
litres a day. It was subsequently discovered that this liquid after a
very simple process of purification, would burn with a brilliant light.
The "oil fever" then seized all America and myriads of searchers rushed
into the valleys of the Alleghanies in Pennsylvania.
The oil industry was created. For a long time America was the only
country producing the precious oil; forty years ago she still furnished
two-thirds of the world's supplies. But although the oil-fields of the
Alleghanies and of Ohio were developed rapidly, they have been far
surpassed by the enormous deposits of Baku. In 1898 Russia outdistanced
the United States, and kept the first place until 1902, when America
recovered it after a great struggle, thanks to the new oil basins of
Texas, California, and the Mid-Continent, and above all those of Kansas
and Oklahoma, with its famous "Glen Pool," which in 1908 produced the
fantastic figure of 50,000 barrels _a day_.
Russia has never been able to retrieve her position. Her production,
which in 1901 was 50 per cent. of that of the whole world, was not more
than 20 per cent. two years before the War, and in 1918 had fallen to
7.86 per cent. The cause is chiefly the diminution of production of the
"black region" of Baku, in the peninsula of Apsheron, which juts out
into the Caspian Sea and is connected with the open seas by a railway
and by a pipe 800 kilometres long, through which the annual flow of oil
towards Europe before the great world catastrophe amounted to 400,000
tons. In five years the average yield of the wells diminished by 40
per cent., while the mean depth of the borings was increased by 25
per cent. It was necessary to dig more and more deeply to find less
and less oil. The old oil-fields of Baku were nearing exhaustion. Now
they alone furnished four-fifths of the production of Russia. That
is why, in 1918, Russia lost the second place, which she had held so
long, to her young rival Mexico. It is true that the two revolutions
which she had to undergo in this quarter century helped the process
considerably. The revolution of 1905 caused the bloody disturbances
of the Caucasus: the finest factories were burnt and numerous wells
destroyed. Great unrest continued incessantly in this region until the
triumph of Lenin. But there are still in Russia oil-fields of very
considerable extent, scarcely touched before 1914, which the world
cannot afford to dispense with.[6]
The United States, Russia, Mexico, Rumania, these were, in order of
importance, the four chief oil-producing countries before the War.
Rumania shares with America the distinction of being the first country
in which rock-oil was extracted. The same year in which Colonel Drake
made his experiments at Tytusville 250 tons were extracted from a well
by hand-pumping: the oil was only just below the surface. Since then
Rumanian production has continually increased. It was 500,000 tons when
the region of Moreni, one of the richest in the world, was discovered.
Foreign capital flowed in immediately, and Rumanian production reached
its highest point in 1913 with 2 million tons. The War gave it an
appreciable setback; at the present time it does not come to more than
half this figure.[7]
[Illustration: Pre-war production of oil in Mexico, Rumania, the Dutch
Indies and Galicia.]
Although the production of Rumania, hampered by the lack of electricity
which hinders the borings, has recovered with difficulty, that of
Mexico, often a prey to civil war, has known no pause in its incredible
progress. In ten years it has passed from 3 to 160 million barrels,
carrying its share in world production from 1 per cent. to 23 per cent.
The figures are worth quoting:--
-------+---------------------+-----------------
Year. | World Production | Percentage from
| 1910-21 (barrels). | Mexico only.
-------+---------------------+-----------------
1910 | 328,000,000 | 1.10
1911 | 344,000,000 | 3.65
1912 | 352,500,000 | 4.70
1913 | 385,000,000 | 6.80
1914 | 400,000,000 | 5.30
1915 | 426,500,000 | 7.70
1916 | 459,500,000 | 8.70
1917 | 505,500,000 | 10.09
1918 | 515,000,000 | 12.40
1919 | 551,000,000 | 15.85
1920 | 684,000,000 | 23.35
1921 | 759,000,000 | 25.00
-------+---------------------+-----------------
It is Mexico which saves the world to-day, for the United States--the
greatest producers in the world--do not even supply enough for their
own consumption, and are obliged to call in the help of Mexico to make
good their deficit. In spite of all their efforts, they have only
succeeded, during the last three years, in increasing production by 24
per cent., while Mexico has augmented hers by 130 per cent. The other
countries follow at a considerable distance. Here is the record of each
for 1921:--
Barrels.
United States 469,639,000
Mexico 195,064,000
Russia 28,500,000
Dutch East Indies 18,000,000
Persia 14,600,000
Rumania 8,347,000
India 6,864,000
Poland (Galicia) 3,665,000
Peru 3,568,000
Japan and Formosa 2,600,000
Trinidad 2,354,000
Argentina 1,747,000
Egypt 1,181,000
Venezuela 1,078,000
France 392,000
Germany 200,000
Canada 190,000
Italy 35,000
Algeria 3,000
Great Britain 3,000
Other countries 1,000,000
The total production was 759,000,000 barrels of 42 gallons, against
684,000,000 barrels in 1920. It exceeds 100 million tons, easily
beating the records of the preceding years. If we remember that half a
century ago, it was only 66,000 tons, and that _between 1913 and 1920
it has almost doubled_, we shall see what a tremendous stimulus the
great world War has been.
But fears are increasingly felt. Will it be possible to satisfy the
dizzy increase in the consumption of oil? And do not certain countries
already fear to see the reserves contained in their soil exhausted?
FOOTNOTES:
[Footnote 5: Plutarch's _Lives_, Alexander the Great, chap. xliv.]
[Footnote 6: Cp. chap. xvi, _The Struggle for the Oil-fields of
Russia._]
[Footnote 7: Having fallen to 920,000 tons in 1919, it had increased to
1,030,086 tons in 1920 (12 per cent. increase). This slight recovery is
the first noted; for six years Rumanian production steadily decreased.
The worst year was 1917.]
CHAPTER III
AMAZING INCREASE IN CONSUMPTION
Fears of the United States
The consumption of oil is rising at a terrific rate. Entire branches of
industry are transformed, and it may be said that all modern transport
is increasingly dependent upon the use of the new fuel. Automobilism
and aviation owe their existence to it. Not only do steam engines
tend to give place to the oil motor in a great number of cases, but
they themselves begin to use oil instead of coal. Locomotives and the
engines of ships more and more seek the source of their energy in
oil. No more smoke, no more troublesome ash, and double the calorific
power. The work of a fireman, formerly so exhausting, is reduced to
the opening and closing of a tap. If coal is replaced by mazut in the
furnaces of ships, their radius of action is increased by 50 per cent.;
it is more than tripled if the internal-combustion engine is used.
Certain British engineers are not afraid to assert that _one ton of
mazut, used in a Diesel engine for ships, is equivalent to at least six
tons of coal_.
Few countries hesitate in face of such advantages. Since 1885 the
railways of Southern Russia have been run on oil; those of Rumania
since 1887. The railway companies of the United States consumed 20
million barrels even in 1909--that is, _one-tenth_ of the production at
that time. And the last few years have been marked by the conclusion
of contracts by the United States Railroad Administration for the
delivery of 50 million barrels. The engines of the Southern Pacific
Railway have been aptly described as veritable monsters. Their boilers
are two metres in diameter and fourteen and a half metres long. Their
heating-surface is double that of ordinary locomotives. The driver's
place is in front, which allows him to see the track.
Mexico has long since followed the example set by the United States. So
also has Austria for her Alpine railways. France has made experiments
which have been much talked of; and the Argentine, only a few months
ago, has concluded important contracts with the _Shell Transport and
Trading Company_ for the supply of oil for her railways. Everywhere the
substitution of oil for coal is going on, and consumption is developing
with such rapidity that the supply is no longer anything like equal to
the demand. Even if Russia recovered, the discrepancy between the needs
of the world and the quantity available would be considerable. That
is why the price of liquid fuel, which requires little labour in its
production, remains so high.
Since North America supplies 80 per cent. of the world production,
the dollar has become the standard currency for oil. At the present
time, Rumanian oil, delivered in Hungary, is sold at the same price as
American oil. _The market-price is therefore fixed for the whole world
by New York._
Very few people realize at all clearly what will be the consumption
of oil in a few years' time. It is natural enough, for it is only a
short time since our great and instructive Press began--very timidly,
however--to entertain its readers with this burning topic. There is
no one, at present, who does not know that the question of fuel is of
supreme importance to the whole industrial life of Europe.
Now, the world-production of coal was, in 1920, about 100 million tons
short, compared with the production in 1913. The directors of colliery
companies endeavour to increase the output of the mines, but they
obtain in general only disappointing results, which is not strange when
we observe the increasing number of miners' strikes, the rise in wages,
and the fact that laws are continually passed to reduce the hours of
labour.
In producing steam, one ton of mazut gives almost the same result as
two tons of coal; more than 50 million tons of fuel-oil are therefore
required to make good this enormous deficit.
Now, in 1919 the world production of mazut did not exceed 75 million
tons. After making good the shortage of coal, this would leave only 25
million tons to satisfy the ordinary demand. This comparison of figures
makes clear how great is the need of oil, at a time when the use of
oil, in preference to coal, is becoming more and more the order of the
day. Now, the great and general increase in consumption is not equalled
by the production which, though far from stationary, is none the less
much below the needs which are predicted for the future in competent
circles. An American oil journal recently published the following
figures for the consumption of the United States:--
1907 24 million tons
1918 57 million tons
1919 75 million tons
And even at the beginning of 1920 an increase of 25 per cent. over 1919
was noted. The rate of increase was such that, in January and February
1921, the American consumption was greater by 230,729 barrels _a day_
than the national production. The stock of oil in the United States,
both national and Mexican, has recently been considerably reduced,
and does not amount to more than 114,000,000 barrels, representing
only four months' consumption, although for years past it has always
been sufficient to meet the consumption for six months. It must be
remarked that motor-cars are terrible gluttons for petrol, and that in
the United States every farmer has his car. In a self-respecting family
there are generally three--a limousine for use in town, an open car for
touring, and a Ford for the servants to fetch provisions. It has been
calculated that there is on an average one motor-car to every thirteen
inhabitants. The Ford works alone are capable of turning out three
million annually.
And, as if that was not enough, America is planning to develop, by
motor traction, the means of transport in Asia, the continent without
railways. We may predict for this a consumption of 120 million tons in
the near future.
_The United States consume twice as much oil as the rest of the world,
while their resources do not amount to more than one-seventh of those
of the world._
Their consumption increased in 1920 by 25 per cent.; their production
only by 11 per cent. And already fears are entertained that it may
diminish. Two-thirds of the oil-fields of Oklahoma, which state alone
produces nearly one-quarter of the total, have been developed; and the
number of borings tends to diminish.
If the increase in world-consumption of oil continues at the rate that
it has done during the past few years, the oil reserves of the United
States, calculated on the basis of 70 barrels to each inhabitant,
without allowing for increase of population, would, according to the
Smithsonian Institute, come to an end about the year 1927.
These figures seem to me a little exaggerated, for the reserves
contained in the soil of the United States cannot possibly be
completely exploited in so short a time. But the figures published by
the Geological Survey of the Department of the Interior shows that
other countries consume half as much oil as the United States, while
their soil contains seven times more.
"These countries consume at the present time two million barrels a
year; at this rate, they have reserves sufficient for 250 years. The
United States consume 400 million barrels a year; they have only enough
for 18 years.[8]
"The total amount of oil which can still be extracted from the soil of
the entire world has been computed at 60,000 million barrels--43,000
million have already been brought to the surface by successful borings.
"Of the 60,000 million which remain to be extracted, 7,000 million are
to be found in the United States and in Alaska; 53,000 million in the
rest of the world."
That is why the American Navy, having in view the treatment of
bituminous shale by distillation, has reserved to itself the rights
over immense deposits, chiefly in Colorado and Utah. If the United
States do not succeed in acquiring new oil-fields in the rest of the
world, the position will become so serious that they will only be able
to avoid war at the price of economic vassalage.
There is oil in all parts of the world, and yet dominion over oil is
one of the most concentrated possible.
From Alaska almost to Tierra del Fuego, every country in the New World
possesses some.
Alaska.
Canada: its presence was discovered in 1789 by Sir Alexander
Mackenzie.
United States.
Mexico.
Central America.
Venezuela.
Trinidad, Guiana.
Colombia.
Ecuador, Peru, Bolivia.
Chili, the Argentine.
Brazil and Uruguay: it is hoped that oil will be found shortly.
[Illustration: Map of the Principal Oil-bearing Regions of the World.]
In Europe it is less evenly distributed:
Hanover (Wenigsen).
Alsace.
Italy.
Poland. The Ukraine. Rumania.
Hungary: a subsidiary company of the _Anglo-Persian_, the _D'Arcy
Exploration_, found oil deposits in March 1921.
Asia is nearly as rich as America:
The Caucasus.
Persia, Mesopotamia.
Dutch Indies.
Siam, Burma.
China.
Japan and Formosa.
Africa and Oceania, on the contrary, seem to possess only small
quantities of the precious oil. There is some in North Africa, in
Egypt, and possibly in Madagascar. The great British prospecting group,
which I have already mentioned in connection with Hungary, is making a
thorough search at this moment in Western Australia and New Zealand.
Now nearly all these oil-fields, scattered in the four corners of the
world, and in so many different countries, are at the present moment in
the hands of two great trusts--one American, the _Standard Oil_, and
the other Anglo-Dutch, the _Royal Dutch-Shell_--and certain companies
controlled by the British Government.
FOOTNOTES:
[Footnote 8: Cp. Part III, chap. xiv, _How the United States Lost
Supremacy over Oil_.]
PART II
THE STRUGGLE OF THE
TRUSTS
CHAPTER IV
THE STANDARD OIL COMPANY
Although it sometimes happens that governments oppose each other
openly in the struggle for oil, as in the case of Poland, Rumania, the
Caucasus, and Turkey, they prefer, in general, to hide behind trusts.
There exist in the United States numerous oil concerns whose power is
far from negligible, such as the _Sinclair Oil Company_, with a capital
of 500 million dollars, and the _Texas_ and the Doheny interests,
which together represent another 500 million dollars. But all these
independent producers must bow before the unchallenged supremacy of the
_Standard Oil_.
The _Standard Oil_, a purely American concern, preceded the _Royal
Dutch_--a Dutch company with considerable British, and recently a
little French, capital[9]--by twenty years.
As a matter of fact, there is no longer to-day one _Standard Oil_, but
forty companies, all bearing this name followed by that of a town or
State:
_The Standard Oil of New Jersey_,
_The Standard Oil of Pennsylvania_,
_The Standard Oil of Kansas_,
_The Standard Oil of Ohio_.
The first is the most important. All are federated under one great
administrative body.
The Chairman of the Board of Directors of _Standard Oil Companies_ is
at the present time Mr. Bedford, formerly Chairman of the _Standard Oil
of New Jersey_, where his place has been taken by Walter Teagle. This
great Council is the real brain of the _Standard_, from which emanates
the general policy of this federation of companies, as powerful as the
Government of the United States--more powerful sometimes.
Its history, like that of all American trusts, has something of the
marvellous. At the beginning of a great undertaking there is always a
great man: the founder of the _Standard_ was John Rockefeller, a small
dealer in oil, who, in 1865, conceived the idea of forming a federation
of all American oil-dealers.
There were in 1870, in the United States, 250 refineries, which waged
among themselves a merciless price-war.
It was to put an end to this struggle, which was so advantageous to
the consumer, that the _Standard Oil Company_ was created, _a combine
of refiners, not of producers_. Following a strict and constant
principle, which it has always observed, the _Standard_ has refrained
from seeking raw oil, leaving this task entirely to the prospectors and
producers. But as soon as it reaches the surface, the oil, wherever
it is found, becomes the exclusive property of the Company, to whose
innumerable refineries it is conducted by pipe-lines. The original
_Standard Oil Company_, that of Ohio, began humbly with a capital of
a million dollars, and the small consumption of 600 barrels a day.
Established in Cleveland, it grouped together all the interests in
the refining and transport of oil acquired in Pennsylvania since
1865 by Rockefeller, Andrews, Harckess and Flager. Two years later,
not only had it brought all the refineries in the neighbourhood of
Cleveland under its own control, but it had built others at Baltimore,
Philadelphia, New York, Boston, and Pittsburgh.
Six years after its inauguration, it already acquired the greater part
of the crude oil produced in the United States. Moreover, its capital
had been twice increased, in 1872 and 1874.
At the end of ten years, it transported and distributed 95 per cent. of
the American output.
In 1881 it amalgamated thirty-nine oil companies. The trust was
constituted and already disposed of a capital of 75 million dollars.
The first cycle of its growth was finished. Supreme in the United
States market and sure of its monopoly, it completed the laying of its
first pipe-line to the Atlantic. The _Standard Oil_ was about to lay
claim to Europe.
The Agreement of January 2, 1882
Such fortunes were not built up by entirely honourable methods. The
directors of the _Standard Oil of Ohio_ had formed pools. They imposed
buying and selling prices on every company which participated. This
system, which in a dozen years gave such wonderful results, was not
without its faults. There was friction between members of the pool. The
need for establishing unity of direction was soon felt. It was with
this object that the _Standard Oil Trust_ was founded in 1882.
It was the first time that the word "Trust" appeared in the name of
a firm. A Committee of nine members, or trustees, was formed. It
comprised all the Rockefeller family: John Rockefeller, Payne, William
Rockefeller, Bestwick, Flager, Warden, Pratt, Brewster, Archbold. The
nine trustees became the sole delegates and depositories of all the
39 companies conjointly engaged. They received from each concern the
shares and the corresponding voting powers. Trust Certificates, of a
nominal value of 100 dollars, were exchanged for shares only in the
proportion of the value of each undertaking to the total value of all
the undertakings constituting the Trust.
The Agreement of 1882 which sealed the pact, provided for the admission
into the Trust of new companies and the eventual formation of a
_Standard Oil Company_ in each State of the Union.
Companies of four kinds entered the combine of 1882:--
1. Fourteen companies in which _the whole_ of the shares were held by
the trustees. Among these were the _Atlantic Refining Company_, the
_Standard of Ohio_, and the _Standard of Pittsburgh_. The first of
these companies succeeded in recovering its liberty in 1911.
2. Rich private individuals, having an interest in the oil industry
and holders of large parcels of shares, such as W.C. Andrews and John
Archbold.
3. Twenty-four companies in which the _majority_ of the shares were
held by the trustees:--
_Central Refining Company of Pittsburgh_,
_Germania Mining_,
_Empire Refining_,
_Keystone Refining_,
_National Transit Company_, etc.
These twenty-four companies placed themselves under the control of the
Trust from 1882 onward. Two others have come in under compulsion:--
(1) The _Tide-water Pipe-line Company_, having constructed pipe-lines
itself, entered into fierce competition with the _Standard_. On
October 9, 1883, it was compelled to negotiate with the _National
Company_. Under the resulting contract, it agreed to provide 11-1/2
per cent. of the quantity sent to the ports by pipe-lines as its
share of the traffic, and was guaranteed an annual profit of at least
half a million dollars for fifteen years.
(2) _The Producers' Associated Oil Company_, born of a concerted
effort of independent producers to fight the _Standard_, gave in in
October, 1887.
4. One other company alone forms the fourth class. The Trust has an
interest in this but has never been able, whatever its efforts, to
obtain the majority of the shares and to control the company. This is
the _United States Pipe-Line Company_. This company experienced many
difficulties and mortifications. After having struggled against the
inertia of the railways devoted to the _Standard Oil_, and spent more
than 15,000 dollars on law costs alone, it succeeded in pushing its
lines up to Washington, but could never get any further, nor reach the
coast; the _Standard_ bought up the intervening territory.
At its zenith, in 1911, when it was declared illegal by the Supreme
Court of the United States, the _Standard_ owned 90 per cent. of the
pipe-lines and controlled 86-1/2 per cent. of the oil production of
America. A single company, the _Pure Oil Company_, founded in 1895,
whose field of exploitation was Germany, was able to maintain its
independence. The seventy-five small refineries existing outside
the Trust did not refine, all put together, a fifth as much as the
_Standard_. The refinery which the latter possessed at Bayonne was by
itself more important than ten of these competing refineries.
The European market was almost completely conquered. Everywhere the
_Standard_ operated by means of its subsidiary companies:--
The _Anglo-American Oil Company_ in Great Britain.
The _American Petroleum_ in Holland.
The _Deutsche Amerikanische Petroleum Gesellschaft_ in Germany.
The _Société pour la Vente du Pétrole_ in Belgium.
The _Vacuum Oil_ in Austria-Hungary.
The _Societa Italo-Americana per Petrollo_ in Italy.
The _Romana-Americana_ in Rumania.
The _Danske Petroleum Altieselskabet_ in Denmark.
The _Swenska Petroleum Altiebolage_ in Sweden.
The _International Oil_ in Japan.
In Galicia, the Trust held its own against all similar indigenous
enterprises. The Rumanian refiners were obliged to come to an
understanding with it; otherwise it would, with its powerful means
of pressure, have created a monopoly for itself. And the _French Oil
Cartel_ was at its mercy.
Causes of the Success of the Standard
The difficulty is not to produce oil, but to transport it, for it is
generally found in more or less desert regions. Hence Rockefeller's
brilliant idea, to construct pipe-lines bringing the oil direct to the
great centres! Thenceforward, since the oil was transported almost
automatically, its price dropped considerably. All the producers became
tributaries of the pipe-lines, and the _Standard_ obtained practically
complete control of the market.
This was the first cause of the success of the _Standard_. All
the small producing companies became compulsorily its clients. As
controller of the market, it fixed the price in draconian fashion.
There is a second cause: its alliance with the great railway companies,
and the support which it received from the railway magnates--Scott of
the _Pennsylvania Railroad_, Vanderbilt of the _New York Central_,
Jewet of the _Erie Railroad_, Watson of the _Lake Shore_, and many
others less well known.
Its subsidiary, the _South Improvement Company_, on January 18, 1872,
made contracts with the railway companies, by which it fixed the
proportionate shares in the transport of oil to the Atlantic seaboard
as follows:--
27-1/2 per cent. to the _Erie_,
27-1/2 per cent. to the _New York Central_,
45 per cent. to the _Pennsylvania_.
The companies thus favoured by the _Standard_ made their competitors
pay double rates. One of these latter produced before the Inter-State
Commerce Commission the scandalous tariffs demanded of them:
On the _Louisville and Nashville Railroad_, increased rates to
competitors of 87 to 333 per cent.;
On the _Cincinnati, New Orleans, and Texas Pacific_, from 63 to 267
per cent.;
On the _St. Louis, Iron Mountain and Southern_, from 82 to 257 per
cent.
Systematic negligence in transport was proved with regard to
competitors. The _Union Tank Line Company_, which owns tank-wagons
as the _International Sleeping Car Company_ owns restaurant cars,
would only put them at the disposal of the _Standard_, and compelled
its adversaries to dispatch their oil in barrels, which is much more
costly. The Trust alone was entitled to lay its pipe-lines beside the
railway-lines or underneath the track. It possessed 35,000 miles of
such lines at the end of last century--or rather the _National Transit
Line_, which acts as its instrument, owned them. Such abuses could not
be allowed to continue. The inquiry by the Hepburn Committee revealed
a multitude of crying injustices. For example, it was enough for the
_Standard_ or the _South Improvement_ to telegraph "_Wilkinson and Co._
have received a truck which only paid $41.50; screw them up to $57.50,"
and the order was executed.
The Charter of the _South Improvement_, which had even succeeded
in acquiring the right of expropriation in order to construct
its pipe-lines, was withdrawn under the pressure of indignant
oil-producers. But the Federal Government of the United States will
never succeed in crushing the _Standard Oil_.
Its Two Dissolutions--Roosevelt's Fight against the Standard Oil
Twice over, in 1892 and 1911, its constitution was judged illegal, but
in vain.
In 1892 the system of nine trustees was declared illegal by the Supreme
Court of Ohio. The trustees voted the dissolution of the Trust, but
continued to administer all the corporations in the same way until
1899. The Trust was apparently divided into twenty distinct companies;
the nine old trustees distributed the shares in such a way as to
possess the majority in each one. Thus they made sure, as before, of
unity of direction. Rockefeller had reversed the judgment of the court.
Here is the legal formula, which is dignified in its simplicity:
"John Rockefeller has placed in the hands of the said attorney
256,854/292,500 of the total shares held by the said trustees on July
1, 1892, in each of the companies whose shares were deposited."
Still better, after receiving the shares which were granted them in
each company, the old trustees took them and sold them to the _Standard
Oil Company of New Jersey_, which has a capital of 100 million dollars
of common stock, and only ten million dollars of preferred stock. For
the _Standard_ has a monarchical constitution. All power to the holders
of preferred stock! The holders of common stock have none but that of
drawing dividends. Though they may be in an enormous majority, they
count for nothing in the direction of the enterprise.
About 1900 Rockefeller went still further. He increased the number
of ordinary shares, and reduced that of the privileged shares. A
memorandum of the Industrial Commission drew attention to this. "During
the year 1900, the common stock has been increased by 38,550,700
dollars and the preferred stock has been reduced by 3,968,400 dollars."
In short, Rockefeller makes the concern more and more autocratic.
The _Standard_ forms a veritable State within a State, which nothing
can bend. The Trust was reconstituted, with a holding company, the
_Standard Oil Company of New Jersey_, holding the title-deeds of all
the other companies.
It was then that Roosevelt undertook to destroy a power before which
everything bowed down. The Federal Government brought an action
before the Court of St. Louis, under the Sherman Anti-Trust Law. The
_Standard Oil_ and the seventy companies dependent on it were accused
of "conspiracy, coercion, intimidation, rebating and other illegal
acts in restraint of trade." The Federal Court of St. Louis ordered
the dissolution of the Trust in 1909. The _Standard_ entered an appeal
before the Supreme Court of the United States, which confirmed the
dissolution in 1911, after five years of inquiries, prosecutions,
judgments and appeals. The struggle had been going on since 1906.
Many judgments had to be reversed. Thus, the _Standard Oil Company
of Indiana_, with a capital of only a million dollars, was ordered
to pay a fine of 29 million dollars for an illicit understanding
with the _Chicago and Alton Railway_. It was paying only six cents a
hundredweight for transport, while its competitors paid eighteen. This
judgment was reversed in July 1908 by the Court of Appeal of Chicago.
"It is strange," ran the decision "that a company with a capital of a
million dollars should be fined a sum representing twenty-nine times
this capital." The first tribunal had found 1,462 infringements proved,
and had zealously applied the maximum for each case; that is how it had
arrived at the incredible figure of 29 million dollars.
The _Standard Oil_ was given six months to dissolve. The result was the
same as in 1892. There were simply thirty-four companies apparently
independent. In the midst of this new constellation, the _Standard Oil
Company of New Jersey_, whose capital has risen to 600 million dollars,
merely shines with a greater brilliance than its satellites. And the
_Standard_ has no longer to fear attack from the Government of the
United States, which bows obediently to its will. Even better, the late
President Harding energetically supported its claims throughout the
world. Whoever attacks the _Standard_ attacks the Federal Government
itself.
To think of Rockefeller's modest company in 1870, with its 600 barrels
a day and its small capital of a million dollars, and to see what it
has become to-day, is to be lost in amazement. In 1920, the Great
Council of the _Standard_ controlled a capital of a thousand million
dollars; representing almost equal profits, and a daily consumption
of two hundred million barrels, which it even hopes to see presently
increased to three hundred million. Here are the original and the
present positions; they are widely different:--
Capital has increased from 1 to 1,000.
Profits have increased from 1 to 100,000.
Production has increased from 1 to 300,000.
The _Standard_ has soared so high because it was a national enterprise.
Every bank, every shipping company, every railway in the United States,
was interested in the success of the Trust, for this great corporation
exported to the four corners of the world a commodity drawn from
the soil of the Union, and brought into the country, one year with
another, more than a hundred million dollars. It looked as though all
competition was impossible, and yet a European company has been found
bold enough to attack, not only in Europe and Asia, but on its own
ground of the United States, this financial power, whose turn-over must
be estimated at twelve thousand million francs at least, or more than
twice the pre-War budget of a nation like France.
FOOTNOTES:
[Footnote 9: Forty per cent. of the capital of the _Royal Dutch_ is in
French hands, but France unfortunately has no voice in the direction of
this undertaking.]
CHAPTER V
THE _ROYAL DUTCH-SHELL_
In face of the formidable hegemony which the _Standard Oil_ exercised
over the oil markets of the world, an opposition arose, at first timid,
then bolder in proportion as success attended its efforts.
This was the _Royal Dutch_ allied to the _Shell_. Thirty years have
sufficed to give it a unique position in the world.
It was in 1890, at The Hague, that the _Royal Dutch Oil Company_[10]
was founded, with a capital of 1,300,000 florins. As a result of
borings carried out in the Sunda Islands, the Government of the Dutch
Indies granted it concessions at Sumatra. After some years, as the sale
of crude oil did not give a sufficient return on the capital already
sunk, the directors of the young company resolved to erect a refinery
on the spot. It was necessary for this purpose to increase the capital
to 1,700,000 florins in 1892. A strange fact to relate to-day, this
issue was a failure. The capitalists of the day had lost confidence
in an undertaking whose net profits for two years had been _nil_. In
spite of these initial difficulties, the board of directors persevered.
It even acquired new concessions, whose more profitable exploitation
allowed of a first dividend in 1894 of 8 per cent. This distribution
restored the confidence of the public, and the _Royal Dutch_ was
able to increase its capital without difficulty in 1895 to 2,300,000
florins, with a view to extending its sphere of action. In the same
year it was able to distribute a dividend of 44 per cent. Considering
the importance of its operations, the company decided in 1897 to
increase its capital to 5,000,000 florins, in order to obtain tank
steamers to transport its products. The dividends had then risen to 52
per cent., but it could not keep up for long so exceptional a rate.
For, from 1898 onward, the _Standard_, becoming uneasy, tried to obtain
control over its rival. To escape from its grip, the _Royal Dutch_ was
compelled to issue one and a half million preference shares, which
were allotted to friendly groups. A bitter economic struggle followed.
The _Royal Dutch_ maintained its independence, but the _Standard_, to
destroy its young rival, did not hesitate to sell in extra-American
markets at less than cost, and the steady lowering of the price of
oil compelled the Dutch company to reduce its dividend to 6 per cent.
It was maintained at this rate the following year, but began to rise
again in 1900, and reached 24 per cent. in 1901.
Since then the _Royal Dutch_ has progressively increased its capital
to the present fantastic figure, under conditions which were so
many windfalls for its shareholders. Its dividends during the great
world War rose to the enormous rates of 45, 48 and even 49 per cent.
There were some years when it went so far as to distribute to its
shareholders dividends in shares of 200 per cent., thus tripling its
nominal capital.
The Alliance with the Shell
The early career of the _Royal Dutch_ was as modest as that of the
_Standard Oil_ and far more troubled. At its very beginning it found
in the East a young British firm, the _Shell Transport and Trading
Company_, which put up a keen competition, the more disastrous because
the latter possessed a fleet of tank steamers, while the _Royal Dutch_
as yet had none. The _Shell_ was directed by Sir Marcus Samuel, one of
the cleverest business men in London.
Samuel had begun humbly as a trader in sea-shells. His business
prospering more and more, he hunted about for some commodity to
exchange for the shells which he brought from the East. He decided upon
oil, and became himself a producer in Borneo.
In 1897 the _Shell_ was registered in Great Britain, with the view
of absorbing the business of _Samuel and Company_ and certain other
similar concerns. The new company had a large number of tank steamers
and hundreds of depots.
The _Royal Dutch_ had then amalgamated the greater number of the
independent producers of the Sunda Islands, but was experiencing some
difficulty in getting its oil to Europe, and so decided to negotiate
with the _Shell_.
Hence the agreement of 1902, by which the two companies entrusted the
sale of their products to a company which they created specially for
the purpose, the _Asiatic Petroleum_. Its capital was subscribed as
follows:--
1/3 by the _Royal Dutch_,
1/3 by the _Shell Transport_,
1/3 by the Rothschilds.
This simple alliance became a complete union ten years later. The
_Royal Dutch_ and the _Shell_ amalgamated on the following basis:--
On January 1, 1907, the two groups transferred their assets to two
companies, one Dutch, one British. These were the _Bataafsche Petroleum
Maatschappij_ and the _Anglo-Saxon Petroleum_.
The _Bataafsche_, or _Batavian Oil Company_, which now has a capital
of 200 million florins, was specially entrusted with the extraction
of oil and with everything concerning its production. Its oil-fields
are situated in Java, Sumatra and Borneo, and it exploits them directly
or by subsidiary companies. It has interests in the Mexican _Corona_
company and in many Russian companies.
Although this last part of its program has not hitherto been
productive, the _Bataafsche_ has distributed during the last few years
dividends representing annually nearly half its capital. Directly or
indirectly, it is responsible for almost the whole production of the
Dutch Indies, which amounts to nearly 20 million barrels annually, and
is steadily rising. To meet this increase, the _Batavian Oil Company_
is obliged every year to construct new reservoirs. In 1920 their
capacity had reached more than 900,000 tons.
The _Anglo-Saxon Petroleum_, with its head-quarters in London, was
entrusted with everything concerning the transport and sale of oil,
that is to say, with the commercial side of the business. Unlike the
_Bataafsche_, this company undertakes no direct exploitation, although
it controls the production of a large number of subsidiary companies in
Ceylon, British India, Malay, Northern and Southern China, Siam, the
Philippines, Australia, New Zealand and South Africa. For the _Royal
Dutch-Shell_ has an almost organic structure. Instead of reproducing
itself in new companies, always the same, like the _Standard Oil_,
it only receives new adherents for distinct functions. One company
is entrusted with the distribution of its products, another with the
exploitation of oil-fields or with refining. The _Royal Dutch_ and the
_Shell_ have become to-day holding companies. In 1907 the _Royal Dutch_
ceased to be an industrial enterprise and became an omnium of oil
securities.
Forty per cent. of the profits resulting from this co-operation were
to come to the _Shell_, 60 per cent. to the _Royal Dutch_, which has
reserved the lion's share for itself.
At the time of signing this agreement the _Shell_ was not without
a certain anxiety. Thus it was agreed, in order to safeguard its
interests, that the _Royal Dutch_ would buy, on January 1, 1907,
half a million ordinary shares of the _Shell_ at the price of thirty
shillings, and would undertake not to sell again without the consent of
the board of directors of the _Shell_.
In case of liquidation or sale by private contract before January 1,
1932, it was stipulated that the net product of the liquidation, up to
£9,000,000 sterling, was to be divided equally between the _Shell_ and
the _Royal Dutch_, and that only above this amount the products should
be shared in the proportion of 40 and 60 per cent. We see how closely
these two concerns are allied. The only difference which exists between
them is that, officially, one is Dutch, the other British.
Deterding's First Victory. The Chinese Campaign
Freed from all obstacles in the Dutch Indies and allied with one of
the most powerful British firms, the _Royal Dutch_, under the skilful
guidance of Henry Deterding, was ready to attempt a conquest of the
world.
But for the second time it came up against the hostility of the
_Standard Oil_, which waged a bitter warfare in the Far East--the
famous price-war of 1910.
The _Standard Oil of New York_ considered China as its private
property. It had taught the Chinese to use kerosene by distributing,
free of charge, lamps inscribed _Mei Foo_, or _Good Luck_. When this
method became too expensive it sold them at cost price, and when the
_Royal Dutch_ appeared as a competitor it was selling, in this way, two
million lamps a year. With a population of 400 million Chinese, this
produced an unlimited market for kerosene, for which, in comparison
with petrol, the American demand is small.
The _Standard_ tried to fight by selling refined oil below cost price
in foreign markets, while keeping the price very high in America in the
shelter of the tariff wall. It even went so far as to sell in the Far
East 50 per cent, lower than in Holland, although the latter market was
nearer the American oil-fields. At the same time the refined American
oil, which was quoted in England at the end of August 1910 at 6-1/4d.
a gallon, fell at the end of November to 5-3/4d., and in December to
5-1/2d. Deterding's receipts from the sale of kerosene were reduced by
3,750,000 dollars. But he would not give way. He did not leave China;
he stood his ground and fought. Although his oil was of an inferior
quality to that of the _Standard_, it was near at hand, and had not
to be transported for long distances like that of its rival (which
involved the latter in great expense). An agreement was finally made.
The _Standard_, which had taken possession of the Chinese market in
1903, gave up 50 per cent, of that trade to the _Royal Dutch_. The
latter's share has even been increased recently to 60 per cent. For the
first time Deterding had conquered!
Perhaps he would not have triumphed so easily if the _Standard Trust_
had not been dissolved just at that time by the Supreme Court of the
United States. But two such powerful groups could not have continued
indefinitely to struggle for the international market without making
sure of some stability and limiting their respective zones of operation.
After many attempts they have come to an understanding.
In 1907 an agreement fixed the quota of oil that each group might send
to the British market.
In 1912 an agreement of a similar kind put an end to the struggle that
had been going on in the Far East.
The absence of a definite general agreement between the two great
Trusts did not exclude the possibility of tacit agreements, which
regulated their operations in the international market and assured to
both an extraordinary prosperity. _The_ Standard _has several times
made very tempting offers of close co-operation to the_ Royal Dutch,
_leaving this group free to make its own conditions_. The _Royal
Dutch-Shell_ has always refused, for _the future is its own_. What will
happen to the _Standard_, an almost exclusively American concern, when
the oil resources of the United States are exhausted? Since 1919 it
has been endeavouring to acquire oil-fields in the rest of the world,
to guard against this danger, but everywhere it finds the "closed
door." The _Royal Dutch_, aided by the British Government, has taken
possession of all that remain in the world.
New Struggle with the Standard Oil for the Conquest of the World
One day, to the great astonishment of everybody interested in the
American oil industry, Mr. Deterding brought a cargo of oil to the
United States and sold it under the very nose of the directors of the
_Standard Oil_. Emboldened by this first success, he tried to establish
himself in the United States, and with this aim in view bought
oil-bearing properties in Oklahoma. The _Royal Dutch_ rapidly increased
its territory.
By a bold policy and without recourse to the sharp practices of the
directors of the _Standard Oil_, Deterding revenged himself for
the attack upon him in the Far East. The _Royal Dutch_ sent large
quantities of petrol to America and sold them at rates as high as those
of the _Standard_. This enabled it to make good its losses in the Old
World and to emerge victorious from the struggle.
During his Chinese campaign Deterding had been handicapped by the
inferiority of the oil from Borneo. To remedy this he proposed to
obtain possession of various Californian wells.
Of all the wars that Deterding has waged, that of California is
the most interesting and perhaps the most strenuous. It required a
remarkable audacity for the _Royal Dutch_ to establish itself on the
very territory of the _Standard_ in America. Would it not meet there
the coalition of this great firm and the independent oil companies?
And yet Deterding triumphed. He created the _Roxana Petroleum Company_
in Oklahoma, the _Shell Company of California_ on the shores of
the Pacific, and then extended his conquests to Texas, New Mexico,
Colorado, Utah, Arizona, Montana, Dakota and Nevada. Everywhere the
_Royal Dutch_ brings with it its curious methods. It begins by taking
an option for six months on an oil bearing property, giving it the
right to examine the books of the company and to make an inquiry. At
the end of six months it takes an option on another property, and
continues in this way throughout the region. After leaving nearly all
the options without sequel, the _Royal Dutch_ is ready to begin boring
operations on its own account in selected places.
This method, adopted for the first time in California, is to-day the
_habitual method_ of the _Royal Dutch-Shell_. Thus this company rarely
makes miscalculations in the oil-fields it exploits. Its agents have
orders to report the minutest details to head-quarters.
In order to interest the American public in the success of his
enterprise, Deterding was clever enough to place upon the New York
market, in 1916, 220,000 so-called American shares. This issue was a
great success, and it has thus become against the interest of many
Yankees for the United States Government to start reprisals against the
_Royal Dutch_, of which the late President Harding has often spoken.
In 1915 the _Royal Dutch_ already controlled one-ninth of the American
output. _One-third of its total production comes to-day from the United
States._ It has obtained for its pipe-lines the right of passage to
St. Louis and the river, and its surveys of Virginia and Louisiana are
complete. It owns the great refineries of Martinez, near San Francisco,
and of St. Louis and New Orleans.
Seventy-five per cent. of the Californian output, which exceeds ten
million tons, now escapes the control of the _Standard Oil_.
But more than this, the _Royal Dutch_ is gaining possession of the
deposits of Mexico and Venezuela. The oil-bearing territories of
Tampico and Panuco, the railway, and the local oil companies belong
to Mr. Deterding. The importance of this region is well known. Its
geographical position, a few miles from the sea, and its nearness to
the Panama Canal double its value. Three hundred and fifty kilometres
by sea, one hundred and seventy-five by pipe-line across the isthmus of
Tehuantepec, and the oil can be delivered at a centre which commands
the whole South American market.
Not content with conquering the _Standard Oil_ on its own ground,
Deterding also caused it to lose its "Algeria." Master of the _Mexican
Eagle_, which he bought from its founder, Lord Cowdray, in 1918 for
more than a thousand million francs, he controls to-day the bulk of
Mexican production. By this master-stroke he increased by 50 per cent.
the quantity of oil that the _Royal Dutch_ can offer to the world.
The Americans felt the loss very keenly, for hitherto all the output of
the _Mexican Eagle_ had gone to the _Standard Oil_.
The _Mexican Eagle_ had a large number of tank steamers, the
acquisition of which brought up the fleet of the _Royal Dutch-Shell_ to
more than a million tons.
Moreover, the directors of the _Royal Dutch_ do not hesitate to assert
that the oil-bearing district of Venezuela, of which, since their
agreements with the _General Asphalt Company_, they control more than
15,000 square miles, is as rich in oil as the district of Tampico.
That is why they have put up enormous buildings, both warehouses and
refineries, at Curaçao. The _Shell_, which has operated for four
or five years in Venezuela, has just overcome the difficulties of
approaching the coast by constructing a flotilla of tankers of very
small draught, thus permitting the transport of oil from Maracaibo to
Curaçao.
The Panama Canal itself is seriously menaced. The United States have
spent more than 300 million dollars in constructing the canal, and now
American vessels are going to be dependent upon the _Royal Dutch_ for
oil. Mr. Deterding has a depot at one end of the canal and another at
the entrance to the gulf. He dominates American commerce.
This is indeed a work of conquest. Mr. Deterding follows the commercial
example of Great Britain. _He has stations at all the strategic points
of the world._ He also controls the Suez Canal at both ends. The
capacity of the refinery at Suez has been increased by 7,000 barrels
a day, on account of the increase in the tonnage passing through the
canal during the War. Mr. Deterding is building a station on the Cape
Verde Islands, situated just half-way between Africa and America. He
has establishments at the Antipodes, in the East and West Indies, on
the west coast of South America, on the coast of Africa, and at the
Azores. The European market, in particular the French, is dependent
on him. Through the instrumentality of M. Deutsch de la Meurthe, the
oil deposits in Asia, owned by the Rothschilds, have come under the
_Royal Dutch_ trust, which possesses 90 per cent. of the capital of
the oil companies of the Caspian and Black Seas and 25 per cent. of
that of the _New Russian Standard Company_ of Grosny. In August 1920
the _Shell_ bought the _Mantasheff_ and the _Lianosoff_, together
with a 40 per cent. interest in the _Tsatouroff_, fearing to see the
_Standard Oil_ acquire the Nobel properties at Baku. The contract was
signed in London, but was incompletely carried out, for Great Britain
hoped to treat directly with the Soviets at Genoa and to have no more
responsibility towards the former owners.[11]
A large part of the Rumanian production is controlled by the _Royal
Dutch_.
In Germany the _Royal Dutch-Shell_ has an interest in the _Erdol und
Kohle Veränderung Aktien Gesellschaft_, the _Aktien Gesellschaft für
Petroleum Industrie_ and the _Deutsche Bergin Aktien Gesellschaft_.
Since 1912 it has established itself in Sweden as the _Anglo-Swedish
Oil Company_, to drive out the _Standard Oil_, until then mistress of
the market. Everywhere the _Royal Dutch_ insinuates itself into the
good graces of governments, thanks to its elastic methods and to the
cleverness of some of its directors, such as the brilliant Armenian
Gulbenkian, who has been well named the "Talleyrand of Oil." In
co-operation with the Belgrade Government, it has just formed a new
company at Agram, with a capital of 50 million crowns, to exploit the
oil of Jugo-Slavia.
As the _Financial Times_ wrote: "Following the creation in France
of the _Société Maritime des Pétroles_ and the _Société pour
l'Exploitation des Pétroles_, the _Royal Dutch_ is able to obtain from
the French Government an important interest in the oil-fields which
remain at its disposal."
Its last triumph was its entry into Spain. The eminently suggestive
list of companies controlled by the _Royal Dutch_ will give an idea of
the network which it has spread over the whole world:--
_Shell Transport and Trading Company._
_Asiatic Petroleum Company._
_Anglo-Saxon Petroleum._
_Bataafsche Petroleum Maatschappij._
_Erdol und Kohle Veränderung Aktien Gesellschaft._
_Aktien Gesellschaft für Petroleum Industrie._
_Deutsche Bergin A.G._
_Anglo-Swedish Oil Company._
_Asiatic Petroleum_ (Ceylon).
_Asiatic Petroleum_ (Egypt).
_Asiatic Petroleum_ (Federated Malay States).
_Asiatic Petroleum_ (India).
_Asiatic Petroleum_ (Northern China).
_Asiatic Petroleum_ (Philippines).
_Asiatic Petroleum_ (Siam).
_Asiatic Petroleum_ (Southern China).
_Asiatic Petroleum_ (Straits Settlements).
_Anglo-Egyptian Oil-fields._
_British Imperial Company_ (Australia).
_British Imperial Company_ (New Zealand).
_British Imperial Company_ (South Africa).
_Astra Romana._
_Caribbean Petroleum._
_Dordesche Petroleum Industrie Maatschappij._
_Dordesche Petroleum Company._
_Sumatra Palembang._
_Nederlandsche Indische Tanks Troomboat._
_Vereinigte Benzinwerke, Hamburg._
_Home Light Oil Company._
_British Petroleum Company._
_Norsk Encelska Mineralojeanie Colaget._
_Shell Marketing Company._
_Italian Company for the Import of Oil._
_British Tanker Company._
_Moebi Hid._
_Ceram Petroleum._
_Ceram Oil Syndicate._
_Société Bnito._
_North Caucasian._
_Russian Standard of Grosny._
_Mazut Company._
_Ural-Caspian Company._
_Grosny Sundja Oil-fields._
_New Shibaïeff Petroleum._
_Commercial and Industrial Oil Companies of the Caspian and Black Seas._
_Mantasheff._
_Lianosoff._
_Tsatouroff._
_Kotoku Oil-fields Syndicate._
_United British Refineries._
_New Orleans Refining Company._
_Simplex Refining Company of Panama._
_Panama Canal Storage Company._
_Shell Company of California._
_Californian Oil-fields, Ltd._
_W.V. Oil Company._
_Volley Pipe-Line Company._
_Roxana Petroleum Company_ (Oklahoma).
_Trahola Pipe-Line Company_ (Oklahoma).
_Shell Corporation of Martinez._
_Shell Company of Canada._
_Roxana Petroleum Maatschappij_ (Texas).
_Tampico-Tanuco Petroleum._
_La Corona._
_Mexican Eagle._
_Eagle Oil Transport._
_Venezuelan Concessions Company._
_Curaçao Petroleum._
_General Asphalt Company._
_Burlington Investment Company._
_United British Oil-fields of Trinidad._
_United British West Indies Petroleum Syndicate._
_Turkish Petroleum._
_Roxana Petroleum Corporation of Virginia._
_Ozark Pipe-Line Corporation._
_Union Oil of Delaware._
_Société Maritime des Pétroles._
_Photogen_ (Austria, Hungary, Poland).
_Jugo-Slav Petroleum._
This list is certainly not complete, and it grows longer every day. Is
it not eloquent by itself?
The _Royal Dutch_ has penetrated every State in the world, assuming
everywhere the national colour of the country it desires to conquer.
It has travelled far since it began in the Dutch Indies, with a tiny
capital of a million florins and seven small tank steamers. Its annual
production, which was then 25,000 tons, to-day exceeds 15 million tons.
Its fleet of tankers is one of the most powerful in the world. Last
year it amounted to 1,400,000 tons. _And the_ Royal Dutch _controls a
capital of twenty-two thousand million francs_.
Partial Decline of the Standard
The _Standard Oil_ is certainly no longer the colossus of the world.
It has never completely recovered from the last judgment delivered
against it in 1912, which compelled it to separate from its subsidiary
companies. Although the sentence of the Supreme Court could not
put an end to the community of interests which united these--since
Rockefeller himself possessed 25 per cent. of the shares of the various
affiliated companies--it has certainly hampered the development of
the _Standard_ during the last few years. The very heavy taxation
imposed upon it has also contributed to limit its powers of expansion.
The American Government takes 44 per cent. of its income in the form
of taxes. In 1920 Rockefeller paid an ordinary federal tax of 12 per
cent. and a super-tax of 65 per cent. In fact, Rockefeller and all his
associates are being driven out of the business by the federal taxes.
If Rockefeller is the person who paid in 1920 the largest sum in income
tax (14,800,000 dollars), it is clear that the greater part of his
money is passing from the coffers of the company to be invested in
Government, State and municipal securities which are not taxable.
_Up to about 1890 the_ Standard Oil _reigned as absolute mistress of
the oil market, both in Europe and America_. But in 1890 the oil from
the Caucasus, Galicia and Rumania began to break up this monopoly.
Purely European financial groups, the Rothschilds of Paris and Vienna,
the Nobels of Sweden, the great German banks, and those of Lille and
Roubaix which later were to form the "Consortium du Nord," became
progressively more and more interested in the new oil enterprises
that were taking shape in Eastern Europe. Germany had formed an actual
Trust, the _Europeanische Petroleum Union_, which, but for the War,
would certainly have led to German control of all European oil. Instead
of only two great Trusts fighting for world supremacy for the benefit
of Britain or the United States, we should see a third, claiming Europe
and Turkey in Asia for its share in the name of Germany.
But this group, expanding rapidly when war broke out, found itself
opposed from that moment by another organization, the _Royal
Dutch-Shell_, which was also advancing by giant strides and which
concentrated all its power throughout the world against that of the
_Standard Oil_.
The most skilful part of the policy of the _Royal Dutch_ was to
_establish itself wherever there was any oil_, while the _Standard_
confined itself almost exclusively to America. This was a great
mistake. To dominate the production and sale in America was defensible
as a commercial policy so long as the United States were the greatest
producers of oil. It became an error from the day on which important
oil deposits were discovered in other parts of the world.
The _Standard_ still has the preponderance in the United States, where
the _Shell_ only appeared in 1900, but it is far from controlling 86
per cent. of the output, as it did at the height of its power in 1911.
It has been much too negligent about extra-American oil deposits.
In 1890 a representative of the _Standard Oil_ was in Java, studying
the oil situation in the Far East. He urged the _Standard_ to establish
itself there before any competitor appeared. Hypnotized by the American
market, it refused.
In a similar way it came into Rumania too late, and controls only 10
per cent. of the total output, while the _Royal Dutch_ controls 31 per
cent. In Mexico the _Standard_ also met with the competition of the
_Royal Dutch_, which, in combination with British interests, takes 40
per cent. of the production. In Russia its rôle is insignificant.
This state of affairs has been brought about by the errors of judgment
of the directors of the Trust. _The power of the_ Standard Oil _has
diminished_, and it no longer exercises a really effective control
except within the United States. Even this control the _Royal Dutch_
is striving to filch from it. The latter has just formed a new trust,
uniting the companies hitherto independent: the Doheny group and
the British Pearson syndicate, the _Associated Oil_, the _Oklahoma
Producing_ and the _Oil Union of Oklahoma_, with six or eight other
undertakings which have been successfully conducted during the last
few years. The _Shell_ is trying to bring in the _Mexican Petroleum
Company of Delaware_,[12] a sister company to the _Eagle_ and the
greatest producer in Mexico, which has up to now remained faithful
to the _Standard Oil_. That is why it bought up large quantities of
_Mexican Petroleum_ stock in May 1919 on the New York Exchange. If it
succeeds the _Standard_ will see its remaining share in Mexico yet
further diminished.
This new Trust has the financial support of the Morgans. It is
particularly directed against the _Standard Oil_.
These facts are very little known in France. _The_ Royal Dutch _is
about to launch a new attack on the_ Standard, or to acquire an
interest in a Trust destined to combat it, which will perhaps end by
grouping under its ægis all Rockefeller's competitors.
The Pearson syndicate, under Lord Cowdray, has joined the _Royal
Dutch_. Now, Mr. Doheny himself is coming in too.
The great oil International develops continuously. Where will it end?
Already the _Standard Oil_ produces no more than 17 per cent. of the
oil of the United States--it is true that it has always disdained the
extraction of petroleum--but it refines only 49 per cent., which is a
much more serious matter.
Rapid Increase in the Activities of the Royal Dutch
Production
1910 1,600,000 tons
1913 7,000,000 tons
1920 15,000,000 tons
Net Profits
1907 13,000,000 florins
1915 29,000,000 florins
1920 130,000,000 florins
Dividends
1907 27-3/4 per cent.
1915 49 per cent.
Authorized Capital
1890 1,300,000 florins
1902 7,500,000 florins
1910 50,000,000 florins
1911 100,000,000 florins
1916 150,000,000 florins
1918 230,000,000 florins
1919 400,000,000 florins
1921 600,000,000 florins
Financial Results of the Royal Dutch since its Agreement with the Shell.
-----+----------------+----------------+----------------+-------------
| Gross Profits | Prior Charges | Net Profits | Dividends
Year | (in | (in | (in | (per cent.)
| 1,000 florins) | 1,000 florins) | 1,000 florins) |
-----+----------------+----------------+----------------+-------------
1907 | 13,657 | 242 | 13,415 | 27-3/4
1908 | 13,592 | 66 | 13,526 | 28
1909 | 12,978 | 66 | 12,912 | 28
1910 | 14,644 | 92 | 14,552 | 28
1911 | 13,693 | 2,652 | 11,041 | 19
1912 | 26,680 | 302 | 26,378 | 41
1913 | 30,554 | 384 | 30,170 | 48
1914 | 30,937 | 571 | 30,366 | 49
1915 | 30,419 | 440 | 29,979 | 49
1916 | 32,823 | 193 | 32,630 | 38
1917 | 49,740 | 5,367 | 44,373 | 48
1918 | 96,877 | 24,487 | 72,390 | 40
1919 | 118,169 | 18,169 | 100,000 | 45
1920 | 138,736 | 9,286 | 129,450 | 40
1921 | 107,170 | 3,071 | 104,098 | 31
-----+----------------+----------------+----------------+-------------
FOOTNOTES:
[Footnote 10: The Netherlands were then in the position in which France
now finds herself. The _Royal Dutch_ began by sending two engineers to
the United States to familiarize themselves with the details of oil
production, since Holland possessed no such industry.]
[Footnote 11: A first instalment, representing 70 per cent. of the
value of these companies, was alone paid. See chap. xvi, _The Struggle
for the Oil-fields of Russia_.]
[Footnote 12: The _Mexican Petroleum Company of Delaware_ has control
of a large number of companies in the United States and in Mexico,
which include the following:--
_Mexican Petroleum of California_,
_Huasteca Petroleum_,
_Tamahua Petroleum_,
_Tuxpan Petroleum_,
_Mexican Petroleum Corporation_.
]
CHAPTER VI
THE OIL-WORLD'S NAPOLEON: HENRY DETERDING
If the _Royal Dutch_ has succeeded in its amazing effort to reduce
the power of the _Standard Oil_, it is because the former possessed
a man who was worth millions, whom the Americans, in their outspoken
admiration, have called the "Oil-World's Napoleon"--Henry Deterding.
"Mr. Deterding is Napoleonic in boldness, and Cromwellian in depth,"
said Admiral Lord Fisher, the reorganizer of the British Navy in the
twentieth century. The strongest personality in the oil-world is no
longer Rockefeller, but Deterding. Supported by such men as Gulbenkian,
the "Talleyrand of Oil"; Colijn, formerly War Minister to the
Netherlands; Loudon, Cohen, Stuart, and Sir Marcus Samuel, the founder
of the _Shell_ and a former Lord Mayor of London--Deterding dared to
challenge the _Standard Oil_ and to keep up the war for twenty years in
every part of the world, and even to establish himself on the latter's
own ground, the United States.
The _Royal Dutch_ was established in 1890, when the _Standard_ ruled
as absolute sovereign over the markets of Europe and America. De Gelder
was the first Chairman, but he was soon replaced by the more capable
Kessler.
"Old Kessler," as the _Royal Dutch_ people call him among themselves,
fixed his head-quarters at Batavia. Needing an assistant, he engaged
the young Deterding, who was then employed in a bank at Batavia. It was
Kessler who guided the _Royal Dutch_ through the difficulties of its
early years. But he died suddenly in 1900, and Deterding succeeded him.
While the _Standard_ stuck to the formula, "American oil to light
the world," Deterding set to work to acquire oil deposits as near as
possible to all markets. The new policy extolled by Walter Teagle,
Chairman of the _Standard Oil of New Jersey_, on the occasion of the
fiftieth anniversary of the company in January 1920, is no other than
that pursued by Deterding for fifteen years. For the _Standard Oil_,
seeing to what a pass its former policy has brought it, has sought
since 1919 to revise its methods and copy those of its rival.
_Five factors have contributed to the world-wide expansion of the_
Royal Dutch.
1. Deterding's cleverness in associating the _Royal Dutch_ with the
_Shell_, and in interesting the Rothschilds of Paris in his operations.
Thanks to these connections, he surrounded himself with able
personalities, such as Frederick Lane, Sir Marcus Samuel, Sir Waley
Cohen, and Gulbenkian.
2. The support of the Dutch Government.
3. The support of the British Government.
4. The fact that the _Royal Dutch_ had not a market close at hand to
absorb its production, in the Dutch Indies, as the _Standard_ had in
the United States.
5. The readiness of the Dutch and British to prospect over-seas.
It is a combination of these forces--personal, political, and
economic--which has resulted in the formation of the _Royal
Dutch-Shell_ group, now a world-power. Under the laws of the United
States, a similar group would be impossible.
"Deterding is a plunger," said an American oil-man, who has often been
a competitor of his in various parts of the world. "He plunges with
other people's money, not his own; that is why he takes such risks.
For instance, he paid five times what any one else would have paid to
gain a footing in Egypt, and he has lost a great deal there. However,
he pays in shares for the properties he buys, and this gives him an
advantage over the _Standard_, which has always paid in cash. In spite
of everything, he merits great praise for having started from nothing
and having built up the great organization which he directs."
Deterding's profession of faith, so to speak, is summarized in a
memorable declaration which he made to the Committee of Imperial
Defence in March 1913:--
"Oil is the most extraordinary article in the commercial world, and the
only thing which retards its sale is its production. There is no other
article in the world of which you can guarantee the consumption as long
as you can produce it. _In the case of oil, begin by guaranteeing the
production and consumption will look after itself._ There is no need
to bother about consumption, and as a seller, it is useless to make
contracts in advance, because oil sells itself. All that you need is
a well-filled purse, so that you are dependent upon no one, and can
say to the people who will not buy to-day, 'Very well. I am going to
spend £1,000,000 in building reservoirs, and in future you will have
to pay much more!' _The great point for the Navy is to make certain
of oil from a group which can draw its supplies from many different
geographical points_, because one cannot count on any particular
oil-field. My experience is that districts which have regularly
produced 18,000 barrels a day, have dropped to 3,000 without any
previous warning."
Since its alliance with the _Shell_, the _Royal Dutch_ has undergone
a world-wide expansion. Deterding concluded long-term contracts with
the famous British State-subsidized company, the _Anglo-Persian Oil_,
guaranteeing it the greater part of the Persian output until 1922.
But his cleverest stroke was certainly to acquire an interest in the
management of the _Mexican Eagle_. Owing to this, the output of the
_Royal Dutch-Shell_ group increased by more than 50 per cent., rising
from thirty to more than fifty million barrels a year. The purchase of
shares from Lord Cowdray cost Deterding a thousand million francs.
Deterding conducts his business like a soldier. He accepts or refuses
a proposition once and for all. It is often dangerous not to fall
in with his wishes. The _New Schibaïeff Petroleum Corporation_ has
had experience of this. Reconstituted in 1913, with a capital of
£1,150,000, it set itself against the will of Deterding. He fought, and
at the end of the struggle the £1 shares were worth 6-1/2d., at which
price the _Royal Dutch_ bought them up, at the same time condescending
to accept control of the company.
The establishment of close relations between the _Royal Dutch-Shell_
and the British Government was one of the most noticeable activities
of the oil-world. It has not been proved that the British Government
really controls the _Royal Dutch_, although well-informed people
believe it. If there has been any change in the direction of the _Royal
Dutch_, which, according to the constitution of the company, should
remain in Dutch hands, it must have been effected as a result of
agreements between the Dutch and British Governments, for the shares
of the _Royal Dutch_ were held by interests closely connected with the
Royal Family of the Netherlands. An alliance of this nature would have
great advantages. Besides, since the British Government has purchased
the control of the _Anglo-Persian_, Sir Marcus Samuel has made great
efforts to induce it to take an interest in the _Royal Dutch-Shell_
group. The _Royal Dutch_ has become more British than ever since 1922,
when it ceded the greater part of its share in the _Shell_ to the
purely British consortium directed by the bank of _Cull and Company_.
Deterding would find it difficult to do without the support of British
foreign policy. He knew this very well when he transferred his offices
from The Hague to London.
The most striking proof of the alliance between the British Government
and the _Royal Dutch_ is the course of events in India, where the oil
situation is peculiar. In 1905, in exchange for certain exclusive
rights and for a protective tariff granted by the State, the _Burmah
Oil Company_ consented to maintain a fixed price for kerosene. In
India, in an open market, kerosene would cost £25,000,000 sterling
instead of £11,000,000 annually. Such, at least, is the opinion of
Sir John Cargill, Chairman of the _Burmah Oil_. Before the War, there
was overproduction of kerosene in India; this surplus has since
been transformed into a veritable dearth. The _Royal Dutch_ supplied
the _Burmah Oil_ with the petroleum that was needed to satisfy the
Indian market. Thanks to Deterding, India will continue to get its oil
cheaper than other countries. Without his help there would have been a
considerable rise in price, and the _Burmah Oil_, in which the British
Admiralty is interested, would have been weakened, and would have
fallen into the hands of other companies.
The _Royal Dutch-Shell_ has rendered the same service to the British
Government in Egypt. "We have conducted our business on the same lines
in Egypt," said Sir Marcus Samuel. "_In order to help the Government,
we have operated in the Egyptian market in the same way as in India._"
In exchange the _Royal Dutch_ counts on the support of the British
Government. This is the case in Venezuela, where the Venezuelan
Government is trying to establish its rights over concessions which the
company covets. And not in vain, for on March 7, 1921, it was announced
in France that the Venezuelan Courts of Justice had upheld the validity
of the fifty years' concessions which had been granted to the _Colon
Development_, in which the _Royal Dutch_ is interested, through the
_Burlington Investment_.
But in Mesopotamia the company seeks the support of France against
the _Anglo-Persian_, and is not opposed to American participation. I
believe, rather, that it desires the support of the French Government
in case the British Government, hypnotized by the _Anglo-Persian_,
deserts it. In any case, it hopes to play off one against the other.
Deterding's ambition is to crush the _Standard Oil_. He is the
declared enemy of the _Standard_, Mr. W. Teagle, for whom he has some
sympathy, excepted. When people tell him that he will never succeed
in getting the better of the _Standard_, with its enormous capital,
he replies that he has the means to fight against all the dollars
that the _Standard_ can gather. Has he not the Rothschild millions at
his disposal? Besides, he has great advantages over the _Standard_.
I have already mentioned the cost of production of the _Royal Dutch_
in the Dutch Indies. It is considerably lower than that of the
American Trust.[13] In a price war this would give it an incontestable
superiority. The _Royal Dutch-Shell_ possesses such reserves of oil
that the question of exhaustion does not arise for it; and it extends
over the whole world, whereas the _Standard_ has been able to root
itself firmly in America alone. Several European States have crossed
swords with it, for example, Austria, which definitely closed Galicia
against it in 1911. Its high-handed methods have made many enemies.
The _Royal Dutch_, on the contrary, thanks to its clever and elastic
policy, has insinuated itself into the good graces of most governments.
Almost everywhere, public opinion is on its side.
Besides, _Deterding knows more about the affairs of the_ Standard
_than the_ Standard _itself_. This statement was made by a director
of the American company. Deterding has no difficulty in following its
movements. On one of his visits to New York, he installed himself in
the Board-room of the _Standard_, in order to tell the directors that
he was not satisfied with the way in which the Chinese agreement was
respected, that they owed him a rebate on oil sold in his preserves,
and that they must not sell any more there--or it would be war. He
spoke for ten or fifteen minutes, and that was time enough to say a
great deal. Without a note, he quoted many details, and even figures;
for example, the exact number of gallons sold by the _Standard_ in
various places. And when one of his hearers inquired, after his
departure, whether it was all accurate, another of Mr. Deterding's
interrogators replied: "Last time he came, we took down all his
statements in shorthand and verified them afterwards. We saw that he
had an incredible knowledge of our affairs in every country in which
our interests conflict with his own."
Will there soon be a renewed conflict between the _Royal Dutch_ and
the _Standard Oil_? Deterding wanted it quite recently. If we are
to believe the authorities on the matter, we have narrowly escaped
the greatest oil war in history. For once, Deterding gave way to the
moderate counsels of the more conservative members of his company, and
war was not declared. Mr. Colijn was sent from The Hague to the office
in Great St. Helen's, in the city of London, and it was announced that
Mr. Deterding was taking a much-needed rest.
These personal struggles with the _Standard_ are probably at an end.
Agreement is actively sought, at present, between the _Standard_
and the _Anglo-Persian_, especially owing to the influence of Sir
John Cadman. Since 1922, Elliot Alves and the _British Controlled
Oil-fields_ have followed the same policy. Perhaps before long there
will be an "oil peace," concluded between the directors of the great
Trusts. Was it not even outlined at The Hague Conference? Time will
show how long it will last.
My information, drawn from an authoritative source, tends to prove that
a great re-grouping of oil interests will not long be delayed.
A true saying, but perhaps a strange one--"Oil will be poured on
the troubled waters of Europe." For economics is more powerful than
politics. We are at the dawn of the great "Age of Oil."
FOOTNOTES:
[Footnote 13: Only for the American portion of its production are the
costs of the _Royal Dutch_ as high as those of the _Standard_.]
PART III
THE STRUGGLE BETWEEN THE POWERS
CHAPTER VII
THE _EUROPEANISCHE PETROLEUM UNION_:
A German Trust for the Control of European Oil, which Foundered in the
Great World Conflict
The adoption of oil for general use coincided with the half-century of
prosperity which preceded the great catastrophe, the great world War.
Between 1865 and 1914, mazut, kerosene, petrol, vaseline and paraffin
made their appearance, and spread throughout Europe.
And yet Europe consumed foreign oil almost exclusively. For a long
time, this oil came entirely from the United States. It was the golden
age of the _Standard Oil_ in Europe. Its influence ruled over British
distributing companies and French refiners, over the governments of
Germany, Italy, Rumania and Spain.
But the appearance of oil from the Caucasus and Eastern Europe rapidly
broke up the _Standard's_ monopoly. The Rothschilds and the Nobels,
the _Deutsche Bank_ and the _Disconto Gesellschaft_; the banks of
Lille and Roubaix, exploiting the oil in Galicia; the cartel of French
refiners founding the Polish company, _Limanowa_ and the _Aquila
Franco-Romana_ in Rumania, and lastly, the _Royal Dutch_ through the
_Astra Romana_ and the _Black Sea Company_--all multiplied their
efforts between 1900 and 1914 to create various independent oil
concerns on both sides of the Caucasus and the Carpathians.
Parallel with these private efforts of manufacturers and bankers, the
governments of Europe were engaged in safeguarding the independence
of their States in this complex question of oil. In 1903, the French
Chamber voted for the principle of monopoly in oil. From 1908 onwards,
the British Government, through the d'Arcy group, encouraged the
formation of the _Anglo-Persian_. And, while appearing to fear the
remarkable growth of the _Shell_, it surreptitiously assisted it, and
tried to guarantee supplies from Mexico through Pearson, from India
through the _Burmah Oil_, and from Mesopotamia through the _Turkish
Petroleum_ in agreement with Germany.
In 1911 the Reichstag was on the point of adopting the same course
as the French Chamber. Under the influence of the Kaiser, important
companies such as the _Deutsche Erdol Aktien Gesellschaft_ and the
_Deutsche Petroleum Verkaufs Gesellschaft_ were formed to gain control
of Austrian, Rumanian and Caucasian oil. The powerful _Steaua Romana_,
with a capital of 100 million francs, owed its existence to the latter,
which had succeeded in acquiring a monopoly of the whole output of
the Galician companies, _Schodnika_, _David Fanto_, and _Galizische
Karpathen_, and had also obtained an interest in the _Danube Navigation
Company_, _Bayerischer Lloyd_. In Rumania, the _Deutsche Erdol_
controlled the _Konzern_ group, which included the _Vega_, _Concordia_,
and _Credit Petrolifer_. The oil of Pechelbronn in Alsace was also in
its hands.
In 1906 the _Deutsche Bank_ and the _Disconto Gesellschaft_ took
under their control the great company of _Nobel Brothers_, in Russia.
They founded, at Bremen, the _Europeanische Petroleum Union_, a
trust which amalgamated the principal European oil interests, and
was to give Germany the certainty of European preponderance. They
absorbed the _Akverdoff_ company at Grosny, created the _Spies
Petroleum_, and undertook the conquest of the oil industry in the
Caucasus and in Apsheron. From 1911 to 1914, German capital and German
interest predominated in the whole of Central and Eastern Europe,
in Scandinavia, and even in Turkey, for the _Deutsche Bank_ became
an associate of Great Britain in the _Turkish Petroleum_, the sole
concessionnaire of the Sultan for the oil of Mosul and Bagdad. This
was the time when Sir Ernest Cassel, a little Frankfurt Jew, who
became one of the lords of British finance and whose grand-daughter
and heiress married a cousin of the King of England in July 1922, was
striving to avert the impending world War by bringing French, British
and German interests into association wherever possible. An agreement
was arrived at. The capital of the _Turkish Petroleum_ was provided by
the _Royal Dutch_, the _Anglo-Persian Oil_, and the _Deutsche Bank_.
But for the catastrophe of 1914, Germany would have ended by dominating
European oil. Probably the United States and Great Britain would not
to-day share between them the lordship over oil.
CHAPTER VIII
THE WAR AND OIL
The War which has just ravaged the world, proved that the country which
controls oil will one day control the earth. It is just as Elliot Alves
predicted: "Armies, navies, money, even entire populations, will count
as nothing against the lack of oil." That the Allies have won this War
is in great part due to the two greatest trusts, the _Standard Oil_
and the _Royal Dutch-Shell_, which placed themselves at the service of
the Entente. Germany, hemmed in on all sides, saw her last resources
disappear when the Eastern front broke up.
Without petrol for lorries, tractors, motor-cars, aeroplanes--without
heavy oil for ships' boilers and factory engines--without lubricating
oil for all machinery, how was it possible to carry out the combined
movements of armies? It was not until about 1916 that people began to
say this War would be a "war of oil." The army staffs first grasped
its real utility during the defence of Verdun, situated at the end of
a wretched railway with a single line of metals. The destruction of
many railway lines and the inadequacy of the system behind the front
led the generals to transport their troops more and more frequently
by motor-lorry. It might be said that this War was the victory of the
lorry over the railway. The last phase, in particular, consisted in a
campaign of motors and aeroplanes against railways. Rich in railway
materials, our enemies were poor in petrol. Our High Command, at the
end of 1918, resolved to profit by our superiority on this point.
Before the War, Germany imported 1,263,000 tons of oil:
719,000 from the United States;
220,000 from Galicia;
158,000 from Russia;
114,000 from Rumania;
52,000 from India.
From the very beginning of hostilities nearly all these sources were
closed to her. That is why the German General Staff fought so hard for
Galicia, then for Rumania, and finally for the Caucasus.
"As Austria could not supply us with sufficient oil," wrote Ludendorff
in his _Memoirs_, "and as all our efforts to increase production were
unavailing, Rumanian oil was of decisive importance to us. But even
with deliveries of Rumanian oil, the question of oil supplies still
remained very serious, and caused us great difficulty, not only for the
conduct of the War, but for the life of the country. The stocks of the
Caucasus opened a more favourable prospect for us in 1918."
"The eastward march of the central empires is thus explained as due to
the urgent need for the conquest of oil. The treaty of Bukarest was an
'oil peace,' as also was that of Brest Litovsk.
"In Rumania, Germany seized all the oil-deposits, all the refineries,
all the pipe-lines, and altered and reorganized them according to
the immediate needs of her armies. For the benefit of her dependent
company, the _Steaua Romana_, she plundered all the properties of the
British, Dutch, French, or purely Rumanian companies.
"It was then that she destroyed the Baïkop-Constantza pipe-line and
relaid the pipes on a military route from Ploesti to Giurgiu. It was
then that the economic staff of her army founded in 1917-18 the _Erdol
Industrie Anlagen Gesellschaft_, which sequestrated, liquidated,
despoiled all the other oil companies and collected the booty for its
own profit in a vast monopoly of exploitation and distribution. This
monopoly was only broken in August 1918, by the double victories of the
Allies on the Eastern and Western fronts."[14]
When the Eastern front gave way, Germany's resources vanished. She had
left only her benzol, a little heavy oil, and no lubricating oil. She
had to give benzol to her airmen instead of petrol, although knowing
perfectly well that their machines would thereby lose greatly in power.
Her motor-lorries were not in use during calm periods; Ludendorff kept
them for critical moments. And the scarcity of oil was so serious
in the interior of Germany that the peasants passed the long winter
evenings in darkness.
The Allies, also, lived through some tragic moments.
The year 1917 was the most terrible for them. Their armies almost
ran short of petrol, their navies of heavy oils. Now, their armies
consumed a million tons of petrol a year, their navies eight million
tons of heavy oils. The stocks were reduced to such a point that, in
May 1917 the Grand Fleet had to give up its training cruises and battle
exercises, for the German submarines made a special point of attacking
tankers coming from America or Asia. In France and Italy, the use of
oil and even petrol was severely restricted.
In December 1917, when the cartel of the ten French refiners, which
had undertaken to supply the French armies, recognized that it was
powerless, and had to admit in an official letter that its stocks
would be exhausted in March 1918, on the eve of the spring campaign,
M. Clemenceau sent a despairing appeal to President Wilson. The
representative of the Commander-in-Chief had pointed out that France
did not possess in its storage depots sufficient reserves to last more
than _three days_ in a situation like that of Verdun.
Here is the text of the historic telegram: "At the decisive moment of
this War, when the year 1918 will see military operations of the first
importance begun on the French front, the French army must not be
exposed for a single moment to a scarcity of the petrol necessary for
its motor-lorries, aeroplanes, and the transport of its artillery.
"A failure in the supply of petrol would cause the immediate paralysis
of our armies, and _might compel us to a peace unfavourable to the
Allies_. Now the minimum stock of petrol computed for the French
armies by their Commander-in-Chief must be 44,000 tons and the monthly
consumption is 30,000 tons. This indispensable stock has fallen to-day
to 28,000 tons and threatens to fall almost to nothing if immediate and
exceptional measures are not undertaken and carried out by the United
States.
"These measures can and must be undertaken without a day's delay
for the common safety of the Allies, the essential condition being
that President Wilson shall obtain permanently from the American
oil companies tank steamers with a supplementary tonnage of 100,000
tons. This is essential for the French army and population. These
tank-steamers exist. They are sailing at this moment _in the Pacific
instead of the Atlantic Ocean_. Some of them may be obtained from the
fleet of new tankers under construction in the United States.
"President Clemenceau personally requests President Wilson to give the
necessary Government authority _for the immediate dispatch to French
ports of these steamers_.
"The safety of the Allied nations is in the balance. If the Allies
do not wish to lose the War, then, at the moment of the great German
offensive, they must not let France lack the petrol which is as
necessary as blood in the battles of to-morrow."
To "harness the _Standard Oil_ to the victorious chariot of the
Entente," to use the expression of Mr. Page, nothing less was necessary
than the official intervention of the United States Government. The
_Standard_ preferred to compete with the _Royal Dutch_ in the Pacific.
Wilson put an end to this state of affairs and the Petroleum War Board
immediately placed all the necessary boats at the disposal of France.
Thanks to the reserves thus built up, Foch, at the time of the great
German push in Picardy, was able to bring up heavy reinforcements
by motor-lorries and fill the gaps where the British front had been
broken. Marshal Foch was able to execute his strategic surprises only
by relying on the 92,000 motor-lorries and the 50,000 tons of petrol
a month, which the Government placed at his disposal from March to
November, 1918.
The Allied Governments had already decided to pool their resources, and
had set up the Inter-Allied Petroleum Conference, a central body whose
task was to supply them all.
It was constituted as follows:
1. Sir John Cadman, Kembal Cook, Ashdown and Graham, representing the
British Petroleum Executive.
2. Captain Foley and L.J. Thomas, representing the American Petroleum
War Board.
3. Professor Bordas, Controller-General of the French Technical
Services, and head of the laboratories of the Ministry of Finance;
Henry Bérenger, Lieutenant Georges Bénard, and the Marquis de
Chasseloup-Laubat, representing the French General Petroleum Commission.
4. Captain Pozzo and Lieutenant Farina, representing the Italian
Commission on Mineral Oils.
The Chairman was Sir John Cadman, a former professor in the University
of Birmingham, who has played so important a part in British policy
during the last few years.
The Inter-Allied Petroleum Conference had a gigantic task to face.
During the last eighteen months of the War, it had to procure twelve
or thirteen million tons of oil. It succeeded because it was able to
guarantee the co-operation of the _Royal Dutch_ and the _Standard Oil_
in the cause of the Entente. It ordered the two trusts to supply each
country from the nearest producing country. This was a great sacrifice
for them, as it obliged each trust to refrain from fighting in the
territory of the other. It arranged for the transport of oil in the
double bottoms of British ships; 1,280 ships were adapted in this way,
being equivalent to a hundred new tank-steamers. And it hurried on the
construction of tank-steamers in Great Britain and the United States;
600,000 tons were built in America and 400,000 in Great Britain.
_During hostilities the Americans tripled their oil fleet._
Its efforts were so successful that, on March 28, 1918, at the height
of Ludendorff's offensive, the President of the French General
Petroleum Commission was able to write to the Prime Minister:
"France has at her disposal for the battle 170,526 tons of petrol and
67,000 tons of other oils, instead of the 44,000 tons asked for."
"Thanks to the Inter-Allied Petroleum Conference," as M. Henry Bérenger
remarked, "never, at any moment, have our soldiers lacked a drop of
this spirit which gives them the necessary means of rapid movement
and of cornering and defeating the enemy. If hostilities had lasted
only a few more days, our victorious troops would have taken, in the
Ardennes, whole armies whose line of retreat was becoming so congested
that they must have fallen into our hands without resistance. Hence the
Germans hastily accepted the conditions which were imposed upon them,
without either hesitation or discussion." (December 7, 1918.)
This time, the military and political importance of oil was apparent
to every eye. On the morrow of the Armistice (November 21, 1918), it
was celebrated in enthusiastic speeches. And Lord Curzon was able to
declare, at Lancaster House, "Truly posterity will say that the Allies
floated to victory on a wave of oil."
FOOTNOTES:
[Footnote 14: H. Bérenger: _La Politique du Pétrole_, 1920.]
CHAPTER IX
AN IMPERIALISM NOT WITHOUT GREATNESS
If the trusts were powerful before the War, they are much more so
to-day, assisted as they have been by the fantastic rise of the dollar
and the pound and the unheard-of prices at which they were able to sell
oil during the great conflict. The _Europeanische Petroleum Union_ has
fallen to pieces; therefore they have no longer to fear a third rival.
_The_ Royal Dutch _and the_ Standard Oil, _by helping the Allies, have
also served their own interests_.
We are living in the midst of a general disorganization of the
world. Only two nations have found their position strengthened by
the War: Great Britain and the United States. "Sentiment rapidly
yielded to self-interest." Scarcely was the Armistice signed when the
United States demanded the winding-up of the Inter-Allied Petroleum
Conference. The _Standard_ was eager to regain its liberty. In vain
France drew attention to her unhappy position, both in Paris and in
London, and asked for the continuance of the Inter-Allied Conference.
Britain was not sorry to be able to dispute the oil supremacy of the
United States and to reap the benefit of the preparations she had been
slyly making for several years.
The British Empire rests on a foundation of coal. A new fuel, oil,
appears which has such advantages over the former that it displaces
it everywhere. Unfortunately, Great Britain possesses so little of it
that Dr. David White, of the American Geological Survey, does not even
mention it in his estimate of the oil deposits of the world. If we take
the whole British Empire, it contains scarcely 4 per cent. of the known
resources of the globe.
Great Britain, to maintain her world supremacy, resolved to win the
control of oil as she had done that of coal. Besides, her coal will
only last another century.
It was the silent task of a few men. Their proceedings were unknown,
even to the people interested, and they did not fear to bring conflict
into the world to win new greatness for their country. Meanwhile the
United States basked in a false security, trusting in their production,
which gave them 70 per cent. of the world's oil.
"Ten years ago France and Britain were in the same position as regards
oil. Each had a few millions invested in distant enterprises; neither
had control over an indispensable fuel. Suddenly it was discovered
that a technical invention, the introduction of mazut into the furnaces
of ships, was going to give the United States the power to make all
other nations her tributaries. At once a few British business men,
technical experts, and diplomatists joined forces. They decided to
wrest from America the mastery of this new force. They laid their plans
in silence and followed them for years with determination; they sank
millions of money, carried on intrigue in every corner of the world;
they _fomented revolutions_ and accumulated on their own shoulders
responsibilities, risks, expenses.
"Why? To gain money or honours? No! Sir Marcus Samuel and Lord Cowdray
count their wealth in millions; Lord Curzon is at the height of his
diplomatic career.... But in Britain, as in America, there is a
tradition that a successful business man has obligations towards the
society in which he has amassed his millions. He must make a personal
contribution to its greatness....
"It is to this tradition that Britain owes her great leaders; it is
these leaders who have created her world-wide Empire, and who, under
our astonished eyes, have just made possible for her so prodigious a
development.... Their imperialism is a universal danger, but it does
not lack a certain greatness."[15]
FOOTNOTES:
[Footnote 15: Francis Delaisi, _Oil: Its Influence on Politics_.]
CHAPTER X
THE STRUGGLE BETWEEN GREAT BRITAIN AND THE UNITED STATES IN MEXICO
There is no country in the world where the struggle for oil between
Britain and the United States has been so acute as in Mexico. That
this country has been for many years in a state of perpetual unrest is
because of the fight for oil concessions.
The _Standard Oil_ enjoyed practically a monopoly in Mexico up to the
time when the deposits at Tampico were discovered. It was the only firm
which sold oil there, so it did not scruple to abuse its position. It
imported crude oil, refined it on the spot, and re-sold it at a profit
of 600 per cent. Immediately the oil deposits were discovered, Porfirio
Diaz, to put an end to this monopoly, granted important concessions
to the British firm of Pearson, which shortly afterwards founded the
_Mexican Eagle_. These concessions were the signal for the newspaper
campaign which was let loose against Porfirio Diaz in the United
States, and for the outbreak of the Maderist insurrection in Sonora
and Chihuahua. Rockefeller and Pearson made war on each other with
the help of Mexican _condottieri_. The United States supported Madero,
Great Britain Porfirio Diaz.
The _Standard Oil_ subsidized the Maderists. Lane Wilson, formerly
Ambassador of the United States to Mexico, actually stated in public,
on January 7, 1913, that the movement on behalf of Madero had been paid
for by the _Standard_, and that a document lying in the archives of the
State Department at Washington proved it! Manuel Liyo, an official in a
high position in the Mexican Ministry of the Interior, stated, before
the Committee of the United States Senate, that the brothers Madero had
concluded the following treaty with the _Standard_:--
I. If Madero is made President, he will grant to the _Standard_ all
available concessions.
II. He will withdraw all those granted to Pearson.
When Madero was made President, the market price of the _Standard_ rose
in Wall Street by 50 per cent. But this triumph did not last long. We
are often astonished at the continual changes of front of the United
States, which support the feeble Presidents in Mexico and oppose the
energetic ones. By 1913 the _Daily Graphic_ and the _Vossische Zeitung_
had discovered the key to this mystery. Ever since Pearson obtained a
footing in Mexico the _Standard_ has poured out gold in floods to drive
out the British. It wishes to be the sole mistress of those immense
oil-fields, which have turned out to be among the richest in the world.
Only 54 million acres are being exploited at present, and already
Mexico holds the second place in world production. Now the Mexican
Minister of Industry and Commerce estimates the area of the oil-fields
of that country at 150 million acres. Where will Mexico stand when all
this territory is exploited?
To arrest the progress of Pearson, the _Standard_ sent an emissary to
Mexico to demand a monopoly of oil exploitation. It offered, in return,
the immediate conclusion of a loan of 200 million Mexican dollars.
Rockefeller's envoy promised, moreover, that the revolution would die
down as though by magic, while, in case of refusal, it would continue
until General Huerta was replaced by a more tractable President who
would submit to American requirements.
Like his predecessor, Porfirio Diaz, General Huerta refused to make
Mexico the vassal of the great trust, and the insurrection redoubled in
violence.[16]
Tired of the continual struggles which ravaged their country for the
benefit of the two great Anglo-Saxon nations, the Mexicans resolved to
profit by the European War to win their freedom for ever. According to
the laws of the country (1884, 1892, 1910) the owner of the surface
was also the owner of the subsoil. All that a company had to do was to
buy the ground and it was at peace with God and man. The Constitution
of 1917 disturbed this peace. "The subsoil," it declared, "belongs
to the nation." To exploit petroleum deposits a Government permit
was required. This permit is only to be granted to Mexicans or to
foreigners who consent to submit to the laws of the country as natives,
and thus renounce their privileges as foreigners.
As soon as they received word of these new arrangements the British and
American newspapers thundered against the unhappy President Carranza,
whose fall from power was not long delayed. Taught by his example, his
successor attempted a policy of conciliation, but in vain. The present
President, General Obregon, is faced with the same difficulties, but
holds firm. The Mexican Government hopes to free itself for ever, by
means of the Constitution of 1917, from the diplomatic interference
which has poisoned its existence. But the Obregon Government, though
moderate, is not strong. It is supported by the middle-classes, but
has the army and the people against it. Now, for some time, unfortunate
tendencies have been shown by the Mexican people. It has just indulged
in a Communist Congress, with the object of "grouping all the forces of
the proletariat."
If President Wilson always maintained a policy of non-intervention
towards Mexico--a policy, moreover, which was severely criticized
within the United States--his successor at the White House meant
to make himself felt there as well as in other parts of the world.
President Harding had among his ministers Mr. Fall[17] of New Mexico,
who has always interested himself in this question, and who at one time
made energetic protests. He demanded that American citizens should not
be expelled from Mexico on the simple order of the President of the
Republic, and that a Commission should assess, at the earliest moment,
the damages suffered by Americans during the Revolution-requirements
contrary to the Constitution.
Thus I was not particularly surprised to hear that the Committee of
the United States Senate had undertaken to recognize the new Mexican
Government only on the condition that the article of the Constitution
of 1917 which forbids foreigners to hold mineral rights _was not
applied to United States citizens_.
The _Mexican Eagle_, however, is undisturbed. Pearson was clever
enough, at its formation, to place it under Mexican law. His borings
have continued uninterruptedly, while American companies were obliged
to suspend operations and wait for Government authority.
Pearson and the Mexican Eagle
The struggle between Pearson and the _Standard Oil_ became at one time
so acute that the United States Government acquiesced in the payment
by American oil companies operating in Mexico of royalties to bandits
and insurgents as though to the established Government.[18] The general
insecurity was such that certain American companies paid 1,500 dollars
_a month_ to a bandit in the Tampico district on the understanding that
he would guarantee not to cut their pipe-lines.
Such a state of affairs could not go on for ever. After many years
of conflict the two companies came to a sort of understanding by
which they shared the exploitation of oil deposits, and when faced
by the hostility of General Carranza's Government they sent a common
delegation to the Peace Conference to defend their interests against
expropriation by the Mexican Government.
In order to centralize its interests, each of the two groups founded,
after a time, a company for the exploitation of the concessions granted
to it. It was in this way that the _Mexican Eagle_ was created in 1908,
to take up a part of the Pearson[19] interests. Its capital, which was
originally 30 million Mexican dollars, was increased to 50 millions
in 1911, on the acquisition of the Pearson oil properties in the
Tehuantepec region. In 1920 it was 86,277,000 Mexican dollars.
"An institution is the elongated shadow of a man," said Emerson.
This definition applies very well to the _Eagle_, in the success of
which the personality of Pearson has been the dominating factor. From
the earliest days the difficulties it had to struggle against were
considerable. They would have discouraged a man of weaker character
and less tenacity. His entire production was destroyed in the disaster
at the Dos Bocal well--an enormous gusher which took fire. A fierce
price-war was going on at the moment, conducted by Americans with great
persistence for many months. Then came the time of unrest and fighting,
and of the civil war to drive the British from Mexico.
However, the _Eagle_ remains, triumphant, possessing an immense domain
of a million hectares in the richest regions, extending along the
borders of the Gulf, in the State of Vera Cruz and the isthmus of
Tehuantepec.
Although it holds in reserve the greater part of this domain, its
output exceeds 100,000 barrels a day. One of its wells alone produces
in six days as much as the Pechelbronn deposits in Alsace yield to
France in a year (60,000 tons), and, according to the estimates
of British experts, its oil-field at Naranjos is alone capable of
producing before its exhaustion a sum of money equal to the whole of
the British national debt.
Pearson's war against the _Standard Oil_ was worth while.
1919
The Royal Dutch-Shell Lays Hands upon the Mexican Eagle
Towards 1919 the weak spot about the _Mexican Eagle_ was its isolation
among organisms so powerful as the two dominating groups of the world,
the _Standard Oil_ and the _Royal Dutch-Shell_. Isolated producers
sometimes lack markets, especially if by their geographical position
they are far from great centres of consumption. This was the case
with the _Mexican Eagle_, which, though it remained independent, was
nevertheless obliged to submit to the very burdensome competition of
the _Standard_ in the sale of its products.
Lord Cowdray held so large a number of shares in the _Mexican Eagle_
that to obtain them was practically to obtain control of the concern.
In 1911 the _Standard_ wished to buy them from him; he refused. In 1913
the _Royal Dutch_ suffered the same rebuff. It had only offered him
£2 15s. a share when he wanted £3. These shares, which were issued at
par--10 Mexican gold dollars, that is, 25.90 francs, or scarcely more
than £1--have risen at a phenomenal rate. Their _lowest_ prices were:--
1912 36 francs
1918 83 francs
1919 126 francs
1920 398 francs
And they rose to 712 francs in 1919 and 738 francs in 1920! Since then
they have depreciated considerably, as have all oil securities. Skilful
manoeuvres on a large scale provoked a panic among holders of Mexican
shares, which made it possible to buy them at a low price, and led to
important operations on the Stock Exchanges, beginning in December 1921
in New York.
In June 1919 Deterding offered Lord Cowdray £6 a share; he accepted.
The _Shell Transport_ took one million, the _Royal Dutch_ a million
and a half.
If Pearson consented to get rid of the controlling interest which he
had in the vast undertaking founded by his genius and perseverance,
it was by reason of the enormous sums which had to be found before
the immense resources contained in the oil-bearing properties of the
_Mexican Eagle_ could be turned to account. It can only handle 111,000
barrels a day, whereas, since the discovery of the oil-fields of
Zacamixtle and Naranjos, its production could be increased, if it were
desired, to 700,000 barrels a day, that is, about 110 million litres
or 110,000 tons a day. In order that non-specialists may understand
the importance of such a yield, we may say that one gallon contains
4.546 litres, one barrel (36 gallons) contains 163.655 litres, and that
_six_ barrels represent one ton. The _Eagle's_ first well, which gave,
to begin with, 100,000 barrels a day, thus yielded a daily production
of 16,000,000 litres or 16,000 tons of oil. And it continued to yield
large quantities--diminishing progressively, be it understood--until
November 1919, when it was invaded by salt water.
_The_ Shell _intends to spend several millions within the next five
years in order to triple the output of the_ Eagle. Very shortly the
development of its installations will allow of its refining 140,000
barrels daily, and it is clear that, some time hence, the enormous
figure of 200,000 barrels daily will be reached, that is, 5 million
barrels a month against the present 2-1/2 million. The _Shell's_
engineers will not push its exploitation to the maximum possible, for
they wish to make the _Eagle_ last _half a century_.
In acquiring control of the _Compania Mexicana de Petroleo El Aguila_
(the true name of the _Eagle_) the _Shell_ had in view simply to ensure
a sufficiency of liquid fuel for the British Navy. For the _Mexican Eagle_
will soon hold one of the first positions among the world's producers.
Before long it will furnish, by itself alone, one-third of the Mexican
production. The capital of the _Shell_ was increased in 1919 simply
with the object of hastening the development of the oil-fields it
controls. In view of the considerable increase in Britain's need of
petroleum we may believe that patriotism was Lord Cowdray's motive
also. However it may be, the negotiations were concluded in June 1919,
and it was a master-stroke on the part of the _Royal Dutch-Shell_
group, for its position was greatly strengthened by this association,
which increased its production of oil by 50 per cent. Moreover, the
_Royal Dutch-Shell_ made a very successful deal, since the shares
bought at £6 each are now worth double on account of the increase of
capital at par in January 1920 and the new increase in January 1921
under the same conditions, that is, one new for two old shares at
par. Since the _Mexican Eagle_ came under the control of the great
Anglo-Dutch trust it has benefited by the incomparable selling power
of the _Shell_: the great shipping companies, the Pirrie and the
Furness-Withy groups, and the Argentine railways immediately concluded
with it important contracts for the supply of oil. And this alliance
brings the _Eagle_ practically unlimited financial resources.
Financial Results of the Mexican Eagle for Eleven Years
------+----------------+--------------+--------------+--------
Year. | Gross Profits. | Net Profits. | Sinking Fund | Dividend.
| | | and Reserves.|
------|----------------|--------------|--------------|--------
| $ | $ | $ |Per cent.
1911 | 1,974,000 | 874,000 | 194,000 | 8
1912 | 5,703,000 | 4,265,000 | 2,920,000 | 8
1913 | 10,488,000 | 8,166,000 | 3,551,000 | 8
1914 | 13,005,000 | 9,689,000 | 5,857,000 | 8
1915 | 14,676,000 | 11,215,000 | 6,562,000 | 8
1916 | 18,082,000 | 17,064,000 | 8,259,000 | 16
1917 | 20,521,000 | 12,948,000 | 6,922,000 | 20
1918 | 28,857,000 | 15,860,000 | 19,830,000 | 25
1919 | 36,868,000 | 29,508,000 | 11,050,000 | 45
1920 | 59,453,000 | 54,659,000 | 8,952,000 | 60
1921 | 81,982,000 | 69,083,000 | 34,879,000 | 30
------+----------------+--------------+--------------+-------
The balance-sheets of the _Mexican Eagle_ are expressed in Mexican gold
dollars. The Mexican dollar, which, on the gold basis, is worth about
half a dollar, was equivalent, at the rate of exchange of January 1,
1921, to:--
8.50 francs.
2s. 9d.
0.495 dollar.
Present Position of the Petroleum Industry in Mexico
Almost the whole of the Mexican petroleum industry is in the hands of
the two great Anglo-Saxon nations.
Seventy per cent. of the capital invested there is American in origin,
27 per cent. Anglo-Dutch. Now Great Britain, in spite of the smallness
of the capital she has sunk, triumphs more and more. Only 3 per cent.
of the capital invested in this Mexican industry is Mexican.[20]
[Illustration: Increase of oil production in Mexico from 1900 to 1920.]
Production continues to grow at a prodigious rate.[21] It has risen
from 87 million barrels in 1919 to 195 million in 1921. Edward
Doheny declares that it will continue to increase for thirty years.
Considerable oil-fields are still unexploited along the coast of the
Pacific, and the Mexican Government officially announced the discovery
of oil in the islands of the Gulf of California in September 1921. The
_Mexican Petroleum_ has just bored a well, the Cerro Azul, producing
100,000 barrels a day. Two miles from this well there is another which
yields 260,000 barrels a day. All these deposits are found at an almost
uniform depth of 600 metres. It is estimated that Mexico can still
produce 4,500 million barrels of oil.
There were 367 wells in production in Mexico on January 1, 1921, of
which 61 belong to the _Eagle_ and 34 to the _American Petroleum_.
Other companies, with five exceptions, rarely hold more than a dozen
wells.
The _Eagle_ stands to-day at the head of all producing companies. Here
are the four companies which produce the most:--
_Mexican Eagle_ 32 million barrels
_Standard Oil of New Jersey_ 19 million barrels
_Texas Company_ 12-1/2 million barrels
_Mexican Petroleum_ 12-1/2 million barrels
Great Britain has played a very clever game. As Phelan, the American
Senator, wrote: "Her companies accommodate themselves to the political
views of the Mexican Government." Moreover, they have all, from the
_Mexican Eagle_ down to subsidiary companies of the _Royal Dutch_ like
the _Corona_, been placed under Mexican law, which shields them from
the effect of the Constitution of 1917. American companies, on the
other hand, whether constituted under the laws of New Jersey, Texas or
Delaware, remain foreign companies.
Since March 1922 they have been working out a plan for amalgamation, so
as to form a powerful American group which could resist the demands of
the Mexican Government.
The companies joining the group would be the _Standard Oil_, the
_Sinclair_, the _Texas Company of Mexico_, the _Atlantic Refining_ and
the _Mexican Petroleum_. The Supreme Court of Mexico has decided[22]
that properties acquired before the Constitution of 1917 was
promulgated would not be confiscated--a declaration which has reassured
the United States.
Mexico retains only 4 per cent. of her production. In 1920 alone she
exported 153 million barrels out of the 159 million produced, keeping
for home consumption only 6 million barrels. Seventy-eight per cent.
of her production went to the United States. Every year Great Britain
takes from Mexico more than 40 million gallons of illuminating oil,
benzine and fuel oil. Mexico literally saves the world. Without her
there would be a universal shortage of petroleum.[23]
FOOTNOTES:
[Footnote 16: "During the last nine years," wrote a New York editor
on the occasion of the last revolution, "there has not been a single
disturbance in Mexico in which Americans have not taken part by lending
their aid to the party opposed to the government.... Americans have
supported Madero against Diaz, Huerta against Madero, Carranza against
Huerta, Villa and Sapeta against Carranza."]
[Footnote 17: Secretary of State for the Interior, an ardent partisan
of intervention. Mr. Fall is a believer in the slogan "_Standard Oil_
must prevail."]
[Footnote 18: Evidence of Edward Doheny before Committee on Foreign
Affairs of the United States Senate.]
[Footnote 19: Since elevated to the peerage under the title of Lord
Cowdray.]
[Footnote 20: According to official statistics of July 2, 1920, the
Mexican petroleum industry represents a value of 300 million Mexican
dollars.
Million
dollars.
Wells bored and in production 100
Value of ground on which they are situated 50
Pipe-lines, railways and rolling-stock 50
Refineries, buildings and machinery 50
Various properties, chiefly British 50
]
[Footnote 21: Cp. chap. ii, _Oil: Its Origin, Discovery, and History_.]
[Footnote 22: July 1920.]
[Footnote 23: Each Mexican well produced as much, in 1920, as 537
American wells.]
CHAPTER XI
A STATE-SUBSIDIZED COMPANY: THE _ANGLO-PERSIAN_
Although the United States, in spite of the civil wars they let loose
there, could never drive Pearson out of Mexico, they triumphed over
him in Central America and the chief States of South America by the
mere force of their prestige. During 1912 and 1913 Pearson obtained
concessions in Costa Rica, Colombia, Venezuela, and Ecuador. That
would have given him a monopoly of the supply of oil to all shipping
passing through the Panama Canal. Washington placed its veto on these
concessions and caused them to be annulled in the name of the Monroe
Doctrine. No South American republic dared to resist.
Meanwhile the _Shell_ installed itself in Trinidad, a British colony,
then in Venezuela and Colombia. To quiet all fears it was wise enough
to associate itself with American firms: for example, the _Colon
Development_ was founded, a British company constituted in common
with the American _Carib Syndicate_. It has since come out that all
the British shares are grouped in the hands of the _Burlington
Investment_, which is itself dependent on the _Royal Dutch-Shell_. Not
having succeeded directly, through Pearson, who was too much distrusted
by America, Britain has none the less succeeded indirectly, through
Deterding, in controlling the entrance to the Panama Canal.
It is a strange fact that, while the United States were watching the
activities of the Pearson group with evident hostility, they displayed
not the least mistrust of the _Royal Dutch-Shell_. By a bold and
masterly policy, the latter obtained a footing in the very heart of
the territory of the _Standard Oil_. American law, unlike French,
does not distinguish between ownership of land and ownership of the
minerals. As in Mexico before 1917, both belong to the owner of the
surface. The _Royal Dutch-Shell_ bought land, sank wells, and was thus
able to exploit oil as it pleased. Cleverly following the example of
the _Royal Dutch_, the _Shell_ endeavoured to place its shares with
the American people, so as to give them an interest in its prosperity.
It was not difficult, considering its high dividends. In 1919 the
_Shell_ placed 750,000 shares upon the New York market; by so doing, it
realized a premium of £4,390,623, of which £4,000,000 were appropriated
to reserve and to amortization. The source of its capital did it no
harm, for, before the War, all American large-scale industries had had
to make calls upon European savings. And if the _Shell_ was British,
the _Royal Dutch_ was without a considerable German element, although
officially a Dutch company. Deterding had not yet openly joined forces
with Great Britain. He was hesitating. Foreseeing the imminent outbreak
of the world conflict, he was much too clever to bind himself before he
knew who would win.
These two companies, connected since 1907, but each keeping its
separate financial organization (at the same time reserving for each
other a 40 per cent. share in any new subsidiary company), were thus
freely allowed to install their reservoirs and pipe-lines beside those
of the _Standard_. Besides, the Democrats, fearful of the political and
commercial power of the American trusts, were not sorry to set against
them competitors who could have no influence upon the domestic politics
of the United States. They came to be looked upon as international
undertakings without any political ends. To complete the illusion the
British Government, which assisted them in secret, simulated fear of
their excessive growth.
* * * * *
The British Admiralty declared that it was important to free the Royal
Navy from the tutelage of the trusts. It was voted the money required
to obtain an interest in the operations of the _Burmah Oil_, thus
ensuring for itself a share of the oil of Burmah; and in May 1914
it bought half the shares of the _Anglo-Persian Oil_, which holds a
thirty-years' monopoly for the exploitation of oil deposits in Persia,
excepting only the five northern provinces. For Persian territory
on the borders of the Caspian Sea was always reserved for Russian
influence.
The _Anglo-Persian_ began obscurely. Its inception, in 1909, passed
unnoticed. It was founded, _without an appeal to the public to
subscribe its capital_, by the _Burmah Oil_, a company at that time
better known in Scotland than on the London Stock Exchange. Its
first object was to take over the concessions which the Australian,
d'Arcy, had obtained in 1901, and which covered the enormous area
of 500,000 square miles. D'Arcy had obtained these concessions
from the Persian Government for the infinitesimal sum of 200,000
francs, of which 100,000 francs only were paid in cash and the rest
in shares. The Persian Government was to receive 16 per cent. of
whatever profit d'Arcy might make. It was much disappointed, for the
first investigations along the Turko-Persian frontier were really
discouraging. D'Arcy spent five million francs in vain, and he was
thinking of abandoning the whole affair when he heard of oozings and
gushings in the Shustar region, 140 miles north of Mohammerah, to the
north of the Persian Gulf. D'Arcy recognized the presence of oil, but
had to face the construction of a pipe-line and refinery, and to
find new capital for these purposes. Certain foreign capitalists made
him tempting offers, but D'Arcy, who had found a staunch supporter in
Admiral Fisher, the reorganizer of the British Navy in the twentieth
century, resolved that the Persian concessions _should remain under
British control_. He obtained the financial assistance of the _Burmah
Oil_, and the latter founded the _Anglo-Persian_ in 1909. The Royal
Navy had already 150 ships burning oil. Pretyman, a Lord of the
Admiralty, got Lord Strathcona appointed to the chairmanship of the
_Anglo-Persian_, the first results of which were encouraging, so that
the British Government could direct its future. The capital of the new
company was very quickly used up. It constructed a pipe-line 145 miles
long to bring its oil to the Persian Gulf, and a refinery on the island
of Abadan which cost a great deal. But as the prospecting then taking
place revealed the existence in Persia of rich deposits, a commission
of geological experts, presided over by a rear-admiral, was sent to
the spot by Winston Churchill, then First Lord of the Admiralty, to
make an inquiry. On the conclusions embodied in its report, the British
Government decided to take control of the business. In the month of May
1914 the _Anglo-Persian_ made a somewhat stormy entrance into history,
for up to then very little had been heard of it: the negotiations
and then the contract with the Admiralty had been conducted with
the greatest secrecy. Parliament showed great surprise when Winston
Churchill placed the matter before it, and asked for its sanction to
the agreements which had been made. It was even necessary for Sir
Edward Grey to come to the rescue in order to win a majority in the
House.
The Government had a certain majority of two thousand votes by the
purchase of £2,200,000 of new ordinary shares. This amount has since
been more than doubled, for on March 6, 1921 the Government announced
in the House of Commons that it held £5,200,000 ordinary shares, £1,000
preference shares, and £199,000 debentures. Two-thirds of the ordinary
shares of the _Anglo-Persian_ are to-day in the hands of the British
Government, the other third is held by the _Burmah Oil_, which is
directed by the Admiralty. Thus absolute Government control is assured.
The _Anglo-Persian_ has become literally a State-directed company,
but British officials are wise enough to entrust to technical experts
the actual management of the undertaking. This explains its great
success. Two trustees, Lord Inchcape and Sir E.H. Packe, represent the
Government on the Board of Directors: they have the right of absolute
veto upon all decisions.
Finally, the Government has made a contract with the _Anglo-Persian_
for the supply of important quantities of oil at an advantageous
price for a certain number of years. The needs of the Navy are thus
guaranteed for a period of years. There is no surprise to be feared,
for the oil-fields are near the Persian Gulf, where Great Britain
reigns as mistress, and where no foreign ship can enter without her
permission. It is, moreover, an important strategic point; ships can be
dispatched from there to all parts of the world where Great Britain has
interests--Suez, Gibraltar, India, Australia, Africa.
The oil-deposits of Persia are so rich that it will soon be necessary
to increase tenfold the projected development of the equipment,
pipe-lines, and refineries, to deal with future production. Even in our
time the natives collect the oil by rudimentary processes and transport
it on the backs of camels to the markets of the interior, where it
serves as an object of exchange. Persia is one of the few countries in
which numerous spontaneous springs and seepages reveal the existence of
oil. In certain valleys it flows along the slopes and pours into the
rivers, making the water unfit for consumption. The _Anglo-Persian_
already ranks among the chief oil-producing companies of the world. It
is precisely this success, we may believe, which has caused so much
apprehension in the United States on the subject of the rivalry between
British and American producing companies. The _Anglo-Persian_ controls
an almost unlimited production in Persia, and as soon as there are
enough pipe-lines and reservoirs, the output will increase in enormous
proportions. _From 1923 onward, the_ Anglo-Persian, _by itself, will
be in a position to supply a large proportion of the needs of Great
Britain_. It will then be free of the contract which, for more than
seven years, has bound it to the _Royal Dutch-Shell_, obliging it to
dispose of a considerable portion of its production through the latter
company.
When its program is completed, the _Anglo-Persian_ will possess a
fleet, the capacity of which will exceed a million tons. Expenses are
small, because of the great productivity of the wells, which gives
to Persia a marked superiority over all the other oil-fields of the
world, except perhaps Mexico. Its yield of benzine and kerosene is much
superior to that of most of the oil-fields of the United States; it is
richer than that of Mexico.
But for several years, the _Anglo-Persian_ has no longer been content
with Persia, rich as it is. Its ambitions now extend to the whole
world. It is in process of installing its depots in all the great ports
of the world. In French territory alone, reservoirs will be constructed
in the ports of Dunkirk, Le Havre, Rouen, Saint-Nazaire, La Pallice,
Bordeaux, Marseilles, Bizerta, Algiers, Oran, Casablanca, Dakar.
Through the agency of its subsidiary, the _d'Arcy Exploration_, it is
prospecting for oil in every part of the globe. Wherever geological
conditions appear to indicate the presence of oil in commercial
quantities, the operations of drilling are undertaken. The activities
of the _d'Arcy Exploration_ are carried on at present in Great Britain,
Australia, New Zealand, Canada, Hungary; and again, quite recently, the
company has concluded arrangements for investigating and prospecting
in districts of France and her colonies which are likely to produce
oil. A French company, the _Société Générale des Huiles de Pétrole_,
has been founded, with an initial capital of 100 million francs,
jointly subscribed by French and British groups, with the object of
undertaking the refining and distribution of oil in France as well as
her colonies. According to the agreement signed in London on October
27, 1920, by Sir Basil Zaharoff for the _Banque de la Seine_, nine
subsidiary companies will be founded, each having a different function:
importation, refining, distribution, and transport of oil.[24] And this
"Franco-British Anglo-Persian" is even going to build an oil fleet,
thanks to the _Société Navale de l'Ouest_.
Other enterprises are also under consideration. The _Anglo-Persian
Oil_ has acquired important interests in the _British Oil Bunkering_,
and it has also founded the _Tankers Insurance Company Limited_,
an insurance company with a capital of £100,000, for it intends,
henceforward, _to do its own insurance_. By means of the _Scottish
American Oil_, of which it has technical and commercial control, it has
even succeeded in penetrating into Mexico, thus completing the work
begun by Pearson and continued by the _Shell_.
Its activities, during the month of December 1920 alone, were
remarkable. It obtained a footing in Spain, founding a company with a
capital of 25 million pesetas, of which 55 per cent. was subscribed by
the _Anglo-Persian_ and 45 per cent. by a Spanish group having at its
head the _Banco Urquijo_ and the _Spanish Credit Bank_. It concluded
a contract _with the Hungarian Government guaranteeing it exclusive
rights of exploitation on Magyar territory_, in case oil should be
discovered there, which has happened. Deposits have been found near
Letenye and the quantities which it is hoped to obtain will no doubt be
more than sufficient to supply the needs of Hungary.
The Hungarian Minister of Finance submitted to the National Assembly,
in December 1920, a report concerning the cession of rights to prospect
for oil to a syndicate controlled by the _d'Arcy Exploration_.
The Government at Budapest, not having the necessary capital for
exploration, was favourably disposed to the offers of the subsidiary of
the _Anglo-Persian_. The negotiations were conducted by Dr. Telesky,
a former Minister of Finance, and Dr. von Bockh, Secretary of State.
According to the agreement reached, the _d'Arcy Exploration_ undertook
to devote at least £100,000 to prospecting for oil; if the results were
satisfactory, the company would exploit one-third of the geological
productive units, one-third would be kept in reserve, and the remaining
third would revert, free of all expense, to the State. As regards the
second portion, the Hungarian Government reserved complete freedom of
action. A company was formed with a capital of £1,000,000 sterling, of
which the Hungarian Government subscribed ten per cent.; the company
had to deposit with the Government 25 per cent. of the shares, and to
undertake to hand over to it each year one-tenth of the production, in
kind or in money.
The _Anglo-Persian_ has also obtained possession of the oil-bearing
territory of Transylvania, ceded to Rumania. During the War, this was
seized and exploited by the Austrian military authorities, for it
belonged to the _Hungarian National Petroleum Company_. The capital
of this company was heavily drawn upon for repairs undertaken at
the close of hostilities. An appeal for funds became necessary. The
_Anglo-Persian_ demanded that the technical and commercial management
of the undertaking should be entrusted to it and that two of its
nominees should sit on the Board of Directors; it then subscribed
£500,000 in preference shares. Each of these shares carried twenty
votes against one for an ordinary share: thus the _Anglo-Persian_ has
complete control.
In addition to this, it has taken over the share which was reserved for
Britain in the German interest in the _Steaua Romana_, and disposes of
nearly 80 per cent. of the shares in the _Turkish Petroleum_, which has
claims to oil concessions in Mesopotamia.
On October 13, 1921, the _Anglo-Persian_ made an agreement with the
Japanese company _Tei-Koku_, undertaking to supply it with 350,000
barrels of petroleum yearly. Half of this is destined for the Japanese
Navy.
Organizations for the sale of its products are to be found in Belgium,
Denmark and Norway.
Part of the famous deposits of Rivadavia, which the Argentine
Government intended to reserve for itself, has fallen under its control.
In co-operation with the Australian Government--from which it had
already obtained, in May 1920, exclusive rights in the former German
colonies of Papua--the _Anglo-Persian_ founded the _Commonwealth Oil
Refineries_, with a capital of £500,000. It is prospecting actively
in Western Australia, and has asked the Government of Perth for a
concession of 100,000 acres.
In New Zealand it has offered to subscribe 50 per cent. towards the
formation of a capital of £100,000 for prospecting purposes.
And the _Anglo-Persian_ is, at the present moment, building vast
works in New Brunswick, for the distillation of oil from shale. The
oil produced will be used for heating the boilers of British ships.
The oil-bearing lands in this region are rich and extensive, and the
shale of which it is composed has been found twice as rich in oil as
the Scottish shale, the first from which the precious "rock-oil" was
distilled.[25] As in Wyoming, Colorado and Utah, there are enormous
laminate rocks, stretching in beds below the valleys, of a thickness
of eight to ten metres; when distilled they may produce up to 240
litres of oil to the ton. When the Mormons, fleeing from persecution
in 1846, took refuge in the Far West and discovered these oil shales,
they never suspected the service they would render half a century later
to the British and American Navies.[26] They found themselves held up
in their march across the desert for want of fuel, but one of their
leaders announced that Providence would soon supply their needs. The
prophecy came true that very day: a Mormon was surprised to notice
that the stones on which he placed his saucepan took fire. Since then,
hunters and prospectors venturing into these desolate regions use no
other fuel than these rocks.
FOOTNOTES:
[Footnote 24: The _Anglo-Persian_ will subscribe 45 per cent., France
55 per cent. of the capital of each of these companies. The Agreement
of October 27, 1920, was the occasion of very sharp attacks from
certain short-sighted members of the House of Commons, who did not
understand that the British Government was about to lay hands, in
concert with the _Royal Dutch_, upon the oil wealth of France, and
reproached the Government with dispersing its efforts.]
[Footnote 25: The Scottish factories treat three million tons of shale
annually, from which the average yield is only 122.5 litres of oil to
the ton, half the yield of the Canadian and American rocks. Apart from
this bituminous shale, it seems unlikely that Great Britain, which
controls 90 per cent. of the future production of the globe, would have
succeeded in finding oil-deposits in her own soil.]
[Footnote 26: Anticipating the time when the oil-fields of the United
States will be exhausted, the American Government has taken possession
of millions of hectares of land containing bituminous rock, in order to
ensure the fuelling of its Navy.]
CHAPTER XII
AN AMERICAN BALKANISM
The British Controlled Oil-fields
The _Anglo-Persian Oil_ is no longer sufficient for Great Britain,
which founded a new company in 1918, the _British Controlled
Oil-fields_, specially commissioned to fight the _Standard Oil_.
Established under Canadian law with an initial capital of £12,000,000,
increased later to £40,000,000, and capable of a further increase up
to £159,000,000, the _British Controlled Oil-fields_ will be one of
the greatest financial powers of the world. Like the _Anglo-Persian_,
it is entirely in the hands of the British Government under the system
of the voting trust. It seems that an immense tract of oil-bearing
territory exists from Mexico to the Argentine, a continuation of that
of the United States. Already Mexico has become the second greatest
producing State in the world; and oil has been found in almost all
the South American States, even in Brazil and on the plateaux of
Bolivia. Of these immense deposits the _British Controlled Oil-fields_
wishes to gain possession on behalf of the British Government, thus
completing the work of the _Royal Dutch-Shell_ in Venezuela and in the
neighbourhood of the Panama Canal. It possesses properties of very
great value from Mexico to Brazil, in Trinidad, Venezuela and Costa
Rica. In 1920 it began operations in Ecuador, and it is at present
prospecting in Brazil, in the State of Bahia, where bituminous seepages
and traces of asphalt abound. Its concessions actually surround
two-thirds of the Caribbean Sea: they are situated in the States of
Guatemala, Honduras, Nicaragua, Costa Rica, Panama, British Guiana,
Colombia, Venezuela, Peru, Ecuador, and the island of Trinidad. The
concessions of the _British Controlled Oil-fields_ are nearly always
on the sea coast--or rather in close proximity to the sea--which is
a considerable advantage. It has expressly chosen them, on both the
Atlantic and the Pacific, as a precaution _in case war should break out
between Britain and the United States_; for, even with the help of the
Japanese fleet, the British Navy might not be able to seize the Panama
Canal. And its units must be in a position to replenish their stores
of fuel without being obliged to make a long detour round the Magellan
Straits.
The _British Controlled Oil-fields_ is at present negotiating for the
control of important concessions in Panama and Nicaragua. It controls
all those of British Guiana, nearly all those of Honduras, but I
fear it is about to lose those it had in Costa Rica. In order to
obtain them, Great Britain did not hesitate to foment revolution in
this little Republic. Unable to obtain anything from the established
Government, it helped to place in power the revolutionary President
Tinoco, from whom it got all it wanted: more than 6,000 square miles
granted to the _British Controlled Oil-fields_. Unfortunately Tinoco
has been overthrown: the regular Government, restored to power,
hastened to annul these concessions. Great Britain, to compel it to
ratify these concessions, stirred up a war between Costa Rica and
Panama, while she sent the cruiser _Cambrian_ to the coast of Costa
Rica in order to increase the pressure. Events went against her. Costa
Rican troops invaded Panama. A landing took place on February 28, 1921,
on the Pacific coast, south of the Dulce Gulf, the eastern shore of
which is common to both countries, and another less important one on
the Atlantic, towards Bocas del Toro. Panama lost the territory of Coto.
Mr. Alves, Chairman of the _British Controlled Oil-fields_, set out
in March 1921 for Costa Rica, to study the question at issue. But the
United States stepped in; and Judge White, as arbitrator, pronounced in
favour of Costa Rica. On August 26, 1921, an American naval detachment
assisted the Costa Rican forces to take definite possession of
the contested territory, in spite of the indignant protests of the
Government of Panama against the violent measures of which it was the
victim.
There is continual warfare among the little republics of Central
America. The imbroglio of British and American affairs around the Gulf
of Mexico and the Caribbean Sea (_British Controlled Oil-fields_,
_Mexican Eagle_, _Royal Dutch Shell_, _Mexican Petroleum_, _Standard
Oil_) makes this region _the Balkans of the oil world_.
The _British Controlled Oil-fields_, the board of which includes a
British admiral and a Member of Parliament, is the result of long
investigations pursued by Lord Fisher on behalf of the Admiralty. The
results of these studies are being methodically turned to account in
order to ensure to Great Britain the supremacy of the sea by means of
the supremacy of oil.
CHAPTER XIII
POLITICAL TENDENCIES OF THE _ROYAL DUTCH_
The British Oil Empire
Until 1914, the British Government seemed to resist the formidable
extension of the _Royal Dutch_ throughout the world. Under the pretext
of ensuring reserves for itself, it got possession of outlets which
this company had not yet touched, taking control of the _Anglo-Persian_
and in 1918 founding the _British Controlled Oil-fields_. The reason
was that they were not yet allied. But since the War an event of
considerable importance has taken place: Deterding has thrown in the
fortunes of his trust with those of the greatest empire in the world,
the British Empire, whose policy at present dominates the world.
At the beginning of its history, the _Royal Dutch_ was a Dutch company.
If the _Royal Dutch_ became British by its union with the _Shell_, it
was German through its Rumanian share in the _Deutsche Petroleum_,
which united the petroleum interests of the _Deutsche Bank_, _Steaua_,
_European Petroleum_, and the _Deutsche Mineratal Industrie_. The first
important capital of this powerful consortium was furnished by German
banks: the _Deutsche Bank_, the _Disconto Gesellschaft_, and the firm
of _Bleichröder_ are, as it were, the fundamental tripod supporting
the edifice. It has been justly said that if Germany had not the most
important place in the _Royal Dutch_, it is because Mr. Deterding was
more concerned with British interests. He uses the power of nations
as he uses money. Great Britain being mistress of the seas, he has
given to British capital the most important part in his undertakings.
But the Rothschild family is international. There are branches in
London, Paris, Berlin, and Vienna. Mr. Deterding had safe places to
anchor while waiting for the wind. During the retreat of the Rumanian
army, the wells controlled by the _Royal Dutch_ were partly destroyed.
Whether this destruction was the work of Rumanian or of German soldiers
is not important. The _Deutsche Bank_ was associated with Mr. Deterding
in Rumania. Whatever was the result of the War, the _Royal Dutch-Shell_
had to be compensated....
It would have been just the same as far as Bagdad. If Germany had
gained Asia Minor, the property of the _Royal Dutch_ would still have
been saved by the _Deutsche Bank_. As the Allies have the upper hand,
Mr. Deterding has nothing to fear. He is in close touch with France
and Britain. He is in opposition only to America. And this coalition
of the oil powers is a very curious one, in which enemy nations agree
at certain times and disagree at others, all of them being led by a
superior power to unsuspected ends, just as they were in the world race
for armaments. An important fact which may puzzle the simple-minded, is
that, during the War, Mr. Deterding made his flag respected.
His cleverness was such that, _whichever side was victorious_, he was
bound to come out unscathed from the conflict.
Since Great Britain has conquered Germany, he has thrown in his
fortunes with hers.
It was a master-stroke for British policy. Allied to this powerful
trust, Great Britain now possesses an oil empire extending throughout
the world:--
Europe
Russia _Royal Dutch-Shell_
Rumania _Royal Dutch-Shell_
Hungary _Anglo-Persian_
Jugo-Slavia _Royal Dutch-Shell_
Albania _Anglo-Persian_
America
Newfoundland _Anglo-Persian_
New Brunswick _Anglo-Persian_
California _Royal Dutch-Shell_
Oklahoma _Royal Dutch-Shell_
Texas, Louisiana _Royal Dutch-Shell_
Mexico _Royal Dutch-Shell_ (_Mexican Eagle_)
Central America _British Controlled Oil-fields_
Trinidad _Royal Dutch-Shell_
Venezuela _Royal Dutch-Shell_
Guiana _British Controlled Oil-fields_
Brazil _British Controlled Oil-fields_
Colombia _British Controlled Oil-fields_
Ecuador _British Controlled Oil-fields_
Argentine _Anglo-Persian_
Asia
Caucasus _Royal Dutch-Shell_
Persia _Anglo-Persian_
Mesopotamia _Turkish Petroleum_
India _Burmah Oil_
Dutch Indies _Royal Dutch-Shell_
Straits Settlements _Royal Dutch-Shell_
China _Royal Dutch-Shell_
Oceania
Australia _Anglo-Persian_
New Zealand _Anglo-Persian_
Papua _Anglo-Persian_
Africa
Egypt _Royal Dutch-Shell_
Madagascar _Royal Dutch-Shell_
South Africa _Royal Dutch-Shell_
Morocco _Anglo-Persian_
CHAPTER XIV
HOW THE UNITED STATES LOST SUPREMACY OVER OIL
The Americans themselves realize that they are about to lose their
supremacy over oil. "While we were basking in a false security, lulled
by the knowledge of our resources," the American _Nation_ wrote
recently, "foreign companies silently and energetically took possession
of the unexploited oil-fields." The _Mexican Eagle_, a British company,
received vast concessions in Mexico. The _Shell_, another British
group, established itself in many places. The _Royal Dutch_, which,
in appearance at least, was originally a Dutch company, was founded
to exploit the oil of the East Indies. Later, a fusion of the _Royal
Dutch_ and the _Shell_ took place, and the _Mexican Eagle_ sheltered
under the wings of the new company. The _Anglo-Persian_ was created
to exploit Persia and the East, and the British Government subscribed
£2,000,000, reserving the control for itself in order to supply the
needs of the navy.[27] This company was for years closely connected
with the _Royal Dutch_.[28] This gigantic aggregation of British
interests, at the present time, owns or controls a great part of the
oil of California, Oklahoma, Louisiana, Mexico, Trinidad, Venezuela,
Colombia, Rumania, Russia, Persia, Egypt, India, and the East Indies.
Except in North America, many of the concessions are so vast that
they exclude American companies from the most profitable oil-fields.
However, adds the _Nation_, the experts of the United States Geological
Survey were making disturbing discoveries that 40 per cent. of American
oil was exhausted, and that, at the present rate of production, the
exploitation would be complete in fifteen or twenty years, for home
requirements were becoming so great that more oil would have to be
imported than was being exported. In 1920, the imports exceeded the
exports by 100 million barrels. And _British companies, closely
connected with the British Government, are now in exclusive possession
of 90 to 97 per cent. of the future world production_. What a change in
the situation!
Ten years ago, Britain possessed no oil, to-day she is independent,
to-morrow she will be mistress. The feat has been accomplished by the
silent efforts of a few men such as Sir Marcus Samuel, chairman of the
_Shell_, Lord Cowdray (Pearson), Lord Curzon, formerly Viceroy of
India, Sir John Cadman, technical adviser to the British Government,
Professor in the University of Birmingham, and Chairman of the
Inter-Allied Petroleum Conference during the War, Lord Strathcona,
creator of the Canadian railways, who played a great part in the
_Anglo-Persian_, and, above all, Admiral Lord Fisher.
These men acted _even without the knowledge of the British people and
its parliamentary representatives_. Their fellow-countrymen and their
opponents only heard of their activities _when they had endowed their
country with a world-wide oil empire_.
There was veritable amazement in the House of Commons when it was
informed of what Lord Fisher and Lord Strathcona had done with the
_Anglo-Persian_. Their work narrowly escaped undoing. Lord Fisher
himself described, in September 1919, the opposition he met with, even
among his colleagues. "I was dubbed 'an oil maniac' when I was at the
Admiralty in 1885. Lord Ripon, the First Lord, sent for me and told me
I was called a Radical enthusiast and nicknamed 'Gambetta,' and said he
meant to make me a member of the Board of Admiralty. I told him all the
rest of the Board would leave. He saw me a week after and confessed it
was so; but, thank God! I was spared to be Director of Naval Ordnance
instead."
Lord Fisher experienced the same difficulties when he wished to
equip the British Navy with submarines. It is to him, and to the
Bethlehem Steel Works (United States), that the Allies owed the prompt
completion of the special type of submarines which "went, unconvoyed
from America to the Dardanelles and acted there prodigiously." A few
of these submarines which succeeded in passing through the wire nets
of Chanak-Nagara, for a long time controlled the Sea of Marmora and
prevented the Turks from taking supplies by sea to their fortifications
on the Straits. Oil supremacy and naval supremacy go hand-in-hand. When
he wished to give his country empire over oil, Lord Fisher's principal
object was to preserve her dominion over the seas. For that fleet will
be victorious which has at its disposal the most abundant sources of
oil. Ships using oil have driven out those burning coal, just as the
latter replaced sailing ships.
When we compare the results obtained by France and by Britain, on whose
soil it seems that no deposits of mineral oil have yet been discovered
(a fact which rendered Lord Fisher's task none the easier); and when we
see Britain mistress of nearly all the oil remaining in the world, we
stand confounded with admiration before the genius of those to whom she
owes such an empire.
British Oil Policy
Having been obliged to allow the first place to America, the country
which first discovered oil, and which until recently produced 70 per
cent. of the world's output, Great Britain began to gain upon her by
keeping command of oil-carrying ships. Whoever transports a commodity
controls it, and is master of it up to a certain point, for he is the
indispensable intermediary for those who wish to obtain it. Should any
difficulty arise, the transporter, according as he fulfils his office
or not, grants or withholds supplies for the markets, as he pleases.
The British genius has always sought to compensate, by maritime
superiority, for the inferiority of Great Britain in certain respects.
If the United States occupied the first place among producers of oil,
they ranked second to Great Britain as transporters. Great Britain,
understanding that oil "is destined to play the same part in the world
as coal, cotton or steel," made a special point of retaining control of
oil-carrying ships. It was a thrilling duel.
The world tonnage of tank-steamers rose by June 30, 1919, to 2,616,000,
tons, of which 1,500,000 tons sailed under the British flag, 1,000,000
tons under the American. In June, 1920, the United States had gained
the first position. They had 308 tank-steamers, amounting to 1,734,843
tons, or 51 per cent. of the whole (3,386,091 tons). On January
1, 1921, the supremacy of Great Britain was restored. Of the 524
oil-steamers afloat, 252 belonged to her, the United States having only
191. But she lost this position again six months later.
Mistress of one of the foremost oil-carrying fleets, Britain next
sought, until 1922, to monopolize almost all the remaining resources of
the world. The _Royal Dutch-Shell_, _British Controlled Oil-fields_,
and _Anglo-Persian Oil_ were valuable auxiliaries of the Foreign Office
for this object. According to Dr. David White, one of the members of
the American Geological Survey, this is what Great Britain possesses
to-day:--
Million
barrels.
Canada: the whole of the deposits are reserved for
British control 995
Algeria, Egypt: 50 per cent. 462.5
Persia, Mesopotamia: 75 per cent. 4,365
S.E. Russia, S.W. Siberia, Caucasus: 50 per cent. 2,925
Rumania, Galicia, Europe: 50 per cent. 1,567.5
New Russia and Sakhaline: 50 per cent. 462.5
Dutch Indies: 50 per cent. 753.75
India: the whole 995
In Peru alone have the United States triumphed over Great Britain.
The discovery of oil there is due to the English. But, thanks to the
power of its capital, the _Standard Oil_, through the medium of the
_International Petroleum Company_, managed to acquire the shares of the
four most important British companies. And the United States at present
controls 70 per cent. of the output there, the British retaining only
27 per cent. and Italy 3 per cent. The Peruvian production, however, is
not very high; it does not yet reach 3 million barrels.
The need for oil has grown so great that the deposits containing this
precious liquid fuel are greedily coveted by the various governments
which take shelter behind financial groups. _There is a shortage of 250
million tons of coal on this planet, and it produces only 98 million
tons of oil._ But no Government can boast, in this matter, of having
shown a foresight equal to that of Great Britain.
The British Government is no longer content to-day to encourage, favour
and defend its own nationals. Better than this, it makes conquests or
establishes protectorates having as essential object the reservation
exclusively for its nationals of new oil-bearing territories, such
as Persia and Mesopotamia. The treaty recently imposed on Persia was
nothing but a disguised protectorate. Fortunately for Britain, the
Soviet Government has voluntarily given up its advance into that
country since it concluded a trade agreement with London. And it is
sufficient to read the Treaty of Sèvres to see the underlying motives
of the British negotiators: the desire to monopolize the oil of Asia,
and anxiety to keep out the United States, all the oil-fields left to
France being in particular granted to her with the idea of a future
British participation.
The British Government is so jealous of its position in Mesopotamia
that it will not even tolerate American prospectors there, and certain
incidents have happened in connection with which the disappointed
Yankees have asked the State Department at Washington to demand
satisfaction.
The British oil policy is not uniform. Sometimes, when it seems
possible, she gets possession of proved oil-fields. Sometimes, in the
case of a country which would hold its own, she negotiates for an
advantageous share in the profits--this is what happened with France
by the San Remo Agreement--or she makes contracts ensuring abundant
supplies of the precious mineral oil.
When a State does not fall in with her views sufficiently quickly,
Britain does not recoil from any means of pressure. This is what led
Admiral Degouy, in April 1920, to write: "As a corollary to well-known
negotiations with one of the richest countries in oil in the Near East,
the British Admiralty has organized and is maintaining on the Danube a
numerous flotilla of gunboats and river monitors." The reason is easy
to guess.
From 1918 to 1920 an unofficial squadron of small Russian steamers,
requisitioned and armed by Great Britain, dominated the Caspian Sea,
so that Batum, the port of embarkation for oil on the Black Sea, and
Baku, its place of production, were both in the hands of the British.
They disposed of the petroleum and mazut there at their own pleasure,
permitting no control over their purchases. Britain first took as
much as she could; it was only afterwards that she allowed France to
replenish her stores in turn, provided there was any petroleum left.[29]
Thus ends the work of Lord Fisher, who applied himself for more than
thirty years to the problems of oil. Thus end the experiments and
observations conducted modestly and quietly for so long at Portsmouth.
Henceforward the British Navy is sure of its supplies of oil for a
century. But the position is such that the United States can avoid war
only at the price of industrial servitude.
Hemming-in of the United States
While Great Britain was pouncing upon nearly all the oil remaining in
the world, the United States basked in a false security. Had they not
supplied 80 per cent. of the needs of the Allies during the War? It is
true that if the War had continued the United States would not have
been able to satisfy those needs. "In September and October 1918,"
declared Mr. Deen, who played such an important part in the alliance
of the _Royal Dutch_ with the _Shell_ and who now directs the oil
industry of Oklahoma, "the Allies were taking each day 194,000 barrels
of petrol, while the average daily output was 191,000. Adding together
the consignments sent to Europe by Mexico and the United States, we
reach the figure of 1,200,000 barrels a day, while the United States
was producing only 960,000 and Mexico 140,000. The daily deficit was
thus 300,000 barrels."
The United States sacrificed themselves in the cause of the Allies
during the War.[30] Great Britain has shown no gratitude. They had
already reached the point at which they could not supply their home
consumption, since 25 per cent. of the petroleum consumed in the States
used to come from Mexico, and they sent the Allies more than their own
production. The War contributed not a little to placing them in their
present position.
According to Walter Teagle, the new chairman of the _Standard Oil_,
if their consumption continues to increase at the present rate they
will consume, in a few years, 630 million barrels, or double what they
produced in 1919. Since 1914 alone the number of motor-cars in the
United States has increased from 1,700,000 to 8,000,000 (Ford cars
swarm there). These alone absorb 85 per cent. of the national output,
leaving only 15 per cent. for the railways, shipping, manufactures and
export.
The American companies have made a great effort. They have speeded up
production, raising it from 376 million barrels in 1919 to 443 million
in 1920. New exploratory work has been carried on, especially in
Texas and Kansas. But will not this hasten yet more the time when the
resources of the United States will be exhausted?
At the word of command from the United States Government, "Draw more
and more on the oil in foreign countries," the _Standard_ sent out
prospectors all over the world. But everywhere they ran up against
an unforeseen obstacle. An American prospector had the misfortune
to appear on the shores of the Dead Sea in October 1919. Without
hesitation the British General who was Governor of Palestine had him
arrested in Jerusalem. To the indignant protests of President Wilson
Britain simply replied that it was not a question of measures aimed
specially against the Americans, but that all prospecting in Palestine
was forbidden until a new order. The same thing happened in Mesopotamia.
Everywhere in the world, except possibly Canada, in which country
they have considerable influence on account of their geographical
proximity, the Americans for two years found the "closed door."[31]
Generally they were either completely excluded from oil-bearing
concessions situated in the territory, the colonies, or even the sphere
of influence of Great Britain, Japan and the Netherlands; or else they
were authorized to establish themselves only under such conditions
that they would lose the effective control of their undertakings.
Foreigners are forbidden to prospect for oil in Burma, India, Persia,
Uganda and the United Kingdom. A policy which _excludes foreigners from
the control_ of petroleum products is followed in Algeria, Australia,
Barbados, Kenya Colony, British Guiana, France, French West Africa,
Guatemala, Japan, Formosa, Saghalien, Madagascar, Mexico, New Guinea,
and probably in the Union of South Africa. Venezuela and Uganda are
considering a similar policy.
The _right to exploit mineral wealth_ cannot be granted to foreigners
in Australia, Barbados, Kenya Colony, New Guinea, the Dutch Indies,
France, French West Africa, Guatemala, India (probably), Great Britain,
Japan (practically), Trinidad (in part), Venezuela, Madagascar, and,
except for rights already acquired, in Rumania and Slovakia. Temporary
restrictions have been placed on the acquisition of oil concessions
by foreigners in two districts of Colombia and in the new Rumanian
territory.
The ownership of oil deposits belongs to the Government in Bolivia,
Costa Rica, Slovakia, South Africa, Uganda, Venezuela, Great Britain,
and partly so in the Argentine, Australia, British Guiana, Ecuador,
India, Trinidad, Canada and Colombia. The Dominican Republic, Mexico,
Rumania and Russia are considering the possibility of following the
same course. But the United States have pledged themselves not to
recognize the new Mexican Government unless it renounces this measure.
In France the Government has regalian rights over the riches of the
subsoil; it grants them at its discretion.
In face of this situation, Senator Gore of Oklahoma, on March 10, 1920,
demanded of the Federal Government a report upon the measures taken by
foreign Governments to exclude Americans from oil-fields. Two months
later, on May 17th, President Wilson transmitted to the Senate the
report of the Secretary of State.
"The policy of the British Empire," wrote the Acting Secretary of
State, Frank L. Polk, "is reported to be to bring about the exclusion
of foreigners from the control of the petroleum supplies of the Empire,
and to endeavour to secure some measure of control over oil properties
in other countries. This policy appears to be developing along the
following lines, which are directly or indirectly restrictive on
citizens of the United States:--
"1. By debarring foreigners and foreign nationals from owning or
operating oil-producing properties in the British Isles, colonies and
protectorates.
"2. By direct participation in ownership and control of petroleum
properties.
"3. By arrangements to prevent British oil companies from selling their
properties to foreign-owned or controlled companies.
"4. By Orders in Council that prohibit the transfer of shares in
British oil companies to other than British subjects or nationals."
These measures have led to the control of the _Shell_, by agreement
with the _Royal Dutch_, which holds 60 per cent. of its shares. "It
is understood that the British Government has a controlling interest
in the _Anglo-Persian Oil Company_, and that it has also assisted in
the development of the Papuan oil-fields by bearing one-half of the
expense and contributing experts...." All prospecting for oil in the
United Kingdom must be authorized by the Board of Trade. In fact, the
only borings carried out in the country are by _S. Pearson and Son,
Ltd._, acting as petroleum development managers to the Government. In
Trinidad no one may acquire oil-bearing land without the authorization
in writing of the Governor, subject to the approval of the Secretary
of State for the colonies. Now the latter requires of every British
company that not more than 25 per cent. of its capital is to be held by
aliens and that the majority of the directors shall be British.
The Polk Report goes on to prove that almost all other countries, even
the smallest, close the door to Americans. Only Bolivia, Colombia and
Costa Rica, which has recently annulled the concessions granted to the
_British Controlled Oil-fields_ place Americans and their own nationals
on the same footing. The case is different in Guatemala, in Ecuador,
and, above all, in Mexico, "only Mexicans by birth or naturalization
and Mexican companies have the right to acquire ownership in lands,
waters and their appurtenances, or to obtain concessions to develop
mines, waters, or mineral fuels in the Republic of Mexico. The nation
may grant the same rights to foreigners provided they agree before the
Department of Foreign Affairs to be considered Mexicans in respect of
such property and accordingly not to invoke the protection of their
Governments in respect to the same, under penalty, in case of breach,
of forfeiture to the nation of property so acquired. Within a zone of
100 kilometres (62.14 miles) from the frontiers and of 50 kilometres
(31.07 miles) from the sea-coast, no foreigner shall under any
conditions acquire direct ownership of lands and waters."
Meantime the San Remo Agreement had been signed, by which the French
Government--voluntarily or no--associated itself with Great Britain
in order to drive out America from the Asiatic centres of petroleum
production, and delivered over to her the resources which might be
discovered in the zones of influence reserved for France. The French
Government was so embarrassed about this agreement that for three
months it dared not publish it.
When it made up its mind to do so, the publication aroused grave
anxiety in the United States.
The Struggle for Mesopotamia
However, public opinion and American official circles followed the
progress of the struggle with passionate interest. The situation became
even more strained in consequence of an article in _Sperling's Journal_
by Sir Edward Mackay Edgar, which constituted a literal defiance.
Great Britain openly boasted of her triumph. "I should say," wrote
Sir Edward, "that two-thirds of the oil-fields exploited in Central
and South America are in British hands. In the states of Guatemala,
Honduras, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, and
Ecuador, the great majority of the concessions are in the hands of
British subjects and will be developed by our capital.
"The Alves group (_British Controlled Oil-fields_) whose properties
extend two-thirds round the Caribbean Sea is entirely British; and the
regulations controlling it ensure the absolute perpetuity of direction
in the interests of Great Britain. No citizen, no American group,
has attained, or will ever attain, in Central America a position ...
like that of Mr. Alves. If we consider the greatest of all petroleum
organizations, the _Shell_ group, it possesses or controls undertakings
in every oil-producing country of the world, including the United
States, Russia, Mexico, the Dutch Indies, Rumania, Egypt, Venezuela,
Trinidad, India, Ceylon, the Malay States, China, Siam, the Straits
Settlements and the Philippines.
"No doubt we shall have to wait some years before the benefits of this
position can be reaped; but there is no doubt that the harvest will be
magnificent. Before long America will be obliged to buy from British
companies, at the rate of millions of pounds every year and to pay in
dollars, in increasing quantities the oil she cannot do without, and
which she can no longer obtain from her own reserves.
"I estimate that if their consumption continues to increase at the
present rate, in _ten years the Americans will be obliged to import 500
million barrels_, which, at the very low price of two dollars a barrel,
means an annual paying out of a thousand million dollars, of which
the greater part will fall into British pockets. With the exception
of Mexico and a small part of Central America, _the whole world is
solidly barricaded against an attack in force by the United States_.
The British position is impregnable."
One year after the peace the struggle between Great Britain and America
reached its bitterest phase. The United States wished to obtain, at
any price, part of the oil deposits of Mesopotamia and of the new
oil-bearing territory which had just been discovered at Djambi in the
Sunda Islands. Consequently, on November 20, 1920, Mr. Colby, Secretary
of State, addressed a Note to Lord Curzon, which the American Press
published on the 24th, in which he protested against the exclusion of
Americans from Mesopotamia and claimed equality of treatment for all
nations.
The British Government made, at the time, only a vague reply to the
Colby Note. The English Press published the complete text.[32] Lord
Curzon then declared that the existing British rights in Mesopotamia
were only the confirmation of those acquired before the War by
the _Turkish Petroleum Company_, the control of which the British
Government holds in common with the _Royal Dutch_, for it has
bought 200,000 ordinary shares in this company. But for the War the
exploitation of the oil deposits of Mosul and Baghdad would long since
have begun. The rights acquired by the French Government under the San
Remo Agreement represent only the German share, and they were granted
in return for facilities given for the dispatch to the Mediterranean of
the petroleum produced. Neither the rights of the _Turkish Petroleum
Company_, nor the San Remo Agreement will preclude the Arab State of
Iraq from enjoying the full benefit of ownership or from prescribing
the conditions upon which the oil-fields shall be developed. The
British Government has no desire whatever to deny the United States a
share in the expansion of the petroleum industry of Mesopotamia. And
the British Note draws attention to the fact that London by no means
agrees with Washington on the estimate of the petroleum resources
of the various nations. While the potentialities of the future are
necessarily problematical, the undisputed fact remains that at present
United States soil produces 70 per cent. of the oil production of the
world.[33] It is not easy, therefore, to justify the United States
Government's insistence that American control should now be extended to
resources which may be developed in mandated territories. The British
Government, nevertheless, is in general agreement with the contention
of the United States Government that the world's oil resources should
be thrown open for development without reference to nationality.
This somewhat hypocritical reply did not satisfy the Federal
Government. Great Britain might be in agreement with its contention
that "oil resources should be thrown open for development without
reference to nationality," but that did not make her open up
Mesopotamia to Americans. And on the occasion of a meeting of the
Council of the League of Nations at Paris, to examine in detail the
problem of mandates, Washington, to annoy London, sent a Note on
February 1, 1921, demanding that the question of mandates over former
German colonies should be reconsidered. In the end America won her
point, for during the negotiations which were conducted in London
at the end of July 1922, Walter Teagle asked that the shares in the
_Turkish Petroleum_ granted to the _Anglo-Persian_ (50 per cent.), to
the _Royal Dutch_ (25 per cent.), and to France (25 per cent.) should
be reduced in order to make room for American interests. Deterding
protested, but finally accepted. The British Government gave way
immediately. It is a doubtful victory for the United States, for who
knows when this region will be pacified? And France will do her utmost
to avoid the diminution of her share. The Angora Government showed
itself at Lausanne determined to resume possession of the Mosul region,
which is so rich in oil and which M. Clemenceau gave up to Britain with
so little resistance.
The Struggle for Djambi
Meanwhile the _Royal Dutch_, which, in agreement with the
_Anglo-Persian_, had asked the British Government to reserve for it the
exploitation of Mesopotamian deposits, was endeavouring to monopolize
the new deposits discovered at Djambi in the Sunda Islands.
Djambi is the last great territory to be exploited in the Dutch Indies;
the oil-fields in this district cover four million acres. At first the
designs of the _Royal Dutch_ met with no opposition, and it obtained
from the Dutch Lower Chamber the grant of these deposits for its
subsidiary, the _Bataafsche Petroleum_. But two representatives of the
Standard brought a communication to the Dutch Chamber and Ministers at
The Hague. The _Standard_ offered to found a company in partnership
with the Dutch Government, which would hold half the territories of
Djambi on the same terms as the _Royal Dutch_. It recalled the fact
that in the United States the Dutch had been given every facility, and
counted on reciprocal treatment.
This unexpected communication caused great disturbance in the financial
and political world of the Netherlands. A deputy asked if the note
from the _Standard_ came from the American Government. The Prime
Minister replied that he did not know, but that in any case this note
must express the views of Washington. A Socialist member proposed
exploitation of the whole field by the State; this was defeated by 55
votes to 24. The Liberals, fearing international complications, were
opposed to the Government plan. Finally, the Second Chamber adopted
this plan by 49 votes to 30.
Thereupon a vigorous Note arrived at The Hague from Mr. Hughes, the
Secretary of State, who nearly defeated Wilson on the occasion of his
re-election to the Presidency and who holds to-day the most important
post in Mr. Coolidge's Cabinet. Mr. Hughes ordered the United States
Ambassador to insist vigorously that the Dutch Government should
grant the same facilities in the Dutch Indies to American as to other
companies. For, he said, the nationals of all countries have an equal
right to vital natural resources, and one cannot forbid access to one
particular nation. "We do not seek preference over other countries, but
we do not wish other countries to obtain advantages to our detriment.
And concerning oil, the solution of the problem is to give equal rights
to all the companies of all nations."
The Government of the Netherlands sent to Washington its reply to the
American Note. It drew special attention to the disinterestedness shown
by the Americans at the time when competition was free, a time chosen
by the _Royal Dutch_ to make a much more advantageous offer than those
of its rivals. In 1915 the exploitation of the deposits in the Sumatra
regions was granted to the State; but in 1918 this ruling was modified,
and it was decided that exploitation might take place directly by the
State, or through the agency of a company, or under the system of a
State-controlled monopoly.
At this time no American protest had reached the Dutch Government,
and none was sent until after the signing of the contract between the
_Royal Dutch_ and the Government.
However, added the Note, there still remain numerous valuable
oil-fields in the East Indies, and the Dutch Government would be
prepared to grant concessions to American capital.
This affair seems to have been by no means settled by the vote of the
Dutch Lower Chamber. The polemic continued between Washington and The
Hague. In May 1921 the American Government demanded the publication of
its Note of April 19th, which The Hague was determined to keep secret.
And in Holland the Colonial Secretary was violently reproached for
having concealed from the Chamber the details of the correspondence
exchanged with the United States. I have been able to procure the text
of the letter submitted by the _Standard_:
"The development of petroleum deposits is at present a vital question
for every country, and increasing attention must be devoted to it by
the whole world. The Dutch colonies have the good fortune to possess
extremely rich petroleum deposits, especially in the Djambi region. The
_Standard Oil_, an American limited liability petroleum company, asks
to be allowed to share in the development of the deposits at Djambi,
and a decision must shortly be taken on the matter. Considering the
great extent of the oil-fields of Djambi, the Dutch Government will
certainly not consider it to the interest of the country and people to
allow them to be exploited by a single company.
"The _Standard Oil_ submits for the approval of the Dutch Government
a scheme for founding a Dutch company under the mining legislation of
the Dutch Indies, according to which part of the Djambi region would be
exploited on the basis of the native law. This project would have to be
submitted to the Second Chamber of the States-General. The _Standard
Oil_ declares itself ready to furnish all necessary guarantees for the
exploitation of the said territory.
"The _Standard Oil_ is convinced that the Dutch Government will readily
admit that the United States, which are and always have been the
greatest producers of petroleum, could bring as much profit to Dutch
interests as they have done for their own citizens.[34] We American
companies, therefore, believe that we have a right to share in the
development of the petroleum fields of Djambi, and we are sure that
this participation would serve the interests of Holland equally with
those of the United States, and would help to strengthen the bonds of
friendship which exist between the two countries."
This did not have a soothing effect on public opinion in Great Britain.
Since the War, wrote _The Times_, the question of petroleum had become
an international question of the first order. Great Britain took an
especial interest in it; its security depended, more than that of
other countries, on power over sea and air. Up to Trafalgar, when the
essential thing was to have ships of stout oak, she watched carefully
over her forests.... She could not do the same with oil, for she
possessed so little in the Empire.
The United States desire equality of treatment. Britain denies the
justice of this claim. "United States soil," wrote Lord Curzon,
"produces 70 per cent., and American interests in adjoining territory
control a further 12 per cent. of the oil production of the world."
Great Britain, he pointed out, had only 40 per cent., and that in
distant territories.
The United States replied that eighteen years from now all their oil
would be exhausted, and they would not even be able to satisfy their
home consumption. The orders for 1920 exceeded the output. "Not so!"
replied the British. The excessive demand caused the price of oil
to rise, and the demand then diminished in reaction. You have even
been obliged to lower the price. The price of Pennsylvanian crude oil
fell from 6.10 to 3.00 dollars a barrel between December 1920 and
April 1921. And as Mexico is developed the swing of the pendulum will
continue in the same direction. But you need not fear the exhaustion of
American petroleum. Read the reports of your experts. Mr. David White,
of the United States Geological Survey, has given his opinion that the
American fields will have passed maximum production in a few years'
time. Mr. Lane, formerly Secretary of the Interior, has gone even
further, and has estimated the percentages of exhaustion of the main
oil-fields as follows:--
Lima, Indiana 93 per cent.
Appalachian 70 per cent.
Colorado 65 per cent.
Illinois 51 per cent.
But Mr. White himself admits that there are in the United States many
oil-fields insufficiently exploited or even still unknown. As for
Mexican petroleum, which is said to be threatened by salt water, there
is no need for uneasiness. Exploitation there is only just beginning
and will produce many pleasant surprises.
Lord Curzon, moreover, sweeps aside all statistics with a disdainful
gesture. We cannot trust their accuracy, he says. But this gesture
did not impress the United States; they were determined to obtain
satisfaction at any price.
FOOTNOTES:
[Footnote 27: This amount has since been more than doubled.]
[Footnote 28: By the contract already mentioned which expired in 1922.]
[Footnote 29: _Revue Universelle_, October 15, 1920.]
[Footnote 30: They did not sacrifice themselves for nothing!]
[Footnote 31: Report of the American Director of the Bureau of Mines,
Van H. Manning, to the Secretary of State for the Interior.]
[Footnote 32: _Times_, April 6, 1921.]
[Footnote 33: In reality, at the date of this Note, the United States
were only producing 64 per cent., and a great part of this output is in
British hands (_Royal Dutch-Shell_).]
[Footnote 34: The question, however, has not been settled as they
desired.]
CHAPTER XV
THE AMERICAN RETORT
The United States began to retort by feverishly carrying out a naval
program which aimed at depriving Great Britain of the supremacy of the
sea. They built an immense merchant marine, which already numbered, on
June 30, 1920, more than 28,000 ships. And their dockyards were busy
constructing battleships more powerful than those of Britain. At the
Washington Conference, Great Britain was obliged to renounce her claim
to the sole naval supremacy. Besides, she could not have continued to
struggle for it. The United States can devote hundreds of millions of
pounds to their fleet without inconvenience, but Great Britain, who has
suffered more from the War, and whose budget--if we are to believe her
statesmen--is balanced with difficulty, could not do so. The British
people are so over-burdened with taxation that it would be impossible
to obtain more from them.
If Great Britain is no longer sole mistress of the seas, what use,
in case of war, would be the enormous oil-deposits of which she has
secured the possession in Central America, Mexico, and on both sides
of South America? What would be the use of all the work of the _British
Controlled Oil-fields_?
But if Great Britain still possessed naval supremacy _in the same
proportions as in 1914_, it would be sufficient for America to have _a
fleet equal to the former German fleet_ in order to prevent her access
to the Caribbean Sea. The British fleet would never dare to venture
there. It would do as it did from 1914 to 1919!
Now, if the American fleet is in a position to prevent access to the
American coast and to the Gulf of Mexico, its adversaries may have the
most powerful battleships in their naval bases and the most imposing
reserves of motor-lorries and aeroplanes in their depots, yet all these
forces, in the present state of oil production, run the risk of being
paralysed for want of sufficient supplies.[35]
But the United States are not content with wanting to deprive Britain
of her naval supremacy. By threatening reprisals on their territory
against the _Royal Dutch-Shell_ and British companies, they compelled
the British Government to give way on questions concerning Palestine
and Mesopotamia. The Americans were all the more furious to see their
prospectors arrested in Palestine, because they had obtained the right
to make borings there, before the War, from the Turkish Government.
The whole of the valley of Yarmak, the neighbourhood of Bethlehem
(Vebi Musa), the south of the Dead Sea, and the east of the Jordan,
were to be prospected by the _Standard_.[36] Moreover, by the General
Leasing Act of 1920, the Federal Government obtained authority to
exact from every oil company operating in the United States, that it
should number none but American citizens among its shareholders. A
judicial decision has just been given, refusing to British citizens the
right to become shareholders in a company of this kind. Moreover, Mr.
Daniels, Secretary of the Navy, wished to get a Bill passed through
Congress, authorizing the President to place an embargo on the export
of petroleum. The _Royal Dutch-Shell_, which now draws 43 per cent. of
its output from the United States, would thus be unable to transport it
to Great Britain. But on this point he is in conflict with Mr. Payne,
the new Secretary of the Interior, who thinks the above-mentioned Bill
a sufficient protection for the United States. This Bill forbids the
leasing of wells by a corporation of foreign shareholders, unless these
latter belong to a country which grants reciprocal treatment; the
corporation, besides, must have a majority of foreign shareholders.
The system of reciprocity was inaugurated by President Harding.
Governments which allow free competition to American companies receive
the like treatment.
The permits solicited by the _Royal Dutch_ will therefore probably be
refused, while those sought by Canadian companies, such as the _Midland
Oil_, are much more likely to be granted; it will be enough that their
British shareholders become Canadians. For Canada has always allowed
the _Standard Oil_ very great liberty on her territory. In April 1919,
she even refused the association of interests proposed by the _Shell_,
for fear of offending Washington. If ever war broke out between Great
Britain and the United States, Canada would almost certainly proclaim
her independence and break away from the British Empire.
The General Leasing Act may become a dangerous weapon in the hands of
the _Standard_, and will perhaps be used by it to bring pressure on
the _Royal Dutch_, which has several times refused its co-operation.
Many Californian companies, subsidiaries of the _Shell_, have already
been called upon to prove that their shareholders are really American
citizens as required by Congress.
Thus, the threats uttered by Walter Teagle at the meeting of the
American Petroleum Institute in 1920 are beginning to be put into
execution: "If foreign Governments insist on carrying out their policy
of nationalizing oil-bearing territory, if they insist on keeping
petroleum deposits for their own future profit, at the same time
demanding from the United States the satisfaction of their present
needs, then there is no alternative for us but to take note of their
attitude and, as a means of self-protection, to examine the methods of
preserving our own oil for our own needs. Given their position in the
world's commerce and the economic and financial weapons they have in
their hands, the United States could certainly compel other countries
to a redistribution of oil-bearing land, so as to obtain a part of
those territories which these countries wish to keep for themselves."
"_Great Britain_," Senator Phelan pointed out, "_holds one half the
world's oil and produces only a quarter, while the United States,
owning one-sixth, produce three-quarters._ In the possible conflicts
of to-morrow, she desires, by means of oil, not only to have all the
chances of success on her own side, but also to take from her future
rivals, although they may be her friends of to-day, these same chances
of triumph. She tries deliberately to diminish the resources of
America, which will be exhausted in eighteen years, as things go at
present."
Shortly afterwards, in 1920, the former Secretary of the Interior, Mr.
Franklin K. Lane, anxiously wondered whether Great Britain was acting
in this way to prevent the growth of the American Navy. "_Now, do such
proceedings lead to peace or war?_ Is it admissible that Britain--not
merely British capitalists, but the State or Government of Great
Britain, that is, a political entity--should take possession of a
market of such importance and keep the rest of the world out of it? It
is surely obvious that if not only nationals, but States themselves,
represented by Governments, take part in economic competition, and
turn themselves into business houses or manufacturing firms, there is
no hope of appeasing the conflicts which will constantly arise from
commercial rivalry."
FOOTNOTES:
[Footnote 35: _Producteur_, January 1921, _Les Grands Programmes
Nationaux_.]
[Footnote 36: It took America three years to obtain satisfaction as
regards Palestine. On April 9, 1922, the British Government notified
the State Department at Washington that it granted, at last, to the
_Standard Oil_ the prospecting rights which this company claimed,
and conceded the same rights to Americans as to the nationals of all
Governments signing the Treaty of Versailles.]
CHAPTER XVI
FROM WASHINGTON TO GENOA
The Struggle for the Oil-fields of Russia
A period of calm followed the Washington Conference. On his way to
the United States, Sir John Cadman, the Grand Master of British Oil
Policy, was lavish with protestations of peace and good will. He
affirmed that British policy in no way aimed at eliminating Americans
from the oil-bearing regions of the world, and he even declared himself
in favour of co-operation between British and American capital in the
exploitation of oil. "If," he added, "there are restrictions in certain
Dominions and Colonies, it is because the home Government could not
resist the demand for them. Besides, in Canada, the biggest company,
the _Imperial Oil_, is American. In Trinidad there is a law excluding
all but British companies from oil concessions upon Crown lands, but no
restriction exists upon other lands in the colony. In Burma also the
participation of foreign capital is forbidden, but this prohibition is
of long standing; it goes back 35 or 40 years, and there is reason to
believe that it may soon be repealed."
Sir John Cadman went so far as to declare that he categorically
repudiated all governmental intervention in the oil question. In the
mouth of one of the directors of the _Anglo-Persian_, this statement is
somewhat amusing.
But undoubtedly, the British Government, feeling that it had gone
too far, realized the necessity of dropping some ballast. During the
Washington Conference, on the fringe of the main naval agreement, an
oil truce was secretly negotiated. Britain even consented to allow the
_Standard Oil_ to establish itself in the five provinces of Northern
Persia which had formerly been reserved for Russian interests. In
order to obtain concessions form the Persian Government, in spite of
the initial opposition of the _Anglo-Persian_, the _Standard_ had not
hesitated to make use of the American minister at Teheran.[37] _The
support which the representatives of Washington never refused has
always been one of the principal causes of its triumphs._
But the struggle between Britain and the United States was not long
in breaking out again with renewed intensity, this time for the
conquest of the remaining oil lands, now escheat, from the Caucasus
to the Urals and Turkestan. The Genoa Conference will be regarded
by history, not so much as a great effort towards world peace, as a
"Conference on Oil," at which the immense riches of the old Tsarist
Empire were offered by Tchitcherin to the appetites of the Powers. I
have developed this point in the preface to the Russian edition of
this book, which has recently been translated under the direction
of M. Melik-Noubaroff, formerly President of the Imperial Technical
Commission of Baku and chief engineer of the Nobel Company: "Though
Russia, which held first place in the world's production for a few
years at the beginning of the twentieth century, has now dropped back
to third place, the reserves contained in her soil still exceed 1,000
million cubic metres, almost equalling those of the United States and
Alaska together (1,113 million cubic metres). Persia and Mesopotamia,
Mexico itself, as well as the north of South America, rank after her.
All other countries are far behind. The time will come, perhaps in less
than twenty years (exceptional circumstances apart) in view of the
terrific rate of consumption, when the reserves of the United States
will be exhausted; then Russia will play a big part in the world."
The developed areas throughout Russia, Siberia, and the Caucasus are
much smaller than the extent of the proved deposits, which themselves
are but a small fraction of those whose existence has been indicated
with certainty by preliminary surveys. The oil resources of Russia
represent alone _one-sixth of the reserves of the world_. Hence the
greed and covetousness with which they were regarded at Genoa.
The question of oil is the primary political question of the present
age, but in this Conference at which the future of Europe was to be
enacted, France was the only nation which seemed not to notice the fact.
The Quai d'Orsay had not deigned to appoint a single oil expert to
Genoa.[38] More than that, I am in a position to state that the only
one of the French delegates who was acquainted with the oil question
had received precise instructions before his departure to keep strictly
aloof from all discussions about oil. It was, of course, manifestly
impossible to expect to settle the question of Russia's oil at Genoa
in the absence of any representative of the United States. The French
delegation therefore held only a watching brief.
By this self-denial France at any rate earned the distinction of taking
no part in the scandalous concession-hunting which went on behind the
scenes at Genoa while the Soviet delegates were discussing the great
principles of international morality with the official representatives
of the Powers. Into this feverish atmosphere the news dropped like
a bomb-shell that Krassin had signed a contract conferring upon the
_Royal Dutch-Shell_ a monopoly of the oil in the Caucasus. The news
caused a great sensation, and immediately provoked solemn denials,
which were more resounding than convincing. The few oil magnates and
their satellites who were not already at Genoa hurried thither prepared
for battle. The French Government at once dispatched M. Laurent Eynac.
The Cabinet, however, had decided that he alone should be attached
to the delegation in an official capacity. And it was not until
the afternoon of the day upon which it made this decision that it
recognized the necessity of adding M. Pincan, the very able director of
the Oil and Petrol Department of the Ministry of Commerce, on account
of the fact that M. Eynac for over a year had been out of touch with
his former colleagues.
The French delegation adopted the Belgian point of view upon the
restitution of private property, and energetically defended French
pre-War interests in Russian oil, which, in December 1920, represented
a value of 200 million francs. A common policy was elaborated in
conjunction with the principal Belgian oil companies, whose importance
in the Caucasus equalled our own, with a view to the defence of rights
acquired before and after the nationalization of mines and factories
by the Soviets. In order to obtain absolute equality of treatment for
French interests in the Caucasus, M. Laurent Eynac very pointedly
called the British Government's attention to the stipulations of the
San Remo Agreement. He relied upon Article 2 of the Agreement, based
upon the principle of cordial co-operation and reciprocity in all
countries where the oil interests of France and Britain can in practice
be combined, and upon Article 6, which runs thus:
In the territories which belonged to the late Russian Empire the
two Governments will give their joint support to their respective
nationals in their joint efforts to obtain petroleum concessions and
facilities to export and to arrange delivery of petroleum supplies.
The British Government, anxious not to obstruct the private
negotiations of the _Royal Dutch-Shell_ and the Soviets, got out
of the difficulty very skilfully by giving to this latter clause a
restricted interpretation. On May 15, 1922, in the House of Commons,
Mr. Chamberlain went so far as to declare that Article 6 and the other
analogous provisions of the San Remo Agreement would only become
effective if French and British nationals decided jointly to acquire
specific concessions. Nationals of a single country, like the British
trusts, would therefore retain complete liberty of action.
If, in the light of these explanations, one appreciates the threat of
monopoly contained in the insertion, at the instance of the British
delegation, of Clause 7 in the Memorandum of May 2, 1922, stipulating
that in cases where the exploitation of property formerly belonging to
foreigners could be assured only by incorporating them in a general
group, the preferential right to the restitution of the property should
not apply, one is driven to wonder what in such circumstances has
become of the cordial "Franco-British co-operation" spoken of in the
San Remo preamble. Would it not be merely an empty formula?
* * * * *
For a long time past, the _Royal Dutch-Shell_ had been striving to
obtain a grasp of the oil deposits in Russia, and thus to realize, by
arrangement with the British Government, its dream of world hegemony
in oil. Its only reason for not amalgamating with the _Anglo-Persian_
and the _Burmah Oil_ at the beginning of 1922 was fear of American
reprisals. The question was much debated, but after considerable
hesitation Mr. Lloyd George refused to give his consent; so soon after
the Naval Pact of Washington it would have caused something approaching
a sensation in the United States and would have appeared intentionally
provocative.
As soon as Britain had signed the trade agreement with Moscow, the
_Royal Dutch_ opened negotiations with the Soviet representatives, and
it was not long before these relations bore fruit in the sale of 10,000
tons of oil to the _Asiatic Petroleum_, one of the _Royal Dutch-Shell_
subsidiaries.
I may mention here that the signatories on behalf of the co-operatives
of Russian producers were Krassin, Rakovsky, Mrs. Varvara Polovtsef,
Victor Nogin, and Basil Krysin. The notorious agreement between the
_Shell_ and the Soviets, which agitated the Press of the whole world
and produced a scandal which almost wrecked the Conference, was not
concluded at Genoa; it was drafted in London during February in the
following form:--
The Russian Soviet Government is prepared to give consideration to a
proposal by which the sale of all oil products available for export
from the various oil-fields of Russia would be placed in the hands of
a syndicate formed upon the following basis:--
The initial capital will be provided by equal contributions from the
Russian Government and the foreign group.
The management of the syndicate will have control of all sales
and will be entrusted to a Council composed of an equal number of
representatives of the Russian Government and the foreign group.
The syndicate will be responsible to the Russian Government for
the most favourable sale of oil products possible. In order to
derive the maximum advantage from such sale, the syndicate will
provide or within an agreed period create the necessary distributive
organization, which will entail a certain capital expenditure.
It is suggested that the capital thus required be raised by the issue
of bonds bearing a fixed rate of interest.
Payment of the interest upon these bonds will be guaranteed by the
foreign group.
The syndicate will receive, as remuneration for its activities, a
certain commission upon all sales, which commission will be fixed
upon a sliding scale according to the quantities sold.
For quantities not exceeding 100,000 tons 5 per cent. is suggested;
for larger quantities a proportionate rate will be arranged by mutual
agreement. Furthermore, it is understood that any surplus realized
by the sale of Russian oil over and above the export price of the
American market will belong entirely to the syndicate.
After meeting working expenses, the profits thus realized will be
applied in the first place to the payment of the interest upon any
bonds which the syndicate may issue, and the balance will be divided
equally between the two parties to the syndicate, i.e., the Russian
Government and the foreign group.
These arrangements will hold good for five years certain, after which
period the Russian Government will have the right to redeem the bonds
at the price of issue or upon such other terms as may be stipulated
at the time of issue, and to terminate the agreement. The Russian
Government, however, will be obliged to give one year's notice at
the end of the fourth year if it desires to terminate the agreement.
In default of such notice, the agreement will hold good for another
period of five years.
It is understood that the Russian Government reserves the right at
any time to sell oil products directly to foreign Governments, but
such sales will in no case exceed 50 per cent. of the total quantity
available for export in any year.
The success of the syndicate will depend entirely in the early stages
upon transport facilities between the places where the stocks of oil
products are available and the ports of embarkation. Unfortunately,
at the present time these facilities are in some measure lacking,
and with a view to remedying the situation, the foreign party to
the syndicate will be required to invest at least £500,000 in the
transport system. This sum, as well as all other sums mentioned
below, will be guaranteed by the Russian Government, and in case of
necessity will be secured upon the stocks of Russian oil.
This money will be used for the purchase of the necessary rolling
stock, for the maintenance of pipe-lines, and, if required, for the
installation of new pipe-lines for the various products.
Against the sums thus employed, transport bonds will be issued
bearing interest at the rate of 8 per cent.; furthermore, these
bonds will carry the right to a bonus, the amount of which will be
determined by the quantity of oil products transported over and above
a pre-arranged quantity.
The amount of this bonus will be fixed by mutual agreement, and
will take the form of an agreed tax upon each pool of oil products
transported in Russia over and above a pre-arranged quantity.
Payment of the interest upon these bonds will be guaranteed by the
Russian Government, and in case of necessity will be secured upon the
existing stocks of oil.
The transport organization thus formed by the rolling stock to be
acquired and by that which is at present available will be under the
management of a Council composed of an equal number of delegates of
the Russian and the foreign group.
All rolling stock and everything belonging to this joint undertaking
will be exempt from requisition or confiscation whether by the
Central Government or by local authorities.
The Council of the undertaking will be free to appeal for qualified
foreign workmen, and in general to administer and manage the business
in the best interests of the enterprise and the objects it has in
view.
Any additional capital which may be required will be provided by
equal contributions from the Russian Government and the foreign group.
Such additional capital will be raised by the issue of bonds bearing
interest at a rate to be fixed by mutual agreement at the time of
issue, the Russian Government being responsible for the subscription
of one-half of the issue and the foreign group for the subscription
of the other half.
These bonds will carry the right to a bonus in the same way as the
bonds mentioned above.
The activities of the Council of the joint undertaking will be
subject to all laws and decrees of the Russian Socialist Federal
Soviet Republic and to all regulations which may be in force.
Of all the employés of the syndicate in Russia, 50 per cent. only may
be non-Russian.
If an agreement upon this basis is deemed possible, the foreign group
will have the right to appoint representatives in Russia to examine
conditions of transport, to take samples of existing stocks, etc.
After the expiry of ten years the Russian Government will be free to
redeem the transport bonds at the price of issue or upon such other
terms as may be stipulated at the time of issue.
It is clearly understood that these terms will provide for certain
bonuses at the time of redemption to be calculated upon the average
profits of the joint enterprise during the last two years of its
operations.
The Russian Government will signify its intention to redeem these
bonds by the end of the ninth year at latest.
I am aware that serious changes in this contract were contemplated by
the two parties in the course of the negotiations. _They were only to
be introduced if Mr. Lloyd George succeeded in bringing about the_ de
jure _recognition of the Federal Soviet Republic_. This agreement,
which was duly initialled, _but not signed_, at Genoa, referred only
to concessions for deposits not hitherto exploited. But the Soviet
Government had given an oral promise to hand over to the English the
fields which were already developed and which had been nationalized
for the past four years. Moreover, during this winter, British groups,
through Krassin as intermediary, had entered into relations with the
former owners and had negotiated with them for the resumption of their
concessions. The Bolshevik Government has always urged foreign Powers
seeking to acquire a share of Russian oil to deal separately with the
dispossessed owners in order to protect themselves against all possible
claims in the future.
From the very beginning of 1922, the _Royal Dutch_ spread a rumour
in France that it was experiencing difficulties with the British
Government and must rely upon the support of the French Government.
This manoeuvre succeeded so well that, when the French representatives
at Genoa were given precise information about the impending conclusion
of the agreement between the _Shell_ and the Soviets, they shrugged
their shoulders and smiled contemptuously; the rivalry between the
_Royal Dutch_ and Great Britain was unquestionable. If the great trust
obtained certain advantages, France would benefit; it was best to let
it carry on. Their disillusionment was bitter.
* * * * *
Now the British Government, in conjunction with the _Royal
Dutch-Shell_, has been seeking to obtain for itself the products of the
oil wells of the Caucasus, not since 1922, but since 1919. The early
negotiations proceeded slowly. Mr. Lloyd George had then but little
confidence in the permanence of the Bolshevik régime. He did not even
contemplate negotiations with its representatives. The financiers of
the _Royal Dutch-Shell_ approached only the most important of the
dispossessed Russian oil magnates. On July 27, 1920, one of the most
powerful subsidiaries of the trust, the _Bataafsche Petroleum_, bought
a large quantity of the shares in Caucasian companies owned by MM.
Mantasheff, Lianosoff and Pitoieff. For the celebrated Russian actor,
Pitoieff, is also a great oil proprietor. The purchase price was fixed
at £11,042,000, of which £645,000 was paid in cash. The balance was to
be paid by instalments, but the Russian proprietors have not received
even the first.
Events had moved quickly. Mr. Lloyd George had developed a sudden
and violent sympathy with the Government of Moscow. He now saw in it
a saviour who would secure for dormant British industry the work of
reconstructing the immense devastated empire. He had decided to bestow
upon it his official blessing, to obtain that of all Europe, and to
approve its theories and practices, in particular nationalization.
Henceforward, the _Shell_ considered it had no further concern with
the proprietors of the old régime. And Colonel Boyle, one of its most
active agents, entered into relations with Krassin, who _promised
to reserve to the_ Royal Dutch-Shell _the monopoly of the export of
Russian oil_.
Krassin promised everything he was asked, and allowed the contract to
be drafted. But as soon as there was talk of signing it at Genoa, he
gave the project such publicity that the general diplomatic hue-and-cry
which resulted prevented its signature. _It was the Soviets themselves
which divulged their agreement with the_ Shell. They have no wish to
place the greatest riches of Russia in the hands of a single people,
and especially a people so successful and ambitious as the British.
The British Government just failed to realize its greatest dream; the
conquest of the remaining oil deposits throughout the world--a conquest
which would have assured its supremacy in the future and would have
made all other peoples its tributaries.
But, in spite of everything, I believe in the future of the British
people, one of whose leaders was not afraid to say, twenty years before
Germany had begun to dream of European hegemony: "I believe in this
race, one of the greatest governing races the world has ever known,
this Anglo-Saxon race, proud, tenacious, self-confident, resolute,
which no climate and no vicissitude can corrupt, and which will
infallibly be the predominant force in future history."
FOOTNOTES:
[Footnote 37: I believe that the exploitation of these deposits will
shortly be placed in the hands of the Sinclair Company, one of the most
powerful American concerns after the _Standard_. A large number of
shares in this company have recently been bought by the _Standard_.]
[Footnote 38: Nevertheless, it had been warned as early as the previous
March of the agreement which was afoot between the _Shell_ and the
Soviets, and it had seen the text of the contract.]
PART IV
FRANCE'S PART IN THE STRUGGLE BETWEEN GREAT BRITAIN AND THE UNITED
STATES
CHAPTER XVII
THE CARTEL OF TEN
In this bitter struggle between Britain and the United States for
dominion over the world's oil, what is France's position? France as yet
possesses very little oil, although petroleum has been found in various
parts of her colonial empire and that of Alsace has been restored to
her; but on account of her political importance, she is a "second"
who may decide the victory. Hence the efforts made by the two great
Anglo-Saxon nations for her alliance.
After 1870, there was no free competition in petroleum in France. The
industry fell into the hands of the great firms which, sheltered behind
the customs barriers established by the National Assembly at Versailles
immediately after the Commune, formed a cartel enjoying a veritable
monopoly, and apportioning the different regions of France. These
ten firms did not compete. They fixed their prices in agreement and
shared among themselves the quantities to be sold. It would have been
impossible for an eleventh to establish itself in France without their
consent. In the original cartel of 1885 there were only three members;
round these the other existing refineries grouped themselves in 1893.
Thus the Cartel of Ten was formed:--
_Fenaille et Despeaux._
_Désmarais frères._
_Fils de A. Deutsch._
_Compagnie Industrielle des Pétroles._
_Raffinerie du Midi._
_Société Lille-Bonnières et Colombes_ (_L.B.C._).
_Paix et Cie._
_G. Lesieur et ses fils._
_Compagnie Générale des Pétroles._
_Raffinerie de Pétrole du Nord._
These were the ten firms which, protected by the ridiculously high
customs tariff fixed on July 8, 1871, had monopolized for their own
profit the sale of the petroleum brought in by the then all-powerful
_Standard_. With a total capital not exceeding 100 million francs,
_they made for the ten of them a profit of 50 million francs a
year_.[39] Thus, France paid more for her oil than any other country
in Europe. Protected by its agreement with the trusts by which it
guaranteed them the monopoly of its supplies, the cartel did not exert
itself. We had only 400 tank-wagons, 54 ill-organized depots, and 17
refineries. The process of refining in France has never employed more
than 300 to 400 men, of whom just over a third were specialists.[40]
Their fleet of tankers in 1914 comprised only 14 small boats of 3,000
to 6,000 tons, of which only three sailed under the French flag. The
others were under the British flag "in order to profit by the less
burdensome shipping regulations." It was a veritable humiliation for
France, when, at the beginning of the War, she had to beg Great Britain
to be good enough to return them. Britain had requisitioned them. If
the two countries had not been allied, France would have been disarmed
from the very first day! Eight of these ships were sunk during the War,
and when the cartel was asked to build new ones it refused, "so as not
to give offence" to the great trusts.
Except for Charles Paix, who made a disastrous attempt to the south of
Cheliff in Algeria, none of the "oil men" tried to discover petroleum
in France or her colonial empire, and so to endow the country with a
real independent petroleum industry. They much preferred, with the
aid of the _Standard_, to draw large profits without running any
risks. A remark of M. Deutsch de la Meurthe on this subject has become
famous: "The greatest misfortune that could happen to us would be to
discover petroleum deposits." M. Barthe well remarked in the course
of a comprehensive indictment: "Our oil magnates have been neither
producers nor transporters of oil, and they have not even continued to
be refiners." For, since the law of 1893, which lowered the import duty
from 20 francs to 9 francs a metric quintal[41] for crude oil, and from
32 francs to 13.50 francs for refined oil, thus reducing the incredible
difference of 120 francs a ton between the two, the Cartel of Ten has
arranged with the _Standard Oil_ to bring into France refined American
oil with 7 or 8 per cent. of residual impurities, _which it passes
as crude oil_, so frustrating the fiscal duty and realizing enormous
gains. The understanding with the _Standard_ was changed about 1904
to a close dependence; the Ten became nothing more than Rockefeller's
representatives in France, his _oil importers. The_ Standard _fixed the
quantities to be sold by each one and made them sign an undertaking
to sell at the prices fixed by it at the beginning of each week_. In
the old refineries of Paris, Rouen, Bordeaux, etc., the agents of the
_Standard_ carried on a simple process of distillation, a mere pretence
of refining, well-known under the name of "cracking." They imported a
mixture of mineral spirit and petroleum, oil manufactured in America,
a mixture which they had only to heat slightly in order to separate
the volatile spirit (petrol) from the heavy constituents (petroleum
oils). This fiction has always been admitted by the State officials. It
has allowed really refined oils to come into the country as crude oil,
paying the minimum duty. Millions have thus been lost by the State to
the profit of a few privileged individuals.
Later on, when the cartel made an arrangement with _André et Cie._ that
they should deliver Russian oil to it alone, the _Standard_ wanted the
agreement submitted to it for ratification, and laid down the condition
that _André et Cie._ should only make deliveries in the proportions it
decided upon.
Thus, the _Standard_ was dominant in France up to the War, fixing
prices and eliminating other importers. But, in spite of the lowering
of the customs duties in 1893 they still remained so high that the
_Conseil Supérieur de Navigation Maritime_, at its meeting of May 15,
1913, complained of the difficulties of procuring petroleum in France
at "reasonable terms." Mazut, the price of which is very low, could
not enter the country on account of the 9 francs duty, with which the
legislature had burdened it without discriminating between various
kinds of crude oil of greater or lesser value. In 1918, the world as a
whole was consuming 30 million tons of mazut, France not one quintal.
And her shipping was very much behind that of other nations with regard
to the use of the Diesel engine. Very few of her vessels burned oil.
"What absolutely prevents the fitting up of our ships" wrote the
Under-Secretary of State for the Merchant Marine, in a letter to the
Minister for Commerce on June 2, 1913, "is the exaggerated price of
liquid fuel caused by the fiscal exactions." On July 21st, M. Charles
Roux, president of the _Comité Central des Armateurs_, took steps to
obtain a lowering of these tariffs. They were without result until
1919, the year in which M. Clemenceau got the Chamber to pass the law
of August 7th, which lowered the import duties on mazut from 9 francs
to 0.40 francs. At last the prohibitive customs barrier was broken
down. The tax on coal was then 1.10 francs a ton. A ton of liquid fuel
paid duties _one hundred times as high_ (90 to 120 francs). From the
fiscal point of view, this tax brought in nothing to the Treasury. _It
was so high that it prevented all importation._ And thanks to that,
also, France was left behind by all her rivals.
FOOTNOTES:
[Footnote 39: Henry Bérenger, _Le Pétrole et la France_, p. 280.]
[Footnote 40: Le Page, _L'Impérialisme du Pétrole_.]
[Footnote 41: 220 lb.]
CHAPTER XVIII
THE PETROLEUM CONSORTIUM
At the beginning of the War, the French State possessed no reserves
of petrol or petroleum: a new example of the unpreparedness so often
remarked!
The "refineries" disposed of a stock amounting at the end of July 1914,
according to the Customs statistics, to:--
408,200 quintals of crude oil,
433,560 quintals of refined oil,
342,090 quintals of petrol.
To meet the earliest needs, these were requisitioned. But, from the
month of September, this method was changed for that of contracts with
the "Ten." The cartel undertook to meet the needs of France; it made
itself responsible for purchases from abroad. The State was thus a mere
customer enjoying the rights of priority over other customers.
The consumption was then unimportant. At the time of the first battle
of the Marne, France had 22 squadrons of 6 aeroplanes (= 132), with
engines of 80 or 100 horse-power; 110 motor-lorries and 50 tractors (=
160). The Germans had 70,000![42]
At the time of the battle of Champagne, France had 4,000 aeroplanes
and 8,500 motor-lorries; that compelled her to increase her reserves
of oil from 22,000 to 40,000 tons. But the crisis as regards supplies
began in April 1916. Payments to foreign countries were more than could
be met by the cartel, which, having just paid an account of a hundred
million francs for purchases made by the State, could advance no more
money. The position grew steadily worse and reached its culminating
point after the United States came into the War in November 1917. The
original little fleet of tankers quickly proved as inadequate as the
size of the docks provided in our ports, which were intended for boats
of 4,000 to 5,000 tons while the American tank-steamers were of 10,000
to 15,000 tons. On December 5, 1917, the Cartel of Ten had to confess
its impotence and resign to the State a task which was too much for its
powers. The stocks ran grave risk of becoming too completely exhausted
on March 1, 1918. It was imperative "to effect a reorganization
which history will record as one of the most substantial triumphs of
the Entente at the decisive moment, and which resulted--thanks to
the pressure on behalf of France which President Wilson put on the
_Standard_--in doubling the figures of our importations of oil and
petrol" (Report addressed to M. Clémentel, Minister of Commerce, in
April 1918). Mr. Wilson, as soon as he received M. Clemenceau's moving
appeal, summoned Bedford and W. Teagle to his room, and insisted that
a certain number of their ships should be taken off their usual routes
and sent to France. Eight days later, three magnificent tank-steamers
entered a French port, bringing 30,000 tons of petrol. And since then,
thanks to a new system of rotation of ships, France was enabled to
receive annually a quantity which, finally, exceeded a million tons.
(Each boat was made to do one extra voyage a year; that gave a gain of
160,000 tons.) Consumption steadily increased; the requirements at the
front rose, at certain times, to 1,800 tons _a day_. France consumed:--
Tons. Tons.
1914 (first half-year: peace) 200,000 } 476,000
1914 (second half-year: war) 276,000 }
1915 457,000
1916 640,000
1917 610,000
1918 1,000,000
_87-1/2 per cent. of this oil was supplied by the American continent_,
the United States, Mexico, Trinidad, South America, etc.; _12-1/2 per
cent. only by the Old World. That is why, in case of a new war, it
would be impossible for any Power whatever to gain the victory if its
tank-steamers could be barred from access to the New World._
During the month of October 1918, alone, the consumption of the Allied
armies was:--
French 39,000 tons
American 20,000 tons
British 32,000 tons
The _Shell_ could scarcely cope with the task of supplying the British
Army. But for the help of the _Royal Dutch_ and the _Standard Oil_, "we
should have had to cease hostilities to our disadvantage, in the fifth
month of the War."[43]
After the Cartel of Ten was obliged to confess its impotence in the
midst of a crisis which nearly lost the War, its work was limited to
putting into good condition the products bought and stored by the
State. Its rôle had become singularly unimportant when the Minister of
Commerce transformed it into a consortium.
The petroleum consortium was born of the necessities of war, like the
consortium of cotton and the consortium of oils. In the midst of these
great conflicts, powerful economic associations, controlled by the
State, can alone save national manufactures and commerce from perishing
for want of materials, and can supply the enormous requirements created
by the war. When, through fear of other countries, the French Republic
took the form of an absolute monarchy, it inaugurated, under the guise
of a protective State socialism, a system of intense exploitation
of the nation's economic forces and of its products, which were
monopolized, seized, or requisitioned. The Government was, in fact,
reduced to a society of consortiums, which, each in its own domain,
were the sole buyers and distributors of wealth. There was the _Comité
des forges_ to deal with metallurgy; there was another for oil.
Because of the difficulties of importation, manual labour, raw
materials, freightage, and exchange, the simple liberty of the merchant
or the isolated manufacturer is no more than an empty word, perhaps
even a dangerous illusion.
The system of the consortium was urged by the United State Government.
Having created centralized organizations for its exports, it desired
that these organizations should come into contact, not with scattered
merchants, but with the Allied States themselves. The important
inter-allied agreements made in Paris and London, in November 1916
and December 1917, on the initiative of M. Clémentel, confirmed the
principle of these industrial and commercial syndicates, financially
responsible to the State, which becomes a direct buyer. Besides, the
French State was not anxious to see the incredible profits which were
going to result from the doubling of oil imports--imports of a value
of a thousand million francs yearly--fall into the hands of the Cartel
of Ten. It therefore imposed upon it, on March 29, 1918, after three
months of inquiries and hesitations, a curious contract.
The State reserved to itself the monopoly of the purchase and import
of oils, and sold them to a special organization (the consortium),
constituted under the form of a limited company with a capital of
thirty million francs, of which half was to be paid up immediately.
This company undertook delivery of the commodity, reimbursed the State
for its expenditure (cost, insurance, freight), itself met the charges
for unloading and storage, and re-sold the oil to the ten members
of the cartel at prices fixed for each variety by the Ministers of
Commerce and Supply. _The distributive trade within the country was
left free._ Each of the Ten subscribed towards the formation of the
capital in the following proportions:--
------------------------------------------------------------------------
|Nominal Capital| Paid-up | Percentage.
| subscribed. | Capital. |
------------------------------------------------------------------------
| Francs | Francs | Francs
_Fenaille et Despeaux_ | 4,725,000 | 2,362,500| 15.75
_Désmarais frères_ | 4,725,000 | 2,362,500| 15.75
_Fils de A. Deutsch_ | 4,725,000 | 2,362,500| 15.75
_Cie. Industrielle des Pétroles_| 3,861,000 | 1,930,500| 12.87
_Raffinerie du Midi_ | 3,504,000 | 1,752,000| 11.68
_Société L.B.C._ | 2,526,000 | 1,263,000| 8.42
_Paix et Compagnie_ | 2,238,000 | 1,119,000| 7.46
_Cie. Générale des Pétroles_ | 1,428,000 | 714,000| 4.76
_Lesieur et fils_ | 1,284,000 | 642,000| 4.28
_Raffinerie du Nord_ | 984,000 | 492,000| 3.20
----------------------------------------------------------------------
| 30,000,000 |15,000,000| --
----------------------------------------------------------------------
As the consortium was founded in the general interest, they agreed to
take interest at the rate of only 6 per cent. on the capital they had
provided. Beyond that, all profits were to go to the State. They were
fairly high, for on July 1, 1919, they amounted to 67 million francs.
This organization constituted a first monopoly of importation by
the State, under the financial management of the consortium, which
arranged for the reception and storage of the products and their sale
to refiners. Under the system which prevailed before that of the
consortium, the Ten pocketed the supplementary profits arising from
buying and transport. These were retained by the consortium for the
benefit of the community.
The oil magnates will never forgive the State for interfering with
their affairs. According to M. Henry Bérenger, "although the State left
to the cartel a large share in the management and the profits--more
than 100 million francs--the latter never consented with a good grace
to the intervention of their country's Government in matters concerning
oil. They never freely accepted the principle of collaboration with the
public authorities." In August, 1918, at the height of Marshal Foch's
offensive, a grave crisis arose from the extraordinary particularism
of the oil magnates. For fear of losing an additional profit of 15
centimes a litre, they refused to pool their cans, as the French High
Command required of them. The reports sent in at this time by General
Head-quarters are categorical in tone. The resistance from private
interests became so strong that the Government decided, in the critical
days of the great advance, to create a Commissioner-General for Petrol
with full executive powers to subordinate rigorously all private
commerce in oil to the requirements of the public safety.
M. André Tardieu, the High Commissioner at Washington, was sometimes
also greatly impeded in his negotiations by the Ten. From the end of
1917, he made direct purchases of oil from the _Standard Oil_, the
_Atlantic Refining_, and the _Texas Oil_, because of the difficulties
that had been made for him by the rivalry and manoeuvring which he
denounced in his telegrams. While the French Government was trying
to buy at £5, the oil dealers were offering £7 10s. Their clumsy and
inopportune intervention furnished the _Standard Oil_ in many cases
with an instrument of pressure.[44]
FOOTNOTES:
[Footnote 42: Report placed before the Chamber on March 20, 1919, by
the Duc de la Trémoïlle.]
[Footnote 43: Statement by M. Henry Bérenger in the Senate, June 2,
1920.]
[Footnote 44: Affairs of the _Archbold_, the _Goldshell_, and the
_Muskogee_. André Tardieu's reply to the oil magnates when challenged
by them to state exactly when and how his mission was impeded by their
proceedings.
The oil-men revenged themselves for the State collaboration which was
imposed upon them by a bitter criticism of the system of the consortium
in the _Revue Politique et Parlementaire_: accounts badly kept; profits
arising from the State's arbitrary allowances for working expenses;
ships arriving in ports where they were not expected, and without bills
of lading (hence no means of control), etc....]
CHAPTER XIX
HOW GREAT BRITAIN WON OVER FRANCE TO HER SIDE IN THE STRUGGLE WITH THE
UNITED STATES
I. Activities of the Royal Dutch and the Anglo-Persian.
On the morrow of the Armistice, on November 21, 1918, Lord Curzon
gathered together all the members of the Inter-Allied Petroleum
Conference at a great banquet, and there uttered the famous saying:
"The Allies floated to victory on a wave of oil." M. Henry Bérenger,
the French Commissioner for Petrol, proposed to retain the great
inter-allied organizations for the distribution of oil, wheat, coal,
etc. The _Standard Oil_ refused. Besides, Sir John Cadman, Sir Marcus
Samuel and Lord Curzon were not sorry to regain their freedom. They had
only one idea--to bring to a successful conclusion their vast scheme,
followed up for ten years with such admirable tenacity, in every
country of the globe, for the acquisition of oil-bearing territories.
France, in compensation for the great damage she had suffered during
the War, was to receive important rights for the development of
concessions in Galicia, Rumania, and Turkey, formerly belonging to
Germany. The great thing was to keep out the American rival. To attain
this end, as M. Delaisi pointed out, the task was rather complex.
Several things were necessary:--
1. To negotiate directly with the Quai d'Orsay in order to get the
principle admitted of an _exclusive association_ between France and
Great Britain, for the exploitation of French concessions throughout
the world;
2. To create Franco-British companies to carry out this agreement;
3. To establish a State monopoly in France, which, under pressure of
diplomatic conventions, would be bound to keep off American competitors.
On January 21, 1919, although the War was over, the mandate of the
Petrol Commission was extended for another six months. The State
retained the monopoly of buying oil and the system of the consortium.
That prevented our oil-men from working hand in hand with the _Standard
Oil_ as they did before the War.
Then, on January 30th, M. Clemenceau granted diplomatic powers to M.
Henry Bérenger. He immediately sent commissions of inquiry into every
country in which France might have petroleum interests, to London,
Warsaw, Bukarest, Constantinople, Baku, and Mesopotamia. M. Bérenger
was all in favour of a great scheme for founding an inter-allied
company in which the French State, bringing as its share the German
concessions which would be ceded to her by the treaty of peace, should
enter into association with Great Britain and the _Royal Dutch_. On
March 7th, the Walter Long-Bérenger agreement was signed, fixing the
broad outlines of a common oil policy in Mesopotamia, Rumania, and
eventually in Galicia and Russia. It was a preliminary sketch of the
San Remo Agreement. It remained only to prepare for its realization.
Eighteen days later, without losing any time, the _Royal Dutch_
offered to co-operate in the plans of the French Government in
matters concerning the management and exploitation of the various oil
interests which might be reserved to France as a consequence of the
treaty of peace. It proposed, moreover, to place at France's disposal
"all its world-wide technical, industrial, commercial and financial
organization, not only in the countries mentioned, but also _in all
other countries_" in which she might need its co-operation. And it
offered to supply France by priority, in time of peace as in time of
war.
M. Clemenceau welcomed the proposal. In order not to offend Parliament
and public opinion, which was tending more and more in favour of a
national oil policy, the _Royal Dutch_ entered into partnership with
one of the great commercial banks, the _Union Parisienne_, in order to
create with its concurrence companies of which the nationality, if not
the capital, should be French.
In this manner were created the _Société pour l'Exploitation des
Pétroles_ in July, and the _Société Maritime des Pétroles_ in August
1919, the former with a capital of 20 million francs, and the
latter of 10 million francs. In the first of these companies five
out of nine of the directors bear names well-known in the _Royal
Dutch_: Deterding, Gulbenkian (the Talleyrand of oil), Colijn, who
at one time nearly succeeded Deterding and who has been Minister
of War in the Netherlands, Cohen, Jonckheer, Hugo. France has only
a minority on the Board of this "French" company, for M. Deutsch
de la Meurthe, whose influence brought over the Cartel of Ten from
the side of the _Standard_ to that of the _Royal Dutch_, is little
more than the mouthpiece of London and The Hague. The _Royal Dutch_,
besides, subscribed 60 per cent. of the capital of the _Société pour
l'Exploitation des Pétroles_, though it now holds only 49 per cent.
In the _Société Maritime des Pétroles_, the disproportion is still
greater; out of seven directors, two only are French, and have played
an important part in French politics during the last few years. It is
to them, in particular, and to the skill of Gulbenkian, who conducted
the negotiations very cleverly, that the _Royal Dutch_ owes its triumph
in French official circles.[45]
But the British Government is not content with these two companies
founded by the _Royal Dutch_, (The second is so little French
that 19,600 out of the 20,000 shares of its capital belong to the
Anglo-Dutch trust, and 400 only have been subscribed by the two French
members of its council.) In spite of the opposition of Parliament, it
authorized the _Anglo-Persian_ to found a company much more important
than the other two put together, a company with a capital of 227
million, the _Société des Huiles de Pétrole_. This Franco-British
_Anglo-Persian_ was created by one of the most powerful personalities
of the financial world in Eastern, Southern, and Western Europe,[46] to
whom Great Britain owed the policy she was then following against the
Turkish Empire.[47]
Through the agency of Sir Basil Zaharoff, who is interested both in the
_Société Navale de l'Ouest_ and in the _Banque de la Seine_, and holds
70 per cent. of the capital of Vickers, this British firm undertook to
construct immediately, giving preference over the other trusts, the
whole of the tank-boats, of 10,000 tons on an average, destined to
ensure to the new "French" company the monopoly of the transport of oil
for the French market. France will depend for its future supplies, in
great part, on this Franco-British _Anglo-Persian_. Its stations will
be found on all her coasts, as well as in her African possessions. The
_Société Générale des Huiles de Pétrole_ will erect vast reservoirs
at Dunkirk, Le Havre, Rouen, Saint-Nazaire, La Pallice, Bordeaux,
Marseilles, Bizerta, Algiers, Oran, Casablanca, and Dakar (Senegal).
As the United States will probably still have the advantage for another
dozen years as regards oil supplies--for it is not very likely that
they will exhaust their reserves so soon as 1927, as the Smithsonian
Institute pretends--, the new enterprise set out to gain immediate
control in the matter of tank-steamers.
Everything being thus prepared in the banks and chancelleries, it
only remained to drive out the _Standard Oil_ from the French market
and to establish firmly the monopoly of purchase and importation
granted provisionally to the Petrol Commission. On May 6, 1919, M.
Henry Bérenger announced in the Chamber the profits which remained
for the State under the consortium system--profits not paid into the
Treasury, but devoted to a special object, the development of the
petroleum industry; and on June 17th, M. Klotz brought forward a Bill
to establish this monopoly permanently.
The _Standard_, which, since the Armistice, had been impatiently
waiting for the time when restrictions upon trade in France would be
removed, no longer had any illusions about the desire of the Commission
to expel it from that country. Although the _Standard_ had resumed
its freedom from the conclusion of hostilities, it had none the less
continued its supplies of oil to France, and knowing the Treasury was
in difficulties, had accepted 5 per cent. bonds in payment. Now, in
self-defence, it declared that it refused all credit.
The Oil Commission, in thus breaking free, had taken precautions
against being caught unprovided. Three days after the rupture with
the _Standard_, on November 25th, it obtained a credit of £2,000,000
from the _Royal Dutch_, which was increased on January 5, 1920, to
£5,000,000. The _Standard Oil_ was ejected and the great Franco-British
trust established in its place, thanks to this long-date contract.
But shortly after the fall of the Clemenceau Cabinet, this success
came near to being undone. No new commissioner had been appointed in
place of Henry Bérenger: a high official of the Exchequer was given the
title of Director-General. The politics of oil, when we needed a real
Petroleum Department, as in Britain, were reduced to the common level
of current events.
For more than a month (February-March, 1920), what remained of
the Petrol Commission was left at a loose end, only indispensable
deliveries were made. A state of anarchy ruled. The stocks, which
had, until then, been laid in four months in advance, fell to almost
nothing. The _Standard Oil_ took advantage of this to regain its
footing.
In spite of its promises, the _Royal Dutch_ did not succeed in
delivering sufficient quantities of oil. By March 13, 1920, the
reserves had fallen below the danger-line, to less than 75,000 tons.
The Director-General, anxious about supplies, decided to resort to the
Americans. And as the powers of the Petrol Commission had been legally
extinct since April 26th, and its provisional monopoly at an end since
April 21st, he established the system of authorizing imports, and
granted licences to several companies which had made contracts with the
_Standard Oil_. Would the _Standard Oil_ succeed in re-entering France?
It was not given the time, for the San Remo Agreement had just been
signed (April 24, 1920). A few days later, the French Government
resumed control of oil, and M. Laurent Eynac, the new Commissioner,
taking the view that what had happened during the interregnum had no
legal existence, hastened to annul the licences to import granted to
the _Standard_.
The great American trust found once more in France, as it had so often
found since the War in other parts of the world, the "closed door."
II. Diplomatic Negotiations
"The diplomatic history of the Franco-British negotiations concerning
Mosul will, when it is made known, constitute the most eloquent
document upon British policy towards France."[48] According to the
agreements of 1916, Mosul was in the French zone of influence in
Arabia. Great Britain began by obtaining the cession of our territorial
rights, as recognized by this treaty. The French Government gave way
to her desires in spite of the opposition of its Foreign Minister. But
when, later on, we demanded in compensation that 50 per cent. of the
oil of Mosul should be reserved for us, Great Britain produced at the
propitious moment the difficulty, unsuspected by our negotiators, of
the _Turkish Petroleum_, a company which she had opportunely created
in collaboration with the _Royal Dutch_ a few months before the
declaration of War in 1914. Now the _Turkish Petroleum_ had obtained
from the Turkish Government the grant of all the naphtha of the
vilayets that we lost in renouncing the Sykes-Picot Agreement of 1916.
So, having abandoned Mosul, all we were to receive in exchange was the
oil with which Britain consented, as a special favour, to supply us.
"When one knows England well," wrote M. Le Page, with justice, "one is
not surprised that, when, with the help of France she has driven out
America from the territory she covets, she should strive to throw over
her helper, having got rid of her rival."
The petroliferous basin, which extends from Persia to Mesopotamia, is
one of the most extensive as yet discovered in the whole world. The
great deposits reach as far as twenty miles to the north of Mosul. In
the valley of the Naphat, the oil flows naturally into the river. At
Hit, on the Euphrates, there are asphalt deposits which have long been
exploited by the natives. And it is probable that this petroleum basin,
which also includes Palestine,[49] continues through Syria right to the
shores of the Mediterranean. Near Latakia (Laodice) there are asphalt
beds, which the _Latakia Oil_, a British company, has been exploiting
since 1915. On the eastern side of the Gulf of Alexandretta, the
streams which flow down from Mount Alma bear traces of oil. Thus, it is
not surprising that this region has aroused, and still arouses, so much
covetousness among the Powers. As early as 1903, the _Imperial Ottoman
Bagdad Railway Company_, the famous _Bagdad Bahn_, obtained the grant
of the right of exclusive exploitation of all deposits found within a
distance of fifty kilometres from its lines. Germany transferred this
right to the _Turkish Petroleum_ when the latter company was created.
The capital of the _Turkish Petroleum_ was, to begin with,
50 per cent. British;
25 per cent. German (_Deutsche Bank_);
25 per cent. Dutch (_Royal Dutch_).
Germany's share has been handed over to France by Great Britain in
order to obtain her support in the struggle against the United States.
As the War broke out almost at once, the _Turkish Petroleum_ had not
time to begin the exploitation of the oils of Mesopotamia. After the
new King of Iraq has decided definitely what is to happen to them, it
will take nearly five years to develop them fully.
In 1914, an Anglo-German agreement had expressly recognized the rights
of France in Asia Minor. These rights, moreover, were respected in all
essentials in the agreements between France, Russia, and Great Britain,
in 1915 and 1916, for the partition of Asia Minor. This latter, in
March 1916, defined French and British zones and French and British
spheres of influence. "In a letter of May 15th," wrote the reporter
of the Public Works Commission, "Sir Edward Grey requested that, in
the zone which was to become French under the Sykes-Picot Agreement,
it should be understood that _all existing concessions_, navigation
rights, and the rights and privileges of all British religious,
educational and medical establishments would be maintained."
In a letter of the same date, M. Cambon agreed. By these means France
was tricked, for doubtless M. Cambon was not aware at the time that,
from June 26, 1914, a British firm, the _Turkish Petroleum Company_,
had obtained from the Turkish Minister of Finance, Saïd Halim, the
concession of all rights over oil discovered or to be discovered in the
vilayets of Mosul, Basra, and Bagdad.[50] Now, it was just from these
three vilayets that the oil in the French zone came; so much so that,
by the interpretation of the Franco-British Agreement of May, 1916,
France was completely ousted from the oil production of Mesopotamia.
Thanks to Henry Bérenger, a new agreement was concluded between him and
Mr. Walter Long in March and April, 1919. Henry Bérenger recalled the
agreement made before 1914 between Saïd Halim and the _Bagdad Bahn_,
the railway company which had passed into French and British hands
since the German defeat. The _Turkish Petroleum Company_ was subject
to this agreement, because the railway passed through its oil-fields.
Rights had been reserved for the Germans over half the production of
Mesopotamia. "Thus, France obtained 25 per cent. as her half-share of
the German rights." Unfortunately, this agreement met with a certain
opposition at the Quai d'Orsay. It was held up, and M. Clemenceau did
not sign it, "because, on February 8, 1919, after we had ceded Mosul
and Palestine at the request of Mr. Lloyd George upon the threefold
condition of the oil agreement--whole-hearted British support of the
French point of view in the event of American objections--and finally
the exact fulfilment of the 1916 treaty concerning the frontiers of
Syria, Mosul excepted, our British friends presented to us a map which
deprived us of one-third of Syria in addition."
Such was the explanation given to the Chamber by André Tardieu! A
certainty was sacrificed for a possibility. M. Henry Bérenger strove
to have the treaty revived, and on December 21st signed a new contract
with Sir Hamar Greenwood, the British Minister in charge of oil
questions, very similar to the Long-Bérenger Agreement, except in the
matter of native interests. This time, however, Lloyd George, not
considering it advantageous enough to Britain, refused to sign it.
Such was the situation when France went to the Conference of San Remo.
The San Remo Agreement
It was not merely the oil deposits of Mesopotamia that France, in
return for a lowly and subordinate participation in British control,
was abandoning to Britain--as they would have had the Chamber believe
at the time of the noisy debate upon Mosul--but the whole of French
oil interests, present and future, whether in the colonies or abroad.
The first article of the agreement which Mr. Lloyd George and the real
"Grand Master" of British oil policy, Sir John Cadman, presented for
signature, stipulated, it is true, that "this memorandum relates to the
following States or countries: Rumania, Asia Minor, territories of the
old Russian Empire, Galicia, French Colonies," and that the agreement
might be extended to other countries by mutual consent; but, of British
territories, only "British Crown Colonies" were opened to French
co-operation, and then only "so far as existing regulations allow."
Thus, London kept an easy method of evasion in reserve. Now, though the
British Empire counts many "Dominions," there is not nowadays a large
number of "Crown Colonies." The former German Colonies themselves, with
one exception, have been handed over to the Commonwealth of Australia,
or to New Zealand, or to the Union of South Africa. Thus, apart from
former German East Africa and a small strip of the Cameroons which
France ceded to Nigeria, these will not be open to "Franco-British
co-operation."
There is but a single country in which the San Remo Agreement has
provided equal treatment for France and Britain, at least in theory;
that country is Rumania.
Rumania is the State in which French interests were the most important;
they would be increased still more by the spoils of the _Deutsche Bank_
and the _Disconto-Gesellschaft_. Accordingly, the two Governments
pledged themselves to support each other in acquiring concessions
which belonged to sequestrated companies, such as the _Steaua Romana_,
_Concordia_, and _Vega_, and in obtaining fresh concessions. "All
shares belonging to former enemy concessions which can be secured and
all other advantages derived from these negotiations shall be divided,
50 per cent. to British interests and 50 per cent. to French interests.
It is understood that in the company or companies to be formed to
undertake the management and the exploitation of the said shares,
concessions, and other advantages, the two countries shall have the
same proportion of 50 per cent. in all capital subscribed, as well as
in representatives on the board, and voting power."
This equality was not a favour, for the French capital invested in
Rumanian oil was at least as important as that of Britain.
In the territories of the old Russian Empire, where French interests
are much less important than British interests, an equal distribution
is not provided for: it would have been to the advantage of France.
But it is stated that the two Governments will give their "joint
support" to those of their nationals who make "joint efforts" to
obtain concessions, and to export and deliver oil. Now, at the present
moment, such efforts are being made by the _Royal Dutch-Shell_
alone, which is even going to the length of proposing to the Soviet
Government to restore the oil industry of Russia, if it is granted
extra-territoriality for its concessions.
In Mesopotamia, "the British Government undertake to grant to the
French Government 25 per cent. of the net output" if the Mesopotamian
oil-fields are developed by Government action. If a private company is
used, the British Government will place at the disposal of the French
Government a share of 25 per cent. in such company. Thus, in the one
case France will be simply a consumer of oil, or in the other she will
be both a producer and a consumer. The negotiators took care to have
inserted that "the price to be paid for such participation shall be no
more than that paid by any of the other participants." They remembered
the price at which British coal had been sold them!
"It is also understood that the said petroleum company shall be _under
permanent British control_." Should a private company be constituted,
"the native Government or other native interests shall be allowed, if
they so desire, to participate up to a maximum of 20 per cent. of the
share capital of the said company, the French contributing one-half of
the first 10 per cent. of such native participation." With this system,
as M. Delaisi has observed, France would subscribe a _third_ of the
capital, upon which condition she would have a right to a _quarter_ of
the oil produced.
If Britain consented to give France this share of the Mesopotamian oil,
when, according to the document which Sir Edward Grey had got M. Paul
Cambon to sign on May 15, 1915, she was _under no obligation_ to give
anything at all--the more so because France had given up Mosul without
previously laying down any conditions about the oil[51]--it was because
the present carried with it as a counterpart privileges and exemptions
granted by France to the _Anglo-Persian_, which will have access, if it
so desires, to the Mediterranean by pipe-lines across Syria. It will
even be able to build railways, refineries, and reservoirs there, and
France is pledged to guarantee the security of its installations in her
zone without levying any tolls. No export or transit dues are to be
levied upon the oil which it sends through French ports.
Finally, while the British Government only opens its "Crown Colonies"
to French penetration, and in these restricts the favour to the
"territories of the Crown,"[52] with the further condition that the
concessions in question are not already the subject of negotiations
initiated by private interests, the French Government threw open the
whole of its great colonial empire, and undertook to facilitate the
acquisition of concessions by "any Franco-British group or groups of
good standing." It simply called attention to the fact that Parliament
had resolved that, in companies formed for the exploitation of colonial
deposits, French interests should be represented in the proportion
of 67 per cent. But the French Parliament was under an illusion: in
order to have control of a business, it is not sufficient to hold
one-half or three-quarters of the shares. Every one knows that, in
France, shareholders rarely attend the general meetings which appoint
the directors. Still less will they undertake the journey to London,
where the head office will almost always be located. They do not
even go to The Hague; this explains why they have no influence in the
_Royal Dutch_, although they hold more than half its capital. The last
increase of capital of the _Royal Dutch_ was voted by _forty-four
persons_, representing 218 votes. People did not allow their private
arrangements to be disturbed by an event which might have notable
results upon the world-future of this trust: not one share in 1,110 was
represented.
However, Britain did not wait till the San Remo Agreement was signed
before grasping the oil-fields of the French colonial empire: she
gained possession of them while the War was being fought!
FOOTNOTES:
[Footnote 45: These facts are still too recent and too controversial
for me to be able to make any more detailed reference to them.]
[Footnote 46: Agreement signed in London, October 27, 1920. Cp. chap.
xi, _A State-subsidized Company (the Anglo-Persian)_.]
[Footnote 47: Policy of the "Auxiliary Greek Empire."]
[Footnote 48: _Revue Universelle_, October 15, 1920, Le Page,
_L'Impérialisme du Pétrole_.]
[Footnote 49: The _Standard Oil_ obtained the grant of seven
concessions there, to the south of the Dead Sea, which the British are
preventing it from exploiting.]
[Footnote 50: If he knew of it, there can never have been so serious a
diplomatic blunder.]
[Footnote 51: One of two things should have been done: either Mosul
should only have been given up against the promise of a large share
of its production, or Upper Mesopotamia should have been retained,
because, even if its deposits had been exploited by British companies,
the presence of France would have forced them to reckon with her.]
[Footnote 52: This phrase does not appear in the official English text
of the San Remo Agreement.--Translator's Note.]
CHAPTER XX
GREAT BRITAIN AND THE OIL-FIELDS OF THE FRENCH COLONIAL EMPIRE
As early as July 10, 1914, M. Clémentel had appealed to the French
Government to prevent foreign Powers from laying their hands upon the
oil deposits of Northern Africa. "At a time when Britain is pursuing in
Persia a policy which is well known to you, and when oil concessions
are, at bottom, the chief cause of the troubles in Mexico," he
exclaimed, "the French Government cannot permit its representatives in
Algeria, or in Morocco, to give deposits of oil to all comers."
The Government paid no attention to this, for, two years later, Lord
Cowdray (Pearson) had obtained a concession of 730,000 hectares for
prospecting, and 101,000 for immediate exploitation. These extensive
territories were bounded on the east by the railway from Ténès to
Orléansville, on the south by the railway from Orléansville to Relizane
and thence to Saint-Lucien, on the west by the lines from Saint-Lucien
to Saint-Barbe and from Trelat to Oran, and on the north by the sea
between Oran and Ténès. And when, on November 9, 1916, M. Ernest
Outrey submitted to the Chamber documents demonstrating how the French
Government had proceeded to hand over the oil riches of Algeria without
consulting Parliament, M. Marcel Sembat, the Minister for Public Works,
deemed the following reply a complete justification:
"If you are dealing with lands where the presence of oil is doubtful
and where, according to technical experts, you would have to spend many
millions upon prospecting, and if a company says to you 'Here are our
guarantees; we have competent technicians, and we are prepared, under
Government control, to spend four million francs upon prospecting,'
what are you to do?"
When the Pearson firm addressed its request for a concession to the
French Government, on January 18, 1915, the Minister, in forwarding
it to the Governor of Algeria, did not hesitate to write that "the
question would have to be submitted to Parliament."[53]
But he was not long in changing his opinion, and, in order to dispense
with Parliament, it was decided to deal with the request "by decree
enacted by the Council of State."[54]
On August 18, 1916, before any final decision had been taken upon the
matter, M. Marcel Sembat instructed the Governor of Algeria "to give
the petitioning company every facility for the sale of oil obtained as
a result of the investigations which it may undertake." And, on October
11th, M. Lutaud forwarded to him the following letter from the Prefect
of Oran, which pointed out an ingenious method of _evading the law upon
concessions_:
"In conclusion, M. Dussert (Engineer-in-Chief for Mines at Algiers)
proposes, if the Administration should decide not to present a Bill to
Parliament, a different solution from that contemplated by the Minister
for Public Works. He suggests that an immense mining concession,
covering the whole of Dahra, the Bel-Hacel range, and the forest of
Mouley-Smaïl, should be granted to Algeria, leaving the colony, from
the date of this concession, to give the oil company a three years'
lease, renewable for two years, which could be made permanent as soon
as the company had selected the lands which it wished to retain."
There followed a report by M. Dussert upon the petition: "This petition
is formulated upon entirely abnormal conditions; _the boundaries to
which it would apply would enclose an area fifteen times as great as
the concessions which are usually granted_."
What the English desired above everything was to get a grip on
these vast lands so as to keep off their American rivals, should
important sources of oil be found there later on. The production of
oil in Algeria is still insignificant, though it increased almost
tenfold between 1914 and 1917. Henceforward, the majority of companies
operating there, the _Société co-intéressée des Pétroles algériens_,
the _Société algérienne des Pétroles de Tiliouanet_, the _Société
d'Études, de Recherches et d'Exploitation des Pétroles en Algérie_, are
invariably British. Lord Murray has even been ingenious enough to have
inserted in the articles of association of the last-mentioned company
a clause which nullifies all the precautions taken by the legislature:
two-thirds of the directors are to be French, as the law requires;
the managing director is to be French; but "the Board may in addition
by special resolution confer powers upon such persons as it deems
fit and for such purpose or purposes as it may determine."[55] This
little paragraph alone changes the whole aspect of these articles of
association, which, on the surface, appear to conform so closely with
the requirements of Parliament. The company will entrust its interests
to whomsoever it wishes.
But Britain has not been content with seizing the deposits in
Algeria.[56] She has also installed herself in Madagascar. Since June,
1921, the _Royal Dutch_ has been making a minute inspection of the
fields of Sakalava.[57]
And if the hope to which M. Launay gave expression at the Academy of
Sciences is realized, and oil is found in Indo-China, Laos, Tonkin, and
Annam, the _Royal Dutch-Shell_ will probably waste no time in gaining
possession of deposits so near its base.
FOOTNOTES:
[Footnote 53: Letter from the Minister to M. Lutaud, Governor of
Algeria, January 27, 1915.]
[Footnote 54: _Ibid._, June 26, 1916.]
[Footnote 55: Article 27 of the articles of association of the _Société
d'Études, de Recherches, et d'Exploitation des Pétroles en Algérie_,
registered at Algiers, December 18, 1918.]
[Footnote 56: The majority of firms operating in Algeria are British
companies registered under French law, just as the _Mexican Eagle_ (_El
Aguila_) is a British company registered under Mexican law. The most
important is the _Société co-intéressée des Pétroles algériens_, which
Pearson founded with a capital of ten million francs, and in which he
has retained a considerable interest. But the one which has given the
best results is the _Société algérienne des Pétroles, de Tiliouanet_,
whose oil yields 15 per cent. of petrol, 65 per cent. of illuminating
oil, and 20 per cent. of paraffin residues.]
[Footnote 57: The _Royal Dutch-Shell_ contemplates the formation of a
French company with a capital of twenty-five million francs for the
exploitation of the oil deposits of Madagascar. This company would take
over the concessions of the _Sakalava Proprietary Oil-fields_, which is
already working there.]
CHAPTER XXI
THE _STANDARD_ AND FRANCE
On May 17, 1921, Mr. Hughes Wallace, the United States Ambassador,
handed to France an official statement of his Government's grievances.
He pointed out all the obstacles which American companies encountered
in France, and asserted that _British companies did not meet with the
same difficulties_.
Now, as Mr. Hughes Wallace observed, France needed ten times the
quantity of mazut that she was getting, and many French factories were
idle for want of fuel. Thus there was room in the French market for
both British and American firms. Mr. Wallace therefore asked that they
should be treated on an equal footing.
M. Laurent Eynac, under whom the Commissariat for Petrol had been
re-established, without mentioning the Agreement which bound him to the
British, replied by putting all the blame on the inevitable delays of
official inquiries, which were "the same for everybody."
But a few days afterwards, _Le Temps_ published an incomplete summary
of the San Remo Agreement; it did not give the official text till July
25th.
The United States now understood the reasons for the attitude of
silent hostility which France had adopted towards American oil
companies. The San Remo Agreement aroused grave anxiety in Washington.
President Harding displayed very clearly his intention not to tolerate
such a policy. He made representations to the British and French
Governments and protested against the exclusion of America from the
Franco-British partition of the oil of Asia; he declared firmly that
the British monopoly countersigned by France at San Remo was not to
be tolerated, and that United States citizens were not to be ousted
through the complacency of France towards the imperialism of London.
The _Washington Post_ wrote as follows: "Oil is indispensable to
America, and American companies only provide inadequate quantities at
excessive prices. The complacent arrangement between France and Britain
for the partition of the oil resources of lands which are not in their
possession is subject to revision upon the request of the United
States, intent on the pursuit of their naval policy."
By subservience to British policy in the East, France was to reap
the enmity of the United States. Its effects were soon felt, for, at
the Brussels Conference in the following October, the "unofficial"
delegate of the American Government declared that his country would
not participate in any international loan for the capitalization of the
German indemnity. This was one hope definitely lost, upon which France
had long been relying. The same thing happened with the repayment of
the French debt to the United States: France fondly hoped that the
Americans would renounce what they had lent her during the War, just
as Louis XVI renounced the millions which he advanced to their infant
Republic, but when President Harding was sounded indirectly upon the
subject, he returned a pointed refusal.
The French Government recognized somewhat tardily the mistakes which
it had committed, and, when Mr. Bedford came to Paris in the autumn
to found the _Standard Franco-Américaine_, it allowed M. Jules Cambon
to accept the presidency. To get round the eviction order which has
been served upon them in the Near East and the French colonial empire,
the United States adopted the ingenious method of founding a French
company, which will have just as good a right as the _Société pour
l'Exploitation des Pétroles_ to share in any concessions reserved to
France. Abandoning the high-handed policy, which played the game of its
opponents, the _Standard_, upon the advice of Walter Teagle, decided
to employ the insinuating methods of the Anglo-Dutch trust. In France,
the _Royal Dutch_ relied upon the _Banque de l'Union Parisienne_, the
_Banque Bénard_, the _Banque Rothschild_, and also, it is said, the
_Crédit Lyonnais_. The _Anglo-Persian_ had the support of the _Banque
Transatlantique_ and the _Banque de la Seine_. The _Standard_ now
allied itself with the _Banque de Paris_, the most powerful of the
commercial banks in Europe.
51 per cent. of the capital of the _Standard Franco-Américaine_
(20 million francs) was subscribed by the _Banque de Paris et des
Pays-Bas_, and 49 per cent. by the American Trust. And in the
constitution of the Board, the _Standard_ acted much more prudently
than the _Royal Dutch_: five out of eight directors were French.
Mr. Bedford, the actual head of the _Standard Oil_, went so far as to
content himself with the vice-presidency, leaving the first place to a
Frenchman.
The establishment of the _Standard Franco-Américaine_ at this time
was the more hazardous because M. Laurent Eynac, taking up the former
Klotz-Bérenger program, was working for a definite State monopoly of
the purchase and importation of oil. But the French market is of such
importance to the _Standard Oil_ in its struggle with the _Royal Dutch_
that it preferred to take all the risks. "France," Mr. Bedford said,
"on account of its geographical situation, is naturally a field for
competition among all great companies." The _Standard_ desires to have
its place there. It proposes to resuscitate the refining industry,
which has almost passed out of existence, and set up great warehouses
in the ports to receive the crude oil; and it would even go to the
length of installing special reservoirs of petrol for supplying motor
vehicles in the neighbourhood of the municipal toll-houses.
Events have turned in its favour, for the idea of monopoly is to-day
thoroughly discredited in France. M. Laurent Eynac was obliged
hurriedly to withdraw his proposal owing to the commotion which it
aroused. An extremely violent Press campaign broke out, and the
political and diplomatic dangers of the San Remo Agreement became plain
to every eye.
The present diplomatic situation is strangely like that of Fashoda. In
1905, France was at one of the turning-points of her history: she had
to choose between the two Powers which had hitherto been her hereditary
enemies. She decided to follow the British, and not the German, policy.
Will she have to choose between the British policy and the American
policy--between the two countries which helped her to emerge victorious
from the great world conflict?
CHAPTER XXII
CONCLUSION
The World in 1923
The political independence of a people may sometimes be nothing but a
sham. France, having neglected to obtain her share in the division of
the world's oil, is to-day in a position of dependence upon Britain
and America. If, to-morrow, she had to defend herself against a fresh
attack, her tanks, her aeroplanes, her submarines, and the whole of her
supply services could only function by consent of her Allies. Even with
the first army in the world, France could be victorious only if Britain
and the United States permitted.[58]
Already in time of peace, nations without oil were in a position of
considerable inferiority, in view of the hundreds of uses to which
oil is put in industry, and especially in the important sphere of
the transport and distribution of commodities. There is no true
independence for a people but that which is assured economically and
financially. Military supremacy is only the happy result of proper
efforts undertaken to attain it. During the War, such independence was
to be desired for France even more than during peace: it would have
avoided the heavy debts which she incurred to her Allies, and it would
have enabled her to exploit herself the resources at home and in the
colonies which she has been compelled to hand over to foreigners.
Before the War, France consumed more than 400,000 tons of oil a year.
To-day, she requires 1,500,000, and the oil wells of Alsace, which the
Treaty of Versailles has restored to her, produce only 60,000 tons, and
Algeria 3,000-4,000 tons.[59] Thus, she is obliged to pay the foreigner
nearly 2,000 million francs a year in order to obtain the oil which she
lacks.
Nevertheless, there is almost certainly oil in France, in the Ain
valley, the Jura Mountains, Auvergne, and the Landes; there is oil in
the French possessions in Northern Africa and in Madagascar; there
must be some in the Cameroons, in Indo-China, and in New Caledonia.
Is it not abnormal that the West Indies and Guiana, when in British
or American hands, produce oil, but when in French hands never yield
anything? The same applies to Oceania. But there is no reason to be
astonished at this; for, under the legislation which was in force
since 1810, no Frenchman had any inducement to search for oil. This
explains the epigram of one of the most important members of the French
cartel, when he declared that "the greatest misfortune that could
happen to an oil magnate in France would be to discover a spring of
oil." Happily, on March 22, 1922, the Chamber altered this state of
affairs by granting, as was suggested in the first edition of this
book, the guarantees which are indispensable to prospectors. Till that
year, the exploitation of deposits which a prospector had discovered
might be conceded to any foreign company which came on the scene at
the right moment to reap the fruits of his labours. Repayment of money
laid out was highly problematical, for the local authorities used to
grant this only to those responsible for the final investigations
leading directly to the discovery of oil. Now, hunting for a "wild
cat"--the American term for a boring--is a very risky operation,
which entails considerable expenditure. In a protest submitted to the
Ministry of Public Works by five Algerian colonists, who had carried
out explorations and borings upon land for which a concession was now
asked by a company of foreign origin, the colonists stated by affidavit
that they had spent 870,000 francs upon 14 borings and 85 wells, of
which seven alone were actually producing a few tons of petroleum.
Even so, the proportion of seven successful wells out of 85 is rather
high. O'Donnell, the president of the American Petroleum Institute,
estimates that, out of every hundred borings made, 98 are unprofitable.
But for fifty years the 2 per cent. which succeeded sufficed for the
consumption of the world.
The policy of France in the Near East since the War has been simply
one long suicide. Little by little, French diplomacy has abandoned
everything that was promised by the agreements of London. While the
San Remo Agreement marked the complete downfall of France in Asia, it
considerably strengthened the position of Britain: not only does it
recognize all rights acquired by Great Britain, including those which,
as in Mesopotamia, rested upon a highly insecure foundation, but it
gives British capitalists an important opening in French colonies which
are still almost untouched, whereas the corresponding advantages which
it confers upon France in some (not all) British colonies apply to
territories where the most desirable fields are already being exploited.
France is paying for her past inertia.
If the Allies have to thank the two great trusts for enabling them to
get their supplies of oil during the War, the latter in return have
notably increased their power. The defeat of the Central Empires has
brought about the ruin of their rival, the _Europeanische Petroleum
Union_, and the destruction of the network of interests which Germany
had succeeded in spreading over Galicia, Rumania, Russia, and Turkey.
The ambition of the _Royal Dutch_ since it linked its fortunes with
those of the British Empire knows no bounds. Its latest success at
Djambi has now spurred it to ask the Netherlands Government for a
monopoly of exploitation in all the Sunda Islands. It has almost
reached the point of eliminating its American rival completely from the
Far East.
The _Standard_ retaliates, and sends prospectors wherever they are
admitted--to Abyssinia (January 1921), Peru, Colombia, the Philippines,
Bolivia. It has gained a footing in the Azores, and in July 1922
was trying in Ecuador to acquire control of the _Lobitos_ from the
_Anglo-Ecuadorian_. It is actively cultivating the Government of
Czecho-Slovakia for the grant of exclusive rights of exploitation, and
it has obtained from the Italian Government a concession for the oil
deposits of San Saba, near Trieste. But the Chinese Government has
refused the permanent agreement which it proposed.
Walter Teagle wishes the _Standard_, like the _Royal Dutch-Shell_,
to become a producer of oil and not to content itself with the mere
control of refining and distribution. But the time is long past when
Rockefeller controlled 95 per cent. of the sales of oil in the United
States. Although the _Standard's_ capital has risen to $1,310,000,000
and the number of its subsidiaries to 62 it now refines only 49 per
cent. of American oil. In the United States there are forty-four
independent companies, representing a capital of two thousand
million dollars, which carry on, not only the extraction, but also
the transport, refining, and sale of oil. Still more serious, the
Anglo-Dutch trust has succeeded in establishing itself on the territory
of the Union itself; at a recent congress of the American Petroleum
Institute, Walter Teagle showed that the _Royal Dutch-Shell_ drew 43
per cent. of its total production from the United States. Be that as
it may, the _Standard_, in America, is always regarded as the great
national champion, upon which falls the task of fighting the _Royal
Dutch_ and the British Empire, which have laid plans for depriving the
United States of their supremacy in oil. _Who attacks the_ Standard
_attacks the Washington Government directly_. And in Europe it still
occupies a strong position through its various subsidiary companies.
_The struggle for oil is no longer a rivalry between great trusts; it
is a struggle between nations._
FOOTNOTES:
[Footnote 58: Herein lies the explanation of the undecided policy of
France since the signature of the Treaty of Versailles.]
[Footnote 59: But she also possesses at Les Telets, near Autun,
bituminous shale which, in 1917, produced 103,400 tons, yielding 75
litres of oil per cubic metre.]
BIBLIOGRAPHY
FRANCE
_Agence Économique et Financière_ (1920-21).
_Annales Franco-Helléniques_ (1920).
Bérenger, Henry, _Le Pétrole et la France_ (1920). _La Politique du
Pétrole_ (1920).
_Brésil_ (1920, "Le Pétrole en Amérique latine").
_Capital_ (1914).
_Courrier des Pétroles._
Delaisi, Francis, _Oil: Its Influence on Politics_ (1920: English
translation, 1922).
_Économiste Européen_ (1906-21).
_Épargne_ (1919).
_Europe Nouvelle_ (1921).
Financial Bulletins of the _Société Générale_.
_France Économique et Financière._
_Illustration Économique et Financière._
_Information_ (1906-21).
Le Page, _L'Impérialisme du Pétrole_ (1921).
_Messager de Paris_ (1919-20).
_Moniteur Économique et Financier._
_Mouvement Financier_ (1909).
_Nouvelles Économiques et Financières._
Parliamentary publications: Reports presented for the Customs
Commission by the Duc de la Trémoïlle (March 1919), and Senator Jean
Morel (June 1919).
Report presented for the Finance Commission by M. Charles Leboucq
(June 1920). #/
Documents submitted to the Sub-Committee on Oil of the Chamber of
Deputies (1920).
_Producteur_ (1921).
_Revue des Deux Mondes_ (1st April, 1920, Contre-Amiral Degouy, "Le
Pétrole et la Marine").
_Revue Financière_ (1911-21).
_Revue Politique et Parlementaire_ (August 1920).
_Revue Universelle_ (October-December 1920).
_Vie Financière_ (1914-21).
_Vie Économique et Financière_ (1912).
GERMANY
Ludendorff, _My Memoirs_.
Potonie, _Entstehung der Steinkohle, des Petroleum, u.s.w._ (Berlin,
1910).
_Vossische Zeitung_ (1913, "The Troubles in Mexico").
BELGIUM
_Revue Belgo-Roumaine_ (1920, "Le Pétrole en Roumaine").
_Revue Économique Internationale_ (1921).
GREAT BRITAIN
_Daily Graphic_ (1913, "The Troubles in Mexico").
_Daily Mail_ (1920).
_Engineering and Mining Journal._
_Financial News_ (1912-21).
_Financial Times_ (1921).
_Financier._
Lord Fisher's Letters to the _Times_ (September 1919).
_Manchester Guardian_ (1921).
_Petroleum Review_ (1910-21).
_Petroleum Times_ (1920).
UNITED STATES
Barnes, _The Romance of Persian Oil_. _The Standard Oil Companies_
(1920).
_Brooklyn Eagle_ (1920-21).
_Nation_ (1921).
_Petroleum Magazine_ (1921).
_Public Ledger_ (Philadelphia).
Reports of the State Department for Foreign Affairs.
Hepburn Committee.
Inter-State Commerce Commission.
Director of the Bureau of Mines to the Secretary of State for the
Interior.
Statistics of the Geological Survey.
Smithsonian Institute.
Independent Oil Producers' Agency.
American Chamber of Commerce in Paris.
_National Bank of Commerce_ of New York.
_Washington Post_ (1919-20).
_World's Work_ (1920).
MEXICO
_Boletin del Petroleo_ (1920-21).
Statistics of the Technical Commission on Petroleum of the Ministry
of Commerce, Industry and Labour.
INDEX
Abyssinia, 248
Africa, 42, 245
Aktien Gesellschaft für Petroleum Industrie, 73, 74
Alaska, 40
Algeria, 234
Alleghanies, 28
Alpine Railways, 35
America, 66, 78, 239, 240 _et passim_
American Navy, 19, 40
American Petroleum, 51
Anglo-American Oil Co., 51
Anglo-Egyptian Oil-fields, 74
Anglo-Persian Oil Co., 87, 93, 151 _et passim_
Anglo-Saxon Petroleum, 62, 74
Anglo-Swedish Oil Co., 73, 74
Antipodes, 72
Apsheron, 26
Aquila Franco-Romana, 98
Argentine, 140, 143, 163
Arizona, 69
Asia, 72
Asia Minor, 225
Asiatic Petroleum Co., 74
Associated Oil, 80
Astra Romana, 75, 98
Australia, 42, 140
Austria, 35
Automobilism, 34
Aviation, 34
Azores, 72, 248
Bagdad, 26
Baku, 24, 29, 73
Banks Interested in Oil, 97, 98, 241, 242
Batavia, 85
Batavian Oil Company, 62, 74
Bibliography, 251
Bituminous Shale, 40
Black Sea, 72
Black Sea Co., 98
Bolivia, 248
Borneo, 61, 68, 75
Brazil, 144
British Controlled Oil-fields, 11, 143, 166
British Crown Colonies, 232
British Government, 89, 98, 133, 147, 152, 153, 157, 168
British Imperial Oil Co., 75
British Oil Policy, 158, 162, 182, 184, 215
British Pearson Syndicate, 80
British Petroleum Co., 75
British Tanker Co., 75
Burlington Investment Co., 76, 90, 130
Burmah Oil Co., 98, 131, 132
California, 68, 152
Californian Oil-fields, 76
Cape Verde Islands, 72
Carib Syndicate, 129
Caribbean Petroleum, 75
Carpathians, 98
Cartel of Ten, 52, 201, 208, 212
Caspian Sea, 72
Caucasus, 22, 45, 78, 97
Central Refining Co. of Pittsburg, 49
Ceram Oil Syndicate, 75
Ceram Petroleum, 75
China, 26, 65, 68, 92, 248
Coal, 12, 16, 17
Colby Note, 168
Colombia, 129, 152, 248
Colon Development Co., 90, 129
Colorado, 40, 69
Commercial and Industrial Companies of Caspian and Black Seas, 75
Companies Controlled by Royal Dutch, 73
Companies forming Standard Oil Trust, 49
Concordia Co., 229
Control of the Seas, 11, 18, 178
Costa Rica, 129, 144
Curaçao, 71
Curaçao Petroleum, 76
Czecho-Slovakia, 248
Dakota, 69
Danske Petroleum Altieselskabet, 51
Danube Navigation Co., 99
D'Arcy Exploration, 137
Deutsche Amerikanische Petroleum Gesellschaft, 51
Deutsche Bergin A.G., 73, 74
Deutsche Erdol Aktien Gesellschaft, 98
Deutsche Petroleum Verkaufs Gesellschaft, 98
Diesel Engine, 14, 34
Dissolution of Standard Oil, 54
Distribution of Oil in Europe, 41
Distribution of Oil in New World, 40
Doheny Interests, 45, 80
Dordesche Petroleum Company, 75
Dordesche Petroleum Industrie, 75
Dutch Indies, 13, 77
Eagle Oil Transport, 76
East Indies, 152
Ecuador, 144
Egypt, 42, 152
Empire Refining Company, 49
Erdol Industrie Anlagen Gesellschaft, 103
Erdol und Kohle Veränderung Aktien Gesellschaft, 73, 74
Europeanische Petroleum Union, 79
Exhaustion of Oil-fields, 176
Far East, 65, 66, 80
Financial Groups, 78
Galicia, 51, 78
Galician Companies, 99
General Asphalt Company, 71, 76
General Leasing Act, 180, 181
Genoa Conference, 185
German Battleships, 19
German Submarines, 15
Grosny Sundja Oil-fields, 75
Hague Conference, 93
Home Light Oil Company, 75
Hungarian National Petroleum Co., 139
Hungary, 137
Imperial Oil Co., 184
Increase in Consumption of Oil, 33, 34
India, 90, 152
Inter-Allied Petroleum Conference, 107, 153
Internal Combustion Engine, 14, 15
International Oil Company, 51
Italian Company for the Import of Oil, 75
Java, 63, 80
Jugo-Slav Petroleum, 77
Jugo-Slavia, 73
Keystone Refining Company, 49
Konzern Group, 99
Kotoku Oil-fields Syndicate, 76
La Corona, 76
Latakia Oil, 224
Lianosoff, 72, 76
Limanowa, 98
Lobitos, 248
Louisiana, 70, 152
Mantasheff, 72, 75, 197
Market-price of Oil, 36
Mazut, 14, 16, 37, 112
Mazut Company, 75
Mesopotamia, 158, 168, 230
Mexican Eagle, 22, 71, 76, 121, 151
Mexico, 29, 30, 32, 70, 81, 113, 114, 115, 125, 143
Mineral Rights, 162
Moebi Hid, 75
Monopoly in Oil, 98, etc.
Monroe Doctrine, 129
Montana, 69
Moreni, Region of, 30
Mormons, 141
Mosul, 10, 26, 223, 224
Motor-traction, 38
National Transit Company, 49
Nederlandsche Indische Tanks Troomboat, 75
Nevada, 69
New Mexico, 69
New Russian Standard Company, 72
New Shibaïeff Petroleum Corporation, 75, 88
New Zealand, 42, 141
Nobel Properties, 73, etc.
Norsk Encelska Mineralojeanie Colaget, 75
North Caucasian, 75
Oceania, 42
Oil as Fuel, 13, 17, 19
Oil Borings, 21, etc.
Oil Lamp, Invention of, 28
Oil Policy, 9
Oil Springs, 21, etc.
Oil Union of Oklahoma, 80
Oklahoma, 80, 152, etc.
Orleans Refining Company, 76
Ownership of Land and Minerals, 116, 129
Ozark Pipe-Line Corporation, 77
Palestine, 161, 179
Panama Canal, 70, 71, 130, 144
Panama Canal Storage Co., 76
Panuco, 70
Persia, 133, 152
Peru, 156, 248
Philippines, 248
Photogen, 77
Poland, 45
Polk Report, 163
Producers' Associated Oil Company, 50
Protective Tariff, 89, etc.
Railways, 35
Royal Dutch, 45, 68, 77
Royal Dutch-Shell, 42, 59, 63, 73, 81, 84, 130, 147, 151
Roxana Petroleum Company, 69, 76
Roxana Petroleum Corporation, 77
Roxana Petroleum Maatschappij, 76
Rumania, 30, 45, 78, 102, 152, 229, etc.
Russia, 29, 30, 152, 186, 230
Revolution of 1905, 30
Bolshevik Revolution, 13
Russia, Soviets, 73, 157
Agreement between Shell and Soviets, 191
Russian Standard, 75
Salt Water in Oil Wells, 20, 122
San Remo Agreement, 10, 165, 169, 228, 239
Sandstone, 23
Shell Co. of California, 76
Shell Group, 167
Shell Marketing Co., 75
Shell Transport & Trading Co., 35, 61, 74
Sherman Anti-Trust Law, 56
Simplex Refining Co., 76
Sinclair Oil Co., 45
Societa Italo-Americana per Petrollo, 51
Société Bnito, 75
Société Générale des Huiles de Pétrole, 137
Société Maritime des Pétroles, 73, 77, 218
Société Navale de l'Ouest, 137, 219
Société pour l'Exploitation des Pétroles, 74, 218
Société pour le Vente du Pétrole, 51
Spain, 74
Standard Franco-Américaine, 241
Standard Oil Co., 9, 11, 42, 45, 57, 65, 77, 86, 92, 130, 174, 215, 221,
239 _et passim_
Standard Oil Trust, 48
Steaua Romana, 99, 140
Submarines, 15, 104, 154
Suez Canal, 72
Sumatra, 63
Sumatra Palembang, 75
Sunda Islands, 59, 248
Swenska Petroleum Altiebolage, 51
Tampico, 70
Tampico-Tanuco Petroleum, 76
Tank Steamers, 155, 209
Tei-Koku (Japanese), 140
Telegram from Clemenceau to Wilson, 104
Texas, 69
Tierra del Fuego, 40
Treaty of Brest Litovsk, 103
Treaty of Bukarest, 103
Trinidad, 144, 152
Trusts, 79
Tsatouroff, 72, 76
Turkey, 45
Turkish Petroleum, 76, 98, 99, 140, 223, etc.
Union Oil of Delaware, 77
United British Oil-fields of Trinidad, 76
United British Refineries, 76
United States, 9, 18, 29, 30, 32, 34, 38, 45 _et passim_
United States Pipe-Line Co., 50
Ural Caspian Co., 75
Utah, 40, 69
Vacuum Oil, 51
Vega Co., 229
Venezuela, 70, 71, 90, 144, 152
Venezuelan Concessions Co., 76
Vereinigte Benzinwerke, 75
Virginia, 70
Volley Pipe-Line Co., 76
Wages of Coolies, 13
War of 1914-1918, 12, 33, 101, 159, 210, etc.
Washington Conference, 184, 185, etc.
World-consumption of Oil, 39, etc.
World-production of Coal, 36, etc.
World-production of Oil, 32, etc.
W.V. Oil Co., 76
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