FOOTNOTES:[10]The Netherlands were then in the position in which France now finds herself. TheRoyal Dutchbegan by sending two engineers to the United States to familiarize themselves with the details of oil production, since Holland possessed no such industry.[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.[12]TheMexican Petroleum Company of Delawarehas 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.
FOOTNOTES:
[10]The Netherlands were then in the position in which France now finds herself. TheRoyal Dutchbegan by sending two engineers to the United States to familiarize themselves with the details of oil production, since Holland possessed no such industry.
[10]The Netherlands were then in the position in which France now finds herself. TheRoyal Dutchbegan by sending two engineers to the United States to familiarize themselves with the details of oil production, since Holland possessed no such industry.
[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.
[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.
[12]TheMexican Petroleum Company of Delawarehas 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.
[12]TheMexican Petroleum Company of Delawarehas 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 theRoyal Dutchhas succeeded in its amazing effort to reduce the power of theStandard 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 theShelland a former Lord Mayor of London—Deterding dared to challenge theStandard Oiland 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.
TheRoyal Dutchwas established in 1890, whentheStandardruled 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 theRoyal Dutchpeople 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 theRoyal Dutchthrough the difficulties of its early years. But he died suddenly in 1900, and Deterding succeeded him.
While theStandardstuck 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 theStandard 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 theStandard 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 theRoyal Dutch.
1. Deterding's cleverness in associating theRoyal Dutchwith theShell, 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 theRoyal Dutchhad not a market close at hand to absorb its production, in the Dutch Indies, as theStandardhad 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 theRoyal Dutch-Shellgroup, 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 theStandard, 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, issummarized 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 theShell, theRoyal Dutchhas undergone a world-wide expansion. Deterding concluded long-term contracts with the famous British State-subsidized company, theAnglo-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 theMexican Eagle. Owing to this, the output of theRoyal Dutch-Shellgroup 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. TheNew Schibaïeff Petroleum Corporationhas 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 theRoyal Dutchbought them up, at the same time condescending to accept control of the company.
The establishment of close relations between theRoyal Dutch-Shelland 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 theRoyal Dutch, although well-informed people believe it. If there has been any change in the direction of theRoyal Dutch, which, according to the constitution of the company, should remain in Dutch hands, it must have been effectedas a result of agreements between the Dutch and British Governments, for the shares of theRoyal Dutchwere 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 theAnglo-Persian, Sir Marcus Samuel has made great efforts to induce it to take an interest in theRoyal Dutch-Shellgroup. TheRoyal Dutchhas become more British than ever since 1922, when it ceded the greater part of its share in theShellto the purely British consortium directed by the bank ofCull 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 theRoyal Dutchis 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, theBurmah Oil Companyconsented 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 theBurmah Oil. Before the War, there was overproduction of kerosene in India; this surplus has sincebeen transformed into a veritable dearth. TheRoyal Dutchsupplied theBurmah Oilwith 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 theBurmah Oil, in which the British Admiralty is interested, would have been weakened, and would have fallen into the hands of other companies.
TheRoyal Dutch-Shellhas 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 theRoyal Dutchcounts 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 theColon Development, in which theRoyal Dutchis interested, through theBurlington Investment.
But in Mesopotamia the company seeks the support of France against theAnglo-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 theAnglo-Persian, deserts it. In any case, it hopes to play off one against the other.
Deterding's ambition is to crush theStandard Oil. He is the declared enemy of theStandard, Mr. W. Teagle, for whom he has some sympathy, excepted. When people tell him that he will never succeed in getting the better of theStandard, with its enormous capital, he replies that he has the means to fight against all the dollars that theStandardcan gather. Has he not the Rothschild millions at his disposal? Besides, he has great advantages over theStandard. I have already mentioned the cost of production of theRoyal Dutchin 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. TheRoyal Dutch-Shellpossesses such reserves of oil that the question of exhaustion does not arise for it; and it extends over the whole world, whereas theStandardhas 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. TheRoyal Dutch, on the contrary, thanks to its cleverand 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 theStandardthan theStandarditself. 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 theStandard, 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 theStandardin 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 theRoyal Dutchand theStandard Oil? Deterding wanted it quite recently. If we are to believe theauthorities 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 theStandardare probably at an end.
Agreement is actively sought, at present, between theStandardand theAnglo-Persian, especially owing to the influence of Sir John Cadman. Since 1922, Elliot Alves and theBritish Controlled Oil-fieldshave 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:[13]Only for the American portion of its production are the costs of theRoyal Dutchas high as those of theStandard.
FOOTNOTES:
[13]Only for the American portion of its production are the costs of theRoyal Dutchas high as those of theStandard.
[13]Only for the American portion of its production are the costs of theRoyal Dutchas high as those of theStandard.
PART III
THE STRUGGLE BETWEEN THE POWERS
CHAPTER VII
THEEUROPEANISCHE 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 theStandard Oilin 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 theStandard'smonopoly. The Rothschilds and the Nobels, theDeutsche Bankand theDisconto Gesellschaft; thebanks of Lille and Roubaix, exploiting the oil in Galicia; the cartel of French refiners founding the Polish company,Limanowaand theAquila Franco-Romanain Rumania, and lastly, theRoyal Dutchthrough theAstra Romanaand theBlack 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 theAnglo-Persian. And, while appearing to fear the remarkable growth of theShell, it surreptitiously assisted it, and tried to guarantee supplies from Mexico through Pearson, from India through theBurmah Oil, and from Mesopotamia through theTurkish Petroleumin 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 theDeutsche Erdol Aktien Gesellschaftand theDeutsche Petroleum Verkaufs Gesellschaftwere formed to gain control of Austrian, Rumanian andCaucasian oil. The powerfulSteaua 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, andGalizische Karpathen, and had also obtained an interest in theDanube Navigation Company,Bayerischer Lloyd. In Rumania, theDeutsche Erdolcontrolled theKonzerngroup, which included theVega,Concordia, andCredit Petrolifer. The oil of Pechelbronn in Alsace was also in its hands.
In 1906 theDeutsche Bankand theDisconto Gesellschafttook under their control the great company ofNobel Brothers, in Russia. They founded, at Bremen, theEuropeanische Petroleum Union, a trust which amalgamated the principal European oil interests, and was to give Germany the certainty of European preponderance. They absorbed theAkverdoffcompany at Grosny, created theSpies 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 theDeutsche Bankbecame an associate of Great Britain in theTurkish 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, whobecame 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 theTurkish Petroleumwas provided by theRoyal Dutch, theAnglo-Persian Oil, and theDeutsche 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, theStandard Oiland theRoyal 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 andthe 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 hisMemoirs, "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 conductof 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, theSteaua 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 theErdol 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, alittle 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 theCommander-in-Chief had pointed out that France did not possess in its storage depots sufficient reserves to last more thanthree daysin 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, andmight 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-steamersexist. They are sailing at this momentin 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 authorityfor 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 theStandard Oilto 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. TheStandardpreferred to compete with theRoyal Dutchin 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-lorriesand 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 theRoyal Dutchand theStandard Oilin 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, ourvictorious 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:[14]H. Bérenger:La Politique du Pétrole, 1920.
FOOTNOTES:
[14]H. Bérenger:La Politique du Pétrole, 1920.
[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. TheEuropeanische Petroleum Unionhas fallen to pieces; therefore they have no longer to fear a third rival.TheRoyal Dutchand theStandard 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. TheStandardwas 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 wasdiscovered 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; theyfomented revolutionsand 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:[15]Francis Delaisi,Oil: Its Influence on Politics.
FOOTNOTES:
[15]Francis Delaisi,Oil: Its Influence on Politics.
[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.
TheStandard Oilenjoyed 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 theMexican 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 Mexicancondottieri. The United States supported Madero, Great Britain Porfirio Diaz.
TheStandard Oilsubsidized 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 theStandard, 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 theStandard:—
I. If Madero is made President, he will grant to theStandardall available concessions.II. He will withdraw all those granted to Pearson.
I. If Madero is made President, he will grant to theStandardall available concessions.
II. He will withdraw all those granted to Pearson.
When Madero was made President, the market price of theStandardrose 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 theDaily Graphicand theVossische Zeitunghad discovered the key to this mystery. Ever since Pearson obtained a footing in Mexico theStandardhas 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, theStandardsent 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 rightswas not applied to United States citizens.
TheMexican 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 theStandard Oilbecame 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 dollarsa monthto 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 theMexican Eaglewas 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 theEagle, 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, theEagleremains, 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 theStandard Oilwas worth while.
1919
The Royal Dutch-Shell Lays Hands upon the Mexican Eagle
Towards 1919 the weak spot about theMexican Eaglewas its isolation among organisms so powerful as the two dominating groups of the world, theStandard Oiland theRoyal 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 theMexican Eagle, which, though it remained independent, wasnevertheless obliged to submit to the very burdensome competition of theStandardin the sale of its products.
Lord Cowdray held so large a number of shares in theMexican Eaglethat to obtain them was practically to obtain control of the concern. In 1911 theStandardwished to buy them from him; he refused. In 1913 theRoyal Dutchsuffered 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. Theirlowestprices were:—
1912 36 francs1918 83 francs1919 126 francs1920 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 man[oe]uvres 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. TheShell Transporttook onemillion, theRoyal Dutcha 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 theMexican Eaglecould 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 thatsixbarrels represent one ton. TheEagle'sfirst 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.
TheShellintends to spend several millions within the next five years in order to triple the output of theEagle. 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, thatis, 5 million barrels a month against the present 2-1/2 million. TheShell'sengineers will not push its exploitation to the maximum possible, for they wish to make theEaglelasthalf a century.
In acquiring control of theCompania Mexicana de Petroleo El Aguila(the true name of theEagle) theShellhad in view simply to ensure a sufficiency of liquid fuel for the British Navy. For theMexican Eaglewill 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 theShellwas 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 believethat 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 theRoyal Dutch-Shellgroup, for its position was greatly strengthened by this association, which increased its production of oil by 50 per cent. Moreover, theRoyal Dutch-Shellmade 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 theMexican Eaglecame under the control of the great Anglo-Dutch trust it has benefited by the incomparable selling power of theShell: 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 theEaglepractically unlimited financial resources.
Financial Results of the Mexican Eagle for Eleven Years
The balance-sheets of theMexican Eagleare 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]
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. TheMexican Petroleumhas 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 theEagleand 34 to theAmerican Petroleum. Other companies, with five exceptions, rarely hold more than a dozen wells.
TheEaglestands to-day at the head of all producing companies. Here are the four companies which produce the most:—
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 theMexican Eagledown to subsidiary companies of theRoyal Dutchlike theCorona, 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 thelaws 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 theStandard Oil, theSinclair, theTexas Company of Mexico, theAtlantic Refiningand theMexican 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]