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:[27]This amount has since been more than doubled.[28]By the contract already mentioned which expired in 1922.[29]Revue Universelle, October 15, 1920.[30]They did not sacrifice themselves for nothing![31]Report of the American Director of the Bureau of Mines, Van H. Manning, to the Secretary of State for the Interior.[32]Times, April 6, 1921.[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).[34]The question, however, has not been settled as they desired.
FOOTNOTES:
[27]This amount has since been more than doubled.
[27]This amount has since been more than doubled.
[28]By the contract already mentioned which expired in 1922.
[28]By the contract already mentioned which expired in 1922.
[29]Revue Universelle, October 15, 1920.
[29]Revue Universelle, October 15, 1920.
[30]They did not sacrifice themselves for nothing!
[30]They did not sacrifice themselves for nothing!
[31]Report of the American Director of the Bureau of Mines, Van H. Manning, to the Secretary of State for the Interior.
[31]Report of the American Director of the Bureau of Mines, Van H. Manning, to the Secretary of State for the Interior.
[32]Times, April 6, 1921.
[32]Times, April 6, 1921.
[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).
[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).
[34]The question, however, has not been settled as they desired.
[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 theBritish Controlled Oil-fields?
But if Great Britain still possessed naval supremacyin the same proportions as in 1914, it would be sufficient for America to havea fleet equal to the former German fleetin 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 theRoyal Dutch-Shelland 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 theWar, 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 theStandard.[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. TheRoyal 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 whichgrants 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 theRoyal Dutchwill therefore probably be refused, while those sought by Canadian companies, such as theMidland Oil, are much more likely to be granted; it will be enough that their British shareholders become Canadians. For Canada has always allowed theStandard Oilvery great liberty on her territory. In April 1919, she even refused the association of interests proposed by theShell, 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 theStandard, and will perhaps be used by it to bring pressure on theRoyal Dutch, which has several times refused its co-operation. Many Californian companies, subsidiaries of theShell, 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 themeeting 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:[35]Producteur, January 1921,Les Grands Programmes Nationaux.[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 theStandard Oilthe 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.
FOOTNOTES:
[35]Producteur, January 1921,Les Grands Programmes Nationaux.
[35]Producteur, January 1921,Les Grands Programmes Nationaux.
[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 theStandard Oilthe 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.
[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 theStandard Oilthe 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, theImperial 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 theAnglo-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 theStandard Oilto 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 theAnglo-Persian, theStandardhad 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 certaintyby preliminary surveys. The oil resources of Russia represent aloneone-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 withthe official representatives of the Powers. Into this feverish atmosphere the news dropped like a bomb-shell that Krassin had signed a contract conferring upon theRoyal Dutch-Shella 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 defenceof 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.
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 theRoyal Dutch-Shelland 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, theRoyal Dutch-Shellhad 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 theAnglo-Persianand theBurmah Oilat 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, theRoyal Dutchopened 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 theAsiatic Petroleum, one of theRoyal Dutch-Shellsubsidiaries.
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 theShelland 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 reservesthe 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 priceof 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.
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 reservesthe 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 priceof 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 thede jurerecognition 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, theRoyal Dutchspread a rumour in France that it was experiencing difficulties with the British Government and must rely upon the support of the French Government. This man[oe]uvre succeeded so well that, when the French representatives at Genoa were given precise information about the impending conclusion of the agreement between theShelland the Soviets, they shrugged their shoulders and smiled contemptuously; the rivalry between theRoyal Dutchand 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 theRoyal 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 theRoyal Dutch-Shellapproached only the most important of the dispossessed Russian oil magnates. On July 27, 1920, one of the most powerful subsidiaries of the trust, theBataafsche 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, theShellconsidered 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, whopromised to reserve to theRoyal Dutch-Shellthe 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 theShell. They have no wish toplace 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:[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 theStandard. A large number of shares in this company have recently been bought by theStandard.[38]Nevertheless, it had been warned as early as the previous March of the agreement which was afoot between theShelland the Soviets, and it had seen the text of the contract.
FOOTNOTES:
[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 theStandard. A large number of shares in this company have recently been bought by theStandard.
[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 theStandard. A large number of shares in this company have recently been bought by theStandard.
[38]Nevertheless, it had been warned as early as the previous March of the agreement which was afoot between theShelland the Soviets, and it had seen the text of the contract.
[38]Nevertheless, it had been warned as early as the previous March of the agreement which was afoot between theShelland 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 onlythree 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-powerfulStandard. 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. Theprocess 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 theStandard, 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 acomprehensive 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 theStandard Oilto 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 theStandardwas changed about 1904 to a close dependence; the Ten became nothing more than Rockefeller's representatives in France, hisoil importers. TheStandardfixed 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 theStandardcarried 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 (petroleumoils). 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 withAndré et Cie.that they should deliver Russian oil to it alone, theStandardwanted the agreement submitted to it for ratification, and laid down the condition thatAndré et Cie.should only make deliveries in the proportions it decided upon.
Thus, theStandardwas 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 theConseil 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 upof 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 theComité 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 dutiesone 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:[39]Henry Bérenger,Le Pétrole et la France, p. 280.[40]Le Page,L'Impérialisme du Pétrole.[41]220 lb.
FOOTNOTES:
[39]Henry Bérenger,Le Pétrole et la France, p. 280.
[39]Henry Bérenger,Le Pétrole et la France, p. 280.
[40]Le Page,L'Impérialisme du Pétrole.
[40]Le Page,L'Impérialisme du Pétrole.
[41]220 lb.
[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 theStandard—in doubling the figures of our importations of oil and petrol" (Report addressed to M. Clémentel, Minister of Commerce, inApril 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 tonsa day. France consumed:—
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:—
TheShellcould scarcely cope with the task of supplying the British Army. But for the help of theRoyal Dutchand theStandard 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 protectiveState 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 theComité des forgesto 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:—
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 theStandard Oil, theAtlantic Refining, and theTexas Oil, because of the difficulties that had been made for him by the rivalry and man[oe]uvring 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 theStandard Oilin many cases with an instrument of pressure.[44]