CHAPTER VI
THE OIL-WORLD'S NAPOLEON: HENRY DETERDING
If the _Royal Dutch_ has succeeded in its amazing effort to reduce the power of the _Standard Oil_, it is because the former possessed a man who was worth millions, whom the Americans, in their outspoken admiration, have called the "Oil-World's Napoleon"--Henry Deterding.
"Mr. Deterding is Napoleonic in boldness, and Cromwellian in depth," said Admiral Lord Fisher, the reorganizer of the British Navy in the twentieth century. The strongest personality in the oil-world is no longer Rockefeller, but Deterding. Supported by such men as Gulbenkian, the "Talleyrand of Oil"; Colijn, formerly War Minister to the Netherlands; Loudon, Cohen, Stuart, and Sir Marcus Samuel, the founder of the _Shell_ and a former Lord Mayor of London--Deterding dared to challenge the _Standard Oil_ and to keep up the war for twenty years in every part of the world, and even to establish himself on the latter's own ground, the United States.
The _Royal Dutch_ was established in 1890, when the _Standard_ ruled as absolute sovereign over the markets of Europe and America. De Gelder was the first Chairman, but he was soon replaced by the more capable Kessler.
"Old Kessler," as the _Royal Dutch_ people call him among themselves, fixed his head-quarters at Batavia. Needing an assistant, he engaged the young Deterding, who was then employed in a bank at Batavia. It was Kessler who guided the _Royal Dutch_ through the difficulties of its early years. But he died suddenly in 1900, and Deterding succeeded him.
While the _Standard_ stuck to the formula, "American oil to light the world," Deterding set to work to acquire oil deposits as near as possible to all markets. The new policy extolled by Walter Teagle, Chairman of the _Standard Oil of New Jersey_, on the occasion of the fiftieth anniversary of the company in January 1920, is no other than that pursued by Deterding for fifteen years. For the _Standard Oil_, seeing to what a pass its former policy has brought it, has sought since 1919 to revise its methods and copy those of its rival.
_Five factors have contributed to the world-wide expansion of the_ Royal Dutch.
1. Deterding's cleverness in associating the _Royal Dutch_ with the _Shell_, and in interesting the Rothschilds of Paris in his operations. Thanks to these connections, he surrounded himself with able personalities, such as Frederick Lane, Sir Marcus Samuel, Sir Waley Cohen, and Gulbenkian.
2. The support of the Dutch Government.
3. The support of the British Government.
4. The fact that the _Royal Dutch_ had not a market close at hand to absorb its production, in the Dutch Indies, as the _Standard_ had in the United States.
5. The readiness of the Dutch and British to prospect over-seas.
It is a combination of these forces--personal, political, and economic--which has resulted in the formation of the _Royal Dutch-Shell_ group, now a world-power. Under the laws of the United States, a similar group would be impossible.
"Deterding is a plunger," said an American oil-man, who has often been a competitor of his in various parts of the world. "He plunges with other people's money, not his own; that is why he takes such risks. For instance, he paid five times what any one else would have paid to gain a footing in Egypt, and he has lost a great deal there. However, he pays in shares for the properties he buys, and this gives him an advantage over the _Standard_, which has always paid in cash. In spite of everything, he merits great praise for having started from nothing and having built up the great organization which he directs."
Deterding's profession of faith, so to speak, is summarized in a memorable declaration which he made to the Committee of Imperial Defence in March 1913:--
"Oil is the most extraordinary article in the commercial world, and the only thing which retards its sale is its production. There is no other article in the world of which you can guarantee the consumption as long as you can produce it. _In the case of oil, begin by guaranteeing the production and consumption will look after itself._ There is no need to bother about consumption, and as a seller, it is useless to make contracts in advance, because oil sells itself. All that you need is a well-filled purse, so that you are dependent upon no one, and can say to the people who will not buy to-day, 'Very well. I am going to spend £1,000,000 in building reservoirs, and in future you will have to pay much more!' _The great point for the Navy is to make certain of oil from a group which can draw its supplies from many different geographical points_, because one cannot count on any particular oil-field. My experience is that districts which have regularly produced 18,000 barrels a day, have dropped to 3,000 without any previous warning."
Since its alliance with the _Shell_, the _Royal Dutch_ has undergone a world-wide expansion. Deterding concluded long-term contracts with the famous British State-subsidized company, the _Anglo-Persian Oil_, guaranteeing it the greater part of the Persian output until 1922. But his cleverest stroke was certainly to acquire an interest in the management of the _Mexican Eagle_. Owing to this, the output of the _Royal Dutch-Shell_ group increased by more than 50 per cent., rising from thirty to more than fifty million barrels a year. The purchase of shares from Lord Cowdray cost Deterding a thousand million francs.
Deterding conducts his business like a soldier. He accepts or refuses a proposition once and for all. It is often dangerous not to fall in with his wishes. The _New Schibaïeff Petroleum Corporation_ has had experience of this. Reconstituted in 1913, with a capital of £1,150,000, it set itself against the will of Deterding. He fought, and at the end of the struggle the £1 shares were worth 6-1/2d., at which price the _Royal Dutch_ bought them up, at the same time condescending to accept control of the company.
The establishment of close relations between the _Royal Dutch-Shell_ and the British Government was one of the most noticeable activities of the oil-world. It has not been proved that the British Government really controls the _Royal Dutch_, although well-informed people believe it. If there has been any change in the direction of the _Royal Dutch_, which, according to the constitution of the company, should remain in Dutch hands, it must have been effected as a result of agreements between the Dutch and British Governments, for the shares of the _Royal Dutch_ were held by interests closely connected with the Royal Family of the Netherlands. An alliance of this nature would have great advantages. Besides, since the British Government has purchased the control of the _Anglo-Persian_, Sir Marcus Samuel has made great efforts to induce it to take an interest in the _Royal Dutch-Shell_ group. The _Royal Dutch_ has become more British than ever since 1922, when it ceded the greater part of its share in the _Shell_ to the purely British consortium directed by the bank of _Cull and Company_. Deterding would find it difficult to do without the support of British foreign policy. He knew this very well when he transferred his offices from The Hague to London.
The most striking proof of the alliance between the British Government and the _Royal Dutch_ is the course of events in India, where the oil situation is peculiar. In 1905, in exchange for certain exclusive rights and for a protective tariff granted by the State, the _Burmah Oil Company_ consented to maintain a fixed price for kerosene. In India, in an open market, kerosene would cost £25,000,000 sterling instead of £11,000,000 annually. Such, at least, is the opinion of Sir John Cargill, Chairman of the _Burmah Oil_. Before the War, there was overproduction of kerosene in India; this surplus has since been transformed into a veritable dearth. The _Royal Dutch_ supplied the _Burmah Oil_ with the petroleum that was needed to satisfy the Indian market. Thanks to Deterding, India will continue to get its oil cheaper than other countries. Without his help there would have been a considerable rise in price, and the _Burmah Oil_, in which the British Admiralty is interested, would have been weakened, and would have fallen into the hands of other companies.
The _Royal Dutch-Shell_ has rendered the same service to the British Government in Egypt. "We have conducted our business on the same lines in Egypt," said Sir Marcus Samuel. "_In order to help the Government, we have operated in the Egyptian market in the same way as in India._"
In exchange the _Royal Dutch_ counts on the support of the British Government. This is the case in Venezuela, where the Venezuelan Government is trying to establish its rights over concessions which the company covets. And not in vain, for on March 7, 1921, it was announced in France that the Venezuelan Courts of Justice had upheld the validity of the fifty years' concessions which had been granted to the _Colon Development_, in which the _Royal Dutch_ is interested, through the _Burlington Investment_.
But in Mesopotamia the company seeks the support of France against the _Anglo-Persian_, and is not opposed to American participation. I believe, rather, that it desires the support of the French Government in case the British Government, hypnotized by the _Anglo-Persian_, deserts it. In any case, it hopes to play off one against the other.
Deterding's ambition is to crush the _Standard Oil_. He is the declared enemy of the _Standard_, Mr. W. Teagle, for whom he has some sympathy, excepted. When people tell him that he will never succeed in getting the better of the _Standard_, with its enormous capital, he replies that he has the means to fight against all the dollars that the _Standard_ can gather. Has he not the Rothschild millions at his disposal? Besides, he has great advantages over the _Standard_. I have already mentioned the cost of production of the _Royal Dutch_ in the Dutch Indies. It is considerably lower than that of the American Trust.[13] In a price war this would give it an incontestable superiority. The _Royal Dutch-Shell_ possesses such reserves of oil that the question of exhaustion does not arise for it; and it extends over the whole world, whereas the _Standard_ has been able to root itself firmly in America alone. Several European States have crossed swords with it, for example, Austria, which definitely closed Galicia against it in 1911. Its high-handed methods have made many enemies. The _Royal Dutch_, on the contrary, thanks to its clever and elastic policy, has insinuated itself into the good graces of most governments. Almost everywhere, public opinion is on its side.
Besides, _Deterding knows more about the affairs of the_ Standard _than the_ Standard _itself_. This statement was made by a director of the American company. Deterding has no difficulty in following its movements. On one of his visits to New York, he installed himself in the Board-room of the _Standard_, in order to tell the directors that he was not satisfied with the way in which the Chinese agreement was respected, that they owed him a rebate on oil sold in his preserves, and that they must not sell any more there--or it would be war. He spoke for ten or fifteen minutes, and that was time enough to say a great deal. Without a note, he quoted many details, and even figures; for example, the exact number of gallons sold by the _Standard_ in various places. And when one of his hearers inquired, after his departure, whether it was all accurate, another of Mr. Deterding's interrogators replied: "Last time he came, we took down all his statements in shorthand and verified them afterwards. We saw that he had an incredible knowledge of our affairs in every country in which our interests conflict with his own."
Will there soon be a renewed conflict between the _Royal Dutch_ and the _Standard Oil_? Deterding wanted it quite recently. If we are to believe the authorities on the matter, we have narrowly escaped the greatest oil war in history. For once, Deterding gave way to the moderate counsels of the more conservative members of his company, and war was not declared. Mr. Colijn was sent from The Hague to the office in Great St. Helen's, in the city of London, and it was announced that Mr. Deterding was taking a much-needed rest.
These personal struggles with the _Standard_ are probably at an end.
Agreement is actively sought, at present, between the _Standard_ and the _Anglo-Persian_, especially owing to the influence of Sir John Cadman. Since 1922, Elliot Alves and the _British Controlled Oil-fields_ have followed the same policy. Perhaps before long there will be an "oil peace," concluded between the directors of the great Trusts. Was it not even outlined at The Hague Conference? Time will show how long it will last.
My information, drawn from an authoritative source, tends to prove that a great re-grouping of oil interests will not long be delayed.
A true saying, but perhaps a strange one--"Oil will be poured on the troubled waters of Europe." For economics is more powerful than politics. We are at the dawn of the great "Age of Oil."
FOOTNOTES:
[Footnote 13: Only for the American portion of its production are the costs of the _Royal Dutch_ as high as those of the _Standard_.]