CHAPTER XI
A STATE-SUBSIDIZED COMPANY: THE _ANGLO-PERSIAN_
Although the United States, in spite of the civil wars they let loose there, could never drive Pearson out of Mexico, they triumphed over him in Central America and the chief States of South America by the mere force of their prestige. During 1912 and 1913 Pearson obtained concessions in Costa Rica, Colombia, Venezuela, and Ecuador. That would have given him a monopoly of the supply of oil to all shipping passing through the Panama Canal. Washington placed its veto on these concessions and caused them to be annulled in the name of the Monroe Doctrine. No South American republic dared to resist.
Meanwhile the _Shell_ installed itself in Trinidad, a British colony, then in Venezuela and Colombia. To quiet all fears it was wise enough to associate itself with American firms: for example, the _Colon Development_ was founded, a British company constituted in common with the American _Carib Syndicate_. It has since come out that all the British shares are grouped in the hands of the _Burlington Investment_, which is itself dependent on the _Royal Dutch-Shell_. Not having succeeded directly, through Pearson, who was too much distrusted by America, Britain has none the less succeeded indirectly, through Deterding, in controlling the entrance to the Panama Canal.
It is a strange fact that, while the United States were watching the activities of the Pearson group with evident hostility, they displayed not the least mistrust of the _Royal Dutch-Shell_. By a bold and masterly policy, the latter obtained a footing in the very heart of the territory of the _Standard Oil_. American law, unlike French, does not distinguish between ownership of land and ownership of the minerals. As in Mexico before 1917, both belong to the owner of the surface. The _Royal Dutch-Shell_ bought land, sank wells, and was thus able to exploit oil as it pleased. Cleverly following the example of the _Royal Dutch_, the _Shell_ endeavoured to place its shares with the American people, so as to give them an interest in its prosperity. It was not difficult, considering its high dividends. In 1919 the _Shell_ placed 750,000 shares upon the New York market; by so doing, it realized a premium of £4,390,623, of which £4,000,000 were appropriated to reserve and to amortization. The source of its capital did it no harm, for, before the War, all American large-scale industries had had to make calls upon European savings. And if the _Shell_ was British, the _Royal Dutch_ was without a considerable German element, although officially a Dutch company. Deterding had not yet openly joined forces with Great Britain. He was hesitating. Foreseeing the imminent outbreak of the world conflict, he was much too clever to bind himself before he knew who would win.
These two companies, connected since 1907, but each keeping its separate financial organization (at the same time reserving for each other a 40 per cent. share in any new subsidiary company), were thus freely allowed to install their reservoirs and pipe-lines beside those of the _Standard_. Besides, the Democrats, fearful of the political and commercial power of the American trusts, were not sorry to set against them competitors who could have no influence upon the domestic politics of the United States. They came to be looked upon as international undertakings without any political ends. To complete the illusion the British Government, which assisted them in secret, simulated fear of their excessive growth.
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The British Admiralty declared that it was important to free the Royal Navy from the tutelage of the trusts. It was voted the money required to obtain an interest in the operations of the _Burmah Oil_, thus ensuring for itself a share of the oil of Burmah; and in May 1914 it bought half the shares of the _Anglo-Persian Oil_, which holds a thirty-years' monopoly for the exploitation of oil deposits in Persia, excepting only the five northern provinces. For Persian territory on the borders of the Caspian Sea was always reserved for Russian influence.
The _Anglo-Persian_ began obscurely. Its inception, in 1909, passed unnoticed. It was founded, _without an appeal to the public to subscribe its capital_, by the _Burmah Oil_, a company at that time better known in Scotland than on the London Stock Exchange. Its first object was to take over the concessions which the Australian, d'Arcy, had obtained in 1901, and which covered the enormous area of 500,000 square miles. D'Arcy had obtained these concessions from the Persian Government for the infinitesimal sum of 200,000 francs, of which 100,000 francs only were paid in cash and the rest in shares. The Persian Government was to receive 16 per cent. of whatever profit d'Arcy might make. It was much disappointed, for the first investigations along the Turko-Persian frontier were really discouraging. D'Arcy spent five million francs in vain, and he was thinking of abandoning the whole affair when he heard of oozings and gushings in the Shustar region, 140 miles north of Mohammerah, to the north of the Persian Gulf. D'Arcy recognized the presence of oil, but had to face the construction of a pipe-line and refinery, and to find new capital for these purposes. Certain foreign capitalists made him tempting offers, but D'Arcy, who had found a staunch supporter in Admiral Fisher, the reorganizer of the British Navy in the twentieth century, resolved that the Persian concessions _should remain under British control_. He obtained the financial assistance of the _Burmah Oil_, and the latter founded the _Anglo-Persian_ in 1909. The Royal Navy had already 150 ships burning oil. Pretyman, a Lord of the Admiralty, got Lord Strathcona appointed to the chairmanship of the _Anglo-Persian_, the first results of which were encouraging, so that the British Government could direct its future. The capital of the new company was very quickly used up. It constructed a pipe-line 145 miles long to bring its oil to the Persian Gulf, and a refinery on the island of Abadan which cost a great deal. But as the prospecting then taking place revealed the existence in Persia of rich deposits, a commission of geological experts, presided over by a rear-admiral, was sent to the spot by Winston Churchill, then First Lord of the Admiralty, to make an inquiry. On the conclusions embodied in its report, the British Government decided to take control of the business. In the month of May 1914 the _Anglo-Persian_ made a somewhat stormy entrance into history, for up to then very little had been heard of it: the negotiations and then the contract with the Admiralty had been conducted with the greatest secrecy. Parliament showed great surprise when Winston Churchill placed the matter before it, and asked for its sanction to the agreements which had been made. It was even necessary for Sir Edward Grey to come to the rescue in order to win a majority in the House.
The Government had a certain majority of two thousand votes by the purchase of £2,200,000 of new ordinary shares. This amount has since been more than doubled, for on March 6, 1921 the Government announced in the House of Commons that it held £5,200,000 ordinary shares, £1,000 preference shares, and £199,000 debentures. Two-thirds of the ordinary shares of the _Anglo-Persian_ are to-day in the hands of the British Government, the other third is held by the _Burmah Oil_, which is directed by the Admiralty. Thus absolute Government control is assured.
The _Anglo-Persian_ has become literally a State-directed company, but British officials are wise enough to entrust to technical experts the actual management of the undertaking. This explains its great success. Two trustees, Lord Inchcape and Sir E.H. Packe, represent the Government on the Board of Directors: they have the right of absolute veto upon all decisions.
Finally, the Government has made a contract with the _Anglo-Persian_ for the supply of important quantities of oil at an advantageous price for a certain number of years. The needs of the Navy are thus guaranteed for a period of years. There is no surprise to be feared, for the oil-fields are near the Persian Gulf, where Great Britain reigns as mistress, and where no foreign ship can enter without her permission. It is, moreover, an important strategic point; ships can be dispatched from there to all parts of the world where Great Britain has interests--Suez, Gibraltar, India, Australia, Africa.
The oil-deposits of Persia are so rich that it will soon be necessary to increase tenfold the projected development of the equipment, pipe-lines, and refineries, to deal with future production. Even in our time the natives collect the oil by rudimentary processes and transport it on the backs of camels to the markets of the interior, where it serves as an object of exchange. Persia is one of the few countries in which numerous spontaneous springs and seepages reveal the existence of oil. In certain valleys it flows along the slopes and pours into the rivers, making the water unfit for consumption. The _Anglo-Persian_ already ranks among the chief oil-producing companies of the world. It is precisely this success, we may believe, which has caused so much apprehension in the United States on the subject of the rivalry between British and American producing companies. The _Anglo-Persian_ controls an almost unlimited production in Persia, and as soon as there are enough pipe-lines and reservoirs, the output will increase in enormous proportions. _From 1923 onward, the_ Anglo-Persian, _by itself, will be in a position to supply a large proportion of the needs of Great Britain_. It will then be free of the contract which, for more than seven years, has bound it to the _Royal Dutch-Shell_, obliging it to dispose of a considerable portion of its production through the latter company.
When its program is completed, the _Anglo-Persian_ will possess a fleet, the capacity of which will exceed a million tons. Expenses are small, because of the great productivity of the wells, which gives to Persia a marked superiority over all the other oil-fields of the world, except perhaps Mexico. Its yield of benzine and kerosene is much superior to that of most of the oil-fields of the United States; it is richer than that of Mexico.
But for several years, the _Anglo-Persian_ has no longer been content with Persia, rich as it is. Its ambitions now extend to the whole world. It is in process of installing its depots in all the great ports of the world. In French territory alone, reservoirs will be constructed in the ports of Dunkirk, Le Havre, Rouen, Saint-Nazaire, La Pallice, Bordeaux, Marseilles, Bizerta, Algiers, Oran, Casablanca, Dakar. Through the agency of its subsidiary, the _d'Arcy Exploration_, it is prospecting for oil in every part of the globe. Wherever geological conditions appear to indicate the presence of oil in commercial quantities, the operations of drilling are undertaken. The activities of the _d'Arcy Exploration_ are carried on at present in Great Britain, Australia, New Zealand, Canada, Hungary; and again, quite recently, the company has concluded arrangements for investigating and prospecting in districts of France and her colonies which are likely to produce oil. A French company, the _Société Générale des Huiles de Pétrole_, has been founded, with an initial capital of 100 million francs, jointly subscribed by French and British groups, with the object of undertaking the refining and distribution of oil in France as well as her colonies. According to the agreement signed in London on October 27, 1920, by Sir Basil Zaharoff for the _Banque de la Seine_, nine subsidiary companies will be founded, each having a different function: importation, refining, distribution, and transport of oil.[24] And this "Franco-British Anglo-Persian" is even going to build an oil fleet, thanks to the _Société Navale de l'Ouest_.
Other enterprises are also under consideration. The _Anglo-Persian Oil_ has acquired important interests in the _British Oil Bunkering_, and it has also founded the _Tankers Insurance Company Limited_, an insurance company with a capital of £100,000, for it intends, henceforward, _to do its own insurance_. By means of the _Scottish American Oil_, of which it has technical and commercial control, it has even succeeded in penetrating into Mexico, thus completing the work begun by Pearson and continued by the _Shell_.
Its activities, during the month of December 1920 alone, were remarkable. It obtained a footing in Spain, founding a company with a capital of 25 million pesetas, of which 55 per cent. was subscribed by the _Anglo-Persian_ and 45 per cent. by a Spanish group having at its head the _Banco Urquijo_ and the _Spanish Credit Bank_. It concluded a contract _with the Hungarian Government guaranteeing it exclusive rights of exploitation on Magyar territory_, in case oil should be discovered there, which has happened. Deposits have been found near Letenye and the quantities which it is hoped to obtain will no doubt be more than sufficient to supply the needs of Hungary.
The Hungarian Minister of Finance submitted to the National Assembly, in December 1920, a report concerning the cession of rights to prospect for oil to a syndicate controlled by the _d'Arcy Exploration_. The Government at Budapest, not having the necessary capital for exploration, was favourably disposed to the offers of the subsidiary of the _Anglo-Persian_. The negotiations were conducted by Dr. Telesky, a former Minister of Finance, and Dr. von Bockh, Secretary of State. According to the agreement reached, the _d'Arcy Exploration_ undertook to devote at least £100,000 to prospecting for oil; if the results were satisfactory, the company would exploit one-third of the geological productive units, one-third would be kept in reserve, and the remaining third would revert, free of all expense, to the State. As regards the second portion, the Hungarian Government reserved complete freedom of action. A company was formed with a capital of £1,000,000 sterling, of which the Hungarian Government subscribed ten per cent.; the company had to deposit with the Government 25 per cent. of the shares, and to undertake to hand over to it each year one-tenth of the production, in kind or in money.
The _Anglo-Persian_ has also obtained possession of the oil-bearing territory of Transylvania, ceded to Rumania. During the War, this was seized and exploited by the Austrian military authorities, for it belonged to the _Hungarian National Petroleum Company_. The capital of this company was heavily drawn upon for repairs undertaken at the close of hostilities. An appeal for funds became necessary. The _Anglo-Persian_ demanded that the technical and commercial management of the undertaking should be entrusted to it and that two of its nominees should sit on the Board of Directors; it then subscribed £500,000 in preference shares. Each of these shares carried twenty votes against one for an ordinary share: thus the _Anglo-Persian_ has complete control.
In addition to this, it has taken over the share which was reserved for Britain in the German interest in the _Steaua Romana_, and disposes of nearly 80 per cent. of the shares in the _Turkish Petroleum_, which has claims to oil concessions in Mesopotamia.
On October 13, 1921, the _Anglo-Persian_ made an agreement with the Japanese company _Tei-Koku_, undertaking to supply it with 350,000 barrels of petroleum yearly. Half of this is destined for the Japanese Navy.
Organizations for the sale of its products are to be found in Belgium, Denmark and Norway.
Part of the famous deposits of Rivadavia, which the Argentine Government intended to reserve for itself, has fallen under its control.
In co-operation with the Australian Government--from which it had already obtained, in May 1920, exclusive rights in the former German colonies of Papua--the _Anglo-Persian_ founded the _Commonwealth Oil Refineries_, with a capital of £500,000. It is prospecting actively in Western Australia, and has asked the Government of Perth for a concession of 100,000 acres.
In New Zealand it has offered to subscribe 50 per cent. towards the formation of a capital of £100,000 for prospecting purposes.
And the _Anglo-Persian_ is, at the present moment, building vast works in New Brunswick, for the distillation of oil from shale. The oil produced will be used for heating the boilers of British ships. The oil-bearing lands in this region are rich and extensive, and the shale of which it is composed has been found twice as rich in oil as the Scottish shale, the first from which the precious "rock-oil" was distilled.[25] As in Wyoming, Colorado and Utah, there are enormous laminate rocks, stretching in beds below the valleys, of a thickness of eight to ten metres; when distilled they may produce up to 240 litres of oil to the ton. When the Mormons, fleeing from persecution in 1846, took refuge in the Far West and discovered these oil shales, they never suspected the service they would render half a century later to the British and American Navies.[26] They found themselves held up in their march across the desert for want of fuel, but one of their leaders announced that Providence would soon supply their needs. The prophecy came true that very day: a Mormon was surprised to notice that the stones on which he placed his saucepan took fire. Since then, hunters and prospectors venturing into these desolate regions use no other fuel than these rocks.
FOOTNOTES:
[Footnote 24: The _Anglo-Persian_ will subscribe 45 per cent., France 55 per cent. of the capital of each of these companies. The Agreement of October 27, 1920, was the occasion of very sharp attacks from certain short-sighted members of the House of Commons, who did not understand that the British Government was about to lay hands, in concert with the _Royal Dutch_, upon the oil wealth of France, and reproached the Government with dispersing its efforts.]
[Footnote 25: The Scottish factories treat three million tons of shale annually, from which the average yield is only 122.5 litres of oil to the ton, half the yield of the Canadian and American rocks. Apart from this bituminous shale, it seems unlikely that Great Britain, which controls 90 per cent. of the future production of the globe, would have succeeded in finding oil-deposits in her own soil.]
[Footnote 26: Anticipating the time when the oil-fields of the United States will be exhausted, the American Government has taken possession of millions of hectares of land containing bituminous rock, in order to ensure the fuelling of its Navy.]