CHAPTER XVIII

THE PETROLEUM CONSORTIUM

At the beginning of the War, the French State possessed no reserves of petrol or petroleum: a new example of the unpreparedness so often remarked!

The "refineries" disposed of a stock amounting at the end of July 1914, according to the Customs statistics, to:--

408,200 quintals of crude oil, 433,560 quintals of refined oil, 342,090 quintals of petrol.

To meet the earliest needs, these were requisitioned. But, from the month of September, this method was changed for that of contracts with the "Ten." The cartel undertook to meet the needs of France; it made itself responsible for purchases from abroad. The State was thus a mere customer enjoying the rights of priority over other customers.

The consumption was then unimportant. At the time of the first battle of the Marne, France had 22 squadrons of 6 aeroplanes (= 132), with engines of 80 or 100 horse-power; 110 motor-lorries and 50 tractors (= 160). The Germans had 70,000![42]

At the time of the battle of Champagne, France had 4,000 aeroplanes and 8,500 motor-lorries; that compelled her to increase her reserves of oil from 22,000 to 40,000 tons. But the crisis as regards supplies began in April 1916. Payments to foreign countries were more than could be met by the cartel, which, having just paid an account of a hundred million francs for purchases made by the State, could advance no more money. The position grew steadily worse and reached its culminating point after the United States came into the War in November 1917. The original little fleet of tankers quickly proved as inadequate as the size of the docks provided in our ports, which were intended for boats of 4,000 to 5,000 tons while the American tank-steamers were of 10,000 to 15,000 tons. On December 5, 1917, the Cartel of Ten had to confess its impotence and resign to the State a task which was too much for its powers. The stocks ran grave risk of becoming too completely exhausted on March 1, 1918. It was imperative "to effect a reorganization which history will record as one of the most substantial triumphs of the Entente at the decisive moment, and which resulted--thanks to the pressure on behalf of France which President Wilson put on the _Standard_--in doubling the figures of our importations of oil and petrol" (Report addressed to M. Clémentel, Minister of Commerce, in April 1918). Mr. Wilson, as soon as he received M. Clemenceau's moving appeal, summoned Bedford and W. Teagle to his room, and insisted that a certain number of their ships should be taken off their usual routes and sent to France. Eight days later, three magnificent tank-steamers entered a French port, bringing 30,000 tons of petrol. And since then, thanks to a new system of rotation of ships, France was enabled to receive annually a quantity which, finally, exceeded a million tons. (Each boat was made to do one extra voyage a year; that gave a gain of 160,000 tons.) Consumption steadily increased; the requirements at the front rose, at certain times, to 1,800 tons _a day_. France consumed:--

Tons. Tons. 1914 (first half-year: peace) 200,000 } 476,000 1914 (second half-year: war) 276,000 } 1915 457,000 1916 640,000 1917 610,000 1918 1,000,000

_87-1/2 per cent. of this oil was supplied by the American continent_, the United States, Mexico, Trinidad, South America, etc.; _12-1/2 per cent. only by the Old World. That is why, in case of a new war, it would be impossible for any Power whatever to gain the victory if its tank-steamers could be barred from access to the New World._

During the month of October 1918, alone, the consumption of the Allied armies was:--

French 39,000 tons American 20,000 tons British 32,000 tons

The _Shell_ could scarcely cope with the task of supplying the British Army. But for the help of the _Royal Dutch_ and the _Standard Oil_, "we should have had to cease hostilities to our disadvantage, in the fifth month of the War."[43]

After the Cartel of Ten was obliged to confess its impotence in the midst of a crisis which nearly lost the War, its work was limited to putting into good condition the products bought and stored by the State. Its rôle had become singularly unimportant when the Minister of Commerce transformed it into a consortium.

The petroleum consortium was born of the necessities of war, like the consortium of cotton and the consortium of oils. In the midst of these great conflicts, powerful economic associations, controlled by the State, can alone save national manufactures and commerce from perishing for want of materials, and can supply the enormous requirements created by the war. When, through fear of other countries, the French Republic took the form of an absolute monarchy, it inaugurated, under the guise of a protective State socialism, a system of intense exploitation of the nation's economic forces and of its products, which were monopolized, seized, or requisitioned. The Government was, in fact, reduced to a society of consortiums, which, each in its own domain, were the sole buyers and distributors of wealth. There was the _Comité des forges_ to deal with metallurgy; there was another for oil.

Because of the difficulties of importation, manual labour, raw materials, freightage, and exchange, the simple liberty of the merchant or the isolated manufacturer is no more than an empty word, perhaps even a dangerous illusion.

The system of the consortium was urged by the United State Government. Having created centralized organizations for its exports, it desired that these organizations should come into contact, not with scattered merchants, but with the Allied States themselves. The important inter-allied agreements made in Paris and London, in November 1916 and December 1917, on the initiative of M. Clémentel, confirmed the principle of these industrial and commercial syndicates, financially responsible to the State, which becomes a direct buyer. Besides, the French State was not anxious to see the incredible profits which were going to result from the doubling of oil imports--imports of a value of a thousand million francs yearly--fall into the hands of the Cartel of Ten. It therefore imposed upon it, on March 29, 1918, after three months of inquiries and hesitations, a curious contract.

The State reserved to itself the monopoly of the purchase and import of oils, and sold them to a special organization (the consortium), constituted under the form of a limited company with a capital of thirty million francs, of which half was to be paid up immediately. This company undertook delivery of the commodity, reimbursed the State for its expenditure (cost, insurance, freight), itself met the charges for unloading and storage, and re-sold the oil to the ten members of the cartel at prices fixed for each variety by the Ministers of Commerce and Supply. _The distributive trade within the country was left free._ Each of the Ten subscribed towards the formation of the capital in the following proportions:--

------------------------------------------------------------------------ |Nominal Capital| Paid-up | Percentage. | subscribed. | Capital. | ------------------------------------------------------------------------ | Francs | Francs | Francs _Fenaille et Despeaux_ | 4,725,000 | 2,362,500| 15.75 _Désmarais frères_ | 4,725,000 | 2,362,500| 15.75 _Fils de A. Deutsch_ | 4,725,000 | 2,362,500| 15.75 _Cie. Industrielle des Pétroles_| 3,861,000 | 1,930,500| 12.87 _Raffinerie du Midi_ | 3,504,000 | 1,752,000| 11.68 _Société L.B.C._ | 2,526,000 | 1,263,000| 8.42 _Paix et Compagnie_ | 2,238,000 | 1,119,000| 7.46 _Cie. Générale des Pétroles_ | 1,428,000 | 714,000| 4.76 _Lesieur et fils_ | 1,284,000 | 642,000| 4.28 _Raffinerie du Nord_ | 984,000 | 492,000| 3.20 ---------------------------------------------------------------------- | 30,000,000 |15,000,000| -- ----------------------------------------------------------------------

As the consortium was founded in the general interest, they agreed to take interest at the rate of only 6 per cent. on the capital they had provided. Beyond that, all profits were to go to the State. They were fairly high, for on July 1, 1919, they amounted to 67 million francs.

This organization constituted a first monopoly of importation by the State, under the financial management of the consortium, which arranged for the reception and storage of the products and their sale to refiners. Under the system which prevailed before that of the consortium, the Ten pocketed the supplementary profits arising from buying and transport. These were retained by the consortium for the benefit of the community.

The oil magnates will never forgive the State for interfering with their affairs. According to M. Henry Bérenger, "although the State left to the cartel a large share in the management and the profits--more than 100 million francs--the latter never consented with a good grace to the intervention of their country's Government in matters concerning oil. They never freely accepted the principle of collaboration with the public authorities." In August, 1918, at the height of Marshal Foch's offensive, a grave crisis arose from the extraordinary particularism of the oil magnates. For fear of losing an additional profit of 15 centimes a litre, they refused to pool their cans, as the French High Command required of them. The reports sent in at this time by General Head-quarters are categorical in tone. The resistance from private interests became so strong that the Government decided, in the critical days of the great advance, to create a Commissioner-General for Petrol with full executive powers to subordinate rigorously all private commerce in oil to the requirements of the public safety.

M. André Tardieu, the High Commissioner at Washington, was sometimes also greatly impeded in his negotiations by the Ten. From the end of 1917, he made direct purchases of oil from the _Standard Oil_, the _Atlantic Refining_, and the _Texas Oil_, because of the difficulties that had been made for him by the rivalry and manoeuvring which he denounced in his telegrams. While the French Government was trying to buy at £5, the oil dealers were offering £7 10s. Their clumsy and inopportune intervention furnished the _Standard Oil_ in many cases with an instrument of pressure.[44]

FOOTNOTES:

[Footnote 42: Report placed before the Chamber on March 20, 1919, by the Duc de la Trémoïlle.]

[Footnote 43: Statement by M. Henry Bérenger in the Senate, June 2, 1920.]

[Footnote 44: Affairs of the _Archbold_, the _Goldshell_, and the _Muskogee_. André Tardieu's reply to the oil magnates when challenged by them to state exactly when and how his mission was impeded by their proceedings.

The oil-men revenged themselves for the State collaboration which was imposed upon them by a bitter criticism of the system of the consortium in the _Revue Politique et Parlementaire_: accounts badly kept; profits arising from the State's arbitrary allowances for working expenses; ships arriving in ports where they were not expected, and without bills of lading (hence no means of control), etc....]