We Fight for Oil

Ludwell Denny


CHAPTER ONE
Concerning the Larger Anglo-American Conflict


A HISTORY of the oil war must wait.  The war is not over.  Contemporary records can be set down by observers in different countries.  From many such incomplete reports future historians may round out the story.

Origins of the struggle have been studied by several men, most of them Europeans.  They described the rivalry among the Powers over petroleum riches of Russia and the Near East in the period immediately following the Great War.  No one, apparently, has attempted to bring the record down to the present.

Since 1925 the battle lines have shifted.  The struggle for Russian resources has grown more bitter.  Another Mosul dispute is in the making.  The Mexican situation has completely changed.  There are new and more important fronts.  In Venezuela and Colombia, Great Britain is manoeuvring for position dangerously near the Panama Canal.

The British Government is directly involved.  It owns and directs the most aggressive company in this international competition.  While British companies help drain diminishing reserves of the United States, Great Britain excludes American companies from most of the petroleum lands of the Empire.

To meet the emergency the Washington Government exerts a “strong” policy.  It formally challenges British oil imperialism, protests nationalization laws of Mexico and other foreign fields and markets.  Fearing a domestic shortage, Washington wants foreign reserves essential to the nation in peace and war.  Subsoil supplies in the United States are sufficient theoretically for only six years at the present consumption rate, according to the Federal Oil Conservation Board.

Anglo-American strife over foreign resources has become a major factor in international affairs.  The British perhaps have been more militant, because their need has been until now so much greater than ours.  But in motive and in method there is little difference between the contending forces.

Oil diplomacy in London and Washington is determined by commercial and military considerations.  It is hidden most of the time.  Corporations do not reveal their secrets.  Governments do not publish their army and navy war plans.  But sometimes when hard pressed a Sir Henri Deterding and a Standard Oil official try to gain public support by telling the worst about each other.  Or a diplomatic note shows the close connexion between foreign policy and commercial rivalry.

Then one sees that this oil war is not important in itself.  It is significant only as part of a larger struggle for world mastery between two great economic empires.  Seen alone it seems fantastic, impossible;  against the background of the wider conflict it appears tragically inevitable.  There would be no serious oil war had not America suddenly grown into an empire threatening Great Britain’s long commercial and naval supremacy.

Modern international power is economic.  The nation which controls oil and other raw materials, foreign markets, and credits will rule the world.[1]

Before the Great War the United States was a debtor nation, owing the world $5,000,000,000.  By 1927 the world owed the United States $25,600,000,000.  Great Britain at the height of her power as world banker had less than $20,000,000,000 of foreign investments.  Foreign debts to the United States Government total more than $11,000,000,000.  Foreign investments of Americans in 1927 amounted to $14,500,000,000, and were increasing at a rate above $2,000,000,000, a year.  The world is paying America an annual tribute, in dividends and interest alone, well over $1,000,000,000.  The yearly American foreign trade turnover exceeds $9,000,000,000.[2]

This economic power carries inevitable international responsibilities.  Political isolation—ordained by the fathers of the Republic as the basis of American foreign policy—ceased with the Spanish-American war and resulting territorial expansion overseas.  “Isolation is no longer possible or desirable,” President McKinley said.  Later President Wilson for a time convinced a sceptical America that:  “We are participants whether we would or not in the life of the world.  The interests of all nations are ours also.  We are partners with the rest.  What effects mankind is inevitably our affair as well as the affair of the nations of Europe and Asia.”  We could not keep out of the Great War.  From that vast destruction of men and wealth, other Powers both victor and vanquished emerged terribly weakened.  The balance of international power moved westward toward America.

The United States became an economic empire, circling seas and continents, penetrating the very capitals of older empires.  Now no major development can occur in any foreign country without touching some American interest.

America apparently cannot stop the historic process which is extending her empire.  She cannot escape the accompanying entanglements.  With Europe poor from the war, with undeveloped continents opening to exploitation, America’s surplus wealth will continue to flow outward.  To protect that wealth, American diplomacy follows.  And sometimes American battleships.

American entanglements abroad are only a matter of degree.  In western Europe our political influence is exercised indirectly, as in the Dawes reparations system or in the credit embargo against France.  In eastern Europe and the Near East there are American financial advisers with almost as much authority as dictators.  In Liberia, America rules in all but name.  We share in China with other Powers control of tariffs and finance, maintain our own courts and army.

In the Western Hemisphere, under a much-stretched Monroe Doctrine, our control is wider.  The Caribbean is an American lake.  No Central American government can defy the will of Washington and live.  Virtual American protectorates extend over Cuba and Panama.  American marines occupy Haiti and Nicaragua.  In 14 of the 20 Latin American republics, there is some form of fiscal, political, or military power wielded by the United States.

There is also our territorial empire, acquired by purchase or conquest—the Philippines, Alaska, Hawaii, Guam, Porto Rico, and the Virgin Islands.

But these territorial possessions and larger economic domains are not enough.  We reach for more.  And as we extend our power over other peoples, they rise up to curse us.

The peoples of Europe envy and distrust us.  European governments discriminate against our trade.  We have outlawed Russia.  In China our gunboats and marines must protect Americans from anti-foreign frenzy.  Throughout Mexico and Latin America we are hated and feared.  Japan, humiliated by the insult of immigration exclusion and suspecting our Pacific policy, watches and waits.

Overshadowing all stands Great Britain, blocking the path of American empire.  Empire is built on sea supremacy, foreign markets, and control of raw materials such as oil.  Without these the British Empire cannot continue dominant.  Without these the American empire cannot rise.  Hence the conflict.  Despite hands-across-the-sea speeches and talk of Anglo-American unity, the two empires are now in combat on the economic fronts of the world.

Great Britain enters this conflict with the advantages and disadvantages of age.  She has possession of much of the earth.  She has imperial experience.  But most of her vitality is spent.  She finds it increasingly difficult to rule her own household.  Her organization and technique are of a past age.  The territorial type of empire seems ill adapted to the future.  While she faces encroachments of a newer competing empire, she must reconstruct her Empire into a so-called commonwealth.[3] And still the revolt in India, in Egypt, grows.

America enters the conflict with the handicap and strength of youth.  With the physical security of two ocean barriers, with natural resources making her uniquely self-sufficient in an emergency, and enriched by war which impoverished her competitor, America is formidable.  Her daring compensates for her inexperience in empire building.  Driven by a self-righteous faith in American civilization, she has the crusader’s zeal and unscrupulousness which has usually conquered others.

There is a growing number of economists who believe that any permanent revival of Great Britain as the world’s industrial centre is highly improbable.  [4] Her past commercial dominance was achieved by acting as “middleman” for eastern Europe and backward continents, converting their crops and minerals into goods which she re-sold to them.  Now that those undeveloped countries are becoming industrialized, there is less need for the British middleman.  Unfortunately for England she has no adequate agricultural industry which she can develop to compensate for her commercial losses.

Industrialization of backward countries not only restricts the market for certain manufactured products, such as cotton goods which have been England’s chief stock in trade;  it creates other markets for machinery and products of light industry.  Anglo-American commercial competition is thus intensified by the restriction of old markets and emergence of new ones.

Great Britain is less able than the United States to meet such competition.  Our favoured geographic position, efficient production methods, and larger credit facilities, enable us to supply developing countries with most of the industrial machinery required by them.  These advantages bring them to us as the logical market for manifold accessories of “civilization” which primitive countries demand in becoming modernized.  More than Great Britain, the United States is sharing in the industrialization of South America and Asia, indirectly by furnishing desired financial capital and directly by ownership of industry in the new areas.

To compete effectively with her American rival in a changing world market, Great Britain is “Americanizing” her industrial plant and sales system.  The Mackenzie Delegation of Inquiry, composed of British employers and trade union officials searching for causes of American industrial superiority, came to this country in 1926.  Their report, issued by the British Ministry of Labour, stressed the following factors:

The United States’ natural resources and raw materials, its freedom from internal trade barriers and tariff walls, industrial technical efficiency, simplification processes, standardization of products, cheap power, Prohibition’s effect on the population as producers and consumers, and co-operation between capital and labour.  “Organized labour have accepted what may be termed the machine-age as an inevitable development of modern industry,” according to the Delegation.  “It is their avowed policy to co-operate with management [employers] to the best of their ability in increasing production.”

The report might have added that American organized labour is weaker in numbers and influence, and much less class conscious than British labour.  One-quarter of American workers in the manufacturing, mining and transport industries are trade union members, compared with almost one-half in Great Britain.  Organized labour in this country has little effective control of production, except in the clothing industry.  In Great Britain labour increasingly controls most basic industries, at least in negative manner.  British labour’s superior power comes not only from larger organized numbers driven by fear of poverty, but also from a political Labour Party and unions organized by industries in addition to the craft-union American system.  Whatever may be the ultimate merits from the workers’ standpoint of class war unionism compared with the “co-operative” policy of the American Federation of Labour, the latter gives American capital an advantage over British capital in the competition for domestic and foreign markets.

“The penalty of commercial and industrial efficiency inevitably is war,” Rear-Admiral Charles P. Plunkett, commandant of the Brooklyn Navy Yard, declared January 21, 1928, in defence of the proposed Coolidge $500,000,000 naval program.  “If I read history correctly, this country is nearer war than ever before, because its commercial position today places us in competition with other great commercial nations[5]—meaning Great Britain.  Was he indiscreet to reveal publicly the American naval mind? Of course there were official denials.  But they do not alter the fact, which can be verified by examining our naval building program or by talking with almost any naval officer.

Rightly or wrongly, we are actively preparing for the Anglo-American war which our naval men believe will be fought to determine commercial supremacy.  The American people are now less opposed than formerly to such preparedness against Great Britain.  They think—justly or unjustly—that Great Britain at the Coolidge Geneva Conference tried to trick America into permanent naval inferiority and refused American pleas for equality.  To understand this attitude, fostered by United States officials, one must start with the Washington Arms Conference.

Secretary of State Hughes opened that Conference with the proposal for a 5-5-3 ratio as among Great Britain, the United States and Japan.  Lord Balfour, head of the British Delegation, accepted that ratio.  This was to be expected since Great Britain in confidential negotiations with the United States had been first to propose both the Conference and the “Hughes plan.”  By that plan and its acceptance in treaty form, Great Britain checked the American capital ship program which threatened British supremacy.  Great Britain did not have enough money to win a capital ship building race;  therefore she called it off, declaring it a tie.  Moreover, the Great War had increased doubts of most naval men as to the importance of capital ships.  There was less incentive for unrestricted building of expensive ships which might soon become obsolete.  Naval strategy was turning to smaller ships and newer weapons, the light cruiser, destroyer, submarine, and aircraft.  These auxiliary craft are the weapons of commercial rivalry, for blockade, for protecting and for attacking merchant shipping and trade routes.

Great Britain came out of the Washington Conference with her sea supremacy more secure than when she went in.  By limiting expensive capital ships, in which she was about to be surpassed, she made cheaper cruisers the gauge of naval strength.  She had more modern cruisers than the United States and all other Powers combined.

This result of the Washington Conference was achieved partly by skilful British diplomacy and partly by France’s refusal to abolish or limit submarines.  With the submarine their only effective security against England in a possible war for European hegemony, the French would not sacrifice this inexpensive weapon.  Unable to force abolition of the submarine, Great Britain prevented cruiser limitation.  Mr. Hughes, despite protest of the American naval experts, first granted parity in capital ships in which America was potentially stronger, and then begged unsuccessfully for equality in cruisers in which Great Britain was stronger.  Being weak in cruisers, the United States had nothing left with which to bargain.  She watched the Conference break up, leaving Great Britain mistress of the seas through cruiser superiority.

The American public was inclined to blame France for preventing complete naval limitation.  But the American admirals said:  The British have trimmed us again.

After the Washington Conference London started a large cruiser building program, widening further the gap between British and American strength.  Then the American admirals were able to force from an “economy first” Administration a pledge to close that gap—either through a treaty establishing cruiser parity, or by building more Yankee cruisers.  The admirals said:  It is no use to try for treaty equality because the British never will grant that until we are stronger than they are.  Mr. Coolidge replied:  Give them a chance.  So the President in his message of December 1926, asked Congress to postpone its cruiser program pending efforts for a limitation treaty.

As a result of the abortive Geneva Conference this Government is now convinced of the accuracy of the navy’s traditional contention that Great Britain—or at least the Tory Government—is determined to “rule the waves” through cruiser superiority.  Rightly or wrongly, Washington believes London rejected the several American proposals at Geneva because they involved a paper equality, and that every British proposal was an attempt to prevent either paper or actual parity.

Granting the British argument that their longer Empire lines and trade routes require for defence more cruisers than the United States needs, their refusal to grant paper parity at Geneva helped create a situation in which not only the American Navy Department but a majority of the American people demand a large building program.  However sincere the Admiralty’s policy at Geneva may have been, it is difficult to understand what Great Britain expects to gain by it.  The United States is preparing for war, as Rear-Admiral Plunkett indicated.

Both nations would lose by war.  But Great Britain would lose more.  Whatever happened to America, Great Britain would cease to exist as a world empire.  The reasons are obvious:

The United States plans to have naval equality or superiority before hostilities begin, if there is to be a war.  America’s only major weakness, lack of an adequate merchant marine for service of supply and naval auxiliary, will be less acute probably within the next decade.  America is vastly superior in manpower, raw materials, food supply, financial reserves, and natural defences.  Great Britain would have serious labour and political disaffection at home probably, and native independence revolt in many of her colonies.  Great Britain is exposed to air and submarine attack by her European neighbours, some of whom might welcome an opportunity to complete her downfall.  Not that they love us but that they hate Great Britain more, as the nearer of two encroaching empires.  Compared with this British disadvantage in war, most of the United States’ potential enemies such as Mexico and the Caribbean states are relatively powerless.  Direct Canadian intervention would be improbable and not decisive in any event.  Even if Japan joined Great Britain to capture the Philippines and Hawaii, the attacking allies would still have to cross half the Pacific Ocean to threaten the American mainland.  It is more probable that Japan would join the United States, or at least remain neutral in the hope that her two chief adversaries would destroy each other.  Though Great Britain were unexpectedly the naval and military victor, she would have received external and internal injuries from which the aged Empire could not fully recover.

Doubtless everyone in Great Britain realizes this—except the Tory minority which controls the Admiralty and Foreign Office.  But apparently few Britons of any party realize that the United States will soon be ready to fight to attain commercial and naval supremacy, unless Great Britain without war will share control of raw materials, markets, and the sea.  The capitalists, politicians, and admirals who direct the American empire may lose;  but they will not be bluffed by the British imperialists.

There are of course powerful personages in both countries seeking a compromise.  The American naval program, American capture of more British foreign markets, and increasing American control of world credit, may make even the British Die-Hards cry for compromise.  Great Britain’s hold on three-quarters of the world’s oil reserves, her near monopoly of rubber and other essential raw materials,[6] and the fact that an economic-financial empire such as ours can profit more from productive peace than from destructive war, may in turn convince American imperialists that compromise is the better way.

Any compromise agreement would be in effect an Anglo-American economic and political alliance, even though partial.  It would tend probably to take the following form:  Naval parity and joint control of the seas;  a free hand politically for Great Britain in her colonies and spheres of influence in exchange for a free hand for the United States in Latin America, with Great Britain ultimately to get out of British Honduras and Jamaica and immediately stop concession-hunting in Panaman, Colombian and other territory commanding the Panama Canal;  Britain to agree not to encourage dismemberment of China and not to seek special commercial advantages there;  the United States to hold the Philippines, and to that extent prevent Japanese expansion or further nationalist revolt in the lower Far East and India;  the United States to scale down its high tariff wall to let in British goods, and hasten war debt cancellation;  both Governments to practise the Open Door policy in regard to raw materials and markets in their territories and spheres of influence, except in strategic areas such as Panama and Suez;  relaxation of restrictions against British shipping in American coastwise trade;  freedom for nationals of each country to form international commercial combines;  abolition of the British exclusion policy preventing American ownership of petroleum lands, and equitable division of joint exploitation by British and American oil companies of new foreign fields.

Such a complete economic and political alliance could not be formed, or at least not in one sweep.  But an informal entente in incomplete form, beginning with the points of worst friction such as naval, communications, and oil rivalry, may be sought by both Governments to prevent ultimate war.

Possibility of an Anglo-American bloc has long been foreseen and dreaded by Latin and Oriental peoples.  They fear that empire alliance, with its vast concentration of economic and political force, would master the world as no other power of church or state has ever done.

For better or for worse, then, it is possible the declining empire as the price of survival may make terms with the rising empire before the Anglo-American economic conflict ends in actual war.

Meanwhile, America has doubled the size of her pre-war army, trained a large military reserve force, projected the biggest naval program in her history.

And the struggle for oil goes on, menacing this flimsy peace.



 

1. Cf., New York International Conciliation, Jan. 1927, “Raw Materials and Their Effect upon International Relations;” a general bibliography and reprint of articles by George Otis Smith, L.L. Summers, E. Dana Durand, Parker Thomas Moon, and Edward Mead Earle.

2. New York Foreign Policy Association Information Service, Supplement, March 1928, Max Winkler, “The Ascendancy of the Dollar.”  Dr. Winkler’s figures are higher than official estimates.  Cf., Commerce Department, T.I.B. No. 503, The Balance of International Payments of the United Slates in 1926;  and T.I.B. No. 507, Foreign Trade of the United States, 1926-27.

3. Cf., New York International Conciliation, March 1927, “Inter-Imperial Relations Committee Report, 1926.”

4. Cf., New York Foreign Affairs, July 1927, article by Clive Day.

5. New York Times, Jan. 22, 1928.

6. Cf., Commerce Department, T.I.B. No. 385, Foreign Combinations to Control Prices of Raw Materials.  Ibid., press release, Nov. 1, 1925, address by Secretary Hoover at Erie, Pa.