We Fight for Oil

Ludwell Denny

Roumania Goes Red a Little

MOST of the familiar oil problems of other producing countries exist in Roumania.  There are nationalization and restriction laws, Government ownership of part of the pipe-line systems and regulation of export, high taxes, alleged bribery of officials, Anglo-American conflict inherited from the San Remo pact, and diplomatic controversy.141  But Roumania is not so vital to the United States as are the areas of the Caribbean, Russia and the Near East, where larger petroleum resources and international issues intensify the struggle.

The State Department has protested repeatedly against provisions of the Roumanian mining law of 1924.

“The protection of important American interests against any prejudicial provision of the Roumanian mining law regulating the exploitation of subsoil resources of Roumania and putting into effect the clause of the new Constitution nationalizing such resources has occupied the Department of State during the last four years,” Secretary Kellogg said in 1928.142

The law provides in Article 1 that “all strata of mineral substances from which metals, metalloids or combinations of these substances may be extracted, as well as strata of mineral fuels, bitumens, mineral waters in general and natural gases of all kinds and all the riches of the subsoil of whatever nature are and remain the State’s property in all their development from the surface to no matter what depth.”143

Articles 32-33 state that “concession [for private exploitation] is granted only to enterprises constituted as Roumanian mining joint-stock companies according to the provisions of the commercial code and which at the same time fulfil the provisions of the present law. ... The capital held by Roumanian citizens in the company must represent at least 60 per cent of the capital;  for existing undertakings, which in the course of 10 years from the promulgation of the law obligate themselves to nationalize, the percentage of Roumanian capital is reduced to 55 per cent.  Two-thirds of the members of the board of directors of the committee of management and of the auditors, as well as the president, must be Roumanian citizens.  Existing joint-stock companies which do not fulfil these conditions may benefit from the advantages of Roumanian joint-stock companies if, during the first 10 years from the promulgation of the present law, they transform themselves in accordance with the rules shown above and on condition that, from the beginning, the majority of the members of the board of directors, of the committee of management, as well as the president, are Roumanians.  In case the company does not conform in this term the concession will be withdrawn, when the company is to blame for the noncompliance.”

The State Department argues that these provisions in effect confiscate Standard’s (N.J.) rights and investments of $70,000,000.  Though the law does not apply until 1934 to foreign properties acquired before 1924, the Rockefeller company maintains that its present holdings will be exhausted by 1931 and that its large capital investment will become valueless unless it can obtain new lands without the nationalizing discriminations of the law.

But foreign companies have suffered little from the law so far.  By alleged financial donations to certain high Roumanian officials, some foreign corporations have continued to operate old properties with a minimum of governmental interference.  Though there has been no formal change in the law, Dutch-Shell and Anglo-Persian are said to be obtaining new lands through formation of “straw” companies with dummy native officers.  These British companies have also acquired Crown land concessions.  Standard has been less ready to play a game in which native Government officials are alleged to share profits as a reward for stretching the law.

Competition of cheap Russian oil in the European and Near East market in 1927-28 brought down the high Roumanian export tax.

But even Mr. Deterding, whose Dutch-Shell has a favoured position there, is displeased with the situation.  “The considerably increased production of that country does not give a correct idea of the present position of the petroleum industry there,” his 1926-27 annual report said, as summarized by the London Times, June 9, 1927.  “The increase is mainly the result of the granting of concessions on a number of State lands to a few privileged companies-lands in which the presence of oil was in many cases proved by non-nationalized companies.  Further, in consequence of the fluctuations in the rate of exchange, the burden of taxes and the disorganization of transport, the general economic position in Roumania is considered to be such that not a single Roumanian petroleum company, not even those with the largest production, can make a profit in proportion to the labour expended and the risks taken.”

The “objectionable” law is nominally an attempt to regain the petroleum resources which have fallen into foreign hands almost exclusively.144  Foreign companies hold five-sixths of present reserves.  Of 160 operating companies, 10 predominantly foreign firms have 92 per cent of total output.  Measured by standards in the United States, Russia, Mexico, Venezuela, or Persia, the production of Roumania is a minor factor in the world market.145  But engineers expect the output to double if the Government lifts restrictions on foreign exploitation.  In 1927 output was 26,100,000 barrels, compared with 23,300,000 in 1926 and 10,867,000 in 1923.

Dutch-Shell and Anglo-Persian tried through the San Remo Agreement to keep Standard from becoming a large producer in that country.  They failed to keep out the American trust, but these two British companies continue to dominate production.  Dutch-Shell and Anglo-Persian own Astra-Romana, the largest company in the country;  they have part interest in Steaua Romana, the third largest producer, and in other important corporations such as Orion and Phoenix.  Dutch-Shell production almost doubled in 1926-27 over the preceding year.  The Service Petroleum Company of London was organized in 1927 with a capital of $5,000,000 and acquired the old Industrie Roumaine Miniere, with 9,000 acres of the best Roumanian oil land and two refineries.

Standard has controlling interest in Romano Americana, which ranks second in single production, but that is the only American property of significance.  French capital, through Steaua Romana, Concorda, Colombia and Aguila Franco-Romana, ranks next to the British in total production and control of reserves.

Standard and the United States Government are waiting impatiently for Roumania to swing back from her “nationalization extremes.”  Perhaps Yankee opportunity will come through financial pressure and control of credits.  After failing to get money elsewhere, Roumania in 1928 was seeking New York participation in a $60,000,000 international loan.  Standard banking interests have blocked Roumanian loans before and may be able to continue, until assured of satisfactory amendment of the mining law and of non-discrimination in administration of that law.  The State Department in the past has vetoed loans to foreign governments pending settlement of disputes over American private property rights.  In this oil and credit conflict American interests think Roumania must accept their terms in the end.


141. Tulsa Oil and Gas Journal, Dec. 29, 1927, p. 136.

142. Frank B. Kellogg, Foreign Relations. Republican National Committee, 1928.

143. State Department translation.

144. Cf., New York Nation, vol. 119, pp. 295-296.

145. Cf., Petroleum Facts and Figures, supra, pp. 15-16, 51-53.