We Fight for Oil

Ludwell Denny

CHAPTER NINE
The State Department Forces the Open Door in Mosul ?


THE Mosul issue is important because it shows how far the United States and European Powers will go in competition for oil lands, and because of the State Department’s tardy and questioned victory in forcing limited American participation in a British monopoly field.  The present settlement represents an enforced, and perhaps temporary, experiment in co-operation between British companies and Standard.

“After long negotiations rendered difficult by varying national viewpoints, a way has been discovered for friendly international co-operation in a concession covering a possible new oil field of first rank,” was the comment of Standard’s Lamp in April 1926.  “For the first time there has been negotiated what promises to be a practical Open Door policy in which four great nations take equal participation in one field.”

This territory was sufficiently vital to be one of the causes of the British-German conflict leading to the Great War.  We have seen how the British Government on the eve of the war snatched the Mosul concession from the American, Admiral Chester, by organizing the Turkish Petroleum Company in which Germans were given one-fourth interest in return for their own 1904 concession claim.146

“Recently published diplomatic documents show that the danger that Chester might obtain these concessions was not without influence as a factor in predisposing the European rivals, before the war, to agree among themselves and exclude the Americans,” says Dr. Parker Thomas Moon.147

After the British defeat by the Turks in 1916, London in the Sykes-Picot Agreement offered to support French claims to Syria and Mosul in exchange for French help in the Near East.  The British drive against Bagdad was successful in the spring of 1917.  But the collapse of their Tsarist Russian allies prevented the British from reaching Mosul.  The Armistice eliminated the Turkish-German army defending Mosul.  Then the British and French victors began to argue over the eastern frontier line in Syria, the French maintaining it should include part of Mosul as secretly promised by Sir Edward Grey.  In January 1920 the British withdrew from Syria, and the following April signed the San Remo Agreement with France.  That agreement, it will be recalled, excluded Americans from participating in Mosul oil exploitation, but granted the French a 25 per cent interest in the (British) Turkish Petroleum Company monopoly in exchange for outlet pipe-lines to be built by France across Syria.  While the State Department at Washington was writing sharp notes to London, challenging the San Remo Agreement as a violation of the Open Door principle and of rights of equality won by America in the war, the British and French fell to bickering again.

France charged the British with encouraging a Turkish invasion of Syria, with inspiring the Arab, Emir Feisal, to declare himself King of Syria, and with stirring up revolt among the Lebanon tribes.  France put down the Lebanon revolt and forced Feisal to flee to London.  But the conflict stretched out until March 1921.  Then pressure of the war-weary and financially impoverished French people drove General Gourand to sue for peace.  In retaliation against Great Britain, France in October 1921 signed a treaty with Angora giving the Turks the coveted Mosul fields claimed by the British.  France thereby tore up the San Remo Agreement, disputed by the United States.  Great Britain struck back at France.  She named Feisal King of Iraq, and claimed Mosul as part of Iraq territory.

France and Great Britain then hit upon the expedient of making war against each other through third parties.  Greece, with dreams of empire in Asia Minor, had been waging miniature war against the torn remnants of Turkey since 1920.  France in 1922 completed an alliance with Turkey, against Greece.  Premier Lloyd George in London began to supply money and munitions to King Constantine in Athens, late ally of the German Kaiser.  Within a few months Turkey decisively defeated Greece.  Constantine toppled from his throne.  Great Britain had lost.  After a frenzied appeal for the British Empire to rise against the Turks, in which he attempted to arouse religious fears and passions for a “holy” Christian war against Islam, Mr. Lloyd George fell like Constantine.  Apparently the long British struggle for Mosul oil had failed.

But British diplomacy has a way of waiting its time until the old trading trick can be played.  That time soon came.  France under Premier Poincaré wanted to occupy the German coal and industrial district of the Ruhr, and needed Great Britain’s tacit support.  Great Britain’s price was French help in the coming Lausanne Conference with Turkey.  France agreed.  It seemed a good bargain for both.

In preparation for the Lausanne Conference, which opened in November 1922, British officers in October led Feisal’s troops into the disputed Mosul territory.  An attempt had been made in the so-called Cadman oil truce to silence the United States’ Open Door opposition to British monopoly by promising Standard Oil one-quarter interest in the Turkish Petroleum Company monopoly concession.  This was the concession regarding which Secretary of State Hughes declared:  “We objected to the alleged concession to the Turkish Petroleum Company owned by foreign interests because it had never been validly granted, and in so doing we stood for American rights generally and not for any particular interest.”148

Though Standard was satisfied with the prospect, two other American groups were fighting the British.  One was led by Admiral Chester, whom the British Government had manoeuvred out of his concession of 1913.  The other group consisted of American financial and legal representatives of the heirs of Abdul Hamid.  They claimed the Mosul field on the basis of a 1918 agreement.  Standard had tried unsuccessfully to buy this Abdul Hamid claim.  Admiral Chester’s supporters charged in effect that the State Department conveniently forgot the Open Door principle after the provisional British deal giving Standard a minority share.  In fact, the United States continued its Open Door protests but with less force.

The British, with French support, prepared at Lausanne a draft treaty containing a clause which would return to the Turkish Petroleum Company the old German Bagdad Railway Mosul concession.149  The Turks were given five days to sign.  But with victory in sight for the British, another dispute between France and Great Britain allowed the Turks to slip out of the net.  Paris blamed London for sabotaging French occupation of the German Ruhr district.  After a few secret conversations between the French and the Turks, the latter rejected the draft treaty, defied the British ultimatum, and broke up the Conference.  As a parting shot the Turkish delegate, Ismet Pasha, charged Britain “with great military effort with a view to suppressing by force of arms the Arabs’s aspirations to independence and their constant desire to see the end of a regime which, by whatever name it may be called, is none the less a mere colonization.”

Admiral Chester, who had been used so many times in the past by the Turks as a shield in their conflict with the British, was again given by Turkey a 99-year exclusive railway, mineral and oil concession, covering 20 kilometres on either side of a 2400-mile right-of-way.150  This in effect was the old German Bagdad Railway concession.  Besides Mosul oil, it covered the untapped fields of the vilayets of Van, Bitlis, and Erzerum.  Having obtained a monopoly concession, Admiral Chester suddenly ceased to demand Open Door protests from the State Department.  Completely misunderstanding the purposes of the Republican Administration in Washington, which favoured Standard, the Democratic Party’s platform in the next national election in the United States condemned the Lausanne Turco-American treaty on the ground that “it barters legitimate American rights and betrays Armenia for the Chester oil concessions.”

The Ottoman-American Development Company, organized by Admiral Chester, also obtained rights under the concession to construct public works and ports on the Black Sea and Mediterranean, in addition to the railway, mines and oil wells, at an estimated cost of $1,500,000,000.

But there were several difficulties ahead.  Not Turkey, but Great Britain was in possession of the Mosul territory.  The State Department would not give effective support to the Ottoman-American Development Company.  Standard, with its hope of sharing the Mosul riches through the Turkish Petroleum Company, later was charged with helping to choke off the Chester credit supply in Wall Street.  And so ended the Admiral’s dream.

But before that, the Chester concession was useful as a Turkish threat against Great Britain when the second Lausanne Conference convened in April 1923.  Turkey at that meeting forced through her demands for abolition of foreign exterritoriality and for retention of the Dardanelles and Bosphorus.  She could not, however, force Great Britain to give up Mosul.  The Mosul dispute was submitted by the Lausanne Conference to direct negotiations, with the provision that the League Council should draw the Turkish-Iraq frontier line if the disputants failed to agree within nine months.

Following the Lausanne Conference, London succeeded through secret negotiations in silencing the State Department’s Open Door protests.  In these negotiations the British pointed to the monopolistic character of the Chester concession, renewed their pledge to give Standard and other American companies a share in the Turkish Petroleum Company monopoly, and intimated that the London Government would not make payments on its war debt to the United States if Washington persisted in blocking British control of Mosul oil.

After long delay the League Council in December 1925 made its anticipated award in favour of Great Britain.  The ilayet of Mosul was included in Iraq territory under a 25-year British mandate.  Turkey signed the frontier treaty in June 1926, later receiving $2,500,000 in lieu of certain oil royalties.  The Iraq 75-year concession grant to the Turkish Petroleum Company modified nominally some of the original monopolistic features.

A French group (penetrated by British capital) and an American group were each given first 25 per cent, then 23.75 per cent, which was later reduced to 21.25 per cent, interest in the company.  In the American participating group are Standard of New York, Standard of New Jersey, Pan-American Petroleum and Transport (Standard), Atlantic Refining (Standard), and Gulf Refining.  Sinclair declined to go in.  Mr. C.S. Gulbenkian, an Armenian with British connexions, has five per cent.

“Recent negotiations have altered the percentages to be issued on the contemplated Iraq petroleum production to give 10 per cent to the Anglo-Persian, S per cent to Mr. Gulbenkian, and the remainder equally divided among the French, American, Shell and Anglo-Persian interests, which will therefore receive 21.25 per cent apiece,” Trade Commissioner MacLean, Paris, on March 5, 1928, reported to the Commerce Department.  At that time there was no agreement as to whether shares were to be distributed in profits, in refined, or in crude as desired by France.151

Great Britain retains controlling interest, through Dutch-Shell and Anglo-Persian together holding 52.50 per cent.

What kind of an Open Door is that?  This question is put by American oil men who say the State Department’s “Open Door victory” gives certain Americans less than a quarter interest, whereas before Sinclair, Standard of New York, and Chester had practically all.

Why did Turkey accept without war the League’s award of Mosul, which had been Turkish territory for four centuries?  Here is the answer of M. Henri de Jouvenal, former French High Commissioner in Syria:

“Early in 1926, when the League’s decision on the Mosul question nearly precipitated an Anglo-Turkish war, England offered Cilicia [Turkish territory] as a bait to Italy.  I was present in Angora at the time, attempting as High Commissioner in Syria to negotiate a treaty of neighbourliness with the Turks.  Personally I have not the slightest doubt that the fear of an Italian landing in Cilicia hastened an arrangement between the British and Ottoman Governments whereby Italy was cheated of a military adventure.”152

However the trick was actually turned by the British, it is now an accomplished fact.  But how effective are the modifications purporting to remove the monopolistic or Closed Door stigma from the Turkish Petroleum Company concession?

Standard’s defence of the concession was made in The Lamp, April 1926:  “Even these varied interests [British-Dutch-French-American] are not to have in combination anything approaching exclusive rights in this vast area.  On the contrary, provisions incorporated in the Government grant specifically forestall this.  It is provided that the Turkish Petroleum Company may select any 24 plots, each of eight square miles, for development.  Four years from the date of the Convention all of the geological and other information covering the areas to be offered competitively is to be made public for the benefit of any individuals or companies that may wish to enter the territory, and the Turkish Petroleum Company must sell to the highest bidder, under Government supervision, in tracts of eight square miles which have been indicated by the Government or outside parties.  This procedure will take place each year by the successive offer of a further 24 plots annually.  When the relative size of the 24 pieces (192 square miles) to be reserved by the Turkish Petroleum Company and the area of the concession (89,000 square miles) granted by the Iraq Government are considered, it will be seen that the international group has made a doubtful bargain unless good fortune attends its exploration work.”  The Standard statement goes on to emphasize the huge capital expenditure necessary for drilling far from railheads and for constructing 700 miles of pipe-line at a cast of $50,000,000.

Through the Mosul settlement, the British obtained two large potential fields close to and supplementing the great south Persian concession of Anglo-Persian.  In addition to retaining majority British control of Turkish Petroleum’s concession, which covers most of the vilayets of Mosul and Bagdad, Anglo-Persian obtained the Ahwaz fields of the so-called Transferred Territories covering the rest of the Mosul-Bagdad oil strata.  In reporting the gushers of Turkish Petroleum near Kirkuk in Mosul and the Anglo-Persian success in the new Ahwaz pool, the Bagdad correspondent of the London Financial Times, October 28, 1927, pointed out:

“We [British] shall have the satisfaction of knowing that three enormous fields situated within close proximity of each other, and capable of supplying the oil requirements of the Empire for many years to come, are being almost entirely developed by British enterprise.”

Turkish Petroleum geologists and engineers have confirmed the existence of three large pools within the Mosul concession area.  The north-east pool runs from Hammam Ali through Kirkuk and Tuz Kharmati to Kind-i-Shrin.  A second extends south of Mosul from Khaiyara through Kifri to the Jebej Oniki Imam.  Another pool starts at El Hadr, south-west of Mosul, and runs toward Bagdad along the Tigris to Fet Hah Pass and Mandali.

Drilling, which began in April 1927, extended to nine of the company’s 24 fields in the winter of 1927-28.  First oil was struck at Palkhana at 1,329 feet.  A well at Quiyara gave 5,000 barrels a day from a seepage pool alone.  Then the well at Baba Gurgur came in, running 95,000 barrels daily.  Enthusiastic prophecies, especially in France, have been stimulated by these initial gushers.  “The successful result secured from the Kirkuk area would appear to indicate a very promising future for this company,” Sir John Cadman said in his November 2, 1927, Anglo-Persian report.

The Mosul Agreement is a truce rather than a permanent peace pact.  Already there is difference of opinion among the different groups incorporated in Turkish Petroleum.  First there is a dispute between the British and French over location of the $50,000,000 pipe-line to the Mediterranean.  This weakens the British position, despite their majority control and their hold upon the Iraq Government.  Control of the pipe-line is becoming a major political factor in Near East diplomacy.

Britain desires to lay the line over a round-about course, southward through Iraq and thence across Palestine to the sea.  This route is entirely within British territory-an important consideration in event of war.  France insists on the original route, planned since the San Remo Agreement, running directly west from the Mosul fields, across Iraq and Syria.  France, as the Mandate power, would thus control the outlet for Mosul oil.  A railway is also to be constructed from Mosul to the Mediterranean, probably over the route chosen for the pipe-line.  Written provisions of the San Remo Agreement, regarding pipe-lines and railroads, follow:

“The British Government agrees to lend their support to any arrangements by which the French Government may obtain from the Anglo-Persian oil supplies which may be transported by canalization from Persia to the Mediterranean by means of any pipe-line which may have been constructed in the interior of those territories placed under French mandate, and regarding which France has accorded special facilities, up to 25 per cent, of the oil so transported on such terms and conditions which may be fixed by common accord between the French Government and the Anglo-Persian Company.

“In consideration of the foregoing agreement, the French Government will acquiesce, if such desire is expressed, and as soon as the request is made, to the construction of two pipe-lines and separate railways, these latter necessitated for the construction and upkeep of the pipe-line and for the transportation of the oil emanating from Mesopotamia, and Persia, and traversing French spheres of influence up to a port or ports on the eastern Mediterranean.  The said port or the said ports are to be chosen by mutual agreement by the two Governments.

“In the event of pipe-lines or railways of this nature traversing a territory in the interior of a zone under French influence, France agrees to accord all facilities for the right-of-way without taxes or transportation claims being imposed for the passage of such oil.  An indemnity, however, will be due the land-owners for the area so occupied.

“France will also accord facilities in the terminal ports for the acquisition of property necessary for the erection of depots, railway tracks (switches), refineries, loading quays, etc.  Oil exported through these installations is to be exempt from export and transit taxes.  The necessary material for the construction of the pipe-lines, railways, refineries, and other installations is also to be free from all import and transportation taxes and claims.

“Should the said petroleum company wish to establish a pipe-line and a railway in the direction of the Persian Gulf, the British Government will use its good offices in order to facilitate similar facilities.”153

One or more railways should be built for general development of the Near East, but must be constructed to carry supplies to Mosul oil fields if they are to be exploited on a large scale.  France contends that the railroad, as the pipeline, should cross the French territory of Syria.  Britain insists on the Palestine route, where the road will be a part of the grandiose scheme of the British chemical trust for exploitation of Dead Sea potash deposits and other Palestine natural resources.

The Americans are not yet taking decisive part in the pipe-line-railway controversy, but their distrust of British majority control of the joint concession is increasing.  This distrust was partly responsible for the refusal of the Sinclair interests to join with Standard and others in entering Turkish Petroleum.  Standard and Gulf, as a result of their experience in the company with the British, are now restive.

Open Anglo-American conflict is expected to begin when the “free” areas are opened far acquisition.  Under the quasi-Open Door principle which the State Department forced into the Mosul settlement, Turkish Petroleum was allowed 24 blocks of land with a total area of about 192 square miles.  The company was granted an exploration period for picking its 24 areas, after which remaining areas were to be thrown open to free leasing competition.  In that competition the Mosul Convention provides that Turkish Petroleum shall have an equal but not a favoured position.

American suspicions were inflamed in 1928 by reports that the British Government, through Sir Adam Ritchie, was pressing its puppet Iraq Government to postpone opening the “free” Mosul zones.

The earlier Anglo-American struggle for the entire field probably will be repeated in the conflict for these remaining areas.  The British are believed to be tied by a secret agreement with the French to bid for the “free” blocks only through Turkish Petroleum.  Standard and Gulf are not tied.  They hope to capture and to control completely most of the remaining fields, in addition to their interest in Turkish Petroleum holdings.  They believe American geologists and engineers are more clever than the British in finding and developing wells.  If Rockefeller and Mellon companies do acquire much of the open Mosul area, the United States will be drawn deeper into the pipe-line and railway dispute.

Meanwhile the Standard-British competition elsewhere in the world is not lubricating their single experiment in cooperation.  In Washington an opposition group headed by Mr. James W. Gerard, war-time Ambassador to Germany, uses the Mosul deal to block Senate ratification of the Lausanne Turco-American Treaty.  Mr. Gerard charges the treaty was signed to permit American interests to “grab vast oil deposits.”154

These charges against the State Department and two unnamed Cabinet officers were detailed at length but without complete documentation by Mr. Vahan Cardashian, attorney for the Delegation of the Armenian Republic, in an application for a Senate hearing and investigation.  In his letter of March 24, 1928, to Senator Borah, he said if the Foreign Relations Committee failed to act favourably on his application he would request President Coolidge to present the American-Armenian dispute to the The Hague Tribunal for adjudication.  Cardashian’s appeal follows in part:

“My dear Senator Borah:  I have the honour to apply for a hearing before the Senate Committee on Foreign Relations, upon the Lausanne Treaty, and to submit herewith a partial brief in support of this petition:

“I charge that two members of the President’s Cabinet bartered the Armenian case at the Lausanne Conference and conspired to effect the expulsion of nearly 1,000,000 Armenians from their ancestral homes, for a share in Mosul oil, and that they are now scheming to seize possession of the oil deposits in the deserted homes of their victims.

“I charge that these men and their confederates in this outrage have used and are now using the Department of State as their willing tool to carry out their infamous design;  and that the Department of State, in an effort to cover up the tracks of those who have dictated its policy in this respect, has resorted to misrepresentation, intrigue and even terrorism, and has flooded the land with shameless and irresponsible propaganda. ...

“Under these clear circumstances, what, then, is the motive, the purpose behind the Turkish policy of the Department of State ?

“I charge that it is oil.

“An Administration which has surrendered legitimate American rights and then has had the impudence to fill the air with irrelevancies, wild insinuations and falsehoods to divert attention from its disgraceful policy;  an Administration which has deliberately trampled upon the Constitution of the United States in its conduct of foreign relations--such an Administration, I charge, would not hesitate, and has not hesitated, to sell out the Armenian people and their homes for oil, in the interest of a privileged group. ...

“If for any reason the Senate Committee on Foreign Relations should be unable and unwilling to consider these wrongs inflicted upon a gallant people, I shall then request the President of the United States to submit the points at issue between the present Administration and Armenia, to the Permanent Tribunal of Arbitration at The Hague, for adjudication.”155

In promising to present the matter to the Committee, Senator Borah replied:  “Before I shall feel interested in this matter, I want something more than general statements.  I want the names of the individuals, the nature of the corrupt bargain, or barter, the facts which you claim will sustain, and the names of the witnesses who will support your contention.”

Senators say such an Armenian attack is so partisan and its simplification of involved foreign policy so extreme, it is not apt to get very far.  The Senate has favoured the Lausanne Treaty by majority vote, and the two-thirds vote requisite for ratification seems only a matter of time.

More serious difficulties, however, are in prospect.  The record of Britain in the Near East and the Middle East, and of the United States in Mexico, proves that diplomatic intervention, sometimes backed by military force, is the price of alien oil exploitation in foreign countries.  Such an issue may become acute in Mosul because of the mixed population, the latent revolt against British Mandate power, and the exposed 700-mile pipe-line route across civil war territory.

In event of fighting, who is going to protect the American capital sunk in Mosul wells and Syrian or Palestine pipe-line?  The chief British argument in the bitter dispute in which the State Department challenged the San Remo Agreement excluding Americans, was that Great Britain had fought for that land and the United States had not, and that Great Britain was prepared to protect it and the United States was not.  But now, in blessing the compromise settlement by which some American companies got a minority share in the Turkish Petroleum concession, the United States Government tacitly has undertaken to share responsibility of defending that valued though explosive property.  This, at least, is the British understanding of the agreement.  The State Department does defend with diplomacy and, if necessary, with threat of war, American oil interests in Mexico and the Caribbean.  Will the American public, or the Senate, permit similar action by the United States in Mosul and Syria ?  Probably not.

What then ?  There would seem to be two possibilities.  The State Department may trade American support for some British imperialist program in Europe or Asia.  Or, in default of this, the British may defend Mosul alone, and then reassert their old claim to exploit Mosul alone.  If Sir Henri has his way the Americans will be kicked out of Mosul soon rather than late.



 

146. Cf., Chaps. II, III. Also Earle, supra.

147. Moon, supra, p. 263.

148. Hughes, supra, p. 75.

149. Cf., Mohr, supra, pp. 185-196.

150. Date of concession, April 30, 1923.  Cf., New York Current History, vol. 18, pp. 485-495.

151. Commerce Department, Foreign Trade Notes, March 24, 1928.

152. New York Foreign Affairs, July 1927.

153. Federal Trade Commission, supra, pp. 103-104.

154. New York Times, Dec. 18, 1927.

155. Washington United States Daily, April 11, 1928.