CHAPTER XIX

HOW GREAT BRITAIN WON OVER FRANCE TO HER SIDE IN THE STRUGGLE WITH THE UNITED STATES

I. Activities of the Royal Dutch and the Anglo-Persian.

On the morrow of the Armistice, on November 21, 1918, Lord Curzon gathered together all the members of the Inter-Allied Petroleum Conference at a great banquet, and there uttered the famous saying: "The Allies floated to victory on a wave of oil." M. Henry Bérenger, the French Commissioner for Petrol, proposed to retain the great inter-allied organizations for the distribution of oil, wheat, coal, etc. The Standard Oil refused. Besides, Sir John Cadman, Sir Marcus Samuel and Lord Curzon were not sorry to regain their freedom. They had only one idea--to bring to a successful conclusion their vast scheme, followed up for ten years with such admirable tenacity, in every country of the globe, for the acquisition of oil-bearing territories.

France, in compensation for the great damage she had suffered during the War, was to receive important rights for the development of concessions in Galicia, Rumania, and Turkey, formerly belonging to Germany. The great thing was to keep out the American rival. To attain this end, as M. Delaisi pointed out, the task was rather complex. Several things were necessary:--

1. To negotiate directly with the Quai d'Orsay in order to get the principle admitted of an exclusive association between France and Great Britain, for the exploitation of French concessions throughout the world;

2. To create Franco-British companies to carry out this agreement;

3. To establish a State monopoly in France, which, under pressure of diplomatic conventions, would be bound to keep off American competitors.

On January 21, 1919, although the War was over, the mandate of the Petrol Commission was extended for another six months. The State retained the monopoly of buying oil and the system of the consortium. That prevented our oil-men from working hand in hand with the Standard Oil as they did before the War.

Then, on January 30th, M. Clemenceau granted diplomatic powers to M. Henry Bérenger. He immediately sent commissions of inquiry into every country in which France might have petroleum interests, to London, Warsaw, Bukarest, Constantinople, Baku, and Mesopotamia. M. Bérenger was all in favour of a great scheme for founding an inter-allied company in which the French State, bringing as its share the German concessions which would be ceded to her by the treaty of peace, should enter into association with Great Britain and the Royal Dutch. On March 7th, the Walter Long-Bérenger agreement was signed, fixing the broad outlines of a common oil policy in Mesopotamia, Rumania, and eventually in Galicia and Russia. It was a preliminary sketch of the San Remo Agreement. It remained only to prepare for its realization. Eighteen days later, without losing any time, the Royal Dutch offered to co-operate in the plans of the French Government in matters concerning the management and exploitation of the various oil interests which might be reserved to France as a consequence of the treaty of peace. It proposed, moreover, to place at France's disposal "all its world-wide technical, industrial, commercial and financial organization, not only in the countries mentioned, but also in all other countries" in which she might need its co-operation. And it offered to supply France by priority, in time of peace as in time of war.

M. Clemenceau welcomed the proposal. In order not to offend Parliament and public opinion, which was tending more and more in favour of a national oil policy, the Royal Dutch entered into partnership with one of the great commercial banks, the Union Parisienne, in order to create with its concurrence companies of which the nationality, if not the capital, should be French.

In this manner were created the Société pour l'Exploitation des Pétroles in July, and the Société Maritime des Pétroles in August 1919, the former with a capital of 20 million francs, and the latter of 10 million francs. In the first of these companies five out of nine of the directors bear names well-known in the Royal Dutch: Deterding, Gulbenkian (the Talleyrand of oil), Colijn, who at one time nearly succeeded Deterding and who has been Minister of War in the Netherlands, Cohen, Jonckheer, Hugo. France has only a minority on the Board of this "French" company, for M. Deutsch de la Meurthe, whose influence brought over the Cartel of Ten from the side of the Standard to that of the Royal Dutch, is little more than the mouthpiece of London and The Hague. The Royal Dutch, besides, subscribed 60 per cent. of the capital of the Société pour l'Exploitation des Pétroles, though it now holds only 49 per cent. In the Société Maritime des Pétroles, the disproportion is still greater; out of seven directors, two only are French, and have played an important part in French politics during the last few years. It is to them, in particular, and to the skill of Gulbenkian, who conducted the negotiations very cleverly, that the Royal Dutch owes its triumph in French official circles.

But the British Government is not content with these two companies founded by the Royal Dutch, (The second is so little French that 19,600 out of the 20,000 shares of its capital belong to the Anglo-Dutch trust, and 400 only have been subscribed by the two French members of its council.) In spite of the opposition of Parliament, it authorized the Anglo-Persian to found a company much more important than the other two put together, a company with a capital of 227 million, the Société des Huiles de Pétrole. This Franco-British Anglo-Persian was created by one of the most powerful personalities of the financial world in Eastern, Southern, and Western Europe, to whom Great Britain owed the policy she was then following against the Turkish Empire.

Through the agency of Sir Basil Zaharoff, who is interested both in the Société Navale de l'Ouest and in the Banque de la Seine, and holds 70 per cent. of the capital of Vickers, this British firm undertook to construct immediately, giving preference over the other trusts, the whole of the tank-boats, of 10,000 tons on an average, destined to ensure to the new "French" company the monopoly of the transport of oil for the French market. France will depend for its future supplies, in great part, on this Franco-British Anglo-Persian. Its stations will be found on all her coasts, as well as in her African possessions. The Société Générale des Huiles de Pétrole will erect vast reservoirs at Dunkirk, Le Havre, Rouen, Saint-Nazaire, La Pallice, Bordeaux, Marseilles, Bizerta, Algiers, Oran, Casablanca, and Dakar (Senegal).

As the United States will probably still have the advantage for another dozen years as regards oil supplies--for it is not very likely that they will exhaust their reserves so soon as 1927, as the Smithsonian Institute pretends--, the new enterprise set out to gain immediate control in the matter of tank-steamers.

Everything being thus prepared in the banks and chancelleries, it only remained to drive out the Standard Oil from the French market and to establish firmly the monopoly of purchase and importation granted provisionally to the Petrol Commission. On May 6, 1919, M. Henry Bérenger announced in the Chamber the profits which remained for the State under the consortium system--profits not paid into the Treasury, but devoted to a special object, the development of the petroleum industry; and on June 17th, M. Klotz brought forward a Bill to establish this monopoly permanently.

The Standard, which, since the Armistice, had been impatiently waiting for the time when restrictions upon trade in France would be removed, no longer had any illusions about the desire of the Commission to expel it from that country. Although the Standard had resumed its freedom from the conclusion of hostilities, it had none the less continued its supplies of oil to France, and knowing the Treasury was in difficulties, had accepted 5 per cent. bonds in payment. Now, in self-defence, it declared that it refused all credit.

The Oil Commission, in thus breaking free, had taken precautions against being caught unprovided. Three days after the rupture with the Standard, on November 25th, it obtained a credit of £2,000,000 from the Royal Dutch, which was increased on January 5, 1920, to £5,000,000. The Standard Oil was ejected and the great Franco-British trust established in its place, thanks to this long-date contract.

But shortly after the fall of the Clemenceau Cabinet, this success came near to being undone. No new commissioner had been appointed in place of Henry Bérenger: a high official of the Exchequer was given the title of Director-General. The politics of oil, when we needed a real Petroleum Department, as in Britain, were reduced to the common level of current events.

For more than a month (February-March, 1920), what remained of the Petrol Commission was left at a loose end, only indispensable deliveries were made. A state of anarchy ruled. The stocks, which had, until then, been laid in four months in advance, fell to almost nothing. The Standard Oil took advantage of this to regain its footing.

In spite of its promises, the Royal Dutch did not succeed in delivering sufficient quantities of oil. By March 13, 1920, the reserves had fallen below the danger-line, to less than 75,000 tons. The Director-General, anxious about supplies, decided to resort to the Americans. And as the powers of the Petrol Commission had been legally extinct since April 26th, and its provisional monopoly at an end since April 21st, he established the system of authorizing imports, and granted licences to several companies which had made contracts with the Standard Oil. Would the Standard Oil succeed in re-entering France?

It was not given the time, for the San Remo Agreement had just been signed (April 24, 1920). A few days later, the French Government resumed control of oil, and M. Laurent Eynac, the new Commissioner, taking the view that what had happened during the interregnum had no legal existence, hastened to annul the licences to import granted to the Standard.

The great American trust found once more in France, as it had so often found since the War in other parts of the world, the "closed door."

II. Diplomatic Negotiations

"The diplomatic history of the Franco-British negotiations concerning Mosul will, when it is made known, constitute the most eloquent document upon British policy towards France." According to the agreements of 1916, Mosul was in the French zone of influence in Arabia. Great Britain began by obtaining the cession of our territorial rights, as recognized by this treaty. The French Government gave way to her desires in spite of the opposition of its Foreign Minister. But when, later on, we demanded in compensation that 50 per cent. of the oil of Mosul should be reserved for us, Great Britain produced at the propitious moment the difficulty, unsuspected by our negotiators, of the Turkish Petroleum, a company which she had opportunely created in collaboration with the Royal Dutch a few months before the declaration of War in 1914. Now the Turkish Petroleum had obtained from the Turkish Government the grant of all the naphtha of the vilayets that we lost in renouncing the Sykes-Picot Agreement of 1916. So, having abandoned Mosul, all we were to receive in exchange was the oil with which Britain consented, as a special favour, to supply us.

"When one knows England well," wrote M. Le Page, with justice, "one is not surprised that, when, with the help of France she has driven out America from the territory she covets, she should strive to throw over her helper, having got rid of her rival."

The petroliferous basin, which extends from Persia to Mesopotamia, is one of the most extensive as yet discovered in the whole world. The great deposits reach as far as twenty miles to the north of Mosul. In the valley of the Naphat, the oil flows naturally into the river. At Hit, on the Euphrates, there are asphalt deposits which have long been exploited by the natives. And it is probable that this petroleum basin, which also includes Palestine, continues through Syria right to the shores of the Mediterranean. Near Latakia (Laodice) there are asphalt beds, which the Latakia Oil, a British company, has been exploiting since 1915. On the eastern side of the Gulf of Alexandretta, the streams which flow down from Mount Alma bear traces of oil. Thus, it is not surprising that this region has aroused, and still arouses, so much covetousness among the Powers. As early as 1903, the Imperial Ottoman Bagdad Railway Company, the famous Bagdad Bahn, obtained the grant of the right of exclusive exploitation of all deposits found within a distance of fifty kilometres from its lines. Germany transferred this right to the Turkish Petroleum when the latter company was created. The capital of the Turkish Petroleum was, to begin with,

50 per cent. British; 25 per cent. German (Deutsche Bank); 25 per cent. Dutch (Royal Dutch).

Germany's share has been handed over to France by Great Britain in order to obtain her support in the struggle against the United States.

As the War broke out almost at once, the Turkish Petroleum had not time to begin the exploitation of the oils of Mesopotamia. After the new King of Iraq has decided definitely what is to happen to them, it will take nearly five years to develop them fully.

In 1914, an Anglo-German agreement had expressly recognized the rights of France in Asia Minor. These rights, moreover, were respected in all essentials in the agreements between France, Russia, and Great Britain, in 1915 and 1916, for the partition of Asia Minor. This latter, in March 1916, defined French and British zones and French and British spheres of influence. "In a letter of May 15th," wrote the reporter of the Public Works Commission, "Sir Edward Grey requested that, in the zone which was to become French under the Sykes-Picot Agreement, it should be understood that all existing concessions, navigation rights, and the rights and privileges of all British religious, educational and medical establishments would be maintained."

In a letter of the same date, M. Cambon agreed. By these means France was tricked, for doubtless M. Cambon was not aware at the time that, from June 26, 1914, a British firm, the Turkish Petroleum Company, had obtained from the Turkish Minister of Finance, Saïd Halim, the concession of all rights over oil discovered or to be discovered in the vilayets of Mosul, Basra, and Bagdad. Now, it was just from these three vilayets that the oil in the French zone came; so much so that, by the interpretation of the Franco-British Agreement of May, 1916, France was completely ousted from the oil production of Mesopotamia.

Thanks to Henry Bérenger, a new agreement was concluded between him and Mr. Walter Long in March and April, 1919. Henry Bérenger recalled the agreement made before 1914 between Saïd Halim and the Bagdad Bahn, the railway company which had passed into French and British hands since the German defeat. The Turkish Petroleum Company was subject to this agreement, because the railway passed through its oil-fields. Rights had been reserved for the Germans over half the production of Mesopotamia. "Thus, France obtained 25 per cent. as her half-share of the German rights." Unfortunately, this agreement met with a certain opposition at the Quai d'Orsay. It was held up, and M. Clemenceau did not sign it, "because, on February 8, 1919, after we had ceded Mosul and Palestine at the request of Mr. Lloyd George upon the threefold condition of the oil agreement--whole-hearted British support of the French point of view in the event of American objections--and finally the exact fulfilment of the 1916 treaty concerning the frontiers of Syria, Mosul excepted, our British friends presented to us a map which deprived us of one-third of Syria in addition."

Such was the explanation given to the Chamber by André Tardieu! A certainty was sacrificed for a possibility. M. Henry Bérenger strove to have the treaty revived, and on December 21st signed a new contract with Sir Hamar Greenwood, the British Minister in charge of oil questions, very similar to the Long-Bérenger Agreement, except in the matter of native interests. This time, however, Lloyd George, not considering it advantageous enough to Britain, refused to sign it.

Such was the situation when France went to the Conference of San Remo.

The San Remo Agreement

It was not merely the oil deposits of Mesopotamia that France, in return for a lowly and subordinate participation in British control, was abandoning to Britain--as they would have had the Chamber believe at the time of the noisy debate upon Mosul--but the whole of French oil interests, present and future, whether in the colonies or abroad. The first article of the agreement which Mr. Lloyd George and the real "Grand Master" of British oil policy, Sir John Cadman, presented for signature, stipulated, it is true, that "this memorandum relates to the following States or countries: Rumania, Asia Minor, territories of the old Russian Empire, Galicia, French Colonies," and that the agreement might be extended to other countries by mutual consent; but, of British territories, only "British Crown Colonies" were opened to French co-operation, and then only "so far as existing regulations allow." Thus, London kept an easy method of evasion in reserve. Now, though the British Empire counts many "Dominions," there is not nowadays a large number of "Crown Colonies." The former German Colonies themselves, with one exception, have been handed over to the Commonwealth of Australia, or to New Zealand, or to the Union of South Africa. Thus, apart from former German East Africa and a small strip of the Cameroons which France ceded to Nigeria, these will not be open to "Franco-British co-operation."

There is but a single country in which the San Remo Agreement has provided equal treatment for France and Britain, at least in theory; that country is Rumania.

Rumania is the State in which French interests were the most important; they would be increased still more by the spoils of the Deutsche Bank and the Disconto-Gesellschaft. Accordingly, the two Governments pledged themselves to support each other in acquiring concessions which belonged to sequestrated companies, such as the Steaua Romana, Concordia, and Vega, and in obtaining fresh concessions. "All shares belonging to former enemy concessions which can be secured and all other advantages derived from these negotiations shall be divided, 50 per cent. to British interests and 50 per cent. to French interests. It is understood that in the company or companies to be formed to undertake the management and the exploitation of the said shares, concessions, and other advantages, the two countries shall have the same proportion of 50 per cent. in all capital subscribed, as well as in representatives on the board, and voting power."

This equality was not a favour, for the French capital invested in Rumanian oil was at least as important as that of Britain.

In the territories of the old Russian Empire, where French interests are much less important than British interests, an equal distribution is not provided for: it would have been to the advantage of France. But it is stated that the two Governments will give their "joint support" to those of their nationals who make "joint efforts" to obtain concessions, and to export and deliver oil. Now, at the present moment, such efforts are being made by the Royal Dutch-Shell alone, which is even going to the length of proposing to the Soviet Government to restore the oil industry of Russia, if it is granted extra-territoriality for its concessions.

In Mesopotamia, "the British Government undertake to grant to the French Government 25 per cent. of the net output" if the Mesopotamian oil-fields are developed by Government action. If a private company is used, the British Government will place at the disposal of the French Government a share of 25 per cent. in such company. Thus, in the one case France will be simply a consumer of oil, or in the other she will be both a producer and a consumer. The negotiators took care to have inserted that "the price to be paid for such participation shall be no more than that paid by any of the other participants." They remembered the price at which British coal had been sold them!

"It is also understood that the said petroleum company shall be under permanent British control." Should a private company be constituted, "the native Government or other native interests shall be allowed, if they so desire, to participate up to a maximum of 20 per cent. of the share capital of the said company, the French contributing one-half of the first 10 per cent. of such native participation." With this system, as M. Delaisi has observed, France would subscribe a third of the capital, upon which condition she would have a right to a quarter of the oil produced.

If Britain consented to give France this share of the Mesopotamian oil, when, according to the document which Sir Edward Grey had got M. Paul Cambon to sign on May 15, 1915, she was under no obligation to give anything at all--the more so because France had given up Mosul without previously laying down any conditions about the oil--it was because the present carried with it as a counterpart privileges and exemptions granted by France to the Anglo-Persian, which will have access, if it so desires, to the Mediterranean by pipe-lines across Syria. It will even be able to build railways, refineries, and reservoirs there, and France is pledged to guarantee the security of its installations in her zone without levying any tolls. No export or transit dues are to be levied upon the oil which it sends through French ports.

Finally, while the British Government only opens its "Crown Colonies" to French penetration, and in these restricts the favour to the "territories of the Crown," with the further condition that the concessions in question are not already the subject of negotiations initiated by private interests, the French Government threw open the whole of its great colonial empire, and undertook to facilitate the acquisition of concessions by "any Franco-British group or groups of good standing." It simply called attention to the fact that Parliament had resolved that, in companies formed for the exploitation of colonial deposits, French interests should be represented in the proportion of 67 per cent. But the French Parliament was under an illusion: in order to have control of a business, it is not sufficient to hold one-half or three-quarters of the shares. Every one knows that, in France, shareholders rarely attend the general meetings which appoint the directors. Still less will they undertake the journey to London, where the head office will almost always be located. They do not even go to The Hague; this explains why they have no influence in the Royal Dutch, although they hold more than half its capital. The last increase of capital of the Royal Dutch was voted by forty-four persons, representing 218 votes. People did not allow their private arrangements to be disturbed by an event which might have notable results upon the world-future of this trust: not one share in 1,110 was represented.

However, Britain did not wait till the San Remo Agreement was signed before grasping the oil-fields of the French colonial empire: she gained possession of them while the War was being fought!

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