Enemy on the Euphrates (5 page)

Afterwards, Reynolds explains his predicament. Hundreds of thousands of pounds have already been spent and there is still no discovery of oil. Reynolds is worried that the oil company’s shareholders are losing patience. One final possibility remains: to move the drilling
operations to Maidan-i-Naftun, a location whose name, ‘the plain of oil’, certainly sounds promising. Moreover, an ancient temple nearby is supposedly of fire-worshipping Zoroastrian origin, giving further credence to the notion that there are petroleum resources somewhere in the vicinity. Reynolds therefore tells Wilson that he is going to move all the equipment there – it will be their last chance.

So by April 1908, with the temperature already reaching 115°f and the nomadic Bakhtiari tribesmen departing for their summer pastures high in the Zagros mountains, Reynolds and his drilling team are at Maidan-i-Naftun, grimly persevering with two new wells. Then Reynolds receives the telegram from the Concession Syndicate which he has been dreading. He should continue drilling down to 1,600 feet and then, if no oil is found, abandon the operations and transport his equipment back to Ahwaz and thence down the Karun river to Muhammara.

On hearing this Wilson is enraged. He immediately writes to his direct superior in the Indian Political Service, Major Percy Cox, warning that if the British pull out, their place will soon be taken by the Germans or by one of Rockefeller’s companies. ‘Cannot government be moved to prevent these fainthearted merchants masquerading in top hats as pioneers of Empire, from losing what may be a great asset?’ he writes despairingly to Cox. Meanwhile, Reynolds decides to continue drilling for a little longer, convincing himself that it is possible that there has been error is the coding of the telegram and that it would be unsafe to follow its instructions until he receives further written confirmation. With luck this should give him about one more month.

Tuesday 26 May, 1908: it is an exceptionally hot night and Wilson is sleeping outside his tent. Just after 4.00 a.m. he is awakened by a great rumbling noise and shouts of jubilation from the Persian oilfield labourers. He runs towards the sound of the commotion and witnesses an amazing sight: the long-awaited breakthrough. A huge column of oil is spouting from the primitive percussion drilling rig, fifty feet above the top of the rig, tumbling down over the delighted drillers and labourers and almost smothering them with the accompanying gas. The Concession Syndicate – later to become the Anglo-Persian Oil
Company; and later still, British Petroleum – has struck oil at a depth of 1,200 feet. The first commercially exploitable oilfield in the Middle East has been discovered.

Wilson quickly swallows some yoghurt and flat bread, mounts his stallion and gallops to the Persian telegraph office, thirty miles away at Shushtar, to inform his superiors at Bushire on the Gulf coast of the important news. But when he arrives he realises that he doesn’t have the current secret telegraph code book with him. Instead he gets out the Bible which he always carries with him and consults the Old Testament. Having found the verses he is looking for, he wires to Bushire the following: ‘See Psalm 104 verse 15, third sentence and Psalm 114, verse 8, second sentence.’ When the officers of the Indian Political Service at Bushire check the message against their own Bible, they read ‘That he may bring forth … oil to make his face shine’ and ‘Who turned the flintstone into a springing well’. They know instantly what Wilson is referring to and the information is immediately sent off to the Concession Syndicate’s offices in Glasgow, the Foreign Office and the Admiralty.
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The Admiralty were delighted. Since 1904, when Admiral John ‘Jackie’ Fisher had become First Sea Lord, it had been encouraging and supporting D’Arcy’s oil-exploration activities. Fisher had set up a special committee to study the question of converting the Royal Navy’s warships from coal to oil and he used his considerable influence to encourage the Scottish directors of what was then Britain’s only oil company – Burmah Oil – to refinance D’Arcy’s struggling Persian enterprise when its expensive drilling operations were failing to find reserves. The Concession Syndicate Ltd, which acquired D’Arcy’s original company, First Exploitation Ltd, in May 1905, was the outcome of those endeavours. Following the successful discovery at Maidan-i-Naftun, a new company with a capital of £2 million – the Anglo-Persian Oil Company – was established in April 1909 and Fisher was now able to push forward with his plans to revolutionise the British navy in the knowledge that in years to come the country would have control of a major oilfield in a region effectively under British rule and with good communications with its Indian Empire.

By 1912, a 138-mile, eight-inch-diameter pipeline had been laid from Maidan-i-Naftun – now renamed Masjid-i-Sulayman after the nearby ancient fire temple – to an oil-receiving terminal and refinery at Abadan island. Meanwhile, Wilson had become de facto advisor to the Anglo-Persian Oil Company, personally undertaking land and property acquisitions on its behalf, and in May 1909 he accompanied his immediate superior, Major Percy Cox, to begin negotiating the agreement for the lease of part of Abadan island with Sheikh Khaz’al of Muhammara, the wily Arab potentate whose domain lay on the neighbouring Persian mainland and who, although nominally a vassal of the shah, was, in reality, an independent ruler.

Although the negotiations were protracted, Sheikh Khaz’al was eventually given assurances of continuing British protection while he himself relented on certain contractual demands, and the agreement to lease part of Abadan was signed. Afterwards Cox, who by now had formed a very high opinion of Wilson’s work, appointed him as his assistant and he was instructed to carry out detailed topographical investigations of the whole area surrounding Anglo-Persian’s field of operations in case disturbances among the local tribes should require military intervention. A few years later Wilson was to tell his parents, ‘Whatever happens to all the other matters I have dealt with in this part of the world I shall, I am sure, always be proud of having helped to start the Oil Company on sound lines.’
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However, difficulties at Anglo-Persian’s operations continued. On its first test, in July 1912, the refinery broke down. When it was finally in operation it became clear that the quality of its products was poor: the kerosene extracted for lighting – still a major market for the crude oil – had a dirty yellow tinge and quickly filmed-up the oil lamps in which it was used. And lurking in the background, the huge Royal Dutch/Shell Company, with whom Anglo-Persian had a contract for the marketing of its products, was beginning to deploy its formidable financial power towards a possible takeover of its smaller partner – or at least that was what the directors of Anglo-Persian feared.

By the autumn of 1912, with problems such as these still mounting, the Anglo-Persian Oil Company was fast running out of capital; but millions
more were needed for development of the company’s oilfields. Charles Greenway, Anglo-Persian’s first managing director, a monocle- and spats-sporting gentleman who in spite of his ‘Champagne Charlie’ image had a sound experience of the oil business, now began pressing the government for a subsidy. But although the initial response from government was encouraging, by the following year no practical outcome had been achieved, although Winston Churchill, First Lord of the Admiralty, had made it clear that he was sympathetic towards the company’s plight.

Churchill as First Lord of the Admiralty, 1912

The navy was now building more oil-fired warships but the great battleships of the fleet remained coal-fired. Admiral Fisher, now in
retirement, continued to campaign for these super weapons of the day to be fuelled by oil. This would increase their speed from an average twenty knots to a world-beating twenty-five. But with Anglo-Persian once again struggling to survive, where were the future secure supplies of oil to come from? Not from a monopoly controlled by Royal Dutch/Shell, argued Anglo-Persian and its supporters in the Admiralty who questioned the ‘Britishness’ of a company which was only 40 per cent British-owned and whose two managing directors were respectively Dutch and Jewish. So the solution
had
to be Anglo-Persian, but how were its chronic financial problems to be solved?

Churchill responded with a proposal of breathtaking originality. On 17 June 1914 he introduced a Bill in the House of Commons to partially nationalise Anglo-Persian. The Bill contained two principal elements: firstly, the government would invest £2.2 million in the company in return for 51 per cent of its equity, and secondly, the government would place two directors on the Anglo-Persian board. Despite strong criticism both within Parliament and outside it, the Bill was eventually passed by an overwhelming majority, 254 to 18: the British government was now a direct participant in the international oil business. But the new Anglo-Persian remained a far cry from any kind of experiment in state socialism.
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Since only two government nominees would be on the board of directors, the company remained in all relevant respects a private one. And who were these government directors? One was Admiral Sir Edmond Slade, representing the interests of the Admiralty; the other was James Lyle Mackay, Lord Inchcape, chairman of the Peninsular & Oriental Steam Navigation Company, vice-president of the Suez Canal Company and a director of Hong Kong & Shanghai Bank, a self-made predatory capitalist in the classic mould: in matters of economic policy a devout believer in the superiority of market forces over state intervention – except, that is, in cases where such intervention served his own extensive business interests.
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In spite of his role in Anglo-Persian as a government appointee, there was nothing to prevent Lord Inchcape from owning shares in the company and his private interest in
the oil business would later encompass investments in an Anglo-French consortium, the Middle East Development Company, which had plans for oil exploration in Syria and Arabia.
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But Inchcape had another motive for his involvement in Anglo-Persian and its subsidiaries. As the leading shipowner of the day, the availability of cheap oil supplies to fuel his own fleet was extremely important to him and he would later use his position on the board of Anglo-Persian to lobby to reduce the price of oil for his P&O liners and merchant ships.
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There was, however, a further implication of Churchill’s Act. Britain had now committed itself to a strategic involvement in a region on the frontiers of the Ottoman Empire and within a few hours’ march of Ottoman troops based at the Iraqi city of Basra.

And this was not the only point at which British oil interests touched upon the Ottoman Empire’s Iraqi territories. As Sykes had already discovered, in 1905 German engineers working on the Berlin-to-Baghdad railway project acquired geological data indicating that northern Iraq could be a richly petroliferous area and, as Ambassador O’Conor had feared, they had subsequently passed this information to representatives of the Deutsche Bank in Berlin. They, in turn, sought a concession from the Ottoman government to begin drilling operations in the area of Mosul. However, in 1912, Deutsche Bank transferred its claims for a concession to the Turkish Petroleum Company (TPC), whose capital was distributed between Royal Dutch/Shell, the Deutsche Bank, and an entity named the ‘Turkish National Bank’. Shell and Deutsche Bank each held 25 per cent of the company’s capital with the remaining 50 per cent in the hands of the Turkish bank. However, in spite of its name, half of the latter’s equity was actually owned by British financial interests.

Meanwhile, an envious Anglo-Persian Oil Company looked on with deep chagrin at the success of its rival, Shell, which had now seemingly gained a foothold in what could turn out to be another major petroliferous area, and to further complicate matters the British ambassador in Istanbul reported that the Turks themselves had plans to set up an oil company to work the oil, not only around Mosul but also in the vilayets of Baghdad and Basra, prompting the British foreign
secretary, Sir Edward Grey, to send a sharp protest note to the Ottoman government in July 1913 followed by a further ultimatum on 12 March 1914.
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The British government informed the Turks that it would not agree to the economic concessions they were currently requesting – primarily an increase in Ottoman import tariffs – unless they, in turn, agreed that the TPC should amalgamate with Anglo-Persian. So on 19 March 1914, in a deal orchestrated by the Foreign Office, the TPC was restructured whereby a subsidiary of Anglo-Persian, the D’Arcy Exploration Company Ltd, acquired 50 per cent of TPC, leaving the Deutsche Bank and Shell with 25 per cent each.
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Three months later the British and German ambassadors in Istanbul were informed that an application by the TPC for an oil concession comprising the vilayets of Mosul and Baghdad would be granted, but that ratification and written confirmation would have to wait until certain stipulations were made as to the extent of Ottoman government participation in the new company’s profits and the size of the royalty to be paid.