Mitchell Ch. 2 (1) PDF

## Chapter 2: The Prize from Fairyland The story of oil in the Middle East typically begins with the discovery of oil at Masjid-i-Suleiman in 1908. After seven years of unsuccessful exploration, a small team of drillers working for a British investor on the desert plateau of southwest Persia struck...

## Chapter 2: The Prize from Fairyland The story of oil in the Middle East typically begins with the discovery of oil at Masjid-i-Suleiman in 1908. After seven years of unsuccessful exploration, a small team of drillers working for a British investor on the desert plateau of southwest Persia struck a large source of oil. This discovery led to the creation of BP and launched the development of a modern petroleum industry in the world’s richest oil region. This story of heroic explorers discovering unimagined wealth in a desolate territory overlooks the fact that oil was already known to exist in more convenient places in the Middle East. The main goal of searching in the barren hills of Persia was not to launch the region’s oil industry but to delay its development. The main feature of Middle Eastern oil throughout the twentieth century was that there was always too much of it, but in too few locations. This was not necessarily problematic because if there is an abundance of water, timber, solar energy or grassland distributed across space, collective life can thrive. Those who harness and supply the energy can earn a living and profit from doing so. However, with energy from fossil fuels the quantity of energy available can increase exponentially. The sites at which these large volumes are available are relatively few. This combination of extraordinary abundance and limited locations gave rise to the problem. Firms that organized the supply of fossil fuels could collaborate to restrict their availability. With coal, they were forced to share this ability to sabotage the flow of energy with those who mined and transported it, giving coal workers and their allies unusual political power. In the case of oil, the capacity to slow down or interrupt the supply of energy on a large scale was much harder to organize. Oil workers found it difficult to carry out sabotage, which hampered their efforts to build an enduring mechanism for advancing democratic political claims. The companies that managed the production and distribution of oil faced greater challenges than coal companies in restricting the flow of energy. However, they could benefit from the relative dearth and isolation of sites initially known to produce oil. They could take advantage of the distance that separated these places from those countries already industrialised with coal, where most of the oil was consumed. They could develop their own ability to act at both ends of the separation, maintain or block the conduits that connected the two ends, and do all this with the help of narrowly focused political and military support. The oil companies were smaller and potentially weaker than the workforces whose labour they sought to control, but their power of action expanded along the network of drilling sites, pipelines, terminals, refineries, distribution points, boardrooms, investment houses and government offices that grew with the producing and marketing of oil. Following the discovery of oil at Masjid-i-Suleiman, the fledgling British company, the future BP, was unloading steel pipe to build a pipeline from the oil field to the coast, planning a telephone line to follow the path of the pipeline, contracting with local tribesmen to guard the route, designating a firm of agents to handle the local storage and shipping of oil, drafting a prospectus in Britain to attract investment in the venture, and claiming (unsuccessfully) that the prospectus should be allowed to claim government support for an oil industry in Persia as a future source of fuel for the Royal Navy. These narrow but well-supervised networks of distribution, affiliation, assertion and control became far more extended than those of earlier forms of energy, even coal, reflecting the more fluid and transportable properties of oil and the much larger profits to be made from restricting its supply. Oil workers were not just more isolated and disconnected than coal workers; they were isolated at the ends of a much more extensive network. Assuming that the aim was to discover oil rather than delay its development, the conventional story of Middle Eastern oil makes a second mistake: it misrepresents the protagonists. The main players in most accounts are the large oil companies and their governments, which in turn are often represented by a few heroic men, whose 'driving energy and enthusiasm' propel the struggle for what Daniel Yergin in his epic history of oil calls 'the prize': mastery over the world’s petroleum. This approach leaves out the role of those producing the oil, whose power must be weakened or diverted whenever it threatens access to the prize. It also minimises the oil itself, whose energy is the force that oil firms seek to master and whose location, abundance, density, and other properties shape the methods and apparatus of its control. This apparatus, composed of machinery, men, and women, know-how, finance, and hydrocarbons, is what we refer to in shorthand as the 'oil firm'. It might help to think of the firm, in a technical sense, as a parasite: an entity that feeds off something larger, the flows of energy. If it thrives and becomes very large, as several oil firms did in the course of the twentieth century, the reasons may lie less in the enthusiasm and willpower of its leaders and more in the way it adapts to the processes off which it lives, and which it diverts to its own enlargement. If the flows of energy appear blocked or dysfunctional, this may reflect more the ordinary methods of parasitism than an unresolved struggle for mastery. A third misunderstanding finds its way into most accounts of oil in the Middle East. Petroleum companies were never strong enough to monopolise the flow or stoppage of oil by themselves. They needed outside help, both military and financial. To draw on the resources of well-armed states and government treasuries, Western oil companies began to describe their control of overseas oil as an 'imperial' interest of the state, or in later language as a 'strategic' interest, and thus somehow beneficial to the public well-being. Imperially minded political leaders often supported this view, for a variety of purposes, while others rejected it. Historians of oil usually echo the imperial account. Such accounts jump from the fact that industrial societies (especially the United States) were developing ways of living that consumed ever-increasing amounts of energy to the conclusion that the control of oil by giant oil companies best served that way of life, even when the companies' paramount aim was to impede the flow of energy and increase its cost, and when various alternative methods of supplying oil, and of organising collective life, were possible. In the last third of the twentieth century, when the governments of the producer countries began to share control of the oil, a similar claim was made about the 'national' interest of those countries. Rather than assume that the control of Middle Eastern oil was an imperial or strategic interest of Britain, Germany, the United States or other countries, or that it served the national interest of producer states, we should ask who mobilised these claims and for what purposes, and how they conflicted with other, sometimes more democratic claims to the control of oil, including the claims of those whose labour produced it. Those claims did not emerge until later, for oil company obstruction and other delays postponed the building of large oil industries in most of the Middle East. But from the start, for the imperial powers the access to Middle Eastern oil was connected with the threat of democracy. ## A Veritable Lake of Petroleum At the beginning of the twentieth century, hundreds of enterprises were involved in prospecting for, producing, shipping and distributing supplies of oil in different parts of the world. Among these, a handful of firms were devising methods for controlling the supply of oil over great distances. These enterprises took different forms, corresponding to different methods and points of control. Some were producers of oil, organised like mining companies with workers’ camps and teams of engineers, and in many cases operating the new rotary drilling equipment that replaced the hammer-action of the older percussion drills and could penetrate thousands of feet below ground. Three such firms each came to dominate a distant region of supply - Royal Dutch in Sumatra, Burmah Oil in Rangoon, and the Nobel Brothers in Baku. Other enterprises were banking houses that controlled the flow of investment capital needed to build the railways and pipelines that could monopolise the shipping of oil, including Deutsche Bank in Berlin, Rothschild’s in Paris and the Mellon family of Pittsburg, the founders of Gulf Oil. Another firm, the Shell Transportation Company, expanded in the 1890s by adopting and developing another means of transporting oil in bulk, the ocean-going tanker. The world’s largest operator, the Rockefeller-controlled Standard Oil, began as a refinery business and built its domination of the American market by first monopolising the refining industry (with the help of faster refining techniques, using large quantities of steam power generated by fuel oil from the refinery), then controlling pipelines and shipping routes, and finally taking charge of distribution, replacing independent importers and wholesalers with Standard’s own worldwide networks of storage tanks, horse-drawn delivery wagons and reusable tin cans. Before the 1880s there had been only one significant oil-exporting region in the world, the Oil Lands of northwestern Pennsylvania. By controlling the refineries, and later the pipelines, through which Pennsylvania’s oil flowed, Standard Oil had been able to dominate sales of kerosene and other petroleum products across America and around the world. By the end of the nineteenth century, however, European firms had developed large commercial oil production at five locations outside North America: in Baku, Burma and Sumatra, and in two regions of Central Europe, Austrian Galicia and Romania. The development of technologies for transporting oil that took advantage of its liquid form and eliminated most manual labour from the movement of energy – steel pipelines, high-pressure steam pumps, bulk tankers and large storage tanks - rendered local monopolies in any world region vulnerable to supplies from each of these sites. After a series of unsuccessful efforts to absorb or destroy the main firms producing at these rival locations, Standard Oil came to terms with them. During the first decade of the twentieth century, the American firm and a few large European companies created arrangements to restrict the production of oil and control its worldwide marketing - and simultaneously to address the threat of oil from the Middle East. Two alliances were formed, one to manage Asian trade and the other for Europe. In 1902, Royal Dutch joined forces with Shell and Rothschild, which had oil interests in Baku and Romania, to form an alliance that later became Royal Dutch/Shell. In 1905 the Shell group forced Burmah Oil, which supplied the vast Indian market, to agree to a division of Asian sales, an agreement to which Standard also adhered. The European markets were organised in a similar way. In 1906, Rothschild joined with the other large Caspian producer, Nobel, and with Deutsche Bank, its partner in Romania, to form the European Petroleum Union, a cartel to manage the western European kerosene and fuel-oil markets. The cartel then agreed with Standard Oil to divide up European sales, the US company accepting a limit of 80 per cent and the European side sharing the rest. At the same time, the large companies turned their attention to the Middle East. It was not enough to divide up the marketing of oil from the world’s five or so existing oil regions. The firms continued to face the risk that a rival enterprise might develop a large new source of petroleum, menacing the world with additional supplies. The greatest danger lay in the Middle East, where oil companies knew of several potential sites. A related threat was that Russian producers at Baku on the Caspian Sea – the world's most prolific oil region at the start of the century, but also the one most isolated from large markets – would find an easier way to ship their oil abroad, in particular shortening the route to Asia by building a pipeline to the Persian Gulf. To block these threats, the three largest European oil firms purchased rights to explore for oil in the Middle East: Deutsche Bank in 1904 in northern Iraq (at that time, the Ottoman provinces of Mosul and Baghdad, part of what Europeans called Mesopotamia), Burmah Oil the following year in Persia, and the Shell group in Egypt. Oil politics proceeded in a peculiar way. Since the object of the largest companies was more often to delay the development of new oil regions, they had to take control of key sites. It was not always necessary to control the oilfields themselves. The companies had learned from Standard Oil that it was easier to control the means of transportation. Building railways and pipelines required negotiating rights from the government, which typically granted the further right to prevent the establishing of competing lines. After obtaining the rights, the aim was usually to delay construction, but without losing the right. Iraq became the key place to sabotage the production of oil. It would retain that role through much of the twentieth century, and reacquire it in a different way in the twenty-first century. The story of Iraq illustrates how this process began. Of the three sites in the Middle East, Iraq was the most promising and accessible. Local producers around Mosul had mined oil from hand-dug pits for centuries, refining it in local stills and supplying the lamp oil market of Baghdad. Around 1870 the governor of Baghdad had built a larger refinery north of the city, at Baquba. In 1888 the Ottoman sultan took over the rights to the oil as a monopoly of the imperial court, and three years later asked Calouste Gulbenkian, a young Armenian petroleum engineer whose father had developed a business importing kerosene from Baku, to prepare a report on the Mosul oilfields. Thanks to the availability of previous surveys of the region's potential oil sites, Gulbenkian was able to submit the report without himself visiting the area. He later built one of the world’s largest personal fortunes through the rights he negotiated to the oil of Iraq, without ever setting foot in the country. A British geological survey of 1899 confirmed the area's potential as a petroleum region, noting that where the Tigris River cut through the low limestone hills, the cliffs 'exude long threads' of crude oil that pollute the river. The report noted that the oil could be shipped in light steamers and barges down the Tigris, which ‘offers a natural outlet towards the Persian gulf’. That year, the Ottoman government proposed to manufacture a second outlet for the oil, by offering for sale a concession to build a railway connecting Mesopotamia to Europe. The leading German oil firm, Deutsche Bank, began to negotiate for the concession. After a German technical commission of 1901 described Mosul as a veritable “lake of petroleum” of almost inexhaustible supply, Deutsche Bank moved ahead with plans to ensure that oil from this ‘lake’ was unable to reach European markets, where it would threaten the large investments it was making in Romanian oil. In 1903 it purchased the rail concession, and the following year an exclusive right to the oil of Mosul and the neighbouring province of Baghdad. The bank then stalled on building the railway, and made little effort to develop the oil. The petroleum fields of Egypt occupied an even more accessible location, on the coast of the Red Sea near the entrance to the Gulf of Suez. A very large proportion of the shipping of the world passes within two miles of our wells, which are situated within a few hundred yards of deep water, according to a Shell group geologist. Oil deposits had been known for thirty years, but French opposition to British control of Egypt helped prevent their development before 1904, when the two governments settled their dispute over Egyptian state revenues. A Department of Mines was set up that year to auction exploration rights, which speculators quickly bought up. The largest investor was the English financier Ernest Cassel, who had built a fortune managing the supply of capital for the construction of the Aswan Dam in Egypt and speculating in the agricultural land watered by the scheme, and now hoped to make another fortune buying up and selling investment rights in oil. Cassel's local investment firm, the National Bank of Egypt, set up the Eastern and African Concessions Syndicate to hold its oil leases. The aim was to monopolise the oil rights not just for Egypt but for the entire Ottoman Empire. Like Deutsche Bank in Turkey, Shell had no strong interest in developing the Egyptian oilfields. It invested in Cassel's syndicate as a way to join his scheme to control oil rights to the entire region, a scheme that focused on 'the great economic and political struggle for the oilfields of Mesopotamia'. The British administration in Cairo accused Shell of trying to restrict the development of Egypt's oilfields: ''You company, in its natural desire to establish a virtual monopoly,' wrote Edward Cecil, Britain's senior financial official in Cairo, 'is anxious to control large areas of undeveloped land, and possibly to restrict temporarily the production of petroleum'. When Shell objected to the government's proposed solution - to enforce 'continuous working clauses' in its leases and encourage rival companies to work the oilfields - the British administration responded with a remedy that Britain would later oppose throughout the Middle East: in 1913, it nationalised Shell's subsidiary company in Egypt. ## The Protection of Indian Investments Despite their accessibility, neither the banks of the Tigris nor the shores of the Red Sea provided the site for the first large oilfield in the Middle East. In 1905, Burmah Oil took over the monopoly rights that another British speculator had acquired to search for oil in Persia. As in Egypt and Ottoman Iraq, however, Burmah's aim in rescuing this failing venture was not to open up the production of Middle Eastern oil. Persia lay between the world's most productive oilfields of that period, at Baku on the Caspian Sea, and Burmah Oil's protected markets in India. The two large oil producers in the Caspian region, Rothschild and Nobel, had made plans to construct a pipeline running south from Baku to the Persian Gulf, but put them aside in favour of the shorter line westward to Batumi on the Black Sea. Since Baku's isolation from major markets was a main cause of the collapse, the Russian government revived the plan for a trans-Persian pipeline, with the support of Rothschild and Nobel. The oil rights that the British speculator, William Knox D'Arcy, purchased that year from the Shah of Persia included an agreement that, so long as he proceeded with exploration, the government would allow no other company to build a pipeline to carry oil to the country's southern shore. The power to block the construction of a Russian pipeline to the Persian Gulf helped keep D'Arcy's speculative venture afloat. D'Arcy seemed to share the belief that Persia was a less promising location than Mesopotamia. After securing the Persian concession, he began competing with Deutsche Bank to obtain the Mesopotamian rights from Turkey. The drilling team he sent to the region in 1901 chose as its first exploration site a place called Chiah Surkh, near Kasr-i Shirin, which lay not on the desert plateau of southern Persia, in fact barely in Persia at all, but on the border of Mesopotamia, about fifty miles north-east of Baghdad and closer to the Caspian than the Gulf, in an area that a frontier adjustment of 1914 would transfer to the future state of Iraq. The site offered a foothold in Mesopotamia, along with a more immediate advantage. The Baku oil firms might have bypassed D'Arcy's monopoly of pipelines to the southern shore of Persia by using a route that crossed into Iraq at Khanaqin, on the main Tehran-Baghdad road, reaching the Gulf via southern Iraq. Kasr-i-Shirin lay on the same route. By drilling there rather than in southern Persia, D'Arcy blocked the potential bypass route for a pipeline from Baku, securing his ability to obstruct any increase in Caspian exports to India. After two years of drilling the team struck oil, but the twenty-five barrels a day that trickled from the well were not enough to interest the large oil companies to whom D'Arcy had hoped to sell his venture. Instead he agreed to share his rights in Persia with Burmah Oil, which suspended operations at the site near Baghdad and moved the drillers and their equipment hundreds of miles to the south-east, up the valley of the Karun River into the mountains of Khuzestan. <start_of_image> Diagrams of oilfields and railways of Mesopotamia and the Persian Gulf are included in the document. D'Arcy was able to find an investment partner thanks in part to the support of a group of largely Indian-based British imperialists, who were attempting to expand the reach of Britain's Indian empire by establishing greater control over local potentates of the Persian Gulf, and by encouraging local British monopolies in trade, steam navigation, and other enterprises. Led by Lord Curzon, the new Indian viceroy, they popularised the idea that Britain was engaged in an imperial struggle with Russia in which Persia and the Gulf formed a vital frontier. In his book Persia and the Persian Question, Curzon had warned repeatedly about the dangers of allowing Russia to build a railway to the Persian Gulf, and on taking office he had signed a protection agreement with the ruler of Kuwait to prevent the building there of a Russian pipeline or railway terminus. In an effort to portray Russia as a military threat rather than a commercial rival, Curzon failed to mention that a principal purpose of such a railway or pipeline would be to export oil from Baku. This omission was not due to ignorance. Before his appointment to India, while serving as a member of parliament, Curzon had travelled to the Caucasus and Persia, and after witnessing the oil boom in Baku in 1890 he became a shareholder and director of the Persian Bank Mining Rights Corporation, which spent three years trying to develop oil production in Persia a decade before D'Arcy's efforts. When the D'Arcy initiative discovered oil, Curzon's colleague Lord Kitchener, commander-in-chief of the Indian army and another proponent of India's imperial expansion, had a telegram sent to the head of the Indian military detachment guarding D'Arcy's site enquiring whether the reports of the discovery were true, in order to decide whether to buy shares in the venture. Later historians like to repeat the views of men like Curzon and Kitchener, describing the events of this period as the unfolding of the 'Great Game' – a long struggle on the imperial border between the British and Russian empires. Although Kipling used the phrase 'Great Game' in Kim, his 1901 tale of espionage adventures on India's north-west frontier, he employed it to refer to the game of life, not to Anglo-Russian rivalry. The term was not used in diplomatic documents or public discussion, and only became popular among historians much later, in the Cold War era. This later creation of scares about Soviet expansion connected with an American attempt to challenge British control of Iranian oil, first established by D'Arcy, depended on attributing to the Russians a centuries-long interest in expanding to the Gulf, for which the anachronistic phrase 'Great Game' provided a convenient shorthand. In the early twentieth century, many political figures in Britain disagreed with the view of the Indian imperialists about Russia, arguing that both sides, British and Russian, might gain from improved trade between the Caucasus and India. This was particularly true since the largest Russian oil exporters were foreign, and included strong British interests. In 1901, 30 per cent of capital invested in Baku oil came from abroad, and over two-thirds of that was British With the pipeline to the Gulf blocked by the D'Arcy oil concession, the Baku oil industrialists tried an alternative project – a rail line from the Caspian to Karachi, which British and French financiers supported but the imperialists governing India again obstructed. (Others could have benefited from increased Russian supplies to India, as a railway might have carried sugar and grain as well as kerosene. Food supplies would have alleviated the deadly famines that British commercial policy helped inflict on India, and that Curzon's cost-cutting imperial management exacerbated, including the mass starvation that took between 5 and 10 million lives.) For Britain's Indian imperialists, expanding India's commercial and political empire into the Gulf required the blocking of Russian commercial expansion. A speculative investment in Persian oil, even one that failed, was a useful means to these ends. They helped arrange for Burmah Oil to invest in D'Arcy's scheme and keep alive his monopoly rights both to Persian oil and to the building of a trans-Persian pipeline. For Burmah Oil, the D'Arcy project looked particularly useful. Under great pressure from Shell, whose oil exports from Baku were eroding its protected sales in India, Burmah was about to acquiesce to the 1905 agreement with Shell's Asiatic group, limiting its share of the Indian market. In deciding to take over D'Arcy's failing venture, Burmah wanted to keep the concession afloat as a means to prevent others from producing oil in the Middle East, or pumping it there from the Caucasus, which would only add to its problems in India. After further exploration failures, the firm cut back its Persian commitments to a minimum, 'to maintain a covering interest and no more'. As the company later acknowledged, 'it was primarily the protection of its Indian investments that took the Burmah Oil Company into Persia'. Burmah's partner in Persia, the D'Arcy enterprise, remained committed to finding oil and recovering its investment. In May 1908, despite orders from Burmah to begin winding down its drilling operations, the exploration party discovered the large field at Masjid-i-Suleiman. Perhaps worried by the great size of the discovery, Burmah still tried to go slow, recalling the head of the drilling team to Britain and then demanding that he drill further exploratory wells before starting production. 'For why I do not know', complained D'Arcy, 'as if they all failed, it could not affect existing facts. I suppose when they have made Musjid [sic] like the top of a Pepper Pot they will be happy.' Burmah took a year to incorporate the Anglo-Persian Oil Company, the firm later known as BP, which acquired D'Arcy's concession rights in exchange for shares in Burmah. With little interest in developing its new source of supply, the company took another three years to lay an eight-inch pipeline to carry the oil 140 miles to the shoreline, on the border of Iraq at Abadan, and to build there a set of rudimentary stills with which to refine it. We have now assembled an alternative account of the beginnings of the modern oil industry in the Middle East. The story begins not with heroic prospectors in the barren hills of Persia, but with rival firms and their allies attempting to win 'the great economic and political struggle' for the oil of Mesopotamia. The goal of the large firms was not to develop important new sources of oil, but to delay their development; for some it was also to obstruct the export of oil from the large Russian fields at Baku. To achieve these goals, the oil companies were learning to portray their needs as furthering the imperial interests of the state, and thus contributing to the well-being of the nation. ## A Scheme to Keep Product out of the Market As soon as it discovered oil, the much-delayed venture in Persia encountered two further problems. First, Anglo-Persian faced a 'flank attack' from rival companies attempting to destroy it (or so the company claimed) by opening up a competing production site nearby. Deutsche Bank had decided to develop its oil concession in Mesopotamia, in collaboration with Shell. The events that followed are often told as the story of the Baghdad Railway - the final episode in the imperial rivalry among European powers that is said to have triggered the First World War. While financiers, contractors, shippers, and cotton and grain merchants were all initially interested in a plan for a rail line that would connect Mesopotamia and the Persian Gulf to Europe, most accounts never mention that Deutsche Bank eventually built the railway to serve primarily as a pipeline on wheels. The Ottoman government had other goals for the railway. It saw it partly as a means for the easier movement of troops. By settling refugees from military defeats in other parts of the empire along the route, it also hoped to use the railway to increase the production of grain - its primary source of revenue, an income disrupted since the 1870s by the arrival of cheap grain from America. The first section of the route, known as the Anatolian Railway, connecting Istanbul with central Anatolia, had been built in the 1890s. The line failed to make a profit, but subsidies from the Ottoman government, costing more than the total agricultural tax revenue of the region the railway served, guaranteed Deutsche Bank and other bond-holders a return on their investment. For the German bank and its allies, however, financing the remainder of the route to Baghdad was impossible until they linked it with the production of oil in Mesopotamia. Since initially they had no interest in developing a new source of oil, they used the exclusive railway and petroleum concessions to prevent others from developing it. Only when Anglo-Persian found oil across the border in Persia did the project move ahead, in tandem with a plan to create a new way to sell the unwanted oil in Europe. At that point the British firm tried to block the scheme. Not realising that extending the line to Baghdad was primarily an oil project, and that large oil firms were often interested less in producing oil than in sabotaging its production, scholars have found it hard to follow the story of the Baghdad Railway – or the reasons for the blockages, delays and collaborations that were somehow to be blamed for the outbreak of the Great War. As in Persia, the initial goal in acquiring exclusive rights to Mesopotamian oil and the means of transporting it to Europe was to block the production of oil. After obtaining the oil concession in July 1904, the Germans stalled on building the railway and on drilling for oil. The 'dilatory handling of the whole affair', Deutsche Bank acknowledged twenty years later, 'was carried out for tactical reasons'. By March 1907, the Ottoman government was contesting the oil contract on the grounds that Deutsche Bank 'had not fulfilled certain of its provisions, notably with respect to test borings'. The following year, however, the Young Turk Revolution brought to power a government initially more disposed towards Britain, at the same time as the British venture found oil in Persia. The Germans quickly resumed construction of the railway. To put themselves in a position to threaten the new Anglo-Persian production, they began looking for somewhere to sell the anticipated supplies of unwanted oil, the income from which would help finance the railway. The solution was a plan to break the hold of Standard Oil over the supply of kerosene in Europe. The European Petroleum Union of 1906 had secured one-fifth of the market for European companies. To attack Standard's remaining share, Deutsche Bank in Germany and allied oil interests in France organised domestic legislation in the two countries to create government-regulated monopolies of the lamp oil market. Meanwhile Deutsche Bank itself suffered a flank attack, which it attributed to Standard Oil. An American syndicate calling itself the Ottoman-American Development Company negotiated a preliminary concession to build a rival railway, a more ambitious line 2,000 kilometres in length, running from the Mediterranean coast of northern Syria through Aleppo and Sivas to Mosul, and on to the Persian frontier at Khanaqin - where Anglo-Persian had been drilling – with rights to any mineral resources found within forty kilometres of the track. A Berlin newspaper reported that the head of the syndicate, a retired US admiral named Colby M. Chester, was 'a straw man of the Standard Oil Company', while Deutsche Bank warned that the concession was not a plan 'for bona fide railroad development but a scheme for controlling certain undeveloped oil fields in order to keep their product out of the market' – a tactic that the bank would have little difficulty in recognising. The Rockefeller group’s involvement remained a rumour, although we know that John Worthington, the head geologist and oil scout for Standard Oil, visited the Middle East in 1910 and reported favourably to the company concerning the oil prospects of Mesopotamia. Given the extraordinary efforts of Standard Oil to prevent the development of rival oilfields in every corner of the world at that time, its absence from the battle over Mesopotamian oil would be surprising. American officials were puzzled that the Colby syndicate would put down a large deposit on such an ambitious scheme without undertaking any preliminary surveys. The US State Department sent a diplomat from Washington to meet with Chester's son, the syndicate's representative in Istanbul, to explore supporting the concession as an instrument for expanding American trade in the Ottoman Empire. Unaware that the concession agreement might be intended not for an expansion of trade but its decrease, the diplomat was astonished to discover that, on the day he arrived in Istanbul to meet him, the son had left the country for Vienna. The Germans used their influence with Ottoman officials to have final approval for the American concession denied. In the meantime, a consortium of British financiers close to the new government in Istanbul created a London-based joint-stock company called the Turkish Petroleum Company. The group was led by Ernest Cassel, whose plans to organise a monopoly of all the region's oil rights, starting from Egypt, we have already encountered. In 1912 Cassel's group arranged for Deutsche Bank, which still held the rights to the Mesopotamian oil, and its European ally Shell, which included the oil interests of the French Rothschilds, each to take a nominal 25 per cent share in the oil company. The financiers, who called their investment firm the National Bank of Turkey, and gave several prominent members of the new Turkish government seats on its board, retained the other half of the company. The oil and railway scheme could now threaten the Anglo-Persian Oil Company. The latter's control of the Persian oilfields, intended to block rival firms from threatening the large Indian market of its parent company, Burmah Oil, would be circumvented by the development of Mesopotamian oil. Unable to defeat the flank attack, Anglo-Persian's alternative was to join it. For this it needed the help of the British government, which could use the Ottoman Public Debt Administration (the consortium of foreign creditors created after the state bankruptcy of 1875) to veto the increase in customs duties with which Turkey would service the loans needed for the railway. Anglo-Persian warned the government that if the Shell group – a rival in seeking Admiralty contracts for fuel oil – obtained control of Mesopotamian oil, it would lower prices to drive Anglo-Persian out of business, or into a merger with Shell, and then raise prices and 'open up this potentially vast source of supply only gradually'. A Foreign Office official objected to 'the attitude of Anglo-Persian, who have hitherto posed as being ultra-imperialist', but were now threatening to sell out to Shell if the government did not help them out. Supporters of Anglo-Persian in the Foreign Office, persuaded by this argument, forced Cassel's British investment consortium to transfer to them their 50 per cent share in the venture. To protect Anglo-Persian more fully, Britain also negotiated an agreement with the German and Turkish governments that the railway would stop short of the Persian Gulf, at Basra, and secured a monopoly on river transportation from Basra to the Gulf for the shipping interests of the India shipping magnate James Mackay, Lord Inchcape. The British government portrayed this monopoly, and the long delays caused in obtaining it, as essential to keeping imperial communications in British hands. However, a British company, Lynch Brothers, already controlled steam navigation from Baghdad to the Gulf. The Times in London had dismissed the pretence of entrepreneurs and imperialists that the Baghdad Railway threatened to become 'a high road to India', and it was widely understood that Britain's communications and trade with India would continue to use maritime rather than overland routes. The advantage of forcing Lynch to cede its shipping monopoly to Inchcape was that Inchcape was also a director of Anglo-Persian. The arrangement protected not the flow of Britain's imperial trade towards the Persian Gulf and India, but a point of blockage. Through Inchcape, Anglo-Persian retained the power to prevent Mesopotamian oil from reaching the protected markets of Asia. In the summer of 1914, at the same time as the kerosene monopolies were being finalised in Germany and France, the Turkish Petroleum Company agreement was signed in London, and the Ottoman government agreed to lease to the new company all 'petroleum resources discovered, and to be discovered' in the provinces of Mosul and Baghdad. On the eve of the Great War, the world's four largest petroleum companies after Standard Oil – German, French, Anglo-Dutch and British – had agreed to share the rights to the oil of Mesopotamia. The outbreak of the war postponed any development of the concession. This was hardly a problem. Limiting the production of oil was a central purpose for agreeing to share it. The final paragraph of the 1914 agreement was a famous 'self-denying clause', under which Europe's principal oil companies promised not to undertake oil production anywhere in the Ottoman Empire (except Egypt and Kuwait, which together with southern Persia were already under British control), unless jointly through the Turkish Petroleum Company. ## Fairyland While dealing with the flank attack in Mesopotamia, the Anglo-Persian Oil Company had encountered a second difficulty: no one would buy its oil. The Persian crude was found to contain high levels of sulphur, whose smell, along with the film it produced on glass when burned, made the oil unsuitable for use as kerosene for illumination. There was no market for the company's product, and with no dividend in sight investors were unwilling to provide the funds to complete the production facilities. The only hope for Persian oil was to sell it not as an illuminant but as fuel oil for steam or diesel engines. Since there were few oil-powered engines in use anywhere near southern Persia, the company faced bankruptcy. The solution to this difficulty was for D'Arcy and Burmah Oil to translate their weaknesses and needs into an imperial interest. This was a tactic the company used at every opportunity. The government of India had been paying for a detachment of soldiers to guard the company's oil drillers. After the discovery of oil, the British minister in Tehran, Arthur Hardinge, suggested that the company should assume the cost of the guard, or replace it with a cheaper local force. In rejecting the suggestion, D'Arcy replied that he and his partners are endeavouring to develop and have already met with marked success in laying the foundations of this new industry, an industry to be worked entirely by British initiative, in British hands, and by British capital, and one which we have every reason to believe should be looked upon with favour, if not indulgence by the British Government, since it may in the near future become a source of valuable oil for our navy. Anglo-Persian tried the same tactic to cope with the larger problem of creating a market for its products. It appealed again to the British government, asking it to create a demand for its oil by purchasing two long-term contracts for fuel oil, one for the Indian Railways and the other for the Royal Navy. Both the India Office and the Admiralty rejected the proposal. The Indian railways ran on coal, of which India had plenty. The Admiralty, on the other hand, had already converted most of its fleet to run at least partially on oil, and was now considering whether to build ships that could run on oil alone. There were many other sources of oil available, however, including the Egyptian wells on the Gulf of Suez that lay directly on one of the world's main shipping lanes, were