Ghosts of Empire (6 page)

Gulbenkian was one of those supernaturally wily businessmen who seem to emerge perhaps only once or twice in a generation. He had been born in Constantinople in 1869, the son of an Armenian merchant. Even in the 1880s, Gulbenkian's father had been operating in the oil business and was sufficiently fascinated by it to send his son to King's College London to study engineering. Calouste graduated with a first-class degree
in 1888. In 1952 he even received an honorary fellowship from King's College, and he was by then the oldest surviving graduate of the Civil Engineering school, as well as being one of the richest men in the world. This was the only honour he ever accepted.

Gulbenkian was not only wary of honours; he didn't like people much either. His biographer recounts how, because he hated social gatherings, he avoided ‘big dinners and receptions unless he thought he might be able to buttonhole somebody useful or pick up an interesting acquaintance'. The time came when he felt he had the best people in the world working for him and did not need to go in search of fresh contacts. He then simply stopped going to parties. Like many interesting characters, Gulbenkian was a mass of contradictions. He insisted on the finest French cooking and wines at home and in restaurants and yet he ate and drank only sparingly. Though he loathed people in general, he was an inveterate womanizer. He was devoted to the Armenian Orthodox Church, but didn't like his own family. A lover of the sea, he never owned a yacht, even when a multi-millionaire. His one guiding principle was his love of work. From the comfort of his armchair, he constantly read reports from associates and subordinates stationed all around the world. His wife, Nevarte, was a socialite and, from 1900 to 1925, her mansion at 38 Hyde Park Gardens became a centre of London social life. Mr Five Per Cent was more interested in pursuing young women. His own son, Nubar, a polished product of Harrow School and Trinity College, Cambridge, recalled that ‘on medical advice' his father would keep ‘one mistress, of no more than seventeen or eighteen, whom he changed every year until he was eighty'.
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Calouste was, unsurprisingly, a ‘control freak'. Even the sex lives of his children were under his direction. Nubar described how ‘father . . . decided it was time my sexual life should start. He arranged for me to call one afternoon on our family doctor.' The doctor introduced Nubar to a ‘very respectable-looking young woman of about twenty or so'. They were then taken by taxi to a hotel which Nubar described coyly as a ‘maison de rendezvous'.
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Gulbenkian's role in the development of oil in Iraq was decisive. He managed to act as a broker who could conciliate the various national interests –British, French and later American–that were represented in the
Turkish Petroleum Company. In his canny way, he was also deeply aware of the position of the Iraqi government and people. The Gulbenkians kept their stake right to the end, even when, as Nubar remarked in 1965, ‘the governments and people of the Middle East must eventually have an increasingly larger share of their own wealth' and when the days of the capitalist entrepreneurs were coming, ‘no less inevitably, to their end'.
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This later view that the governments of the Middle East should be allowed to enjoy some of the wealth in their own countries was not widespread in the early 1920s. The British had secured Iraqi oil, or the rights to it, because they did not want to be dependent on the United States of America. The San Remo Agreement, as we have seen, gave Anglo-Persian roughly a half-share in the TPC (the actual size was 47.5 per cent); France had 25 per cent, an Anglo-Dutch company, Royal Dutch Shell, had 22.5 per cent, and Calouste Gulbenkian had his 5 per cent, which had been assembled out of the holdings of Anglo-Persian and Royal Dutch Shell. This looked like a reasonable settlement to all concerned.

Unfortunately, the initial San Remo Agreement was met with a howl of protest from the Americans. The Italians were also indignant, as they were anxious to turn the Anglo-French oil accord into a tripartite agreement, giving them a fair share.
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Though the Italians were less successful, the Americans were able to force their way into the deal. A contemporary oil analyst put the matter very bluntly by saying that the only question about Iraqi and Iranian oil that remained to be resolved was ‘whether America will be excluded from the division of the spoils'. From the point of view of the Americans, discoveries of large quantities of oil in the Middle East threatened their dominance in the industry, which for ‘more than half a century had been pre-eminently an American industry'. France, Britain and Germany had produced nothing, but had consumed a great deal. They were merely ‘passive spectators'.
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San Remo had come as a ‘bombshell' to the Americans because they had been effectively barred from participating in Iraq.
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The difficulty for the Americans was that, in the immediate aftermath of the war, they had posed as the champions of colonial peoples against imperial aggression. Woodrow Wilson, the US President, had, immediately after the end of the war, been seen as a saviour in Baghdad. In
February 1919, more than a year before the San Remo Agreement was signed, a memorandum from the US Consulate in Baghdad boasted that ‘the name of President Wilson is upon the lips of the people of Bagdad a great deal these days. By Moslems, Christians and Jews it is invariably the President who is mentioned as the representative of a disinterested nation which is seeking to secure the liberties and happiness of the oppressed people of the world.' The memorandum continued, without any apparent irony, to suggest that the President would secure ‘a reign of justice and righteousness for all'.
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But the attitude of the Americans rapidly shifted from idealism to hard-nosed pragmatism. Immediately after the war ended in November 1918, the President had denounced ‘the whole disgusting scramble' for the Middle East.
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After the San Remo Agreement in April 1920, however, President Wilson's Secretary of State, a Missouri lawyer called Bainbridge Colby, was denouncing the British and French, not because of their imperialist greed, but because they had shut out American interests. Colby, who in an earlier life had been Mark Twain's attorney, complained bitterly that the Agreement was ‘a monopolistic combination designed to ignore American interests'. He made no mention of the Iraqis. It was simply a case of ‘me too'. Starry-eyed Princeton idealism, as represented by the President, had given way to the powerfully commercial instincts of the American Mid-West, as expressed by the Secretary of State.
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Other members of Wilson's dying administration joined in the outcry against France and Britain, the old colonial powers. Frank Polk, who would give his name to the Wall Street law firm Davis, Polk and Wardwell, was an under-secretary of state. He wrote a report which reached the Senate on 17 May 1920, only three weeks after the hated San Remo Agreement had been signed. In this document, Polk savaged Britain, observing that the ‘policy of the British Empire is reported to be to bring about the exclusion of aliens from the control of the petroleum supplies of the Empire'. The British were grasping and greedy in their ‘endeavor to secure some measure of control over oil properties in foreign countries'. The next month, on 29 June, speaking at a dinner given by the International Chamber of Commerce (a group founded in 1919, whose members called themselves ‘merchants of peace'), the President of the American Petroleum
Institute, Thomas O'Donnell, was firm but condescending: ‘Nobody has a higher appreciation than I of the Englishman abroad or at home. He is a good sportsman, always willing to take a chance in exploring for the world's treasure . . . I am rather surprised that some of my good English friends do not agree with me in advocating that a free opportunity should be given to all people to explore this useful product.'
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Other Americans were not so jovial. For the President, despite all the idealism he had shown at the Palace of Versailles during the Paris peace conference in 1919, the world had become a bitter place. He was gloomy. He foretold more conflict, but this time in the field of business. ‘It is evident to me', he wrote at the beginning of 1920, ‘that we are on the eve of a commercial war of the severest sort, and I am afraid that Great Britain will prove capable of as great commercial savagery as Germany has displayed for so many years in her competitive methods.'
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The mood between the former allies, the United States and Great Britain, soured during 1920, as angry memoranda flew across the Atlantic Ocean, between 10 Downing Street and the State Department. What the Americans called the ‘open door' policy really meant allowing US interests to exploit the resources of other countries on the same basis as the British and French were already permitted. No one really cared very much about the Italians, as their oil industry was negligible. The Germans and Turks, defeated powers, could be safely ignored, but the Americans grew louder and more aggrieved. In November 1920, Walter Teagle himself, the president of the Standard Oil Company of New Jersey, later known as Esso, addressed the American Petroleum Institute. In his speech he gave an admirable defence of the American position. The Americans were, at that time, already responsible for 70 per cent of the world's oil production, so their attitude could be interpreted by the oil-industry professionals of other countries as one of sheer greed. This was not the case, maintained Teagle. ‘Our British friends . . . have argued that if the United States is now supplying 70 per cent of the world's [oil] production, we should be content with things as they are. This is an entirely fallacious view.' Was it reasonable, Teagle asked, ‘to ask that Americans go heedlessly on to the quick exhaustion of their own supply and then retire from the oil business'? The American petroleum industry could not ‘accept such a
conclusion'. American oil interests now would be compelled to look to the ‘development of petroleum outside the United States'.
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By early January 1921, Congress was beginning to agitate on this issue. A Democratic senator from Tennessee, Kenneth McKellar, was now arguing for an oil embargo on Great Britain in retaliation for the exclusion of US interests from Iraq. McKellar pointed out that the British navy was still heavily dependent on US oil, and that this fact had provided the initial stimulus for Britain to exploit Iraqi oil; but it would take a long time for oil to be produced in Iraq, despite the rich deposits which might be found. In the meantime, McKellar argued, Britain still needed US oil. He went on to explain to the Senate that ‘if Great Britain is not permitted to get oil from this country her navy will be severely handicapped'. This was true. Britain would ‘be obliged to come to terms' with the US.
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On the Republican side, Frank Kellogg, a senator from Minnesota who would later serve as secretary of state himself, was equally belligerent. Speaking in the same debate, Kellogg argued that the US government should ‘by treaty provide for the protection of American interests in the development of oil lands in foreign countries'. He spoke darkly of ‘retaliatory legislation if Great Britain refuses the square deal to Americans'. Serious journals even discussed the possibility of an Anglo-American war.
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Against such a storm of protest from the Americans, the British government found itself increasingly impotent. Lord Curzon alluded to the fact that Britain controlled only 4.5 per cent of the world's petroleum supply, while 82 per cent was controlled by the US, because in addition to the 70 per cent that the Americans produced themselves, American companies operating in Mexico supplied a further 12 per cent.
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As far as the Americans were concerned, however, these facts were irrelevant. The new Republican Secretary of State, Charles Evans Hughes, who took Bainbridge Colby's place in March 1921, even argued that the US enjoyed the same rights as Britain by right of conquest, since America had also been victorious in the First World War. The rights of Iraqis and other oppressed peoples which Woodrow Wilson had been widely expected to champion in 1918 were again completely overlooked. For Hughes, ‘in view of American contributions to the common victory over the Central Powers, no discrimination can rightfully be made against us in a territory won by
that victory'. Might may well have been right, but it was rare even for an American secretary of state to put the case so bluntly.
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In the face of pressure from the American Congress and American business, the British government simply gave up. Winston Churchill, the Colonial Secretary, could not see how he could justify keeping the Americans out.
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In January 1922, the Colonial Office, still under Churchill's control, decided to admit American oil interests into Iraq, and negotiations between the British champion, the Anglo-Persian Oil Company, and the Standard Oil Company were initiated. Two months later, Churchill persuaded Anglo-Persian to accept a memorandum calling for a minority US shareholding in the Turkish Petroleum Company.
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The shareholding was agreed in 1923 and implemented fully in the Red Line Agreement in 1928. Under the new dispensation, Calouste Gulbenkian would still retain his 5 per cent. The Anglo-Persian Oil Company, Royal Dutch Shell, the Compagnie Française des Pétroles and an American consortium, led by Standard Oil of New Jersey, would each own 23.75 per cent of the company's shares. The odd number was merely the result of each company giving Gulbenkian 1.25 per cent of the shares from its holding. In 1955, the year Gulbenkian died, his share in the oil company, by then renamed the Iraqi Petroleum Company, or IPC, brought him an income of £5,000,000 a year, a vast sum comparable to £100 million in 2011 prices.