RUSSIAN WELLS.

Franklin Times, Volume XXII, Issue 26, 2 March 1932, Page 2

RUSSIAN WELLS.

HOW BRSTAIN LOST CONTROL. NOT WELL-KNOWN. The story of how Britain failed in Russian oil fields is not well known. Originally the Caucasian fields were Tsarist State-owned, and in the early part of this century sold or leased them lo private companies, including foreigners, lout retained certain restrictive powers and collected production royalties. At this time, the Standard Oil Company had a partial sales monopoly in the North Russian market, but had no producing units there. Sir Henri Deterding, of the Royal Dutch Shell, therefore purchased wells in the Caucasus and used Russian oil to challenge this sales monopoly.

Britain’s Huge Interests

At the outbreak of the 1917 Revolution, the British had about £17,000,000 invested and were the largest foreign producers there.

In 1918 Moscow nationalised all the fields, and British and American interests purchased the stock of the nationalised companies. It was following the Armistice that the real struggle and manoeuvring set in.

Early in J 920 the Allied Supreme Council agreed to recognise that they would favour British and French interests. This naturally aroused vigorous protests from Washington and was upset. Then in April 1920, the British and French Governments came together in conference and agreed to give their joint support to their respective nationals in their joint effort to obtain concessions and export facilities in the territories of the Russian Empire. After this agreement Sir Henry Detecting began direct negotiations with the Soviet Government and the AngloRussian trade* agreement followed. When challenged. Sir Austen Chamber tain. the British, Foreign Secretary, admitted that these negotiations were carried out with the knowledge of Downing street, and this was the posilion wh.cn the Geneva Conference was held in J 922. At the conference, Russia refused demands to do-nationalise the oil fields but offered to share part of them with British, American, French. Italian, Belgian and German interests conditionally. No agreement was arrived at and further discussion was postponed until a confidence at The Hague the following monfn.

The British Government and the Dutch Shell at this conference came forward with another proposal, which had been tentatively accepted by Russia.. lander this plan, Dutch Shell was to receive a block concession of eerlain fields with the obligation of sellling claims of other foreign owners

by sharing production or by purchase of sui'h claims. This was not acceptable lo I lie delegates, and Washington wrecked the compromise as being monopolistic.

j Following this failure, IS compan- ! ies and organisations of owners of old j Hussian shares were fonned inlo what was called the International Defence ! Committee., which agreed to boycott j Soviet oil until Moscow' “rehabilitated j on equal conditions to all interested | parlies their respective oil rights and j properties.” They were also pledged i to deal with the Soviet Government as ; a united group only, j Despite ibis pledge, some of the ! committee began secret negotiations | with tire Soviet, chief among them being Washington and London represen- . talives. and within a few months Sir Henri Delerding had contracted for the purchase of 70.000 lons, and taken an option over an additional J 00,000. That ended the boycott plans and the InterI national Defence Committee.

While British and American. interests were continuing to outmanoeuvre

Mr Sinclair Talks Big. one another, Mr Harry F. Sinclair, accompanied by the ex-Secretary of State Fall and Mr Archibald Roosevelt, quietly slipped in. Mr Sinclair talked big and, as the phrase goes, “got away with it.”

A provisional agreement* was signed in November, 1923 providing for a joint company to exploit certain fields.

Mr Sinclair and the Soviet Government were to share equally in management, stock ancl profits, and the former promised to invest 115,000,000 dollars in the joint company and to float a 250,000,000 dollar loan in New York for Russia. 3 There was also an understanding that Sinclair would obtain the diplomatic recognition of Moscow.

The Sinclair concessions covered the fields claimed by Standard, but what did the Bolshevists care since from Sinclair’s big talk they were convinced that the power and influence of John D. Roclcfeller in Washington was inconsiderable compared with that of the Fall-Sinclair combination? As a matter of fact they did not stop with the granting of Caucasian concessions but

gave Sinclair additional concessions in Siberia, and aided him in North Persia.

While Moscow was favouring Sinclair and dreaming of the wealth he would bring to the country, Great Britain with the aid of France was making another effort to wrest the Caucasus from the Soviet by employing that method which has proved so popular in Mexico of supporting disaffected groups in a counter revolution. Moscow, however, suppressed this revolt.

Then followed the Sinclair crash. Investigations by the United States Senate exposed the underhand activities of the Fall-Sinclair-Doheny combination in acquiring the Teapot Dome and Elk Hill naval oil reserves in the U.SA., Ex-Senator Fall was racing the court of justice and Sinclair was looking for means of keeping out of prison. This exposure prevented him from delivering the promised millions to Russia and of obtaining diplomatic recognition for her. Cancellation of the concessions consequently followed. Moscow Plays a Lone Hand.

Tiring of these abortive concessions, negotiations with British and • American interests and of the counter revolutionary outbreaks supported by foreign capital, the Soviet Government rehabilitated the Caucasian fields and set to work in earnest on production, which immediately increased. From 1924 the Soviet State Oil Trust became an important factor in the oil world. In that year, the British and American interests again combined Lo attack the position. They formed the Anglo-American Oil Company which operating as a buying agency for them, purchased 250,000 tons before the end of the year. This was equally divided between the two interests.

But this arrangement, like all others,

was soon to end, for early in 1925, Sir Henri Deterding and Washington caught each other attempting to deal separately with Moscow for the purchase of the export production for many years in advance.

Again the opponents entered the fray but the problem of each was to determine the most advantageous line of action. The Dutch-Shell dominated sales in the Mediterranean-Suez Canal region, and recognised that this position could only be disturbed by someone introducing supplies from the nearby Cau-

Ciisiau fields. In an effort to prevent fills they endeavoured unsuccessfully to buy up the Russian surplus.

America Wins. Standard Oil had a better line of action. They did not bother Moscow, but purchased from a Russian syndicate an Egyptian consignment of 800,000 tons of crude oil and 000.000 tons of kerosene. This looked like a victory for Standard. Their publicity agencies immediately ceased their antiRussian attitude and became pro-Rus-sian, and a Mr Lee, who was closely associated with John D. Rockefeller, went to the extent of writing a friendly book on Russia.

1 This co-operation between Washingj lon and Russia did not suit Sir Henri j Deterding, and he began wondering how Standard Oil had slipped in on | him. In the up and down course of the fight for oil concessions since the war. he had been accustomed to de- , footing Standard Oil. He had been on i top in this Russian struggle and lat- ■ lerly had a concession within his palm only to lose it as he had lost the sales 1 contract oi' the Egyptian consignments. To make matters worse the Bolshev- i isfs were rubbing salt in the wound . by setting up a sales organisation j against him in England. j Sir Ilenri Deterding had lost, and probably because of his greed. He | was opposed to even sharing export j production and wanted all or nothing. Towards the end of 192 G negotiations ;

between Soviet Oil Syndicate and representatives of foreign oil companies had progressed satisfactorily for the marketing of the Soviet product in foreign countries but. in January, 1927, Sir Henri Deterding broke up the conference by insisting on a monopoly of control of exports. The newly established competitor in England was the Russian Oil Products Company, a selling organisation, and Deterding set out to meet this competition by a price-cutting war, which was met cut for cut by his competitor. Deterding continued with this policy at a cost of many millions of pounds to Dutch Shell, believing that Poor Russia would break down under the strain. The Arcos Raid. It was during this stage that the British Home Office made a sudden Government raid on Arcos, Ltd., head-

quarters of the Russian Commercial Agency. The night before this raid the Soviet Government had obtained a £12,000,000 credit from the Midland Bank of London, which would enable Russia to defend herself against Sir Henri Deterding’s price war. Whoever inspired this raid, which, it is claimed was undertaken without Cabinet authority, knew that it would force a diplomatic break and the Midland Bank to canoel the credit. American interests were not slow to take advantage of this break to strengthen their relations with the Soviet Government. In 1927 their purchases increased and in the early part of 1928 they were pruohasing 432,000 to**B annually. So the struggle ended.