It is a strange fact that, while the United States were watching the activities of the Pearson group with evident hostility, they displayed not the least mistrust of the Royal Dutch-Shell. By a bold and masterly policy, the latter obtained a footing in the very heart of the territory of the Standard Oil. American law, unlike French, does not distinguish between ownership of land and ownership of the minerals. As in Mexico before 1917, both belong to the owner of the surface. The Royal Dutch-Shell bought land, sank wells, and was thus able to exploit oil as it pleased. Cleverly following the example of the Royal Dutch, the Shell endeavoured to place its shares with the American people, so as to give them an interest in its prosperity. It was not difficult, considering its high dividends. In 1919 the Shell placed 750,000 shares upon the New York market; by so doing, it realized a premium of £4,390,623, of which £4,000,000 were appropriated to reserve and to amortization. The source of its capital did it no harm, for, before the War, all American large-scale industries had had to make calls upon European savings. And if the Shell was British, the Royal Dutch was without a considerable German element, although officially a Dutch company. Deterding had not yet openly joined forces with Great Britain. He was hesitating. Foreseeing the imminent outbreak of the world conflict, he was much too clever to bind himself before he knew who would win.
These two companies, connected since 1907, but each keeping its separate financial organization (at the same time reserving for each other a 40 per cent. share in any new subsidiary company), were thus freely allowed to install their reservoirs and pipe-lines beside those of the Standard. Besides, the Democrats, fearful of the political and commercial power of the American trusts, were not sorry to set against them competitors who could have no influence upon the domestic politics of the United States. They came to be looked upon as international undertakings without any political ends. To complete the illusion the British Government, which assisted them in secret, simulated fear of their excessive growth.
The British Admiralty declared that it was important to free the Royal Navy from the tutelage of the trusts. It was voted the money required to obtain an interest in the operations of the Burmah Oil, thus ensuring for itself a share of the oil of Burmah; and in May 1914 it bought half the shares of the Anglo-Persian Oil, which holds a thirty-years' monopoly for the exploitation of oil deposits in Persia, excepting only the five northern provinces. For Persian territory on the borders of the Caspian Sea was always reserved for Russian influence.
The Anglo-Persian began obscurely. Its inception, in 1909, passed unnoticed. It was founded, without an appeal to the public to subscribe its capital, by the Burmah Oil, a company at that time better known in Scotland than on the London Stock Exchange. Its first object was to take over the concessions which the Australian, d'Arcy, had obtained in 1901, and which covered the enormous area of 500,000 square miles. D'Arcy had obtained these concessions from the Persian Government for the infinitesimal sum of 200,000 francs, of which 100,000 francs only were paid in cash and the rest in shares. The Persian Government was to receive 16 per cent. of whatever profit d'Arcy might make. It was much disappointed, for the first investigations along the Turko-Persian frontier were really discouraging. D'Arcy spent five million francs in vain, and he was thinking of abandoning the whole affair when he heard of oozings and gushings in the Shustar region, 140 miles north of Mohammerah, to the north of the Persian Gulf. D'Arcy recognized the presence of oil, but had to face the construction of a pipe-line and refinery, and to find new capital for these purposes. Certain foreign capitalists made him tempting offers, but D'Arcy, who had found a staunch supporter in Admiral Fisher, the reorganizer of the British Navy in the twentieth century, resolved that the Persian concessions should remain under British control. He obtained the financial assistance of the Burmah Oil, and the latter founded the Anglo-Persian in 1909. The Royal Navy had already 150 ships burning oil. Pretyman, a Lord of the Admiralty, got Lord Strathcona appointed to the chairmanship of the Anglo-Persian, the first results of which were encouraging, so that the British Government could direct its future. The capital of the new company was very quickly used up. It constructed a pipe-line 145 miles long to bring its oil to the Persian Gulf, and a refinery on the island of Abadan which cost a great deal. But as the prospecting then taking place revealed the existence in Persia of rich deposits, a commission of geological experts, presided over by a rear-admiral, was sent to the spot by Winston Churchill, then First Lord of the Admiralty, to make an inquiry. On the conclusions embodied in its report, the British Government decided to take control of the business. In the month of May 1914 the Anglo-Persian made a somewhat stormy entrance into history, for up to then very little had been heard of it: the negotiations and then the contract with the Admiralty had been conducted with the greatest secrecy. Parliament showed great surprise when Winston Churchill placed the matter before it, and asked for its sanction to the agreements which had been made. It was even necessary for Sir Edward Grey to come to the rescue in order to win a majority in the House.
The Government had a certain majority of two thousand votes by the purchase of £2,200,000 of new ordinary shares. This amount has since been more than doubled, for on March 6, 1921 the Government announced in the House of Commons that it held £5,200,000 ordinary shares, £1,000 preference shares, and £199,000 debentures. Two-thirds of the ordinary shares of the Anglo-Persian are to-day in the hands of the British Government, the other third is held by the Burmah Oil, which is directed by the Admiralty. Thus absolute Government control is assured.
The Anglo-Persian has become literally a State-directed company, but British officials are wise enough to entrust to technical experts the actual management of the undertaking. This explains its great success. Two trustees, Lord Inchcape and Sir E.H. Packe, represent the Government on the Board of Directors: they have the right of absolute veto upon all decisions.
Finally, the Government has made a contract with the Anglo-Persian for the supply of important quantities of oil at an advantageous price for a certain number of years. The needs of the Navy are thus guaranteed for a period of years. There is no surprise to be feared, for the oil-fields are near the Persian Gulf, where Great Britain reigns as mistress, and where no foreign ship can enter without her permission. It is, moreover, an important strategic point; ships can be dispatched from there to all parts of the world where Great Britain has interests—Suez, Gibraltar, India, Australia, Africa.
The oil-deposits of Persia are so rich that it will soon be necessary to increase tenfold the projected development of the equipment, pipe-lines, and refineries, to deal with future production. Even in our time the natives collect the oil by rudimentary processes and transport it on the backs of camels to the markets of the interior, where it serves as an object of exchange. Persia is one of the few countries in which numerous spontaneous springs and seepages reveal the existence of oil. In certain valleys it flows along the slopes and pours into the rivers, making the water unfit for consumption. The Anglo-Persian already ranks among the chief oil-producing companies of the world. It is precisely this success, we may believe, which has caused so much apprehension in the United States on the subject of the rivalry between British and American producing companies. The Anglo-Persian controls an almost unlimited production in Persia, and as soon as there are enough pipe-lines and reservoirs, the output will increase in enormous proportions. From 1923 onward, the Anglo-Persian, by itself, will be in a position to supply a large proportion of the needs of Great Britain. It will then be free of the contract which, for more than seven years, has bound it to the Royal Dutch-Shell, obliging it to dispose of a considerable portion of its production through the latter company.
When its program is completed, the Anglo-Persian will possess a fleet, the capacity of which will exceed a million tons. Expenses are small, because of the great productivity of the wells, which gives to Persia a marked superiority over all the other oil-fields of the world, except perhaps Mexico. Its yield of benzine and kerosene is much superior to that of most of the oil-fields of the United States; it is richer than that of Mexico.