The Russian Soviet Government is prepared to give consideration to a proposal by which the sale of all oil products available for export from the various oil-fields of Russia would be placed in the hands of a syndicate formed upon the following basis:—
The initial capital will be provided by equal contributions from the Russian Government and the foreign group.
The management of the syndicate will have control of all sales and will be entrusted to a Council composed of an equal number of representatives of the Russian Government and the foreign group.
The syndicate will be responsible to the Russian Government for the most favourable sale of oil products possible. In order to derive the maximum advantage from such sale, the syndicate will provide or within an agreed period create the necessary distributive organization, which will entail a certain capital expenditure.
It is suggested that the capital thus required be raised by the issue of bonds bearing a fixed rate of interest.
Payment of the interest upon these bonds will be guaranteed by the foreign group.
The syndicate will receive, as remuneration for its activities, a certain commission upon all sales, which commission will be fixed upon a sliding scale according to the quantities sold.
For quantities not exceeding 100,000 tons 5 per cent. is suggested; for larger quantities a proportionate rate will be arranged by mutual agreement. Furthermore, it is understood that any surplus realized by the sale of Russian oil over and above the export price of the American market will belong entirely to the syndicate.
After meeting working expenses, the profits thus realized will be applied in the first place to the payment of the interest upon any bonds which the syndicate may issue, and the balance will be divided equally between the two parties to the syndicate, i.e., the Russian Government and the foreign group.
These arrangements will hold good for five years certain, after which period the Russian Government will have the right to redeem the bonds at the price of issue or upon such other terms as may be stipulated at the time of issue, and to terminate the agreement. The Russian Government, however, will be obliged to give one year's notice at the end of the fourth year if it desires to terminate the agreement. In default of such notice, the agreement will hold good for another period of five years.
It is understood that the Russian Government reserves the right at any time to sell oil products directly to foreign Governments, but such sales will in no case exceed 50 per cent. of the total quantity available for export in any year.
The success of the syndicate will depend entirely in the early stages upon transport facilities between the places where the stocks of oil products are available and the ports of embarkation. Unfortunately, at the present time these facilities are in some measure lacking, and with a view to remedying the situation, the foreign party to the syndicate will be required to invest at least £500,000 in the transport system. This sum, as well as all other sums mentioned below, will be guaranteed by the Russian Government, and in case of necessity will be secured upon the stocks of Russian oil.
This money will be used for the purchase of the necessary rolling stock, for the maintenance of pipe-lines, and, if required, for the installation of new pipe-lines for the various products.
Against the sums thus employed, transport bonds will be issued bearing interest at the rate of 8 per cent.; furthermore, these bonds will carry the right to a bonus, the amount of which will be determined by the quantity of oil products transported over and above a pre-arranged quantity.
The amount of this bonus will be fixed by mutual agreement, and will take the form of an agreed tax upon each pool of oil products transported in Russia over and above a pre-arranged quantity.
Payment of the interest upon these bonds will be guaranteed by the Russian Government, and in case of necessity will be secured upon the existing stocks of oil.
The transport organization thus formed by the rolling stock to be acquired and by that which is at present available will be under the management of a Council composed of an equal number of delegates of the Russian and the foreign group.
All rolling stock and everything belonging to this joint undertaking will be exempt from requisition or confiscation whether by the Central Government or by local authorities.
The Council of the undertaking will be free to appeal for qualified foreign workmen, and in general to administer and manage the business in the best interests of the enterprise and the objects it has in view.
Any additional capital which may be required will be provided by equal contributions from the Russian Government and the foreign group.
Such additional capital will be raised by the issue of bonds bearing interest at a rate to be fixed by mutual agreement at the time of issue, the Russian Government being responsible for the subscription of one-half of the issue and the foreign group for the subscription of the other half.
These bonds will carry the right to a bonus in the same way as the bonds mentioned above.
The activities of the Council of the joint undertaking will be subject to all laws and decrees of the Russian Socialist Federal Soviet Republic and to all regulations which may be in force.
Of all the employés of the syndicate in Russia, 50 per cent. only may be non-Russian.
If an agreement upon this basis is deemed possible, the foreign group will have the right to appoint representatives in Russia to examine conditions of transport, to take samples of existing stocks, etc.
After the expiry of ten years the Russian Government will be free to redeem the transport bonds at the price of issue or upon such other terms as may be stipulated at the time of issue.
It is clearly understood that these terms will provide for certain bonuses at the time of redemption to be calculated upon the average profits of the joint enterprise during the last two years of its operations.
The Russian Government will signify its intention to redeem these bonds by the end of the ninth year at latest.
I am aware that serious changes in this contract were contemplated by the two parties in the course of the negotiations. They were only to be introduced if Mr. Lloyd George succeeded in bringing about the de jure recognition of the Federal Soviet Republic. This agreement, which was duly initialled, but not signed, at Genoa, referred only to concessions for deposits not hitherto exploited. But the Soviet Government had given an oral promise to hand over to the English the fields which were already developed and which had been nationalized for the past four years. Moreover, during this winter, British groups, through Krassin as intermediary, had entered into relations with the former owners and had negotiated with them for the resumption of their concessions. The Bolshevik Government has always urged foreign Powers seeking to acquire a share of Russian oil to deal separately with the dispossessed owners in order to protect themselves against all possible claims in the future.
From the very beginning of 1922, the Royal Dutch spread a rumour in France that it was experiencing difficulties with the British Government and must rely upon the support of the French Government. This man[oe]uvre succeeded so well that, when the French representatives at Genoa were given precise information about the impending conclusion of the agreement between the Shell and the Soviets, they shrugged their shoulders and smiled contemptuously; the rivalry between the Royal Dutch and Great Britain was unquestionable. If the great trust obtained certain advantages, France would benefit; it was best to let it carry on. Their disillusionment was bitter.
Now the British Government, in conjunction with the Royal Dutch-Shell, has been seeking to obtain for itself the products of the oil wells of the Caucasus, not since 1922, but since 1919. The early negotiations proceeded slowly. Mr. Lloyd George had then but little confidence in the permanence of the Bolshevik régime. He did not even contemplate negotiations with its representatives. The financiers of the Royal Dutch-Shell approached only the most important of the dispossessed Russian oil magnates. On July 27, 1920, one of the most powerful subsidiaries of the trust, the Bataafsche Petroleum, bought a large quantity of the shares in Caucasian companies owned by MM. Mantasheff, Lianosoff and Pitoieff. For the celebrated Russian actor, Pitoieff, is also a great oil proprietor. The purchase price was fixed at £11,042,000, of which £645,000 was paid in cash. The balance was to be paid by instalments, but the Russian proprietors have not received even the first.
Events had moved quickly. Mr. Lloyd George had developed a sudden and violent sympathy with the Government of Moscow. He now saw in it a saviour who would secure for dormant British industry the work of reconstructing the immense devastated empire. He had decided to bestow upon it his official blessing, to obtain that of all Europe, and to approve its theories and practices, in particular nationalization. Henceforward, the Shell considered it had no further concern with the proprietors of the old régime. And Colonel Boyle, one of its most active agents, entered into relations with Krassin, who promised to reserve to the Royal Dutch-Shell the monopoly of the export of Russian oil.
Krassin promised everything he was asked, and allowed the contract to be drafted. But as soon as there was talk of signing it at Genoa, he gave the project such publicity that the general diplomatic hue-and-cry which resulted prevented its signature. It was the Soviets themselves which divulged their agreement with the Shell. They have no wish to place the greatest riches of Russia in the hands of a single people, and especially a people so successful and ambitious as the British. The British Government just failed to realize its greatest dream; the conquest of the remaining oil deposits throughout the world—a conquest which would have assured its supremacy in the future and would have made all other peoples its tributaries.
But, in spite of everything, I believe in the future of the British people, one of whose leaders was not afraid to say, twenty years before Germany had begun to dream of European hegemony: "I believe in this race, one of the greatest governing races the world has ever known, this Anglo-Saxon race, proud, tenacious, self-confident, resolute, which no climate and no vicissitude can corrupt, and which will infallibly be the predominant force in future history."
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