STRAITS British Policy towards the Ottoman Empire and the Origins of the Dardanelles Campaign © 1997-2005 Geoffrey Miller





STRAITS : British policy towards the Ottoman Empire and the Origins of the Dardanelles Campaign © Geoffrey Miller



Map of Turkey
STRAITS British Policy towards the Ottoman Empire and the Origins of the Dardanelles Campaign © 1997-2005 Geoffrey Miller



Chapter 28




Admiralty and Oil







While Shell locked horns with the Admiralty, Greenway busied himself. The energetic head of Anglo-Persian saw Sir Frederick Black early in March 1913 for preliminary discussions; the APOC now proposed to sell the British Government (to Navy specification) six million tons of oil from their properties in Persia and Mesopotamia, beginning with 50,000 tons in 1914-15 and rising to 350,000 tons by 1917-18, then remaining at that figure till 1933-34. The price was to be an extremely favourable 35 shillings per ton for the first three million tons and 25 shillings for the second three million. Starting from 1 July 1914, and on each 1 July thereafter, the Government was to advance Anglo-Persian 10 shillings per ton in respect of the first 200,000 tons delivered with the balance made up on receipt of telegraphic advice of the sailing of each vessel from the port of loading.[1]

                Greenway called at the Admiralty on 11 March to discuss his proposals with Black and Hopwood, and returned two days later, when Churchill sat in on the meeting. Greenway quickly made his position clear: he needed capital of £2 million but even a substantial Admiralty contract would not be enough to allow him to obtain this without an advance payment sufficient to allow him to guarantee 5% interest on the borrowing. This explained the need for the 10 shillings per ton Admiralty advance. Even though the company would not be able to deliver at an annual rate of 200,000 tons until the third year of the contract, the full advance would still be required from the beginning which led to the anomalous situation where, for the first full year at least (when only 50,000 tons was to be supplied) the agreed advance would total more than the value of all the oil shipped that year. Not surprisingly the Admiralty at first balked at this prospect. Black wanted a new formula so that the advance payments for any year should not exceed ‘what could be recovered in the value of oil delivered’ however, because of his pressing need for funds to guarantee the interest payments, Greenway would agree to this only on condition that, for the first two years, the advance should be set at 20 shillings a ton. Alternatively, the company suggested ‘a guarantee of interest of 4 per cent. for a period of, say, ten years by either the Admiralty or the Indian Government in the same manner as interest is guaranteed on certain Indian railways.’ Unfortunately for Greenway, correspondence between the Foreign Office and the India Office revealed that, although India had a certain political interest as far as policing the Persian Gulf was concerned, the Indian Government had only just reached the experimental stage with oil for the Indian Railways and so, in the circumstances, ‘the India Office do not feel they have such a substantial and purely Indian interest in the question as to incur financial liabilities, especially as the Admiralty have not made any request for such action in naval interests.’

                Against the Admiralty’s natural inclinations, it was becoming a straight choice between allowing the company to be absorbed by Shell, resulting in much higher prices and the threat of foreign influence, or agreeing to Greenway’s terms. To lessen the burden of making this choice one aspect was decidedly in Anglo-Persian’s favour: the Royal Commission had commented that it was a fortuitous circumstance that the oil was to be found, comparatively, so near the coast; even so, a pipeline would still have to be built — and protected. In wartime this would necessitate the dispatch of Indian troops to safeguard the pipeline or the initiation of a campaign to make it in the interests of the local tribes to protect it (which would require tactful handling); or possibly a combination of both. However the Admiralty still jibbed at Greenway’s proposed advance and determined to offer only £50,000 initially which, it was readily admitted, had the drawback of hindering the company’s development but otherwise allowed the Admiralty to have ‘experience of the manner in which deliveries come forward in 1913-14 and 1914-15, and the India Office experiments with oil on Government railways may possibly have been concluded.’[2] To support his case, in part, for a renegotiation of terms, Churchill also had in his possession the memorandum he had commissioned from the Admiralty War Staff; while this advocated forward contracts spread over as wide a geographical area as possible it also could not deny the commercial logic of accepting Anglo-Persian’s favourable price. Greenway, it recommended, should be pressed to make his proposals for advance payments ‘in as acceptable a shape as may be practicable.’[3]

                Armed with this information Churchill set to work preparing a long Cabinet memorandum which was complete in draft by the end of May.[4] One of his priorities was to demolish the Royal Commission’s recommendation for a four year peace reserve. ‘During the last six months’, he maintained tendentiously, ‘the whole subject has been scientifically examined by the War Staff. The first essential was to compute on a scientific basis the probable consumption of the fleet month by month during a year of war, and to work this out according to the oil-burning ships we should have each year for the next five years. This calculation, though necessarily speculative, was very elaborate…’ Always a useful ploy, Churchill clearly hoped to divert the argument by spouting ‘scientific’ analysis. Confusingly, however, the new War Staff estimate now brought to four the number of competing standards for reserves: first was the original Admiralty standard of 4 months’ war expenditure for oil-only ships plus 3 months for oil and coal ships; then Captain Pakenham’s Committee with its recommendation for one years’ war expenditure; third, the Fisher Royal Commission wanting 4 years’ peace expenditure; and last, the War Staff estimate of 6 months’ war expenditure. Of the four, the original standard produced the lowest figure, the Royal Commission the highest. Churchill’s favoured War Staff estimate was marginally higher than the original standard but substantially below the Royal Commission and, he conceded, ‘must be regarded as the minimum compatible with safety.’[5]

                Adding to these figures for reserves the amounts required for annual consumption necessitated the making of a series of forward contracts to ensure a regular supply.

In framing this “tableau” of contracts, [Churchill argued] three governing principles have been observed: (1) a wide geographical distribution to guard against local failure of supplies, to avoid undue reliance on any particular source, and to preserve as much expansive power or elasticity in regard to each source as possible; (2) to frustrate as effectually as possible, by keeping alive independent competitive sources of supply, the formation of a universal oil monopoly and thus safeguard the Admiralty from becoming dependent on any single combination; and (3) to draw oil supplies as far as possible from sources under British control or British influence and along those sea routes which the Navy can most easily and most surely protect.

                The future of the oil market is so uncertain and the present prices are so unfavourable that a balance has to be struck, on the one hand, between the relative advantages and disadvantages of making long forward contracts at a fixed price and of providing for periodical revisions of prices on the other. It should be added that action is urgent as the future oil supplies are being increasingly bought up, the absorption of the smaller independent producers is imminent or is actually proceeding, and the oil market is being rapidly contracted both from natural and artificial causes.[6]

With the first of his three criteria Churchill confirmed the view of the Admiralty memorandum upon which his own had been based, though with one important omission: while accepting that too much reliance should not be placed on one source of supply, the Admiralty memorandum nevertheless argued that the trend of prices and the results of experiments with other descriptions of oil ‘have all contributed to render the Persian supply relatively more important than was originally anticipated.’[7] Churchill had then to turn this bald statement into a series of enticing arguments to ensure that his Cabinet colleagues were left in no doubt as to the merits of associating with the APOC.

                Characteristically, he set to work with a vengeance: Anglo-Persian oil, he argued, would be drawn from a source that could be protected and, if necessary in time of war, could be re-routed round the Cape making hostile interference very difficult; not only was the current price favourable but there was ‘the almost certain prospect of a further considerable saving on future market prices’; the Foreign Office – so Churchill understood – were thought to view favourably ‘this extension of our interests in the neutral zone of Persia and the support thereby given to British enterprise in that quarter’; and finally, if the India Office ‘found it convenient to use oil on their railways, and to preserve facilities for re-conversion to coal, they could take the additional Persian oil supplies which will be available under this contract after 1915, and this would provide the Admiralty with an expansive power from this source in case of great emergency.’ Of course, Churchill added in the final telling argument, his colleagues were free to find these features inadmissible, in which case the forward contract could not be realized and savings of nearly £300,000 per year after 1915 would have to be sacrificed.[8]

                Churchill desired to take the oil question to its logical conclusion: the proposals he set out, with one small exception, all involved the Admiralty purchasing the finished product. The next step therefore would be for the Admiralty to purchase crude oil, as opportunities arose, and distil it themselves, directly or indirectly:

…If we are over a very long period of time to be dependent, for a large portion of our Navy, upon oil fuel, it is indispensable that we should acquire the power to deal in the crude products; to buy at opportune moments; to transport either by our own freights or at periods when freights are favourable; and to work the crude product by whatever processes are necessary to the specific quality we require. In no other way can we safeguard ourselves from a prejudicial effect of market operations.[9]

Despite his eloquence (or perhaps as a result of his browbeating?) the Cabinet discussion was inconclusive; the sticking point remained of the risk involved in making advance payments to the APOC.[10]

                Churchill was also clearly aware of an important subsidiary issue which might tend to undermine his grand Admiralty scheme and which he therefore attempted to fend off. Having staked out his claim on the basis that ‘a large portion of our Navy’ would be dependent on oil, the First Lord had to explain the Admiralty’s decision to revert to coal (with oil used only as an adjunct) in the latest Revenge class battleships which were due to be laid down from November 1913 onwards. Obviously the oil requirements of a battleship far exceeded those of a cruiser or destroyer for which ‘oil must be used or they could not be built to discharge their tactical purposes’, and there was still some doubt as to the certainty of oil supplies; nevertheless it was a retrograde step. But Churchill did not see it that way: ‘Why has this been possible?’ he asked rhetorically. ‘The following is the reason:—

Oil is only required in big ships when an exceptional speed has to be reached. The ordinary speeds can be effectively realised with coal as the main motive power. The fast division of battleships of the year 1912-13 consisted of vessels of exceptional speed, and therefore required oil. But the essence of a fast division consists in the relation of its speed (a) to the enemy’s main fleet, and (b) to your own main fleet. Speed is only relative, and if the general speed of the line of battle were raised to that of the fast division, the fast division would ipso facto fall back into the ordinary category. In creating a fast division we therefore had no intention of raising the ordinary average speed of the line of battle, which remains at a maximum for individual ships at from 20 to 21 knots…It is therefore possible to use coal as their main motive power, and this, it must be admitted, is convenient on other grounds…[11]

This was tenuous reasoning at best and the folly of the Revenge class was exposed the following year when, with the nation at war and Fisher back at the Admiralty, the old ‘oil-maniac’ ordered their conversion to oil only.[12] Before this, as late as March 1914, Churchill was still maintaining before a Commons’ Committee that ‘Oil will be used as the sole fuel for small craft and for light cruisers of the Arethusa type, and for capital ships of exceptional speed. For all the rest, and for the line of battle, coal will continue to remain the motive power.’[13]

                Having failed in the Cabinet to gather absolute adherence to his views Churchill tried another tack, writing to the India Office the same day to urge the desirability of India and the Admiralty acting jointly: although oil had been under consideration for some time for use as the motive power on Indian Railways detailed tests had only been under way since January and, it was expected, they would take at least a year to complete (this turned out to be a conservative estimate). This seemed, however, to matter little as both Anglo-Persian and Churchill assumed the trials would be successful.[14] Nevertheless, the First Lord was forced to admit that the Admiralty interest in the matter was more urgent ‘as the Indian Government, with cheap coal available for its railways, is not under immediate and pressing necessity to make a change from one fuel to the other’; though, if the Admiralty did enter into a large contract with the APOC, while they would be taking on the full burden of the advances proposed, important Indian interests would undoubtedly be served as well. There was thus, argued Churchill, a ‘strong case’ for joint action irrespective of possible oil fuel requirements for Indian railways. The political interests at stake in the Gulf – which were described as ‘considerable’ – depended upon Anglo-Persian retaining its independence; this would not only guarantee favourable terms for the Admiralty and India but would prevent the combination with Shell which would bring Dutch influence into Persia. Similarly, with regard to the Mesopotamia oilfields, sacrifice of independence meant that alliance with German interests ‘through the Deutsche Bank and Bagdad Railway interest’ was inevitable. Churchill generously ‘suggested’ therefore that the Indian Government should guarantee interest of 4% on £2 million for ten years!

                The First Lord had one final rabbit to pull from the hat: by virtue of Indian involvement it would become possible ‘to keep as confidential as possible from foreign countries as well as from competing oil companies the detailed allocation of Admiralty contracts for this important munition of war.’[15] Churchill’s concern was as, at the same time, the German Ambassador in London had been made aware by ‘an informant, who knows all about the matter’ that the British Government were attempting to keep the APOC ‘as strong and independent as possible’ while trying to prevent Shell from obtaining a predominant position ‘in order as much as possible to check the control of prices…’[16] Again, it had been an impressive performance by the First Lord, but based on a false premise: the Admiralty had misread the Indian position, considering it more enthusiastic than was the case. Neither Crewe, the Secretary of State for India, nor Hardinge, the Viceroy, would be swayed by the arguments and the guarantee scheme was rejected by the Cabinet on 9 July 1913.[17]

                Rebuffed with regard to Indian involvement, the indefatigable First Lord now set to work on his speech to be delivered in debate on 17 July 1913 in the House of Commons Committee on the Navy Estimates and in which he outlined the twofold Admiralty policy. In the interim, a series of forward contracts ‘for about five years’ would be negotiated, but Churchill was not about to say with whom, nor admit the fact that, in the case of Anglo-Persian, the term under consideration was 20 years; instead he drew a veil of secrecy over the matter using the convenient excuse of confidentiality. ‘When you are carrying through a series of complex and delicate negotiations’, he lectured the Committee, ‘which may powerfully affect a market limited and controlled like the oil market, or when you are trying to hold a balance between various oil combinations, and preserve and develop independent sources of supply you do not exactly want to go and tell everybody what you are doing beforehand. Our power, such as it is, to make good and thrifty contracts for the public depends very largely on our being preserved by the House in our right of confidential negotiations.’

                All this led, inextricably, to the Admiralty’s ultimate policy, which was a step further than that envisaged by the Royal Commission. Unable now to count on the assistance of India, the Admiralty would have to become ‘the independent owner and producer of its own supplies of liquid fuel.’ This was to be achieved in three ways: first, by building up an oil reserve in Britain ‘sufficient to make us safe in war and override price fluctuations in peace’; second, ‘by acquiring the power to deal in crude oils as they come cheaply into the market.’[18] And, third, ‘we must become the owners, or at any rate,’ (in case this was going too far for the Committee), ‘the controllers at the source of at least a proportion of the supply of natural oil which we require.’ The Admiralty had decided to go into the oil business! Churchill studiously avoided any hint of the huge amounts that were being proposed as an advance to Anglo-Persian nor that the Company and its Persian fields would come to assume, on the Admiralty’s own calculations, greater import than any other source of supply. Rather, the Committee members left with Churchill’s provocative, if dissembling, admonition ringing in their ears: ‘On no one quality, on no one process, on no one country, on no one company, on no one route, and on no one field must we be dependent. Safety and certainty in oil lie in variety, and in variety alone.’[19]

                Although Churchill encountered little opposition on the day, before long the suggestion was increasingly being made that the Admiralty was proceeding contrary to the recommendations of the Royal Commission. Fisher himself was concerned in another direction as Churchill’s antipathy to Marcus Samuel had resulted in attacks being made on Shell. Fisher fully agreed with Churchill’s stated intention – ‘You want to get oil from everyone everywhere’ he exhorted – but could not see how this could be reconciled with the assault on Shell. Fisher had also come under the spell of Deterding, the ‘greatest man’ he had ever met, and so warned Churchill to ‘Placate him, don’t threaten him! Make a contract with him for his fleet of 64 oil tankers in case of war. Don’t abuse the Shell Company or any other oil company.’[20] Churchill tackled this opposition in two ways: first, by announcing the appointment on 30 July 1913 of an Admiralty Commission, headed by Rear-Admiral Sir Edmond Slade, to travel to the Gulf and report upon the resources of the APOC;[21] and second, by writing to Fisher on 13 August to request a statement of support set out along lines suggested by Churchill himself.[22] Both were astute moves. Slade’s report was unlikely to be anything other than favourable, while Fisher, now distracted by his admiration for Deterding (‘the Napoleon of Oil’), meekly obliged.[23] Armed with this statement Churchill was later able to silence his critics in the House.[24]

                Churchill’s dealings with the Royal Commission present an interesting illustration of the First Lord’s enthusiasms. By the time of his appointment conversion to oil had long been Admiralty policy of which Churchill (with Fisher, initially, as his mentor) was certainly a proponent. The formation of the Royal Commission with Fisher as its chairman was a clear signal to all concerned of the direction the Admiralty was about to take under Churchill’s tutelage, but Fisher wrong-footed Churchill by recommending the adoption of a four year peace reserve. While cutting down the reserve requirements, once Churchill became convinced of the urgency of the matter by the summer of 1913, he planned instead for the Admiralty actively to enter the oil business. He was now running ahead of the Royal Commission which had become, in effect, his poodle. ‘I fear’, Fisher wrote not entirely in jest, ‘he wishes to keep on the Royal Commission and of course I will do anything he thinks will be of service. I am his facile dupe!’ Nevertheless, both Fisher and Dumas complained repeatedly that the Commission was no longer doing enough to justify its existence. It was still however useful for Churchill to have the Commission in the background to add credibility, ex post facto, to his decisions.[25]

                Concurrently with the fruition of Churchill’s plans concerning the APOC, a series of agreements was reached between Britain and Turkey to overcome the outstanding differences between the two countries in Mesopotamia and the Gulf. The former Grand Vizier, Hakki Pasha, had been dispatched to London in late January 1913 to conduct the negotiations when, against expectations, good progress had been made. British proposals dating from July 1911 to conclude the long-running saga of the Baghdad Railway had revolved around a five-way split with England, Germany, France, Russia, and Turkey all taking an equal share, thus giving the three Entente Powers a majority. This was unacceptable at the Porte, and resulted in a counter proposed in April 1912 for a four-way split, to be achieved by excluding Russia. The British replied in July, offering to withdraw their claims in return for an agreement that the line should terminate at Basra and that nothing was to be built beyond Basra without British consent; also, two British directors – vetted by the British Government – should be appointed to the board of the Baghdad Railway Company, and there should be equality of treatment on all railways in Asiatic Turkey.[26] A year later these aims were at last achieved; however, the Anglo-Turkish convention of 1913 also required a German signature following the successful conclusion of Anglo-German talks and this would not be forthcoming until 15 June 1914.[27]

                Having finally dealt with the vexed question of the Baghdad Railway the Ottoman Government also attempted to resolve the competing claims of the D’Arcy group and the Turkish Petroleum Company to the Mesopotamian oil concession. The waters were muddied when a further group, fronted by the self-styled ‘Baron’ Thomas de Ward, applied for the concession early in 1913. This application was allegedly accepted in principle by the Turkish Minister of Mines before further negotiations were suspended following the political upheaval in the aftermath of Enver’s January coup. Then, in February, the TPC applied for the concession. Apprehension that they would succeed set off alarms in London and resulted in pressure on behalf of the APOC being applied to both the new Grand Vizier, Shevket Pasha, and Hakki Pasha in London. The Turkish response to this pressure was to suggest that the concession should be auctioned which, with far greater financial resources at its disposal, would be tantamount to handing it to the TPC. Lowther’s appeals to the Grand Vizier increased in intensity until, in April, Shevket suggested a compromise solution: amalgamate the two companies (the D’Arcy group and the TPC) and he would ensure that Britain held the predominant share. While this might solve the problem of a third party, such as de Ward, entering the fray as the main contenders squabbled it also raised the unhappy prospect that neither the D’Arcy group – which was, in effect, virtually identical to the APOC – nor the TPC would be willing to relinquish a controlling share. A conference was arranged on 5 June 1913 between Greenway for Anglo-Persian and Babington-Smith of the National Bank of Turkey for the TPC to attempt to settle the issue; predictably it did nothing of the sort and negotiations dragged on for months.[28]

                Meanwhile the concurrent Admiralty negotiations with regard to the APOC’s Persian fields fell into abeyance, awaiting the report from Admiral Slade’s commission; Slade and his colleagues arrived at Mohamerrah on 23 October 1913, stayed three months, and returned to England on 25 January 1914. They found Anglo-Persian’s output was limited, not by the production of the field but by the capacity of the pipeline and refinery — capital intensive items. Also, encouragingly, although it would have been wrong to assume that the local tribes would never cause trouble, the influence of the APOC had ‘increased the general tranquillity [sic] of the district’; if trouble developed, the difficulties, though serious, would not be insurmountable. However, as a contingency, it was felt desirable that the company’s concession should not be confined to one district ‘but should be distributed as much as possible consistent with economy of working.’ The conclusion was, as expected, a complete vindication of Churchill’s policy:

40. We are satisfied that the Company’s concession is a most valuable one and, providing no unforeseen factor intervenes, the existing field is capable, with proper development, of supplying a large proportion of the requirements of the Admiralty for a considerable period, while the whole Concession, judiciously worked, would probably safeguard the fuel supply of His Majesty’s Navy.[29]

The Commission also examined ‘certain districts in Persia adjacent to the Persian Gulf’, and recommended that tests should be carried out without delay to establish their oil-bearing potential. Although they were convinced that ample supplies would be available in the northern fields, ‘Obvious advantages would accrue from the discovery of a productive field in the south’. Such a field could be more easily defended.

                Slade reported to the Admiralty directly upon his return to London and then appeared before the Cabinet Committee that had been formed to investigate the subject. The Committee decided ‘in favour of an immediate negotiation with the A-PC on the lines of HMG finding the necessary capital in return for ordinary shares to enable the company fully to develop the property.’ Consequently, the negotiations with Anglo-Persian were speedily resumed and an outline scheme was agreed in principle; not only would the contract ensure a large supply of fuel oil for the Navy for a long period but, as a majority shareholder, the cost of the oil to the state would be further reduced materially when the company was in a position to pay satisfactory dividends. All this had happened by 10 February 1914.[30] Six days later Churchill warned the Cabinet that, unless they now wanted to reconsider the whole question, action should follow almost immediately: ‘The negotiations have now been carried to the final stage, and every day commits us more in good faith, though not of course in law…’ Cabinet assent followed on 18 February for the Admiralty to purchase a £2.2 million majority shareholding in the company[31] — only the Treasury now stood in Churchill’s way.


The rancorous negotiations between the D’Arcy group and the TPC over the Mesopotamian concession finally reached a conclusion on 19 March 1914 — but not before the participants had received a number of shocks. Babington-Smith’s National Bank, caught in the middle of a struggle between Greenway and Deterding and distrusted by the British Government, proposed to withdraw leaving Shell and Deutsche Bank to represent the TPC.[32] The question of shares still could not be settled and, with the talks in stalemate by the end of 1913, the way was again open for other interested parties to step in. Baron de Ward’s British group resumed their discussions with the Turks in December 1913, only to be informed that ‘for reasons of policy touching the vital interests of the [Ottoman] Empire, this concession would be granted only to an Anglo-German group.’ Demonstrating both his flexibility and his desire to obtain the concession, de Ward made arrangements so that, if the Porte insisted on these conditions, ‘our group would be joined by a very strong German element’![33]

                Then, on 13 January 1914, a certain Mr Goldie wrote from Cairo to inform George Clerk at the Foreign Office that his interests had been negotiating for the concessions in ‘Baghdad, Moursil, and Bassorah’; like de Ward he also wanted Government support and like de Ward he, too, would be disappointed — the Government, Clerk replied, were already committed to supporting another group.[34] More portentous, in January came the news that the American Standard Oil Company was trying to substitute money for diplomacy by offering the Turks ‘heavy cash advances’ to obtain the Mesopotamian concession. Mallet was instructed to lodge a protest at the Porte while Lichnowsky in London was requested to inform his Government to do likewise.[35] ‘Oil is booming’, was the view of the British Embassy in Constantinople, ‘and this multitude of applications for assistance in obtaining concessions becomes positively bewildering.’[36] During this time Anglo-Persian had been stalling, pending the satisfactory outcome of the Admiralty deal which would put the company in a strong financial position. With the return of Slade’s commission in January, and the deal therefore almost a foregone conclusion, the company felt able to submit to Foreign Office pressure and accept the latest formula in which the D’Arcy group would have 50% of the Mesopotamian concession and the TPC – now composed solely of Shell and the Deutsche Bank – the other 50%.[37]

                No sooner had this satisfactory progress been made when disturbing news arrived in the form of a memorandum dated 10 March 1914 from Ernest Weakley, the Commercial Attaché at Constantinople, who had received information from a private source pointing ‘to the possibility that the Germans are working with the Turks behind our backs.’ Yet another concession-hunting group had been formed – the Societé Anonyme Ottomane – at the instigation of Halil Bey and Djemal Pasha and comprising, amongst others, Mahmoud Mukhtar Pasha (the Ambassador in Berlin) who was thought to be the link between the group and the Germans. ‘The situation is most perplexing’, concluded Weakley, ‘and the attitude of the Turkish Government is not quite clear in the matter, for whilst apparently acknowledging that the oilfields are to be given to the D’Arcy group or combine – whatever that combine may ultimately be composed of – they at the same time consent to negociate [sic] or at least to encourage negociations and applications from various other people.’[38] Alarmed, Grey replied immediately to Mallet:

You may state categorically that if concession for these [Mesopotamian] fields is given to any Company in which D’Arcy group does not receive 50% of the whole I shall be compelled to break off all negotiations with Hakki Pasha and to reconsider terms on which HMG could consent to Customs increase and monopolies.[39]

It was now time to knock some heads together. A conference was held at the Foreign Office on the afternoon of 19 March 1914 to resolve the situation; given the urgency an agreement was duly signed.[40] This resolved the internecine struggle between the two companies, which had looked at one time as if it would allow a third party to snatch the concession from under their noses; but still the Mesopotamian concession was in the gift of the Turks and had yet to be obtained!

                Grey telegraphed Mallet later that night to inform him that, as a result of the agreement, the new group would operate in Turkey only through the TPC. Mallet was instructed to join with Wangenheim to request that the Ottoman Government grant the exclusive concession to the company to produce oil in the vilayets of Mosul and Baghdad.[41] Greenway tried to go one better: at the end of March he sent his agent in Constantinople, H. W. Stock, a copy of the draft concession to be submitted to the Porte. Having done this, Greenway then wrote to Alwyn Parker at the Foreign Office enclosing a copy of the draft and admitting ‘the one clause which you will probably question is No. 6 which gives the concessionaire a preference for the exploitation of all Petroleum deposits, discovered or to be discovered, in the Ottoman Empire, as well as for the monopoly for Moussoul and Baghdad.’ Greenway claimed that Herr Bergmann of the Deutsche Bank and Deterding had insisted very strongly upon the retention of this clause ‘on the ground that it would have been insisted upon had they been applying for the concession independently under the aegis of the German Government, and that in any case it is a condition that should be obtained if at all possible.’[42] Unwilling to acquiesce in this fait accompli the Embassy in Constantinople was issued immediate instructions to inform Stock that, as Greenway had agreed to the insertion of the contentious clause ‘in opposition to the clearly expressed wishes of HMG he has been informed that unless this clause is cancelled, the support of HMG must be withdrawn.’[43]  Although article 6 was duly deleted, it was the opinion of the Embassy that it was not the only objectionable condition: many of the other articles were deemed ‘quite inadmissable’ for reasons which were apparent: ‘the draft is evidently a German one and, with German thoroughness, asks for most things that could conceivably or remotely be associated with petroleum…’[44]

                Nothing was ever simple where oil was concerned and, at this juncture, the unwelcome Baron de Ward surfaced again, writing to Mallet on 10 April to seek the diplomatic support his group had formerly eschewed as they had then looked upon the matter ‘as a purely industrial enterprise in regard to which the Turkish Government would have entire liberty of action.’ His appeal was somewhat embarrassing for Mallet, as it appeared to offer terms which were more advantageous to Turkey than those of any other competing group. Beaumont, the Counsellor at the Embassy, minuted ‘Should the proposition be a serious one, as it appears to be, it will be difficult for the FO to refuse to have anything to do with it. In some respects the offer is more favourable to the Turkish Government than that of the Anglo-German combine…If the object of the FO is to secure control of the Mesopotamian Oil-Fields it might be as advantageous to support Baron de Ward as their present protégés, always assuming that he has a sufficiently strong group of British capitalists behind him…’[45]

                Having just, after months of protracted, frustrating negotiations, come to an understanding with the German interests and German Government, and having had them confined to searching for oil in the Baghdad and Mosul vilayets only, the Foreign Office was never going to throw away the hard earned results of the 19 March Fusion agreement to consult with de Ward in the hope of obtaining a better deal for the Turks. Mallet informed de Ward on 16 April that the Government was committed to D’Arcy.[46] The new TPC – 50% D’Arcy group, 25% Shell, 25% Deutsche Bank – would then be confined to exploring a certain area: Grey had successfully accommodated both Shell and the Germans while leaving the rest of the country open for other, possibly all-British, groups. All that had to be done now was for the exclusive concession to be granted by the Turks, but this the Porte could not do. In the heaviest of ironies, Turkish mining law forbade the granting of a monopoly concession and although Mallet and Wangenheim came up with a leasing plan in May, the question was still unresolved on the outbreak of the European war.[47]

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[1]    Admiralty Memorandum on Oil Fuel, Enclosure Nº 1, Memorandum submitted by Mr Greenway on the 10th March, 1913, PRO Cab 37/115/39.

[2]    Admiralty Memorandum in Regard to the APOC's Proposal for a Contract to Supply Oil Fuel, 16 June 1913, PRO Cab 37/115/39.

[3]    The War Staff had also tackled the thorny issue of the Royal Commission’s suggested four year peace reserve: Sir Henry Jackson, the C.O.S., had worked on the basis that arrangements should be made ‘to cover with reasonable certainty the requirements of one year of war’ which, he argued, would necessitate having at the start of the war six months’ supply in reserve and trusting, somehow, to make up the remaining six months’ requirement. To assist in this (and particularly in view of the very reasonable price) it was desirable that the Admiralty ‘should be in a position to contract for the full quantity offered by the Anglo-Persian Company, in order to have the full resources of this field behind us; but it will help greatly if in normal circumstances India will take a proportion, as otherwise in time of peace the total offered would form rather too large a portion of Admiralty requirements, taking distance also into account…’ When ‘normal circumstances’ did not prevail, that is, in time of war, Indian railways could revert to coal. Churchill needed little convincing of the benefits to be gained by admitting the Indian Government to the deal: ‘we are eagerly seeking the co-operation of the India Office’, he wrote Lord Crewe on 1 May, adding, ‘We are of course anxious to drive a hard bargain with the Company, as well as to get the utmost help from the India Office and make them party to a long contract.’ Sir Henry Jackson, Memorandum in regard to outline scheme of supply of oil fuel, 25 April 1913, revised 5 May 1913, PRO Adm 116/1219; Churchill to Crewe, 1 May 1913, WSC Comp. vol. II, pt. iii, p. 1940.

[4]    The draft was handed to Sir Francis Hopwood to put into its final form and be printed while Churchill was away from the Admiralty Churchill’s important memorandum Oil Fuel Supply for His Majesty’s Navy was ready by 16 June 1913 and was debated in Cabinet two days later. Hopwood also informed Churchill of efforts he had been making privately ‘to induce the Shell Company to offer us another substantial contract.’ Hopwood to Churchill, 29 May 1913, ibid., pp. 1943-4.

[5]    Winston Churchill, Oil Fuel Supply for His Majesty’s Navy, 16 June 1913, PRO Cab 37/115/39. The following chart gives a comparison of the competing standards:



Original Standard

Pakenham Cttee.

Royal Commissn.

New Standard

April 1, 1913

  340,000 tons

   816,000 tons

   800,000 tons

  441,000 tons

April 1, 1914





April 1, 1915





April 1, 1916





April 1, 1917






[6]    Ibid., paragraph 9.

[7]    Admiralty Memorandum in regard to the APOC's proposals for a contract to supply oil fuel, PRO Cab 37/115/39 [my emphasis].

[8]    Even now the restless, autocratic First Lord would not let this ‘positive’ argument stand on its merits: he intended to use a sledgehammer to crack this particular nut. For ‘completeness’, and in implementation of the recommendation that sources of supply be widely distributed, Churchill outlined the other contracts negotiated and under consideration by the Admiralty, each of which carried attendant dangers. This was the ‘negative’ argument: Shell, for example, was under Dutch control but ‘might in certain political circumstances become German.’ The contract with the Union Oil Company of California depended upon the use of the soon-to-be-opened Panama Canal and the oil was ‘therefore during a portion of its passage travelling upon a route which we cannot control.’ Mexico offered the only really large supply immediately available but the oil was expensive and needed special treatment to conform to Admiralty specifications; and so on.

[9]    Churchill, Oil Fuel Supply, 16 June 1913, para. 10, PRO Cab 37/115/39.

[10]  Jack, The Purchase of the British Government’s Shares in the British Petroleum Company 1912-14, p. 155.

[11]  ‘With the 4 fast ships of 1912-13 and the Malaya, together with the 3 Canadians (if they come), we shall have completed a squadron of 8 fast battleships, sufficient, that is to say, to provide a fast division of 4 at either end of the line of battle, and this year we revert to building battleships of normal speed for the ordinary service of the line.’ Churchill, Oil Fuel Supply, 16 June 1913, para. 4, PRO Cab 37/115/39.

[12]  Parkes, British Battleships, pp. 581-7.

[13]  Churchill, Statement in Committee of the House of Commons on the Navy Estimates for 1914-15, 17 March 1914, PRO Cab 37/119/61.

[14]  Jack., The Purchase of the British Government’s Shares in the British Petroleum Company 1912-14, p. 144 and note 15.

[15]  ‘If this guarantee be given by India,’ Churchill argued, ‘the Admiralty would undertake to make good to Indian revenues any actual payment that might prove not to be recoverable from the company, pro rata, to the quantities of oil actually drawn by the Admiralty. The aggregate financial risk is much lighter than if the Admiralty undertook the full onus of advances amounting in all to £2,000,000 during a contract period of twenty years. The difference is that between India guaranteeing £80,000 a-year for ten years, and the Admiralty paying £100,000 a-year for twenty years.’ Memorandum by Churchill, Proposed Arrangement with the Anglo-Persian Oil Co. for the Supply of Fuel Oil, Supplementary note, 4 July 1913, PRO Cab 37/116/46.

[16]  Lichnowsky to Bethmann-Hollweg, 2 July 1913, Dugdale, German Diplomatic Documents, vol. IV, pp. 244-5.

[17]  Jack, The Purchase of the British Government’s Shares in the British Petroleum Company 1912-14, p. 156. ‘It is to be hoped that India will come to our assistance’, Churchill wrote Grey that day. ‘If she does not, we must go forward alone by the more expensive and unsatisfactory method’ of advance payment of £100,000 a year — one way or another, Churchill was in no doubt that the APOC would receive ‘substantial financial aid’ from the British or Indian Government. Churchill to Grey, 9 July 1913, WSC Comp. vol. II, pt. iii, p. 1948.

[18]  Disingenuously, Churchill referred to the situation where a new field was developed but ‘those who are producing it have exhausted their original capital and have not yet opened up new lines of consumption and customers, [then] there are opportunities of purchasing large quantities of oil, if the means of storage and transport are available, at prices which bear no relation to what that same oil will afterwards be sold at…’.

[19]  Extracts from Speeches of the First Lord of the Admiralty in Regard to Oil Fuel, 17 July 1913, In Debate in Committee of the House of Commons, PRO Cab 37/119/61; see also, Jack, The Purchase of the British Government’s Shares in the British Petroleum Company 1912-14, pp. 156-7.

[20]  Fisher to Churchill, 13 July 1913, WSC Comp. vol. II, pt. iii, pp. 1948-9.

[21]  See, Admiralty Commission on the Persian Oilfields, PRO Cab 37/119/61. The Commission was composed of: Slade, Professor John Cadman, E. R. Blundstone, J. C. Clarke and E. H. Pascoe. The Commission arrived at Mohammerah on 23 October 1913 and returned to England on 25 January 1914.

[22]  Churchill to Fisher, 13 August 1913, WSC Comp. vol. II, pt. iii, pp. 1951-2.

[23]  See, Fisher to Churchill, 18 October 1913, ibid., pp. 1955-6: Fisher informed Churchill that, ‘in about a fortnight’, he would send the required Statement ‘for you to make use of as necessary as to there being no antagonism between the Admiralty and the Royal Commission.’

[24]  Churchill, Extracts from Speeches…, In debate in Committee in the House of Commons on the Supplementary Navy Estimate for 1913-14, 2 March 1914, PRO Cab 37/119/61. ‘This is what Lord Fisher writes…’ Churchill announced, stretching the truth almost to breaking point.

[25]  Dumas, diary entries, 9, 12 April and 23 September 1913, IWM PP/MCR/96; Fisher to Churchill, 11 & 24 April 1913, 18 October 1913, 13 December 1913, WSC Comp. vol. II, pt. iii,  pp. 1938-9, 1955, 1960-1; Fisher to Masterton-Smith, undated, Masterton-Smith mss., PRO Cab 1/32.

[26]  Heller, British Policy, pp. 60-1; Kent, “Constantinople and Asiatic Turkey”, in Hinsley (ed.), op. cit., p. 153.

[27]  Zimmermann to Count von Wedel, 19 June 1914, Dugdale, German Diplomatic Documents, vol. IV, pp. 253-5.

[28]  Kent, Oil and Empire, pp. 49-60.

[29]  Report of the Admiralty Commission on the Persian Oilfields, 11 May 1914, PRO Cab 37/119/61 [my emphasis].

[30]  Admiralty memorandum, signed by Lambert, Hopwood, Slade and Black, 10 February 1914, PRO Cab 37/119/28.

[31]  Ibid.; Jack, The Purchase of the British Government’s Shares in the British Petroleum Company 1912-14, p. 160.

[32]  Kent, Oil and Empire, pp. 62-80.

[33]  Thomas de Ward to Mallet, 10 April 1914, Constantinople Embassy Archives, PRO FO 195/2456.

[34]  Goldie to Clerk, 13 January 1914, PRO FO 195/2458 file 507.

[35]  Lichnowsky to Foreign Office, 29 January 1914, Dugdale, German Diplomatic Documents, vol. IV, p. 253.

[36]  Minute by Ryan on Clerk’s reply to Goldie’s letter of 13 January 1914, PRO FO 195/2458, file 507.

[37]  Kent, Oil and Empire, pp. 84-90.

[38]  Ernest Weakley, Memorandum on Mesopotamian Oilfields, 10 March 1914, PRO FO 195/2456, file 64.

[39]  Grey to Mallet, no. 133, 11 March 1914, ibid.

[40]  The Arrangement for Fusion of the Interests in the Turkish Petroleum Concession of the D’Arcy Group and of the TPC. Kent, pp. 92-3.

[41]  Grey to Mallet, no. 150, 19 March 1914, PRO FO 195/2456, file 64.

[42]  Greenway to Parker, 30 March 1914, 30 March 1914, ibid [my emphasis].

[43]  Draft letter, British Embassy to H W Stock, 1 April 1914, ibid.

[44]  Unsigned minute, probably by Ryan, on Greenway to Parker, 30 March 1914, ibid.

[45]  Minute by Beaumont on de Ward to Mallet, 10 April 1914, ibid.

[46]  Draft reply, Mallet to de Ward, 16 April 1914, ibid.

[47]  Kent, Oil and Empire, pp. 105-11.



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