THE OIL CENTURY

I shall begin illustrating my newly developed theory of the “Rule of the Retroactively-Inevitable” by stating an odd element of chemistry, which is that burning oil releases over twice as much energy as an equal weight of burning coal. Because of this, every admiral knew it was inevitable that eventually every battleship in the world must be powered by oil. But first you had to have oil to burn .And in the mid-19^th century the only known large oil fields were in the United States, under Pennsylvania, and on the Pacific island of Borneo, in the far off Dutch East Indies. So, for half a century every war ship built for every navy in the world was powered by bulky, dirty inefficient coal. Then in 1901 a German professor named Kissling discovered a virtually unlimited “lake of petroleum” south of the Ottoman Turkish city of Kirkuk, and around Basra , at the head of the Gulf of Arabia. The professor had been searching in this god-forsaken dessert on orders from his boss, George von Siemens, managing director of Deutsche Bank.

Before he earned his “von”, George Siemens was just a promising Prussian civil servant. His skills in negotiating telegraph treaties had brought him the attention of Otto von Bismark (above), the man who in 1871 had  made Wilhelm Ludwig the first Kaiser of Germany. Otto helped set up the Deutsche Bank and made George it's first director, because to him it seemed inevitable that Germany would be surrounded by enemies; France to the east, Russia to the West, and everywhere the British Navy. But it also was inevitable that money could wiggle through this British blockade.

George von Siemens (above) knew very little about banking, but he was convinced it was inevitable that railroads were going to build a new world order. So,  much of the money that built the second and third American transcontinental railroads in the 1870's came from his Deutsche Bank, and George had a close up view of American capitalism in action. Americans, he wrote, “...are ruthless robbers...but they know how to think big.” So Director Siemens started looking for someplace to invest where the robbers thought smaller.

To Abdul Hamid II (above), 34^th Sultan, it was inevitable that the natural resources in the Ottoman Empire ought to make it one of the strongest powers in Europe. But successful rebellions in Hungary, Bulgaria and Albania, and graft and waste in his government, had reduced Turkey to “The Sick man of Europe" - so deeply in debt that Abdul was forced by his creditors in London and Paris to turn over collection of the Empire's taxes (and its post office) to the “Ottoman Public Debt Administration”, run from Paris and London. So when Deutsche Bank offered Abdul a hundred million dollars to build a Railroad from Berlin to Bagdhad, Abdul eagerly accepted, even if George Siemens insisted it be built with “only German materials”, and gave Deutsche Bank mineral rights for 20 miles on either side of the railroad tracks. And that's why Professor Kissling was tapping rocks in the god-forsaken dessert outside of Kirkurk and in the marshes around Basra – to find some way of paying for the railroad. And it was Kissling's report, made public in 1905 to reassure British investors in Deutsche Bank, which started a barrel- chested big-thinker ego-maniac named Winston Churchill to thinking about the inevitable triumph of the British Empire.

Modern history remembers him as the British archetypal bulldog, but that came later. In turn-of-the-twentieth-century Britain he was a more of a Newt Gingrich – a bombastic clown extravagant in his language and his life style, which he financed by writing only slightly embellished books and newspaper accounts of his adventures. Then he went into politics, and in 1913 Winston (above) was named First Lord of the Admiralty, civilian head of the British navy. While everybody else was worried about the German Grand fleet sailing up the Thames, and German armies sweeping across France,Winston was convinced it was inevitable that the Berlin to Baghdad railroad would be the greatest threat to the British Empire.

His Admirals told Churchill the British Navy would need a speed of 25 knots to out maneuver a larger German fleet. Such a speed was possible only with oil powered warships. But in 1913, the British Empire controlled less than 2% of the world's oil reserves. Churchill wrote to his government masters, “We must become the owners or at any rate the controllers at the source of at least a proportion of the oil which we require.” The decision was made that the Foreign Office and the Bank of England were to acquire all the oil reserves that they could.

By now George von Seimens was no longer manager of Deutsche Bank, having passed away in October of 1901. And Abdul Hamid was no longer Sultan, having been deposed by the Young Turks under Enver Pasha in 1909. But so gentle was Abdul's captivity that he was allowed to keep all the land he had donated to himself, including that atop the oil fields around Kirkurk and Basra. And in 1913 there was incorporated a most unusual bank in Constantinople. It was called the National Bank of Turkey, but its money and board of directors were almost exclusively British, with the exception of a duel Ottoman Armenian-slash-British citizen, named Calouste Gulbenkian.

Half of the capital for the new bank was supplied by Deutsche Bank, now with out the guiding hand of George Seimens. The other half was put up by the Anglo-Persian Oil Company, which spurred by Professor Kissling's report, had stumbled upon oil reserves in present day Iran. But what the folks at Deutsche Bank did not know, was that the British government had secretly bought out the Anglo-Persian Oil Company, meaning the German bankers were now unwitting junior partners with the British Government.

The National Bank of Turkey help incorporate the Turkish Petroleum Company. Abdul Hamid put up his property rights, and Deutshe Bank put up their mineral rights, and the Bank of Turkey put up the money for the exploitation of the oil underneath Basra and Kirkurk. And the guy who drew up the paperwork was none other than Calouste Gulbenkian (above), who paid himself for his work by giving himself a 5% share in the new company. For a few brief moments it seemed inevitable that they all were going to get very, very rich. And then World War One broke out. The Berlin to Baghdad railroad had yet to reach Baghdad. Nobody had yet pumped a drop of oil out of the ground. And for the next four years artillery replaced lawyers as the big guns in oil negotiations, and the inevitable was put on hold

In 1915 the British army captured Basra, and in 1917 they captured Bagdhad, in 1918 they captured Kirkurk. And in 1919, at the peace conference in Paris, they sliced all of that off from Turkey, and labeled it a brand new country, which they named Iraq. Deutsche Bank was bankrupt. Abdul Hamid was dead. Turkish Petroleum Company became Iraq Petroleum Company, and was eventually divided up by various oil corporations, including Anglo-Persian. British corporations now controlled most of the world's oil supply outside of the United States. Until...who should suddenly show up but the Armenian/British lawyer, Calouste Gulbenkian. He now had a third citizenship, Portuguese – they had been neutral during the War - but he was still alive and he still had his 1914 contracts, and he insisted it was inevitable that he was going to be paid his 5%.

After ten years of haggling, in July of 1928, the world's oil companies finally caved in. They let Calouste Gulbenkian take a big red marker and draw a circle around all the oil fields he laid claim to. The “Red Line Agreemant” gave him, personally, 5% of the value of any oil pumped out from within that circle - forever. He was now “Mr. Five Percent”, one of the richest men in the world. When he died in 1955, his personal fortune was estimated at $840 million ($39 billion in today's money).

Over time Anglo-Persian Oil became Anglo-Iranian Oil, and then finally, British Petroleum, and then just “B.P.”, the largest oil company and the fourth largest and most profitable corporation in the world.. And as the Petroleum Century drew to a close, at about a quarter to ten on the morning of April 20, 2010, an oil rig leased by B.P., 48 miles off the coast of Louisiana, exploded. Eleven workers were killed. Before the well was capped almost 5 million barrels of toxic petroleum gushed into the Gulf of Mexico, killing everything which ingested it. B.P. has estimated its total cost for the clean up will be about $40 billion. And from the moment the admirals decided battleships would be powered by oil, this spill was inevitable.

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