THE OIL CENTURY

I shall begin by stating a singular fact of chemistry, which is that burning one pound of coal produces one kilo-watt-hour of electricity, while burning the equivalent volume of oil produces 12.76 kilo-watt-hours.  Because of this, long before any Europeans knew where to find enough oil to burn, every admiral knew it was inevitable that future navies must be powered by oil. 

Then in 1901 a German professor named Kissling discovered a virtually unlimited “lake of petroleum” south of the Ottoman Turkish city of Kirkuk (above, upper center), and around Basra (above, lower right),  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 Bismarck (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 Bismarck it seemed inevitable that Germany would be surrounded by enemies; France to the west, Russia to the east, and everywhere the British Navy. But the British addiction to capitalism made it was possible that  money could wiggle through any 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 1880'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 than he did.

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 own 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 banks in Paris and London. 

So when Deutsche Bank offered Abdul a hundred million dollars to build a railroad from Berlin to Bagdad (above),  Abdul eagerly accepted, even if George Siemens insisted it be built with “only German materials”, and give 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 dessert outside of Kirkurk (above) 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 start thinking about the not yet 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 Churchill 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 own adventures. 

Then Winston went into politics, and in 1913 he was named First Lord of the Admiralty (above), civilian head of the British navy. While everybody else was worried about the coal fed German Grand fleet sailing up the Thames, Winston was convinced it was inevitable that the Berlin to Baghdad railroad would fuel the rise of a greater Germany powered by oil.

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....of at least a proportion of the oil which we require.” The decision was made that the Foreign Office and the Bank of England must acquire all the oil reserves that they could. But how?

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. 

And in 1908 there was incorporated a most unusual bank in Constantinople. It was called the National Bank of Turkey. The most visible member of the board of directors was an Ottoman Armenian-slash-British citizen, named Calouste Gulbenkian (above).  Of course the British Foreign Office insisted, the bank was "...not initiated or suggested by us..."But that was horse manure.

Half of the capital in the National Bank of Turkey was supplied by Deutsche Bank, which also put up  their mineral rights along the Berlin to Bagdad railroad. The other half was put up by a new investment fund called the Anglo-Persian Oil Company, in which the same Calouste Gulbenkian was a major stock holder.  In 1912  Anglo-Persian Oil stumbled upon more oil fields in Iran, and hints of some in Saudi Arabia.,

And the guy who drew up the paperwork for all of this was none other than the little Armenian Calouste Gulbenkian (above), who paid himself for his work by giving himself a 5% share of all the oil pumped out of the new oil fields, if any ever was. 

The entire region was on the cusp of great changes.  The Berlin to Baghdad railroad had yet to reach Baghdad. Nobody had yet pumped a drop of oil out of the ground, because there were no pipe lines or terminals to receive it.  And the German bankers had not yet noticed they were now junior partners in the oil business with the British government. And then the First World War broke out.  And for the next four years artillery replaced lawyers as the big guns in oil negotiations, and the inevitable became subject to change.

In 1915 the British army captured Basra. In 1917 they captured Bagdad. In 1918 they captured Kirkurk.  By 1919 the Kaiser was deposed. The Austro-Hungarian Empire was dissolved. Deutsche Bank was bankrupt. Turkey was flat broke again. 

At the peace conference in Paris, the victorious English and French sliced the oil fields off from the Ottoman Empire leaving behind Turkey, and two brand new countries built around oil fields - Syria under French control and Iraq controlled by England. Each new country had a figure head appointed as President. In Syria he was a Shite, while the majority of the population were Sunni Muslims. In Iraq the potentate was Sunni, while the majority of the people were Shite.  That kept the both leaders reliant on their colonial investors

British and French corporations now controlled most of the world's oil supply outside of the United States.  Turkish Petroleum Company became the Iraq Petroleum Company, and eventually became "British Petroleum.  And then, stepping back into the sun light of the new world peace,....

...who should suddenly show up but the Armenian/British lawyer, Calouste Gulbenkian. He was still with his 1914 contracts still in his pocket, and he insisted it was inevitable that he was going to be paid his 5%.

After ten years of legal haggling, in July of 1928, the 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 (above). The “Red Line Agreement” gave him, personally, 5% of the value of any oil pumped out from within that circle - forever.  His heirs are still collecting it today.

He was “Mr. Five Percent”, maybe the richest man in the world because he had been in the right place at the right time.  When he died in 1955, his personal fortune was estimated at $840 million ($40 billion in today's money).

The value of all this oil was established during World War Two, during which Germany was constantly short of fuel, while the battleships and tanks and aircraft of Britain and the United States were awash in the black gold. In 1945 the inevitable became fact.

As the Petroleum Century drew to a close, British Petroleum was the largest oil company and the fourth largest and most profitable corporation in the world.  And then, a decade into the twenty-first century, at about a quarter to ten on the morning of 29 April, 2010, an oil rig 48 miles off the gulf coast of Louisiana, leased by B.P., exploded. 

Eleven workers were killed. But worse even than the loss of human life, before the well was capped 

almost 5 million barrels of toxic petroleum crude gushed into the Gulf of Mexico.....

... killing everything which ingested it.  B.P. has estimated its total cost for the clean up will be at least about $40 billion.  The actual final cost will likely be several times that amount. 

And from the moment the admirals decided future battleships would be powered by oil, this spill, and the millions of other spills larger and smaller, world wide, all became inevitable. It helps if you remember, it has only been a little over a century since oil became the energy source of the future. But in the future only change is inevitable.

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