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Oil in Soviet-Western Relations In the Interwar Years

Published online by Cambridge University Press:  07 August 2018

Hans Heymann Jr.
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Extract

The world-wide struggle over petroleum that was carried on in the period between the first World War and the second World War occupies a significant place in the chronicle of Soviet-Western relations. Soviet oil was a prize as well as a contestant in this struggle and was deeply involved in the controversies over control of oil resources and markets that created so deep a rift in international relations in the interwar years. The facts in the case provide a striking illustration of the power of oil as a source of international friction. The quarrels which are here resurrected were composed in due time, and differences were reconciled. But the old struggle over oil has been revived in a new setting and is again contributing its share of suspicion to the troubled international scene.

The first World War and its aftermath saw a fundamental change in the world petroleum situation. Oil had emerged as a vital factor in military strategy and an eagerly sought-after fuel, demanded in ever greater quantities by a motorized world. As a result, the international oil groups redoubled their efforts to acquire control over the most promising foreign sources of production.

Type
Articles
Information
American Slavic and East European Review , Volume 7 , Issue 4 , December 1948 , pp. 303 - 316
Copyright
Copyright © Association for Slavic, East European, and Eurasian Studies 1948

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References

1 Decree on nationalization, Council of Peoples Commissars, June 28, 1918.

2 Total investments in the Russian oil industry in 1914 have been estimated at 465,-000,000 rubles. Of this, foreign capital was distributed in the following proportions:

Source: Dr. Wilhelm Mautner, “Das Westeuropaeische Kapital in der Russischen Erdoelindustrie,” Petroleum-Zeitschrift, No. 5, 1925.

This estimate indicates a very large proportion of foreign investments to total investments. A somewhat lower proportion is shown by Apostol, Paul and Michelson, Alexandre, La Lutte pour le pétrole et la Russie (Paris, 1922), pp. 166-72.Google Scholar

3 See particularly United States Federal Trade Commission, Report on Foreign Ownership in the Petroleum Industry (1923).

4 For an excellent analysis of these, see Herbert Feis, Petroleum and American Foreign Policy, Commodity Policy Studies, No. 3 (Stanford University, 1944), pp. 3-13.

5 The decree of the Council of People's Commissars on the “General Economic and Juridical Conditions of Concessions,” dated November 23, 1920, is reproduced in English in Leites, K., Recent Economic Developments in Russia (Oxford, 1922), pp. 230-33.Google Scholar This decree caused such a commotion among orthodox Communists that Lenin deemed it necessary to defend it a few days later in a remarkable speech that emphasized its political as well as its economic advantages. See Lenin, V. I., Sočinenija (Moscow, 1930), XXV, 498–513 Google Scholar (speech at the meeting of secretaries of cells of the Moscow organization of the R.K.P. [b]).

6 The negotiations were carried on with the knowledge of the British Foreign Office. Davenport, E. H. and Cooke, S. R., The Oil Trusts and Anglo-American Relations (New York, 1924), pp. 130-31Google Scholar.

7 Fischer, Louis, Oil Imperialism (New York, 1926), p. 38 Google Scholar.

8 Saxon Mills, J., The Genoa Conference (New York, 1922), pp. 182-83Google Scholar; see also, Leo Pasvolsky, and Moulton, Harold G., Russian Debts and Russian Reconstruction (New York, 1924), pp. 209-20.Google Scholar

9 de la Tramerye, Pierre L'Espagnol, The World Struggle for Oil (London, 1923; New York, 1924), pp. 144-46Google Scholar.

10 New York Times, May 12, 1922.

11 Annex I to the minutes of the third meeting of the first Non-Russian Sub-Commission (Private Property), with the Russian Commission.

For complete maps of proposed concession areas, see Karty Koncessionnykh Ob'ektov SSSR (Moscow, 1926).

12 Groupement International des Sociétés Naphtières en Russie.

13 Davenport, and Cooke, , op. cit., p. 136.Google Scholar

14 The subsidiary involved was the Asiatic Petroleum Company, which had purchased 70,000 tons of oil with an option for a further 130,000 tons. Petroleum Times, May 26, 1923.

15 A law suit was fought over the cancellation in 1925, with former Secretary of State Robert Lansing as Sinclair's attorney, but the Moscow court upheld the Soviet Government's action. Mautner, Wilhelm, Der Kampf um und gegen das Russische Erdoel (Vienna-Leipzig, 1929), pp. 98–101 Google Scholar.

16 Denny, Ludwell, We Fight for Oil (New York, 1928), pp. 171–72Google Scholar.

17 Negotiations for Soviet concessions continued even after 1924; see Hoffman, Karl, Oelpolitik und Angelsaechsischer Imperialisms (Berlin, 1927), pp. 292–301 Google Scholar.

18 Saruchanoff, N., “Kurzer Umriss der Nachkriegsentwicklung der Russischen Erdoelindustrie,” Petroleum-Zekschrift, No. 33, August 19, 1936 Google Scholar.

19 Petroleum Times, April 27, 1929, p. 729.

20 , W. P. and Coates, Zelda K., A History of Anglo-Soviet Relations (London, 1943), p.234 Google Scholar.

21 Fischer, , op. cit., p. 35.Google Scholar

22 Roberts, Glyn, The Most Powerful Man in the World; the Life of Sir Henry Deterding (New York, 1938), pp. 255-57.Google Scholar

23 Mautner, , op. cit., p. 129.Google Scholar Impressive evidence in this connection is cited by Delaisi, M. Francis, “Oil and the Arcos Raid,” Foreign Affairs (London), October-November, 1927 Google Scholar.

24 Standard hoped to obtain a sales monopoly of Soviet petroleum on the world markets. Mautner, , op. cit., p. 93.Google Scholar

25 Petroleum Times, October 6, 1927, p. 662.

26 Deterding's threat was unequivocable: “The Standard Oil Company apparently wants … distribution of stolen property in such a way as to destroy legitimate trade. My intention is to fight the matter to the bitter end, if necessary, over the whole world, as we wish the public to know who caused this dishonest upset of the petroleum industry.” Official statement by Deterding, August 5, 1927, quoted in Amtorg Trading Corporation Soviet Oil Industry, a compilation of statements regarding purchases of Soviet oil by the, Standard Oil Company of New York and the Vacuum Oil Company (New York, 1928).

27 Revue Petrolifère, December 8, 1928, p. 1764.

28 The Standard Oil Company of New York estimated in January, 1928, that, if the price war continued, an annual loss of almost $13,000,000 would be incurred by Shell and $4,000,000 by Socony. Statement of the Standard Oil Company of New York, January 16, 1928, reprinted in Amtorg Trading Corporation, op. cit., p. 20.Google Scholar

29 Called the Achnacarry or “As Is” Agreement, it stipulated that the status quo of all United States exporting companies be maintained. See United States Congress, Senate Committee on Patents, Hearings, Part 7, pp. 3660, 3678, 3679. (1942).

Cf. Jung, Erich, Das Problem der Stabilisierung des Welt-Erdoelmarktes (Cologne, 1930), pp. 54–55 Google Scholar; Hexner, Ervin, International Cartels (Chapel Hill, N. C , 1946), pp. 256-62Google Scholar.

30 Losses were reflected in the oil companies' abnormally low dividends for 1928. New York Times, October 3, 1928.

31 Deterding, nevertheless, claimed that the compensation question was settled to his satisfaction, namely, that the agreement provided for a 5 percent rebate on R.O.P.'s deliveries to British oil companies, the difference to be paid into an indemnity fund for former owners. The Russians, he insisted, were fully aware of this arrangement. (New York Times, March 26, 1929.) Soviet officials, however, denied any such arrangement and maintained that the usual price of sale for long-term contracts had been charged, with allowance for the customary commercial rebate; that if Deterding desired to transfer part of his own profit to third parties, it was purely his own concern. State Bank of the USSR, Economic Survey, Vol. IV, No. 13, April 7, 1929.

32 Economist, March 9, 1929, p. 511.

33 The shift is clearly illustrated by the following figures showing Soviet oil exports in relation to world oil exports in this period (exports in thousand metric tons):

Source: Bronshtein, V. B. and Rosenblum, V. E., Neftjannaja epopeja (Moscow, 1935), pp. 252-60Google Scholar.

34 Kessler, I. B. August, “The Oil Industry in the World Crisis,” International Cartels (Journal of the Bureau of International Cartels), No. I (1939), p. 2 Google Scholar.

35 One tanker load of Soviet gasoline even strayed into Baltimore Harbor. Business Week, December 17, 1930.

36 The charge that the Russians used their oil sales to further political objectives is not borne out by the facts. A detailed study of Soviet oil marketing policies in the interwar period, undertaken by this writer, indicates that oil products were sold to any purchaser, regardless of political complexion, including the most outspoken enemies of the Soviet system, such as Fascist Italy and Nazi Germany. Considering the great pressure under which Soviet exports had to be built up and the powerful opposition and competition encountered in the market, it is reasonable to assume that the Russians simply could not afford the luxury of playing politics with their trade at that time.

37 World Petroleum, March, 1932.

38 Petroleum-Zeitschrift, No. 15, 1932.

39 Sowjetwirtschaft und Aussenhandel, No. 13 (July, 1934), p. 3.

40 Including the chairman of the Soviet oil monopoly, the head of R.O.P., Ltd., and a member of the Narkomvneštorg, the Soviet Commissariat of Foreign Trade. New York Times, May 3, 1932.

41 Rotterdamsche Bankvereeniging, Monthly Review, No. 6 (June, 1932), pp. 149–53-Cf. New York Times, May 17, 1932.

42 New York Times, June 9, 1932.

43 In gasoline alone, from 1929 to 1936 there was a threefold increase in production, but a twenty-six-fold increase in consumption. Revue Petrolifère, No. 758 (November 5, 1937), pp. 1546-48.

44 Rosenholz, A. P., Foreign Trade and Economic Independence (Moscow, 1935), p. 3 Google Scholar.