People love an anniversary. It could be a wedding anniversary. A birthday — 21st, 30th, 50th, etc. It could be the end of a war.
Heck, the whole of England basically came to a halt this week, just to celebrate the Queen’s 90th birthday.
But yesterday was another important anniversary. One that many didn’t see. In fact, I bet it’s one many don’t even know about.
Yesterday was the 100th anniversary of one of the world’s most significant and secretive events. An event that kicked off a century of turmoil, greed and war.
This event starts with the British and French. Yet it ends in the struggle to dominate oil assets around the world by every global superpower.
This is a bit of a history lesson. But it’s an important one. One that helps put today’s battle for oil in perspective. It also helps us understand century long political manoeuvring to control oil, to control war, to control the world.
It’s all too much to get through in just one Money Morning so this is part one. Stay tuned for part two this Saturday.
Sykes and Picot
On 16 May, 1916 the British and the French, with assent of Russia, signed a secret agreement.
This agreement was to determine how to divide the Ottoman Empire. It would establish ‘spheres of influence’ for the British and French. It was a play for a region rich in oil. Something the British had come into high demand for.
This secret agreement was conditional on the Triple Entente (Britain, France & Russia) defeating the Central Powers (Germany, Austria, Italy & Ottoman Empire) in the First World War. We know how that ended…
Sir Mark Sykes and Francois Georges Picot put together this secret agreement. The original text of the agreement states,
‘That in the blue area France, and in the red area Great Britain, shall be allowed to establish such direct or indirect administration or control as they desire and as they may think fit to arrange with the Arab state or confederation of Arab states.’
‘The British and French government, as the protectors of the Arab state, shall agree that they will not themselves acquire and will not consent to a third power acquiring territorial possessions in the Arabian peninsula, nor consent to a third power installing a naval base either on the east coast, or on the islands, of the red sea. This, however, shall not prevent such adjustment of the Aden frontier as may be necessary in consequence of recent Turkish aggression.’
‘It is agreed that measures to control the importation of arms into the Arab territories will be considered by the two governments.’
It concludes with note that Russia should give it the thumbs up. And the Japanese, ‘should be informed of the arrangements now concluded.’
Source: Wikipedia Commons
This document became the foundation of French and British claims in the Arab world. As you can imagine, for a century this has been the subject of significant Arab complaint.
The agreement was never going to stand the test of time though. France and Britain agreeing to share the Arab world? Yeah right. The French however weren’t keen on voiding the agreement. They were determined to claims on Syria.
Britain decided that Palestine, Mosul and Iraq were more important strategically. So they ‘gave’ the French their claim to Syria and Lebanon.
Of particular interest to the British though was oil rich region of Mesopotamia (Iraq). But why would the British be so keen on oil so far away from domestic shores? Remember, at the time private car ownership was uncommon, and the world’s industry still ran on coal.
Make them bigger, stronger and faster
Winston Churchill was an astute naval strategist. As First Lord of the Admiralty he helped beef up the British Navy.
Bigger guns and better armour were first. But then they needed faster ships. To achieve this they needed a new energy. The navy was reliant on coal. But this simply didn’t burn hard enough to power the upgraded fleet. They needed more powerful engines to power the fleet than domestic coal.
Speaking about the difficulty of switching the nation’s most valuable war assets to oil, he said,
‘The oil supplies of the world were in the hands of vast oil trusts under foreign control. To commit the navy irrevocably to oil was indeed to take arms against a sea of troubles . . . If we overcame the difficulties and surmounted the risks, we should be able to raise the whole power and efficiency of the navy to a definitely higher level; better ships, better crews, higher economies, more intense forms of war power—in a word, mastery itself was the prize of the venture.’
And by 1914 the British held a 51% controlling stake in the Anglo-Persian Oil Company. This company was the first company to extract petroleum from Iran — you might now know this company by it’s modern name, British Petroleum; BP [LON:BP].
When the chance came after the First World War to get access to more oil, the British jumped at it. Enter Sykes & Picot.
By 1919 Churchill was War Secretary. The goal was always strategic naval strength. And as an island nation, protection of the seas was critical. To secure the strength of the navy the British needed to secure the energy to power it.
The Sykes-Picot agreement led to the San Remo conference in 1920. Here the British and French agreed to establish Mandatory Palestine (under British administration) and the French Mandate for Syria and the Lebanon.
But in secret they set up ‘The San Remo Oil Agreement’. This gave the British permanent control over any entity exploiting oil in Mesopotamia (Iraq). In particular, full control of the Turkish Petroleum Company. The TPC had close to a monopoly on oil exploration in Iraq.
As Germany originally had interest in TPC, France demanded their share. The French would get 25%, and favourable oil transport terms.
Meanwhile, the US was not particularly happy about being excluded.
In effect this gave the British control of some of the most oil rich regions in the world. And a pathway from Iraq to the Mediterranean. It also gave them a pathway to the Persian Gulf and on to British-controlled India.
It comes as no surprise that the most formidable naval fleet in the world was now the British Royal Navy. And they had managed to secure the most valuable resource for war, oil. They also had free reign through the Med and the Persian Gulf.
In part two you’ll see how British/French relations soured. How this let Germany become a major power again. How an annoyed US decided they wanted in on this oil game. And how the US took the British model for oil control, and improved it.