Chapter X: Russia, Galicia, and Roumania

Passing next to Russia, there is no doubt that in the past this was a far more dangerous competitor of the Standard than it now is. The Baku output was at first so tremendous that it seriously disarranged the Standard’s calculations, and when first Russian shipowners and afterwards Sir Marcus Samuel proposed in 1891 to ship Russian oil in bulk in tank steamers to the Far East, a perfect panic seized the Standard. Immediately one of those bogus agitations, in which it excels, broke out with great virulence. Not only was the shipping community thrilled by the supposed dangers to other vessels of conveying oil in bulk through the Suez Canal, but the British nation was once more warned of the dark and malevolent designs of Russia against “our highway to India.” Nothing could be more amusing than this waving of the Union Jack over the designs of the Standard Oil Trust, but we shall see the same “patriotic” imposture reappear in the flash-point agitation a few years later. The Standard was at this time supplying its Far Eastern markets with “case-oil,” packed in tin cans, which was, of course, a more expensive method of transit than the large tanks of the bulk-oil steamers, and the agitation against the new scheme was carried to the Foreign Office. The story is told (without unduly emphasising the Standard’s share in it) in Mr. J. D. Henry’s well-known work, “Thirty-five Years of Oil Transport” (Chaps V. and VI.). Messrs. Russell and Arnholz, solicitors, wrote to the Foreign Office, urging the Government to use their influence through the British directors of the Suez Canal Company to prevent the transit of bulk oil. Lord Salisbury asked them for whom they were acting, and received this very significant reply:--

In view of the opposing commercial interests engaged, and the fact
that the true promoters of bulk transit have not yet declared
themselves, we respectfully submit that without pleading the
privilege of our profession it would be imprudent on our part to
permit our clients to disclose their names.

In the reply which the British directors of the Suez Canal Company forwarded to Lord Salisbury, this coyness on the part of the Standard was thus commented on:--

They decline to give your lordship any clue for the present as to
the names of their clients, but an expression in their letter of
November 10th, which describes the passage of petroleum in bulk
as a disturbance of the regular and safe case trade, leads to the
inference that they are pleading the cause of parties engaged in
sending petroleum through the canal packed in cases, and whose
interests they appear to think may be damaged by facilities being
given for the more economical conveyance of petroleum by these tank
ships.

The Foreign Office then informed Messrs. Russell and Arnholz that Her Majesty’s Government could not take action in the direction they desired without full information as to what British interest they represented in the matter. As the Foreign Office thus declined to become a Rockefeller catspaw, somebody organised a memorial by merchants and tinplate manufacturers in Wales, where the Standard still buys most of the material for its cans, and another by shipowners who at that time were being chartered to carry case-oil to the East for the Standard. Finally, Sir Frederick Abel and Mr. (now Sir) Boverton Redwood prepared a report for those British shipowners who were hostile to the bulk carriage of oil through the Canal. Sir Frederick Abel was a chemist who constantly gave evidence on behalf of the Standard Oil Trust when it needed an expert, and Mr. Boverton Redwood had been from 1870 till just before this period (1889) the salaried chemist of the Petroleum Association, a trade body whose members vended the Rockefeller oils. Mr. Redwood was subsequently for a considerable period regularly employed to test oil cargoes on behalf of the Anglo-American Oil Company, and he gave evidence against raising the flash-point of lamp oil before the Petroleum Committee of 1896. His presence on the scene is sufficient to satisfy anybody in the oil trade as to what was the real origin of this benevolent agitation against tank steamers. While this gentleman was still in Egypt Sir Marcus Samuel artfully published in the _Times_ an extract from a paper Mr. Redwood read to the Institution of Civil Engineers, in which he said:--

The tank storage of kerosene oil has undoubtedly a great advantage
over barrel or case storage in the event of fire.

Mr. Redwood was thus rather neatly cornered, for he had to admit in his report that this statement was still true. So he had to lay the chief stress on the danger of burning oil escaping on to the water--which the experience of nearly twenty years has proved to be a very trifling risk. The directors of the Suez Canal Company took a very accurate measure of this report when they replied:--

Without entering into the question whether the work of Sir F. Abel
and Mr. Boverton Redwood is not merely a criticism of our regulations
_bearing too exclusively the impression of the anxiety of parties
interested in the present mode of transporting petroleum to the
East_, we, &c.

After this the agitation fizzled out, and the transport of oil in bulk still continues. The subject was referred to at the Institution of Civil Engineers in February, 1894, when Mr. (now Sir) Fortescue Flannery invited Mr. Boverton Redwood to state how his prophecies on the carriage of bulk oil through the Canal had been fulfilled. Mr. Redwood replied thus (_Proceedings Inst. C.E._, vol. cxvi. p. 250):--

He could only say that if, _as appeared to be the case_, the
transport of petroleum through the canal had been going on with
entire absence of anything approaching to an accident, he was very
glad to hear it. He did not know, however, that that was to be taken
as absolute proof that no risk existed. Time alone, and a longer time
than had as yet elapsed, would demonstrate that.

Nearly twenty years have now elapsed; the Standard Oil Trust itself has tank steamers which convey oil through the Canal, and Mr. Henry in his work shows that between 1892 and 1906 2,000,000 tons of oil were thus transported.

* * * * *

With the collapse of its artfully engineered agitation on this subject the Standard next turned its energies to diplomacy. It devoted great arts to Ludwig and Manuel Nobel, the millionaires who had grown rich out of the “gushers” of Baku, and cherished dreams of becoming the Rockefellers of Russia. The Standard’s emissaries played on their vanity and induced the Nobels to form the Russian Refiners’ Union, which 80 per cent. of the trade had entered in 1894. The idea was that the Russian export output should be limited to an amount agreed with the Standard, and that Nobel Brothers were to be the sole agents in Europe. Each refiner was to send out a certain quantity of oil according to the capacity of his refinery. At the same time there were certain distributing firms in Europe which had been dealing chiefly in Russian oils, and as Nobel Brothers did not require them, the good, kind Standard agreed to buy them up. It is in this way that the Italian Petroleum Company, the Bremen-American Company, and Reith & Co. of Antwerp (all mentioned in my list of foreign marketing companies) came under the control of the Standard. At the same time they acquired the Kerosene Company, which had a great storage installation close to the Anglo-American plant at Purfleet. The Trust continued to run these businesses in their old names, and it was some time before the truth began to leak out. Production in Baku was at that time so tremendous that before the three years during which the union was to last had expired, the Russian refiners were quite tired of it. Then the pleasing result was realised that, with the exception of Nobels, none of them had any selling organisation in Europe, and that the Standard had so perfected its control of the kerosene trade that people who wanted Russian oil could only get American. The first firm to take action were the Paris Rothschilds, who are the owners of the Caspian and Black Sea Company at Baku, and next to the Nobels the largest refiners in Russia. They established in 1898 in this country at vast expense a new selling organisation called the Anglo-Caucasian Oil Company, afterwards merged in the Consolidated Petroleum Company, and a vigorous contest took place for their share of the English kerosene trade.

The Russian oil trade has always been a commercial switchback. At the time just mentioned the Rothschilds and Nobels were exporting largely to Europe, and the Mantascheffs were sending large quantities of Russian oil to the Far East. Then came the Baku riots of 1905, when murder and incendiarism stalked through the oil-fields and the production fell off tremendously. It was a stroke of luck for the Standard, for it crippled their (at that time) strongest rival. Since that day the exports of petroleum from Baku have not been large, most of the reduced output being consumed in Russia, where oil fuel is used far more extensively than it is here. Then early last year came the Maikop “boom,” a vast number of French and English companies being floated to work oil on the borders of the Black Sea. The majority of them will never produce a barrel of oil, but the good properties will soon be pumping oil, and their product is bound to have its effect on the European market. Hence no doubt the Standard’s second reason for embarking on the recent oil war--the desire to stifle these infant companies at their birth, when they are still subject to the diseases of inexperience, experimental work, and bad management.

Passing next to Austria, we find the Standard operating in the Galician oil-field, the production of which has risen from 214,800 tons in 1895 to 1,734,235 tons in 1908. The story is told in the Foreign Office Report on Austria-Hungary for 1908 (No. 4,355 Consular Reports). There was an enormous production in 1908, but the State railways could not use the raw oil in its locomotives until the benzine was extracted. This is our Consul’s narrative (p. 15):--

The Producers’ Association, however, had not the capital to build the
necessary works for this process or the new reservoirs required, and
at this stage the Standard Oil Company of America saw an opportunity
to extend its influence in Austria. The American company entered into
negotiations with the association and offered to erect the factory
for extracting the benzine, and further to build the new reservoirs
and lease them to the producers, who would, in return, have to supply
raw oil to the Standard Oil Company’s representatives in Austria at
a special price. An arrangement on these lines, which would have
given the American Combine a predominating influence in the Austrian
oil industry, was on the point of being signed when the Austrian
Government intervened in June, 1909, to prevent it by undertaking to
carry out the necessary works itself on much easier terms for the
producers....

By this arrangement the Standard Oil Company has been entirely
excluded from the business of supplying the State railways with
oil; but the Austrian Government has gone further in its desire
to protect the Austrian oil industry from the competition of the
American Trust, which is represented here by an affiliated company
[_i.e._, the Vacuum Oil Company, of Austria, a branch of the Vacuum
Oil Company, of Rochester, N.Y.], and has introduced a Bill in
the Reichsrat containing various provisions aimed directly at the
Standard Oil Company. Thus a concession will in future be necessary
for carrying on the business of storing, handling, and refining
raw oil, and the provincial authorities are able to refuse this at
their discretion. Further, the distribution of petroleum by means
of tank carts is only to be allowed by permission of the Ministry of
Commerce. The tank carts were recently introduced into Austria by the
representatives of the American Trust, but met with great opposition
on the part of the trade because they rendered the middleman
superfluous, and there is little doubt that the Ministry will not
give the permission required.

The _Times_ Vienna correspondent on September 14, 1910, reported further developments of this war against the Standard. It appears that there is also operating in Galicia a certain Limanova Petroleum Company, which, though registered as an Austrian company, has about £500,000 of French capital invested in it. It has been working “in some sort of unconfessed relationship with the Vacuum Oil Company,” and the _Times_ correspondent tells us how the Rockefellers have been forced to swallow their favourite medicine. He writes:--

The object of the Standard Oil and its affiliated companies in
Austria (as in other countries) is to obtain control of the Galician
oil-fields, which are worked chiefly by a large number of Austrian
producers and refiners organised in a loose ring or trust. The
tactics of selling oil at or below cost price currently employed by
the Standard Oil Company to kill its competitors or to bring them to
their knees appear to have been employed both by the Vacuum and the
Limanova Companies.

Some months ago the Austrian Government intervened to protect the
Austrian producers and refiners, and applied to the Limanova Company
in particular methods of administrative chicanery and railway
discrimination strikingly similar to those which made the name of the
Standard Oil Company a byword in the United States. The tactics of
the Austrian authorities are as indefensible, or as defensible, as
are those of the Standard Oil Company.

The Standard did not enjoy railroad discriminations applied to itself, and it not only made unavailing representations to the Austrian Government through the United States Minister at Vienna, but, acting through the French shareholders in the Limanova Company, they induced the French Minister to remonstrate with Austria.

These representations having produced little effect, the French
Government is now stated to be about to adopt measures of
retaliation, and to impose a prohibitive tariff upon Austrian
petroleum imported into France.

In order to help the Standard Oil Trust to crush out the Galician oil industry, the French consumer was to pay more for the petroleum products, ozokerit, &c., that he buys from Austria. But this scheme has failed, for on November 9, 1910, it was announced in the _Neue Freie Press_ (quoted here by the _Financial Times_) that the Limanova Company had surrendered. It has agreed to give up all business transactions with the Vacuum Company, not to sell directly or indirectly to them either crude oil or the products of petroleum, and not to make use of the selling agency of the Vacuum Oil Company for the sale of its own products. It has further agreed not to undersell the other Galician refiners, and the Austrian Government has therefore cancelled the discriminations referred to which it employed against the Limanova Company. Deserted thus by its French ally, the Vacuum Company has to rely on itself, and it is announced that the United States Government has sent a special envoy to Vienna to discuss with the American Ambassador, among other things, the differences between the Austrian Government and the Vacuum Oil Company. It looks as though the Austrian Government is going to win in its struggle with this unscrupulous monopoly, and that the Vacuum Oil Company will have to climb down.

In the neighbouring country of Roumania the Standard has waged a bitter war for the control of the oil industry. The output of oil in Roumania has been increasing very largely--it trebled in quantity between 1895 and 1900 and as it has a high flash-point the Standard wanted to get control of the field in order to supply its Italian and Mediterranean market. When its agents appeared first on the scene, Roumania had one large refining company--the Steana Romana--which dealt with about two-thirds of the native crude oil. The wells were all, or nearly all, in the hands of small proprietors who were unable to sink them deep enough, and whose ability to market their oil was hampered by the high railway rates and deficiency of tank cars. The Standard came forward with a proposal to build a pipe line from the fields to its proposed refinery, but fortunately for Roumania its statesmen had heard of the Standard’s American record, and they refused to allow it to thus obtain entire control of the national output. It was allowed to build a refinery, and it bought certain oil-wells from the owners, but the pipe-line project was decisively ruled out. Strange conversions went on at Bucharest when the Standard’s lobbyists put in their fine work. Politicians and newspapers which had opposed the Standard were converted from the error of their ways in the manner with which Mr. Archbold has made us familiar, but the Standard was unable to secure any special privileges. By this time the Deutsche Bank, which controls the Steana Romana, had taken an active interest in the matter, and formed some sort of alliance through the European Petroleum Union with the Shell-Royal-Dutch combine, and the Rothschilds, the Mantascheffs, and Gukasoffs of Baku. The terms of this alliance are unknown, but very keen rivalry has been going on in the Roumanian oil-field, and only last year the Shell-Royal-Dutch party purchased a large Roumanian oil company, the Astra, which is now valued at £1,200,000. In the spring of 1907 the Standard came to a “selling arrangement” with the European Petroleum Union, and this was followed by a similar arrangement with the Asiatic Petroleum Company, whose capital is equally held by the Shell Company, the Royal Dutch, and the Paris Rothschilds. Just how far the European Petroleum Union is involved in the “rate-war” which has broken out between its twin the Asiatic and the Standard is unknown, but as the Deutsche Bank is largely interested in Galician oil-fields where such a bitter fight has been going on with the Standard for some months, it is probable that the whole combination must ultimately be involved if the “oil war” lasts much longer. Sir M. Samuel has stated that the Bataafsche Petroleum Maatschappij and the Anglo-Saxon Petroleum Company, Ltd., distributed in dividends in 1909 £1,500,000, and that the profits for 1910 will not be lower, so that apparently that contest has not seriously affected the Shell-Royal-Dutch combine.

THE TRUST IN GERMANY, SWEDEN, AND FRANCE

“We are always short of men to do the things we want to do--young men
who are honest and therefore loyal, men to whom work is a pleasure;
above all, men who have no price but our price. To such men we can
afford to give the only things they have not got--power and money.”

H. H. ROGERS _to T. W. Lawson in_ “_Frenzied Finance_.”