Ghosts of Empire

by Kwasi Kwarteng

  The monarchy that the British so obligingly gave to the Iraqi people would, in the long run, produce as many problems as it supplied solutions. Faisal, the new king, was a thirty-eight-year-old Sunni from the Hejaz, on the Red Sea, to the west of the modern kingdom of Saudi Arabia, and he had spent his earliest years among the Bedouin tribesmen. As a member of the Hashemite family, he was descended from the Prophet Mohammed in the thirty-eighth generation, and his father, Hussein bin Ali, was the Sharif of Mecca, the keeper of the holy city. The Hashemites had been subordinate in status to the Ottoman Sultan, who presided over the extensive Ottoman Empire from the Topkapı Palace in Constantinople. Faisal, as was the custom for the sons of important dignitaries in the Ottoman Empire, had spent time in Constantinople. He had been educated to play his part as a high official in the empire, not to become a leader of an Arab nation. He had been befriended during the First World War by T. E. Lawrence, to whom he seemed an obvious candidate to be king of Iraq. The British felt that a king would be a convenient stabilizing figure in the country’s unsettled political situation. The precise ethnic origins of the monarch were regarded as a minor consideration. Gertrude Bell, in a letter to her father at the end of January 1921, had wondered whether a Turk might not be a better bulwark against the Shias than a ‘son of the Sharif’; the Sunnis of Baghdad were worried that they would be swamped by the Shias, and the Ottoman Turks had shown themselves historically to be fierce antagonists of the Shias. 47

  The Cairo conference had set Faisal on the way to becoming king of Iraq. A plebiscite was arranged in which he got 96 per cent of the vote, enough to give a veneer of popular legitimacy to the new dynasty. T. E. Lawrence and Gertrude Bell were proud of their handiwork. Bell wrote to her father on 28 August 1921, in a gushing manner, telling him about the ‘terrific week’ she had just enjoyed. ‘We’ve got our King crowned.’ Faisal’s coronation had taken place the week before; at six in the morning of the 2 1 st he had stood in a military uniform and been formally crowned and proclaimed king.48

  A political solution of a kind had been found, in which Iraq would be a constitutional monarchy, with a constituent assembly, under the aegis of the British Empire. It was a Sunni monarchy in a country most of whose people were Shia. In October 1922, a treaty between Britain and Iraq was signed which proved to be the ‘backbone of Britain’s indirect rule’. Mindful of the costs of imperial rule, the British government insisted that the Iraqis paid for the costs of the British Residency, where the High Commissioner would live, and other general costs of administration. Over all these arrangements hung the ‘smell of oil’.49 If the political problem of control had now been partially solved, how would the oil itself be obtained? What structure would now be required to serve the British Empire’s interest in this important matter?

  Gertrude Bell had never bothered about oil. By 1926, she was tired and on Sunday 11 July, after the usual afternoon swimming party, she returned home, worn out by the dust and heat. She went to bed, asking to be woken at 6 a.m. During the night, she took an overdose of pills, from which she died. The circumstances of her death remain obscure. What is known is that she had sent a note to Ken Cornwallis, a British adviser to the King of Iraq, the day before, asking him to look after her dog Tundra, ‘if anything happened to her’. Her death certificate, signed off by Dr Dunlop of the Royal Hospital in Baghdad, stated that she had died from an overdose.50 Her death was widely mourned, as she had been a celebrated figure within the British establishment. She had believed in her personal mission. ‘Seven years I’ve been at this job of setting up an Arab state. If we fail, it’s little consolation to me personally that other generations may succeed,’ she told her father in January 1923.51 More than a year after her death, T. E. Lawrence expressed his sense of loss to Gertrude’s father. He had never, he wrote, met ‘anyone more entirely civilized, in the sense of her width of intellectual sympathy . . . her loss must be nearly unbearable’.52 Others, less sentimentally, began to wonder about the oil.

  2

  Rivals

  Even before the First World War, many politicians and administrators had realized how important oil would be to the maintenance of the British Empire. At the same time, Arab nationalism was acknowledged to be a potent factor in Iraqi affairs. Trying to create a regime that would allow relatively unhindered access to the oil of Iraq was a delicate operation. By early 1922, a political settlement had been reached, in which a broadly pro-British ruler, foreign to Iraq, had been installed. It was now time to reach a commercial settlement in which Iraq’s oil wealth could be efficiently exploited.

  Conveniently enough, there already existed a company, the Turkish Petroleum Company, or TPC, which had been formed in 1912 precisely to exploit the oil found in the old Ottoman Empire. The company had been interested in Iraq more as an investment, a medium-term bet rather than a ‘get rich quick’ scheme. The TPC’s initial capital had been £80,000, which made it a relatively small concern even in those days. In the eighteen years from 1910 to 1928 Iraq could ‘scarcely be called an oil producer’. In 1929 the annual production figure was still only 800,000 barrels. Iran, Iraq’s Shia neighbour, produced 42.1 million barrels of oil in the same year, more than fifty times as much.1 It was, in fact, only in 1927 that oil was struck. This did not deter the great powers, least of all Britain. A note prepared by the Middle East Department of the Colonial Office on 11 December 1922 was quite clear about the importance of Iraq’s oil. The oilfields of Iraq were rich with potential and they had not ‘even been properly prospected’. The report confidently stated that there was ‘no doubt that there are considerable deposits of oil’, particularly in Mosul, in the north of the country.2

  The successful conclusion of the war had strengthened British political interests in the Middle East and, by diminishing the power of the Turks and the Germans, it had also provided a powerful boost to British enterprise. ‘Furthermore, the treaty of October 10, 1922 between Great Britain and the Kingdom of Irak’ had conferred ‘sufficiently wide “advisory” powers upon the British High Commissioner at Baghdad’ to protect the ‘economic rights’ of British nationals in the country. More particularly, in relation to the Turkish Petroleum Company, the German defeat had strengthened Britain’s hand. Deutsche Bank, Germany’s greatest financial enterprise, had been an initial investor in the TPC when it was formed back in 19 12. Because Germany had lost the war, however, the Deutsche Bank shares in the TPC–amounting to 25 per cent of the company–were simply expropriated in December 1918. The British were already well represented in the company: Anglo-Persian, which would many years later be called Anglo-Iranian and then British Petroleum, or BP, owned 50 per cent. Consequently, when combined with the Deutsche Bank shares, the British stake in the company was three-quarters of the shares. The Anglo-Persian Company itself was majority-owned (51 per cent) by the British government, thanks to a deal brokered in 1914. This deal had been considered ‘radical’ for the times, since no British government had ever acquired shares in any private enterprise in this way.3

  This shareholding was not only useful in itself. It provided a bargaining chip with which Britain could keep its wartime allies, who were now potential commercial rivals, happy–the prospect of acquiring shares in the much prized company was an alluring prospect during any diplomatic negotiations. In the aftermath of the war the Sykes–Picot Agreement had been buried and Mosul reverted to British control. In compensation, the San Remo Agreement of April 1920 granted the former German stake of 25 per cent to the French, and the British share was reduced to around a half.4

  Eliminating the Germans, who had been the principal capitalists and investors in the country before the First World War, from the scramble for Iraqi oil wealth was fortunate for the British. The famous Berlin–Baghdad railway had been a German enterprise, financed by German capital and built largely by German engineers. The Baghdad Railway Company had begun, even before 1914, using local crude oil to fuel its locomotives.5 As early as 1904 the Germans had prevailed on the Ottom
an Sultan in Constantinople, Abdul Hamid, to grant them a railway concession, which gave them the right to survey for oil in Mosul and Baghdad.6 The Turks had been less obliging on the issue of oil rights. Although they had allowed the German railway company to prospect for oil, they refused to recognize the claim of the actual oil company, the TPC. After intensive lobbying, the oil concession in the provinces of Mosul and Baghdad was finally granted on 27 June 1914, the day before Archduke Ferdinand was assassinated in Sarajevo.7

  By the end of the war in 1918, the position had become confused. Britain had strengthened its position immeasurably. It now controlled most of the oil in the Middle East. Anglo-Persian was dominant in Iran, the TPC controlled Iraqi oil, while oil in the Gulf had not yet been discovered. Britain’s enemies, the German Empire and the Ottoman Empire, had collapsed, allowing Churchill to remark that the end of the war had witnessed a ‘drizzle of empires’ falling through the rain. There were some annoyances. King Fuad of Egypt claimed that he was now de facto heir of the sultans and therefore the rightful owner of any oil found in the old Ottoman Empire. The exiled Turkish royal family also claimed the oil rights. While their claims could be ignored, a more formidable business negotiator emerged in the shape of Calouste Gulbenkian, an Armenian merchant, as he called himself, who had brokered the initial deal in 1912. His tenacity in holding on to his small shareholding in the company would provoke the ire of the colonial powers and make him tremendously rich. Though his initial stake in the Turkish Petroleum Company had been 15 per cent, he managed to keep hold of 5 per cent during the negotiations of the 1920s and hence earned the sobriquet ‘Mr Five Per Cent’.8

  Gulbenkian was one of those supernaturally wily businessmen who seem to emerge perhaps only once or twice in a generation. He had been born in Constantinople in 1869, the son of an Armenian merchant. Even in the 1880s, Gulbenkian’s father had been operating in the oil business and was sufficiently fascinated by it to send his son to King’s College London to study engineering. Calouste graduated with a first-class degree in 1888. In 1952 he even received an honorary fellowship from King’s College, and he was by then the oldest surviving graduate of the Civil Engineering school, as well as being one of the richest men in the world. This was the only honour he ever accepted.

  Gulbenkian was not only wary of honours; he didn’t like people much either. His biographer recounts how, because he hated social gatherings, he avoided ‘big dinners and receptions unless he thought he might be able to buttonhole somebody useful or pick up an interesting acquaintance’. The time came when he felt he had the best people in the world working for him and did not need to go in search of fresh contacts. He then simply stopped going to parties. Like many interesting characters, Gulbenkian was a mass of contradictions. He insisted on the finest French cooking and wines at home and in restaurants and yet he ate and drank only sparingly. Though he loathed people in general, he was an inveterate womanizer. He was devoted to the Armenian Orthodox Church, but didn’t like his own family. A lover of the sea, he never owned a yacht, even when a multi-millionaire. His one guiding principle was his love of work. From the comfort of his armchair, he constantly read reports from associates and subordinates stationed all around the world. His wife, Nevarte, was a socialite and, from 1900 to 1925, her mansion at 38 Hyde Park Gardens became a centre of London social life. Mr Five Per Cent was more interested in pursuing young women. His own son, Nubar, a polished product of Harrow School and Trinity College, Cambridge, recalled that ‘on medical advice’ his father would keep ‘one mistress, of no more than seventeen or eighteen, whom he changed every year until he was eighty’.9 Calouste was, unsurprisingly, a ‘control freak’. Even the sex lives of his children were under his direction. Nubar described how ‘father . . . decided it was time my sexual life should start. He arranged for me to call one afternoon on our family doctor.’ The doctor introduced Nubar to a ‘very respectable-looking young woman of about twenty or so’. They were then taken by taxi to a hotel which Nubar described coyly as a ‘maison de rendezvous’.10

  Gulbenkian’s role in the development of oil in Iraq was decisive. He managed to act as a broker who could conciliate the various national interests –British, French and later American–that were represented in the Turkish Petroleum Company. In his canny way, he was also deeply aware of the position of the Iraqi government and people. The Gulbenkians kept their stake right to the end, even when, as Nubar remarked in 1965, ‘the governments and people of the Middle East must eventually have an increasingly larger share of their own wealth’ and when the days of the capitalist entrepreneurs were coming, ‘no less inevitably, to their end’.11

  This later view that the governments of the Middle East should be allowed to enjoy some of the wealth in their own countries was not widespread in the early 1920s. The British had secured Iraqi oil, or the rights to it, because they did not want to be dependent on the United States of America. The San Remo Agreement, as we have seen, gave Anglo-Persian roughly a half-share in the TPC (the actual size was 47.5 per cent); France had 25 per cent, an Anglo-Dutch company, Royal Dutch Shell, had 22.5 per cent, and Calouste Gulbenkian had his 5 per cent, which had been assembled out of the holdings of Anglo-Persian and Royal Dutch Shell. This looked like a reasonable settlement to all concerned.

  Unfortunately, the initial San Remo Agreement was met with a howl of protest from the Americans. The Italians were also indignant, as they were anxious to turn the Anglo-French oil accord into a tripartite agreement, giving them a fair share.12 Though the Italians were less successful, the Americans were able to force their way into the deal. A contemporary oil analyst put the matter very bluntly by saying that the only question about Iraqi and Iranian oil that remained to be resolved was ‘whether America will be excluded from the division of the spoils’. From the point of view of the Americans, discoveries of large quantities of oil in the Middle East threatened their dominance in the industry, which for ‘more than half a century had been pre-eminently an American industry’. France, Britain and Germany had produced nothing, but had consumed a great deal. They were merely ‘passive spectators’.13 San Remo had come as a ‘bombshell’ to the Americans because they had been effectively barred from participating in Iraq.14

  The difficulty for the Americans was that, in the immediate aftermath of the war, they had posed as the champions of colonial peoples against imperial aggression. Woodrow Wilson, the US President, had, immediately after the end of the war, been seen as a saviour in Baghdad. In February 1919, more than a year before the San Remo Agreement was signed, a memorandum from the US Consulate in Baghdad boasted that ‘the name of President Wilson is upon the lips of the people of Bagdad a great deal these days. By Moslems, Christians and Jews it is invariably the President who is mentioned as the representative of a disinterested nation which is seeking to secure the liberties and happiness of the oppressed people of the world.’ The memorandum continued, without any apparent irony, to suggest that the President would secure ‘a reign of justice and righteousness for all’.15

  But the attitude of the Americans rapidly shifted from idealism to hard-nosed pragmatism. Immediately after the war ended in November 1918, the President had denounced ‘the whole disgusting scramble’ for the Middle East.16 After the San Remo Agreement in April 1920, however, President Wilson’s Secretary of State, a Missouri lawyer called Bainbridge Colby, was denouncing the British and French, not because of their imperialist greed, but because they had shut out American interests. Colby, who in an earlier life had been Mark Twain’s attorney, complained bitterly that the Agreement was ‘a monopolistic combination designed to ignore American interests’. He made no mention of the Iraqis. It was simply a case of ‘me too’. Starry-eyed Princeton idealism, as represented by the President, had given way to the powerfully commercial instincts of the American Mid-West, as expressed by the Secretary of State.17

  Other members of Wilson’s dying administration joined in the outcry against France and Britain, the old colonial powers. F
rank Polk, who would give his name to the Wall Street law firm Davis, Polk and Wardwell, was an under-secretary of state. He wrote a report which reached the Senate on 17 May 1920, only three weeks after the hated San Remo Agreement had been signed. In this document, Polk savaged Britain, observing that the ‘policy of the British Empire is reported to be to bring about the exclusion of aliens from the control of the petroleum supplies of the Empire’. The British were grasping and greedy in their ‘endeavor to secure some measure of control over oil properties in foreign countries’. The next month, on 29 June, speaking at a dinner given by the International Chamber of Commerce (a group founded in 1919, whose members called themselves ‘merchants of peace’), the President of the American Petroleum Institute, Thomas O’Donnell, was firm but condescending: ‘Nobody has a higher appreciation than I of the Englishman abroad or at home. He is a good sportsman, always willing to take a chance in exploring for the world’s treasure . . . I am rather surprised that some of my good English friends do not agree with me in advocating that a free opportunity should be given to all people to explore this useful product.’18

  Other Americans were not so jovial. For the President, despite all the idealism he had shown at the Palace of Versailles during the Paris peace conference in 1919, the world had become a bitter place. He was gloomy. He foretold more conflict, but this time in the field of business. ‘It is evident to me’, he wrote at the beginning of 1920, ‘that we are on the eve of a commercial war of the severest sort, and I am afraid that Great Britain will prove capable of as great commercial savagery as Germany has displayed for so many years in her competitive methods.’19