Modern history


The Arabian Concessions: The World That Frank Holmes Made

AMONG THE MILLIONS whose lives were displaced and diverted by the First World War was one Major Frank Holmes. But then, he had learned to be a wanderer long before the war. Born on a farm in New Zealand in 1874, he had first gone off to work in a South African gold mine and then, for the next two decades, specializing in gold and tin, had followed the itinerant life of a mining engineer all around the world—from Australia and Malaya to Mexico, Uruguay, Russia, and Nigeria. Holmes was robust and sturdy in stature, and assertive and headstrong in manner. A competitor once described him as “a man of considerable personal charm, with a bluff, breezy, blustering, buccaneering way about him.” During World War I, he became a quartermaster in the British Army, and it was while on a beef-buying expedition to Addis Ababa, in Ethiopia, in 1918, that he first heard from an Arab trader about oil seepages on the Arabian coast of the Persian Gulf. As a mining engineer, Holmes found his interest piqued. Later, while stationed in Basra, in the area that would become Iraq, he took a further interest in what could be learned about the activities of the Anglo-Persian Oil Company on the Persian side of the border, and in what he was told about indications of petroleum along the Arabian coast.

After the war, Holmes helped set up a company, the Eastern and General Syndicate, to develop business opportunities in the Middle East. In 1920, he established the syndicate’s first venture, a drugstore in Aden. But Holmes’s heart was not in drugstores; it was in what had become his consuming passion and obsession—oil. He was convinced that the Arabian coast would be a fabulous source of petroleum, and he pursued his dream with unswerving stamina. A promoter par excellence, with a gift for making people believe in him, he traveled up and down the Arabian side of the Gulf, from one impoverished ruler to the next, spinning his vision, promising them wealth where they saw only poverty, seeking always to put another concession into his kit.1

Holmes undertook his campaign under the watchful, skeptical, and suspicious eyes of various British officials in the area, who were charged with overseeing the foreign relations of the local potentates and with protecting His Majesty’s interests in the region. They saw Holmes as an unscrupulous troublemaker with a “capacity for mischief,” who was trying, in pursuit of a quick profit, to undermine British influence in the area. To one official, Holmes was nothing more than “a rover in the world of oil.” Perhaps the most damning comment of all came from another, who simply declared that Holmes was not “a particularly satisfactory individual.” But that was not the judgment of the Arabs along the coast. To them, Major Holmes would become something altogether different—“Abu Naft,” the “Father of Oil.”

Leaving behind the drugstore in Aden, Holmes set up headquarters for his oil campaign on the small island of Bahrain, just off the coast of Arabia. He had been attracted to Bahrain by the reports of oil seepages. The Sheikh had no interest in oil but was, however, keenly interested in fresh water, which was in short supply. Holmes drilled for water, struck it, and made a nice profit on it. More important, the grateful ruler, as had been promised, in exchange rewarded him in 1925 with an oil concession.2

Holmes had already sewn up other oil rights. In 1923, he won an option to a concession in al-Hasa, in what was to become the eastern part of the kingdom of Saudi Arabia, and in the next year, to the Neutral Zone between Saudi Arabia and Kuwait, which was jointly controlled by the two countries. He also tried, unsuccessfully, to get one in Kuwait proper. And, as if all that were not enough to keep him busy, he was commuting to Baghdad from Bahrain, trying to put together a rival bid in Iraq against the Turkish Petroleum Company, thus assuring the further enmity of various governments and companies.

Holmes’s activities alarmed, in particular, the Anglo-Persian Oil Company, which did not want anyone else operating within its “sphere of influence,” causing trouble that could interfere with its operations in Persia. The company, to be sure, was convinced that there was no oil to be found in Arabia. In the words of John Cadman, the geological reports “leave little room for optimism,” and one of the company’s directors had declared in 1926 that Saudi Arabia appeared “devoid of all prospects” for oil. (Albania, the director had added, was the promising oil play.)3

In an effort to promote their prospects, in the face of such skepticism, Holmes and his Eastern and General Syndicate retained a prominent Swiss geologist to investigate eastern Arabia. But that effort backfired when the professor, whose expertise in Alpine geology singularly ill-prepared him for the desert, produced a report that declared that the region did “not present any decided promise for drilling on oil” and that exploration there “would have to be classified as pure gamble.” Word of the damning report leaked out into the London financial community, making it even more difficult for the syndicate to raise the money it needed to support Holmes in his concession hunt and further drilling.

By 1926, the syndicate was in deep financial trouble. Holmes was continually obliged to fork out money for travel expenses, gifts and gratuities, and entertainment. So bleak was the syndicate’s financial predicament that it was driven to try to sell all of its concessions to Anglo-Persian, but the company said no. After all, there was no oil in Arabia. And Holmes met a decidedly frigid reception when he tried to obtain capital in the City of London. Despite his persistence and salesmanship, he could not get anywhere. “Holmes was the worst nuisance in London,” one English businessman recalled. “People ran when they saw him coming.”4

Bahrain and the New York Sheikhs

With no likelihood of success in Britain, Holmes sailed for New York to work with an American named Thomas Ward—and hoping to find better luck with what Holmes called “the really big New York Sheikhs.” But he met only further rejection. An executive from Standard Oil of New Jersey told him that Bahrain was too far away and too small to be of interest—after all, it was no larger on the map than his pencil point. Other companies were not interested because their attention was focused on their efforts to become part of the Turkish Petroleum Company.

But, at last, one American company did show a flicker of interest in Bahrain—Gulf Oil. It was committed to developing production on a diversified basis around the world as a hedge against general shortage or declines in specific producing areas. The company had almost been wiped out in its early years, at the turn of the century, when production gave out at Spindletop. Holmes provided Gulf with rock samples and a “greasy substance,” along with a report of oil traces in his water wells in Bahrain. All this was sufficiently intriguing that, in November 1927, Gulf took overall rights claimed by Eastern and General to Arabian concessions, and agreed to work with Holmes’s group to try to secure a concession in Kuwait. But a problem quickly emerged with the option. In 1928, Gulf became part of the American group in the Turkish Petroleum Company and thus a signatory to the Red Line Agreement, which precluded any one of the companies from operating independently in any area within the confines of the lines specified on the map. That clearly ruled out Saudi Arabia, as well as Bahrain. The companies had to act in unison or not at all. Notwithstanding Gulf’s implorings, the TPC board was not prepared to take up Holmes’s entire Arabian package. So, while Gulf could pursue Kuwait because it was outside the Red Line, it had to surrender its interest in Bahrain.

Gulf executives brought the Bahrain concession to the attention of Standard of California, which, like Gulf, was aggressively committed to developing foreign oil supplies, but which, despite very large expenditures, did not have one drop of foreign oil to show for its efforts. So Standard of California, known as Socal, took up Gulf’s option to Bahrain. Unlike Gulf, Socal was not part of the Turkish Petroleum Company, and thus was not bound by the Red Line restriction. Socal set up a Canadian subsidiary, the Bahrain Petroleum Company, to hold the concession.5

And then both Socal, in Bahrain, and Gulf, in Kuwait, ran smack into a wall: the implacable opposition of the British government to the entry of American companies into the area. Before World War I, in an effort to ward off German penetration in the Gulf region, Britain had made agreements with the local sheikhs, including those of Kuwait and Bahrain, that oil development should be entrusted only to British concerns, and that the British government would be in charge of their foreign relations. Thus, London insisted on a “British nationality clause” in any concession agreement, whether it be in Bahrain or Kuwait. Such a clause required that oil development be carried out by “British interests” and exclude American. The requirement meant that neither Gulf nor Socal could develop their concessions.

A rather nasty series of negotiations followed between Socal and Gulf on one side, backed up by the United States government, and the British government on the other. To the American companies, the “nationality clause” seemed nothing less than a cunningly constructed barrier to keep them out of the various sheikhdoms along the Gulf. Yet, in truth, the British government felt harried, beleaguered, and very much on the defensive before the greater American power, as it struggled to maintain positions it regarded as crucial to the empire.6

But in 1929, the British government reconsidered its position; the entry of American capital, it decided, would in all probability encourage more rapid and widespread development of oil in areas Britain controlled, which would be to the benefit both of local rulers, who always needed money and might otherwise ask Britain for further subsidies, and of the Royal Navy, which needed reliable oil supplies. Moreover, the diplomatic pressure from the United States was intensifying. The British government was willing to back off, at least insofar as Bahrain was concerned. So it made a deal with Socal. The American company could exercise the Bahrain option, though only under certain conditions that would guarantee Britain’s position and political primacy. For instance, all communications from the company to the Amir were to pass through the political agent, the local representative of the British government.

The Bahrain Petroleum Company began drilling a little over a year later, in October 1931. And, on May 31, 1932, it hit oil. Petroleum had been discovered on the Arab side of the Gulf. Though only modest in production, the Bahrain discovery was a momentous event, with far wider implications. The established companies were quite shaken by the news. Over the course of a decade, Major Holmes, with his obsession about oil, had become a figure of condescension and ridicule. But now his instincts, and his vision, had been vindicated, at least to some small degree. Was he to be proved right on a much grander scale? After all, the tiny island of Bahrain was only twenty miles away from the mainland of the Arabian Peninsula where, to all outward appearances, the geology was exactly the same.7

Ibn Saud

In the early 1930s, Britain’s political agent in Kuwait spoke of the ruler of neighboring Saudi Arabia as “the astute Bin Saud, who always takes the ‘long view.’” In fact, Ibn Saud did not have the luxury of taking a very long view during those years. He had a pressing problem; he needed money for his treasury, and quickly. That was what led him to think about oil. To be sure, he was very skeptical about the prospects for oil in his country. And he was not at all happy about what the development of an oil industry would mean for his kingdom, in the unlikely event that petroleum was discovered. Foreign capital and technicians could disturb, perhaps even disrupt, traditional values and relationships. Granting a concession to explore for oil was, however, quite another thing, so long as it was reciprocated with the appropriate financial considerations.

Abdul Aziz bin Abdul Rahman bin Faisal al Saud was just over fifty years old. He had an imposing physical presence; at six feet, three inches tall, with a barrel chest, he towered over most of his countrymen. The impression he had made during a visit to Basra more than a decade earlier still held. “Though he is more massively built than the typical nomad sheikh, he has the characteristics of the well-bred Arab, the strongly marked aquiline profile, full-fleshed nostrils, prominent lips and long, narrow chin, accentuated by a pointed beard,” observed a British official in Basra at that time. “He combines with his qualities as a soldier that grasp of statecraft which is yet more highly prized by the tribesmen.” Ibn Saud, also known as ‘Abd al-‘Aziz, certainly applied his talents both for war and for statecraft to a most remarkable achievement in nation building, the creation of modern Saudi Arabia. And his later amassing of immense wealth was no less remarkable for a ruler who, in his early days, could carry his entire national treasury in the saddlebags of a camel.8

The Saudi dynasty had been established by Muhammad bin Saud, the emir of the town of Dariya in the Nejd, the plateau in central Arabia, in the early 1700s. There he took up the cause of a spiritual leader, Muhammad bin Abdul Wahab, who espoused a stern puritanical version of Islam that would become the religious mortar for the dynasty and its state. The Saudi family, allied with the Wahabis, began the rapid program of conquest that within half a century carried them to domination of much of the Arabian Peninsula. But the expansion of the Saudi realm alarmed the Ottoman Turks, who mobilized against them and defeated them in 1818. Muhammad’s great grandson, Abdullah, was taken to Constantinople, where he was beheaded. In due course, Abdullah’s son Turki reestablished the Saudi kingdom, this time centered in Riyadh, but this first Saudi restoration fell apart because of the struggle for power between two of Turki’s grandsons. For a time, a third grandson, Abdul Rahman, was the nominal governor of Riyadh, under the sway of a hated rival family, the Al-Rashid. But in 1891 Abdul Rahman fled into exile, along with his household, including his son Abdul Aziz—the future Ibn Saud—who made part of the journey in a bag hung from a camel saddle. Abdul Rahman and his household wandered for two years, spending some months with a nomadic tribe deep in the desert. Eventually, they were invited by the Sabah family, which ruled Kuwait, to take up residence in that small city-state on the Persian Gulf.

For his part, Abdul Rahman had two goals: to reestablish the Saudi dynasty as master of Arabia, and to make universal the Wahabi branch of Sunni Islam. His son, Ibn Saud, would be the instrument to both ends. Mubarak, the Amir of Kuwait, took the young Saudi prince under his wing and gave him an expert education in realpolitik and the judicious making of foreign policy. Mubarak helped teach him, as Ibn Saud later put it, how to “consider our advantage and our harm.” The boy was also given a stern religious education, prescribed a Spartan life, and learned at an early age the arts of war and of survival in the desert. He was soon given an opportunity to apply those arts when the Turks incited the Rashids, the traditional enemy of the Saudis, to attack Kuwait, which was then under British protection. As a diversionary measure, the Amir of Kuwait dispatched Ibn Saud, then just twenty years old, to try to retake Riyadh from the Rashids. He led a small band across the desert, only to have his first assault repulsed. On the second attempt, combining stealth with force, Ibn Saud entered the city by night and, at dawn, slew the Rashids’ governor. In January 1902, his father proclaimed him, at age twenty-one, Governor of Nejd and Imam of the Wahabis. He had begun the second al-Saud restoration.

Over the next several years, in one military campaign after another, Ibn Saud established himself as the acknowledged ruler of central Arabia. Around that time, he also made himself the leader of the Ikhwan, or Brotherhood, a new movement of intensely religious warriors, whose rapid spread in Arabia provided Ibn Saud with a pool of devoted soldiers. During 1913–14, he brought eastern Arabia, including the large, inhabited al-Hasa oasis, under his control. And since the population there was mainly Shia Moslems—whereas the Saudis were Sunni, and not merely Sunni but of the strict Wahabi sect—he paid special attention to the administration and schools of al-Hasa, regularizing the Shias’ status and preventing their harassment. Despite the tenets of Wahabism, Ibn Saud was an astute politician who knew that it was in his political interest not to encroach too far upon the sensitivities of the Shias. “We have thirty thousand of the Shi’ah, who live in peace and security” in the Hasa, he once said. “No one ever molests them. All we ask of them is not to be too demonstrative in public on their fete-days.”

The last territories critical to the Saudi empire were added in the years immediately after World War I. Ibn Saud captured northwest Arabia. Then, in 1922, the British High Commissioner, exasperated at disputes involving Ibn Saud and the Amir of Kuwait, took a red pencil and himself fixed the boundaries between them. He also delineated two “neutral zones” along Ibn Saud’s borders, one shared with Kuwait, the other, with Iraq—called “neutral” in both cases because the Bedouin would be able to pass back and forth to graze their flocks and because they would be jointly administered. By December 1925, Ibn Saud’s troops, the ferocious Ikhwan, had captured the Hejaz, the holy land of Islam, on the western side of the peninsula, bordering on the Red Sea. There lay the port of Jidda and the two holy cities of Mecca and Medina. In January 1926, in the Great Mosque of Mecca, after congregational prayers, Ibn Saud was proclaimed King of the Hejaz, making the Saudi dynasty the keeper of the holy places of the world’s Moslems. And so, at the age of forty-five, Ibn Saud was the master of Arabia. In the course of a quarter of a century of skillful war making and astute politics, he had reestablished Saudi ascendancy over nine-tenths of the Arabian Peninsula. The restoration was virtually complete.9

But then the warriors of his expansion, the Ikhwan, began to criticize Ibn Saud for backsliding from Wahabism. They declared that the instruments of modernity that were starting to find their way into the kingdom—the telephone, the telegraph, radio, the motorcar—were all tools of the devil, and they rabidly criticized Ibn Saud for having any truck at all with the infidel British and other foreigners. Increasingly insubordinate, in 1927 they rose up in rebellion against him. But he defeated them, and by 1930 had destroyed the Ikhwan movement. Ibn Saud’s control of Arabia was now secured. Thereafter, the scales would tilt away from conquest and toward caution, to safeguard and enhance the nation that he had constructed over a thirty-year period. To commemorate the consolidation, the name of the realm was changed in 1932 from the “Kingdom of the Hejaz and Nejd and Its Dependencies” to the name by which it is known today—Saudi Arabia.10

But just at the moment when Ibn Saud’s efforts appeared to have won the crown of success, yet another threat appeared. Simply put, Ibn Saud was fast running out of money. With the onset of the Great Depression, the flow of pilgrims to Mecca—all Moslems able to do so were expected to try to make at least one such pilgrimage in the course of their lives—slowed to a trickle, and they were the major source of the King’s revenues. The kingdom’s finances fell into desperate straits; bills went unpaid; salaries of civil servants were six or eight months in arrears. Ibn Saud’s ability to dispense tribal subsidies constituted one of the most important glues bonding a disparate kingdom and unrest developed throughout his realm. To make matters worse, the King had just embarked on an expensive and varied development program, ranging from the establishment of a domestic radio network, to tie the country together, to the reconstruction of the water supply system for Jidda. Where could alternative sources of money be found? Ibn Saud tried to collect taxes a year in advance. He dispatched his son Faisal to Europe to look for aid or investment, but he was unsuccessful. As his financial problems continued to grow, the King did not know where to turn for help.11

The Sorcerer’s Apprentice

Perhaps valuable resources were hidden under the soil of his realm. Such was the idea suggested to King Ibn Saud by a companion during an automobile ride, probably in the autumn of 1930. The companion was an Englishman, a former official in the Indian Civil Service, who had set himself up as a merchant in Jidda and had, just a few months earlier, converted to Islam under the tutelage of Ibn Saud. The King had personally given him his Islamic name, Abdullah. But his real name was Harry St. John Bridger Philby, known as Jack to his English friends, and now, perhaps, remembered best as the eccentric father of one of the most notorious double agents of the twentieth century, Harold “Kim” Philby, who became the head of anti-Soviet counterespionage in British intelligence, while actively spying for the Soviets. He might well have taken lessons from his father on how to play multiple roles. Indeed, many years later, on reading Kim Philby’s own account of his years as a double agent, the retired court interpreter for Ibn Saud could only marvel that Kim was “a true replica of his father.”

The father, Jack Philby, was a relentless contrarian, an inveterate rebel against authority and convention. In Jidda, he once paraded his pet baboons in public to demonstrate that he could do without the human company of the small European community. Raised in Ceylon and a graduate of Trinity College, Cambridge, Philby began his career in the Indian Civil Service. He was a member of the British political mission in Baghdad and Basra during World War I, which provided his introduction to the Arab world. A gifted linguist, he took the opportunity to study Arabic, which led him to take a deep interest in the genealogy of Arab tribes and potentates. That, in turn, developed into a lifelong fascination with perhaps the most powerful of all the potentates at that time, Ibn Saud, whom he first met while on a mission to Riyadh in 1917. That meeting, which included thirty-four hours of personal interviews with Ibn Saud, set the course of the rest of Philby’s life.

In 1925, angered by British policy in the Middle East, Philby quit the Indian Civil Service, of which he was still a member, though he was then serving in Transjordan. He returned to Saudi Arabia to establish a trading company in Jidda. He also renewed his friendship with Ibn Saud, and over time became an informal adviser to the King, traveling and hunting in his party, even joining in the evening deliberations of the King’s Privy Council. Ibn Saud took a special interest in Philby. On the eve of his conversion to Islam in 1930, Philby would recall, the King told him “how nice it would be for me when I became a Muslim and could have four wives.” But first he was required to go through the painful process of adult circumcision. Some said that Philby had no particularly strong religious convictions, and that he became a Moslem in order to facilitate his business dealings and his ease of movement through the country. The conversion did enable him to pursue one of his obsessions, for which he became deservedly famous—as explorer, mapper, and chronicler of Arabia. Over the years, his arduous journeys took in great parts of the peninsula, from a lonely expedition through the Rub al-Khali, the Empty Quarter in the southeast of Arabia, to a search for the ancient Jewish communities in northwestern Arabia. In recognition of his efforts, he was eventually to receive the Founder’s Medal of the Royal Geographical Society.

Philby would don the appropriate bowler hat on his trips back to England or put on the white jacket required at dinner in the colonies of the empire, and even in Arabia, he took five o’clock tea and fanatically kept up with the cricket scores from Lord’s. Yet, despite all that, he remained at odds with Britain and British policy, which he saw as “traditional western dominance in the eastern world.” In contrast, he was to recall proudly, “I was surely one of the first of the champions of eastern emancipation from all foreign controls.” Certainly the British found Philby most troublesome. “Since he retired from Govt. service 5 years ago, Mr. Philby has lost no opportunity of attacking & misrepresenting the Govt. & and its policy in the Middle East,” commented one British official. “His methods have been as unscrupulous as they have been violent. He is a public nuisance, & it is largely due to him & his intrigues that Ibn Saud—over whom he unfortunately exercises some influence—has given us so much trouble during the last few years.” Another official denounced Philby as “an arch-humbug.”12

Whatever the extent of his influence, Philby knew very well Ibn Saud’s severe financial problems and the threat they posed to the kingdom. During that automobile ride in the autumn of 1930, Philby, noting that Ibn Saud was particularly despondent, said, as cheerfully as he could, that the King and his government were like folk asleep on buried treasure. Philby was convinced that great mineral wealth lay beneath the desert. But its development required prospecting, explained Philby, and that meant foreign expertise and foreign capital.

“Oh, Philby,” the King replied, “if anyone would offer me a million pounds, I would give him all the concessions he wanted.”

Philby admonished the King that no one would give a million pounds or anything like that without some preliminary exploration. The King was much more interested in exploring for water than oil. In that case, Philby had a name to suggest—Charles Crane, an American plumbing tycoon and philanthropist, who had a special interest in the Arab world, and who would, said Philby, “give one of his eyes for the pleasure of shaking hands with Your Majesty.” Crane was sponsoring development projects in neighboring Yemen, and Philby knew he was then in Cairo. Why not invite him to Saudi Arabia, said Philby.

Ibn Saud extended the invitation, and on February 25, 1931, Crane arrived in Jidda, where the King received him with considerable pomp and lavish banquets. He was entertained by a mesmerizing sword dance performed by several hundred of the King’s own bodyguards. As gifts, the King gave Crane bundles of rugs, daggers, and swords, as well as two pedigreed Arabian horses. The two men discussed the parched and stony desert and the possibility that there might be underground rivers beneath the Nejd. Crane recounted how he had obtained dates from Egypt and personally introduced their cultivation in the California desert, in a town called Indio, successfully irrigating them with artesian wells. Now, out of his new friendship for Ibn Saud, he made available, at his own cost, an American mining engineer named Karl Twitchell, who was then working on one of Crane’s projects in Yemen, to investigate the water potential of the kingdom. After making an arduous 1,500-mile journey to assay the likelihood of artesian water beneath the Arabian desert, Twitchell showed up in Jidda in April 1931 with bad news: there were no prospects of artesian wells.13

A year later, in March 1932, as the gap between revenues and expenditures in his kingdom continued to widen, the King had a visit in Riyadh from an especially astute observer of his problems, Sheikh Ahmad, the Amir of Kuwait. The Sheikh had made the trip by motorcar over three hundred miles of desert sand and gravel, which had left him with an abiding lesson: All cars traveling that route should carry at least five passengers as “only five persons could get cars out of sand.”

The two rulers pledged eternal loyalty to each other. When Sheikh Ahmad described Ibn Saud as his “elder brother,” the King broke into tears, and he in turn declared, “Just as the Al Saud and the Al Sabah standards had flown side by side in every victory or defeat, during the last three hundred years, so he prayed and believed it would continue to do so in the future.”

Sheikh Ahmad was struck by Ibn Saud’s apparent ill-health and the general strain he was showing. Sharing his impressions with the British political agent on his return to Kuwait, the Sheikh said, “Gone were the days when he was the hardest man in his kingdom and led every raid and foray.” Sheikh Ahmad begged the King “to go slow in the matter of expenditure,” for otherwise “he would most assuredly ‘crash.’” In particular, the Sheikh “talked ‘straight’ on the matter of the object of obvious waste that he saw all round him”—motorcars. Yes, for the King, a few good luxury cars were necessary. Beyond that, however, Sheikh Ahmad urged Ibn Saud to reduce the number of his cars by three-quarters “and standardize by concentrating on Fords and Chevrolets.” That advice havingbeen delivered, Sheikh Ahmad drove back across the desert in a gift presented to him by Ibn Saud—a large, eight-cylinder Cadillac limousine from the King’s own fleet.

The two men had also discussed oil exploration. The King admitted that he had permitted some preliminary examination to be carried out, but added that “he was not anxious in the least to grant concessions to foreigners.” Yet, given his financial difficulties,didhe have a choice? Twitchell, the American engineer, had, in fact, reported some promising oil prospects in the al-Hasa, in the eastern part of the country. Then, on May 31, 1932, Standard Oil of California made its oil discovery on Bahrain. That abruptly and significantly increased the attractiveness of al-Hasa—and made Ibn Saud, on consideration, less averse to foreign investment in his kingdom. Twitchell, though insisting to Ibn Saud that he was only an engineer and not a promoter, nevertheless agreed at the King’s behest to try to locate interest and capital in the United States.14

The Negotiation

Months before its Bahrain discovery, Standard Oil of California had already begun to inquire about a concession in al-Hasa. Now, contacted by Twitchell, Socal was not only delighted and immediately receptive, but also retained him as one of its negotiators. Twitchell returned to Saudi Arabia in February 1933 in the company of Lloyd Hamilton, a lawyer for Socal, to initiate their negotiations with Ibn Saud’s minister of finance, Abdullah Suleiman. They were up against a cunning and masterly opponent. Suleiman was the brother of the King’s private secretary. A Nadji by birth—most of the other senior administrators were Syrians, Egyptians and Libyans—he had, as a young man, been an assistant to an Arab merchant in Bombay, where he had learned much about trading and business. The King had nicknamed him “my support.” In fact, this “frail little man of uncertain age” was the most powerful person in Ibn Saud’s inner circle, with responsibility not only for finance, but also for defense and the Pilgrimage. He was “the ultimate eminence grise, always self-effacing and keeping himself in the wings,” said Ibn Saud’s interpreter, but with “power and influence so monumental that I often thought of him as the uncrowned King of Arabia.”

Suleiman was certainly the most important man in the kingdom outside the royal family. He carried an enormous workload that was based upon an accounting system for public finances that he had invented and that only he could understand. He was inveterately secretive and peremptory, and kept as much control of affairs for himself as he possibly could, making sure that no potential rivals encroached on his terrain. Though he could generally act on his own authority, he took care, on the matter of oil, to send long messages to the King. In his negotiations with Socal about a concession in al-Hasa, Suleiman knew exactly what he wanted—a very large sum of money, and as soon as possible. Whether oil was there could be left to later.

Twitchell and Hamilton were not, however, the only contestants for access to the Hasa. The Iraq (formerly Turkish) Petroleum Company dispatched Stephen Longrigg as its representative. Longrigg, formerly a British official in Iraq, was also in effect representing the interests of Anglo-Persian, which, because of its participation in the IPC and the Red Line Agreement, could not go it alone. “So the stage is set,” the British minister, Andrew Ryan, reported to London in March 1933, “the dramatis personae being an avid Abdullah Suleyman, who thinks of oil in Hasa as already a marketable commodity; Twitchell and Hamilton featuring Standard Oil of California; Longrigg … representing the Iraq Petroleum Company.” But in his cast of characters Ryan had left out the most important player of all—the King. And he also made a major misjudgment in writing that Harry St. John Bridger Philby would be among “the minor possible personages.” Philby was no mere bit player.15

At the time of the Bahrain strike in May 1932, Socal had sought out Philby in order, in the words of a Socal director, to “get in touch with His Majesty Ibn Saud.” Philby dallied with Socal. But he knew that competition among the various oil companies would get a better deal for his friend the King, so he also made contact with the Iraq Petroleum Company through its dominant member, Anglo-Persian, alerting them to Socal’s interest in al-Hasa. “I am not in any way committed to serve the interests of the said concern,” he wrote to a senior Anglo-Persian geologist, “but I am generally disposed to help anyone practically interested in such matters and capable of being useful to the Government to get a move on.” Ultimately, Philby signed on as an adviser to Socal. But he kept that arrangement secret. At the same time, he kept up his contacts with the IPC—so successfully that its representative, Longrigg, regarded him as a confidant. In fact, Philby’s primary loyalty was, and would remain, to the King.

Philby took pleasure from his new association with Socal; helping an American company to succeed in Arabia would be yet another way to tweak the lion’s tail and frustrate British interests in the area. The arrangement with Socal also brought him great personal relief. Though he was pursuing many projects for his trading company, he shared the problem of the rest of the kingdom: He was not being paid. He needed money urgently—among other things, in order to pay the Cambridge University fees for his son, Kim. For his services, Socal agreed to give Jack Philby one thousand dollars a month for six months, plus bonuses both upon the signing of a concession contract and on the discovery of oil. Thus, Kim Philby was able, after all, to pursue his studies at Cambridge, where he took the first steps on the way to becoming a Soviet spy.

As the negotiations dragged on, the Saudis left no doubt that their prime objective was a large up-front payment. “It is no good my holding out to you hopes that you can secure the concession without a substantial quid pro quo,” Philby wrote to Socal. “The main point is that Ibn Saud’s Government owes a good deal of money, and has had to default on its payments to its creditors. Its only hope of being able to pay them now depends on the mortgaging of its potential resources.”16

The positions of the two Western groups were strikingly at odds. While Socal was very interested in obtaining the concession, the Iraq Petroleum Company, with Anglo-Persian behind it, was in quite a different frame of mind. Longrigg had confided to Philby “that they did not need any more oil, as they already had more in prospect than they knew what to do with. At the same time they were vitally interested to keep out all competitors.” Thus, for IPC, its efforts were more prophylactic than prospective. In addition, since IPC—Anglo-Persian really—continued to be skeptical about the oil potential in al-Hasa, it was in no mood to make any large commitment in Saudi Arabia. Longrigg’s brief, as he explained to the British minister, was certainly “not to buy a pig in a poke by paying big money at this stage for the right of extracting problematic oil.”

Though others were growing frustrated by the pace of negotiations, Philby, who delighted in being a mystery man, was glorying in his multiple roles—working as a paid agent for Socal, acting as an adviser to the Saudis, coaching IPC and serving as Longrigg’s confidant, and casually dropping in conversation with the various oil men what the King had said to him on their most recent auto ride up to Mecca. And it was not only oil that occupied Philby; he was also busily engaged in obtaining a monopoly on the importation of motor vehicles for the Saudi government and for the pilgrim-transport company, as well as in setting up the country’s wireless system.17

Despite its eagerness, Socal was offering only about a fifth of what the Saudis were asking. In early April 1933, one of Socal’s executives wrote Philby about “the unfortunate impasse to which our negotiations have come. … The country is practically unknown as to oil possibilities; and it would be the height of folly for an oil company to pay out large sums of money before having had a look at the geology of the area.” Socal did not have to worry too much about IPC and Anglo-Persian. For their part, they were unwilling to come up with anything but a small fraction of what Socal was offering to pay. Finally Philby advised Longrigg, “You might just as well pack up; the Americans are far and away higher than that.” And Longrigg did exactly that, departing abruptly and leaving the field open to Socal. Meanwhile, Philby was coaxing Socal and Suleiman toward what he called “this detente,” which meant a much higher offer from Socal.

By May 1933, the final draft of the concession agreement between Socal and Saudi Arabia was ready for the King’s “pleasure.” After some pro forma discussion in the Privy Council, Ibn Saud told Abdullah Suleiman, “Put your trust in God, and sign.” The agreement provided for a £35,000 ($175,000) payment in gold up front—£30,000 being a loan, and £5,000 as the first year’s royalty paid in advance. After eighteen months, a second loan of £20,000 ($100,000) would be made. The total loan was to be repaid only out of any oil royalties the government was due. In addition, the company would make another loan of £100,000 ($500,000) in gold on the discovery of oil. The concession was good for sixty years, and covered about 360,000 square miles. On May 29, 1933, the agreement was signed. Ibn Saud had won the very substantial cash payments that he wanted. The King and his finance minister had also insisted on terms that provided a great incentive to Socal to move as expeditiously as it possibly could.18

The only remaining problem was how to obtain that much gold. Because America had just gone off the gold standard, Socal’s efforts to dispatch the gold directly from the United States were turned down by Assistant Secretary of the Treasury Dean Acheson. But finally, the Guaranty Trust’s London office, acting on behalf of Socal, obtained thirty-five thousand gold sovereigns from the Royal Mint, and they were transported to Saudi Arabia in seven boxes on a ship belonging to the P&O line. Care had been taken that all the coins bore the likeness of a male English monarch, and not Queen Victoria, which, it was feared, would have devalued them in the male-dominated society of Saudi Arabia.

The gaining of the concession by an American company would inevitably begin to change the web of political interests in the region. When Philby told Sir Andrew Ryan, the British minister, that Socal had won the concession, he was “thunderstruck, and his face darkened with anger and disappointment,” which delighted Philby no end.* Britain’s loss would indeed be America’s gain, though Washington was slow to realize it. Despite recurrent protestations from Socal, the Roosevelt Administration refused to establish diplomatic representation, wearily repeating that there was no need for it. It was not until 1939 that the U.S. minister to Egypt was also accredited to Saudi Arabia, and only in 1942 did the United States establish a permanent, one-man legation in Saudi Arabia.

Anglo-Persian and the Iraq Petroleum Company soon realized that they had blundered by being too timid and too miserly. The members of the IPC recriminated among themselves but determined not to make the same mistake again. In 1936, the group obtained a concession for the Hejaz, the western part of Saudi Arabia, extending from Transjordan all the way down to Yemen. The terms were much higher than those agreed to three years earlier by Socal. The only drawback was the IPC never found oil in its concession.19


Saudi Arabia was not the only country on the Arabian Peninsula in which oil interest was mounting. Intermittent negotiations for a concession in neighboring Kuwait had been dragging on for a decade. The exploration effort in Bahrain had upset the Amir of Kuwait, Sheikh Ahmad. “It was a stab to my heart,” he told Major Holmes in 1931, “when I observed the oil work at Bahrein and nothing here.” The jovial and thickset Ahmad, who had become Amir of Kuwait in 1921, prided himself on his modernity; by the mid-1930s, he wore dress slacks and patent leather shoes beneath his robes. He was also an enthusiast of the British Navy, and the walls of his drawing room were decorated with photographs of British officers and war sloops. But he seemed to be engaged in a balancing act, arising out of Kuwait’s precarious position. As a senior British diplomat explained, the Sheikh had “set out to run a rather dangerous policy” of trying “to play His Majesty’s Government, the Iraqi government and King Ibn Saud off against each other.”

Such balancing had always been the central problem for Kuwait, as a small state trying to assure its independence and freedom of action midst larger powers. It had long played a commercial role owing to its location near the head of the Persian Gulf and along the trade and pilgrimage route between Basra and Mecca. Its emergence as an independent principality dates from the middle of the eighteenth century, when nomadic tribes from the interior of the Arabian Peninsula settled there and, in 1756, selected a sheikh from the Al Sabah family as the ruler. By the nineteenth century, it had become the emporium for commerce in the upper Gulf. Though paying some tribute to the Ottoman Empire, it successfully resisted direct application of Turkish authority. At the end of the nineteenth century, Britain wanted to blunt German penetration, as represented in the Berlin–Baghdad railway, and Kuwait wanted to assure its independence of the Ottomans. As a result, Britain assumed responsibilities for Kuwait’s foreign affairs and later established a protectorate over the emirate.

Now Sheikh Ahmad was being courted both by Anglo-Persian and Gulf. Having acquired Major Holmes’s purported and controversial option, Gulf was working through Holmes and his Eastern and General Syndicate (which the Foreign Office had taken to calling Gulf’s “jackal”). Anglo-Persian was still skeptical about prospects for oil in Kuwait. Moreover, if exploration did happen to prove successful, it would only add more oil to a world market already laboring under great surplus. And there was always the fear among Anglo-Persian executives that in Iran, the site of their most valuable concession, the Shah would “revive the accusation that they are frittering away their energies elsewhere than in Persia.” Then why was Anglo-Persian pursuing a concession in Kuwait? The reason was that it could not take the chance of simply standing aside in Kuwait, if only to block someone else from getting a concession. Anglo-Persian’s prime interest was defensive—to prevent another company from moving in on what it called its “flank,” threatening to undermine its position and influence in Persia and Iraq. The risk was too great. Kuwait was, as Sir John Cadman continued to insist, within Anglo-Persian’s “sphere of influence.”20

Financial need also fueled Sheikh Ahmad’s interest in courting concessionaires. Like all the other sheikhdoms down the coast of the Persian Gulf, Kuwait was suffering severe economic hardship. The local pearling trade had been Kuwait’s number-one industry and principal source of foreign earnings. Whether or not he knew the name, Sheikh Ahmad had good reason to be intensely annoyed with a Japanese noodle vendor from Miye prefecture, one Kokichi Mikimoto, who had become obsessed with oysters and pearls and had devoted many difficult years to developing the technique for cultivating pearls artificially. Eventually, Mikimoto’s efforts paid off, and by 1930, large volumes of Japanese cultured pearls were beginning to appear on the world’s jewelry markets, practically destroying the demand for the natural pearls that divers brought up from the waters off Kuwait and elsewhere in the Persian Gulf. Kuwait’s economy was devastated; export earnings plummeted, merchants went bankrupt, boats were laid up onshore, and divers returned to the desert. Ahmad and his principality needed a new source of revenues; the welcome prospect of oil had appeared just in time.

The little country faced a number of other economic difficulties. The Great Depression had more generally crippled the economies of Kuwait and the other sheikhdoms. So bad had conditions become that slaveowners along the Arab coast were selling off their African slaves at a loss, to avoid the maintenance costs. Moreover, Sheikh Ahmad was angry with Britain for failing to give him what he deemed adequate support in various controversies with neighboring Saudi Arabia and Iraq. The Sheikh believed that the entry of an American oil company into Kuwait would bring American political interest, which he could use to bolster his position against Britain, as well as against regional rivals. Yet with all that said, the Sheikh knew that he dare not alienate Britain. He still depended primarily on it for Kuwait’s political and military security against all his neighbors—Saudi Arabia; Iraq, which was challenging his rights; and Persia, which did not even acknowledge Kuwait’s existence and legitimacy. Kuwait was a very small state; it was Britain’s imperium that reigned over the Gulf, and the Sheikh recognized the practical value of the Royal Navy.21

For its part, the British government wanted to do everything it could to maintain its influence and position in the region, and that meant trying to ensure that any concession went to an English company. But how to do it? Though the British Nationality Clause had been put aside in the case of Bahrain, London continued to insist upon it for Kuwait, which would have effectively barred Gulfs participation with the Eastern and General Syndicate by restricting development only to a British-controlled firm. Gulf protested the exclusionary policy to the U.S. State Department, which in turn pressed the issue with the British at the end of 1931.

The British Admiralty vigorously insisted on retaining the nationality clause, not only on the familiar strategic and military oil supply grounds, but also because of the supposed difficulty that Britain would face in guaranteeing “the protection of American citizens in the hinterland of Kuwait.” That might even result in “American warships intervening in Gulf affairs in order to provide the protection” that Britain “might not be able to offer.” But the central fear was, as one official put it, of Britain’s “losing influence and position to another, richer nation, in an arena critical to its imperial interests.” After further reflection, however, key departments of the British government—the Foreign Office, the Colonial Office, and the Petroleum Department—were all prepared to jettison the nationality clause. “The last thing we want,” said one Foreign Office official, “is an oil war” with the United States. Indeed, American capital could contribute to political stability and economic development in the area, which was in British interests. In April 1932, the British government put the nationality clause aside. At that juncture, there seemed no great cost, and no real reason not to do so. After all, Anglo-Persian seemed hardly interested in exploring for petroleum in Kuwait. Sir John Cadman, the chairman of Anglo-Persian, told the Foreign Office that any oil found in Kuwait would not “be of interest to the Anglo-Persian Oil Company.” He added, “The Americans are welcome to what they can find there!”22

Gulf and the United States government were pleased by the Cabinet’s decision to eliminate the nationality clause. But no one was more jubilant than Major Holmes. He attributed the “wonderful victory,” at least in good part, to an individual he decided was the most popular man in England, the American ambassador Andrew Mellon—the former U.S. Treasury Secretary and scion of the family that controlled Gulf Oil. Having arrived at his new post in 1932, at the age of seventy-seven, Andrew Mellon was more than comfortable in London. He enjoyed the fact that he could get a legal drink (Prohibition was still in force in the United States); he had been married in England; he habitually dressed in English-cut suits. And he knew how to do business in Britain. Almost exactly three decades earlier, he had gone to England to try to persuade Marcus Samuel that Shell should let the nascent Gulf Oil Company out of its supply contract, which had gone sour when the underground pressure at Spindletop dwindled away. With his quiet and persistent charm, Mellon had succeeded.

In 1932, however, he was under a cloud. There were several instances during his tenure as Secretary of the Treasury in which, it was said, companies belonging to the huge Mellon empire had gotten special treatment or support. Such reports had already led to an effort in Congress to impeach him as Treasury Secretary when Hoover abruptly appointed him to the Court of St. James’s. Some described his ready acceptance as a form of voluntary and prudent self-exile.

Mellon was not merely the family patriarch and uncle of Gulf’s chairman, William Mellon; he was also the man who had bankrolled Gulf and pushed it into becoming an integrated oil company. He continued to regard Gulf as a Mellon family company and took a very personal interest in it. He had already intervened to facilitate State Department help for Gulf in its quest to open the door to Kuwait. When he sailed for London as ambassador, which could put him in the middle of the Kuwait fight, the Undersecretary of State had squeamishly tried to establish fair ground rules: “It would always be very easy to lean over backwards too far for the sake of preventing criticism,” he cabled the American embassy in London. “In all that we do, therefore we must accord the Gulf Oil Company no more or no less, but precisely the same, assistance that we should accord to any other bona fide American company under similar circumstances.” But it would be mighty hard to maintain such a distinction. Even in the State Department, Gulf was described as a “Mellon interest”; the British would refer, interchangeably, to Gulf and the “Mellon oil group.” And Andrew Mellon himself never gave much indication that he recognized the distinction. He referred to Gulf as “my company” (hardly without foundation, as Mellon interests owned most of the stock) and he would act on that premise.23

While jettisoning the nationality clause for Kuwait, London had nevertheless announced that it would insist upon reviewing all bids and recommending to the Amir which one he ought to accept. That should not have been too complicated a matter, as Cadman had just flatly announced that Anglo-Persian was not interested. But then, in May 1932, Socal made its discovery in Bahrain, transforming the situation and perspective along the entire Arabian coast. Anglo-Persian quite abruptly changed its mind. Cadman hurriedly wrote to the Foreign Office to disavow his recent statement of no interest; for now Anglo-Persian had suddenly decided that it very much wanted to bid for a concession in Kuwait. No one was more pleased with Anglo-Persian’s change of heart than the Sheikh himself, who stated with eloquent simplicity a fundamental maxim of business. “Yes, I have now two bidders,” he said, “and from the point of view of a seller that is all to the good.”

The next move lay with the British government; it was up to the Petroleum Department, in particular, to review not only Gulf’s offer, but the new bid from Anglo-Persian, and to afford an “opinion” to the Amir. But as the review of the two bids dragged on in London, Holmes and Gulf—and the U.S. government—became suspicious, believing that the delay was a ruse that would lead to a recommendation in favor of Anglo-Persian’s offer. The American embassy kept after the matter, though the State Department did not wish to appear to be acting “merely for the personal benefit of Mr. Mellon.” But, by the autumn of 1932, when no recommendation seemed to be forthcoming, Mellon lost patience and decided to forget about decorum and pursue the matter directly with the Foreign Office. After all, this was business. Perhaps his sense of urgency increased as it became evident that the unpopular Herbert Hoover was soon to be turned out of the White House, thus bringing Mellon’s own stint as ambassador to a quick termination. “The fact that the American Ambassador has so keen a personal interest in securing the concession for his own group and that his term of office is now coming to an end,” observed a senior Foreign Office official, “may also afford some explanation of the repeated and insistent representations.” Indeed, so vigorous was Mellon’s pursuit that one State Department official recommended that the Secretary of State suggest to Mellon “that he go easy on this question.”

The Petroleum Department finally disgorged its analysis of the two bids, which the British political agent in Kuwait transmitted to the Amir in January 1933. But it resolved nothing; all it did do was open a new, more acrimonious stage of competition between Anglo-Persian and Gulf, involving an acid exchange of accusations and threats. But Anglo-Persian felt its hand weakening. Its position in Persia, the company’s real treasure, was in jeopardy, owing to the Shah’s unilateral repudiation of its concession there in November 1932.24

There was, indeed, an alternative to a bidding war—cooperation. Each company was impressed by the other’s strong determination, and by the powerful forces behind it. While Anglo-Persian saw America’s wealth and its potentially great political influence, Gulf saw entrenched British power in the region. John Cadman raised the possibility of amalgamation with Ambassador Mellon, but with no clear answer. Shortly after Mellon vacated his post and went back to the United States, Cadman was distressed to learn that the word in oil circles in America was that “Andy Mellon had returned determined to keep his hands on Kuwait.”

At the end of March 1933, Cadman left London on his way to Persia to negotiate with the Shah over the canceled concession. He stopped in Kuwait, fully prepared to discuss the details of a concession with the Amir. Learning of Cadman’s imminent arrival, Major Holmes not only arranged to see the Sheikh Ahmad a few hours before Cadman’s appointment but also extracted a promise that he would be given the opportunity to top whatever offer Cadman might put on the table. In his own meeting at Dasman Palace, Cadman tried to get the Sheikh to agree that an “All British Company” would better serve his purposes. The Sheikh replied that “it was a matter of indifference” to him “what nationalities were involved so long as the payments stipulated in the Agreement were made.” Cadman then put his own bid, all prepared, on the table and produced a gold pen, which he gave to the Amir in order to sign the agreement. He told the Sheikh that he would double the offer “if the Sheikh was prepared to sign the Agreement forthwith.” But, added Cadman, “he was unable to leave his higher offer open.” Unfortunately, the Sheikh could express only his most earnest regrets. He had promised Holmes that the Gulf group would be given an opportunity to better any offer Cadman might present, and he obviously could not go back on his word.25

Cadman was surprised and upset. Now he was absolutely convinced that an agreement had to be made with Gulf; the Sheikh’s “two buyers” had to be reduced to one, at all costs. Otherwise, the Sheikh could continue to play one group off against the other, pushing up the price. Moreover, the only way that Anglo-Persian could absolutely guarantee that it did not lose out in a bidding match was by establishing a joint venture with Gulf. Strenuous discussions followed between the two companies, and by December 1933, they came to final terms, establishing a new fifty-fifty joint venture. It was called the Kuwait Oil Company. Yet still fearful of the expansionist power of the American companies, the Foreign Office insisted that actual operations on the ground of the Kuwait Oil Company had to be “in British hands.” The result was a further agreement in March 1934, between the British government and the Kuwait Oil Company that assured, despite Gulf’s 50 percent, British dominance over development within the country.

The actual negotiations to obtain a concession for the new Kuwait Oil Company from Sheikh Ahmad were entrusted to two men, the venerable Frank Holmes for Gulf, and the much younger Archibald Chisholm for Anglo-Persian. When the two crossed over through the customs post from Iraq into Kuwait, they were met by a letter from the political resident, genially offering his “welcome to the heavenly twins.” Indeed, the competition between the two companies appeared to have run its course. One Sunday morning, not long after their arrival in Kuwait, Holmes and Chisholm found themselves sitting beside each other at the tiny church service run by an American mission. The lesson that day was from Beatitudes, and when the words “blessed are the pure of heart” were spoken, Holmes jabbed Chisholm in the ribs. “At last,” whispered the redoubtable major, “you and I are pure in heart about each other.”

But their work was far from over. If he had been forestalled from pitting one bidder against another, Sheikh Ahmad proved to be a very tough negotiator, and was extremely well informed about political developments and concession terms in Iraq, Persia, and Saudi Arabia. Moreover, the Sheikh was not at all pleased with the political agreement about British dominance on which London had insisted. But finally, on December 23, 1934, Sheikh Ahmad, having obtained what he wanted, affixed his signature to the agreement, which granted a seventy-five-year concession to the Kuwait Oil Company. The Sheikh received an upfront payment of £35,700—$179,000. Until oil was found in commercial quantities, he would receive a minimum of £7,150 ($36,000) a year. Once oil was found, he would receive an annual minimum of £18,800 ($94,000), or more—depending on volume. And as his representative to the Kuwait Oil Company in London, the Sheikh appointed his old friend Frank Holmes, who was to hold the position until his death in 1947.26

The “Sure Shot”?

The Kuwait concession was signed a year and a half after the Saudi one. By then Standard Oil of California was already busily at work in Saudi Arabia. It had set up Casoc—the California-Arabian Standard Oil Company—to hold the concession, and administrative headquarters had been established in Jidda, in a tall building with multiple balconies and its own electric generating plant. The landlord was none other than H. St. John B. Philby. On the other side of the country, in September of 1933, the first two American geologists had arrived in the town of Jubail on a motor launch from Bahrain. In order to downplay their strangeness to the local population, they had grown beards and had donned Arab head-dresses and outer robes. They docked early in the morning, and by evening had made their first excursion into the desert. A few days later, they came to a hilly area they had already spied from Bahrain and identified a promising geological structure, the Dammam Dome. It was a desolate expanse of sand and naked rock, only twenty-five miles from a similar structure on Bahrain where Socal had found oil. It was a “sure shot,” they were convinced. Drilling commenced in the summer of 1934. Every item that the geologists, engineers, and construction workers needed—be it equipment or food—had to be brought in over a supply line that stretched back to the port of San Pedro, near Los Angeles. The early optimism notwithstanding, the Dammam Dome was not a sure shot. The first several wells were all failures—either dry or, at best, giving some small shows of oil and gas, but nothing remotely commercial.

Over the next few years, more American geologists arrived; they fanned out through the desert, often traveling by camel, with an escort of ten guards and assorted guides. Conditions were extreme; the daytime temperatures would get up to 115 degrees, while the nights became bitterly cold. They would set out in September from Jubail and not return until the following June. Their guides measured distances for them not in miles or kilometers, but in “camel days.” When they got deep into the desert, three weeks away from Jubail, they were beyond the range of the shuttle of supply camels and hunted their own gazelle and Qatar birds, or bought a sheep for five riyals (about $1.35) from a passing Bedouin. But they also put the new techniques of seismography to good use, and they made aerial surveys of the country, using a one-engine Fairchild 71, with a hole cut out of the bottom through which to take photographs with film especially manufactured by Kodak to withstand desert heat. The plane flew straight parallel courses, six miles apart, while geologists sat by the windows, drawing everything they could see for three miles in each direction. There were hints of oil, but only hints.

Socal’s management back in San Francisco was becoming increasingly anxious about the project. The mood about the Saudi concession was such, one executive was later to remember, that “sometimes there was an open question whether the venture should be abandoned and the approximately $10 million spent written off as a total loss.” Yet there was another alarming possibility—that Socal would find oil in a part of the world where it had no distribution facilities, and at a time when global oil markets, like the rest of the world economy, were depressed and suffering from acute oversupply. In other words, what would Socal do if it actually discovered any petroleum in the desert of Arabia?27

The Blue Line Agreement

In fact, Socal was already encountering that nasty problem because of its success on Bahrain, where the existing production capacity was 13,000 barrels per day and the potential capacity was estimated at 30,000 barrels per day. In the first half of 1935, Socal choked down its production in Bahrain to just 2,500 barrels per day due to lack of access to markets. It found great difficulty in selling directly to European refineries because most of them were not equipped to handle a crude such as that from Bahrain, with high sulfur content. A proposed marketing deal with Standard Oil of New Jersey, Shell, and Anglo-Persian fell apart. Socal needed something else—something more stable. The answer was a joint venture of its own.

Early in 1936, a discouraged K. R. Kingsbury, president of Socal, arrived in New York City. James Forrestal, head of the investment bank Dillon, Read, brought Kingsbury (known as “the King”) together with the top management of Texaco. Forrestal had recognized that Texaco had a problem no less serious in its own way than that facing Socal. It had an extensive marketing network in Africa and Asia, but did not have its own crude in the Eastern Hemisphere to run through the system, and thus was shipping products from the United States. Without a Middle Eastern supply, Texaco faced the prospect of losing markets or losing money in the years ahead. It was obvious to Forrestal that marrying Socal’s low-cost potential Middle East crude to Texaco’s Eastern Hemisphere distribution system would make great sense for both companies.

But how to do it? Forrestal, assisted by Dillon, Read vice-president Paul Nitze, worked out a scheme that created a major new enterprise. Socal and Texaco would pool all their assets “East of Suez,” with each having an equal interest in the new venture. Socal threw in its Bahrain and Saudi oil concessions, as well as a concession in the East Indies. The joint venture also took over Texaco’s widespread marketing system in Africa and Asia. The other companies may have had their Red Line; Socal and Texaco delineated their consolidated area by what they called the “Blue Line.” The California-Texas company, or Caltex, as their joint venture became known, would provide the vitally needed outlet both for Bahrain production and for any oil that might eventually be found in Saudi Arabia.

The established international companies, which had been quite concerned about the disruptive impact of Bahrain oil competing for markets, were relieved by Socal’s hook-up with the Texas Company. While still complaining that Socal’s activities on Bahrain were “irksome” and that it would “probably have to try to buy them out,” the IPC, along with Shell and Anglo-Persian, told the Foreign Office that the joint venture would cause “a minimum of disturbance of markets which is all to the good from the point of view of British oil interests.” A Jersey executive put it a little differently. The merger “would mean a fair degree of stabilization.” The establishment of Caltex also meant that any new oil found in Saudi Arabia could be managed and would not necessarily destroy prices. As for neighboring Kuwait, it was already in the reliable hands of Anglo-Persian and Gulf.28


Exploration in Kuwait had begun in 1935, but only in 1936 was seismic work undertaken. The Burgan field in southeastern Kuwait was suggested as the most promising area. And there petroleum was struck, unexpectedly and with a surprisingly large flow, on February 23, 1938. In order to gauge the size of the discovery, crude oil was allowed to flow unrestrictedly into an adjoining sand reservoir, then ignited. The heat from the flaming oil was so intense that the sand walls of the banked reservoir were transformed into sheets of glass. The directors of Anglo-Persian and Gulf heaved a mighty sigh of relief. Major Frank Holmes was jubilant, while at Dasman Palace, Sheikh Ahmad needed to have no further worry about the economic threat from cultured pearls.29

Meanwhile, exploration next door in Saudi Arabia had met with repeated discouragements, and the Socal board grew increasingly restive. In November 1937, Socal’s manager of foreign production cabled Arabia with the firm order that no more projects were to be initiated without the submission of a detailed proposal first. Then, in March 1938—a few weeks after the Kuwait discovery—came the stunning news: at 4,727 feet, large quantities of oil were tapped in Well Number 7 in the Arab Zone. Thus, discovery was finally made, almost three years after drilling had first begun on Dammam Number 1. Ibn Saud and Saudi Arabia were on the road to fortune. The kingdom’s unity would no longer be dependent upon—or vulnerable to—the fluctuations in the number of the faithful who made the pilgrimage to Mecca.

The discovery of oil in Saudi Arabia set off fevered efforts to obtain concessions there, not only by the Iraq Petroleum Company, but also, more ominously, by German, Japanese, and Italian interests. It appeared to observers that there was a concerted drive by the Axis powers to obtain drilling rights in Saudi Arabia. The Japanese established diplomatic representation in Saudi Arabia and offered what were, in comparison to existing terms, huge sums for a concession within the country and for the King’s interest in the Neutral Zone—altogether what one Saudi official called an offer of “astronomical proportions.” The Japanese also presented Ibn Saud with a gift of classic samurai military armor, though far too small to fit the large monarch. In order to try to gain a foothold, the Germans accredited their minister in Baghdad to Saudi Arabia and opened a permanent mission; they also pursued an arms deal with the Saudis. Meanwhile, Italy kept up a steady campaign of pressure on the Saudis for a concession. But Casoc had, by the secret annex to the 1933 agreement, preference rights to Saudi territory, which it successfully exercised on May 31, 1939, expanding the total area of its exclusive concession to 440,000 square miles—equal to about one-sixth the size of the continental United States. Of course, there was a price to be paid for such loyalty. As Saudi financial needs mounted, Socal found itself repeatedly making loans, totaling several million dollars, to the kingdom.

But there was good reason to be forthcoming, considering the stakes. The discovery in Well Number 7 in March 1938 had opened a new era. Work sped up on creating the required industrial, administrative, and residential development at Dhahran—which would eventually become an American middle-class suburb, an oasis, in the midst of the desert. Immediately after the strike at Well Number 7, a pipeline was begun, linking the oil field to Ras Tanura, a coastal spot that had been chosen as the site for a marine terminal. In April 1939 a great procession of four hundred cars, carrying the King and a huge retinue, crossed the desert to Dhahran, where they encamped in 350 tents. The occasion was the arrival of the Socal tanker D. G. Scofield at Ras Tanura, to pick up the first cargo of oil. With appropriate pomp, King Ibn Saud himself turned the valve through which the first trickle of oil flowed out of Saudi Arabia.30

Socal hastened to spread its exploration over the vast desert. A wildcat well, drilled down to ten thousand feet, indicated the possibility of very large deposits of oil. Meanwhile, production in 1940 got as high as twenty thousand barrels per day. The future seemed ever more promising. But then World War II intruded. In October 1940 the Italians bombed Dhahran, though apparently aiming at Bahrain. A small refinery was started up at Ras Tanura a few months later, in January 1941, but it was closed down the following June. In neighboring Kuwait, operations were suspended because of the war. On orders of the Allied governments, all the wells in Kuwait were plugged with cement, putting them out of commission, for fear that they would fall into German hands.

In Saudi Arabia, too, oil operations were mostly shut down, and the majority of the American employees sent home. A skeleton crew kept production of twelve thousand to fifteen thousand barrels per day going, as feedstock for the Bahrain refinery. But further development was postponed, and the entire enterprise was put in a state of suspended animation. Elsewhere, however, as people began to assimilate what Saudi Arabia’s oil potential might be, and what it might mean, the country’s petroleum reserves would become the object of political power plays more intricate and intense than anything that might have been imagined by the men from Standard of California, King Ibn Saud, or even Philby, who had originally planted the idea of buried treasure in the King’s mind.

Jack Philby had prospered in Saudi Arabia through the 1930s and continued his geographical explorations of the country. After the outbreak of World War II, he tried to become a middleman between Ibn Saud and Chaim Weizmann, leader of the Zionist movement, for a partition of Palestine, but it came to nothing. His habitual anti-British sentiments did not abate. He became obstreperously critical of the Allies, and was arrested on a trip to India and sent back to Britain, where he was put in jail for a half year. He spent the rest of the war writing pamphlets, poetry, and unpublishable books, and tinkering in fringe politics. Returning to Saudi Arabia after the war, he again became an adviser to the King, carried out new explorations, wrote more books, and profitably pursued his trading business in the postwar oil boom. With a young woman presented to him by the King, he also became a father again at the age of sixty-five. After the death of Ibn Saud, however, Philby took to criticizing what he saw as the spendthrift ways under King Saud, Ibn Saud’s son. He was expelled from Saudi Arabia, but after a few years was allowed to return. On a trip to Beirut in 1960 to visit his son Kim, he became ill and was rushed to the hospital. The man whose life had been so eventful and panoramic, so daring and theatrical, now lay unconscious. He awoke for only a moment and murmured to his son, “I am so bored.” And then he expired. On his gravestone in a Moslem cemetery in Lebanon, Kim arranged for a simple inscription: “Greatest of Arabian Explorers.”

And what of Major Frank Holmes—“Abu Naft,” the Father of Oil? He was, of course, the one who imagined, conceived, and promoted the entire Arabian oil venture. In the middle 1940s, when the extent of Arabian oil riches was first beginning to be realized, Holmes—by then ensconced as Kuwait’s oil representative in London—was asked an obvious question. What made him so certain of Arabian oil prospects and so confident, in the face of the virtually unanimous verdict of the world’s leading oil geologists that Arabia would be “oil dry”? To be sure, his early practical experience as a mining engineer had taught him that theoretical advice, however expert or august, could be quite wrong.

But Holmes offered a more simple answer. He tapped his finger to his nose. “This,” he said, “was my geologist.”31

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