A DAPPER GENTLEMAN from Persia, Antoine Kitabgi, carrying the title of general, arrived in Paris toward the end of 1900. Variously said to be of Armenian or Georgian origin, Kitabgi had held several positions in the Persian government, including director general of the customs service. He was, said a British diplomat, “well versed in Western matters—being able to draw up a concession and initiate commercial movements.” Those were the skills appropriate to his mission. For although the ostensible reason for his visit was the opening of a Persian Exhibition in Paris, Kitabgi’s main purpose was something else: He was a salesman—his aim was to find an investor in Europe willing to assume a petroleum concession in Persia. Kitabgi was serving not only his own ends—he certainly expected suitable compensation—but also those of the Persian government, which had important political and economic interests at stake. While the finances of the government of Persia were always muddled, one thing about them was certainly obvious: The government was desperately short of money. The reason? The answer was provided by the Prime Minister—“the Shah’s prodigality.”
What was to flow from General Kitabgi’s efforts would prove to be a business transaction of historic proportions. Though its fate would hang by a thread for years, the deal would initiate the era of oil in the Middle East, eventually propelling that region to the center of international political and economic contention. And Persia itself—or Iran, as it would be known from 1935 onward—would emerge into a prominence on the world stage that it had not enjoyed since the days of the ancient Persian and Parthian empires.1
“A Capitalist of the Highest Order”
In Paris, Kitabgi sought the aid of a retired British diplomat, who, after some consideration, reported back: “Concerning the oil, I have spoken to a capitalist of the highest order, who declares himself disposed to examine the affair.” The capitalist in question was one William Knox D’Arcy. Born in Devon, England, in 1849, D’Arcy had emigrated to Australia, where he became a solicitor in a small town. He also developed an unquenchable passion for horse racing. By nature, D’Arcy was always willing to take a chance, and he took a flyer and organized a syndicate to get an old gold mine back into operation. The mine turned out still to be very rich in gold, and in due course D’Arcy returned to England and the life of an extremely wealthy man. After the death of his first wife, he married a prominent actress, Nina Boucicault, who entertained lavishly; Enrico Caruso even came to sing at their dinner parties. In addition to his house in London, D’Arcy maintained two estates in the country and had the only private box at the Epsom racing track aside from the royal box. He was an investor, a speculator, a putter-together of syndicates, not a manager, and he was looking for a new investment. The prospect of petroleum in Persia attracted him, he was again willing to take a chance, and, in so doing, he would become the founder of the oil industry of the Middle East.
Oil seepages had been noted for centuries in Persia, where the oozings were used for such purposes as the caulking of boats and the binding of bricks. In 1872, and again in 1889, Baron Julius de Reuter, founder of the Reuters news agency, had obtained Persian concessions that provided, among other things, for the development of oil. But both concessions generated great protest within Persia and considerable opposition from Imperial Russia, as well as much waste in haphazard and unsuccessful efforts to find oil. Both ended by being terminated. In the 1890s, a French geologist began to publish reports, based upon his extensive research in Persia, that pointed to considerable oil potential. His work was known to various parties, including General Kitabgi, who, eager to ensnare D’Arcy, promised the millionaire nothing less than “the presence of a source of riches incalculable as to extension.” How could one not be interested? But first the concession had to be won.
On March 25, 1901, D’Arcy’s own representative left Paris, arriving in Tehran, via Baku, on April 16. The negotiations in the Persian capital proceeded slowly and intermittently, and D’Arcy’s man passed his time buying rugs and embroidery. The inveterate intermediary, Antoine Kitabgi, was busier. According to the British minister to Persia, Sir Arthur Hardinge, Kitabgi “secured in a very thorough manner the support of all the Shah’s principal Ministers and courtiers, not even forgetting the personal servant who brings His Majesty his pipe and morning coffee.”2
Russia Versus Britain
Persia could claim a national identity stretching back to the ancient empire of Cyrus the Great and Darius I, which by the fifth century B.C. stretched from India all the way into what today are modern Greece and Libya. Later the Parthian empire emerged out of the region now known as Iran and became the redoubtable eastern rival of the Roman empire. Persia itself was a great crossroads for trade and conquest between Asia and the West. Wave after wave of armies and entire peoples passed through and, in some cases, settled there. Alexander the Great swept in from the West; Genghis Khan and the Mongols, from the East. At the end of the eighteenth century, an avaricious dynasty known as the Qajars succeeded in winning control over a country that had fragmented into the principalities of contending warlords and tribal confederacies. The Qajar shahs ruled uneasily for a century and a half. In the nineteenth century, a country habituated to invasion found itself subject to a new form of foreign pressure—the diplomatic and commercial competition between Russia and Britain for dominance over Persia, which inevitably became a preoccupation of the Qajar shahs, as they sought to play the two great powers off against each other.
The rivalry between Britain and Russia turned Persia into a major issue in Great Power diplomacy. Lord Curzon, Viceroy of India, described Persia as one of “the pieces on a chessboard upon which is being played out a game for the domination of the world.” Beginning in the 1860s, Russia had embarked on a relentless drive of expansion and annexation in Central Asia. The Russians were looking beyond Central Asia, as well, toward controlling neighboring countries and acquiring a warm-water port. To Britain, Russia’s expansion was a direct threat to India and the routes thereto. Any resources put into bolstering Persia against the Russian advance, a British diplomat had said in 1871, were “a sort of premium on the Insurance of India.” Russia was on the move throughout the region; in 1885 it launched an attack on neighboring Afghanistan, which came very close to precipitating war between Russia and Britain.
Russia renewed its pressure on Persia around the turn of the century. In the face of this new push, the British sought ways to keep Persia intact, to serve as a buffer between Russia and India. The two great powers wrangled for influence over Persia through concessions and loans and other tools of economic diplomacy. But, as the new century opened, the British position was precarious, for Persia was in clear danger of falling under Russian sway. Russia was seeking to establish a naval presence in the Persian Gulf, while Persia’s economy was already to a considerable degree integrated into that of Russia. The Shah, Muzaffar al-Din, was “merely an elderly child,” in the words of Hardinge, the British minister, and “the Persian monarchy itself was an old, long-mismanaged estate, ready to be knocked down at once to whatever Foreign Power bid highest, or threatened most loudly its degenerate and defenceless rulers.” Hardinge feared that the foreign power would most likely be Russia, for the “Shah and his ministers were in a state of complete vassalage to Russia, owing to their own reckless extravagance and folly.” The Russians were not much concerned about the economics of the relationship; as one Russian official put it, “What interest do we have in trading with seven or eight million lazy ragamuffins?” Rather, the Russians wanted to assert their political dominion over Persia and exclude the other Great Powers. To Hardinge, an “all-important” objective of British policy was to resist so “detestable” an incursion.
Here was where D’Arcy and his oil scheme could help. A British oil concession would assist in righting the balance against Russia. And thus Britain gave its support to the venture. When the Russian minister found out about the negotiations over D’Arcy’s concession, he angrily sought to block them. He did succeed in slowing the pace. But then D’Arcy’s man in Tehran threw another five thousand pounds onto the table, since, he reported back to D’Arcy, “the Shah wanted some ready money and stood out for some on signing the concession.” That extra money did the trick, and on May 28, 1901, Shah Muzaffar al-Din signed the historic agreement. It provided him with twenty thousand pounds in cash, with another twenty thousand pounds’ worth of shares, as well as 16 percent of “annual net profits”—however that term was to be defined. (And the definition was to prove very contentious.) In turn, D’Arcy received a concession good for sixty years, covering three-quarters of the country.
From the beginning, D’Arcy had deliberately excluded from his proposed concession the five northern provinces, closest to Russia, in order to “give no umbrage to Russia.” But the rivalry between Britain and Russia was hardly finished. The Russians now sought to build a pipeline from Baku to the Persian Gulf that would not only expand their kerosene exports into the Indian market and Asia but also, and more important, project Russia’s strategic influence and power in Persia, throughout the Gulf region, and onto the shores of the Indian Ocean. The British argued hard against the project, both in Tehran and St. Petersburg. Hardinge, the minister in Tehran, warned that the “preposterous” concession for a pipeline, even if it was never built, would “afford an excuse for covering Southern Persia with surveyors, engineers and protecting detachments of Cossacks, preparing a veiled military occupation.” The British opposition succeeded; the pipeline was not built.3
D’Arcy’s negotiator in Tehran was exuberant over the deal he had made. Not only would the scheme benefit D’Arcy, but it would also “have far-reaching effects, both commercially and politically for Great Britain and cannot fail to largely increase her influence in Persia.” The Foreign Office, though refusing to assume any direct responsibility, was certainly willing to give political support to D’Arcy’s efforts. But Hardinge, the man on the spot, was more skeptical. He knew Persia—its political system, its people, the geographical and logistical nightmares, and the decidedly unpromising history of recent concessions in the country. He suggested caution: “The soil of Persia, whether it contains oil or not, has been strewn of late years with the wrecks of so many hopeful schemes of commercial and political regeneration that it would be rash to attempt to predict the future of this latest venture.”
What then drew D’Arcy to such a risky enterprise—to “wildcatting on a colossal scale in a distant unsettled land,” in the words of one historian? The answer, of course, was the irresistible lure of immense wealth, the chance to become another Rockefeller. Moreover, D’Arcy had gambled before, on the Australian gold mine, and with tremendous success. Yet no doubt, if D’Arcy had been able to predict accurately what lay ahead, he would have held back from this new venture. It was a vast gamble, on a much grander scale than his Australian mine, with many more players than he had reckoned on, and a complex political and social dimension that had been wholly absent in Australia. In short, it was not a reasonable business proposition. Even the estimate for expenditures was to be grossly understated. At the outset, D’Arcy had been advised that it would cost ten thousand pounds to drill two wells. Within four years, he was to be out of pocket in excess of two hundred thousand pounds.4
The First Go
D’Arcy had no organization, no company, only a secretary to handle his business correspondence. To put together and run the operations on the ground in Persia, he hired George Reynolds, a graduate of the Royal Indian Engineering College with previous drilling experience in Sumatra. The first site chosen for exploration was at Chiah Surkh, an inaccessible plateau in the mountains of northwestern Persia, near what would later become the Iran-Iraq border, closer to Baghdad than Tehran, and three hundred miles from the Persian Gulf. The terrain was hostile, the entire country altogether had barely eight hundred miles of road, and large parts of the region were ruled by warring tribes that hardly recognized Tehran’s authority—let alone any concession it might grant. Persian Army commanders would rent out their soldiers as gardeners or workmen to local landowners and pocket the wages for themselves.
The population was abysmally lacking in technical skills, and indeed, the hostility of the terrain was more than matched by the hostility of the culture toward Western ideas, technology, and presence. In his memoirs, Hardinge discussed in some detail the dominant Shia sect with its religious zeal, its resistance to political authority, and its fierce antagonism toward all from the outside world, be they Christians or Sunni Moslems. “The hatred of the Shiahs for the first four Caliphs was, and is still, so strong that some of the more enthusiastic members of the sect have, from time to time, sought to hasten their own entrance into Paradise by defiling the tombs of these usurpers and especially that of Omar, the chief object of their hatred at Mecca. It could only be restrained by the doctrine of ‘Ketman’ or pious dissimulation … which renders it lawful for a good Moslem to appear to dissemble or even lie, for a really pious purpose.” He then went on to apologize for giving so much attention to the clash between Shia and Sunni and to the influence of Shia faith on the political system of Persia: “I have touched on this question at perhaps unnecessary length, but it played—and I think still continues to do so—an important part in Persian politics and thought.” And indeed it would continue to do so.
The task ahead was daunting. Each piece of equipment had to be shipped to Basra on the Persian Gulf, transshipped three hundred miles up the Tigris to Baghdad, then carried by man and mule over the Mesopotamian plain and through the mountains. Once the pieces had arrived, Reynolds and his motley crew of Poles, Canadians, and Azeris from Baku struggled to put the machinery together and somehow get it to work. To the Azeris, even the introduction of the lowly wheelbarrow was startling, a major innovation.
D’Arcy himself worried from London that things were not moving fast enough. “Delay serious,” he telegraphed George Reynolds in April 1902. “Pray expedite.” But delay was the order of the day; actual drilling only commenced a half year later, at the end of 1902. The equipment kept breaking down, the insects were incessant, supply of food and parts was a constant problem, and the general working conditions were ruinous. The “infernal heat” in the workers’ quarters got up to 120 degrees.
Then there were the problems of politics. The work camp had to maintain a separate “Mohamedan Kitchen” because of the frequent appearance of various local dignitaries who all seemed, said Reynolds, “very keen on receiving a substantial present from us, especially in the shape of some shares of our Company.” On top of everything else, Reynolds had to be a diplomat of the first order to deal with the petty feuds and open warfare between the various tribes. And the small band in the drilling camp had to be constantly alert to the threat from the Shia faithful. “The Mullahs in the North are exciting the population as much as they can against the foreigners,” Reynolds’s deputy warned D’Arcy. “The real fight is now between the Shah and the Mullahs for the control of the public affairs.”5
“Every Purse Has Its Limits”
Even in such uncompromising circumstances, the work proceeded, and in October 1903, eleven months after drilling had begun, there were the first shows of oil. But D’Arcy quickly discovered that he had gotten himself into something far more difficult and much more expensive than he had imagined: a financial struggle that would threaten the venture at each step. “Every purse has its limit,” he anxiously wrote in 1903, “and I can see the limits of my own.” As expenditures continued to mount, he realized he could not go it alone. He needed to be bailed out. Otherwise, the concession would be lost.
D’Arcy applied to the British Admiralty for a loan. The idea for the loan was not his own, but rather had been inspired by one Thomas Boverton Redwood, “the éminence grise of British oil policy before the First World War,” and a man who had a profound influence on the course of international oil developments in the first two decades of this century. Immaculately dressed, with an orchid in his buttonhole, Redwood was often mistaken for a handsome leading actor of the day, a mix-up in which he took obvious pleasure. Redwood’s achievements in petroleum were wide ranging. A chemist by training, he patented what later proved to be a valuable process of distillation; in 1896, he published A Treatise on Petroleum, which, several times revised, remained the standard work for the next two decades. Already, at the turn of the century, he was Britain’s premier oil expert; his consulting firm was used by almost every British oil company, including D’Arcy’s venture. Redwood also became the leading outside adviser on petroleum to the British government. He saw the advantages to the Royal Navy of burning fuel oil, rather than coal; and, strongly suspicious of both Standard Oil and Shell, he wanted to see oil reserves developed by British companies from sources under British control.
Redwood was a member of the Admiralty’s Fuel Oil Committee. To say that he was familiar with D’Arcy’s concession and its difficulties would be an under-statement, for he advised D’Arcy at every step, and it was surely he who brought D’Arcy’s plight to the attention of the Fuel Oil Committee, whose chairman in turn encouraged D’Arcy to put in for the loan. In his letter of application, D’Arcy outlined the financial pressures he faced; he had spent £160,000 on exploration to date, with at least another £120,000 to be expected. Advised that the loan would be approved, D’Arcy was told to expect in return to give the Admiralty a contract for fuel oil. Both the Admiralty and the Foreign Office supported the proposal. But the Chancellor of the Exchequer, Austen Chamberlain, thought there was no chance that the House of Commons would approve any such loan. He turned it down.
D’Arcy was desperate. “It is all I can do to keep the bank quiet and something must be done,” he wrote after the loan was refused. By the end of 1903 he was overdrawn £177,000 at Lloyds Bank and was forced to put up some shares in his Australian gold mine syndicate as collateral. But in mid-January 1904, the second well at Chiah Surkh turned into a producer. “Glorious news from Persia,” a jubilant D’Arcy declared, adding an altogether sincere personal comment—“the greatest relief to me.” But discovery or no discovery, tens of thousands pounds more, perhaps hundreds of thousands more, would be required to carry on the job, and D’Arcy no longer had access to such resources.
In his search for new investors, D’Arcy tried to secure a loan from Joseph Lyons and Company—to no avail. He dallied for a few months with Standard Oil, but without result. He went to Cannes to see Baron Alphonse de Rothschild, but the Rothschilds decided that they had enough to do with their new links to Shell and Royal Dutch in Asiatic Petroleum. Then, to make matters worse, the flow at Chiah Surkh shrank to a trickle, and Boverton Redwood had the unhappy task of telling his client that the wells would never repay their cost and that they should be closed down—and the entire exploration effort shifted to the southwest of Persia. By April 1904, D’Arcy’s overdraft had increased further, and Lloyds Bank was demanding the concession itself as security. Less than three years after its inception, the Persian venture was on the verge of collapse.6
The “Syndicate of Patriots”
But there were those in the British government who were alarmed that D’Arcy might be forced to sell out to foreign interests or lose the concession altogether. What concerned them were matters of grand strategy and high politics and Britain’s relative position among the Great Powers. For the Foreign Office, the main issues were Russian expansionism and the security of India. In May 1903, the Secretary, Lord Lansdowne, had risen in the House of Lords to make a historic statement: The British government would “regard the establishment of a naval base or of a fortified port in the Persian Gulf by any other power as a very grave menace to British interests, and we should certainly resist it with all the means at our disposal.” This declaration, said a delighted Lord Curzon, Viceroy of India, was “our Monroe Doctrine in the Middle East.” For the Admiralty, the issue was more specific: the possibility of obtaining a source of secure supplies of fuel oil for the British fleet. The battleships, the heart of the Royal Navy, were committed to coal for their fuel. Oil was being used, however, to propel smaller ships. Even that reliance aroused fear about whether there were sufficient quantities of oil in the world on which to base a significant element of British strength. Many doubted it. Those in the Admiralty who did favor oil over coal for propulsion still saw it only as an adjunct, at least until a large, secure supply of petroleum could be identified. Persia might provide that source, and thus D’Arcy’s venture deserved support.
The Treasury’s rejection of D’Arcy’s loan application seemed terribly shortsighted to the Foreign Office, and Lord Lansdowne immediately expressed concern that “there is danger of whole petroleum concession in Persia falling thus under Russian control.” Hardinge, the minister in Tehran, concurred, warning that the Russians might well gain control of the concession and then use it to expand their reach, with dire political consequences. He argued that British majority control in the concession should be maintained at all costs.
The Russians were not the only worry. D’Arcy’s visit to Cannes to see the Rothschilds, with the threat that the concession might pass under French control, galvanized the Admiralty back into action. The chairman of the Fuel Oil Committee hurriedly wrote D’Arcy to ask that, before entering into any deals with foreign interests, he allow the Admiralty the opportunity to arrange for its acquisition by a British syndicate. So the Admiralty had assumed the role of matchmaker, and none too soon. Lord Strathcona, an eighty-four-year-old self-made millionaire with impeccable “imperial” credentials, was asked to become head of a “syndicate of patriots.” After he was assured that the venture was in the interests of the Royal Navy—and in addition, that he would have to invest no more than fifty thousand pounds of his own money—Strathcona agreed, not because of its commercial possibilities, as he later recalled, “but really from an imperial point of view.”
Now the Admiralty had a figurehead. But with whom was it to make the match? The answer was a firm called Burmah Oil. An offspring of the network of trading houses in the Far East, Burmah had been founded by Scottish merchants in 1886, with headquarters in Glasgow. It had transformed primitive oil gathering by Burmese villagers into a commercial industry with a refinery in Rangoon and markets in India. By 1904, it also had a tentative agreement to provide fuel oil to the Admiralty, for Burma was regarded as a secure source owing to its annexation into India in 1885. But the Scottish directors of Burmah Oil worried that supply in Burma would prove limited and that successful development in Persia would flood the Indian market with abundant new sources of cheap kerosene. Thus, they were willing to listen to the Admiralty’s overtures.
The oil consultant Boverton Redwood acted as intermediary. He was an adviser to Burmah, as well as to D’Arcy, and he told Burmah’s directors that Persia could prove rich in oil and that a marriage between the two companies made eminent sense. The Admiralty, meanwhile, insisted that the Persian concession “should remain in British hands and especially from the point of view of supplies for the navy of the future.” But the cautious Scottish merchants, for their part, did not talk grandly and abstractly, nor would they be rushed. They had very practical questions—most important, could Persia be considered under British protection? The Foreign Office, prompted by the Admiralty, reassured them on this point. The impatient D’Arcy, in an attempt to speed up the negotiations, invited Burmah’s vice-chairman to watch the Epsom Derby from his private box, near the winning post. The rich food and drink so upset the vice-chairman’s liver that he was sick four times in the next few weeks, and he never again accepted an invitation from D’Arcy to see the races.
Meanwhile, the Admiralty increased its pressure on Burmah Oil to save D’Arcy, and Burmah Oil in turn obviously needed the Admiralty, both for the fuel oil contracts, which were being negotiated in detail at exactly the same time, and to help protect its markets in India. Finally, in 1905, almost exactly four years to the day after the concession had been initialed by the Shah in Tehran, the match was consummated between D’Arcy and Burmah in London. Their agreement established the so-called Concession Syndicate; D’Arcy’s operation became a subsidiary, and D’Arcy himself a director of the new enterprise. In effect, Burmah became a very special kind of investor, for it provided new capital as well as the management and expertise to carry on. Given the bleak history of previous concessions in Persia and his own lack of luck to date, D’Arcy may well have had no alternative. The important point was that his venture had been saved. At least exploration could now go forward, and D’Arcy still had a chance to get his money out of the deal. The matchmakers, too, were satisfied. As the historian of Burmah Oil put it, D’Arcy’s needs “coincided exactly with those of the Foreign Office, anxious about the route to India, and of the Admiralty, seeking reliable fuel oil supplies.” Henceforth profit and politics would be inextricably linked in Persia.7
To the Fire Temple: Masjid-i-Suleiman
The establishment of the Concession Syndicate was followed by the shift of exploration to southwestern Persia. Under the direction of George Reynolds, the wells were plugged at Chiah Surkh, the camp was closed, and the equipment—some forty tons worth—was dismantled, carried back to Baghdad, shipped down the Tigris back to Basra, and then transshipped to the Iranian port of Mohammerah. Eventually it would be shipped by river, wagon, and mules (as many as nine hundred) to new sites, where there were also indications of oil. Drilling first commenced at Shardin.
But there was another potential site at a place called Maidan-i-Naftan, “the Plain of Oil.” The specific spot, Masjid-i-Suleiman, was named for a nearby fire temple. Reynolds had first made his way to that roadless spot somewhat circuitously. In late November of 1903, he had been marooned in Kuwait, trying to arrange passage back to England, feeling altogether dispirited about D’Arcy’s venture in Persia and its financial problems, and just about ready to pack it all in. But in Kuwait he encountered a British official, Louis Dane. Dane was traveling around the Persian Gulf with Lord Curzon, who was making a grand tour of the region to celebrate the Lansdowne Declaration and to underline British interests in the Gulf. Dane himself was compiling a gazetteer of the Gulf and surrounding lands, and he had come across several references to Maidani-Naftan in both old and recent accounts of travelers. The accounts reminded him of Baku.
At Dane’s strong urging—“it seems a thousand pities to turn up what may be an immense national benefit”—and with the support of Lord Curzon, Reynolds set off for Maidan-i-Naftan. He had reached the desolate region in February 1904, and had reported back that the rocks were saturated with oil. Now, two years later, in 1906, he returned to Masjid-i-Suleiman and found even more extensive indications of oil. When Boverton Redwood saw Reynolds’s report, he was exultant. It contained, he announced, the most important and promising information to date.
The operation at Masjid-i-Suleiman would prove immensely difficult and trying—not “all beer and skittles,” as Reynolds sarcastically informed the Burmah managers in Glasgow. Work was delayed by sickness caused by contaminated drinking water, which, said Reynolds, was “best described as water with dung in suspension.” He added, “The materials afforded for food here are rather trying for any digestion, so that teeth natural or false, are essential if a man is to retain his health.” That point was well taken. When a British military officer later assigned to the concession developed a toothache, he had to survive days of agony—the pain in no way assuaged by the knowledge that the nearest dentist was fifteen hundred miles away in Karachi. At least when it came to sex, the workers could find relief closer to home, a mere 150 miles away in Basra, at what was, by coincidence, euphemistically called the “dentist.”8
George Reynolds was the man who held the whole thing together. Already around fifty when he first arrived in Persia in September of 1901, he would proceed to carry out an unusually difficult enterprise under endlessly trying circumstances. He was at one and the same time engineer, geologist, manager, field representative, diplomat, linguist, and anthropologist. In addition, he had a most valuable knack for jerry-rigging machinery when parts broke or were simply missing. He was taciturn, tough, and tenacious. It was his determination and obstinate commitment that kept the project going when there was every reason—from illness, to extorting tribesmen, to mechanical frustration, to searing heat and unforgiving winds, to endless disappointment—to waver. Arnold Wilson, the lieutenant of the British guards at the site, described Reynolds as “dignified in negotiation, quick in action, and completely single-minded in his determination to find oil.” In short, said Wilson, Reynolds was “solid British oak.”
Reynolds could also be a stern taskmaster. He ordered his men to behave like “reasonable beings,” not “drunken beasts,” and made sure they understood that Persian women were definitely off limits. But the true bane of his existence was not the desert, nor even the local tribesmen. Rather, it was the new investor, Burmah Oil, which he constantly feared would lose its will. The managers in Glasgow seemed unable to comprehend the immense difficulties of the circumstances under which Reynolds worked and could not resist second-guessing him, questioning and impugning his judgment. Reynolds responded with searing and impolitic sarcasm that enveloped the weekly reports he sent back to Scotland. “You really amuse me,” he wrote to his contact in Glasgow in 1907, “by instructing me how to run a contumacious Parsee and an alcoholic driller, both suffering from swelled heads.” The dislike was mutual. “The type machine would not reproduce the words I would like to say about the man,” this Glasgow manager once said.9
Revolution in Tehran
The physical rigors and isolation—and conflicts with the management back in Glasgow—were by no means the only obstacles to success. The Shah’s government was in an advanced state of decay, and the foreigners’ concessions were a major political sore. The conservative religious opponents of the Shah’s regime took the lead in attacking despotism. They joined forces with merchants and groups seeking liberal reforms. In July 1906, the government attempted to arrest a prominent preacher, who had blamed the people’s misery on “the great luxury of Monarchs, some clerics, and the foreigners.” Riots ensued in Tehran as many thousands of Persians, fired up by the mullahs, took to the streets. The bazaars closed; a general strike gripped the capital; and a large crowd, estimated at around fourteen thousand people, mostly from the bazaars, sought refuge in the garden of the British legation. The result was the end of the Shah’s regime, a new constitution, and the establishment of a Majlis or Parliament, which put an investigation of the concession at the top of its agenda. But the new political system proved unstable, and its authority was very weak outside the capital.
Even more troublesome was the matter of local rulers. The new drilling site was in the winter grazing pasture of the Bakhtiari, the most powerful tribal confederacy in Persia, and one over which Tehran had very little say. The Bakhtiaris were nomads, driving flocks of sheep and goats and living in open goat-hair tents. In 1905, Reynolds made an arrangement with some of the Bakhtiaris under which, in exchange for a high fee and promise of a share in profits, they agreed to provide “guards” for the concession. However, among the main things to be guarded against were the Bakhtiaris themselves, and the agreement fell apart because of the constant family feuds and tribal tensions, as well as what seemed the Bakhtiaris’ inveterate tendency toward extortion. Reynolds described one of the Bakhtiari leaders as “a man as full of intrigue as the egg of a nightingale is pregnant with music.” D’Arcy, continually informed of the problems, could only complain, “Of course Baksheesh is at the root of it all.”
The increasing tempo of harassment and threats from local tribes led to new fear for the safety of the enterprise and its works. D’Arcy asked the Foreign Office for protection, and a guard force was eventually dispatched. This was done, the Foreign Office grandly said, because of “the importance attached by His Majesty’s Government to the maintenance of British enterprise in South West Persia.” But it was not much on which to lean—a total of two British officers and twenty Indian cavalry. Meanwhile, the clash between Britain and Russia eased; in 1907, as part of the Anglo-Russian Convention, the two countries sought to put their differences to rest by agreeing to partition Persia into spheres of influence. Both sides had good reasons. Russia had been weakened by its devastating defeat in the Russo-Japanese War and the turmoil of the Revolution of 1905, and St. Petersburg now saw great merit in reaching an accord with London. For their part, the British, in addition to their long-standing fear of “spontaneous infiltration” of Russian influence toward India, were now beginning to worry more about German penetration into the Middle East. Under the 1907 convention, northern Persia was to be under Russian sway, the southeast under British, and the middle a neutral zone. But that middle area happened to be the location of the new drilling sites. The immediate impact of the explicit division of the country into spheres was, as the new British minister in Tehran observed, to give “a great impetus” to the “already existing anti-foreign sentiment.” The partition of Persia was also one of the steps that led to the formation of the Triple Entente of Britain, Russia, and France that, seven years later, would be at war with Germany and the Austro-Hungarian and Turkish empires.10
Racing the Clock
The drilling site, Masjid-i-Suleiman, would be “the last throw of the concessionary dice.” It also presented Reynolds and his crew with the greatest logistical problems yet. The first difficulty was that there was no road. One had to be carved out of the desert in the face of all sorts of hazards, including a torrential rain that wiped out most of a half-year’s effort. Finally, the road was completed, the equipment moved in, and in January of 1908, drilling began at this last site.
But time was fast running out for the Concession Syndicate. Burmah Oil was most unhappy with the slow progress and the large outflow of money. Its vice-chairman suggested that “the whole thing” might “go smash.” All of this put Burmah increasingly at odds with D’Arcy, who was totally committed to the project and who, in turn, was impatient with the Scottish caution. In April 1908, the Burmah board told D’Arcy in no uncertain terms that the money was exhausted and that, unless he himself put up half of the additional funds required, work would stop.
“Of course, I cannot find £20,000 or anything,” D’Arcy plaintively complained, “and what to do I know not.” But he shrewdly concluded that Burmah was too committed to back out. The Burmah directors set an April 30 deadline for D’Arcy’s reply; he simply ignored it, letting the day come and go with no response. He was playing for delay—to give Reynolds in Persia more time. Relations between Burmah and D’Arcy sank to a new low.
With no word from D’Arcy, Burmah acted on its own. It sent off from Glasgow, on May 14, 1908, a letter to Reynolds, saying that the project was over, or nearly so, and that he should be prepared to pack up. The letter instructed Reynolds to carry the two wells at Masjid-i-Suleiman down to no more than sixteen hundred feet. If no oil was found by that depth, Reynolds was ordered to “abandon operations, close down, and bring as much of the plant as is possible down to Mohammerah” and from there, ship the equipment on to Burma. The end of the Concession Syndicate seemed very near. So much for that dream of “riches incalculable” that had been dangled before D’Arcy years earlier. A cable was sent ahead to Reynolds, alerting him to be prepared for an important directive that was being dispatched by post. But, such being the mails in that part of the world, the letter itself was not received in Persia for several weeks. That delay was just what the headstrong Reynolds badly needed.
For even as the letter was making its way to Persia, excitement at the drilling site began to mount. A smell of natural gas could now be detected from one of the wells. Then a drill bit came unscrewed and was lost in the hole; several days were spent fishing for it in temperatures that reached 110 degrees in the shade. The drilling was now going through the hardest rock yet. Vaporous gas, in the powerful sunlight, could clearly be seen rising from the hole. On the night of May 25, 1908, the temperatures were so hot that Arnold Wilson, the British lieutenant of the Indian cavalry guards, went to sleep on the ground outside his tent. Shortly after 4:00 A.M. on the twenty-sixth, he was awakened by shouting. He rushed to the site. A gusher of petroleum, rising perhaps fifty feet above the top of the drilling rig, was smothering the drillers. The accompanying gas was threatening to suffocate the workers.
Oil had, at last, been struck in Persia. It was just two days short of seven years since the Shah had signed the concession agreement. Lieutenant Wilson’s may well have been the first report to get back to England. At least according to legend, he sent it in code: “See Psalm 104 verse 15 third sentence.” At that place, the Bible reads: “that he may bring out of the earth oil to make a cheerful countenance.” Unofficial word reached D’Arcy at a dinner party. He was delighted, but determined to keep his enthusiasm in check. “I am telling no one about it until I get the news confirmed,” he insisted. Confirmation came very shortly, and a few days later, while the first well continued to gush, oil was struck in the second well. Three weeks or so after that, Reynolds received the letter of May 14 from Burmah Oil, ordering him to begin winding down operations. It was a striking echo of the letter half a century earlier that had told Colonel Drake to quit his operations at Titusville, which arrived just as he struck oil. In this case, by the time Reynolds received the letter, he had already sent a cable back to Glasgow, sarcastically saying: “The instructions you say you are sending me may be modified by the fact that oil has been struck, so on receipt of them I can hardly act on them.” The letter itself proved every prejudice Reynolds had about Burmah’s management in Glasgow and gave him a good deal of bitter satisfaction.
Reynolds remained in Persia as chief engineer for a couple of years after the strike at Masjid-i-Suleiman. Yet, despite the discovery, his conflicts with Burmah continued to worsen. D’Arcy tried to protect him, telling Burmah’s directors that Reynolds was “a man who will never by a stupid action imperil the Concession.” But such support could not save him in the face of the hostility that had built up toward him in Glasgow, and in January 1911, he was unceremoniously fired. In his own memoirs, Arnold Wilson offered an epitaph for Reynolds’s service: “He was able to endure heat and cold, disappointment and success, and to get the best out of every Persian, Indian, and European with whom he came in contact, except his Scottish employers, whose short-sighted parsimony had so nearly wrecked a great enterprise. … The service rendered by G. B. Reynolds to the British empire and to British industry and to Persia was never recognized. The men whom he saved from the consequences of their own blindness became very rich, and were honoured in their generation.” In firing Reynolds, the directors of Burmah Oil did manage some grudging praise for him, and they gave him a thousand pounds as a token for his troubles.11
The “Big Company”: Anglo-Persian
On April 19, 1909, the Glasgow branch of the Bank of Scotland was mobbed by fevered investors. Never before had the premises seen such a scene. “Oil on the brain” had suddenly gripped the dour Scottish industrial city. The public stood ten deep at the counter, clutching application forms. At times during the day, it was altogether impossible even to enter the building. The newly incorporated Anglo-Persian Oil Company was going public, and this was the day for the public offering of its stock.
For some months, it had been clear that a very rich source of oil had been found in Persia. All involved were agreed that a new corporate structure now had to be devised to work the concession. But the actual shaping was attended by the inevitable and endless wranglings of lawyers. Moreover, the British Admiralty took exception to the draft prospectus’s “making public” its encouragement of Burmah’s stake in Persia. “As the Admiralty is our prospective good customer, we cannot afford to stamp on their corns,” admitted the vice-chairman of Burmah, and the prospectus was toned down. Objections also arose from an unexpected source, Mrs. D’Arcy. With a flair for the theatrical that befitted the onetime actress, she remonstrated with her husband about the omission of his name from the company’s title. Though he refused to make an issue of it, Mrs. D’Arcy persisted. “This, I think, a great mistake as far and wide his name is associated with this Persian business,” she wrote to D’Arcy’s lawyer. “I am making a last bid for fame to you.”
Her bid failed. Still, while Burmah Oil had taken the majority of the ordinary shares, D’Arcy came out well in the end. He was compensated for the exploration expenses that had so sorely tested his pocket, and he received shares worth a market value of £895,000 (£30 million or $55 million today). Yet D’Arcy could see the venture slipping further from his grasp. “I feel like signing away a child,” he lamented on the day he came to final agreement with Burmah Oil. True, the links of paternity were not quite broken. D’Arcy became a director of the new company, and he pledged his continuing interest—“I am just as keen as ever.” But the influence of this “capitalist of the highest order,” and, as his wife had feared, his very name, faded away even before William Knox D’Arcy’s death in 1917. It was small consolation that Anglo-Persian kept the name “D’Arcy” merely for an exploration subsidiary.
A major new source of oil had been proved, loosely at least under British protection. Anglo-Persian itself very quickly emerged as a significant company. By the end of 1910, it already employed 2,500 people. But still, the organization of its operations in Persia was a complex and problematic business, made even more Byzantine by the clash of corporate and political authorities. Arnold Wilson, by then acting consul in the region, became the de facto adviser on local affairs to the company, which he found to be a continually trying experience. “I have spent a fortnight upon Oil Company business, mediating between Englishmen who cannot always say what they mean and Persians who do not always mean what they say. The English idea of an agreement is a document in English which will stand attack by lawyers in a Court of Justice: the Persian idea is a declaration of general intentions on both sides, with a substantial sum in cash, annually or in a lump sum.”
An oil field at least ten miles square was soon proved in the area, creating a new problem—how to get the crude oil out and then get it refined. A 138-mile pipeline, crossing two ranges of hills and a desert plain—its route initially marked out by sticks and calico flags—was built in a year and a half. Six thousand mules were enrolled in the effort. The site chosen for a refinery was Abadan, a long, narrow island of mud flats and palm trees in the Shatt-al-Arab, the extended estuary of the Tigris, Euphrates, and Karun rivers. The laborers were mainly Indians from Burmah’s Rangoon refinery, and the construction was badly done. On its first test, in July 1912, the refinery immediately broke down. Thereafter, it operated far below capacity. The quality of its products was also poor; the kerosene had a yellowish tinge and filmed up lamps. “It has been,” an exasperated director of Burmah said in September 1913, “one chapter of misfortunes after another since the Refinery first tried to start.”
In October of 1912, Anglo-Persian took a significant step to assure itself of markets by making an arrangement with Asiatic, the trading arm of Royal Dutch/Shell. Beyond local markets, Anglo-Persian would sell crude and all its gasoline and kerosene through Asiatic, but reserved the rights to its fuel oil, on which it was preparing to base its strategy for future growth. At this stage, Anglo-Persian simply could not afford the costs of challenging the established giants to a marketing war. Shell, for its part, wanted to contain any new threats; as Robert Waley Cohen wrote to his colleagues in The Hague, “the situation of these people, apparently with very large supplies, made them rather a serious menace in the East.”
But the menace was mitigated by the fact that Anglo-Persian soon found itself in deep financial trouble. Once again, the very survival of the Persian venture was in doubt. By the end of 1912, the company had exhausted its working capital. John Cargill, the chairman of Burmah Oil, was blunt. “What a hell of a mess Persian things are in,” he wrote. “It’s all very well to say ‘don’t worry,’ but my name and business reputation are too closely associated with the Anglo-Persian Oil Company to admit of my not being terribly anxious and worried over the present horrible state of affairs.”
Millions of pounds were needed for development, but there was no obvious way to get new capital. Yet, without an infusion of funds, the effort in Persia would grind to a stop, or the whole enterprise might simply be swallowed by Royal Dutch/Shell. A few years earlier, Burmah had saved the day. Now a new savior would have to be found.12