OIL AND GRAND STRATEGY:

GREAT BRITAIN AND GERMANY, 1918-1941

A Dissertation
submitted to the Faculty of the
Graduate School of Arts and Sciences
of Georgetown University
in partial fulfillment of the requirements of the
degree of
Doctor of Philosophy
in History

By

Anand Toprani, M.Phil.

Washington, DC
August 20, 2012
Copyright 2012 by Anand Toprani
All Rights Reserved

ii
OIL AND GRAND STRATEGY:
GREAT BRITAIN AND GERMANY, 1918-1941
Anand Toprani, M.Phil.
Thesis Advisor: Professor David S. Painter, Ph.D.
Abstract
This study examines how oil shaped grand strategy in Great Britain and
Germany between 1918 and
1941. The history of oil in the twentieth century is a chapter in the
story of European decline. The
emergence of oil accelerated Britain and Germany’s decline as great
powers capable of independently
exerting their economic and military power. Having fought the First World
War largely with oil from the
United States, Britain was determined to avoid basing its energy security
upon the goodwill of another
great power. After 1918, London undertook a policy of developing
alternative sources of oil under British
control. In the future, Britain’s key supplier would be the Middle East,
already a region of vital
importance to the British Empire. This quest for energy independence from
the United States was a
failure. The empire was bereft of oil, while Italian hostility threatened
British transit through the
Mediterranean. A shortage of tankers also forced Britain to import oil
from U.S.-controlled sources in the
Western Hemisphere, which depleted Britain’s reserves of foreign
exchange.
Germany could not import oil from overseas in wartime due to the threat
of blockade, while
accumulating large stockpiles was impossible because of its shortage of
foreign exchange. The Third
Reich based its oil supply on petroleum synthesized from coal, limited
domestic crude oil production, and
imports from Romania. By 1939, Berlin was confident that Germany had
enough oil to fight a war first
against the Allies and then the Soviet Union. Victory would allow the
Third Reich to occupy the oilfields
of the Caucasus and the Middle East, thereby creating the economic
foundations for Germany to become
a world power. This plan began to falter after the defeat of France, when
Germany found itself
responsible for meeting Europe’s energy requirements while still at war
with Britain. An escalating oil
crisis in Axis Europe, a lack of strategic alternatives, and the
imperatives of National Socialist ideology,

iii
all compelled the Third Reich to invade the Soviet Union in June 1941 to
seize enough resources to fight
Britain and eventually the United States before the balance of power
turned against Germany.

iv
Acknowledgments
I am a little embarrassed to see how little I have managed to accomplish
in graduate school on my
own. Every word that appears in this dissertation was only made possible
through the labor, generosity,
and patience of innumerable friends and colleagues – quite a compliment
considering the length of the
manuscript. If I appear modest, to paraphrase Winston Churchill, it is
only because I’ve got a lot to be
modest about.
An historian is only as good as his sources, and our access to said
sources depends upon the good
graces of unnamed, too-often forgotten archivists, who fulfill the
thankless task of keeping records open
and accessible to scholars. Accordingly, I would be committing an
unpardonable sin if I did not first
acknowledge the archivists of the following institutions, without whom
this dissertation would have been
shallow indeed: in the United States, the National Archives in College
Park, MD, and Washington, DC,
the Library of Congress, the Division of Manuscripts and Archives at the
Yale University Library, and the
Franklin Delano Roosevelt and Herbert Hoover presidential libraries; in
the United Kingdom, the
National Archives and the British Petroleum Archive; and in Germany, the
Bundesarchiv, BerlinLichterfelde, the Bundesarchiv-Militärachiv, the
Politische Archiv des Auswärtigen Amtes, and the
Archiv der Bundesanstalt für Geowissenschaften und Rohstoffe. I wish to
make special reference to Amy
Schmidt, who was my guide to the Military Records at College Park. The
National Archives will not be
same once archivists with her skill have been entirely replaced by
digital finding aids.
The staff of the Georgetown and Yale university libraries also provided
an invaluable service by
tracking down numerous books through interlibrary loans. By struggling
mightily to keep the university’s
decrepit microfilm readers functioning throughout my period of research,
the staff at Georgetown allowed
me to complete an immense amount of preliminary research on campus before
I even set foot in the
archives. This gave me the luxury of delving more deeply into under-
utilized archival collections, since I
had already plucked the low-hanging fruit. Toshiro Higuchi, David
Painter, and Paul Simmons also went
out of their way to acquire documents for me from the following archives
that I was not able to visit: the

v
American Heritage Center (University of Wyoming), the Hoover Institution
(Stanford University), the
Imperial War Museum (Duxford), and the J. Seeley Mudd Library (Princeton
University).
In spite of my renowned (some might say infamous) frugality, graduate
school would not have been
possible without extensive financial support from a variety of
institutions. Georgetown’s history
department took the first step by providing me with a fellowship that
included a non-service year that I
devoted to the writing of my most of my dissertation. The Smith
Richardson Foundation, the George C.
Marshall Foundation, the Young Scholars Program of the Cosmos Club
Foundation, and the Herbert
Hoover Library Foundation all provided me with financial assistance to
complete my research in the
United States and Europe. It is still a source of amazement that anyone
would actually give money to a
ne’er do well graduate student to spend summers in England and Germany,
but I am not complaining.
Maria Snyder, the Grants Administrator at Georgetown’s Graduate School of
Arts & Sciences, went out
of her way to help me identify and apply for numerous research grants and
fellowships.
No short set of acknowledgements can do justice to the many friends and
colleagues whose
consideration sustained me through graduate school. I wish to express my
gratitude first to the members
of my dissertation committee: Michael Dennis, Richard Kuisel, David
Painter, and Aviel Roshwald.
Roger Chickering was also a source of encouragement and facilitated my
visits to German archives. I
want to thank Michael Dennis for his friendship, as well. I hope this
dissertation validates in some small
way the years of guidance he has provided to me since our paths initially
crossed more than a decade
(and, in my case, more than thirty pounds) ago, when I took my first
class with him at Cornell.
Beyond Georgetown faculty, Geoffrey Megargee of the U.S. Holocaust Museum
also shared with me
with his many insights regarding the operations of the German High
Command during the Second World
War. Kairn Klieman of the University of Houston was enthusiastic about
bouncing ideas off one another
and reading fellowship applications. Peter Hayes of Northwestern
University shared his knowledge of the
postwar exploits of a mysterious IG Farben executive who figures
prominently in my story. Ray Stokes of
the University of Glasgow not only kindly answered my inquiries but also
provided me with copies of

vi
some important documents from the BASF Archive in Ludwigshafen. David
Edgerton of Imperial
College, London, forced me to question my assumptions about British
history.
Among my small band of friends at Georgetown including Paul Adler, John
Bowlus, Eric Gettig,
Emrah Safa Gurkan, Toshihiro Higuchi, Onur Isci, Evelyn Krache Morris,
Nick Naroditski, Graham Pitts,
Joel Suarez, and Andy Wackerfuss, I must emphasize the contributions of
Bjoern Hofmeister. It is one of
my greatest regrets at Georgetown that our paths did not cross until
after my fourth year of graduate
school. Bjoern was my indispensable guide to Germany and the
Bundesarchiv, for which I will be
eternally grateful. Bjoern was always ready to lend a hand when it came
to dealing with German
archivists, and both he and Oliver Bast helped me to overcome my mediocre
command of the German
language. Bjoern was also a gracious host during my two research trips to
Berlin in 2010 and 2011.
Without him, a good half of this dissertation would doubtless be weaker.
Finally, Bjoern spared no effort to arrange for me meetings with two pre-
eminent scholars of German
oil policy during the Third Reich in July of 2011: Dietrich Eichholtz and
Rainer Karlsch. Prof.
Eichholtz’s pioneering studies on the history of the German war economy
and German oil imperialism
during the first half of the twentieth century were among the few truly
indispensable secondary sources I
consulted during the research and writing of this dissertation. In spite
of the fact that he and I differed on
several points regarding the oil policy of the Third Reich, Prof.
Eichholtz was unfailingly gracious and
encouraged me to carry on his work. I consider this task to be a great
honor.
I must express my gratitude for the unstinting friendship and
encouragement of Richard Moss. Rick
and I established a close bond during our eminently forgettable years
together at the State Department’s
historical office. I have come to depend upon the warmth Rick, his wife,
Amy, and his son, Sam,
extended to me during the lonely process of researching and writing the
dissertation. Rick and his family
have always demonstrated a faith in my scholarship and character I
consider entirely unwarranted, but
nonetheless find immensely gratifying.
By some extraordinary stroke of good fortune, International Security
Studies at Yale University
awarded me a Smith Richardson Pre-doctoral Fellowship for the 2011-2012
academic year. Yale’s
vii
munificence ensured that the final product was superior to anything I
could have produced on my own if I
was scrambling to defend the dissertation before my savings ran out. New
Haven deserves its reputation
as the “Baltimore of Connecticut,” but I at least had the support of
numerous ISS colleagues, including
Jeremy Friedman, Wayne Hsieh, Nathan Kurz, Charlie Laderman, the “real”
Chris Miller, Chapin
Rydinsward, Adam Tooze, and Zack Wasserman. Scott Boorman was a constant
source of encouragement
and introduced me to the study of logistics history. Oliver Bast, Paul
Solman, and Gagan Sood lent me
their friendship, as well as their counsel. Finally, I am indebted to
Ryan Irwin and Paul Kennedy for
taking a chance on me in the first place. I hope they were not
disappointed.
Last, but not least, what can I say about the one truly indispensable
person I have known during the
entire ordeal of graduate school, my Doktorvater, David Painter. Prof.
Painter recruited me to
Georgetown from Oxford and spent many months encouraging (some might say
haranguing) me to follow
in his footsteps by writing a study of oil and international relations. I
could not have asked for a more
knowledgeable and supportive doctoral supervisor. Through the many peaks
and valleys of graduate
school, Prof. Painter was a constant source of encouragement. Perhaps the
greatest tribute I can pay him is
the admission that neither this dissertation nor the many awards I have
won would have been possible
without him. If this dissertation sings rather than simply squawks, the
credit belongs to him.
Since I’ve given away the credit for pretty much everything I have
accomplished over the past six
years, I might as well take what is left and assume responsibility for
any analytical or grammatical
shortcomings in this dissertation. At least that way I will not leave
graduate school empty handed.
One final piece of administrative housekeeping: This dissertation is
based entirely on declassified,
publicly available records at government and private archives in the
United States, Great Britain, and the
Federal Republic of Germany. The views expressed herein are entirely my
own and not necessarily those
of the U.S. Government.
11 October 2010, Fairfax, VA
25 July 2012, New Haven, CT

viii
Table of Contents
Introduction
Oil, Grand Strategy, and a World at War
.........................................................................
............................. 1
Chapter I
The Allure of Energy Independence: Britain, 1918-1921
.........................................................................
.. 31
Chapter II
The Years of Complacency: Britain, 1921-1932
.........................................................................
............... 99
Chapter III
The Reality of Dependence: Britain, 1932-1939
.........................................................................
............. 178
Chapter IV
Making Do with Less: Germany, 1918-
1936.....................................................................
....................... 268
Chapter V
Fueling War: Germany, 1936-1939
.........................................................................
................................. 345
Chapter VI
Crisis and Opportunity: Germany, 1939-1941
.........................................................................
................. 409
Chapter VII
Oil and Operation Barbarossa: Germany, 1941
.........................................................................
............... 483
Conclusion
Oil and the Illusion of Grand Strategy
.........................................................................
............................. 521
Appendix
Bibliographical Essay
.........................................................................
...................................................... 541
Bibliography
.........................................................................
.................................................................... 553

ix
List of Maps
Map 1: Proven and Probable World Oil Reserves, no date (circa 1921)
.................................................... 26
Map 2: Regional Shares of World Oil Production, no date (circa 1921)
.................................................... 27
Map 3: “Export Movements of Crude Petroleum and its Products among
Continents – 1938 [in barrels per
day],” December 1942
.........................................................................
..................................................... 168
Map 4: “Oilfields & Concession Areas in the Middle Eastern Countries
Together with Neighbouring
Oilfields in the U.S.S.R.,” March 1945
.........................................................................
........................... 172
Map 5: Areal Comparison of Major Oil Concessions in the Middle East
against the United States, no date
(circa 1939/41)
.........................................................................
................................................................. 173
Map 6: Oilfields, Pipelines, and Refineries of the Middle East, no date
(circa 1943) .............................. 174
Map 7: “The Western Axis Oil Position,” 1943
.........................................................................
.............. 408
Map 8: “Petroleum Production in Europe and the Near East,” 23 February
1942 ................................... 480
Map 9: “The Crude Oil of the Near East,” 07 March 1941
......................................................................
481
Map 10: “Crude Oil [in] the Caucasus and Near Orient,” 22 January 1942
............................................. 482

x
List of Illustrations
Illustration 1: “World Crude Oil Production,” 22 February 1945
.............................................................. 28
Illustration 2: “Production – Eastern Hemisphere,” 22 February 1945
...................................................... 29
Illustration 3: “Production – Western Hemisphere,” 22 February 1945
..................................................... 30
Illustration 4: “World Consumption vs. World Production [of] Petroleum,”
1938 .................................. 169
Illustration 5: “Financial Control by Countries of Proven Petroleum
Reserves Inclusive of U.S.A.,”
Western Hemisphere, no date (circa 1938)
.........................................................................
...................... 170
Illustration 6: “Financial Control by Countries of Proven Petroleum
Reserves,” Eastern Hemisphere, no
date (circa 1938)
.........................................................................
.............................................................. 171
Illustration 7: “Petroleum Reserves of the World,” 22 February 1945
..................................................... 175
Illustration 8: “Division of Proved Reserves,” 22 February 1945
............................................................ 176
Illustration 9: “Refining Capacities – Worldwide,” 22 February
1945..................................................... 177

xi
Abbreviations and Acronyms
(Translations in Brackets)
AA: Auswärtiges Amt (German Foreign Office)
a.D.: auβer Dienst (Retired)
ADM: Admiralty
AG: Aktiengesellschaft (Corporation)
AIOC: Anglo-Iranian Oil Company
AIR: Air Ministry
APOC: Anglo-Persian Oil Company
BA-B: Bundesarchiv, Berlin-Lichterfelde
BA-MA: Bundesarchiv-Militärarchiv, Freiburg
BAPCO: Bahrain Petroleum Company
BASF: Badische Anilin- und Soda-Fabrik
BGR: Archiv der Bundesanstalt für Geowissenschaften und Rohstoffe
BNA: British National Archives
BOD: British Oil Development Corporation
BOT: Board of Trade
BP: British Petroleum
BRABAG: Braunkohle-Benzin AG
BVJP: Beauftragter für den Vierjahresplan (Plenipotentiary for the Four-
Year Plan)
CAB: Cabinet Office
CFP: Compagnie Française des Pétroles
CID: Committee of Imperial Defence
CO: Colonial Office
DGFP: Documents on German Foreign Policy
DEA: Deutsche Erdöl
xii
DPAG: Deutsche Petroleum A.G.
EPU: Europäische Petroleum Union
FO: Foreign Office
F-T: Fischer-Tropsch Process
GmbH: Gesellschaft mit beschränkter Haftung (Limited Liability Company)
GPO: Government Printing Office
Gulf: Gulf Oil Company
HaPol: Handelspolitische Abteilung, Auswärtiges Amt (Commercial Policy
Division)
HMSO: His/Her Majesty’s Stationary Office
HWA: Heereswaffenamt (Army Ordinance Office)
IBC: International Bergin Company
ICI: Imperial Chemical Industries
IPC: Iraq Petroleum Company
IWM: Imperial War Museum
Jersey: Standard Oil Company of New Jersey
Konti: Kontinentale Öl AG
KOC: Kuwait Oil Company
LOC: Library of Congress
MGFA: Militärgeschichtliches Forschungsamt
MID: Military Intelligence Division
MUN: Ministry of Munitions
NARA: National Archives and Records Administration
NEDC: Near Eastern Development Corporation
NSDAP: Nationalsozialistische Deutsche Arbeiterpartei (National Socialist
German Workers’ Party)
OKH: Oberkommando des Heeres (Army High Command)
OKM: Oberkommando der Marine (Naval High Command)
xiii
OKW: Oberkommando der Wehrmacht (Armed Forces High Command)
PAAA: Politisches Archiv des Auswäritgen Amtes
PIPC: Petroleum Imperial Policy Committee
POWE: Ministry of Fuel and Power
PPR: Sub-Committee on Petroleum Products Reserves
PREM: Office of the Prime Minister
RAF: Royal Air Force
RArbM: Reichsarbeitsministerium (Reich Ministry of Labor)
RfB: Reichstelle/Reichsamt für Bodenforschung (Reich Office for Soil
Exploration)
RFM: Reichsfinanzministerium (Reich Ministry of Finance)
RG: Record Group
RKM: Reichskriegsministerium (Reich Ministry of War)
RLM: Reichsluftfahrtministerium (Reich Ministry of Aviation)
RM: Reichmark
RUSI: Journal of the Royal United Service Institution
RVM: Reichsverkehrsministerium (Reich Ministry of Transportation)
RWA: Reichstelle/Reichsamt für Wirtschaftsausbau (Reich Office for
Economic Development)
RWehrM: Reichswehrministerium (Reich Ministry of Defense)
RWM: Reichswirtschaftsministerium (Reich Ministry of Economics)
RWP: Reichsamt für wehrwirtschaftliche Planung (Reich Office for Defense-
Economy Planning)
Shell: Royal Dutch/Shell
SKL: Seekriegsleitung (Naval Warfare Command)
SOCAL: Standard Oil Company of California
T: Treasury
TBM: Technische Brigade Mineralöl (Technical Petroleum Brigade)
TPC: Turkish Petroleum Company
xiv
USSBS: United States Strategic Bombing Survey
VJP: Vierjahresplan (Four-Year Plan)
Vowi: Volkswirtschaftliche Abteilung (Economic Division, IG Farben)
WFO: Wirtschaftsführungstab Ost (Economic Command Staff)
WFSt: Wehrmachtsführungsstab (Armed Forces Operations Staff)
WiRüAmt: Wehrwirtschafts- und Rüstungsamt (Defense-Economy and Armaments
Office)
WSO: Wirtschaftsstab Ost (Economic Staff, East)
WStb: Wehrwirtschaftsstab (Defense-Economy Staff)
WO: War Office
YUL: Yale University Library, Manuscripts and Archives

xv
Introduction
Oil, Grand Strategy, and a World at War
The availability or lack of oil profoundly influenced international
affairs throughout the twentieth
century. Although most scholars understand that oil played a significant
role in many of the great power
contests of the last century, they do not always grasp the how and why.
This is particularly the case when
it comes to the two global conflicts of the first half of the twentieth
century, the world wars, not to
mention the volatile interwar period.1 The evolution of oil from a purely
commercial product into a
strategic commodity began in 1912, when the Royal Navy shifted to burning
oil rather than coal for fuel.
Although the contribution of oil to the outcome of the First World War
was marginal, after 1918,
policymakers around the world understood that ample and secure supplies
of oil were a necessary – if not
sufficient – prerequisite for both economic prosperity and national
security. During the Second World
War, oil played a vital role not only by facilitating or hindering
military operations, but also as an object
of grand strategy. The increasing mechanization of warfare played to the
strengths of the Allies, whose
massive economic and industrial superiority over the Axis was
complemented by ample and relatively
secure supplies of oil. Control of major oil reserves, most notably those
of the Middle East, also figured
prominently in the war aims of both the Allied and Axis powers.
This study will demonstrate how oil shaped and constrained grand strategy
– the long-term pursuit of
national interests during both peace and war – in Great Britain and
Germany after the First World War.
Oil’s significance to grand strategy reveals itself through the dynamic
interaction between each nation’s
objectives on the one hand, and a variety of factors that determine
access to oil on the other, including
petroleum geology, geographical constraints, logistical exigencies,
technological change, and financial
limitations such as the availability of foreign exchange. Within the
realm of international politics, the
evolution of oil from an illuminant (to replace whale oil) into the
premiere source of propulsion fuel (with
the concomitant displacement of coal) accelerated and perhaps even
precipitated Britain and Germany’s
decline as great powers capable of independently exerting their
considerable economic and military
1

See the appendix to this study for additional discussion of secondary

sources.

1
strength.2 Ironically, just as geography and geology had facilitated
Europe’s rise to global hegemony
following the discovery of the New World, those two factors also
conspired to place it at a tremendous
disadvantage during the Age of Oil. The history of oil in the twentieth
century is therefore also a chapter
in the story of European decline.
In the age-old struggle waged by scholars over the role of structure vs.
agency in history, this study
comes down decisively on behalf of the former. If there is a strong whiff
of economic and geographical
determinism within the thesis, it seems justified when we are talking
about the contest for possession of a
natural resource that exists in finite quantities in only certain parts
of the world. It is also difficult to
overlook the fact that victory during both of the world wars came to the
alliance that enjoyed a massive
superiority in economic resources and materiel. Of course, no scholar
can, as one historian concedes,
“support the proposition that only natural resources structure the
underlying competition among nations.”3
Nonetheless, even allowing for various externalities, to paraphrase
Abraham Lincoln, geological and
geographical facts can be stubborn things. Geologically speaking,
countries may or may not be favored
with domestic sources of oil (the United States and the Russia/Soviet
Union vs. Britain, Germany, and
Japan). Those countries that lost out on the random allocation of natural
petroleum reserves had no option
but to import oil or produce synthetic alternatives for those purposes
where no suitable substitute existed.
Geography dictated whether the former could be done cheaply by water
(Britain) or expensively by land
(Germany) during periods of crisis, whereas the technological and
economic obstacles to the latter –
assuming that sufficient coal was ever available – were beyond the
capacity of most nations to surmount.4

Geopolitics is a notoriously slippery concept, but my definition is

borrowed from David Haglund: “I use it in a
restrictive sense that connotes a connection between geography, politics,
and the question of access to needed raw
materials.” David Haglund, “‘Gray Areas’ and Raw Materials,” Inter-
American Economic Affairs 36: 3 (1982): 2351 (quotation from pg. 24).
Implicit within this understanding of international politics is the idea
that “states are
locked into an almost Darwinian struggle” for strategic, political, and
economic supremacy. Ronald Hyam, Britain’s
Declining Empire: The Road to Decolonisation, 1918-1968 (Cambridge:
Cambridge University Press, 2006), 73.
3
Alfred Eckes, The United States and the Global Struggle for Minerals
(Austin: University of Texas Press, 1979),
ix. Emphasis in the original.
4
Although it was still a great power as of 1939 and possessed large
domestic reserves of coal, France was incapable
of adopting synthetic fuel as a major source of petroleum. For one thing,
the production of synthetic fuel was tightly
regulated by the holders of the most promising patents, who actively
discouraged their use in France. Gregory
Nowell, Mercantile States and the World Oil Cartel, 1900-1939 (Ithaca:
Cornell University Press, 1994), 227-252.
Additionally, French coal production was insufficient to meet the
additional demand – France already imported one-

2
The shift from coal to oil, which harmed Britain and Germany relative to
the United States and
Russia/Soviet Union, cannot be explained in purely geological terms,
since it would have been preferable
for the Europeans to continue relying on their substantial coal reserves.
Technological change took
matters out of their hands once soldiers and statesmen realized after
1918 that future wars would be
fought largely by and sometimes even for oil.
It would be misleading, however, to dismiss the relevance of human
agency, even if it played only a
secondary role vis-à-vis the immutable facts of geography and geology,
not to mention impersonal
developments such as technological change. Britain and Germany occupied
different roles within the
international system: the former was a maritime power and the leading
defender of the status quo,
whereas the latter (with occasional intermissions) was a revisionist
continental power that spent decades
undermining first the Concert of Europe and then the Anglo-American world
order by all manner of
peaceful and violent methods. But the simple fact of their divergent
outlooks concerning the post-1815 or
post-1919 international settlements is less an explanation than an
observation, for it tells us little about
why policymakers made (or could not make) certain choices, and why those
choices may or may not have
proved wise in hindsight.
One plausible means by which to assess the role of individuals or groups
of policymakers is through
the prism of logistics. Among the themes that run throughout this study
is that policymakers and planners
had to grapple with the constraints imposed by logistics particularly in
the case of oil, for the mere
possession of an oilfield did not by itself translate into economic or
military strength unless one also had
the means of exploiting its stored energy. Logistics demanded that
policymakers make hard choices about
the allocation of scarce resources needed to acquire and maintain access
to sources of oil, such as tankers
and pipelines for Britain, or coal, steel, foreign exchange, and
ultimately military force in the case of
Germany. The decisions taken by policymakers were rarely made on the
basis of “rational” economic
factors such efficiency but rather were informed by wider geopolitical
and ideological considerations.

third of its hard coal requirements (25,000,000 tons) by the mid-1930s.

“Ölstrategie,” Militär-Wochenblatt, 121.
Jahrgang, Nummer 27 (15 January 1937).

3
By logistics, I am referring to something more profound than the mere
science of “supplying war” or
one of the “forgotten dimensions of strategy” (alongside technological
and social forces), both of which
imply that logistics is concerned simply with equipping armies.5 A more
sophisticated definition that
conveys the interrelationship between logistics and policy is “the
creation and sustained support of
weapons and forces to be tactically employed to attain strategic
objectives.”6 Yet even this description
seems too narrow in scope by suggesting that logistics is but a creature
of war. Even private companies
must develop elaborate methods of supply chain management to further
their commercial objectives. One
of the reasons why the major oil companies vertically integrated their
upstream (exploration and
production) and downstream (refining, transportation, and retailing)
operations in the nineteenth century
was the desire to mitigate their logistical costs.7 We might therefore
profit from a more expansive
definition of logistics as the management of economic resources – human,
capital, or material – in the
service of wider strategic ambitions (since logistics, by its very
nature, “must always accompany the
strategic imagination”).8 Logistics thereby becomes an essential stage in
the process of converting
economic potential into strategic power.
Once we include the exigencies of logistics within our analytical
framework, we recognize that
although the inevitability of Europe’s economic and military decline was
inescapable, the timing and
manner of this decline was by no means preordained. Policymakers, by the
choices they made about how
to manage their existing resources or acquire new ones, determined the
pace and costs (both economic
and human) of decline, whether it was gradual and relatively bloodless
(Britain) or abrupt and gruesome
(Germany). Deterministic factors such as geology or geography alone
cannot explain why National
5

Martin Van Creveld, Supplying War: Logistics from Wallenstein to Patton

(New York: Cambridge University
Press, 2004); and Michael Howard, “The Forgotten Dimensions of Strategy,”
Foreign Affairs 57: 5 (1979): 975-979.
6
Scott Boorman, “Fundamentals of Strategy: The Legacy of Henry Eccles,”
Naval War College Review 62: 2
(2009): 100.
7
One of the best short explanations of why the major oil companies adopted
vertical integration remains: Edith
Penrose, The Large International Firm in Developing Countries: The
International Petroleum Industry (Cambridge:
MIT Press), 150-172. The fundamental objective of such measures (whether
pursued by private companies or even
national governments through cartels such as the Organization of
Petroleum Exporting Countries) is to regulate
production and thereby control the price of oil. This is because in the
oil industry, by contrast to other industries
where output is manufactured rather than discovered, the price of oil
(rather than demand, which tends to be fairly
inelastic) has heretofore been the most important factor determining its
supply.
8
Boorman, “Fundamentals of Strategy,” 96.

4
Socialist Germany opted for costly overland imports from within Europe
and even more expensive
synthetic alternatives instead of just importing oil cheaply from low-
cost producers in the Western
Hemisphere and the Middle East. By the same token, whereas geopolitics
and ideology play an
indispensable role in defining the “strategic imagination” of
policymakers, neither is a sufficient
explanation. Just as geopolitical imperatives drove Britain to import oil
from the Middle East, and
Germany oil from Romania, logistics determined the extent to which this
was possible. By setting limits
between what is practical as opposed to desirable, logistics serves as
the final filter through which policies
must be sifted before we can determine their success or failure.
Many historians have commented upon the role played by natural resources
such as arable land and
energy in facilitating Europe’s rise between the discovery of the New
World – itself a product of Europe’s
relative poverty at the time compared to other regional units within
Eurasia – and the Industrial
Revolution – which itself depended upon the presence of plentiful coal
deposits within Europe.9 A
number have expressed skepticism about the significance of raw materials
in relation to other factors such
as natural diversity, technological change, political-economic evolution,
and sometimes even culture.10
“[Resource] endowment is not very helpful in explaining change,” one
historian argues, for “Resources

Basically, over the course of three centuries, the land, agricultural

produce (food, cotton, and tobacco, in
particular), and precious metals of the New World allowed Europe to
escape the environmental constraints imposed
by its scarcity of arable land and develop a comparative advantage
relative to the rest of Eurasia in terms of overseas
trade. The specie of the New World also facilitated European trade with
and political infiltration of South Asia and
the Far East. By the nineteenth century, Europe’s peasantry could either
be exported to the colonial periphery or
integrated into the Continent’s burgeoning industrial labor force. This
nascent proletariat was increasingly fed with
calories produced in the New World, while the factories that employed
them depended upon inputs imported
initially from the New World (cotton) as well as indigenous sources of
hydrocarbon energy (coal). The interaction of
these factors exponentially increased Europe’s economic productivity
compared to those societies lacking access to
colonial “ghost acres” and still relying on organic sources of energy
(human and animal labor). The most important
recent study in this line of historical inquiry is Kenneth Pomeranz’s
Great Divergence: China, Europe, and the
Making of the Modern World Economy (Princeton: Princeton University
Press, 2000), 17-23 and 264-297 (esp. 274285). Pomeranz’s thesis is ably
summarized in: P.H.H. Vries, “Are Coal and Colonies Really Crucial?
Kenneth
Pomeranz and the Great Divergence,” Journal of World History 12: 2
(2001): 423-428.
10
For useful critiques of Pomeranz’s work and an introduction to the wider
historiographical debate over Europe’s
“rise” (which is really separate from the question of the “great
divergence” between Europe and Asia), see: Vries,
“Coal and Colonies,” 407-446 (esp. 428-438 for Britain); and Patrick
O’Brien, “Ten Years of Debate on the Origins
of the Great Divergence,” Reviews in History,
http://www.history.ac.uk/reviews/review/1008.

5
are a function of the available technology and have no economic meaning
until a technology has been
invented to employ them.”11
While this study is focused on analyzing only one of the many factors
behind Europe’s decline rather
than its rise, it may be observed that there is a tendency during
considerations of the latter development to
compartmentalize discussions of natural resources from those of
geography. Europe was, it must be
stressed, well-positioned geographically to exploit the resources of the
New World, at least by
comparison with India or China. Moreover, geography does not merely
describe the space between lands,
but also the features of those lands themselves, including their subsoil
resources. In that sense, what was
(or was not) under Europe mattered as much as Europe’s physical
relationship to the rest of the world.
For that reason, any study of the ramifications of geography for great
power relations must consider
geography beyond the narrow confines of just being an “objective of
policy, a prize in a conflict” or as a
“theatre of military action” that may facilitate or hinder campaigning.
For geography also refers to the
environment of a particular space that is both complex in terms of the
diversity of its contents (living or
otherwise) and largely “persistent and unchanging” from the perspective
of human beings, even if we
cannot overlook the “restrictions and opportunities” presented by any
particular environment.12
Regrettably, the role of natural resources (oil in particular) – which
was a function of geography – as a
casual factor behind Europe’s relative decline starting at the end of the
nineteenth century has been
overlooked by many scholars.13 Even revolutionary theorists of
geopolitics such as Halford Mackinder

11

E.L. Jones, The European Miracle: Environments, Economies, and

Geopolitics in the History of Europe and Asia
(New York: Cambridge University Press, 1987), xxvi. One cannot dispute
this contention, except to say that natural
resources can assume a transcendent importance once a society has become
dependent upon their consumption,
perhaps through the pervasive utilization of a particular form of
technology (such as the internal combustion engine
in the case of oil).
12
Geoffey Sloan, “Sir Halford J. Mackinder: The Heartland Theory Then and
Now,” Journal of Strategic Studies
22: 2-3 (1999): 15-17.
13
One notable exception is Peter Hugill’s, “The American Challenge to
British Hegemony, 1861-1947,”
Geographical Review 99: 3 (2009): 403-425 (esp. 403-405 and 418-423),
which challenges the “conventional”
interpretation that the transition in global hegemony from Britain to the
United States took place around 1945. Even
though Britain and the United States never came to blows after 1815, the
latter had been pursuing policies aimed at
promoting a “hegemonic transition” since the U.S. Civil War. The struggle
did not end with Britain’s political and
strategic capitulation to the United States in the Western Hemisphere
after 1895. If anything, it “intensified”
throughout the 1920s and 1930s, particularly with regard to the control
of global oil reserves. This was only natural
in spite of the absence of any threat of war between the two countries:
the control of oil in regions such as the

6
tended to focus their attention on technological developments – in his
case, railroads and then
automobiles and aircraft – whereas the question of raw materials (and
fuel supplies in particular) was an
afterthought.14
A broad comparative analysis that transcends a specific nation, region,
or narrow time period can
yield insights that inform our understanding of international history in
the twentieth century. Beyond
demonstrating the extent to which geopolitical or logistical constraints
frustrated policymakers in both
London and Berlin, this study broadens our understanding of the origins,
conduct, and consequences of
the Second World War, itself the culmination of a decades of military
innovation and transformation
under the pressure of both political and economic change – the French
Revolution and the mobilization of
the masses through appeals to nationalism in the case of the former, and
the Industrial Revolution in the
case of the latter.15 Although the First World War was won using weapons
and tactics derived from the
nineteenth century, the conflict did inaugurate a “military revolution”
that spawned consequent
“revolutions in military affairs” at the operational and tactical
levels.16 A number of new weapons were
either introduced during the war or, in the case of machine guns and
barbed wire, first applied on a
massive scale. Many, but not all, of these weapons required oil either
directly (fuel and lubrication) or
indirectly (derivatives from the petrochemical industry), including oil-
fueled warships, submarines,
aircraft, armored fighting vehicles, assault weapons, and mechanized
transportation. Moreover, entirely
new industries had to be built during and after the war to sustain armies
using these weapons, most
Middle East was not merely a “Mackinderian” strategy for thwarting the
growth of rivals, but also a prerequisite for
economic growth and prosperity through the control of trade (the
transportation sector being dependent on oil and
natural gas as primary or secondary inputs) and “capital accumulation.”
Although the premise of Hugill’s argument
is sound, the execution is lacking. Beyond numerous factual errors and
Hugill’s reliance on outdated secondary
literature, the United States did not win the “oil war” simply because of
the surge in post-WWI oil production in
areas under U.S. control. Britain also had to lose the “oil war” once its
own policy foundered in the 1930s. Hugill
also overlooks the possibility that, after 1895, the real threat to U.S.
pretensions of global hegemony was not a status
quo power such as Britain, but a revisionist one such as Germany, which
explicitly adopted an “American” vision of
growth centered around landed expansion, population displacement or
extermination, and forcible of acquisition of
natural resources.
14
Sloan, “Heartland Theory,” 18-27 and 31-36.
15
For the broad perspective, see: William McNeill, The Pursuit of Power:
Technology, Armed Force, and Society
since A.D. 1000 (Chicago: University of Chicago Press, 1982), 185-361.
16
For more on the concept of “military revolutions” vs. “revolutions in
military affairs,” see: Williamson Murray
and Macgregor Knox, “Thinking about Revolutions in Warfare,” in: The
Dynamics of Military Revolution, 13002050, (New York: Cambridge
University Press, 2001), 1-14.

7
notably the petrochemicals industry. Existing branches of industry were
also affected either directly or
indirectly, most notably agriculture, which was transformed by the
application of hydrocarbon-based
fertilizers and the introduction of oil-fueled equipment and distribution
networks.
Even as the World War drew a close in November 1918, there was no
mistaking the fact that the next
war would be an oil war. “The struggle of world politics,” one leading
German military journal declared
in 1934, “is today more or less a struggle over oil.”17 The central role
occupied by oil within international
affairs between 1939 and 1945 was as inescapable to contemporaries as it
was to later students of the oil
industry.18 The Second World War was not simply “fought on oil,” one
historian observes, but “indeed
sometimes seemed fought for it.”19 Unfortunately, wider acceptance of
this fact has proven elusive, for
“strategic resources shaped the conduct and outcome of World War II in
ways that political and military
historians often neglect.”20 Overlooking the material factors that
provided the foundations for military
power following the Industrial Revolution has contributed to the
dissemination of some rather pernicious
historical myths, the most obvious in the context of the Second World War
being the idea that the
Germany could have ever won the war on terms acceptable to its
leadership.21
Recognizing the political and strategic significance of natural resources
enriches our understanding of
international affairs and grand strategy throughout the twentieth century
by giving us a sense of what one
historian calls the “dynamic interaction” between the various domestic
and foreign policy considerations
that underpin each nation’s conception of its “core values.”22 Another
historian argues that “industrial and
technological capability, foreign policy and defence policy in the
traditional senses, and strategy in the

17

Obrstlt. a.D. Scholz Roesner, “Die Treibstoff-Frage in ihrer Bedeutung

für die Landesverteidigung,” MilitärWochenblatt, 118. Jahrgang, Nummer 44
(25 May 1934). See also: Verbandssyndikus Kurt Bronk, “Deutschlands
Erdöl-Selbstversorgung, militärisch gesehen,” Militär-Wochenblatt, 120.
Jahrgang, Nummer 16 (25 October 1935):
“And even today, all of European politics, even world politics for that
matter, is geared decisively toward
considerations of oil [Ölinteressen].”
18
“Kriegsfolgen in der Welterdölwirtschaft,” Vierjahresplan, 1942: III.
19
Carl Solberg, Oil Power: The Rise and Imminent Fall of an American Empire
(New York: Mason/Charter, 1976),
131-132. Emphasis in the original.
20
Eckes, Global Struggle for Minerals, 89.
21
For a thorough correction of this misconception, see: Alan Levine, “Was
World War II a Near-run Thing?”
Journal of Strategic Studies 8:1 (1985): 38-63.
22
Melvyn Leffler, “National Security,” Journal of American History 77: 1
(1990): 143-152.

8
traditional sense are all interlinked and interacting even in ‘peacetime’
[…].”23 What better way is there to
illuminate the connections between the national and the international,
the military and the civilian, the
political and the scientific, the public and private, than by considering
the example of oil, which draws
together the constituent elements of what we cumulatively understand as
grand strategy.
Although the secondary literature on the subject of oil and grand
strategy during the first half of the
twentieth century is thin, one political scientist offers some useful
observations about oil’s relationship to
military and national strategy during and after the First World War that
are worth repeating and
elaborating upon here.24 Oil revolutionized the “operational, logistical,
and social dimensions of strategy
on the battlefield,” by making possible the introduction of mechanized
warfare and subsequent
development of combined arms on the one hand, while requiring the
development of sophisticated
industries capable of producing oil, refining it into specialty petroleum
products, and distributing it
around the world on the other hand. Although oil was not as important to
the civilian sector prior to 1945
as it was to the military (especially in Western Europe, where the shift
from coal to oil as the primary
source of energy did not begin until the 1950s), policymakers could not
afford to squeeze civilian demand
too much, lest it lead to a collapse of economic productivity and morale
on the home front.25
The introduction of oil-fueled weapons also forced countries to adjust
their “individual national force
structures, military plans, and grand strategies” to accommodate oil’s
burgeoning significance. In 1911
and 1912, when the U.S. and British navies laid down their first
exclusively oil-burning battleships, oil’s
superiority over coal in combat had yet to be established. Supplies of
oil at the time were more
concentrated than those of coal: before the First World War, oil
production was limited to a relatively
small number of locations. The bulk of global output came from just two
nations, the United States and
Russia, plus much smaller centers of production in Austrian Galicia,
Burma, the East Indies, Mexico, and

23

Correlli Barnett, Strategy and Society: The Spencer Wilkinson Memorial

Lecture, 1974 (Manchester: Manchester
University Press, 1975), 6.
24
David Deese, “Oil, War, and Grand Strategy,” Orbis 25: 3 (1981): 525-555.
25
For Europe’s postwar shift from coal to oil, see: Raymond Stokes, “Oil as
a Primary Source of Energy,” in: 1956:
European and Global Perspectives, ed. Carole Fink, Frank Hadler, and
Tomasz Schramm (Leipzig: Leipziger
Universitätsverlag, 2006), 245-264.

9
Romania. The primitive state of petroleum geology also contributed to
recurring fears of the imminent
exhaustion of the world’s oilfields, including those of the United
States.26
In view of such considerations, there was no pressing reason for the
German High Seas Fleet to
follow the Royal Navy in converting to oil. Moreover, no other part of
any nation’s armed forces
underwent any significant modification prior to August 1914, so it was
easy to believe that oil (leaving
aside derivatives such as industrial lubricants) would fill only a niche
role for those countries that already
enjoyed guaranteed access to a product still available only in relatively
small quantities and from few
sources. After 1918, however, the great powers had no option but to
abandon the use of coal in warships,
establish air forces, and mechanize at least a portion of their armies.
Like many other revolutionary
advances in military technology, the use of oil-fueled weapons by some
armies eventually meant that
every other army had to adopt such weapons or perish.
Finally, and from our perspective most importantly, “[the] global balance
of power began to reflect
the distribution of indigenous oil resources, access to foreign oil… and
competition and potential conflicts
over oil-bearing territory.” Besides benefiting oil-rich powers such as
the United States and later the
Soviet Union, oil elevated areas of previously marginal strategic
consequence to being among the most
important assets in the economic arsenals of the great powers during both
the Second World War and the
Cold War. Other areas that had long been the object of great power
competition, such as the new nations
of the Middle East, which acquired a tremendous significance either as
oil-producing states or, almost as
important, oil-transit states, either for ships or pipelines.27
Oil may not have been the dominant factor driving grand strategy during
the twentieth century, but its
indispensability to modern life allows us to see how international
affairs tend to be denominated by oil.
By denominated, I mean that oil was among the mediums by which nations
both defined and pursued

26

For a contemporaneous example of such thinking, see: U.S. Senate,

Petroleum Resources of the United States: An
Article on the Exhaustion of the Petroleum Resources of the United
States, Showing the Present and Future Supply
and Demand, Also the Production of the Principal Oil Fields of the United
States, 64th Congress, 1st Session,
Document No. 363 (Washington, DC: U.S. GPO, 1916).
27
Deese, “Oil, War, and Grand Strategy,” 526-528.

10
their national interests in peace and war.28 In doing so, it effectively
obliterated the unnatural distinction
between geopolitics and strategy, on the one hand, and economic and
commercial considerations, on the
other.29 Whether or not policymakers privileged raison d’état over
commerce in the formulation and
execution of government policy, the control of oil could never be far
from their minds because it was a
necessary prerequisite to both national and economic security.
Oil also affords us one lens by which to distinguish between what was
merely desirable as opposed to
actually feasible in terms of policy. As one recent history of the
Eastern Front observes, at the start of the
“watershed year” of 1942, “as Nazi planners worked furiously to realize
the economic and racial goals
associated with Lebensraum… the operational war plans for 1942 revolved
around the necessity of
securing oil resources, without which the grand Nazi schemes would be
mere chimeras.”30 Even the
absence of oil in the documentary record is not necessarily the evidence
of its absence. As one historian
surmises in the context of post-WWI British planning, oil did not
actually have to be the topic of
discussion for it to occupy a central role: “Oil was not mentioned
because it was always in mind.”31
On a very tangible level, the possession of abundant and secure supplies
of oil allowed the Allies to
exploit their overwhelming materiel superiority during the Second World
War. The Allies’ quantitative
edge did not count for much against the Axis’ qualitative advantage
during the war’s early stages, but it
did give the Allies the ability to absorb their early defeats, learn from
their mistakes, and eventually attain
28

I am grateful to Michael Dennis for sharing this insight with me.

See Ronald Hyam’s critique of “economic imperialism” as an analytical
tool for understanding the history of the
British Empire in his Understanding the British Empire (Cambridge:
Cambridge University Press, 2010), 71-97.
Hyam offers instead a defense of geopolitics, considerations of which he
argues were “dominant” at the “‘high
politics’ level of imperial decision-making,” whereas economic factors
assumed a “secondary” importance due to
the “limited, parochial, and selfish” perspective of economic actors, as
opposed to government officials
“preoccupied with their global perspective” (pg. 78). Whatever the merits
of this conceptual framework for
understanding nineteenth-century imperial history, it seems inadequate
for the post-1918 period by overlooking the
extent to which geopolitics and economics were not only mutually
reinforcing, but virtually the same thing.
30
Stephen Fritz, Ostkrieg: Hitler’s War of Extermination in the East
(Lexington: University Press of Kentucky,
2011), 230-239 (quotation from pg. 236). Fritz’s work – a synthesis of
the recent English- and German-language
secondary literature – is an excellent example of how prosaic concerns
such as energy security and logistics are
finally working their way into the broader historical narrative of
twentieth-century international history. Although
Fritz stresses the interrelationship between economics and racial
politics within the National Socialist worldview, his
treatment of oil oscillates between abstraction and short-term
considerations such as operational logistics. The reader
therefore has no clear understanding of how German planners actually
understood their country’s petroleum
position, and how they sought to redress it beyond physically occupying
the Caucasus.
31
Helmut Mejcher, Imperial Quest for Oil: Iraq, 1910-1928 (London: Ithaca
Press, 1976), 165-166.
29

11
qualitative parity with, or even superiority over, the Axis.32 Oil was
the critical ingredient in this
formulation: without it, the Allies’ overwhelming economic advantage
could not have been translated into
fighting power. Conversely, the Axis consciously fought their wars in
large part to acquire this same
missing ingredient that would give their fantastical ambitions the aura
of plausibility (albeit laboring
against geographical obstacles that would have frustrated the easy
exploitation of foreign oilfields,
whether in the East Indies, the Caucasus, or the Middle East).
Accounts of the Second World War that do not include the resource
disparity between the major
combatants among the most decisive factors contributing to the victory of
the Allies are incomplete and
even misleading. As Winston Churchill remarked, after Pearl Harbor, the
victory of the Grand Alliance
depended “merely [upon] the proper application of overwhelming force.”33
The Second World War was
in no way a contest of equals and attempts to argue otherwise are usually
based on a disingenuous reading
of sources or unreliable interlocutors such as the surviving German
generals who blamed Adolf Hitler for
Germany’s “lost victories.”34 Contemporaries such as Franklin Roosevelt
understood that the AngloAmerican-Soviet alliance – if it held together –
had all of the “necessary elements” to guarantee victory:

32

This argument was first put forward in the immediate aftermath of the
war: Raymond Goldsmith, “The Power of
Victory: Munitions Output in World War II,” Military Affairs 10: 1
(1946): 69-80. Although he does not mention
oil, I am indebted to Mark Harrison for first making this case in terms
of the Allies financial and industrial
superiority: Mark Harrison, “The Economics of World War II: An Overview,”
in: The Economics of World War II:
Six Great Powers in International Comparison, ed. Mark Harrison
(Cambridge: Cambridge University Press, 1998),
1-42. Harrison also provided a good overview of the immediate postwar
literature on the wartime productivity of the
major belligerents during the Second World War in: “Resource Mobilization
for World War II: the U.S.A., U.K.,
U.S.S.R., and Germany, 1938-1945,” Economic History Review, 2nd Series,
41: 2 (1988): 171-192.
33
Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and
Military Conflict from 1500 to
2000 (New York: Random House, 1987), 347-357 (quotation from pg. 347).
Kennedy’s excellent summary of how
the Allies’ massive economic superiority (combined with occasional Axis
strategic blunders) sealed the outcome of
the war is marred only by his oversight of the disparity in oil supplies
between the belligerents. For a more detailed
military history of how the Allies (often inelegantly) used their
materiel superiority to batter the Axis into
submission through a form of attrition not dissimilar to that of the
First World War, see: John Ellis, Brute Force:
Allied Strategy and Tactics in the Second World War (London: Deutsch,
1990).
34
The term “lost victories” comes from Erich von Manstein’s memoirs, but
the worst historical offender is: B.H.
Liddel Hart, The Other Side of the Hill: Germany’s Generals, Their Rise
and Fall, with Their Own Account of
Military Events, 1939-1945 (London: Cassell, 1973).

12
“The ingredient of Anglo-American superiority in the realm of air, sea,
and science, added to the twin
inexhaustibles [sic] of Soviet manpower and American productivity, would
finally crush the Axis.”35
Historians have to varying degrees begun to embrace the idea that a
German victory against a global
coalition in the Second World War on terms acceptable to the Third Reich
was impossible because of
Germany’s inherent materiel and raw materials disadvantages as a small,
relatively poor nation (compared
to the United States and Britain) lying exposed at the center of a region
bereft of adequate supplies of
natural resources and food.36 This argument is compelling on the level of
both military and economic
history, but it is only tenable because oil, like economic, financial,
and military power, was also not
distributed equally between the warring combatants. Although the Allies
enjoyed superiority across the
economic spectrum, nowhere was the difference as wide as “in relation to
energy supplies, the most basic
driver of modern urban and industrial society. Whereas the Anglo-American
alliance was energy rich,
Germany and its Western European Grossraum were starved of food, coal and
oil.”37

35

Calvin L. Christman, “Franklin D. Roosevelt and the Craft of Strategic

Assessment,” in: Calculations: Net
Assessment and the Coming of World War II, ed. Alan Millet and Williamson
Murray (New York: Free Press,
1992), 216-257 (quotation from pg. 257).
36
For a stark description of Germany’s economic backwardness before the
Third Reich relative to not just the
United States but also Britain, see: Adam Tooze, The Wages of
Destruction: The Making and Breaking of the Nazi
Economy (New York: Viking, 2006), 135-145. For a thorough inventory of
Britain economic, technological, and
economic advantages vis-à-vis the Third Reich in 1940 even after the
collapse of France, see: David Edgerton,
Britain’s War Machine: Weapons, Resources, and Experts in the Second
World War (New York: Oxford University
Press, 2011), 11-78. The best short strategic appraisal of Germany’s
prospects during the war is Levine, “ Near-run
Thing?” Although based on by now outdated English-language secondary
sources, Levine’s overall argument is still
largely sound. Bernd Wegner picked up on Levine’s argument and refined it
considerably in his contribution to the
German official history of the conflict, which focused on German grand
strategy between the failure of Operation
Barbarossa and the defeat at Stalingrad: Militärgeschichtliches
Forschungsamt, The Global War: Widening of the
Conflict into a World War and the Shift of the Initiative, 1941-1943,
vol. 6 of Germany and the Second World War
(Oxford: Oxford University Press, 2001), 110-144, 843-1215. Wegner’s
conclusions (pgs. 1206-1215) were
published separately as: “The Road to Defeat: The German Campaigns in
Russia, 1941-43,” Journal of Strategic
Studies 13: 1 (1990): 105-127. Tooze’s Wages of Destruction, 396-512,
develops the Levine/Wegner thesis further
on the economic side.
37
Tooze, Wages of Destruction, 411-412 and 666. Europe’s relative poverty
in terms of agricultural output had been
a source for concern within the Reich since the start of
industrialization in the 1870s. Generations of agronomists
had tried to deal with the financial, geopolitical, and sociological
(racial) dilemmas imposed by Europeans’
changing diets (toward higher consumption of meat and fat). Lizzie
Collingham, The Taste of War: World War Two
and the Battle for Food (London: Allen Lane, 2011), 18-32 and 353-358.

13
The idea (or perhaps ideal) of grand strategy has a long and
distinguished intellectual pedigree.38
Grand strategy is an attempt by governments to impose their will upon the
international system and must
by its very nature transcend purely military considerations.39 Adopting
such an expansive vision of the
objectives of national policy requires a “total strategy,” which one
historian defines “as the management
of various components of power – social, political, military and economic
– in order to secure, in
society’s given world environment, that society’s survival and
prosperity.”40 By the 1930s, policymakers
in London had failed to recognize “the intimate connection which exists,
and ought to be perceived to
exist, between strategic obligations, strategies and resources; between
strategy in the classical military
meaning, finance and technology; between all of them and foreign policy.”
By contrast, Communists
possessed a national strategy that transcended purely military factors
(unlike their Anglo-American
counterparts) and took into account the “social context of strategy,”
which gave them a “total view of
human struggle, and hence of strategy.” Such a broad conception of
national strategy had to be flexible
enough to accommodate itself to changes in the international environment,
which at times might reduce
the value of military strength relative to economic and industrial might.
The aforementioned historian was

38

There is a vast literature on the concept of grand strategy. For a brief

introduction to the topic, see: Paul Kennedy,
“Grand Strategy in War and Peace: Toward a Broader Definition,” in: Grand
Strategies in War and Peace, ed. Paul
Kennedy (New Haven: Yale University Press, 1991), 1-7. For an application
of the concept to the history of Middle
Eastern oil prepared for the benefit of U.S. Central Command, see: Ian
Lesser, Oil, the Persian Gulf, and Grand
Strategy (Santa Monica: Rand Corporation, 1991). Lesser stresses that
“grand strategy is to a remarkable extent the
history of [both] resource access and denial,” and there is a vast,
untapped body of primary sources detailing how
the Allies sought to deny the Axis access to oil during the Second World
War. Unfortunately, there was no space to
incorporate this fascinating subject into this study. Finally, in a
revisionist examination of British war aims during
the First World War, Brock Millman offers an alternative conception of
grand strategy as “a political-military
amalgam which seeks to qualify how war aims will be achieved with the
means at hand” – in other words, he
stresses the instrumentalist nature of grand strategy, which is perhaps a
more practical way of using the concept than
assuming it defines both the objectives and the means of national policy.
Brock Millman, “A Counsel of Despair:
British Strategy and War Aims, 1917-1918,” Journal of Contemporary
History 36: 2 (2001): 241-242.
39
Boorman, “Fundamentals of Strategy,” 100.
40
Barnett, Strategy and Society, 8; and Corelli Barnett, The Collapse of
British Power (London: Eyre Methuen,
1972), xi. Even cultural factors could not be overlooked if they served,
for instance, to degrade a nation’s economic
strength. Barnett’s excoriation of the classically educated British
Establishment’s indifference to or even contempt
of scientific education is drawn from C.P. Snow’s The Two Cultures and
the Scientific Revolution: The Rede
Lecture, 1959 (New York: Cambridge University Press), 1-42 (esp. 23-29).

14
therefore impressed by the possibility that, in the wake of the oil
crisis of 1973, “the possession of oil
wells confers greater weight in international affairs today than the
possession of armed forces […].”41
Close scrutiny of oil’s role in international affairs raises the question
of whether grand strategy is
even possible. This concept, even under its own terms of reference, has a
number of drawbacks, such as
encouraging historians to misinterpret policymakers’ actions as the
product of design rather than of
contingent or structural factors.42 It is also suffused with an implicit
faith in the existence of certain statecentered norms governing
international politics, including a belief in the existence of a truly
“free market”
that is regulated by governments, government accountability, and “the
sovereign power of nations to
maximize their strategic capabilities.”43 There is also the danger of
mistaking policies derived from
policymakers’ subjective worldviews as the product of a dispassionate and
systematic appraisal of a
country’s relative position within the international system.
By its very nature, grand strategy must be intergenerational and grounded
in certain enduring (not to
mention plausible) assumptions about a nation, its means, and its place
within the international system.
The key elements here are intergenerational consistency and stability. In
the case of the former, is it fair to
speak of a “grand strategy” that is limited to a small group of
policymakers (perhaps even just one) at a
discrete moment in time? Strategy only becomes “grand” if it transcends
the brilliance of an individual by

41

Barnett, Strategy and Society, passim (quotations from pgs. 7-8, 4, 5,

and 8). Emphasis in the original.
Unfortunately, Barnett (like far too many students of grand strategy) did
not always practice what he preached.
Perhaps because it was published a year before the Arab oil embargo, his
magisterial The Collapse of British Power
lacks awareness of the symbiotic relationship between oil and finance,
and their significance to British policy.
Closer study of such factors might have led him to question his withering
criticism, to name but two examples, of
Britain’s decision in 1921 to forego its 1902 alliance with Japan in
favor of closer relations with the United States
(with whom it was, along with France, then dividing up the oil reserves
of Iraq) or to expand rather than retrench
British obligations in the Middle East after 1918, even if the means to
defend its new empire between Suez and India
were lacking. Barnett can only lament Britain’s “improvident” reliance on
oil imports during and after the World
War, and although he acknowledges Britain’s strategic commitments in the
Middle East far outweighed the benefits
“until the coming of the age of petroleum”, he still writes off the
British presence in the region after 1918 as “a
classic, and gigantic, example of strategic over-extension.” Collapse of
British Power, 82 and 77.
42
Williamson Murray put it best in a discussion of German grand strategy
between 1933 and 1939: “The late 1930s
suggest that statesmen and military leaders do indeed ‘see through a
glass darkly,’ and that interrelationships among
strategy, national security policy, diplomacy, and political goals are
often disorderly and chaotic. Any attempt to
assign neat theoretical explanations to such processes, can only be made
at the expense of historical reality.”
German Military Effectiveness (Baltimore: Nautical & Aviation Pub. Co. of
America, 1992), 225.
43
Nowell, World Oil Cartel, 300-301.

15
achieving a degree of institutional and intellectual permanence.44 But
the centrality of hydrocarbons to
economic and military power starting in the nineteenth century made a
mockery of any policy that did not
acknowledge the capricious realities of the world’s unequal distribution
of coal and oil. This raises the
question of how policymakers can even begin to formulate a grand strategy
to guide their nation’s path
for decades to come when the very basis of economic and military power in
the Hydrocarbon Age
depends upon secure supplies of a commodity that is rarely produced in
large quantities within those
countries that are also the greatest consumers of it. After the First
World War, policymakers in London
and Berlin constantly had to reassess their assumptions and policies
based upon erratic swings in the rate
of oil discoveries and production that owed more to geology than any
grand strategy.45 The fact that the
rate of oil consumption increased geometrically – from 200,000,000
barrels to more than 1,000,000,000
barrels between 1908 and 1929 – posed an additional burden, because it
forced oil-consuming nations to
acquire ever larger volumes of oil over time even when they tried to
curtail consumption.46
To further complicate matters, “perceptions of what constitutes a vital
resource have evolved with
changes in military and civilian technology.”47 The very idea that a
nation’s security and prosperity
depends upon access to energy is a legacy of the Industrial Revolution,
which still deserves the distinction
of being “by far the biggest transformation in society since the
discovery of agriculture,” not the least

44

This is the central insight of Henry Kissinger’s still useful: “The White
Revolutionary: Reflections on Bismarck,”
Daedalus 97: 3 (1968): 888-924 (esp. 921-922).
45
Taken to its extreme, such an argument renders differences between
nations’ political and economic systems
insignificant: Europe’s dependence on imports of most raw materials
“essential to a modern industry society… was
a matter of geography and nothing to do with politics. It would be the
same whether Europe was a group of
democracies or a single totalitarian unit.” Walter Levy, “The Paradox of
Oil and War,” Fortune (September 1941):
69ff, American Heritage Center (University of Wyoming), Papers of Walter
Levy (hereafter cited as: Levy Papers),
Box 1; reprinted in: Walter Levy, Oil Strategy and Politics, 1941-1981
(Boulder: Westview Press, 1982), 9-23
(quotation from pg. 9).
46
Of course, production has historically been able to keep up with
increased consumption. During the first forty-one
years of its existence (1859 to 1900), the U.S. oil industry produced
1,000,000,000 barrels of oil. Producing the
second billion barrels took only eight years, however, and the seventh
billion just nineteen months. Anthony
Stranges, “Friedrich Bergius and the Rise of the German Synthetic Fuel
Industry,” Isis 75: 4 (1984): 650-651.
Between 1918 and 1944, accumulative U.S. production rose seven-fold, from
4,252,644,000 barrels to
28,100,904,000 barrels, while global production (including the United
States) increased from 6,990,481,000 barrels
to 43,969,052,000 barrels. Everette Lee DeGolyer and Lewis MacNaughton,
Twentieth Century Petroleum Statistics
(Dallas: DeGolyer and MacNaughton, 2004), 12.
47
Lesser, Persian Gulf, 5-6. Emphasis in the original. See also: Gordon
Martel, “The Meaning of Power: Rethinking
the Decline and Fall of Great Britain,” International History Review 13:
4 (1991): 678-679.

16
because it began the process of breaking mankind’s reliance upon organic
forms of energy (human and
animal labor).48 But the consequences for grand strategy were never
static since, to borrow an analogy
from Darwinian evolution, those powers that adapted too well to the
previous regime of energy
consumption would find themselves at a major disadvantage when
alternatives emerged, as was the case
with Britain and coal (and perhaps the United States and oil in the
future).
Again, one should not presuppose that the transition from one form of
energy to another is simply the
product of market factors or efficiency.49 While it may be granted that,
in a “free market,” coal’s eclipse
by oil was inevitable due to the latter’s superiority as a source of
propulsion fuel, major industries such as
coal “do not operate in free markets because they have the political
power to change those markets,” as
adduced by the fact that oil did not displace coal as the primary source
of energy in Western Europe until
well after the Second World War. During the nineteenth century, coal had
little to fear from oil, since the
two commodities served different purposes: the former as a source of
propulsion, the latter as a source of
heat, illumination, and lubrication. While the coal industry became
complacent, the oil industry moved
aggressively into the transportation sector once it perceived the
existential threat posed by electrification,
which would wipe out the market for kerosene. By the time oil’s
superiority as a source of propulsion fuel
became clear around the First World War, the “nationally fragmented coal
industries” had to compete
with international “fully developed corporations rather than weak
entrants” they could strangle at birth.
The firms comprising the coal industry concluded that they themselves had
to enter the oil industry if they
were to survive, but the only option left open to them – producing
petroleum synthetically – was closed
off by the “hydrocarbon cartel” formed between the major oil and chemical
companies (the Standard Oil
48

Snow, Two Cultures, 24.

Bruce Podobnik argues that energy shifts are the product of “geopolitical
rivalry, “corporate competition,” and
“social conflict,” and that their interaction during periods of crisis
leads to “hegemonic shifts,” such as the one
between Britain and the United States that mirrored the shift from coal
to oil. Podobnik also “emphasizes the central
role of human institutions and conflicts” in contrast to the “resource
determinism” of earlier analysts. Podobnik,
Global Energy Shifts: Fostering Sustainability in a Turbulent Age
(Philadelphia: Temple University Press, 2006), 117. The argument is
compelling on the level of corporate competition, but unconvincing within
the realm of military
strategy – oil’s superiority over coal on the battlefield was not a
result of the former being “aggressively marketed.”
The weapons systems of the twentieth century are unimaginable without the
use of petroleum, which meant that
nations either had to acquire crude oil or produce petroleum
synthetically. Countries that chose the latter option like
Germany (or Apartheid South Africa) did so purely out of political
necessity.
49

17
Company of New Jersey – Jersey – and IG Farben), which controlled the
major patents for the synthetic
production of petroleum. As a consequence, the coal industry either
withered or (as was the case in
Germany after 1934) lost its independence when it was forcibly integrated
into the ascendant
“hydrocarbon cartel.”50
The examples of Britain and Germany are particularly instructive. Each
power occupied a different
position within the international system, both in terms of the overall
balance of power and the
international oil industry, which makes them ideal for the purposes of
comparative history.51 Britain was
the home of two major oil companies: the Anglo-Persian Oil Company
(Anglo-Iranian Oil Company after
1935) and Royal Dutch/Shell (Shell). (The British Government held a 51%
stake in the former since
1914, whereas the latter had been 60% Dutch-owned since 1907 but was
effectively British in terms of its
commercial and financial operations since the First World War.52) These
companies boasted of prolific oil
concessions in Latin America, the Middle East, and East Asia, as well as
developed marketing and
transportation networks.53 As of 1927, Shell was the largest oil company
in the world: it produced 50%
more oil than either of its next two competitors, Jersey and Gulf Oil,
and had more tankers than both of

50

Nowell, World Oil Cartel, 224-236 (quotations from pgs. 224-225).

Podobnik, Global Energy Shifts, 38-91, is
also informative on the shift from coal to oil, but he places the
emphasis for the transition almost exclusively on the
development of the internal combustion engine and makes no reference to
the challenge posed by electrification. See
also: Martin Melosi, Coping with Abundance: Energy and Environment in
Industrial America (Philadelphia: Temple
University Press, 1985), 50 and 138-159. The domestic political
consequences of the hydrocarbon revolution in the
developed world are provocatively synthesized in: Timothy Mitchell,
“Carbon Democracy,” Economy and Society
38: 3 (2009): 399-432.
51
An excellent overview of the state of the international oil industry in
the 1920s and 1930s, which highlights
predominance exercised by the U.S. and British major oil companies, may
be found in: Helmut Mejcher, “The
International Petroleum Cartel (1928), Arab and Turkish Oil Aspirations
and German Oil Policy towards the Middle
East on the Eve of the Second World War,” in: Oil, the Middle East, North
Africa and the Industrial States, ed.
Klaus Jürgen Gantzel and Helmut Mejcher (Paderborn: F. Schöningh, 1984),
27-59.
52
Shell Transport and Trading Co., “Memorandum: Shell/Royal Dutch Group,”
16 January 1940, British National
Archives, CAB 63/117.
53
There is no clear distinction between “major” and “independent” oil
companies. The latter are vertically integrated
firms with their own oilfields, transportation infrastructure,
refineries, and marketing networks. Independent
companies usually focus on one or more of the various aspects of
production, but sometimes they too can be
vertically integrated. Within this study, the term “major” has been
applied only to those companies later known as
the “Seven Sisters”: the Standard Oil Company of New Jersey (Jersey), the
Standard Oil Company of New York, the
Standard Oil Company of California, the Texas Company, Gulf Oil, Royal
Dutch/Shell (Shell), and the AngloIranian Oil Company. David Painter,
“Oil,” in: vol. 3 of Encyclopedia of American Foreign Relations, ed.
Alexander DeConde, Richard Dean Burns, and Fredrik Logevall (New York:
Scribner, 2002), 2.

18
those companies combined.54 In fact, until after the Second World War,
British firms (including Shell)
firms produced more oil outside of the United States than did U.S. oil
companies: as of 1939, the former
accounted for 795,300 barrels per day (35.7% of global production beyond
the United States) vs. 554,800
barrels per day (24.9%) for the latter.55 Even if Britain had to import
virtually all of the oil it consumed,
no country was better-equipped to secure such large quantities from
abroad, and on paper its supply
position appeared enviable. What worried policymakers in London was not
whether they would be able to
import oil, but from where and on what terms.
Even after its defeat in 1918, Germany possessed immense latent economic
and military strength. It
was, however, only a modest producer and consumer of petroleum even after
the rise of the Third Reich.
Germany nonetheless posed the greatest threat to Anglo-American
domination of the international oil
industry through its ability to strike at two of the world’s centers of
oil production: the Caucasus and the
Middle East.56 The acquisition of foreign oilfields was an explicit
German war aim between 1940 and
1942. Had these aims been fulfilled, the oil of the Caucasus and Middle
East, as well as synthetic gasoline
produced within Europe, would have formed the resource basis for Germany
to challenge AngloAmerican global hegemony. Not for nothing did a recent
history of the Eastern Front conclude that, “in
many respects, World War II can be seen above all as a war for oil, with
those lacking it (Germany, Italy,
Japan) seeking to defeat those who controlled it (Great Britain, the
United States, and Russia).”57

54

314,200 barrels per day vs. 214,700 and 212,500 barrels per day,
respectively, and 156 tankers vs. 123 tankers.
Thanks to astute acquisitions in Venezuela, the Jersey caught up with
Shell in 1935 at 560,000 barrels per day. Joost
Jonker and Jan Luiten van Zanden, From Challenger to Joint Industry
Leader, 1890-1939, vol. 1 of A History of
Royal Dutch Shell (Oxford: Oxford University Press, 2007), 224-225, 437.
See also: Jonathan Brown and Peter
Linder, “Oil,” in: The Second Conquest of Latin America: Coffee,
Henequen, and Oil During the Export Boom,
1850-1930, ed. Steven Topik and Allen Wells (Austin: University of Texas
Press, 1998), 146.
55
Mira Wilkins, The Maturing of Multinational Enterprise: American Business
Abroad from 1914-1970
(Cambridge: Harvard University Press, 1974), 241.
56
The scale of German ambitions are sketched out in a key document produced
in the autumn of 1940 by one of the
most important officials responsible for petroleum policy in the Third
Reich, reproduced with extensive commentary
in: Titus Kockel, “Eine Quelle zur Vor- und Gründungsgeschichte der
Kontinentale Öl AG aus dem Jahr 1940: E. R.
Fischer (Reichswirtschaftsministerium, II Min. Öl), ‘Die Versorgung
Europas mit Mineraloel vor dem Kriege,
Ermittlung des Nachkriegsverbrauchs und Sicherung der Belieferung, 1940,’
September 1940,” Jahrbuch für
Wirtschaftsgeschichte 2003/1: 175-208.
57
Fritz, Ostkrieg, xxii.

19
Examining the entire interwar period and carrying the story into the
Second World War also allows us
to see how oil’s political, economic, and strategic significance evolved
over time. Britain attempted to
pursue a foreign oil policy after 1918 independent of and, to some
extent, in competition with the United
States. The limitations of this policy compelled Britain first to accept
cooperation with, and later outright
dependence upon, the United States well before 1939. Thanks to oil, Great
Britain effectively became a
colony (or strategic outpost) of the United States not as a result of the
military catastrophes of 1942 in
Southeast Asia (Singapore) and North Africa (Tobruk), as one recent
revisionist study argues, but before
the Second World War even began.58 Germany’s decision to pursue a crash-
program of synthetic fuel
production and gradually cut itself off from the international oil market
in the interest of constructing an
autarkic “Greater Economic Area” (Groβraumwirtschaft) did not happen
overnight. The first steps toward
achieving independence from oil imports had been taken during the Weimar
Republic for entirely
political and economic considerations, whereas after 1933, the rationale
shifted toward securing resources
to wage a genocidal war of conquest.
In essence, this work is a story of two abortive attempts for energy
independence.59 Oil played a
central role in Britain and Germany’s shared desire after 1918 to escape
economic dependence upon the
United States and perhaps even to challenge the North American colossus
for global leadership. The
failure to achieve energy independence also determines the end of this
story: 1939 (Britain) and 1941
(Germany). The Second World War was far from over when Operation
Barbarossa stalled outside of
Moscow and had yet to reach its bloody crescendo in either Europe or East
Asia. But the possibility that
either Britain or Germany could acquire and develop alternative sources
of oil that would allow them to
58

Edgerton, Britain’s War Machine, 4-5, 76-78, and 84-85.

Throughout this study, I have used the term “energy independence” rather
than “oil independence” because the
former is more familiar to contemporary readers. The meaning of the
concept is elusive: it can refer to anything
from self-sufficiency in oil production to eliminating imports from one
particular supplier such as a specific region,
country, or even oil company. Not surprisingly, both nations covered by
this study had different conceptions of
energy independence. Britain’s idea of energy independence after 1918 was
no longer importing oil produced or
controlled by another great power (particularly the United States). By
contrast, Germany’s program for achieving
energy independence was more complex: before 1933, the Third Reich wished
to limit overseas imports, either
through greater synthetic production or overland imports from Romania.
After 1940, Germany would make its new
empire energy independent by, on the one hand, forcibly acquiring the
oilfields of the Soviet Union, and on the
other, evicting hostile foreign interests from the Middle Eastern oil
industry. Ownership of the oilfields within the
enlarged Reich and its sphere of influence would thereafter pass into the
hands of Axis or pro-Axis oil companies.
59

20
reassert their autonomy as great powers had vanished. After 1941, the
intervention and assistance of the
great powers on the periphery of the European international system would
become decisive, both in terms
of the final defeat of the Axis and in the shaping of the postwar world.
Ironically, both countries came close to achieving limited energy
independence: by the late-1930s, the
Middle East appeared capable of soon ending Britain’s need to import oil
from nations not under British
control, whereas the Third Reich went to war in 1939 self-sufficient in
terms of gasoline consumption and
needed only one neighboring supplier (Romania) to cover its requirements
of heavier petroleum products
such as fuel oil and diesel fuel. But energy independence – either from
foreign suppliers in the case of
Britain or from overseas imports in the case of Germany – was (and is)
not synonymous with energy
security: the ability to draw from secure supplies during periods of
crisis. The oil of the Middle East was
unavailable to British forces west of Suez after 1940 because of the
logistical difficulties entailed by
rerouting supplies around the Cape of Good Hope instead of through the
Mediterranean. Synthetic fuel
allowed Germany to wage war but not to win it. Germany’s economically
illiterate generals scoffed at
economic advisers who urged the conquest of the Caucasus by pointing out
that Germany “managed to
carry on the war until 1945 without ever securing the Caucasus oil.”60
But at no point after the failures of
1941/42 did Germany ever possess the opportunity to end the war on
favorable terms. Rather, Axis
Europe had to spend the rest of the conflict laboring under a constant
shortage of energy, which
constrained economic productivity and reduced military effectiveness. The
Allied bombing campaign
against Germany’s synthetic fuel plants after May 1944 also revealed that
independence from overseas
imports had not guaranteed the Third Reich energy security.
By exploring an overlooked factor behind the eclipse of Europe, we can
also gain additional insights
into the rise of the United States to global hegemony – as well as the
consequent the shift from a
multipolar to a unipolar world – a development that was and continues to
be inexorably tied to oil. Oil
supercharged the ascent of the United States, whose economic superiority
was already manifest by the
end of the nineteenth century. This superiority would have eventually
climaxed with the United States’
60

Liddel Hart, Other Side of the Hill, 305-306.

21
eclipse of Europe in the absence of any world wars, but the rise of oil
as the means and object of great
power competition did more than just enfeeble Britain and shackle it to
the United States. It also afforded
the latter the opportunity and means to prevent two of the period’s
rising powers, Germany or Japan, from
ever following in the United States’ footsteps by mimicking the
nineteenth-century model of U.S.
economic development through landed expansion, closed markets, and
defense-in-depth.
This study is divided into seven chapters. The first three examine
Britain’s failed attempt to achieve
energy independence from the United States after the First World War. The
superficial majesty of the
British Empire in 1918 masked serious weaknesses and strategic
liabilities, not the least of which was the
fact that the empire accounted for only a small fraction of world oil
production before 1945. Those few
parts of the formal and informal empire that did show some promise, such
as Bahrain, Iran, Iraq, and
Kuwait, were not reliable sources of supply in wartime due to their
unfavorable geographic position. In
wartime, supplies from the Persian Gulf were only useful for supplying
British forces east of Suez; in the
West, safe passage through the Mediterranean could not be guaranteed in
the event that Italy joined the
Axis. Consequently, in spite of a concerted policy after 1918 to increase
the amount of oil owned and
produced by British companies within the British Empire and its Middle
Eastern client-states, by the eve
of the Second World War, Britain remained dependent upon the oil reserves
of the Western Hemisphere,
access to which was contingent upon the goodwill and generosity of the
United States.
Although the academic literature on the fall of the British Empire is
immense, many imperial
historians have yet to consider methodically the role of oil as an
objective of British petroleum policy
after 1918, or how the search for oil influenced British policy in
regions such as the Middle East.61
Consequently, oil’s significance as a casual factor behind Britain’s
gradual eclipse by and subordination

61

One esteemed historian of Britain and decolonization managed to write an

entire article on Britain’s “undeclared
empire” in the Middle East between the world wars with only a single
(erroneous) reference to oil, which he claims
was “strategically significant” by 1939 – precisely the time when it was
no longer vital. John Darwin, “An
Undeclared Empire: The British in the Middle East, 1918-39,” in: The
Statecraft of British Imperialism: Essays in
Honor of Wm. Roger Louis, ed. Robert King and Robin Kilson (London: Frank
Cass, 1999), 174. Even if we
concede that the expansion of the British presence in the Middle East
after the First World War aimed primarily at
securing air and sea access to India in order to mobilize its resources
as well as those of the white dominions, these
were not the only considerations at play.
22
to the United States before 1945 has been all but ignored. Vital
questions about the strategic viability of
the empire have not only gone unanswered, they have yet to be asked in
the first place.62
The last four chapters consider how policymakers in the Third Reich
reconciled Germany’s tenuous
oil supply position with their plans for war, conquest, and racial
extermination.63 Irrespective of its
barbarity, the Third Reich built upon the existing foundation of
scientific research excellence in Germany,
and the National Socialists made massive investments toward expanding
Germany’s existing synthetic
fuel industry.64 Policymakers, businessmen, soldiers, and bureaucrats in
the Third Reich all placed
enormous faith in Germany’s “creative genius” to overcome its crippling
shortages of raw materials
through technology.65 By a process of strategic alchemy, German
scientific skill would transform
Germany’s abundant supplies of coal into black gold. Although synthetic
fuel production and imports
from Romania left Germany with little margin for error, Hitler had not
pursued rearmament with the
intention of constructing armed forces prepared for any military
eventuality. Pursuing rearmament in both
breadth and depth was impossible without absorbing the economic assets of
the western half of the
Eurasian landmass. Time was also not on Germany’s side, for its initial
advantage in terms of military
preparedness as well as tactical and operational virtuosity were wasting
assets. What mattered was not

62

John Gallagher acknowledges that “by the nineteen-thirties oil was an

important national interest,” while
conceding that the subject of Middle Eastern oil, although “deeply
interesting,” was also “under studied.” John
Gallagher, The Decline, Revival and Fall of the British Empire
(Cambridge: Cambridge University Press, 1982),
123-126 (quotation from pg. 125). That may have been the case in
Gallagher’s time, but several works on British oil
policy before and after the First World War appeared shortly thereafter.
They appear to have made little impression
upon the field of imperial history. Recent surveys of imperial history
after 1918 make only the most cursory mention
of oil. One notable exception is Steven Galpern’s Money, Oil, and Empire
in the Middle East: Sterling and Postwar
Imperialism, 1944-1971 (Cambridge: Cambridge University Press, 2009), but
even this study is more concerned
about explaining how London sought to use oil to give the empire a new
lease of life after the Second World War.
The role of oil in putting Britain in that predicament to begin with
remains neglected.
63
Due to the dearth of German military records prior to 1933, and the
absence of any compelling strategic need for
petroleum when Germany was still hobbled by the restrictions of
Versailles, it is difficult to construct a detailed
assessment of oil and German grand strategy before the Third Reich.
64
I am sensitive to Ian Kershaw’s perceptive observation that “the Hitler
regime was inimical to a rational order of
government administration. Its hallmark was systemlessness,
administrative and governmental disorder, the erosion
of clear patterns of government, however despotic.” Ian Kershaw,
“‘Working Towards the Führer.’ Reflections on
the Nature of the Hitler Dictatorship,” Contemporary European History 2:
2 (1993): 103-118 (quotation from pg.
109). Emphasis in the original. I would add one caveat in the case of
oil: one does not fill gasoline tanks by a
“triumph of will” alone. Even ruthless paladins such as Hermann Göring
deferred to the counsel and managerial
competence of scientific and corporate elites on petroleum policy.
65
“Ölstrategie,” Militär-Wochenblatt, 121. Jahrgang, Nummer 27 (15 January
1937).

23
whether Germany was absolutely ready for war, only that it was relatively
better prepared than its
enemies.66
By the autumn of 1939, there was a consensus within German military and
political leadership circles
that the Third Reich’s petroleum position was, given certain
preconditions (such as secure access to
Romanian exports and unimpaired domestic crude and synthetic production),
adequate to fight a war
against both Britain and France that would create the material conditions
for Germany first to destroy the
Soviet Union and then to challenge the United States for global
hegemony.67 That these assumptions
turned out to be unrealistic over time matters less than the fact that
Germany’s leadership and
knowledgeable outside observers believed them to be valid.68

66

This is a central element of Williamson Murray’s assessment of National

Socialist grand strategy before the war:
The Change in the European Balance of Power, 1938-1939: The Path to Ruin
(Princeton, Princeton University
Press, 1984), 3-49 (esp. 48-49).
67
During the early stages of the war, there was no shortage of warnings
that the Allies should not expect the German
war machine to collapse due to a lack of oil. The noted petroleum
economist Walter Levy stressed this point in both
lectures and articles. See: Walter Levy, “Oil in this War’s Strategy,”
undated speech (sometime between the fall of
France and the start of Operation Barbarossa); and Walter Levy,
“Petroleum’s Part in Axis Strategy,” World
Petroleum 12: 7 (July 1941), 39-43; both in: Levy Papers, Box 1.
68
Levy was particularly impressed by what he perceived as the thoroughness
of Germany’s prewar preparations:
“With the advent of the Hitler regime in January, 1933, Germany prepared
for war. Nothing was left undone to
create the best possible conditions for waging war; mistakes of the past
were studied and studied again, and a
comprehensive plan for every field of economic and military life was
drawn upon to cover any possible emergency.”
Walter Levy, “Oil and War,” 09 May (or 05 September) 1941, unpublished
manuscript, National Archives and
Records Administration, Record Group 169: Records of the Foreign Economic
Administration, Entry 360, Box
2191. Levy was a German Jew who fled the country in 1933 and ended up
serving as the wartime expert on the
German oil industry for the Organization of Strategic Services. Following
the war, Levy handled petroleum affairs
for the European Cooperation Agency before becoming one of the world’s
leading petroleum economists and a
consultant to numerous governments and private companies. Wolfgang Saxon,
“Walter James Levy, 86, Oil
Consultant, Dies,” New York Times, December 15, 1997,
http://www.nytimes.com/1997/12/15/business/walterjames-levy-86-oil-
consultant-dies.html.

24
A Note on Measurements and Translations
The specific chemical properties of various kinds of crude oil affect the
volume of space if occupies.
One ton of oil can fill between six to eight barrels depending upon its
gravity and viscosity. For the sake
of clarity, throughout this study, one ton of oil equals seven barrels of
oil, and vice versa. Americans
usually enumerate oil in barrels, while the British prefer metric tons.
Unfortunately, most primary sources
do not specify whether they are referring to “long” or “short” tons
(2,240 lb vs. 2,000 lb). The oil industry
conducts business in “long” tons, and I have assumed that my sources do
as well unless otherwise
indicated.69
After 1918, Germans usually used the term “Mineralöl” when referring to
petroleum products either
refined from crude oil or produced synthetically from coal. Either
“Erdöl” or “Rohöl” was used when
referring to crude oil, and “Treibstoff” or “Kraftstoff” in the case of
“motor fuel.”70 For the sake of
clarity, except in the case of the phrase “oil crisis,” whenever I use
the term “oil” in chapters four through
seven, I am referring only to crude oil, whereas the term “petroleum”
refers to both natural and synthetic
petroleum. Additionally, I have translated “Verarbeitung” as “refining”
even though the literal translation
is “processing,” since the former is more familiar to English-speaking
readers, and because German
documents of the period rarely used the terms “Raffination” or
“Veredelung,” both of which also translate
as “refining.”
Finally, Germans used a variety of terms when referring to the geographic
area stretching from Egypt
to Afghanistan, and from the Caucasus to Aden, the most common being
“Naher Osten,” “Orient,”
“Vorderasien,” or “Vorder Orient,” and occasionally “Mittler Osten.” For
the sake of clarity, I shall use
the term “Middle East” except with direct quotations, although in the
case of the latter I have rendered
“Vorderasien” as the “Near East” because it seems more appropriate than
the literal translation (“Near
Asia”).

69

J.H. Bamberg, The Anglo-Iranian Years, 1928-1954, vol. 2 of The History

of the British Petroleum Company
(Cambridge: Cambridge University Press, 1994), 56-57.
70
Dietrich Eichholtz, Deutsche Ölpolitik im Zeitalter der Weltkriege:
Studien und Dokumente (Leipzig: Leipziger
Universitätsverlag, 2011), 189-190.

25
Map 1: Proven and Probable World Oil Reserves, no date (circa 1921)
Source: National Archives and Records Administration (NARA), Record Group
107: Records of the
Office of the Secretary of War (RG 107), Entry 191, Office of the
Assistant Secretary for War (OASW),
Planning Branch, Box 100.
26
Map 2: Regional Shares of World Oil Production, no date (circa 1921)
Source: NARA, RG 107, Entry 191, OASW, Planning Branch, Box 100.

27
Illustration 1: Petroleum Administration for War (PAW), “World Crude Oil
Production,” 22 February 1945
Source: Library of Congress (LOC), Harold L. Ickes Papers, Box 221.
28
Illustration 2: PAW, “Production – Eastern Hemisphere,” 22 February 1945
Source: LOC, Harold L. Ickes Papers, Box 221.
29
Illustration 3: PAW, “Production – Western Hemisphere,” 22 February 1945
Source: LOC, Harold L. Ickes Papers, Box 221.
30
Chapter I
The Allure of Energy Independence: Britain, 1918-1921
Great Britain fought the First World War largely with oil imports from
the United States, which was a
painful reversal of fortune for a nation that had enjoyed energy
independence during the Age of Coal.
Since domestic oil production was miniscule, with little likelihood of
any change in the near future,
Britain had no choice but to import oil.1 But even if imports were
indispensable, Britain could still try to
avoid relying upon sources of oil controlled by rival powers. The most
important question after 1918 was
whether Britain could acquire control of supplies of foreign oil on its
own terms and maintain access to
them without recourse to the military and economic power of the United
States or any other great power.
In order to escape reliance exports from the United States or countries
dominated by U.S. oil companies
(Mexico), Britain had not only to develop new sources of supply under
British control, but also to find
alternative, British suppliers that could replace the major U.S. oil
companies.2
The two purely British oil companies, the Anglo-Persian Oil Company
(APOC, or the Anglo-Iranian
Oil Company, AIOC, after 1935) and the Burmah Oil Company (Burmah),
lacked the means to challenge
the U.S. major oil companies. That left Royal Dutch/Shell (Shell), a
partnership between the Royal Dutch
Petroleum Company and the Shell Transport and Trading Company. Due to its
unfavorable financial
position, Shell consented to a 60/40 division of shares with Royal Dutch
when the two companies formed
the Shell Group in 1907.3 Starting in 1916, the British Government made
several efforts to broker a
reorganization that would place most of the group’s subsidiaries under
the control of British nationals. As
far as new supplies of oil were concerned, Britain was already well-
positioned in the world’s key export
market after the First World War, Latin America, where British firms had
long been active within existing
1

All primary sources cited in this chapter are from the British National
Archives (BNA), unless otherwise indicated.
Nor did London try to hide its intentions: as early as 1923, journalists
understood that Britain’s post-1919 oil
policy revolved around “guaranteeing security of supply by the maximum
amount of British control,” partially
through “anglicising” Royal Dutch/Shell (Shell). E.H. Davenport and
Sidney Russell Cooke, Oil Trusts and AngloAmerican Relations (London:
Macmillan and Co., 1923), 38-47 (quotation from pg. 47). See also: B.W.
Patch, “Oil
in World Politics,” 24 December 1935, Editorial Research Reports: 1935,
vol. 2 (Washington, DC: CQ Press).
3
The two companies did not formally merge until 2005. The Shell Oil
Company – Shell’s U.S. subsidiary
(established in 1912 as the American Gasoline Company) – was effectively
independent until 1984/85, when its
parent company and majority shareholder, Royal Dutch, purchased all
outstanding shares.
2

31
(Mexico) or soon-to-be major (Venezuela) producers. But the Western
Hemisphere was no longer an
ideal supplier: besides the fact that production in key nations such as
Mexico was in jeopardy (first by
revolution and later geological problems), Britain had gradually begun
ceding political hegemony in the
hemisphere to the United States after 1895, a process that gathered steam
after 1914 as Britain ran down
its considerable economic investments in Latin America to fund its war
effort.
The obvious place to look for oil free from foreign control was within
the empire and its
protectorates, where Britain could monopolize production by excluding
foreign firms. The British
believed that the road to energy independence from the United States ran
through the Middle East,
particularly Persia (Iran after 1935) and Mesopotamia (Iraq after 1920).4
Already the dominant power in
the region before 1914, the withdrawal of Russia after 1917 seemed to
presage British hegemony in
Persia, while London secured control of Mesopotamia before the First
World War ended largely because
of its expected (but still unproven) oil wealth. Expanding production in
both Iran and Iraq depended upon
finding ways to get the oil to consumers cheaply, since oil shipped from
the Persian Gulf was farther
away from Britain than oil from the Gulf of Mexico. The most effective
means of getting Middle Eastern
oil to Europe was through pipelines that would link the oilfields of both
Iran and Iraq to the
Mediterranean. The question of pipelines and transit rights was therefore
a source of contention
throughout the interwar period. If all went according to plan, Britain
would no longer be dependent upon
the United States (whose oilfields appeared to be in decline in the
aftermath of the First World War and
whose voracious internal consumption would gradually erode any export
surplus even if production
continued to rise) and U.S. oil companies. Instead, Britain would have at
its disposal the services of at
least one major oil company that could challenge the U.S. oil companies
for commercial supremacy. Most

One recent history of British oil policy contends that London did not
pursue a coherent oil policy between 1918
and 1939 and was “broadly neutral” concerning British oil interests in
the Middle East. Charles More, Black Gold:
Britain and Oil in the Twentieth Century (London: Continuum, 2009), 25
and 32. More overlooks the possibility that
disagreements over the methods of British oil strategy should not imply
the absence of such a strategy. The fact that
official documents from the 1930s did not constantly refer to the
objectives laid down at the end of the First World
War also does not signify that these aims had been abandoned. Likewise,
London would not have had to compensate
for the possible closure of the Mediterranean following the break with
Italy in 1936 were it not for the fact that the
government had spent years seeking energy independence from the United
States in the Middle East.

32
importantly, British oil companies would be supplied largely from
oilfields in a region under British
political, military, and economic control. For a country that lived and
died on its access to imports, this
was as close to energy independence as Britain was ever going to get.5

See the appendix to this study for additional discussion of secondary

sources.

33
Prologue: The APOC Share Purchase and the Origins of British Oil Policy,
1912-1914
The British Government’s direct involvement within the affairs of the oil
industry started with the
“landmark” decision to purchase a 51% stake in APOC in 1914 in order to
safeguard the fuel supply of
the Royal Navy.6 The impetus for the acquisition of shares actually came
from APOC.7 London had come
to the rescue of the original holder of the Persian concession, William
Knox D’Arcy’s First Exploitation
Company, in 1905.8 The signing of the D’Arcy Concession in 1901 had come
in the midst of an intense
period of Anglo-Russian competition for influence in Persia. Russia was
Persia’s largest trading
partnership after 1910 and had a large market for its kerosene there. St.
Petersburg therefore could not
afford to be indifferent to the development of an alternative source of
production. The D’Arcy
Concession, while excluding the northern provinces of Persia bordering
Russia, also compelled Tehran to
reject Russian efforts to construct a pipeline across Persia to market
their petroleum in the Indian Ocean
area and beyond.9 In order to prevent the cash-starved D’Arcy from
selling part of his original concession
either to the Russians or the French Rothschilds, the Foreign Office and
the Admiralty (over the
objections of the Viceroy, Lord Curzon) arranged for financing through
the Burmah Oil Company. 10
Burmah’s leadership was wary of taking over the D’Arcy Concession for
they had no market for
Persian oil in the Eastern Hemisphere. Besides, Article 9 of the D’Arcy
Concession stipulated that a new

Geoffrey Jones, State and the Emergence of the British Oil Industry
(London: Macmillan, 1981), 9.
The Anglo-Persian Oil Company (APOC) was not alone in this regard: before
the war, it was usually the oil
companies themselves that pressed for government participation and not
the other way around (Shell in 1902 and
again in 1911, Mexican Eagle in 1913, and, of course, APOC in 1912-1914).
They did so probably knowing full
well that government participation would ensure numerous commercial
benefits with only nominal political control:
“Indeed, if this had not been the case, and if the oil companies had not
been quite convinced that government
‘control’ would consequently never become nationalization, they would
never have pursued their assault on laissezfaire.” Geoffrey Jones,
“British Government and the Oil Companies, 1912-1924: The Search for an
Oil Policy,”
Historical Journal (1977): 647-654 (quotation from pg. 654).
8
A summary of APOC’s operations in Persia/Iran as well as the history of
Iranian oil industry may be found in
Ronald Ferrier’s “The Iranian Oil Industry,” in: From Nadir Shah to the
Islamic Republic, ed. Peter Avery, Gavin
Hambly, and Charles Melville, vol. 7 of The Cambridge History of Iran
(Cambridge: Cambridge University Press,
2008), 639-701 (esp. 639-657). It is not a substitute for contribution to
the official history of BP: The Developing
Years, 1901-1932, vol. 1 of The History of the British Petroleum Company
(Cambridge: Cambridge University
Press, 1982), which does however, have a distinctly pro-company bias.
9
The D’Arcy Concession is reprinted in: Ferrier, History of BP, 640-643.
10
The Foreign Office was certainly concerned about the Russian threat, but
the most likely suitors were the
Rothschilds, whom D’Arcy approached in 1904. Ferrier, History of BP, 59-
62; and T.A.B. Corley, A History of the
Burmah Oil Company, 1886-1924 (New York: Heinemann, 1983), 98-101.
7

34
company would have to be founded if oil was discovered in Persia. Rather
than risk losing the concession
on a legal technicality, Burmah chose to remain in the shadows as a
shareholder in APOC.11 This led to
the creation of the Concessions Syndicate Ltd, subsequently reorganized
as APOC in 1909, with Burmah
temporarily serving as the largest shareholder.12 Two leading historians
of British imperialism describe
London’s brokering of the partnership between D’Arcy and Burmah (which
they misdated as occurring in
1908) as a key departure “from mid-nineteenth-century principles of non-
intervention.” The degree to
which “economic resources were entwined with strategic priorities”
necessitated that the government
undertake a more energetic defense of British private interests “in areas
of political sensitivity.”13
Although APOC had discovered oil in 1908, the company’s commercial
position remained dire. Its
major refinery Abadan was in shambles, and the company was hemorrhaging
money and in danger of
being absorbed by Shell, with whom it had been compelled to sign a
marketing agreement in 1912.14
APOC’s leadership (much to the chagrin of the company’s major
shareholder, Burmah) sought to
preserve their independence by securing government support for a
concession in Mesopotamia.15 This
was a classic instance of what one historian calls “transnational
structuring”: behind the rhetoric of
national interest, matters of profound strategic consequence were settled
not by a strong, aggressive
11

Corley, History of Burmah, 95-111, 128-145.

The pre-1914 ownership structure of the company and its operations in
Persia are summarized in the reports of the
Admiralty Commission on the Persian Oilfields (led by Slade), the final
one of which is reprinted in: Agreement
with the Anglo-Persian Oil Company, Limited, Cd. 7419 (London: HMSO,
1914), CAB 27/180. For the history of
the D’Arcy Concession until the foundation of APOC in 1909, see: Mostafa
Elm, Oil, Power, and Principle: Iran’s
Oil Nationalization and its Aftermath (Syracuse: Syracuse University
Press, 1992), 1-22; Ferrier, History of BP, 27113; Jones, British Oil
Industry, 128-141; Gregory Nowell, Mercantile States and the World Oil
Cartel, 1900-1939
(Ithaca: Cornell University Press, 1994), 53-56; and Anthony Sampson, The
Seven Sisters: The Great Oil
Companies and the World They Shaped (New York: Viking Press, 1975), 52-
57.
13
P.J. Cain and A.G. Hopkins, British Imperialism: Innovation and
Expansion, 1688-1914 (London: Longman,
1993), 408-409.
14
By the time of the Royal Commission’s visit to Persia in December 1913,
not only was completion of the refinery
behind schedule, but its products were second-rate. The most damning
problem, however, was the quality of
APOC’s fuel oil – its viscosity was too high. This was not a problem in
warmer temperatures, but unfortunately, the
Admiralty’s primary theater of operations was in the North Sea, where the
colder temperatures rendered fuel oil
from Abadan unusable. As late as the outbreak of the war, this problem
had not been resolved, and Slade had
informed Charles Greenway (Chairman and Managing Director of APOC) in
October 1914 “that the Admiralty are
now being put to considerable difficulties in the North Sea in
consequence of the unsatisfactory viscosity of our
Oil.” Corley, History of Burmah, 193-194; and Ferrier, History of BP,
148-153, 199-200.
15
Burmah’s leadership feared being sucked into another financial morass,
particularly one designed to protect
APOC from “competition” with Shell. As far as Burmah’s Chairman was
concerned, whether or not APOC
monopolized oil production in both Mesopotamia and Persia was a matter of
commercial indifference to Burmah,
whose existing markets would not be disrupted in any way. Corley, History
of Burmah, 204-208.
12

35
governments (since many within the Liberal Government retained their
party’s nineteenth-century
aversion to excessive interference with the market), but rather, by a
transnational firm that saw temporary
advantage in surrendering a portion of its autonomy in the contest for
commercial advantage over its
rivals.16 London’s support was invaluable in two regards. As a fledgling
company, APOC lacked the
“downstream” facilities to dispose of its Persian crude oil production,
but now it had a customer for its
Persian production through contracts with the Admiralty and the
Government of India. London’s
patronage was essential in guaranteeing APOC a majority share in the TPC
in 1914.
The TPC was originally a joint British-Dutch-German consortium
established in 1912 under the
leadership of prominent Anglo-German businessman, Ernest Cassel. Around
the turn of the century, the
Deutsche Bank (which had become intrigued by the possibilities for oil
development in Mesopotamia
during survey work for the Berlin-to-Baghdad Railway), Shell, and William
Knox D’Arcy (owner of the
1901 Persian concession) all became competitors for an oil concession.
Since the Ottomans were
uninterested in granting a concession to any single company, in 1912,
Cassel convinced the Deutsche
Bank and Shell that they should pool their efforts by joining the TPC
along with the National Bank of
Turkey (actually a British-owned bank used to finance development
projects within the empire). In March
1914, the partners in the TPC along with APOC and representatives of both
the British and German
governments signed the “Foreign Office” Agreement, which transferred the
bank’s shares to APOC and
formalized both the new ownership structure of the TPC and its
operations.17 Besides the fact that London
had pushed for the transfer of shares to APOC, two aspects of this
agreement are noteworthy. First, both
APOC and Shell each had to cede 2.5% of their interest in the TPC to a
major stakeholder in the National
Bank, Calouste Sarkis Gulbenkian, who would help negotiate a concession
with the Ottomans. Second,
the agreement included a “self-denying” clause that compelled members of
the consortium not to
undertake operations anywhere within the Ottoman Empire except through
the TPC or with the
unanimous consent of the three major partners: APOC (47.5% of the TPC’s
shares), the Deutsche Bank
16

Nowell, World Oil Cartel, 55

A copy of the “Foreign Office” Agreement is reprinted as Appendix 1 to:
D.J. Payton-Smith, Oil: A Study of Wartime Policy and Administration
(London: HMSO, 1971), 26-27.
17

36
(25%), and Shell (22.5%). This “self-denying” ordinance was included
within the 1928 “Red Line”
Agreement that reorganized the ownership structure of the TPC after the
war to accommodate French and
U.S. interests at the expense of the Deutsche Bank.18
According to one historian, the need to protect the Royal Navy’s oil
supply “was the main reason for
the growth of the State’s interests in the affairs of the oil companies,
who became not merely purveyors of
a commercial product, but suppliers of a strategic commodity on a par
with armaments.”19 The Admiralty
had already signed a supply contract with Burmah in November 1905, but
the amounts involved were
trivial: the Royal Navy could only draw up to 10,000 tons per year in
peacetime and would have access to
as much as 100,000 tons in wartime, while Burmah committed to
accumulating a 20,000 ton reserve.20

18

The history of the TPC, including both its claim to a concession in Iraq
and as the object of Anglo-American
squabbling up to 1923, is detailed in an internal Colonial Office
summary: R.V.V. (?), “Turkish Petroleum
Company,” 13 December 1923, Middle East No. 5, CO 935/1. Gulbenkian’s
unpublished memoirs are also worth
consulting, since he was present at both the creation of the TPC in 1912-
1914 and its rebirth in 1928 with the
signing of the “Red Line” Agreement: “Short Survey of the Iraq Petroleum
Company’s Origins and Developments,”
Yale University Library, Manuscripts and Archives (hereafter cited as:
YUL), Papers of William Wiseman, Series
III, Box 15. Gulbenkian’s son also provided the Foreign Office with a
history of the TPC/IPC based on his father’s
papers. “History of the I.P.C. and Mr. Gulbenkian’s Part in the
Foundation,” April 1944, enclosed with: Nubar
Gulbenkian to Neville Butler (Head of the American Department, Foreign
Office), 27 October 1944, FO 371/40108.
For the U.S. Government’s perspective, see: “Issues Concerning the Iraq
Petroleum Company as Raised in the
French Note of 13 January 1947 on the Cancellation of the Group Agreement
by the American Partners,” March
1947, no author (probably Walter Levy), NARA, RG 59, Records of the
Petroleum Division, Lot File No. 77D141,
Box 6. For more detailed histories of the TPC before the Second World
War, see: Corley, History of Burmah, 199213; John DeNovo, American
Interests and Politics in the Middle East, 1900-1939 (Minneapolis:
University of
Minnesota Press, 1963), 167-209; Edward Mead Earle, “The Turkish
Petroleum Company – A Study in Oleaginous
Diplomacy,” Political Science Quarterly 39: 2 (1924): 265-277; Marian
Kent, Oil and Empire, Oil and Empire:
British Policy and Mesopotamian Oil, 1900-1920 (London: Macmillan, 1976),
3-113; Helmut Mejcher, Imperial
Quest for Oil: Iraq, 1910-1928 (London: Ithaca Press, 1976), passim;
Nowell, World Oil Cartel, 53-76, 116-132,
183-191; Edith Penrose and E.F. Penrose, Iraq: International Relations
and National Development (London: Ernest
Benn, 1978), 20-23; and U.S. Senate, Select Committee on Small Business,
International Petroleum Cartel
(Reprint), 94th Congress, 1st Session (Washington, DC: U.S. U.S. GPO,
1975), 47-51.
19
Jones, British Oil Industry, 9.
20
Thanks to protection from the Government of India, which imposed a series
of tariffs on imported petroleum
between 1888 and 1911 and blocked attempts by both Standard Oil and Shell
to drill for oil in Burma in 1902 and
1904, respectively, Burmah (in concert with Shell through a 1905
marketing agreement) controlled oil production
and the distribution of kerosene within British India at the start of the
twentieth century. By 1924, Burmah was the
world’s ten-largest oil company in terms of capitalization, even though
it had virtually no commercial presence
beyond the Subcontinent and controlled only 1% of world production. In
1905, a few months before it signed its fuel
contract with the Admiralty, Burmah also became a major shareholder in
APOC. The Admiralty only claimed
11,000 tons a year during the First World War, which was half as much as
it had on average between 1908 and
1913, since the Royal Navy did not have any opponents in the Indian or
Pacific Ocean other than the occasional
German commerce raider. Corley, History of Burmah, 1-3, 64-65, 78-94,
229-230; and Jones, British Oil Industry,
88-105.

37
The Royal Navy had been experimenting with the use of oil (derived from
Scottish shale) as a form of
propulsion since 1865, but progress was slow until after 1901. The
Admiralty’s annual demand for fuel
oil thereafter spiked from 1,200 tons to 277,850 tons between 1902 and
1912.21 Heeding the advice of the
Former First Sea Lord John “Jackie” Fisher (a self-confessed “oil maniac”
since 1886) and numerous
technical experts, First Lord of the Admiralty Winston Churchill took the
“fateful plunge” in April 1912
and decided to begin converting the Royal Navy’s battleships and battle-
cruisers to burning oil for fuel.22
He did so over the objections of many within the Royal Navy
establishment, who opposed basing
Britain’s security on a source of fuel not indigenous to Britain and
whose global supply might not last for
more than a few decades. Supporters of oil pointed to the myriad
technical and tactical advantages it
enjoyed over coal: the saving in space and weight, the elimination of
stokers, and oil’s higher thermal
content allowed for faster speeds, longer range, thicker armor
protection, and heavier armament.23 The

21

The standard work on the Royal Navy’s conversion to oil, particularly

because of its analysis of the wider
diplomatic and financial considerations at stake, remains: Marian Jack,
“The Purchase of the British Government’s
Shares in the British Petroleum Company, 1912-1914,” Past & Present
(1968): 139-168. See also: Winston
Churchill, World Crisis, 1911-1914 (New York: Scribner, 1928), i: 125-
148; Corley, History of Burmah, 181-198;
Ferrier, History of BP, 158-201; A.A. Fursenko, The Battle for Oil: The
Economics and Politics of International
Petroleum Conflict over Petroleum, 1860-1930 (Greenwich: JAI Press,
1990), 127-145; Jones, British Oil Industry,
9-31, 144-176; Sara Regeur, “Persian Oil and the First Lord: A Chapter in
the Career of Winston Churchill,”
Military Affairs 46: 3 (1982): 134-138; Sampson, Seven Sisters, 49-57;
and David Allen Snyder, “Petroleum and
Power: Naval Fuel Technology and the Anglo-American Struggle for Core
Hegemony, 1889-1922 (Ph.D.
Dissertation, Texas A&M University, 2001). The influence of developments
in naval technology is summarized in:
Erik Dahl, Naval Innovation: From Coal to Oil,” Joint Forces Quarterly
(Winter 2000-01), 50-56. Unfortunately, as
a result of his narrow fixation on naval affairs, Dahl did not reflect
upon the wider, grand strategic significance of
Britain’s shift from coal to oil. For a wider perspective, see: Geoffrey
Kemp and John Maurer, “The Logistics of Pax
Britannica: Lessons for America,” in: Projection of Power: Perspectives,
Perceptions, and Problems, ed. Uri
Ra’anan, Robert Pfaltzgraff, and Geoffrey Kemp (Hamden: Archon Books,
1982), 28-49.
22
The Royal Navy had already started construction of entirely oil-burning
destroyers in 1909, and oil was the only
suitable fuel for submarines.
23
One ton of coal converted to steam could move one of weight 60,000 miles,
as opposed to 90,000 tons using oil.
This meant that a 10,000 tons steamer traveling between Britain and
Singapore (a distance of 8,190 miles) at 11
knots required 1,365 tons of coal or 1,020 tons of oil. “Oil Policy for
the Empire,” no date or author, POWE 33/44.
The provenance of the report is unclear, but the notation on the folder
cover reader: “Petroleum Imperial Policy
Committee[,] Minutes of First Meeting[,] 29 th May 1918.” The caloric
value of oil was 1.3 times greater than that of
the best coal (whose quality varied greatly unlike oil), and one ton of
coal took up as much as forty-three cubic feet
to store, compared to only thirty-eight cubic feet in the case of oil. By
1934, the savings in manpower for the Royal
Navy was approximately 15,000 men or £30,000,000. “Öl gegen Kohle,
endgültig?” Deutsche Wehr, Nr. 29/7. (38.)
Jahrgang (19 July 1934); and Waldener-Harz, “Kohle oder Öl,” Militär-
Wochenblatt, 119. Jahrgang, Nummer 15
(18 October 1934).

38
ability to refuel at sea further increased the range of oil-fueled
ships.24 Recent research on the
“dreadnought revolution” of 1905 has stressed the degree to which
Fisher’s re-conception of British naval
strategy depended upon speed rather than firepower. The advantage in
speed Fisher desired was only
possible through the application of oil rather than coal as fuel.25 The
fact that other navies such as the U.S.
Navy were already considering a shift, settled the matter in favor of
Fisher and Churchill.26
Many historians have argued that the introduction of the HMS Dreadnought
and HMS Invincible
temporarily erased Britain’s numerical superiority vis-à-vis its rivals.
What they have failed to note is that
the introduction of oil also granted Britain a qualitative advantage that
no other fleet in the world
possessed save the U.S. Navy (including the Russian Navy, whose main
units in Baltic and the Far East
were based thousands of miles away from the oilfields in the Caucasus).
At one stroke, the introduction of
oil constrained rivals such as France or Russia from using interior lines
of communication to challenge
British naval predominance away from the high seas (in theaters such as
the Mediterranean) or from
waging guerre de course against British commerce. The swift dispatch of
battle-cruisers would, in the
case of the former, prevent rivals from temporarily establishing
numerical superiority in any one theater,
while commerce raiders could neither outrun nor outgun the new battle-
cruisers.27
24

Warwick Brown, “When Dreams Confront Reality: Replenishment at Sea in the

Era of Coal,” International
Journal of Naval History 9: 1-3 (2010),
http://www.ijnhonline.org/2010/12/01/when-dreams-confront-
realityreplenishment-at-sea-in-the-era-of-coal/.
25
The gradual shift in thinking about the “dreadnought revolution” (as well
as a withering critique of the earlier
interpretation put forward by Arthur Marder) is summarized in: Charles
Fairbanks, “The Origins of the Dreadnought
Revolution: A Historiographical Essay,” International History Review 13
(1991): 246-272. Fairbanks points out that
Fisher considered the battle-cruiser, rather than the dreadnought, to be
the core of the Royal Navy (pg. 259-260).
Since speed rather than armor or firepower was what distinguished the
battle-cruiser from other capital ships, the
shift to oil was inevitable whatever the strategic or economic drawbacks.
26
The Taft Administration had already decided to construct the U.S.S.
Nevada as an oil-burning battleship, but the
decision was not finalized until April 1913 by President Woodrow Wilson’s
new Secretary of the Navy, Josephus
Daniels. For the U.S. Navy’s perspective, see: John DeNovo, “Petroleum
and the United States Navy before World
War I,” Mississippi Historical Review 41: 4 (1955): 641-656; John Maurer,
“Fuel and the Battle Fleet: Coal, Oil, and
American Naval Strategy,” Naval War College Review 34: 6 (1982): 69-74;
and Peter Shulman, “‘Science Can
Never Demobilize’: The United States Navy and Petroleum Geology, 1898-
1924,” History and Technology 19: 4
(2003): 365-385 (esp. 367-369 and 371-372). Shulman stresses the degree
to which the U.S. Navy’s decision was
predicated on the assurances of petroleum geologists that domestic oil
reserves were large enough to satisfy future
naval consumption, but he goes too far in asserting that, without them,
“[it] was never inevitable that the Navy
[would] embrace the oil age” (pg. 372).
27
Fairbanks, “Dreadnought Revolution,” 263-271. Even as they combine
insights from social and economic history
with the history of technology, many naval historians still overlook the
importance of logistics and raw materials.
Pace Fairbanks, there is not a scintilla of evidence to claim, before
1905, that the French and Russian navies enjoyed

39
In 1913, on the basis of the findings of the Royal Commission on Fuel and
Engines (which included
Fisher) that had studied the matter of Britain’s future supplies of naval
fuel, Churchill laid down three
principles for his Cabinet colleagues that served as the basis for
British oil policy until 1939.28 The first
was the geographic dispersal of sources of supply, so as to avoid relying
upon any one overseas source,
which might prove disastrous in wartime if Britain was unable to maintain
global naval mastery. The
second was promoting competition in the international oil industry in
order to avoid relying on any single
company. In practice, this meant breaking the dominance of foreign oil
“trusts” such as the U.S. Standard
Oil Company or the, alternatively, Dutch or “Jewish” Shell.29 In their
place, London would cultivate
pliant British alternatives such as APOC or Burmah. Between 1916 and
1924, some policymakers even
entertained aspirations of an “all British” Shell fulfilling such a
role.30 Third, Britain would endeavor
whenever possible to draw supplies from sources located within either the
British Empire or areas of
any “geographic advantage” allowing them to wreak havoc upon British
commerce from “a world-wide network of
bases and coal stations.” Fairbanks, “Dreadnought Revolution,” 267. The
fate of the Russian Second Pacific
Squadron as it sailed around the world in 1904/5 before its destruction
at the Battle of Tsushima disproves any
notion of a Russian “geographic advantage” during the Age of Coal. The
fleet actually burned Welsh coal since
Russian coal was of inferior quality. Although the Russians docked at
French ports, the French lacked the colliers to
supply the fleet. The only alternative were German colliers, but these
too had to purchase their coal from British
firms, and London constantly interfered with supplies. Lamar Cecil, “Coal
for the Fleet That Had to Die,” American
Historical Review 69: 4 (1964): 990-1005.
28
Before the war, two committees considered the oil supply question for the
Royal Navy: the Pakenham Committee
(named after Capt. A.C. Pakenham, Fourth Sea Lord), which met between
1911 and 1912, and the Royal
Commission led by Fisher, established by Churchill in July 1912, and
which issued reports in November 1912,
February 1913, and February 1914. Both committees considered the
acquisition of reserves within Great Britain,
while the latter also studied the viability of oil as a source of
propulsion fuel. H.M. Petroleum Executive,
“Negotiations Regarding the Petroleum Policy of His Majesty’s Government:
Volume I: Report and Proceedings of
the Petroleum Imperial Policy Committee, 29th May, 1918, 10th February,
1919,” March 1919, pg. 6, ADM
116/3452 (hereafter cited as: PIPC, i:).
29
Criticism of the “Jewish” character of Shell stemmed from the fact that
the British portion of the company, the
Shell Transport and Trading Company, which merged with the Royal Dutch in
1907, was founded and operated by a
British Jew, Marcus Samuel (no relation to Herbert Samuel, also Jewish,
the Liberal Party politician and first High
Commissioner to Palestine between 1920 and 1925). Even a brilliant public
servant such as John Cadman,
previously the leading expert on oil policy within the British Government
and after 1927 Chairman of APOC, was
not above Jew-bating, privately confiding to a U.S. official in December
1921 that Shell “was now ruled by a Jewish
Camarilla,” which he condemned as “unprincipled.” Fred Dearing (U.S.
Assistant Secretary of State), Memorandum
of Conversation, 23 December 1921, National Archives and Records
Administration, Record Group 59: General
Records of the Department of State (hereafter cited as: NARA, RG 59),
841.6363/188.
30
Ironically, for all of its efforts after 1916 to make Shell an “all
British” company, the British Government had
been offered a controlling-stake in Shell Transport and Trading in 1902
but had passed since it had no defined oil
policy at the time. Nowell, World Oil Cartel, 56. It would be a mistake
to assume that the Admiralty went out of its
way to harm Shell – practical considerations took precedence of
nationalistic prejudices: “The only bias in the
Admiralty was against expensive oil when it could get cheap oil,” which
hurt Shell since many of its oilfields were
not only located farther away from Britain, but the oil they yielded did
not always conform to Admiralty
specifications. Jones, British Oil Industry, 23-26.

40
British influence such as Persia or after 1918 Mesopotamia, along secure
trade routes, while stimulating
oil development within the British Empire and its dependencies. Churchill
argued that the best way to
safeguard the navy’s oil requirements would be through long-term supply
(“forward”) contracts for the
Admiralty that avoided the extreme fluctuations in prices endemic to the
oil industry and prevented the
government from being “mercilessly fleeced at every purchase […].”31
Although APOC would be the
largest recipient of government orders (200,000 tons starting in 1915,
rising to 500,000 tons if necessary),
Churchill also supported contracts with Shell (100,000 tons after 1915),
Union Oil of California (80,000
tons per year), and Mexican Eagle (200,000 tons per year). Churchill
estimated in 1913 that government
purchases, including both annual consumption and the accumulation of
reserves, would rise from 664,000
tons in 1913/14 to 729,000 tons by 1917/18.32
During a speech before the House of Commons, Churchill expressed the
Admiralty’s conviction that,
although in the “interim” period the navy’s requirements would be
satisfied by forward contracts, the
“ultimate policy” of the British Government should be to own and produce
a portion of its oil
requirements, in addition to possess the spare refining capacity to store
and refine large volumes of crude
oil purchased from suppliers before they entered the world market.33 The
question of whether or not it
was wise to base Britain’s security on an imported commodity – as
opponents complained – missed the
point: Britain already depended on imports of any number of vital
commodities. As Churchill asked the
Cabinet in June 1913, “if we cannot bring oil, how can we get corn?”34

31

Whereas before 1912, the price of fuel oil f.o.b., 22/-, had been roughly
equivalent to coal, it had risen to 39/- in
1913 and seemed set to rise to as much as 50/- by 1914, while freight
rates had risen from 17/- to 27/- per ton/
32
Churchill also included a request that the government accumulate a
reserve equivalent to six months of wartime
requirements – from 441,000 tons in 1913 to 1,412,000 tons by 1917 – as
compared to the four-year peacetime
reserve suggested by the Royal Commission. W.S.C., “Oil Fuel Supply for
His Majesty’s Navy,” 16 June 1913,
CAB 37/115. Churchill misremembered the recommendations of the Royal
Commission, claiming years later that it
had recommended the collection of a four-year war reserve. This would
have amounted to roughly 10,500,000 tons
according to estimated consumption by 1917/18, as opposed to an estimated
2,076,000 tons for four years of
peacetime consumption by 1917 (519,000 tons per year). Jack, “Shares
Purchase,” 152-153.
33
“Navy Estimates (Oil Conversion), July 17, 1913, House of Commons,”
reprinted in: Winston S. Churchill: His
Complete Speeches, 1897-1963, ed. Robert Rhodes James (New York: Chelsea
House, 1974), ii: 2125-2132.
Churchill brought up the matter of government ownership and production of
oil because the Cabinet had already
agreed in principle with the idea of purchasing shares in APOC during the
discussion over the forthcoming Naval
Estimates. Ferrier, History of BP, 181-182.
34
W.S.C., “Oil Fuel Supply for His Majesty’s Navy,” 16 June 1913, CAB
37/115.

41
Although the British Government never directly entered the oil business
as a producer and retailer of
oil, it did effectively become an owner of foreign oilfields. In early-
1913, the Admiralty commenced
negotiations concerning a long-term supply contract with APOC, which then
held an exclusive oil
concession for 80% of Persia (excepting the five northern provinces
within the Russian sphere of
influence) and dispatched a team to Persia led by Vice Admiral Edmond
Slade (a former Director of
Naval Intelligence) and John Cadman (a professor at the University of
Birmingham and adviser to the
Colonial Office) to report on the suitability of the Persian oilfields.35
Slade’s team issued a favorable
report in April 1914, and a month later the British Government purchased
a 51% share in APOC for
£2,200,000 and concluded a secret sales agreement between APOC and the
Admiralty.36 London would
nominate two members of the APOC’s Board of Directors, who would enjoy
veto rights on all matters
concerning the company’s relationship with the British Government, such
as the Admiralty supply
contract, or any plans to sell out to foreign interests.37
Under the terms of the secret contract with APOC, the Admiralty was
guaranteed 6,000,000 tons of
fuel oil over the next twenty years at a cost of 30/- per ton (excluding
freight), minus a rebate calculated
on the basis of APOC’s excess profits, which reduced the cost by as much
as one-third by 1920.
Deliveries would start at 50-70,000 tons in 1914-1915, rising to 300-
350,000 tons by 1917-1918, and
much as 500,000 tons thereafter.38 The two parties revised the agreement
in 1928, and APOC agreed to
fulfill the remainder of its contract at a fixed price of 22/- per ton.
One historian calculates that, including
freight charges and the rebate, the Admiralty paid APOC less than 50/-
per ton of oil in 1922, whereas the

35

The Final Report of the Admiralty Commission on Persian Oilfields (dated

06 April 1914) is reprinted in:
Agreement with the Anglo-Persian Oil Company, Limited, Cd. 7419 (London:
HMSO, 1914), CAB 27/180.
36
Later described as “one of the most farseeing and prudent acts of
statesmanship since the time when the
Government acquired the Suez Canal shares.” Wilkinson, “The Influence of
Oil on Imperial Organization,” Journal
of the Royal United Service Institution (hereafter cited as: RUSI) 68:
469 (1923): 109-114.
37
Agreement with the Anglo-Persian Oil Company, Limited, Cd. 7419 (London:
HMSO, 1914), CAB 27/180. The
terms of the veto were spelled out in a private letter from the Joint
Permanent Secretary of the Treasury (John
Bradbury, later one of the government directors on APOC’s board) to the
company. Bradbury to APOC, 20 May
1914, reprinted in: Ferrier, History of BP, 645-646. Interestingly, the
first instance in which the government
exercised its veto was in 1920, when it opposed APOC’s offer of 100,000
shares to the Persian Government in order
to settle outstanding disputes over royalties and wartime damages.
Ferrier, History of BP, 198-199, 352-355.
38
Actual deliveries between 1922 and 1932 went from a low of 434,493 tons
in 1922/23 to a high of 621,118 tons in
1930. Ferrier, History of BP, 474.

42
market price for diesel fuel was 82/6d and 65/- for fuel oil. This was
from London’s point of view “an
extremely good bargain.” APOC’s leadership also had every “reason to feel
well pleased with
themselves” for having guaranteed their independence from Shell.39 The
company also secured a
commanding position within the Turkish Petroleum Company (TPC) as a
result of the “Foreign Office
Agreement” of March 1914, which was poised to begin prospecting for oil
within Mesopotamia on the
eve of the First World War. Two parties did, however, lose out. The first
was the Iranian Government,
whose oil revenues suffered as a result of the discount APOC was offering
the Admiralty. The second was
Shell, whose British co-founder (Marcus Samuel) questioned how the
Admiralty could privilege Persian
oil to the detriment of imperial sources such as Egypt or other British
protectorates. Samuel warned the
Admiralty that it was setting a precedent for other nations “to reserve
their oil supplies for their own
requirements” while discouraging the oil development within the British
Empire.40
Although concluded separately, the share purchase and the Admiralty
supply contract were two
halves of the same walnut since the latter depended upon the long-term
commercial viability of APOC,
which was in danger until it received the infusion of public capital.41
Churchill’s policy was, however, not
one of direct government intervention in the economy. British governments
of the period, like their U.S.
39

Jack, “Shares Purchase,” 162-167; Jones, British Oil Industry, 154-155.

According to internal APOC records, the
price paid by the Admiralty fluctuated between 20 and 30/- and averaged
22/-. See files deposited in: British
Petroleum Archive, Arc. Ref. 78504 (hereafter cited as: BP, No.). The
original 1914 supply contract expired in 1951
following the nationalization of APOC in Iran. The Admiralty thereafter
continued to sign new supply contracts
until 1959, when it concluded a 5-year agreement. In 1962, the Admiralty
gave notice that it would terminate the
existing contract effective 31 December 1964, thus ending its special
relationship with British Petroleum (BP). For
additional details on the 1959-64 agreement, see: BP 63478.
40
Churchill’s covering letter to the Cabinet oozed contempt for the “great
oil monopolist” Samuel, who was simply
opposed to the government “acquiring an independent source of supply.”
Samuel to F.J.S. Hopwood (Civil Lord of
the Admiralty), 29 May 1914, enclosed with: W.S.C., Minute for the
Cabinet, 09 June 1914, CAB 37/120.
41
“The contract, especially when the success of the company is fully
assured, should give the Navy a large supply of
fuel oil for a long period of time; and as soon as the company is in a
position to pay satisfactory dividends, the cost
of oil to the state will be very materially reduced.” E.J.W. Slade (Rear
Admiral, President of the Admiralty Persian
Oil Commission), et al., “Anglo-Persian Oil: Memorandum showing present
position of Negotiations with AngloPersian Oil Company,” 10 February
1914, BP 71402. None of this should have been remotely surprising to the
U.S.
Government, which had pieced together a rather complete picture of APOC’s
relationship to British grand strategy
by no later than 1919. For example, see: Maurice Wertheim (Finance
Member, American-Persian Relief
Commission), “Chapter VI: The Anglo-Persian Oil Company Limited,” 06
January 1919, YUL, Papers of Edward
M. House, Series III, Box 206. Wertheim’s detailed paper (which includes
a two-page synopsis and is based largely
on publicly available sources such as the original 1913 report of the
Slade Commission to Persia and various official
statements by the APOC itself) accurately identified nearly all of the
motivating factors behind the British
Government’s decision to purchase a controlling share of APOC in 1914,
including tangential factors such as the
possibility that the Indian railways could be converted to the burning of
Persian oil rather than coal.

43
counterparts, shared an abiding faith in the efficacy of the capitalist
system and an aversion to
government interference within private industry. Governments on both
sides of the Atlantic only
tampered with the free market in order to preserve competition and thwart
cartelization or
monopolization. The fact that oil was also becoming a “strategic”
commodity – one that was in short
supply within Britain and its empire – forced the government to swallow
its liberal sentiments and
undertake “an unusual departure from the British tradition of laissez-
faire which, if diminishing in
influence, still represented the orthodox principle governing relations
between state and industry.”42 The
decision was not taken lightly, the Admiralty later explained, but it was
“the lesser of two evils,” which
“does involve much tact and judgment in the conduct of the affairs of the
company […].”43
After the share purchase, the British Government had a guaranteed
supplier for a significant portion
of the Admiralty’s fuel requirements. It did so without the onus of
interfering in the natural workings of
the market, while promoting competition within the oil industry by
frustrating Shell’s bid to take over
APOC. The presence of two government directors on the board of APOC
should not be construed
evidence of any desire on London’s part to meddle in the management of
the company since the
government directors could exercise their veto power only in matters
affecting the interests of the British
Government. More often than not, such men, most notably Slade, went
native and became as devoted to
the interests of APOC as those of the government.44 Although the British
Government resisted pressure to
abandon its share in APOC during the 1920s, its relationship with the
company was far from perfect.
Beyond disputes over the extent of the company’s independence, London
feared that APOC would
exploit its “special relationship” to manipulate the government into
granting it privileges at the expense of

42

J.H. Bamberg, The Anglo-Iranian Years, 1928-1954, vol. 2 of The History

of the British Petroleum Company
(Cambridge: Cambridge University Press, 1994), 174-175.
43
Charles Walker (Admiralty) to the Director, H.M. Petroleum Executive
(Long), 28 February 1918, P.
84548/48009, POWE 33/42.
44
Slade’s appointment to this position and subsequently to APOC’s board is
something of a mystery: he had no
particular knowledge of the oil industry or naval propulsion, and he had
been passed over for promotion to the rank
of Sea Lord after his tenure as Director of Naval Intelligence.
Interestingly, his major critic was “Jacky” Fisher, the
great apostle of oil, who derided Slade as a “fool.” Corley, History of
Burmah, 192.
44
its competitors with no reciprocal obligation to act in accord with
London’s desires if doing so harmed the
company’s operations.45

45

One journalist went so far as to describe APOC’s attempted manipulation

of the British Government as the
“Frankenstein Syndrome.” Sampson, Seven Sisters, 56.

45
The First World War and the Need for Coordination, 1914-1919
The official history of the Ministry of Munitions observed that, over the
course of the First World
War, an adequate “supply of petroleum productions was a vital necessity
for the conduct of the war
[…].”46 In 1913, the United States supplied over 62% of Britain’s total
imports of 1,807,594 tons. The
next four largest suppliers were Romania (11.8%), Russia (7.8%), the
Dutch East Indies (7.7%), and
Mexico (4.2%).47 Britain lost access to Russian and Romanian oil
following the Ottoman Empire’s entry
into the war, while Persian oil production was still negligible and East
Indian oil was both too far way and
already supplying Far Eastern markets. The United States therefore became
Britain and the Allies’ largest
supplier of oil. U.S. oil production increased from 34,000,000 tons in
1913 to 48,800,000 tons in 1918,
while oil exports during the entire war equaled 34,256,000 tons. During
the 1917/18 fiscal year, of the
8,638,000 tons exported by the United States, 4,010,000 tons (46%) went
just to Britain, not including the
2,168,000 tons that went to Canada and the rest of the empire.48 Of the
21,200,000 tons imported by the
Allies during the war, 17,900,000 tons (84%) came from the United
States.49 British imports of U.S. oil
increased from 1,178,000 tons in 1914 to 4,001,000 tons in 1918 (or 70%
and 77%, respectively, of total
imports).50 Mexico also remained an important supplier for Britain even
if the sulfur content of its oil was
too high for Admiralty specifications.51 At its peak, Mexico accounted
for 10% of British wartime oil
imports (399,000 tons in 1918), and it also tripled its share of U.S. oil
imports during the war to 95%.52

46

Official History of the Ministry of Munitions (East Sussex: Naval &

Military Press, 2009), 134-156.
“Oil Policy for the Empire,” no date or author, POWE 33/44.
48
Ferdinand Friedensburg, Erdöl im Weltkrieg (Stuttgart: Ferdinand Enke
Verlag, 1939), 105-113.
49
“Der amerikanische Kontinent – Wehrwirtschaftlicher Versorger der
Demokratien? Vierjahresplan, 1939: XVI.
50
Although the high point in percentage terms (82%) came in 1917.
Friedensburg, Erdöl, 90.
51
Jonathan Brown, Oil and Revolution in Mexico (Berkeley: University
California Press, 1933), 104-105.
52
This rate of increase actually grew more sharply after the war: Mexican
oil exports to the United States
quadrupled between 1918 and 1922 (from 37,719,000 barrels to 126,195,000
barrels), although Mexico’s share of
U.S. oil imports slightly declined (from 99.9% to 96.9%). Everette Lee
DeGolyer and Lewis MacNaughton,
Twentieth Century Petroleum Statistics (Dallas: DeGolyer and MacNaughton,
2004), 60-61. By 1920, Mexican oil
exports (78.08% of which went to the United States) equaled 20% of U.S.
consumption and were valued at
$61,000,000 (compared to $11,000,000 in 1914). Linda Hall, Oil, Banks,
and Politics: The United States and
Postrevolutionary Mexico, 1917-1924 (Austin: University of Texas Press,
1995), 13 and 61.
47

46
These exports indirectly benefitted Britain by allowing the United States
to build up a strategic reserve
and export a larger percentage of its own production to the Allies.53
Thanks to a 1924 study by the U.S. Navy’s wartime expert on petroleum
logistics, we also have a
good idea about Allied rates of consumption and sources of supply during
the last six months of 1918. 54
The largest consumer was Britain, with a six-month (July to December
1918) requirement of 3,161,000
tons of petroleum products, 97% of which had to be imported, with 77%
coming from the United States
alone. 2,213,500 tons, or 70% of the total requirements, was fuel oil
primarily for the Grand Fleet, whose
oil-burning units in 1917 (fifteen dreadnoughts and battle-cruisers,
seventeen cruisers, and 125 destroyers,
plus another forty-five pre-dreadnoughts and cruisers that burned both
coal and oil) required 450,000 tons
of imports per month to meet their operational and reserve requirements.
Although the Royal Navy had
begun converting to oil-burning ships starting in 1912, progress was
slow. As of 1914, 120 of the Royal
Navy’s cruisers burned oil, only but five battleships did so.55 Against
the Royal Navy’s estimated annual
demand of 4,000,000 tons of fuel oil by 1918 (roughly 70% purchased from
the United States), the
French and Italian navies only consumed 90,000 and 120,000 tons,
respectively. Britain was, however,
responsible for supplying 100% of the French Navy’s requirements (20,000
tons of which originated in
the United States) and two-thirds of Italy’s consumption (one-third of
which came from the United
States). The U.S. Navy would require only 750,000 tons.56

53

Friedensburg, Erdöl, 90, and 106-107; and Paul Garner, British Lions and
Mexican Eagles: Business, Politics, and
Empire in the Career of Weetman Pearson in Mexico, 1889-1919 (Stanford:
Stanford University Press, 2011), 204205. In 1920, the United States
still accounted for 59.8% of Britain’s imports of 3,310,587 tons and
Mexico 28.5%.
The only other suppliers of consequence were Persia (4.5%) and the East
Indies (3.7%). Appendix I to: Committee
of Imperial Defence (CID), “Production of Oil from Coal: Report of a Sub-
Committee,” 29 November 1937, 272-A
(also Paper No. O.C.C. 38), enclosed with: T.W.H.I. (Thomas Inskip,
Minister for Coordination of Defence) to the
Cabinet, “Report on the Sub-Committee of the Committee of Imperial
Defence on the Production of Oil from Coal:
Note by the Minister for Co-ordination of Defence,” 03 February 1938,
C.P. 19 (38), CAB 24/274.
54
Paul Foley, “Petroleum Problems of the World War: A Study in Practical
Problems,” United States Naval Institute
Proceedings 50: 261 (1924): 1802-1832.
55
B.S. McBeth, British Oil Policy, 1919-1939 (London: Frank Cass, 1985),
11.
56
H.H.D.T. (Rear Admiral Hugh H.D. Tothill, Fourth Sea Lord) and E.C.G.
(?), “Requirements of Oil Fuel and
Ships in U.S.A.,” 11 July 1917, G.T. 1433, BNA, CAB 24/20.

47
The British Expeditionary Force consumed only 6,900 barrels each day,
which could be carried by a
single oil tanker.57 Total Allied consumption during the last six months
of the war reached 4,587,524 tons
(roughly 34,002,668 barrels), 80% of which came from the United States.58
(Due to the primitive state of
motorization, gasoline comprised only 20% of Allied consumption, compared
to fuel oil, which accounted
for 60%.59) This figure is trivial when considered as a percentage of
U.S. domestic production in 1918
(less than 10% of 355,928,000 barrels).60 The financial cost was not:
between 1914 and 1918, Britain
alone spent £170,393,000 on petroleum imports.61 Imports also doubled
during the war, from 2,000,000
tons in 1913 to 4,000,000 in 1917.62
At the start of the war, the British Government allowed the oil industry
to operate on a voluntary basis
until the supply situation began to deteriorate in 1916.63 It thereafter
imposed controls such as rationing,
centralized government purchases of petroleum under the supervision of
the Board of Trade (BOT), and
created an Interdepartmental Petroleum Committee in February 1917
comprised of representatives of the
Admiralty, BOT, the War and Colonial offices, and the Ministry of
Munitions to advise on the
government’s oil policy and make recommendations regarding the securing
of adequate supplies for the

57

Most of this was for the BEF’s lorry fleet, which increased from 100 in
August 1914 to 60,000 by war’s end.
Jones, “British Government and the Oil Companies,” 655. The original BEF
only boasted of 827 vehicles and 15
motorcycles but possessed 79,000 vehicles and 34,000 motor cycles in
1918, not including tanks and armored cars.
Fursenko, Battle for Oil, 180. Lorries were especially important as
armies’ supply requirements increased. In 1916,
British divisions required 50 wagon-loads of supplies each day, and
lorries were preferable to horses because each
five-ton truck could haul the same amount of goods as three teams of
horses. Joost Jonker and Jan Luiten van
Zanden, From Challenger to Joint Industry Leader, 1890-1939, vol. 1 of A
History of Royal Dutch Shell (Oxford:
Oxford University Press, 2007), 162-163.
58
The economic analyst Ferdinand Friedensburg cites a figure of 9,000,000
tons for all of 1918, including 1,930,000
tons of gasoline and 5,350,000 tons of fuel oil. Allied monthly gasoline
consumption was divided as follows: 88,000
tons for vehicles; 42,000 tons for tanks; and 31,000 tons for aircraft.
Ferdinand Friedensburg, Erdöl im Weltkrieg
(Stuttgart: Ferdinand Enke Verlag, 1939), 15. These figures are
equivalent to those cited in: Fursenko, Battle for Oil,
183. The Royal Navy’s cumulative wartime consumption exceeded 9,000,000
tons. Lt. Cmdr. G.J.A. Miles (Royal
Naval Staff College), “The Supply of Oil Fuel for Fleets and Squadrons
Abroad in the Future,” 14 April 1920, ADM
203/48.
59
Jonker and Zanden, History of Shell, 163.
60
DeGolyer, Petroleum Statistics, 5. In fact, the year before Foley
published his study, 1923, U.S. production
(732,407,000 barrels) had almost doubled from the 1918 figure.
61
Friedensburg, Erdöl, 120.
62
“H.M. Petroleum Executive,” no date or author (covering folder indicates
that the author was the Treasury on 03
October 1918), POWE 33/150.
63
At the start of 1916, which climaxed with the disastrous Battle of the
Somme in July, stocks stood at 36,000,000
gallons. By the end of July, they had declined to only 12,500,000
gallons. Following the imposition of rationing,
stocks quickly swelled to 37,500,000 gallons by the end of December 1916.
Jones, “Oil Companies,” 655-656.

48
armed services. Coordination between the oil companies was handled by the
Pool Board, which was also
under government supervision. Later in 1917, a new Petroleum Committee
superseded the
Interdepartmental Petroleum Committee. This new body was an executive
agency under the leadership of
the Colonial Secretary, Walter Long (with Cadman serving as his technical
adviser), which reported
directly to the War Cabinet. The Petroleum Committee (renamed the
Petroleum Executive in December
1917) became the premier agency coordinating British oil policy during
the war.64 As evidence of its
success, although monthly consumption between June 1917 and October 1918
increased from 397,055
tons to 487,191 tons, stocks also rose from 951,575 tons to 1,813,711
tons.65
In February 1919, Long (now First Lord of the Admiralty) appealed to his
colleagues to preserve the
Petroleum Executive as an independent and permanent department. Britain
could not afford to regress to
the state that predated the war, when “each Government Department had
managed to its own oil affairs,”
without coordination. The defects of such a system became evident
following the start of the German
“unrestricted submarine warfare” campaign of 1917, when the lack of
coordination led to squabbling over
available tanker tonnage. The Petroleum Executive had resolved this
logistical impasse, but Long argued
that the importance of the agency’s work would only increase after the
war, as Britain’s “dependence on
seaborne and to a large extent on foreign supplies for our immense
requirements of petroleum make the
whole question one of peculiar importance vitally affecting our naval and
mercantile supremacy […].”66
In June, Long appealed to Prime Minister David Lloyd George, warning him
that the Petroleum

64

For a useful postwar analyses that complements the Ministry of Munitions

history, see: CID, Oil Board, “Oil
Control during the Great War: Memorandum prepared in the Board of Trade,”
August 1927, O.B. 23, CAB 50/3;
“Petroleum Policy,” no author or date, BP 70025; Appendix VI (“Note on
Government Mineral Oil Organisation
during the First World War”) to Kent, Oil and Empire, 185-188. See also:
Jones, “Oil Companies,” 654-657. Based
on his experiences during the World War, following the Sudeten Crisis of
1938, Cadman began pressing his contacts
in the British Government, including Brigadier Hastings Ismay (the newly
appointed Secretary of the CID) and
Admiral Ernle Chatfield (the former First Sea Lord and future Minister
for the Coordination of Defence) to set up an
interagency “mechanism for dealing with oil supplies” overseen by a
member of the Cabinet. Ismay to Cadman, 02
November 1938; Cadman to Ismay, 30 September 1939; and Ismay to Cadman,
01 October 1939; all in: BP 70025.
65
“H.M. Petroleum Executive,” no date or author (covering folder indicates
that the author was the Treasury on 03
October 1918), POWE 33/150.
66
Long, “Memorandum for the Cabinet: The Need for a Permanent Petroleum
Department,” G.T. 6930, 27 February
1919, CAB 24/76; reprinted as Appendix H to: PIPC, i: 144-145.

49
Executive was losing many of its best staff (including Cadman) and
suggesting that it be reconstituted an
independent agency within the Ministry of Supply.67
By the first anniversary of the Armistice, the Cabinet had failed to take
any action, which prompted
Long to chasten his colleagues, “who perhaps do not fully realize the
importance of this subject and its
growing complexity which make a unified and co-ordinated control
imperative.” Whatever else happened,
the Petroleum Executive should not be subsumed into a larger department,
which would impair the former
“exercising effectively the co-ordinating which constitutes one of its
most important functions.”68 This
memorandum finally caught the attention of the Cabinet, which
reconstituted the Petroleum Executive “as
a separate Department… independent of the Department of Overseas Trade.”
Although the Petroleum
Executive retained its wartime role “as an advisory and consultative
Department on petroleum questions,”
it would not be led by a separate minister. Rather, the first three heads
of the Executive also served as the
Secretary of Overseas Trade (Hamar Greenwood, Frederick Kellaway, and
Philip Lloyd-Greame).69
Long’s desire for unified administration of British oil policy went
unfulfilled: the Petroleum Department
went to the BOT in 1922 and was then shuffled into the Mines Department
(which was itself a sub-agency
of the BOT) in 1928. By 1934, the Petroleum Department boasted of a full-
time staff of three,
supplemented by three part-time employees. None of the concerned parties
(the Admiralty, the Treasury,
the Foreign Office, the Colonial Office, etc.) was willing to cede any of
their authority: “Those
responsible were not indifferent to oil affairs, but their concern did
not manifest itself in any concerted
action to establish a positive, comprehensive oil policy.”70

67

Long to D. Lloyd George, 05 June 1919; and Long to Lord Inverforth

(Minister of Supply), 05 June 1919; both in:
MUN 4/6718.
68
Long, “Memorandum for the Cabinet,” 11 November 1919, C.P. 115, CAB
24/93. The President of the Board of
Trade (Auckland C. Geddes, later Ambassador to the United States) had
also complained that the matter had been
left in abeyance since the start of the year. A.C. Geddes, “Petroleum
Executive: Memorandum by the President of
the Board of Trade,” 10 November 1919, POWE 33/58.
69
Hankey, “Petroleum Committee,” 24 November 1919, C.P. 180, CAB 24/93.
70
Bamberg, History of BP, 175-176; Payton-Smith, Oil, 40. The work of the
department and its relations with the
Colonial Office, Foreign Office, Admiralty, CID, and the oil companies is
summarized in: “Petroleum Department
(Present Work),” no date or author (circa 1930), POWE 33/16.

50
Wartime Efforts to Create a National Oil Company, 1916
As early as 1916, various government agencies began taking an interest in
promoting the
development of a major British oil company that would reduce the
influence of foreign oil companies
within British markets and encourage greater oil production within the
empire.71 The task confronting
British policymakers was daunting. One scholar describes Britain before
the First World War as the
“Saudi Arabia of coal,” but the same did not apply to oil.72 The sun may
not have set on the British
Empire, but the empire accounted for only 2.5% of world oil production in
1913 (1,519,090 tons), plus
243,621 tons in Persia. By 1917, Persian oil production had almost
quadrupled to 937,902 tons, but
imperial production only rose to 1,774,689 tons. Consumption (production
plus imports minus exports)
within the Empire in 1913 was 4,713,319 tons and reached 7,485,645 tons
four years later. During this
period, imports had spiked from 3,076,340 tons to 6,224,258 tons, and the
U.S. share rose from 62% to
over 80%.73 Hopes that a more favorable demand/supply ratio would emerge
following the World War
proved unrealistic. Following a drop between 1918 and 1919 (from
8,906,580 tons to 6,689,326 tons),
consumption rebounded in two years to just below the wartime peak
(8,827,463 tons in 1921). Imperial
production between 1918 and 1921 stagnated, however, increasing by a mere
67,511 tons, and the 1921
figure (1,873,707 tons) equaled only 21% of consumption within the empire
(8,827,463 tons).74
71

Beyond the sources cited below, my analysis of British efforts to form an

“all British” oil company between 1916
and 1924 relied upon the following secondary sources: Corley, History of
Burmah, 243-260, 291-309; Ferrier,
History of BP, 235-261, 371-385; Jones, British Oil Industry, 177-244;
Kent, Oil and Empire, 127-136; and
McBeth, British Oil Policy, 15-55. My findings do not differ from theirs,
but this paper does have a different
temporal and analytical focus. Consequently, the failure of the merger
schemes is considered within the broader
context of British efforts after 1918 to secure oil independence from the
United States and U.S.-controlled sources of
oil.
72
Ian Lesser, Resources and Strategy (Basingstoke: Macmillan, 1989), 25. As
the Secretary of State for India (Lord
Crewe) exclaimed in 1913, abandoning British coal for foreign oil was
akin to French wine growers “preaching the
virtues of Scotch Whiskey as a beverage.” Jones, British Oil Industry,
12.
73
British figures regarding production, consumption, and imports between
1913 and 1917 are drawn from PIPC, i:
5, 108-112. See also: His Majesty’s Petroleum Executive, “Petroleum
Production,” no date, enclosed with: Cadman
to the Under Secretary of State, Colonial Office, 12 May 1919, S.140/J.,
CO 323/813/50.
74
“British Empire Petroleum Production and Consumption,” no date
(handwritten notation of 10 May 1923),
enclosed with: J.C. Clarke (Deputy Director, Petroleum Department) to
Grindle (Colonial Office), 11 May 1923,
P.D./23/1923, CO 323/903/24. For data on the amounts of oil imported into
Britain, their source, and cost between
1913 and 1937, see Appendix I to: CID, “Production of Oil from Coal:
Report of a Sub-Committee,” 29 November
1937, 272-A (also Paper NO. O.C.C. 38), enclosed with: T.W.H.I. (Inskip)
to the Cabinet, “Report on the SubCommittee of the Committee of Imperial
Defence on the Production of Oil from Coal: Note by the Minister for
Coordination of Defence,” 03 February 1938, C.P. 19 (38), CAB 24/274.

51
In February 1916, Foreign Secretary Edward Grey had ruled out using
either APOC or Burmah as the
instrument of Britain’s oil security, as neither possessed “the economic
independence, the areas of supply,
or the commercial ability” to handle the task. Assuming that oil
controlled by U.S. interests would be
absorbed by increased U.S. domestic consumption, the only option left was
for Britain to acquire control
of Shell, possibly through a merger with APOC. Britain would also need an
aggressive British company
to defend its interests in Mesopotamia against German infiltration, and
Shell appeared to be the only
viable candidate. Grey urged the BOT, which was overseeing oil policy at
the time, to coordinate with the
relevant departments immediately and recommend a policy for the
government, for “the question cannot
safely be left open until after the war.”75 The BOT produced the first
official study of Britain’s postwar oil
policy the following August, although partisans of APOC caught wind of
its contents as early as June.76
As one historian observes, this paper represented “a landmark in official
thinking.”77 This is an
appropriate description for two reasons: First, it signaled the start of
London’s eight-year bid to create an
“all British” major oil company that could challenge the major U.S. oil
companies. Second, London
committed itself to imposing British control over the Royal Dutch/Shell
group.
The BOT concluded that “[in] respect of both the peace and war
requirements of the Empire,
petroleum is rapidly becoming as important as coal; in some directions it
has already surpassed it.” Unlike
the United States, Russia, Germany or even Japan (sic!), all of which
enjoyed relatively easy access to
either domestic or foreign sources of oil through native oil companies,
“the British Empire has to rely
almost entirely on supplies drawn from foreign countries and even the
development of her own limited

75

Foreign Office (Maurice de Bunsen) to the Admiralty, 02 March 1916, F.

36846, POWE 33/41.
“L.H.” (Lewis Harcourt, First Commissioner of Works, acting-President of
the Board of Trade), “The Future
Control of Oil Supplies,” August 1916, ADM 1/8537/240. This prompted an
unnamed writer (probably now-Vice
Admiral Slade) to send a blistering note to the Home Secretary, Herbert
Samuel (no relation to Marcus Samuel),
beseeching him “to stop the disgraceful way the Government are playing
into hands of the Royal Dutch Shell,”
which had ensconced itself at the Ministry of Munitions and Board of
Trade, and whose executives “have stated
[that] they will smash the Anglo-Persian and make the Government
recognize the Dutch Shell as the Government
Company for supply,” which would leave Britain at the mercy of a Shell
monopoly, “which analyzed means more or
less Germany.” Note to the Home Secretary, 23 June 1916, BP 69537.
77
Corley, History of Burmah, 250.
76

52
resources… is at present dependent to some extent on foreign or quasi-
foreign sources.”78 In order to
avoid being “placed at the gravest disadvantage as compared with the
other Powers,” it was “essential”
that Britain solidify control over native or imperial sources of oil and
expand British interests in foreign
sources. This was beyond the capacities of the existing “all British”
companies: Burmah, which lacked
sufficient production, and APOC, whose oilfields in Persia and Iraq were
either still under development
or undiscovered. Mexican Eagle was also out of the running since the
political situation in Mexico
following the start of the 1910 Revolution was not promising (even as
Mexican production and oil
companies’ profits – thanks to irregular collection of taxes – soared).79
The most effective instrument
would be a “combination” including Shell. Burmah would be the bait so as
to provide sufficient leverage
to secure “permanent and effective British control” of both Shell
Transport and Trading (the British
portion of the Shell Group) and the group’s British subsidiary, the
Anglo-Saxon Petroleum Company.80
The latter controlled many of the group’s oilfields, including those in
California, Russia, and Venezuela,
plus its Far Eastern distributor, Asiatic Petroleum. Completion of the
merger (excluding the group’s
operations in the Dutch East Indies and Romania, which would remain under
Dutch control) would secure
numerous advantages to Britain, including British control of Anglo-
Saxon’s substantial production and its
fleet of oil tankers. The interests of the Shell Group and Burmah would
then be amalgamated into an

78

Japanese oil production had peaked in 1916 at just below 3,000,000

barrels, while imports totaled only 62,616
barrels. This favorable supply/demand balance did not last: due to
motorization and the conversion of Japanese ships
to diesel fuel, between 1916 and 1927, imports increased roughly 85
times, to 5,413,612 tons. Lt. Col. C. Burnett
(U.S. Military Attaché), G-2 Report, Japan (Economic), “Oil Production
for 1927,” Report No. 3399, 20 March
1928, University Publications of America, U.S. Military Intelligence
Reports: Japan, 1918-1941 (Frederick:
University Publications of America, 1986), Reel 14. See also: United
States Strategic Bombing Survey, Oil in
Japan’s War: Report of the Oil and Chemical Division (Washington, DC:
U.S. GPO, 1946), 23-29.
79
Production rose from 3,634,080 barrels to 157,000,000 barrels between
1911 and 1920, but by the latter year,
taxes paid by the oil companies equaled only 8.9% of the value of all
exports (not including those smuggled out of
the country), which was more than 92% of total production. Hall, Oil,
Banks, and Politics, 14-15.
80
The Managing Director of Asiatic Petroleum (R. Waley Cohen) had actually
broached a similar proposal to the
Chairman of Burmah (John Cargill) in June 1915. Burmah’s relations with
Shell were rather cordial, unlike the
relationship between Burmah and APOC (already strained before 1914 over
the latter’s low return on investment,
worsened during the war). Cargill quickly shot down the initiative,
because it would incur the hostility of two of two
of Burmah’s major patrons: the British and Indian governments. He did,
however, promise to have Burmah’s board
consider the matter if asked to do by London. To that end, he passed
along Shell’s proposal to Slade (then serving as
an adviser to First Lord of the Admiralty Arthur Balfour), who was
unimpressed. Although the Admiralty, the
Foreign and India offices, and the government of India were all opposed,
the BOT remained enthusiastic. Corley,
History of Burmah, 238-240, and 243-249.

53
“Imperial Oil Company” that would be 51% British-owned and forbidden from
selling any of its oilbearing properties without the unanimous consent of
the board of directors, which would have “a
permanent British majority of 5 to 3.”81
Suspicion of the Shell’s “foreign” ownership had encouraged the
Admiralty’s to support the APOC
share purchase in 1913/14.82 But any doubts about Shell’s loyalties
should have been quelled during the
World War. Although Royal Dutch (the Dutch component within the Shell
Group) had adopted a position
of strict neutrality, in reality, it was an enthusiastic supporter of the
Allied cause. Shell constructed
facilities for the production of toluol (a petroleum extract vital in the
production of high explosives) in
Britain and even supplied British forces with gasoline from reserves in
Holland in 1916 during a
temporary shortage. More importantly, the Dutch partners no longer
insisted that their share of Shell’s
profits be remitted to The Hague. Rather, these reserves went London,
bolstering the position of sterling.
By 1918, Royal Dutch’s reserves in London reached £13,000,000, and the
company both bought Treasury
securities and sold them to the Dutch Government. The displacement of
Shell’s finances to London also
ensured that the Anglo-Saxon Petroleum Company became the treasurer for
the entire Shell Group.
Several Shell executives, who had been subjected to vicious smear
campaigns just a few years before,
served and were knighted by the British Government.83
The Admiralty’s oil expert, Admiral Slade, did not care.84 After leading
the commission to Persia in
1913, Slade became one of the two government members of APOC’s Board of
Directors in 1916, and the
Vice-Chairman of APOC a year later while continuing to serve on the
Admiralty payroll.85 Slade’s
superior, First Lord of the Admiralty Arthur Balfour, was also
unimpressed by the thought of giving
government sanction to the creation “of a huge combine dealing with a
prime necessity of modern life,”

81

Lewis Harcourt, “The Future Control of Oil Supplies,” August 1916, ADM
1/8537/240; reprinted as Appendix A
to: PIPC, i: 103-108.
82
Jack, “Shares Purchase,” 143, 149-151, and 165.
83
Jonker and Zanden, History of Shell, 157-162 and 169-173.
84
Slade retired from military service the following year although he served
on the government payroll for the
remainder of the war.
85
His ascent with APOC stalled in January 1918 after a failed coup against
Greenway. Corley, History of Burmah,
239.

54
which gave Slade bureaucratic cover to air his concerns.86 He fired off
three rebuttals of the BOT’s
proposal, which Balfour circulated to the Cabinet in September.
The first paper was a line-by-line critique of the Board of Trade
memorandum. Slade contended that
APOC “in a few years will be in a position to produce more oil” than the
rival Shell-Standard oil cartel
but was unable to compete for the moment due to downstream shortcomings.
By assenting to the ShellBurmah merger, the government was effectively
harming Britain’s national and economic strategy,
leaving the country more vulnerable to price hikes and the flight of
capital (to the tune of £8,000,000 in
the form of oil profits across the empire), not to mention “rendering the
Government’s investment in the
Anglo-Persian Company nugatory and unrenumerative, instead of allowing it
to remain one which (like
their Suez Canal investment) will… be of immense political and economic
value […].”87
In a paper on the “Strategic Importance of the Control of Petroleum,”
Slade evoked a broader
conception of Britain’s oil security than the BOT. Slade argued that
“[it] is of prime importance that no
foreign interests… shall have any of power hampering either the
development of our own resources or
shall control in any way the distribution of the oil.” In reviewing the
two possible combinations of oil
companies, Slade calculated that a merger of APOC, Burmah, and the
Mexican interests (primarily
Mexican Eagle) of Lord Cowdray (Weetman Pearson before 1910) would yield
more oil in both the
Eastern and Western hemispheres than a Shell-Burmah combination
(2,500,000 and 1,600,000 tons as
compared to 2,430,000 and 940,000 tons).88 Another problem with the
Shell-Burmah proposal was
Cowdray’s opposition at the moment to any merger with Shell, while
excluding Cowdray left his interests

86

Minute by Balfour, either 18 or 19 August 1916, CAB 37/154/3.

Unfortunately, the first page of the minute is
missing, but according to Corley, History of Burmah, 250, Balfour had
scraped together some “stray reflections” to
present at the first meeting of the Cabinet Committee on Oil.
87
E.J.W.S., “Observations on the Board of Trade Memorandum on Oil,” 24
August 1916, enclosed with: A.J.B
(Balfour) to the Cabinet, 06 September 1916, CAB 37/154/16. Not
surprisingly, a copy found its way to APOC: BP
69537. Even if Slade was not acting as a puppet of APOC’s leadership, the
company was certainly interested in
forming a closer relationship with Mexican Eagle: the Chairman of APOC,
Greenway, had already brought up the
idea of merging the companies with Cowdray in April 1915. Cowdray evinced
some interest and discussions
continued throughout in 1916, but he ultimately backed out since he
wanted to liquidate is Mexican oil interests for
cash rather than retain them. Jones, British Oil Industry, 179-180, 190-
192.
88
Shell had been hit hard by the war, losing access to both its Russian and
Romanian sources after the Ottoman
Empire joined the Central Powers. The company only managed to replace its
lost production by boosting output in
the United States. Jonker and Zanden, History of Shell, 185-190.

55
vulnerable to absorption by U.S. oil companies. Slade also noted that
much of Shell’s existing oil
production in the Western Hemisphere, primarily Mexico, was unsuitable
for use in ships’ boilers,
whereas its production in California was only useful in the Pacific
theater of operations. Slade conceded
that Shell’s Venezuelan properties might have some value in future, but
they were still “unproved,”
whereas Cowdray and APOC were active throughout the British formal and
informal empires, including
the Middle East.89 APOC already was active in the Middle East, where it
was undertaking geological
surveys 100 miles inland from the Shatt-al-Arab in the winter of 1915/16.
APOC’s Chairman and
Managing Director, Charles Greenway, believed that his company would “be
given the complete oil
rights over any portion of the Turkish Empire which may come under
British influence.”90
Slade’s figures appear to have been based upon those included in a paper
prepared for him by
Greenway and circulated to the Admiralty. Greenway claimed that the
reason why his proposed “all
British” company could supply more oil to Britain than Shell was because
much of the latter’s production
was consumed locally: (3,210,000 tons out of 4,426,000 tons, thus leaving
only 1,216,000 available for
export). The APOC-led “all British” consortium, on the other hand, only
lost 300,000 tons to local
consumers (entirely in Mexico), thus leaving 3,682,300 tons available for
export to Britain.91
Britain’s aim, Slade explained in a separate work on “Petroleum Supplies
and Distribution,” should
be placing the British Government in the position of being not only “a
predominating factor in Oil
Production,” but also exercising “a controlling influence in the
Distribution business of the Empire.” The
British Government already held a controlling-stake in APOC, but the
company’s operations were

89

E.J.W.S., “The Strategic Importance of the Control of Petroleum,” 24

August 1916, enclosed with: A.J.B
(Balfour) to the Cabinet, 06 September 1916, CAB 37/154/16. The second
page of the memorandum is missing, but
another copy may be found in: ADM 1/8537/240.
90
APOC (Greenway) to the Foreign Office, 24 February 1916, F. 36846, POWE
33/41. When de Bunsen brought
this letter to Grey’s attention, the Foreign Secretary threw cold water
on the idea. Foreign Office to the Admiralty,
02 March 1916, F. 36846, POWE 33/41. The government informed APOC its
decision in May 1916, although
several departments concurred that eliminating the TPC from consideration
still left APOC with preferential rights
in Mesopotamia, at least. “Memorandum prepared in the Foreign Office
Library,” 20 February 1918, no author,
POWE 33/41. See also: H.G.N., “Draft Note for Persia Committee,” 14
February 1918, enclosed with the Under
Secretary of Foreign Affairs (Cecil) to the Petroleum Executive, 26
February 1918; and J.C. Clarke (for Long) to the
Under Secretary of State, Foreign Office, 02 March 1918, P.E. 0126; both
in: POWE 33/41.
91
“Royal Dutch/Shell Companies’ Capability of supplying Petroleum to
British Empire,” 18 July 1916, no author,
enclosed with: Greenway to Lt. Serocold (Intelligence Department,
Admiralty), 19 July 1916, ADM 1/8537/240.

56
confined to production, not distribution. Luckily, the government also
controlled the assets of the British
Petroleum Company (BP), a subsidiary of the German-dominated Europäische
Petroleum Union
(controlled by the Deutsche Bank), which had been a major retailer and
distributor of Romanian and
Russian oil within Britain before the war. Slade proposed that the
government should nationalize British
Petroleum and use it to control the marketing of oil throughout the
empire. Backed by British Petroleum,
Slade hoped that APOC would embark on an ambitious program of commercial
expansion “until the
British Empire becomes independent, so far as concerns its Oil
requirements. In this way the Nation
would secure an independent position in Oil as it now holds in Coal,” and
perhaps one day, APOC might
even “absorb the Shell,” rather than allowing Shell to gobble up APOC and
Burmah.92 Slade reiterated
these points two years later before Petroleum Imperial Policy Committee
(PIPC), whose members were
“very sceptical as to the possibility of exercising any control over the
Oil trade of the British Empire”
through a mere distribution company. Slade argued that this was the very
model adopted by John D.
Rockefeller and the Shell Group, for “control of world wide trades” did
not flow from control of supplies,
but rather, “through the preliminary control of the means of transport
and distribution, which has
inevitably lead to the ultimate control of the industry itself.” If a
“National Oil Company” controlled
distribution and sales within the British Empire (the world’s second-
largest consumer), the U.S. oil
companies and Shell would have no option but to do business with it.93
The idea that APOC could fulfill this role was not out of the question.
After three years of trying, in
1917, the company finally received government sanction to purchase three
foreign-owned marketing
firms in Britain: BP; BP’s shipping subsidiary, the Petroleum Steamship
Company; and the Homelight
Oil Company, the marketing arm of independent Russian refiners. Greenway
made his case by arguing

92

E.J.W.S. “Petroleum Supplies and Distribution,” 24 August 1916, enclosed

with: A.J.B (Balfour) to the Cabinet,
06 September 1916, CAB 37/154/16. Emphasis in the original. Greenway made
much the same argument when
trying to convince the government to support APOC’s bid to take control
of BP. Greenway, “Anglo-Persian Oil
Company in relation to the present foreign monopoly of the British Oil
Trade and proposal to form an ‘all British’
Oil Company,” 08 July 1916, ADM 1/8537/240. Slade’s wartime efforts in
“lobbying the British Government and
vilifying Shell” during the war (in concert with Greenway and one of
Slade’s successors as Director of Naval
Intelligence, Reginald Hall) are summarized in: Jones, British Oil
Industry, 182-186, 197-200.
93
Slade to Lewis Harcourt (Chairman of the PIPC), 07 October 1918, POWE
33/45.

57
that “an ‘all British’ Oil Company, with the Anglo-Persian Oil Company as
a nucleus,” could break of the
power of “the two foreign groups which now control the trade in Petroleum
products.”94 Control of BP’s
assets (850 depots and eleven tankers, at a cost of £2,000,000) was,
according to APOC’s official history,
“the missing link” that gave the company the means to market its Persian
crude directly without relying
on its 1912 marketing agreement with Shell, which APOC officials now
considered burdensome.95
In spite of Slade’s opposition, the Admiralty agreed to support a Shell-
Burmah merger as long as “the
new company [shall] have no part in the affairs and management of the
Anglo-Persian Company,” and if
APOC retained the ability to market its products in markets west of
Suez.96 Although the Cabinet
Committee on Oil approved the revised Shell-Burmah merger in November
1916, the plan fell through
due to “eleventh hour” opposition from the Admiralty and the fall of the
Cabinet led by Herbert Henry
Asquith the following month.97 Although the BOT had failed to create an
“all British” Shell, it had
succeeded in bringing oil policy to the forefront of political
discussion. British policymakers became
determined to break the empire’s dependence upon foreign oil suppliers
and continued to covet British
control of the Shell Group. Plans even more ambitious than that of the
BOT in 1916 to achieve both
objectives would emerge when London began to define Britain’s postwar oil
strategy in 1918.

94

Greenway, “Anglo-Persian Oil Company in relation to the present foreign

monopoly of the British Oil Trade and
proposal to form an ‘all British’ Oil Company,” 08 July 1916, ADM
1/8537/240.
95
Ferrier, History of BP, 217-219. APOC’s development into a proper,
vertically integrated oil company following
the First World War is also summarized in Alfred Chandler’s Scale and
Scope: The Dynamics of Industrial
Capitalism (Cambridge: Harvard University Press, 1990), 298-304. The
internal development of the British oil
market around the turn of the century and the early histories of British
oil companies in the Caucasus (which
accounted for roughly one-third of total British investment in Russia),
Mexico, and the East Indies (none of which
involved the British Government in any meaningful way except in the case
of Mexico after the start of the
Revolution) is summarized in: Jones, British Oil Industry, 32-84.
96
Arthur J. Balfour (First Lord of the Admiralty), “Progress of the
Negotiations with Regard to the Burmah-Shell
Amalgamation,” 19 October 1916, ADM 1/8537/240.
97
PIPC, i: 6-7; “Views on the National Oil Policy,” 19 September 1918, no
author (officially Greenway, but
probably Slade ), BP 69537; reprinted as Appendix G to: PIPC, i: 141-
144.. According to Marian Kent, negotiations
broke down over one of the Admiralty’s key demands: that APOC be freed
from its existing marketing agreement
with Shell’s Far Eastern subsidiary, Asiatic Petroleum. Kent, Oil and
Empire, 132. Burmah did not raise any
objections, presumably because the BOT’s scheme would not only ensure the
company’s existence as a separate
entity within a British-controlled Shell Group, but also because this
merger would have the approval of the British
and Indian governments. Corley, History of Burmah, 251.

58
The Petroleum Imperial Policy Committee and the Origins of Postwar Oil
Policy, 1918-1919
In the winter of 1917/18, APOC began applying public pressure on the
government through the media
and questions in the House of Commons to establish an “all-British”
company to free Britain from the
clutches of Shell or the U.S. oil companies.98 As Greenway explained
during APOC’s general meeting,
the company’s wishes were compatible with the government’s existing
policy of creating an “all-British
company” that was “free from foreign taint,” and which “might absorb all
the existing British oilproducing companies.” This aroused the ire of
Samuel, who now feared that British Government’s
interference within the oil industry was a recipe for “disaster.” Other
governments would soon follow
London’s example, he complained to Cadman, such that “the oil question…
might become such a bone of
contention as to lead to international complications.” Shell might also
need to distance itself from London
to avoid the opprobrium of being tarred as an instrument of the British
Government, which could threaten
its concessions in Venezuela, since Caracas had forbidden the granting of
concessions to any state-owned
or -affiliated companies.99 Even the Admiralty was embarrassed by APOC’s
actions, but only because it
believed that it was “undesirable” for “a Government Controlled Company”
such as APOC to “compete
for concessions in territory outside the British dominions or definite
spheres of interest […].”100
The lack of clarity concerning Britain’s long-term oil policy, as well as
the Allies’ deteriorating
supply situation in 1918, prompted Long to form the Petroleum Imperial
Policy Committee under the
leadership of Lewis Harcourt.101 In a letter to his Cabinet colleagues,
Long lamented that governmental
policy had been formulated and pursued on an ad hoc basis. Long intended
his committee to “[elaborate]
an general policy which shall be applicable in all cases and shall form a
basis which will enable His
98

Britain could not afford such inflammatory talk when it still needed the
assistance of the foreign oil companies.
Long ordered that press speculation be squelched and a letter sent to
Greenway “pointing out that the attitude which
had been adopted by the Anglo-Persian Oil Company in this matter was no
in accordance with the National
interests.” “Conference on the Policy to be Adopted by His Majesty’s
Government with Regard to the Proposals
which have Appeared in the Press for the Formation of an All-British Oil
Company held at the Colonial Office,
Friday, December 21st, 1917,” POWE 33/42.
99
Samuel (Chairman of Shell Transport and Trading) to Cadman (Ministry of
Munitions), 06 December 1919 [sic;
1917], POWE 33/42.
100
They were nonetheless amused by Marcus Samuel’s opposition to government
participation in APOC, since “for
many years past he has been urging the Government to identify with the
Shell interests.” Charles Walker
(Admiralty) to the Director, H.M. Petroleum Executive (Long), 28 February
1918, P. 84548/48009, POWE 33/42.
101
“Warrant of Appointment,” 29 May 1918, no author (PIPC indicates that it
was Long), POWE 33/12.

59
Majesty’s Government to deal uniformly with all questions relating to the
[oil] industry,” with particular
emphasis on determining the policy the government “should follow to
secure supplies of oil for naval,
military and industrial purposes.”102 Privately, Long hoped that the PIPC
would tackle the festering issue
of the future development of Mesopotamia.103
Long elaborated further upon the mission of the PIPC in a memorandum for
the committee’s
inaugural meeting on 29 May 1918. Long impressed upon the members of PIPC
that the World War “has
demonstrated the numerous purposes for which the British Empire is
dependent on petroleum,” and that
the problem of ensuring future supplies had been the source of “more than
ordinary anxiety.” Long
mentioned the United States, which had supplied the Empire with 80% of
its oil during the conflict and
had “the power to place this country in an impossible situation should
they desire to be unfriendly.”
Ideally, the PIPC would help the government to formulate and implement a
policy that would allow
Britain to enjoy the same degree of commercial and strategic supremacy
afforded to it by coal during the
previous century.104 Long left the PIPC’s members with no doubts
concerning the significance of their
task: “The importance of the problems cannot be overstated and it is no
exaggeration to say that the future
of the British Empire depends on their satisfactory solution.”105 In
communicating his decision to form
the PIPC to the Cabinet, Long emphasized Britain’s unfavorable oil
position in light of the fact that “[for]

102

Long to A.J. Balfour (Foreign Secretary), et al., 16 May 1918, POWE

33/12.
Deputy Director, Petroleum Executive, to the Director, Petroleum
Executive, 07 May 1918, POWE 33/41. Long
scrawled on the bottom of the paper that the “matter must be submitted to
the “Policy” Committee as soon as it gets
to work.”
104
In a note to the War Cabinet, Long suggested that the terms of reference
for the PIPC be expanded from simply
making recommendations “on the policy to be followed in order to secure
adequate supplies of oil for Naval,
Military and Industrial purposes… to enable it to negotiate directly with
the principal Oil Companies,” and made
reference to securing British control over Shell. He sought the approval
of the War Cabinet to proceed with such a
policy, “provided that such negotiations do not involve His Majesty’s
Government in any financial obligation.”
“Lord Harcourt’s Imperial Policy Committee,” no date or author (almost
certainly Long), POWE 33/12.
105
Untitled Memorandum, Downing Street, no author (probably Long), 29 May
1918, POWE 33/12. Like the
aforementioned warrant of appointment, the memorandum does not list an
author, but it was reprinted in the official
documentary history of the PIPC, along with the minutes of the
committee’s first meeting (PIPC, i: 28-29), when
Harcourt indicated that he had received the memorandum from Long.
103

60
practically the whole of our petroleum requirements we are dependent upon
importation from overseas
[…].”106
The founding of the PIPC sparked a deluge of memoranda from the both
committee and interested
departments.107 One memorandum considered by the PIPC at its first
meeting estimated future British
requirements of refined products at 11,700,000 tons (or 12,400,000 tons
of crude oil). The report also
made reference to a budding preoccupation of British policymakers: the
impending depletion of U.S.
domestic reserves. (As one naval analyst observed, unlike Britain, which
“found herself blessed with a
perpetual dominating position with regard to coal,” U.S. oil hegemony was
likely “to be shortlived,”
largely because of the insatiable demands of U.S. consumers.108) Although
there was no reason to believe
that the United States would not be a reliable supplier in the immediate
postwar period, the U.S. domestic
oil industry was “showing distinct signs of distress and cannot be
depended upon to continue her supplies
at the same rate as formerly.” Such ominous developments compelled the
British Government “to be
prepared to substitute some other source of supply.” Although prospects
in the Dutch East Indies and
Venezuela seemed promising, any increases in production would most likely
be absorbed by neighboring
markets, while the United States would claim the lion’s share of any
increases in North American
production. The only alternatives were Persia, Iraq, and British India.
Iraq’s oil reserves were still

106

Long, “Memorandum for the War Cabinet: Petroleum,” 31 July 1918, G.T.
5275, CAB 24/59. Harcourt also
presented a revised version of Long’s 29 May 1918 memorandum to the
Imperial War Conference on 22 July 1918,
suggesting to the assembled leaders of the British Empire “that no
foreign influence, under any guise, shall be
permitted in British territories.” Rather than risk the diplomatic
repercussions of an outright ban on foreign capital in
imperial oil development, Harcourt advised that the operations of foreign
companies be constrained by not granting
them licenses to operate in British territory. “Memorandum by the Right
Hon. Viscount Harcourt. Presented to the
Imperial War Conference, 22nd July 1918. Petroleum Position of the
British Empire: Measures Suggested to Improve
the Position,” 04 July 1918, PIPC, i: 112-113.
107
For the views of three prominent British oil men, see: “Memorandum by Mr.
J.T. Cargill, Chairman, Burmah Oil
Company,” 08 October 1918; “Memorandum by Lord Cowdray on the Importance
of this Country and the
Dominions Overseas Having their Own Sources of Petroleum,” 05 December
1918; and “Memorandum by Mr. C.
Greenway on the National Oil Policy,” 19 September 1918; appendices E-G
to: PIPC, i: 134-144. Greenway (as
explained below) wanted the government to safeguard APOC’s “development
on ordinary business lines”
independent from Shell, which would allow it serve “as the nucleus of a
real ‘all British’ Government-controlled
Company [emphasis in the original]” after the war. Cargill was broadly
supportive of Greenway’s proposals, while
Cowdray was convinced that greater oil production was possible within the
empire (including Great Britain), which
was why he was selling stake in Mexican Eagle.
108
Lt. Cmdr. G.J.A. Miles (Royal Naval Staff College), “The Supply of Oil
Fuel for Fleets and Squadrons Abroad in
the Future,” 14 April 1920, ADM 203/48.

61
unproven and would not contribute to Britain’s oil needs for another “4
to 5 years time.” The onus
therefore fell on Persia, and in view of the pivotal role of the Middle
East to Britain’s oil security, the
government had to take all measures necessary to ensure the continued
survival of APOC and Burmah as
British enterprises.109
On 30 July 1918, the enigmatic Cabinet Secretary and Secretary to the
Committee of Imperial
Defence (CID), Maurice Hankey wrote to the First Lord of the Admiralty,
Eric Geddes, to express his
concern over Britain’s “uncertain” oil position. Considering that the
United States might not have an
exportable surplus in the future and was soaking up Mexican production,
Hankey believed that control of
potentially oil-rich regions of Iraq and areas adjacent to APOC’s Persian
concession was a vital “war
aim.”110 The following day, Hankey wrote letters to Foreign Secretary
Balfour and Prime Minister Lloyd
George, enclosing a paper by Slade on Britain’s postwar oil position. In
his letter to Balfour, Hankey
remarked that he had come to the realization that “oil in the next war
will occupy the place of coal in the
present war,” and the “only big potential supply that we can get under
British control is the Persian and
Mesopotamian supply,” both of constituted “a first class British War
Aim.” Hankey advised the Foreign
Secretary to “rub this [fact] in” during his next presentation before the
Imperial War Cabinet.111 After
summarizing Slade’s analysis, which he deemed “of supreme importance to
our future,” Hankey advised
Lloyd George to push the British military to occupy Mesopotamia prior to
the war’s end.112
Slade was not a disinterested observer on account of his position within
APOC. He was notorious
within Whitehall for advocacy of APOC, having left government service in
1917 to become a full-time
109

“Oil Policy for the Empire,” no date or author, POWE 33/44. The fact that
British policymakers grasped the
pivotal role of the Middle East to Britain’s energy security as early-
1918 belies Elizabeth Monroe’s claim that oil’s
significance to British policy in the region only became “obvious” after
1945. Elizabeth Monroe, Britain’s Moment
in the Middle East, 1914-1971 (Baltimore: Johns Hopkins Press, 1981), 11.
110
Hankey to Geddes, 30 July 1918, CAB 21/119. It is not clear if Hankey
read the Slade memorandum before he
wrote to Geddes, but the tenor of the conclusions expressed within his
letter is consistent with Slade’s evaluation.
111
The Imperial War Cabinet should not be confused with War Cabinet (both
wartime innovations of Lloyd
George), the latter consisting entirely of British Government ministers
most intimately involved in the conduct of
the war effort, while the latter was a consultative body comprised of the
heads of government of Britain’s major
imperial allies.
112
Hankey to Balfour, and Hankey to Lloyd George, 01 August 1918, CAB
21/119. See also: V.H. Rothwell,
“Mesopotamia in British War Aims, 1914-1918,” Historical Journal 13: 2
(1970): 273-294 (esp. 286-291). Balfour
was not impressed, dismissing Hankey’s suggestion as “a purely
Imperialist War Aim.” Hankey to Balfour, 12
August 1918, CAB 21/119.

62
member of the company’s board. His strategic evaluation of July 1918
(plus an unsigned screed
fulminating against the Shell/Standard Oil “monopoly” circulated within
the Admiralty the following
month) cast numerous aspersions regarding the patriotism of Shell and its
management, which
precipitated a backlash against APOC within the British Government.113
Slade’s conflict of interest in
presenting an official paper to the Cabinet that supported the interests
of a company that also employed
him prompted Geddes to apologize to Long and send a short note to the
Imperial War Cabinet admitting
that Slade’s work “might be read as an ex parte statement on behalf of
the Anglo-Persian Company vis-avis its trade rivals, especially the Royal
Dutch Company.” Nevertheless, Geddes did not revoke the
Admiralty’s earlier endorsement of Slade’s analysis, particularly in
reference “to the contention that the
oil bearing districts of Mesopotamia and Persia are of very great
importance to us.”114
Slade contended that British oil policy had both a strategic and a
logistical dimension, and although
“[the] two are to a great extent interdependent… the question of
sufficiency of supply may be satisfied
without the strategic position, for which we ought to strive, being
obtained.” In light of oil’s superiority
over coal as a source of naval fuel, Britain’s existence as a great power
depended on “command” of
secure oil supplies. British “control” had to “be absolute,” since
foreign interests “might and probably
113

Jones, British Oil Industry, 198-201. For Slade’s memoranda of July and
August 1918, see: E.J.W. Slade, “Paper
by Admiral Sir Edmond Slade on the Petroleum Situation in the British
Empire,” 19 July 1918, enclosed with: R.E.
Wemyss (First Sea Lord), “Admiralty Memorandum for the Imperial War
Cabinet,” 30 July 1918, G.T. 5267, CAB
24/59; and Slade, “The Threatened Foreign Oil Monopoly,” 21 August 1918,
ADM 1/8537/240. The latter paper
received complementary assessments from leading Admiralty officials until
it came across the desk of the Civil Lord
of the Admiralty, E.G. Pretyman, who dismissed it as APOC propaganda that
was riddled with “inaccurate or
exaggerated” claims. Although Pretyman conceded that a “cosmopolitan”
firm such as Shell was perfectly happy to
do with business with Germany before the war, since then, it “has placed
its entire resources at the disposal of this
country and has served us well.” Pretyman took the position that the
British Government (through the Harcourt
Committee) should continue its efforts at “roping in their [Shell’s] very
large petroleum assets without conferring a
monopoly and without surrendering any of the freedom or possibilities of
development of the Anglo Persian Oil
Company.” See the series of minutes attached to Slade’s August 1918 paper
including statements by Naval
Intelligence (possibly Reginald Hall), the Director of Plans (Capt. Cyril
T.M. Fuller), Pretyman, and possibly the
Fourth Sea Lord (Tothill), dated between 26 August and 24 September 1918,
in: ADM 1/8537/240.
114
Geddes to Long, 13 September 1918, ADM 1/8537/240; and Geddes,
“Memorandum to the War Cabinet by the
First Lord of the Admiralty: A Note in Reference to [the] Admiralty
Memorandum on the ‘Petroleum Situation in
the British Empire’ (Paper G.T. 5267),” 17 September 1918, G.T. 5710, CAB
24/64. Kent misidentifies Balfour as
the author of this memorandum. Her contention that the Cabinet dropped
Slade’s recommendations in their entirety
also seems unwarranted. Kent, Oil and Empire, 125-127. Although Jones
will have nothing to do with Slade’s
accusations against Shell, he agrees that Slade’s arguments about “Middle
Eastern oil made an important strategic
point, and Slade helped to convince Lloyd George and Balfour of the need
to acquire the Mesopotamian oilfields for
Britain.” Jones, British Oil Industry, 198.

63
would be guided in their policy of development of oil territories by
their private interests and not by what
is best in the national interest,” including pursuing the development of
low-cost oilfields beyond the
British Empire at the expense of high-cost, lower-producing fields within
it. Slade was also a strong
believer in direct government intervention within the oil industry,
reckoning that “[if] the British
Government can obtain the control of any source or sources of supply that
will provide a material
proportion of the Petroleum requirements of the Empire,” it would break
the power held over Britain by
the major oil companies, “and we shall be masters in our own house in all
matters relating to oil […].”115
Slade warned that Britain and its empire had become even more dependent
upon the United States
than ever before now that access to Russian and Romanian production had
been disrupted. Even if
production within these two nations recovered following the war, that
paled in significance to “[the] first
and most important factor [which] is the life of the United States
fields.” Noting the “anxiety” of both the
U.S. Government and U.S. oil companies regarding future domestic oil
production, Slade estimated “that
within a measurable period, say 10 years, the amount of the Petroleum
that we shall be able to draw from
the United States will be greatly diminished if not entirely stopped.”
Although Mexico boasted of large
reserves and a strong British commercial presence, the United States
would lay claim upon the oil before
Britain could. Although Britain would be overmatched within the Western
Hemisphere by the United
States, the same did not apply to Persia and Iraq, which might “in the
future provide a supply equal to that
now given by the United States.”116
It is worth pointing out here that British concern over the lifespan of
U.S. domestic oil reserves after
1918 echoed official and public sentiment within the United States, which
fed on alarmist analyses of the
lifespan of U.S. oil reserves by the U.S. Geological Service and the
American Association of Petroleum

115

E.J.W. Slade, “Paper by Admiral Sir Edmond Slade on the Petroleum

Situation in the British Empire,” 19 July
1918, enclosed with: R.E. Wemyss (First Sea Lord), “Admiralty Memorandum
for the Imperial War Cabinet,” 30
July 1918, G.T. 5267, CAB 24/59.
116
E.J.W. Slade, “Paper by Admiral Sir Edmond Slade on the Petroleum
Situation in the British Empire,” 19 July
1918, enclosed with: R.E. Wemyss (First Sea Lord), “Admiralty Memorandum
for the Imperial War Cabinet,” 30
July 1918, G.T. 5267, CAB 24/59.

64
Geologists.117 These fears on both sides of the Atlantic proved to be
misplaced. U.S. imports (almost
entirely from Mexico) did quadruple between 1918 and 1922, peaking at 21%
of the total U.S. supply in
1921, and the United States briefly became a net importer from 1920 to
1922. On the other hand, U.S. oil
production increased continuously between 1918 and 1929, from 355,928,000
barrels to 1,007,323,000
barrels (280%), while proven reserves increased at the beginning of every
year between 1918 and 1931,
from 5,900,000,000 barrels to 13,600,000,000 barrels (230%). The specter
haunting the U.S. oil industry
(and therefore the entire world since, as of 1918, the United States had
produced over 60% of all of the oil
produced in human history) was not imminent depletion of U.S. reserves,
but rather the likelihood of
domestic consumption soon overtaking increases in production and the size
of proven reserves. Domestic
demand increased by 250% between 1918 and 1929 from 374,541,000 barrels
to 940,995,000 barrels (4.3
barrels to 7.7 barrels per capita), which roughly corresponded to the
concurrent increase in exports from
63,893,000 barrels to 163,120,000 barrels. For the time being, production
and additions to proven
reserves outpaced increases in total demand (consumption plus exports),
but as was the case after the First
World War, once the ratio of reserves to production began to decline
during the Second World War (from
14.3 barrels in reserve for every barrel produced to only 11.9 just
between 1942 and 1945), anxious
voices in the United States would once again clamor for a more aggressive
U.S. foreign oil policy.118
From the perspective of 1918, however, there was ample reason for London
to question the longevity
of U.S. oil reserves. Slade advised the government to encourage the
development of Persian and
Mesopotamian oil reserves “by purely British interests.” Likewise, London
ought to promote exploration
and production throughout the empire “by purely British interests.” In
the interest of conserving imperial
oil reserves, the government should also assist British oil companies in
acquiring “control of as much oil
lands in foreign countries as possible,” and that such oil should be
marketed within Britain and its empire

117

Michael Aaron Dennis, “Drilling for Dollars: The Making of U.S. Petroleum
Reserve Estimates, 1921-1925,”
Social Studies of Science 15: 2 (1985): 241-265; and William Stivers,
Supremacy and Oil: Iraq, Turkey, and the
Anglo-American World Order, 1918-1930 (Ithaca: Cornell University Press,
1982), 194-199.
118
David Painter, Oil and the American Century: The Political Economy of
U.S. Foreign Oil Policy (Baltimore:
Johns Hopkins University Press, 1986), 3-51 (esp. 9-17, 24-25, and 39-
41). Statistics for the period between 1918
and 1945 are drawn from: DeGolyer, Petroleum Statistics, 12, 17, 53, 60-
61, 63-64, 68, and 108.
65
only by British firms. Finally, the government had to discourage the
entry of foreign interests within the
British or imperial oil industry.119
A cover letter by the First Sea Lord, R.E. Wemyss, indicated that Slade’s
memorandum had been
“[endorsed] in the strongest manner possible” by the Admiralty, and
warned that failure to act would
“wrest from our grasp one of the principal factors on which the
maintenance of our Naval position
depends.” He also expressed the Admiralty’s conviction that Britain’s
“present Allies” might pose as
much of a threat to its future oil security as its enemies.120 The Chief
of the Air Staff, F.H. Sykes, also
backed Slade’s conclusions, for “[the] whole future of air power is
dependent upon adequate supplies of
liquid fuel.” Sykes could not help himself from engaging in some inter-
service jockeying, contending that
that the “Air force will in the near future be the first line of offence
and defence.” By “[clearing] the way
for sea warfare and land warfare,” Sykes believed “that the very
existence of the Empire will depend in
the first instance upon aerial supremacy.”121

119

E.J.W. Slade, “Paper by Admiral Sir Edmond Slade on the Petroleum

Situation in the British Empire,” 19 July
1918, enclosed with: R.E. Wemyss (First Sea Lord), “Admiralty Memorandum
for the Imperial War Cabinet,” 30
July 1918, G.T. 5267, CAB 24/59. Slade’s report (but not Wemyss’ covering
letter) is reprinted as Appendix D to:
PIPC, i: 127-133. Both Marian Kent and Ronald Ferrier claim that Slade
had first pressed the Cabinet on
maintaining control of the oil of the Persian Gulf in a memorandum of 31
October 1916 (“The Political Position in
the Persian Gulf at the End of the War”): Kent, Oil and Empire, 125; and
Ferrier, History of BP, 580. No such
memorandum currently exists within the Cabinet collection cited by both
authors (CAB 24/3), and I have been
unable to locate a copy elsewhere.
120
R.E. Wemyss (First Sea Lord), “Admiralty Memorandum for the Imperial War
Cabinet,” 30 July 1918, G.T.
5264, CAB 24/59.
121
Sykes to the War Cabinet, “Petroleum Situation: Notes by the Chief of the
Air Staff on Admiralty Memorandum
No. G.T./5267 dated 30th July, 1918,” 09 August 1918, G.T. 5376, CAB
21/119.

66
The Harcourt-Deterding Agreement, 1918-1919
Although the PIPC solicited plenty of opinions about Britain’s postwar
oil policy, Harcourt used the
committee to resurrect the policy he had first articulated at the BOT in
1916: facilitating British control of
Shell.122 The “Harcourt-Deterding” Agreement of 1918-19 would have
restructured Shell’s ownership
structure to create a majority for British interests throughout the Shell
Group (excepting those Shell
subsidiaries that operated on Dutch territory that, for legal reasons,
could not be transferred to British
control). After several months of negotiation, in February 1919, Harcourt
and Deterding reached an
agreement. According to Harcourt, the PIPC considered “it most desirable”
that the government do
everything in its power to acquire control of oil reserves beyond the
Empire, which only produced 2.5%
of world production and satisfied 30% of imperial consumption. The
committee wished to promote
private enterprise rather than government control, deeming the latter to
“be entirely hampering and
uneconomic, and in the case of foreign sources of supply diplomatically
disadvantageous, if not
dangerous.”123 Of the two major oil companies with a global presence, the
Standard Oil Company of New
Jersey (Jersey) and Shell, only the latter was susceptible to British
control, with the “price” being a
“redistribution” of TPC shares in Shell’s favor, now that London had
decided to resurrect the TPC and its
1914 concession as a lever to acquire control of Mesopotamia’s oil.124
Harcourt commended the
agreement, which would bring under British control Shell’s Mexican,
Romanian, Russian, and
Venezuelan subsidiaries, as well as the distributor Asiatic Petroleum,
and, “if not immediately, certainly
in the near future, will be of great and growing importance and advantage
to the Empire […].”125

122

Slade had tried to argue in favor of “National Oil Company” that

controlled downstream operations within the
Empire, or at least preserving the independence of APOC and Burma (whose
“actual exportable surplus” was “equal
to more than 50% of the pre-war consumption of the United Kingdom”) but
to no avail. Slade to Harcourt, 07
October 1918, POWE 33/45.
123
Harcourt to Long, 07 February 1919, POWE 33/64.
124
Edwin Montague (Secretary of State for India) to Harcourt, 23 December
1918, CAB 21/119. Control of the TPC
was Deterding’s key objective. Whether or not the Shell was nominally
British or Dutch was irrelevant so long as it
enjoyed London’s patronage without having to cede any of its corporate
autonomy. Corley, History of Burmah, 257258.
125
Harcourt to Long, 07 February 1919, POWE 33/64; reprinted along with an
undated and unsigned copy of the
agreement in: PIPC, i: 15-19. For Long’s reply, see Long to Harcourt, 07
February 1919, POWE 33/64; reprinted in:
PIPC, i: 20. The agreement only covered those properties controlled by
Shell Transport and Trading. Therefore,

67
In return, British Government would be guaranteed a majority of British
subjects on Shell’s Board of
Directors, plus assurances that no sale of Shell’s assets or changes in
the company’s Articles of
Association would be take place without London’s permission. Long boasted
to the Cabinet that “British
influence in the group is greatly strengthened and ultimate predominance
is secured” without any
interference in the company’s operations or “loss of efficiency,” thus
“lessening our present dangerous
dependence on the United States for supplies of fuel oil.”126 During
Cabinet deliberations, Long even
surmised “that, as the result of the proposed arrangement, by the end of
two or three years there would be
a considerably improved position in regard to the oil supply, and that at
the end of ten years this country
would be independent of American supplies.”127 The Board of Royal Dutch
granted its provisional
approval provided that London assisted Shell in broadening its holdings
within British territories; that
Dutch shareholders were exempted from or received a rebate for any
British taxation; and that Shell
receive at least 34% of the shares in any company that obtained the
Mesopotamian concession.128 As
Shell’s official history points out, the Dutch had everything to gain and
little to lose. Shell had indulged
Harcourt through “an intricate charade designed to placate excited
patriotism in return for serious
commercial opportunities […].”129

Royal Dutch’s properties on Dutch colonial land and its valuable U.S.
subsidiary (Shell Union Oil Company after
1922) were not included.
126
H. and H.D. (Harcourt and Deterding), “Memorandum [of Agreement with
Shell],” no date, enclosed with: Long
to the War Cabinet, “Acquisition of British Control over the Royal Dutch-
Shell Group,” 22 February 1919, G.T.
6961, CAB 24/76; reprinted in: PIPC, i: 21-26. A copy of the Harcourt-
Deterding Agreement (dated 06 March
1919) is also reprinted as Appendix II to: Payton-Smith, Oil, 28-31.
127
The War Cabinet granted its consent to the agreement, provided that some
agreement could be reached over
whether or not Dutch shareholders would be exempted from British
taxation. “War Cabinet Meeting, 5 th May, 1919.
British Control of the Royal Dutch-Shell Petroleum Group,” H.M. Petroleum
Executive, “Negotiations Regarding
the Petroleum Policy of His Majesty’s Government: Volume II: History
Summary, Agreements, Conferences and
Correspondence, Index,” pg. 17, POWE 33/14 (hereafter cited as: PIPC,
ii).
128
B. London [sic] to H.W.A. Deterding, 14 March 1919, POWE 33/71. For a
contemporaneous summary of the
negotiations preceding the Harcourt-Deterding Agreement, see PIPC, i: 11-
14; PIPC, ii: 3. The key documents
relating the proposed agreement are reprinted in PIPC, i: 15-26; PIPC,
ii: 13-20. The British Government envisaged
the following distribution of shares in Iraq: 70% for British interests
(APOC and Shell with 34% each and London
taking the remaining 2%), 20% for French interests (which Shell hoped to
purchase, as well), and 10% for the Iraqis.
“Note by Foreign Office,” I.D.C.E 1022 c. iv, no date (circa December
1919/January 1920, following the signing of
the Greenwood-Bérenger Agreement of December 1919), T 161/738.
129
Jonker and Zanden, History of Shell, 214-216.

68
The agreement collapsed on account of several factors. APOC was bitterly
opposed, which effectively
meant that the Admiralty was, as well. Once it caught wind of the
negotiations, APOC fired off a
blistering attack in September 1918 that extolled the company’s “enormous
potentialities.” APOC
claimed that Shell and Standard were draining the empire of £20,000,000
to £25,000,000 each year and
questioned the wisdom of leaving Britain’s energy security in the hands
of “Companies domiciled in
countries… which may become members of some ‘League of Nations’ formed
for the purpose (inter alia)
of endeavouring to destroy British Naval and Commercial supremacy […].”
APOC had the means to
satisfy the primary objectives of British oil policy by serving as “an
‘all British’ Company capable of
safeguarding Naval and Military interests and supply the whole Oil
requirements of the Empire,” either
independently or in concert with other British firms such as Burmah. APOC
preferred to avoid any
merger and “be allowed to proceed with its development on ordinary
business lines,” which included
expansion of the company’s upstream presence in Persia and Mesopotamia
and downstream presence in
Britain. APOC’s board was confident that their company would shortly “not
only be able to supply all of
the needs of the Empire but also other countries to a large extend, and
thus be in the means of place Great
Britain in the position of predominance in regard to Oil she now enjoys
in regard to coal.”130
Both the British Government and Shell saw the agreement as part of a
wider plan for organizing oil
production within Mesopotamia. A British-controlled Shell, acting in
concert with APOC, would
guarantee British control of the TPC and Mesopotamia/Iraq, while an
agreement with the French would
allow the oil to be transported via pipeline through the French mandates
of Syria and Lebanon to the
Mediterranean. Throughout this process, the British Government operated
under the assumption that the
only incentive for Shell in signing the Harcourt-Deterding Agreement was
a share of Mesopotamian oil
production.131 In fact, Shell saw the agreement as a step toward securing
control over the TPC itself.

130

“Views on the National Oil Policy,” 19 September 1918, no author

(officially Greenway, but probably Slade), BP
69537; reprinted as Appendix G to: PIPC, i: 141-144. Emphasis in the
original. This paper is an updated version of
another unsigned memorandum of August 1918 by Slade. “The Threatened
Foreign Oil Monopoly,” 21 August
1918, ADM 1/8537/240. Both memoranda repeated many of Slade’s claims in
his three memoranda of August 1916,
which opposed the BOT’s proposed merger of Shell and Burmah.
131
Minute to Barstow, [?] 1920, T 161/738.

69
London’s agreement would divide the shares under British control equally
between Shell and APOC
(34% to each company with London holding 2% and the remaining 30%
available to other foreign
interests such as France).132 During its negotiations with the PIPC,
however, Shell had also been in touch
with the French Government, with the aim of establishing a state-
sponsored monopoly for Shell in France
directed against Standard Oil. In exchange, a syndicate dominated by
Shell would receive any shares in
the TPC that Britain transferred to France, thereby giving Shell a
majority stake in the TPC.
This plan collapsed under the weight of an oil embargo by Jersey against
France for several months
between 1919 and 1920 that broke the nerve of Paris, which had been
counting on Shell to supply France
with oil from Romania and the Caucasus on tankers seized from Germany.
French plans were in shambles
by December 1919, and Paris gave in the following March and abandoned its
plans with Shell. Rather
than risk another squabble with the United States by handing over its
shares in the TPC to Shell, in 1923,
the French Government created a new company, the Compagnie Française des
Pétroles (CFP), to
administer France’s shares in the TPC. Most of the start-up capital for
this new company came, in fact,
from the French subsidiaries of the British and U.S. major oil
companies.133
The British Government had resurrected the TPC as a means of securing its
control over
Mesopotamia’s oil, which facilitated the Harcourt-Deterding Agreement.134
But in January 1920, British
ministers (including Lloyd George) abruptly decided against turning over
“the interests in the oil wells of
Mesopotamia to joint Stock Companies,” ostensibly because the government
wanted the revenues from

132

The company’s motivations and subsequent lack of enthusiasm are

summarized in: Jonker and Zanden, History
of Shell, 213-216, 251, and 256.
133
The key work on post-WWI French interwar policy is Nowell, World Oil
Cartel, passim (esp. 132-141 and 170183), which should be read in concert
with the statist accounts in: Richard Kuisel, Ernest Mercier: French
Technocrat (Berkeley: University of California Press, 1967), 21-44; Eric
Melby, Oil and the International System:
The Case of France, 1918-1969 (New York: Arno Press, 1981), 8-168;
Mohamed Sassi, “The Emergence of the
French Oil Industry between the Two Wars,” Business and Economic History
On-line 1 (2003),
http://www.thebhc.org/publications/BEHonline/2003/Sassi.pdf ; and Mohamed
Sassi, “Evolution of the Structure of
the French Oil Economy between the Wars: Toward a French Holding
Company,” Business and Economic History
On-line 2 (2004),
http://www.thebhc.org/publications/BEHonline/2004/Sassi.pdf. For a brief
overview, see: Helmut
Mejcher, “The International Petroleum Cartel (1928), Arab and Turkish Oil
Aspirations and German Oil Policy
towards the Middle East on the Eve of the Second World War,” in: Oil, the
Middle East, North Africa and the
Industrial States, ed. Klaus Jürgen Gantzel and Helmut Mejcher
(Paderborn: F. Schöningh, 1984), 51-53.
134
Edwin Montague (Secretary of State for India) to Harcourt, 23 December
1918, CAB 21/119.

70
the “extensive” oil deposits for itself “to pay for the whole
administration of the country […].”135 The
reasons for the decision are unclear.136 The previous year, the Civil
Commissioner in Mesopotamia
(Arnold Wilson) had expressed skepticism about relinquishing “the whole
interests of the Iraq State and
of the British Treasury in what might well prove to be the richest
oilfields in the world, in exchange for
nominal control over oilfields not in British territory,” to a
multinational consortium. (Wilson was
referring to the Long-Bérenger Agreement of April 1919, which would grant
the Mesopotamian
concession to a reconstituted TPC under Anglo-French control.) Such a
policy ran contrary to Britain’s
handling of the Persian oilfields, where it exercised indirect control
though APOC. Oil revenues were also
the only collateral Baghdad could offer against the loans it needed from
London, while the enrichment of
private industry through the transfer of public assets would run afoul of
“the present trend of opinion in
favour of nationalising certain essential industries […].”137 The
Treasury was sympathetic to Wilson’s
argument in view of the costs of the British presence in Iraq: Wilson had
estimated that he would need
£25,000,000 over the next five years to pay for the occupation.138
Ministers took their decision the following year over the objections of
the head of the Petroleum
Executive, Frederick Kellaway, who was not even consulted. Kellaway
complained that London’s sudden
volte-face would create the impression that it was acting in bad faith
and frustrate negotiations with Shell.
“I consider,” Kellaway warned, “that this would be a most disastrous
occurrence at the present time when
the whole question of our future oil supplies is causing such anxiety and
when our dependence on foreign
controlled fields is such a source of danger.” There was also illogic of
the British Government cutting out
France by withdrawing its sponsorship of the TPC, while at the same time
rebuffing U.S. demands for an
135

“Conclusions of a Conference of Ministers,” 23 January 1920, T 1/12544.

Kent describes the decision “to wreck the agreement” with the French and
Shell as the product of a “sublime
misunderstanding of the whole basis of the arrangement […].” Kent, Oil
and Empire, 152. Geoffrey Jones sees the
Cabinet’s actions as a manifestation of public antipathy toward the great
oil trusts. Jones, British Oil Industry, 215216.
137
India Office, “Mesopotamia: Oil Policy,” 10 April 1919, Pol. 1858/19, T
1/12544.
138
Minute from A.P. Waterfield to George Barstow (Controller of Supply
Services), 09 April [1919], T 1/12544.
After Wilson’s brutal and incompetent leadership in Iraq provoked the
uprising of 1920 and his dismissal, he
secured a lucrative position with APOC with such alacrity that even
establishment organs such as the Times were
aghast. Aileen Keating, Mirage: Power, Politics, and the Hidden History
of Arabian Oil (Amherst: Prometheus
Books, 2005), 63-88. Barstow also joined APOC in 1927 as one of the
government directors.
136

71
“Open Door” in Iraq by claiming that the rights of the TPC took
precedence over the claims of rival firms.
Kellaway (backed by Long and the Treasury) reserved his greatest
objection for the idea of having a staterun oil company undertake
operations in Mesopotamia, claiming that “[development] by private
interests
would almost certainly result in [a] far more rapid opening up of the oil
resources of the country.” It
would unwise for the British Government to interfere in an industry that
was “speculative, very technical
and requires audacity in an exceptional degree.” London also lacked
“experts of the proper calibre except
by outbidding the large oil companies who are keenly competing at the
present time for good men.” These
same companies were unlikely to come to London’s assistance if it cheated
them out of their prize.139
Kellaway reiterated his objections to government participation in Iraqi
oil exploration and production
following the signing of the San Remo Oil Agreement of April 1920.
(Besides formalizing the division of
League of Nations mandates in the Middle East, the agreement granted
France either 25% of the oil
produced by a state-owned company operating in Mesopotamia or 25% of the
shares of a private
company. The agreement did not, however, specify whether the company that
produced the oil was
private or state-owned.). If London went ahead with its new policy, the
cost to the taxpayer would run to
between £10,000,000 and £15,000,000. Conversely, if a private company
took over the concession,
besides undertaking the exploration costs, it would also be responsible
for paying for local security. This
would absolve the government of stationing large numbers of British or
Indian Army troops to guard oil
installations, since the company would, like APOC in Persia, most likely
conclude separate security
arrangements with local tribes. Kellaway nonetheless insisted that the
company must “be permanently
British, with Government representatives on the Board,” and that Shell
must either accept this

139

Kellaway, “Mesopotamian Oilfields: Memorandum by the Minister in Charge

of the Petroleum Department,” 22
April [1920], C.P. 1118, CAB 24/104. For Long and the Treasury’s
concurrence, see: Long, “The Anglo French
Petroleum Agreement and Mesopotamia: Memorandum for the Cabinet by the
First Lord of the Admiralty,” 29 June
1920, C.P. 1554, CAB 24/108; and Minute to Barstow, [?] 1920, T 161/738.

72
arrangement or be content with is existing one-quarter share in the TPC
under the terms of the 1914
“Foreign Office” Agreement.140
Kellaway’s objections to government participation in Iraqi oil production
were shared by both the
Civil Commissioner in Baghdad, Wilson, and the minister most concerned
with the development of Iraq’s
oil, Colonial Secretary Winston Churchill.141 The latter considered the
matter of private vs. public
development of Iraqi oil to have been settled during the diplomatic
exchange with the United States
following the signing of the San Remo Oil Agreement, in which “it was
definitely stated that the
provisions of the Anglo-French Petroleum Agreement in regard to
Mesopotamia were based upon the
Turkish Petroleum Company’s claims.” The only government with any claim
to Iraq’s oil was Baghdad,
but Churchill considered it “far more satisfactory if the development
were in the hands of a British
company than in those of an Arab government over which our control will
be hypothetical.”142
Although the San Remo Oil Agreement undid some of the damage done by the
government’s rash
action in January, it could not save the Harcourt-Deterding Agreement.
Shell now began to feel that the
benefits of close cooperation with London were outweighed by the
disadvantages of incurring the
hostility of the U.S. Government. The company was in the process of a
major expansion of its presence in
Latin America, not just in Venezuela, but also in Mexico. Cowdray had
been one of the pioneering figures
in the Mexican oil industry after 1901 and had founded Mexican Eagle in
1909. Following failed bids to
140

Kellaway, “The Anglo-French Petroleum Agreement and Mesopotamia,” 21 June

1920, C.P. 1524, CAB 24/108.
See also: Kellaway, “The Anglo-French Petroleum Agreement and
Mesopotamia: Memorandum by the Minister in
Charge of [the] Petroleum Department,” 15 November 1920, C.P. 2110, CAB
24/115.
141
Wilson had concluded that the British Government was incapable of
managing the Mesopotamian concession. In
view of the immense capital investments required to build a pipeline
before Iraqi oil could be exported, Wilson had
come around to believing that private enterprise should take the lead –
in this case, APOC, which Wilson believed
was “best fitted” for the task. “Telegram from Civil Commissioner,
Baghdad, to Secretary of State for India, dated
7th July 1920,” attached to: E.S.M. (Edwin Samuel Montague), “The Anglo-
French Petroleum Agreement and
Mesopotamia,” 12 July 1920, C.P. 1607, CAB 24/109.
142
Churchill to Hankey, 20 June 1921, enclosed with: Hankey, “Mesopotamian
Oil: Note by the Secretary to the
Cabinet,” 27 June 1921, C.P. 3077, CAB 24/125. Churchill reiterated these
points in a separate memorandum for the
Cabinet: “Mesopotamian Oil and the Turkish Petroleum Company: Memorandum
by the Secretary of State for the
Colonies,” 29 August 1921, C.P. 3271, CAB 24/127. The diplomatic
exchanges between the Department of State
and the Foreign Office regarding the future of oil production in Iraq
between 1920 and 1921 are reprinted in:
Correspondence Between His Majesty’s Government and the United States
Ambassador Respecting Economic
Rights in Mandated Territories, Cmd. 1226, Miscellaneous No. 10 (London:
HMSO, 1921), T 172/1268.
Developments in 1920 are summarized in: Minute for the Chancellor of the
Exchequer, “Mesopotamian Oil,” 06
September 1921, signature illegible, T 161/738.

73
secure a supply contract with Jersey in 1912 and the Admiralty in 1913,
by January 1914, Cowdray
decided to sell off his Mexican interests as quickly and profitably as
possible. He had nearly completed a
sale to Jersey in 1917 before the British Government intervened by
threatening the former Liberal MP and
President of the Air Board with prosecution under the Defence of the
Realm Act if he did not desist.143
Time was of the essence after Cowdray learned in December 1918 that
saltwater had begun to seep into
Mexican Eagle’s largest oilfield. He eventually managed to sell his stake
in both Mexican Eagle and its
downstream subsidiary, Anglo-Mexican, to Shell in March/April 1919 for
£7,700,000.144
The purchase of Mexican Eagle appeared to be a coup for Shell. The former
had paid dividends of
16% in 1915-1916 in spite of the revolution, and in 1920-1921, the
dividend soared to 45% and 60%,
respectively, while profits from overseas and domestic sales in Mexico
totaled £20,000,000 in 1921.145
But immediately thereafter, Shell’s investment went sour. Mexican
production began to decline after
1921 even though the major oil companies continued to pour resources into
the country for several years,
and output only recovered following the discovery of the Poza Rica
oilfield in 1930.146 But Mexico was

143

See the exchange between Ernest George Pretyman (Chairman of the Inter-
Departmental Committee on
Petroleum Products) and Cowdray’s solicitors, Messrs. S. Pearson and
Sons, attached to: Minute, no author, 10
September 1917, G.T. 2000, CAB 24/25. The government’s opposition put
Cowdray in a difficult position, since
neither the Chancellor (Andrew Bonar Law) nor the Colonial Secretary
(Long) was willing to “advance” Cowdray
“a large sum of money” against his “Mexican oil properties as an
alternative to their transfer to the Standard Oil
Trust […].” W.H.L., “Proposals for Purchase of Mssrs. Pearson & Sons’
Mexican Oil Properties,” 18 July 1917,
G.T. 1448, CAB 24/20. Cowdray had already tried to interest the
government in acquiring a controlling stake in
Mexican Eagle in December 1913 in exchange for a £5,000,000 infusion, but
London already “had a better bargain
over Persian oil for less than half that sum and therefore declined.”
Corley, History of Burmah, 245. The pre-WWI
history of the Mexican Eagle is covered in: Fursenko, Battle for Oil,
147-158; and Jones, British Oil Industry, 63-77.
For more on Mexican Eagle’s wartime operations and its eventual sale to
Shell in 1919, see: Brown, Oil and
Revolution, 144-153; and Jones, British Oil Industry, 190-192, and 217-
218.
144
Shell did not secure majority control of Mexican Eagle, but the deal did
allow it to exercise control over the
management of the company. Jonathan Brown, “Why Foreign Oil Companies
Shifted Their Production from
Mexico to Venezuela during the 1920s,” American Historical Review 99: 2
(1985): 370-371. For details on the deal
itself, see: Brown, “Shifted Their Production,” 365-367; Garner, Lions
and Eagles, 221-229; and Hall, Oil, Banks,
and Politics, 61-65. Hall also points to Cowdray’s frustration over
London’s reluctance to defend British interests in
Mexico during the revolution more vigorously for fear of antagonizing the
United States. Brown concludes that
Cowdray felt “vulnerable” (pg. 367).
145
Brown, “Shifted Their Production,” 371; and Hall, Oil, Banks, and
Politics, 15.
146
Stephen Haber, Noel Maurer, and Armando Razo, “When the Law Does Not
Matter: The Rise and Decline of the
Mexican Oil Industry,” Journal of Economic History 63: 1 (2003): 9-16;
and Jonker and Zanden, History of Shell,
226, 259-261, and 453. It seems gratuitous to claim, as do Shell’s
official historians, that the Mexican oil industry
had “declined to relative insignificance” by the mid-1930s. Jonker and
Zanden, History of Shell, 261. Mexico was
still the world’s seventh-largest producer in 1937, when output was just
short of 7,000,000 tons, which was
2,500,000 tons greater than Iraq, roughly equal to both the Dutch East
Indies and Romania, and only 3,000,000 tons

74
just one of Shell’s major investments in the Western Hemisphere. Already
the leading producer in
Venezuela and a major player within the United States, Shell had much to
lose if it became an enemy in
the eyes of the U.S. Government by virtue of any close association with
the British Government.147 The
fact that Shell and London proved unable to reach an agreement concerning
a British tax exemption for
Shell’s Dutch shareholders eliminated any remaining incentive for the
company to go through with the
Harcourt-Deterding Agreement. This was certainly a setback from London’s
perspective, but it was only
facet of Britain’s postwar oil policy, which ultimately revolved around
the British presence within the
nascent Middle Eastern oil industry. Already in control of the region’s
only oil-producing nation, Iran,
London did not allow the failure of the Harcourt-Deterding Agreement to
sidetrack it from securing
control over the other great prize in the region, Iraq.

behind Iran. J.J. Llewellin (Civil Lord of the Admiralty; Chairman of the
Oil Board), et al., “Oil Board: Thirteenth
Annual Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B),
CAB 50/7.
147
Jones, British Oil Industry, 217-221; and Jonker and Zanden, History of
Shell, 251, 256.

75
Taking Control of Iraq: Oil and Anglo-French Relations, 1918-1920
One of the most important challenges confronting the British Government
following the First World
War was stabilizing its hold over Iraq. Elements within the British
Government, most notably the
Admiralty, had been pushing for British control of the reputed oil riches
of Mesopotamia even before the
World War had ended. Of course, Britain was not the only great power that
coveted Mesopotamian oil.
Germany, though the Deutsche Bank, had been a major player in the events
leading up to the formation of
the TPC between 1912 and 1914, and the German military even dispatched an
oil expedition to
Mesopotamia that produced limited amounts of oil using primitive drilling
methods as early as 1917.148
German interest in Mesopotamian oil was certainly a matter of concern for
some in Whitehall, who used
it as a cudgel to prod civilian leaders into supporting a more energetic
policy during the war.149
In 1915, the de Bunsen Committee considering Britain’s war aims vis-à-vis
the Ottoman Empire had
shrunk from calling for its dismemberment between the European Powers and
Britain’s annexation of the
vilayets (provinces) of Mosul, Baghdad, and Basra, even though the
defense of Britain’s oil interests in
Iran and the possible deposits in Mesopotamia “makes it commercially
desirable for us to carry on to
Mosul,” where “there are valuable wells possession of which by another
power would be prejudicial to
our interests.” The committee ruled out annexation, however, not the
least because of its excessive costs,
both in terms of the resources needed to compel the Ottomans to accept
such terms, and for the British to
protect that what they had acquired thereafter. Nevertheless, Britain had
to retain its “strategic position in
the Eastern Mediterranean and in the Persian Gulf,” while safeguarding
its existing commercial
148

Kontinentale Öl Aktiengesellschaft, Mineralöl-Archiv, “Wer erschloß

Mossul-Öl? (Aus den Akten des
Brennstoffkommandos Arabien),” no date (handwritten notation indicates 05
May 1941), NARA, Record Group
242: Foreign Records Seized (hereafter cited as: RG 242), Microfilm
Publication T-580, Reel 907, Box 8, Ordner
56; and “Der Deutsche Anteil an der Erschließung des Iraköls,” no date or
author, enclosed with: Wi VI d,
Aktennotiz, “Betr.: irakisches Erdöl,” 27 May 1941, NARA, RG 242,
Microfilm Publication T-77, Reel 1399, Item
No. Wi/IIA 5.1-2.
149
One Admiralty memorandum of August 1918 pointed out that German engineers
had been active in Mesopotamia
and argued that the Germans considered only the Suez Canal to be of
greater value in the Middle East than the
oilfields of Mesopotamia. “Memorandum on the reported oil fields of
Mesopotamia and part of Persia,” 02 August
1918, G.T. 5313, CAB 24/60. The provenance of the report is unclear but
there is handwritten notation referring to a
Col. Jones of the Admiralty, and the National Archives finding aid
indicates that this was the originating agency.
Mejcher claims, on the basis of Hankey’s letter to Balfour of 01 August
1918 (CAB 21/119), that the author was
Slade. Left unexplained is how Hankey could have brought up the paper
with Balfour one day before it was actually
completed: Imperial Quest for Oil, 40 and 47 n. 54.

76
investments in the region, including “oil production.”150 The government
also informed APOC in 1915-16
that it considered the prewar arrangements concerning the TPC to be null
and void and would not grant
the company any preferential rights within the Ottoman Empire until it
had time to consider the matter “at
a later date when political conditions were altered and more settled.”151
The war ended with British troops occupying most of Ottoman Mesopotamia,
and Britain’s position
appeared unassailable: the need to placate allies such as Russia or
preserving the Ottoman Empire on a
decentralized basis (as the de Bunsen Committee had recommended) had
vanished. The government also
backtracked on its earlier position that the TPC’s claim to concession in
Mesopotamia was invalid.152 But
if Britain was to acquire the dearly earned spoils, the first step was
securing international sanction for
Britain’s postwar administration of Iraq. At the prompting of Long,
Cadman produced a revised copy of
Slade’s report at the end of 1918 for the benefit of Secretary Balfour
and rest of the British delegation at
the Paris Peace Conference. Cadman hoped that the report would encourage
the British delegation to
devote “special attention” to the matter of securing “British control
over additional oil-bearing lands and
to the confirmation and extension of concessions at present held by
British subjects” (i.e. the TPC’s
promise of concession from June 1914), so as to ensure “an uninterrupted
supply of [oil] which has now
become indispensable for the maintenance of our naval and mercantile
supremacy.”153
In fact, there were numerous challenges to British predominance. In view
of the multitude of parties
(British, Dutch, French, U.S., German, and even Turkish) clamoring for a
share of Iraq’s possible oil

150

Maurice de Bunsen (Chairman), et al. “British Desiderata in Turkey in

Asia: Report, Proceedings, and
Appendices,” 30 June 1915, CAB 27/1.
151
“Memorandum Prepared in the Foreign Office Library,” 20 February 1918, no
author, POWE 33/41. The Foreign
Office expanded this paper into a detailed summary of its correspondence
concerning the competition over oil
concessions in Mesopotamia between 1904, when the Anatolian Railway
Company first secured a one-year window
to search for oil in the vilayets (provinces) of Mosul and Baghdad, and
1916, when Greenway attempted to lay claim
to all oil-bearing Ottoman territories that fell into British hands.
Edward Parkes (Foreign Office), “Memorandum
Respecting Oil Concessions in Mesopotamia,” 27 April 1918, 10967,
enclosed with: Alwyn-Parker (Foreign Office)
to the Petroleum Executive, 03 May 1918, POWE 33/41.
152
How exactly Britain could reconcile such a mercenary policy with its
stated aim of ruling Mesopotamia “in the
interests of the inhabitants” was tricky, since resurrecting the TPC “in
our own interests” would “deprive the new
State of a free hand in disposing of its most valuable assets.” Montague
to Harcourt, 23 December 1918, CAB
21/119.
153
Cadman, “Petroleum Position of the British Empire,” December 1918,
enclosed with: Cadman to the Under
Secretary State, Foreign Office, 06 January 1919, Secret 269, POWE 33/60.

77
wealth, guaranteeing British control over that country’s oil industry
would not be a straightforward
matter. British exploitation of Middle Eastern oil depended upon French
cooperation for a number of
reasons. Although the most promising areas for oil development in Iraq
(the former Ottoman vilayet of
Mosul) lay within the British occupation zone, any oil produced there was
worthless unless it had an
outlet to overseas markets. The most practical route (and the one favored
by the TPC – renamed the Iraq
Petroleum Company, IPC, in June 1929) was a pipeline through what became
the French League of
Nations mandates of Syria and Lebanon. This route was considerably
shorter and cheaper than the
alternative route favored by the British Government through the future
British mandates of Transjordan
and Palestine.
The alternative of a pipeline down the Tigris River to Basra was never
discussed, since it would have
placed intolerable burdens on British and French tanker capacity and
entailed additional expenses in the
terms of Suez Canal tolls. These tolls were already a major burden on the
operations of APOC, and the
British Government hoped that any agreement with the French for a TPC/IPC
pipeline would also include
provisions for an APOC pipeline from Persia to the Mediterranean, which
would allow the company to
save money on transportation costs and canal tolls, while further
strengthening its relative position vis-àvis Shell. French diplomatic
support was also essential in fending off U.S. and Turkish encroachments.
Between 1916 and 1920, Britain and France signed three agreements
concerning the future
development of oil in Iraq and other areas of interest (Romania, Russia,
and Galicia), which divided the
spoils from the Central Powers: the Long-Bérenger Agreement of April
1919, the Greenwood-Bérenger
Agreement of December 1919, and the Cadman-Berthelot Agreement of April
1920 (also known as the
San Remo Agreement). Under the agreements, the London promised Paris that
France would receive a
portion (first 20%, then 25%) of the shares of the TPC or any successor,
which both governments agreed
held a legal right to a concession by virtue of its 1914 agreement with
the Ottoman Empire. The CadmanBerthelot Agreement dropped any mention of
the TPC and left open the question of whether a state-run or
private company would receive the concession. In the case of the former,
France would receive onequarter of the oil produced, and in the case of
the latter, one-quarter of the shares. Both of the agreements
78
stipulated that any company that received the Iraq concession would
remain “under permanent British
control.” In exchange, France would consent to the construction of
pipelines carrying both Iraqi and
Persian crude through its mandates in Syria and Lebanon. Both sides also
agreed to abide by the principle
of reciprocity when it came to oil development within their respective
mandates.154 Each of the
agreements also extended to the future Government of Iraq and its
nationals the option of acquiring up to
20% of shares in whatever company worked the concession, but this
inconvenience was unceremoniously
jettisoned in order to make room for the U.S. oil companies after
1922.155
The Long-Bérenger Agreement was initialed while the Harcourt-Deterding
Agreement was still inplay, and it is imperative to understand that the
two agreements were related. As Hamar Greenwood
(Long’s successor as Petroleum Minister) explained to the Cabinet, the
costs of securing French support
for British ambitions in Iraq were negligible – no more than a 20% share
of oil production, “in return for
which we should obtain the immense benefit of cheap transport for two
great producing companies which
will remain under permanent British control.” Ratification of the two
agreements would also lessen
Britain’s “undesirable” reliance upon U.S. oil exports while promoting
closer ties with the French, who
were “as determined as ourselves to reduce their dependence on foreign-
controlled supplies of oil.”

154

“Memorandum of Agreement between Sénateur Henry Bérenger, Commissioner-

General of Petroleum Products
in France, representing the Government of the French Republic, and the
Right Honourable Walter H. Long, M.P.,
His Majesty’s Minister in Charge of Petroleum Affairs, 08 April 1919,
PIPC, ii: 25-26; “Memorandum of
Agreement between Lieutenant-Colonel Sir Hamar Greenwood, Bart., M.P.,
His Majesty’s Minister in Charge of
Petroleum Affairs, and Senator Henry Bérenger, Commissioner-General of
Petroleum Products in France,
representing the Government of the French Republic,” 21 December 1919,
POWE 33/89; and “Memorandum of
Agreement between M. Phillipe Berthelot, Directeur des Affaires
politiques et commerciales au Ministère
Étrangères, and Professor Sir John Cadman, K.C.M.G., Director in Charge
of His Majesty’s Petroleum
Department,” 24 April 1920, CAB 24/108. The agreements are reprinted as
Appendix IV to: Kent, Oil and Empire,
172-178. For a contemporaneous summary, see: PIPC, ii: 3-10.
155
For extended discussion of the agreements, see: Kent, Oil and Empire,
137-157; and Edward Peter Fitzgerald,
“France’s Middle Eastern Ambitions, the Sykes-Picot Negotiations, and the
Oil Fields of Mosul, 1915-1918,”
Journal of Modern History 66: 4 (1994): 697-725. Fitzgerald’s article is
particularly valuable, because he debunks
the hoary myth that the Sykes-Picot Agreement ceded Mosul to the French
sphere of influence, and that Clemenceau
relinquished this gain to Lloyd George in 1918. In truth, the French had
only received the northern portion of Mosul,
while the most promising territories lay within the British sphere.
Furthermore, Sykes-Picot would have guaranteed
the prewar rights of the TPC to prospect throughout Mosul. Finally, the
French lacked the technical capacity to
develop Iraqi oil on their own, and they stood to gain more through
cooperation with the British, not just in Iraq, but
also in Romania. See also: Melby, Oil and the International System, 26-
37.

79
Greenwood warned his colleagues that the French were “inexperienced in
petroleum matters, and if they
do not link up with us are certain to the turn to the United States for
assistance.”156
From his new perch at the Admiralty, Long kept up the pressure in favor
of ratifying the agreement he
had negotiated with the French, even after the Cabinet withdrew its
support for the Long-Bérenger
Agreement in August 1919. Long condescended to his colleagues that they
had not appreciated the
agreement’s “scope and importance.”157 Casting aside concerns about an
agreement with France, Long
claimed that Britain had no option but to cooperate. Not only was Britain
already “committed to the
French Government,” but it was irresponsible for the government to
continue dithering “in face of the
great overwhelming fact that oil is becoming every day more vital to our
national life […].” Long
admonished his colleagues not to forsake their good fortune, for “if we
lose the opportunities which have
grown out of the war, we shall never be able to regain our position, and
shall undoubtedly suffer once
again from a shortness of supplies which will greatly hamper our national
action.”158
The following March, Long reminded the Cabinet that soaring U.S. domestic
consumption would cut
into the amount of oil available for export – hence his support for an
agreement with Shell, which would
diversify Britain’s sources of supply. Long worried that a failure to
achieve an agreement with either the
French or Shell would afford U.S. oil companies the opportunity to “make
an alliance with the Shell
group, or the latter may even come to some close working arrangement with
the French Government,”
which would further dilute the company’s already tenuous ties to Britain.
This would leave Britain with
Iraq and Persia as its only reliably British sources of oil, only one
which was actually proven (TPC
engineers did not strike oil in commercial quantities within Iraq until
October 1927). This situation was
intolerable from Long’s perspective: “[All] our Forces may easily be
rendered immobile if we are
dependent upon the United States of America for our supplies. […] I
cannot exaggerate the extent of the

156

Greenwood, “Memorandum for the Cabinet: French Agreement: Export of Oil

from South Russia,” 06 December
1919, C.P. 259, CAB 24/94.
157
Long, “Memorandum for the Cabinet,” 11 November 1919, C.P. 115, CAB
24/93.
158
Long, “Memorandum for the Cabinet by the First Lord of the Admiralty,” 04
November 1919, C.P. 59, CAB
24/92. Long’s memorandum also includes a detailed timeline of events
surrounding the initialing of both the LongBérenger and Harcourt-
Deterding agreements in 1918-1919.
80
disaster which must ensure if we fail to take advantage of this unique
opportunity to secure the assistance
of the great existing sources of supply [Shell], and instead deliberately
provoke their hostility and drive
them into alliances with foreign interests.”159 R.S. Horne, President of
the BOT, agreed with Long,
remarking that Britain had to cede to Shell a portion of the Deutsche
Bank’s former shares in the TPC. He
had “little doubt” that allowing the Harcourt-Deterding agreement to
lapse “may drive them [Shell] into a
definite antagonism, and into the control of some other country.”160
The British also worried that any failure to reach an accord with the
French would drive Paris into the
arms of Washington. As one PIPC summary explained, “[The] French
Government was actually
negotiating not only with His Majesty’s Government, but with the United
States Government. […] It was
represented that the British Empire was at present, and must for some
years continue to be, very largely
dependent on the United States for its oil supplies, and it was felt that
the prospect of the United States of
America obtaining control, with or without French support of European and
Mid-East oilfields could not
be regarded with equanimity.”161 As the Foreign Office indelicately
observed, British policy was designed
explicitly “to buy away the French Government from the Standard Oil
Company” while leveraging a
majority stake in the TPC for British control of Shell (the Harcourt-
Deterding Agreement). Handing over
a minority stake in the TPC to France was “really a bargain to ensure His
Majesty’s Government being in
a position to obtain control of the Shell Combine.”162
The British and the French finally came together in April 1920 to sign
the San Remo Agreement.
Although welcome, this accord could not, in and of itself, do much to
address Britain’s immediate
shortfall of oil, since Iraqi oil production would not become available
until after the completion of a
pipeline. In the summer of 1920, Long outlined the situation confronting
the Admiralty. He estimated that
the Royal Navy’s fuel requirements in 1920 would reach 1,113,000 tons,
with 400,000 tons (rising
159

Long, “Oil Supplies: Memorandum to the Cabinet by the First Lord of the
Admiralty,” 18 March 1920, C.P. 903,
CAB 24/101.
160
Horne, “Mesopotamian Oilfields: Memorandum by the President of the Board
of Trade,” 16 April 1920, C.P.
1085, CAB 24/103.
161
PIPC, ii: 3-4, 6-8.
162
“Note by Foreign Office,” I.D.C.E 1022 c. iv, no date (circa December
1919/January 1920, following the signing
of the Greenwood-Bérenger Agreement of December 1919), T 161/738.

81
eventually to 500,000 tons) coming from Persia, 200,000 tons from Mexico,
and a further 150,000 tons
from Trinidad. This figure left still left the Royal Navy with a
shortfall of approximately 150,000 tons,
but “the Admiralty is experiencing considerable difficulty in securing
supplies of Admiralty quality fuel
oil to meet the balance of expenditure and to complete reserve,” which
would rise from 1,500,000 tons to
4,500,000 tons over the next ten years. Long contended the present
“distinct shortage” could “only be
overcome the intensive development of existing oilfields and the
exploiting of new oilfields,” and he
argued that it was “essential that the development of potential oilfields
within the sphere of British
influence or under British control, such as that in Mesopotamia, should
be pushed forward with all
possible speed.”163 Whereas efforts in Mesopotamia were still in their
“infancy,” as Long observed the
following December, Persia was already an indispensable supplier thanks
to the low cost of its oil and its
location, which spared the Admiralty the cost of accumulating larger
stocks in Singapore. Long estimated
that replacing the Admiralty’s current supply from Persia from other
sources would cost “six to seven
times” as much, which he implied more than outweighed the additional
costs entailed by providing
physical protection for the oilfields against either rebellious tribes or
the Soviet Union.164
Long also pushed for the construction of pipelines from Persia to the
Mediterranean, since oil from
British-controlled sources such as Persia was a major boon for Britain’s
balance of payments, which had
worsened during the war and left the country in a position of “heavy
indebtedness to the United States of
America which will not be liquidated for very many years […].” Although
he surmised that the Persian
fields might “prove as large as those of the United States,” Britain
would not be able to make full use of
them unless London secured passage for Persian oil through the French
mandates in the Near East. Even
worse, U.S. interests might yet capitalize on Anglo-French differences to
gain a foothold in the French

163

Long, “The Anglo French Petroleum Agreement and Mesopotamia: Memorandum

for the Cabinet by the First
Lord of the Admiralty,” 29 June 1920, C.P. 1554, CAB 24/108.
164
W.H.L., “South Persian Oilfields: Admiralty Memorandum for the Cabinet,”
24 December 1920, C.P. 2377,
CAB 24/117.

82
mandates, which would prevent Britain from enjoying “the full advantages
of our hold of the Persian
oilfields” as the U.S. oil companies would block Persian oil’s access to
the Mediterranean.165

165

W.H.L., “Anglo-French Petroleum Agreement,” 09 January [1921], POWE

33/176.

83
Problems in Persia, 1919-1920: The Armitage-Smith Agreement
In a lecture before the Royal Naval College in 1921, Slade observed that
Britain’s energy future lay to
the east, in Persia and Mesopotamia. The development of this region was
“a matter of supreme
importance to the British Empire,” in view of Britain’s dependence upon
imports from the United States
and that country’s potential unreliability, for “if she was not friendly
to us, it would be quite possible for
her to place such conditions on the supply of this commodity which is of
such vital importance to us, as
would seriously affect our conduct of war.”166 All the more reason, he
argued, to focus Britain’s energies
in Persia and Iraq, which were only viable options that “may in future
redress the balance in our favour.”
Slade condemned his government’s inadequate defense of British interests
in Persia, where “our Enemies
are permitted to have a free hand and the United States, under the cloak
of the Standard Oil Company, is
intriguing to get the Persian Government to repudiate its
Concessions.”167
A visit to Persia in April 1922 confirmed Slade’s worst suspicions.
Production there had exploded
between 1911/12 and 1921/23 from 43,000 tons to 2,327,221 tons, while
annual royalties to Tehran stood
just under £600,000 (or £3,000,000 cumulatively).168 Slade observed that
whereas the fractured political
opposition to Britain in that country “until a short time ago, was more
or less ineffective… now, thanks
apparently to American efforts, there is more cohesion among these
hostile factions” with “dangerous”
consequences for APOC. Slade was convinced that the Americans, both the
U.S. Government and
Standard Oil, were behind “a most carefully organized and systematic
campaign of misrepresentation” to
convince the Persians that APOC was dragging its heels with regard to the
development of its 1901

166

Five years later, Slade reiterated the point rather more bluntly:
Washington could “with a stroke of a pen, deprive
us of 50% of our supplies of Petroleum.” It made no difference whether it
did this to express disapproval of British
policy or to conserve its domestic reserves: “the result would be the
same.” “Strategic Aspect of Oil Supplies in
War,” no date (circa 1926, for Slade makes direct reference to his 1921
speech and his 1925 presentation before the
Royal United Service Institution), BP 68940.
167
“The Strategic Aspect of Fuel Supplies: A Lecture delivered by Admiral
Sir E.J.W. Slade, at the Royal Naval
College, Greenwich, on 14th November, 1921,” BP 69942. For a similar
perspective that offered an optimistic
appraisal of Venezuela, as well, see: Lt. Cmdr. G.J.A. Miles (Royal Naval
Staff College), “The Supply of Oil Fuel
for Fleets and Squadrons Abroad in the Future,” 14 April 1920, ADM
203/48.
168
Ferrier, History of BP, 271 and 370. Note that before 1929, APOC
collected statistics on production and royalties
for the financial year ending on 31 March. Thereafter, statistics covered
the calendar year.

84
concession, and that they should “cancel certain parts of the Concession
on the ground of Nondevelopment and… offer these parts to the
Americans.”169
Slade was right that Britain’s position in Persia was insecure, even if
he was wrong about the reasons.
Persia was in political and economic disarray at war’s end, after having
been occupied by both the Allies
(Russia and Britain) and the Ottomans. Since 1905, Britain and APOC
dominated South Persia through
treaties with the local Bakhtiari tribes (who received 3% of APOC’s
profits) and Sheik Khaz’al of
Khuzestan (which included Abadan). After 1918, Britain saw its chance to
solidify its control over the
rest of the country. Although the British Government was reluctant to
give its full support to APOC’s
boundless claims to concessions throughout the Persian Gulf and Ottoman
Empire, the Foreign Office
agreed that the safety and extension of APOC’s Persian concession “must
form one of the main points in
our future policy in Persia […].”170 The Russians had already consented
in 1915 to British control of the
“neutral zone” between their respective spheres of influence under the
1907 Anglo-Russian Convention,
which is where APOC first discovered oil in 1908.171
The elimination of Czarist Russia after 1917 left Britain free to make
Persia a protectorate through the
Anglo-Persian Agreement of 1919 and complete the imperialist vision of
creating a string of dependences
and colonies linking Britain’s formal and informal empire from Africa,
through the Middle East, to India
and the Far East. This agreement, which presaged the one forced upon Iraq
in 1930 prior to the expiration
of the League of Nations mandate, would have placed British civilian and
military advisers throughout the
Persian Government and Army. In exchange, the British agreed to modernize
the Persian Army, improve
the country’s communications and transportation infrastructure, and
(through a separate agreement) grant
169

Like Cadman, Slade was beginning to doubt the wisdom of APOC’s business
relationship with the British
Government, which led the Persians to believe “that the Anglo-Persian Oil
Company is only the British Government
under another form,” which “is already doing the Company a great deal of
harm.” “Memorandum by Sir Edmond
Slade on his Visit to Persia, 1922,” 23 May 1922, BP 72017.
170
APOC wanted London’s support in compelling Tehran to accept an extension
of the D’Arcy concession to 1986
(i.e. by 35 years). H.G.N., “Draft Note for Persia Committee,” 14
February 1918, enclosed with the Under Secretary
of Foreign Affairs (Cecil) to the Petroleum Executive, 26 February 1918,
POWE 33/41. The Petroleum Executive
agreed: J.C. Clarke (for Long) to the Under Secretary of State, Foreign
Office, 02 March 1918, P.E. 0126, POWE
33/41.
171
Much to the consternation of Marcus Samuel, who questioned the wisdom of
drawing naval oil supplies from an
area susceptible to Russian interference. Samuel to Hopwood, 29 May 1914,
CAB 37/120.

85
a £2,000,000 loan. (None of this would be free: Britain would debit
Persia for all of its expenses in
implementing the agreement, including £131,000 to bribe the prime
minister and two other ministers into
signing the agreement. The loan itself would be secured against customs
revenue and “other sources of
income at the disposal of the Persian Government,” such as its oil
revenues.) The Persian Government
reluctantly accepted the treaty in August 1919, but before it could go
into effect, it needed to be ratified
by parliament (the Majlis), which had been dissolved in 1915. New
elections would have to take place,
but widespread anti-British sentiment throughout Persia ensured that
ratification was impossible. In any
event, the Persians refused even to consider the agreement until British
troops withdrew. To add insult to
injury, Tehran started negotiations for a treaty of friendship with
Soviet Russia. The new Bolshevik
regime had denounced the 1907 Anglo-Russian Convention dividing Persian
into two spheres of
influence in 1918. The following year, Moscow even expressed a
willingness to recompense Tehran for
wartime damage caused by Russian troops. A few days before the signing of
the friendship treaty with
Russia in February 1921, however, Cossack troops under the command of
Reza Pahlavi overthrew the
government, possibly with British support.172 If the British did support
the coup, it turned out to be a
spectacularly bad investment, for Reza Pahlavi was anything but London’s
puppet. The new strongman in
Tehran had no interest in resurrecting the moribund Anglo-Persian
Agreement and chose to sign the treaty
his predecessors had negotiated with Moscow.173
Under these circumstances, APOC would have been the object of
vilification no matter what it did,
but the company’s actions during and immediately following the war did
much to justify Persian
suspicion. In retaliation for the sabotage of its pipelines in 1915 by
revolting tribesmen supported by
German operatives, the company billed Tehran almost £615,000, two-thirds
for damages and the
remainder for lost production. APOC claimed that the national government
was responsible for the safety
172

Slade was enamored with Reza Khan: “At the same time he is in need of
money and it may be possible to buy
him.” “Memorandum by Sir Edmond Slade on his Visit to Persia, 1922,” 23
May 1922, BP 72017. Whether or not
the British supported the coup, they certainly did nothing to stop it.
173
Bamberg, History of BP, 27-32; Elm, Oil, Power, and Principle, 23-28;
Ferrier, History of BP, 350-352; Gavin
Hambly, “The Pahlavi Autocracy: Riza Shah, 1921-1941,” in: Cambridge
History of Iran, ed. Avery, Hambly, and
Melville, 213-243; and Nikki Keddi, “Iran Under the Later Qajars, 1848-
1922,” in: Cambridge History of Iran, ed.
Avery, Hambly, and Melville, 207-212.

86
of the company’s operations on Persian soil, and until it received
payment, the company declined to pay
any royalties to Tehran between 1916 and 1917 (amounting to £44,347). The
Persians disputed these
charges and hired an external auditor (William McLintock) to audit the
company’s claims, which turned
out to be largely fictitious. Actual damages amounted to only £20,000.
McLintock also uncovered a host
of financial irregularities, many of which appear to have been designed
to get around APOC’s contractual
obligation to pay Tehran royalties equivalent to 16% of its profits in
Persia. APOC quickly abandoned its
claims for damages, resumed royalty payments, and paid Tehran a
£1,000,000 settlement. To avoid a
repetition, in 1920, the company used the services of the British expert
appointed to manage Persia’s
finances under the yet to be ratified Anglo-Persian agreement (Sydney
Armitage-Smith) to modify the
existing concession.
The Armitage-Smith Agreement of 22 December 1920 rewrote APOC’s prior
obligation to pay 16%
of its profits to Persia. Henceforth, only those operations that took
place within Persia would pay the 16%
royalty. APOC’s operations beyond Persia would pay royalties only on
those profits “defined and
calculated” by APOC as stemming from its operations in Persia.174 This
revision empowered the company
to set the level of compensation it paid Tehran. It also allowed APOC to
create a wall between its
operations within and beyond Iran. Even if the latter had been
established using the proceeds from
operations in the former, the Iranians would not be entitled to a share
unless the company agreed. No
doubt the British had extracted favorable terms from a helpless
government, but such ungenerous and
shortsighted acts would have major repercussions for British energy
security in the years to come.
Britain could not afford to be indifferent to events in Persia, which
London expected would soon
become the Royal Navy’s primary supplier of oil. As the Royal Navy
grappled with the problem of
supplying its ships with oil after the war, the major problem was not a
lack of supply, so much as having

174

Compare Elm, Oil, Power, and Principle, 19-22, with Ferrier, History of
BP, 358-371. Ferrier, although he does
not question McLintock’s findings, claims that the irregularities
discovered by the latter “deal with certain aspects of
accounting principles over which there was no explicit professional
guidance and on which discretion was exercised
according to individual judgment in accordance with professional
integrity” (pg. 367). The agreement is reprinted in:
Ferrier, History of BP, 653-658.

87
enough oil where it was most needed.175 In January 1919, the Admiralty
briefed the Cabinet on Britain’s
immediate outlook on oil supplies: “The Navy is now dependent upon the
goodwill of the United States
of America for its vital supplies of oil fuel and this dependence must
continue unless and until alternative
supplies can be developed.” The only avenues available to break this
dependence were synthetic
production or the development of the Persian and Mesopotamian oilfields.
Although the Middle East
offered the potential of large quantities of oil, as early as 1919, the
Admiralty was concerned about the
vulnerability of Britain’s supply lines to the region: “Supplies have to
come by a long and difficult sea
route and even if a pipe line is constructed to a Syrian port it will
always be vulnerable and transport
through the Mediterranean may be hazardous.” Another problem was that
neither Middle Eastern oil nor
synthetic fuel was likely to be available in sufficient volume for some
time. The Admiralty therefore
advised the Cabinet to approve the construction of a large naval reserve
in Britain equivalent to one year’s
wartime consumption (4,500,000 tons), which entailed expansion of
existing storage capacity by an
additional 2,750,000 tons at a cost of roughly £1 per ton.176
First Sea Lord Wemyss added in a supplementary evaluation two days later
that neither Romania nor
Russia was likely to provide more than “350,000 tons of oil fuel, on a
very sanguine estimate” in the near
future. Supplies from neither country would be reliable in wartime,
especially in the event of the closure
of the Turkish Straits. “We must therefore continue for a long time to
come to look to the United States,
Mexico, and Persia for the bulk of our supplies,” although Wemyss hoped
that Persia would triple its
existing output of 700,000 tons shortly.177 To keep the merchant marine
from drawing on naval reserves

175

The key developments and documents between 1919 and January 1924 are
summarized in: M.P.A. Hankey,
“Reserve of Oil Fuel for the Navy: Note by the Secretary [of the CID],”
02 February 1924, 479-B, CAB 4/10.
176
R.E. Wemyss, “Oil Fuel Reserve for Navy in Home Waters: Admiralty
Memorandum for the War Cabinet,” 03
January 1919, G.T. 6594, CAB 24/72; and W.H.L., “Oil Fuel Reserve for
Navy in Home Waters,” 08 January 1919,
G.T. 6634, CAB 24/73.
177
Wemyss, “Oil Fuel Reserve: Petroleum Production in Russia: Memorandum for
the War Cabinet by the First Sea
Lord,” 05 January 1919, G.T. 6703. CAB 24/74.

88
in the event of war, the Admiralty and the Petroleum Executive also
advised the government to create an
additional stockpile of 1,500,000 tons of fuel oil for civilian
purposes.178

178

W.H.L. and H.G. (Greenwood), “Oil Fuel Reserve for British Oil-Burning
Merchant Ships: Memorandum
Prepared by the Admiralty and the Petroleum Executive for the Cabinet,”
05 February 1920, C.P. 601, BNA, CAB
24/98.

89
Oil and Anglo-American Relations, 1918-1921
Until Middle Eastern oil production became available in large, secure
quantities, Britain had no
option but to continue relying upon imports from the United States.
Unfortunately, Anglo-American
relations in the immediate postwar era were strained, not least because
of U.S. fears over the country’s
long-term energy security, and which had encouraged U.S. oil companies
(backed by Washington) to seek
control of overseas oil reserves in Latin America and the Middle East in
competition with Shell and
APOC.179 British officials believed that Britain was the target of an
unsubstantiated campaign of slander
within the United States for monopolizing the world’s reserves of oil. In
response to a dispatch from the
British Ambassador to the United States, Auckland Geddes (brother of the
former First Lord of the
Admiralty, Eric Geddes), concerning U.S. criticism of British oil policy
and the publication by the Senate
of a State Department report listing British restrictions on the overseas
operations of U.S. oil companies,
the Petroleum Department fired back with a blistering rebuttal of the
concerns raised in Geddes’ message.
“The overwhelming disparity between the quantities of oil at presented
controlled by Great Britain and
the United States,” in the opinion of the minister responsible, Kellaway,
“provides the most cogent
argument in reply to the American complaints and allegations on this
subject.” Between its own domestic
production and that of Mexico controlled by U.S. companies, the United
States accounted for 80% of the
world’s oil production, as compared to 5% by Britain, only 3% of which
actually came from within the
empire. The Petroleum Department also dismissed concerns regarding the
imminent depletion of U.S.
domestic oil reserves and concluded that allegations that “Great Britain
is monopolizing the undeveloped
oilfields of the world are absurd.”180
Ambassador Geddes was perturbed by the anti-British sentiment he
encountered in the United States
on the oil question. Matters had come to a boil in May 1920 over the San
Remo Oil Agreement. The State
179

For the U.S. response to fears of domestic oil depletion and British
monopolization of world oil reserves, see:
John DeNovo, “The Movement for an Aggressive American Oil Policy Abroad,
1918-1920,” American Historical
Review 61: 4 (1956): 854-876.
180
Petroleum Department to the Under Secretary of State, Foreign Office, 01
July 1920, S.381, CO 323/845/45. The
dispatch from Geddes (dated 12 June 1920) was not included within this
folder. The State Department report in
question to the U.S. Senate is: Restrictions on American Petroleum
Prospectors in Certain Foreign Countries, 17
May 1920, 66th Congress, 2nd Session, Document No. 272 (Washington, DC:
U.S. GPO, 1920).

90
Department complained to the Foreign Office that the Anglo-French
agreement represented an effort to
monopolize oil production within the former Ottoman Empire through the
TPC under the auspices of the
League of Nations. Although the United States had neither declared war on
the Ottoman Empire nor
joined the League, the State Department claimed that U.S. nationals and
firms were entitled to “equal
treatment” in commercial matters within the mandates. Besides claiming
that the TPC had a valid prewar
concession (which had been retroactively affirmed by the Treaty of Sèvres
in 1920), Foreign Secretary
Curzon chided the “nervousness of American opinion concerning the alleged
grasping activities of British
oil interests” as “singularly unintelligible,” since U.S. oil companies
controlled 82% of world oil
production (mostly in the United States and three-quarters of Mexican
output), whereas Britain, including
Persia, only accounted for 4.5%. The United States, “notwithstanding
their assured supremacy,” had
passed legislation granting preferential status to U.S. firms on public
lands (in the Philippines) and “used
their influence” within the U.S. sphere of influence to annul “oil
concessions previously and legitimately
obtained by British persons or companies.”181
Geddes’ initial attempt to deflect criticism of British foreign oil
policy backfired. During a speech in
New York in May 1920, Geddes asked his audience how anyone could claim
Britain was trying to
establish an oil monopoly when the British Empire and Persia accounted
only for 5% of world
production, whereas the United States “have 82 per cent of the present
world supply of oil [including
Mexico] under your control.” This statement was, according to Arthur
Millspaugh (the Foreign Trade
Adviser to the U.S. Secretary of State), based on a disingenuous reading
of statistics. Although the United
States and Mexico did, in fact, account for 81% of global production,
they accounted for less than 20% of
world reserves, while U.S. nationals controlled less than two percent of
world reserves beyond North
America. The British and Dutch were in a much more favorable long-term
position since “[the] oil
regions under the control of the British are not fully developed
regions,” whereas those in U.S. hands “are
developed and in [the] process of exhaustion,” perhaps within twenty
years. Therefore, the British and
181

The exchange of May 1920 to February 1921 is reprinted in: Correspondence

Between His Majesty’s
Government and the United States Ambassador Respecting Economic Rights in
Mandated Territories, Cmd. 1226,
Miscellaneous No. 10 (London: HMSO, 1921), T 172/1268. See also: DeNovo,
American Interests, 176-184.

91
Dutch could end up controlling as much as 75% of world reserves, while
Americans only held 7%. As far
as Millspaugh was concerned, there was ample circumstantial evidence of a
concerted British policy to
monopolize the world’s remaining oil reserves.182
As Geddes explained to Curzon, U.S. complaints were symptomatic of a
wider unease about the
country’s future oil supplies. The United States had enjoyed the luxury
of being “self-supporting in the
matter of oil, but the years of war have witnessed a profound change in
her situation.” The extraordinary
demands imposed by the war had been exacerbated in peacetime by the
higher civilian consumption.
Fears of the depletion of domestic reserves within the coming decades had
become of the “basis of
intense propaganda,” thanks to the efforts of Standard Oil and impolitic
remarks by various British
businessmen.183 Geddes was probably referring to a speech (reprinted in
the Times) by the banker Edward
Mackay Edgar, who at chortled over how “Americans have misused their oil
just as they have misused
every other form of natural wealth,” while the British had been busy
“getting a firmer and ever firmer grip
on the world’s reserves of oil.” Flush with oil, Britain could sit back
and wait for the oil-starved United
States to fork over tremendous sums (perhaps as much as $1,000,000,000 a
year) to pay for its imports.
Such financial transfers would repair Britain’s balance of payments and
give the Empire a new lease on
life.184 Exacerbated by such comments, Geddes warned of a current of
opinion in the United States “that
within a relatively short period “the country would “be absolutely
dependent on foreign countries, and
especially on the British Empire... for supplies of oil, and consequently
for her existence as a powerful

182

Office of the Foreign Trade Adviser (Millspaugh), “The British

Ambassador’s Remarks on Oil in his Speech at
New York,” 28 May 1920, YUL, Frank L. Polk Papers, Series III, Box 32.
Millspaugh based his paper on an AP
article summarizing Geddes’ speech (“Geddes Denies Oil Control is
Sought,” no date), which is also appended to
his memorandum of 28 May 1920.
183
Geddes to Curzon, 29 July 1920, A 5494/898/45, CO 323/832/16.
184
Mackay’s speech ended up being the subject of an alarmist report by the
U.S. Consul General in Britain. Robert
Skinner to the Secretary of State, “The British Quest for Petroleum,” 19
April 1920, No. 9458, NARA, RG 59,
841.6363/43. Skinner took care to pass along additional inflammatory
rhetoric from prominent Britons. In October
1921, A. Beeby Thompson (described by Skinner as “the greatest British
oil specialist”), concluded a speech before
the London of Chamber of Commerce with the observation: “We have scoured
the world for new sources of supply
while American has rested content with her home resources. […] America
has skimmed the cream of her oil wealth
at a period when prices were low, while we enter the world’s market with
our flush production when the value of oil
is appreciated and prices are high.” Skinner, “The Oil Resources of the
British Empire,” 18 October 1921, NARA,
RG 59, 841.6363/178.

92
industrial and maritime nation.”185 What concerned Geddes most was the
possibility of the U.S.
Government might abandon its “national isolation” and adopt “an
aggressive policy with regard to such a
matter as crude oil supply.”186
In February 1921, the Petroleum Department produced a report for the
British Embassy in
Washington DC to rebut future U.S. criticism. Britain was currently the
world’s third-largest consumer of
oil, behind only the United States and (under normal circumstances)
Russia. British consumption of oil
continued to increase following the First World War, now that 90% of the
ships of the Royal Navy were
now powered by oil, twice as many as before the war. Furthermore, of the
3,368,600 tons of oil imported
into Britain in 1920, a mere 2% had come from British possessions, as
opposed to 61% from the United
States. Consequently, despite the fact that per capita consumption of oil
in Britain was only one-twelfth
that of the United States, the absolute figure was still relatively high
and imposed tremendous burdens on
the nation’s economic and national security. The Petroleum Department
dismissed U.S. accusations that
Britain maintained a “closed door” policy concerning oil development by
foreign firms in the empire, for
“no real parallel can fairly be drawn between the British Empire, with
its small and scattered production,
and a country like the United States,” whose vast domestic oil industry
precluded foreigners from
establishing anything more than a token presence. Furthermore, the
Petroleum Department pointed out
that U.S. interests still controlled 80% of Mexican production, while the
remaining 20% was “largely

185

One observer contrasted British and U.S. oil policy by explaining that
the former was derived “from the naval
idea that oil suppliers were essential for national defence,” whereas the
latter stemmed “from the mercantile idea
that oil supplies were essential for money-making.” Even if
prognostications of impending depletion of domestic
reserves were nothing more than “journalistic ‘stunts,’” U.S. firms would
still need access to overseas reserves to
supply their foreign markets.” Paymaster Lieutenant Commander E. Kennedy,
“Oil Imperialism: The Struggle for
Petroleum,” no date (sometime following the 1922 Genoa Conference), ADM
203/58.
186
Geddes to Curzon, 29 July 1920, A 5494/898/45, CO 323/832/16. Geddes
subsequently took it upon himself to
challenge some of the more egregious charges leveled against, most
notably statements made by Senator Henry
Cabot Lodge (R-MA) in April 1921 on the basis of a letter he received
from Secretary of the Interior Albert Fall,
alleging, among other things, that the British Government maintained a
financial stake in Shell. Geddes to the
Secretary of State (Charles Evans Hughes), 20 April 1921, No. 292, NARA,
RG 59, 841.6363/143. Hughes’ reply
was rather conciliatory, and while he fully accepted Geddes’ disclaiming
of any British Government stake in Shell,
Hughes nonetheless stood by the substance of the State Department’s
reports of 1920 and 1921 regarding the
restrictions imposed on U.S. oil companies operating in British
territories. Hughes to Geddes, 10 June 1921, NARA,
RG 59. 841.6363/143. The 1921 report was published as: Restrictions on
American Petroleum Prospectors in
Certain Foreign Countries, 16 May 1921, 67th Congress, 1st Session,
Document No. 11 (Washington, DC: U.S.
GPO, 1921).

93
Dutch-controlled” (Shell).187 Interestingly, in the concluding section of
the confidential version of the
report, the Petroleum Department complained U.S. criticisms were “so
unfounded” that they had to be
symptomatic of a wider “anti-British campaign in the United States,” or
“[a] move in the struggle of
American oil interests to get a share in the at-present unproved
Mesopotamian fields,” to which the
United States possessed “no valid claim”188
Within the Petroleum Department, officials fulminated at U.S. accusations
and fears of imminent oil
depletion: “[In] spite of inspired jeremiads about speedy exhaustion of
their fields, it [the United States]
will be unassailable for many years to come.” In comparison to U.S.
control of 64.5% of the global oil
production and its consumption of approximately two-thirds of Mexico’s
23% share of world production,
British monopolization of Trinidadian and Indian production, amounting to
1.3% of world production,
“has a purely theoretical and artificial importance.” The United States’
avowed fealty to the “Open Door”
was better characterized as a demand that “[the] door is to be open wide
enough to let Americans in, even
if others stay outside.” In the case of Mesopotamia, the sole objective
of the United States according the
Petroleum Department was to secure an equal share of oil production as
France (25%), leaving the
remaining 50% to Britain.189

187

The breakdown in the ownership of Mexican oil production fluctuated

constantly. According to the U.S. State
Department’s Economic Adviser in 1920, U.S. interests controlled 65% of
Mexican production. Office of the
Foreign Trade Adviser (Arthur Millspaugh), “The British Ambassador’s
Remarks on Oil in his Speech at New
York,” 28 May 1920, YUL, Polk Papers, Series III, Box 32. Although U.S.
interests predominated in terms of
output, according to figures collected by the Mexican Government in 1913,
the difference between U.S. and British
firms in terms of investment was much smaller: the former had invested
approximately $195,000,000 in the
Mexican oil industry, with the latter close behind at $150,000,000. W.
Shaw (USGS), “Preliminary Report on the
Petroleum in Mexico,” 21 June 1918, YUL, Inquiry Papers, Series III, Box
16. In 1918, U.S. firms accounted for
75% of all investment in the Mexican oil industry, but by 1937, this
figure had shrunk to only 30%, while British
firms (Mexican Eagle) accounted for 70%. Whereas U.S. firms controlled
77% of Mexico’s production and 80% of
its reserves in 1927, thanks to Mexican Eagle’s discovery of the massive
Poza Rica oilfield in 1930 and the
continuing decline of existing oilfields, by 1936 British interests
controlled 71% of Mexico’s production and 64% of
its reserves. Lorenzo Meyer, Mexico and the United States in the Oil
Controversy, 1917-1942 (Austin: University of
Texas Press, 1977), 3-19.
188
The confidential and public versions of the report are virtually
identical, except for their closing sections. All
quotations are drawn from the confidential version: Petroleum Department,
Memorandum on the Petroleum
Situation, 10 February 1921, A 982/44/45, CO 832/865/32. The public
version was published as: Despatch to His
Majesty’s Ambassador at Washington enclosing a Memorandum on the
Petroleum Situation, Miscellaneous No. 17
(1921), Cmd. 1351 (London: HMSO, 1921), T 172/268.
189
J.C.C. (Clarke), Minute, 09 November 1921, POWE 33/93.

94
Oil and Postwar Naval Planning, 1921
Nothing epitomized the evolving power relationship between Britain and
the United States better than
the waning of the Royal Navy’s predominance. After 1918, it was no longer
possible for Britain to
preserve its “two power” standard of maintaining a fleet equal to its
next two rivals combined. This meant
that the Royal Navy could no longer be dispersed between the European and
Pacific theaters, since
concentrating sufficient forces to deter threats in one theater would
leave it vulnerable in the other. Under
such circumstances, the Naval Staff argued in May 1921 that the “Mobility
of the Fleet must therefore be
the keystone of British naval strategy […].” Britain could supply an
effective naval force in the Atlantic
but it not in the Pacific. Consequently, Britain’s entire strategy
against Japan in the short term rested on
bluff. In the event of a “by no means improbable” war between Japan and
the United States, even if it
remained neutral, Britain would still have to send a force to the Pacific
to defend its interests. Unless the
Royal Navy deployed using its own oil, it would be hard for Britain to
maintain the pretense of neutrality,
thus “[increasing] the probability of our being drawn into hostilities
against our wishes.”190
Hopefully Britain would be able to avoid such an indelicate situation by
collecting sufficient naval
fuel reserves. It was insufficient just have enough oil – the Royal Navy
also needed to have enough
supplies on-hand “within practicable transport distance of the bases at
which it will be required.” Under
such circumstances, the Naval Staff believed that the existing 4,500,000
ton reserve was no longer
sufficient – an additional 3,500,000 tons of naval reserves and 1,500,000
tons of commercial reserves
would have to be gathered for use beyond the European theater of
operations, primarily in the Far East, by
1930. Assuming that a war was unlikely over the next ten years, the Naval
Staff estimated that, in the
event of a war against the United States in 1930, one year’s oil
consumption would total approximately
5,112,000 tons, which would consume the entirety of Britain’s naval
reserves. In the case of Japan, the
figure was only 3,430,000 tons, but this was misleading because the navy
would have to rely entirely on

190

Vice-Adm. Osmond de B. Brock (Vice Chief, Naval Staff), “Memorandum: Oil

Fuel Reserves,” 24 May 1921,
147-C, ADM 116/3102.

95
reserves within the Indian Ocean and the Pacific theaters, as Britain
lacked the resources to transport
sufficient quantities of reserves from Great Britain to the Pacific (a
journey of roughly 10,000 miles).191
Even if Britain managed to accumulate 9,000,000 tons worth of reserves,
the Naval Staff’s planning
for a war against the United States retained an air of fantasy. Assuming
that Britain managed to subsist on
the 4,500,000 tons of reserves in Home waters during the first year of
hostilities, what exactly was it
supposed to do thereafter? The empire was incapable of filling any gap,
since its total production in 1921
(including Persia during the 1920-21 fiscal year) was only 3,617,264 tons
or 1.7% of world output,
including miniscule production in Canada (27,200 tons) and Trinidad
(336,285 tons), neither of which
would available if the U.S. Navy was an opponent.192 Since Mexican oil
would also be unavailable, the
only possible suppliers of any consequence in 1921 were Persia, the East
Indies, and the Soviet Union.
The East Indies accounted for only 3.7% (122,500 tons) of Britain’s
imports in 1921 (3,310,587 tons).
The Soviet share of British oil imports rose quickly following the
signing of the Anglo-Soviet Trade
Agreement of March 1921 to 5.6% in 1925 and reached its interwar peak at
11.7% in 1931.193 As of 1920,
however, only 0.7% (23,000 tons) of Britain’s oil imports came from
Russia.194
Arthur Lee (Long’s successor as First Lord of Admiralty) took the Naval
Staff’s case before the CID
in June 1921 to make the case for maintaining large naval oil reserves in
both Britain and the Far East.
The relative decline of the Royal Navy vis-à-vis its primary rivals after
1918 (Japan and the United

191

Vice-Adm. Osmond de B. Brock (Vice Chief, Naval Staff), “Memorandum: Oil

Fuel Reserves,” 24 May 1921,
147-C, ADM 116/3102.
192
“British Empire Petroleum Production and Consumption,” no date
(handwritten notation of 10 May 1923),
enclosed with: J.C. Clarke (Deputy Director, Petroleum Department) to
Grindle (Colonial Office), 11 May 1923,
P.D./23/1923, CO 323/903/24.
193
Britain and the Soviet Union did not normalize diplomatic relations until
February 1924. Although the British
Government did not discourage the importation of Soviet oil into Britain
by private firms, it refrained from
purchasing any for itself. Aside from legal considerations (much of the
oil being produced from foreign-owned
properties that had been expropriated after 1917), the Soviets were
willing to use oil exports as a political weapon.
In 1926, Moscow had halted oil exports to Britain as a show of sympathy
with the General Strike of 1926, and
London had considered it “undesirable” that any government departments
should ever depend upon oil imports from
the Soviet Union. P.C-L. (Philip Cunliffe-Lister), “Memorandum by the
President of the Board of Trade: Purchases
of Russian Oil,” 22 November 1927, C.P. 289 (27), CAB 24/189.
194
Appendix I to: CID, “Production of Oil from Coal: Report of a Sub-
Committee,” 29 November 1937, 272-A
(also Paper No. O.C.C. 38), enclosed with: T.W.H.I. (Inskip) to the
Cabinet, “Report on the Sub-Committee of the
Committee of Imperial Defence on the Production of Oil from Coal: Note by
the Minister for Co-ordination of
Defence,” 03 February 1938, C.P. 19 (38), CAB 24/274.

96
States), and the need to disperse the fleet across the world to handle a
variety of tasks and potential
threats, meant that British security depended upon preserving the
mobility and striking power of the
fleet.195 Even assuming that the British Government established a
4,500,000 ton war reserve, little action
had been taken to disperse them, such that “the fleet is practically
immobilised so far as operations
outside Home and Mediterranean waters are concerned.” The Royal Navy was
incapable of projecting
power globally, particularly in the Far East. In the event that Britain
would have to fight either the United
States or Japan, the success or failure of naval operations would depend
upon there being adequate
amounts of oil in storage along the way to or near the future area of
operations. A logistical network that
could sustain the Royal Navy around the world was indispensable to
maintaining Britain’s credibility as a
great power: “[It] is well within the bounds of possibility that a
foreign Power would take advantage of
our weakness in this respect, where a proper provision of fuel reserves
would have caused him to adopt a
more cautious attitude.”196
Lee requested that fuel sufficient for one year’s worth of operations “be
available within practicable
transport distance of the bases from which the fleet may be required to
act in the event of war,” and that
the necessary infrastructure for sustaining the fleet en route to the Far
East be constructed.197 Whereas
progress was being made toward creating a one-year supply of fuel for
operations in and around Great
Britain (4,500,000 tons), a further 3,500,000 would have to be deposited
overseas, some of which might
be provided by the dominions and India, since “on the mobility of the
main fleet rests the guarantee for
their safety.”198 More than one-third of the oil (1,215,000 tons) would
go to Singapore and Hong Kong,
but sizable reserves would also be deposited in the Indian Ocean (730,000
tons), North America and
195

For additional discussion of the tactical and operational ramifications

for the Royal Navy, see: Wilkinson, “The
Influence of Oil on Imperial Organization,” 109-114.
196
L of F (Lord Lee of Fareham), “Reserves of Oil Fuel: Memorandum by the
First Lord of the Admiralty,” 21 June
1921, 145-C (also E-35), ADM 116/3102.
197
The Naval Staff estimated that 2,713,000 tons of oil would be “required
for passage of a fleet to the East and for
operations extending over a limited period.” Admiralty, “Naval Oil Fuel
Reserves: Note by the Naval Staff,” 26 July
1921, 147-C, CAB 5/4.
198
L of F (Lord Lee of Fareham), “Reserves of Oil Fuel: Memorandum by the
First Lord of the Admiralty,” 21 June
1921, 145-C (also E-35), ADM 116/3102. The Naval Staff hoped that the
dominions and India would contribute
one-quarter (700,000 tons) of the oil needed for the journey to the Far
East (2,713,000 tons). Admiralty, “Naval Oil
Fuel Reserves: Note by the Naval Staff,” 26 July 1921, 147-C, CAB 5/4.

97
Caribbean (660,000 tons), Australasia (426,000 tons), and the
Mediterranean (300,000 tons). Moreover,
another 1,000,000 tons would have to set aside for civilian merchant
ships, which equaled a total naval
and civilian reserve of 9,000,000 tons, only 2,000,000 tons of which
would have been accumulated by 31
March 1922.199
The Naval Staff and Lee’s studies went to the Standing Defence Sub-
Committee of the CID.
Although the sub-committee agreed with the policy put forward by the
Admiralty, the costs were
prohibitive: just stocking the route to Singapore would cost £2,000,000
for the first year out of seven, and
“the adoption of this scheme by no means covers all the needs of the Navy
in respect to fuel reserves,” but
rather constituted the bare “minimum in which the Naval Staff is prepared
to acquiesce.”200
***
British policymakers had spent the World War and its immediate aftermath
reflecting upon its lessons
for Britain’s energy security. The experience of the war appeared to
validate the precepts laid down by
Churchill in 1913: Britain’s energy security depended upon geographically
dispersed supplies, promoting
competition within the international oil industry, and drawing oil from
British-controlled oilfields and
companies. But the matter of energy security took an additional urgency
due to Britain’s unwelcome
wartime dependence upon imports from the United States. No self-
respecting great power could afford to
place its national and economic security in the hands of another, while
spiraling U.S. domestic oil
consumption and potentially dwindling U.S. oil reserves did not augur
well for the future. By 1918/19,
the PIPC had laid out a two-pronged strategy that would realize
Churchill’s prewar vision. The first was
securing majority-British ownership of Shell. The second was securing
British control of and developing
the only region capable of replacing the United States as Britain’s
primary supplier of oil: the Middle
East. Although neither objective had been achieved by 1921, they would
form the basis of a coherent and
concerted effort by Britain to achieve energy independence from the
United States thereafter.
199

L of F (Lord Lee of Fareham), “Reserves of Oil Fuel: Memorandum by the

First Lord of the Admiralty,” 21 June
1921, 145-C (also E-35), ADM 116/3102. This paper was a copy of a Naval
Staff report dated 07 June 1921 (also
located in ADM 116/3102), which had been circulated to the Admiralty
Board that same day.
200
Hankey, “Reserves of Oil Fuel for the Royal Navy,” 05 October 1921, C.P.
3367 (also C.I.D. 152-C), CAB
24/128.

98
Chapter II
The Years of Complacency: Britain, 1921-1932
The 1920s were a relatively tranquil period for British foreign and
defense policy. But although this
decade offered London the ideal environment in which to implement the
program outlined by the
Petroleum Imperial Policy Committee to make Britain independent of oil
imports from the United States,
the British record during the 1920s was unimpressive. The dream of
creating an “all British” Shell
persisted after the death of the Harcourt-Deterding Agreement, but
attempts to try again upon an even
more ambitious basis foundered as a result of disagreements within the
British Government. In the
Middle East, which was supposed to replace the Gulf of Mexico as the main
the supplier to Britain,
several years would pass before the Turkish Petroleum Company (TPC – Iraq
Petroleum Company, IPC,
after 1929) was able to commence operations in Iraq. Another seven years
would lapse before the IPC
finally completed a pipeline to bring Iraqi oil to European markets. This
is not to say that London was not
making progress – only that, by the end of the 1920s, Britain remained as
incapable of meeting its oil
requirements from British-controlled sources in wartime as before 1918.

99
The British “Control” Clause, 1921-1923
U.S. criticism of British commercial restrictions prompted a debate
within the British Government
over whether to maintain the existing policy of British “control” in
place since 1904.1 The principle of
British “control” required that oil companies operating on many Crown
Lands (in addition to
protectorates such as Kuwait and Bahrain) be registered in Britain or its
dominions; have a majority of its
board comprised of British subjects; and not be owned directly or
indirectly by foreigners.2 This last
condition was the most important, because it effectively ruled out
participation by U.S. oil companies
even through British subsidiaries. The Colonial Office had opposed
foreign oil development within the
empire since the First World War. Matters came to a head when the
Colonial Office blocked the sale of an
oil property in Trinidad to a Norwegian firm, leading Under Secretary of
State for Foreign Affairs Robert
Cecil to observe in October 1918 that “it seems very doubtful whether it
is good policy for a country like
the United Kingdom which depends more than any other both on foreign
investments and on drawing raw
material from foreign lands, to set an example of exclusiveness.”3
Colonial Secretary Long, on the other
hand, rejected the idea of allowing foreign companies to develop those
resources “on the grounds […]
that it gives us no security against foreign combinations, and above all
leaves us to deal with a possibly
hostile control during the period of tension preceding a war.”4
Once the issue emerged as a source of contention with the United States
after the war, the Petroleum
Department argued on behalf of reciprocity. The department was concerned
that, in the wake of the
passage of the Minerals Leasing Act by the U.S. Congress in February 1920
(which forbade the granting
1

The British Government had developed these regulations in response to an

effort by Standard Oil to begin
production in Burma. D.J. Payton-Smith, Oil: A Study of War-time Policy
and Administration (London: HMSO,
1971), 9-10. All primary sources cited in this chapter are from the
British National Archives (BNA), unless
otherwise indicated.
2
Petroleum Department, “Oil Concessions in British Colonies and
Protectorates: British Control of Companies,” no
date (circa 1929), POWE 34/1. These restrictions were not applied
uniformly across the empire: foreign companies
could acquire concessions in Great Britain (after 1935), Canada (only
through companies registered in Canada),
much of Australia, New Zealand, and South Africa, but not in India
(including Burma), Trinidad, and Nigeria. For a
list of where the “control” clause did and did not apply, see: “Oil
Concessions,” Annex to: BOT, “Treatment of
Foreigners and Foreign Enterprises,” 28 October 1932, POWE 33/461.
3
Foreign Office, “Economic Defence and Development: Investment of Foreign
Capital in the British Empire
(Memorandum by Lord R. Cecil),” 14 October 1918, E.D.D.C./45, CAB 24/68.
4
W.H.L., “Investment of Foreign Capital in the British Empire (Memorandum
by Mr. Walter Long),” 28 October
1918, G.T. 6141, CAB 24/68.

100
of such leases to foreign companies whose home country discriminated
against U.S. companies), Britain’s
existing “policies can no longer be safely pursued without consideration
of their reverberations abroad
and without regard to the present [,] almost complete dependence of the
British Empire on foreign
territory for its oil supplies.” The department also questioned whether
such restrictions did anything to
promote oil production within the empire. In the case of India and
Trinidad – the two largest producers of
oil within the empire at the time – where British firms benefitted from a
state-sponsored oligopoly, “it
may be asked whether a more rapid development might not have been secured
if these territories had been
thrown open to foreign enterprise.”5 The department concluded that the
policy of restriction had been “to
the disadvantage of the Empire as a whole,” by inhibiting “competition”
and endangered British security
by incurring retaliatory legislation in previously friendly nations.6
The Colonial Office disagreed: U.S. displeasure had less to do with
British restrictions than the
dispute over Iraq. Furthermore, the Colonial Office took exception to the
Petroleum Department’s
disparagement of British oil companies for not having pursued oil
development within the empire with
sufficient vigor: “[There] is no evidence that there is any potential
British oil-field lying fallow for lack of
foreign capital. The trouble is that the Colonial Empire contains very
little oil. All the more reason for
conserving what there is instead of inviting rapid exploitation by
foreign corporations.” The Colonial
Office pointed out the British “control” clause also preserved Britain’s
political ties with its colonial

Before the Second World War, production in Trinidad was divided between
about a dozen firms, including the
independent Trinidad Leaseholds (formerly a subsidiary of the Central
Mining and Investment Corp. and
Consolidated Gold Fields of South Africa until it was bought out by the
Texas Company in 1956) and United British
Oilfields (an affiliate of Royal Dutch/Shell – Shell). As of 1921,
Trinidad Leaseholds was the largest producer,
accounting for 159,579 tons, most of which it sold to Anglo-Persian
(APOC) or the Admiralty. It also purchased the
crude oil production of the third-largest producer, Apex Oilfields
(46,003 tons). United British was far behind, with
only 51,751 tons, most of which went to South Africa. Committee on Oil
Companies Amalgamation, “List of British
Oil Companies operating in British territory other than those controlled
by the Shell, Burmah or Anglo-Persian
Companies (Memorandum by the Colonial Office),” no date (1922), O.S.C. 8,
ADM 116/3452. Trinidad Leaseholds
and United British each accounted for 13% of production in the early-
1930s. Trinidad Leaseholds also controlled
80% of the local refining capacity, while Shell’s affiliate accounted for
the remainder. Harry Foster Bain, Ores and
Industry in South America (New York: Arno Press, 1976), 340. See also:
Petroleum Department, “Preferential
Treatment for Oil Produced by British Oil Companies Operating in
Trinidad,” May 1932, Annexure H to: Marquess
of Londonderry (Secretary of State for Air; President of the Oil Board),
et al., “Oil Board: Eighth Annual Report,”
31 July 1933, O.B. 122 (also C.I.D. Paper No. 1117-B), CAB 50/5.
6
Petroleum Department, “Memorandum: Acquisition by Foreigners of Oil
Rights in British Territory,” 23 March
1921, enclosed with: Clarke to the Under Secretary of State, Colonial
Office, 07 June 1921, R.252, CO 323/879/12.

101
possessions in the face of geographical and economic handicaps. Finally,
a policy of reciprocity with the
United States was not feasible unless it could be applied throughout the
British Empire, but London could
not force the self-governing dominions or India to comply. Abandoning all
restrictions on foreign
ownership without securing reciprocal concessions was even less
advisable, since it would only result in
the “handing over [of] our oil enterprises to foreign control without
getting any benefit in return.”7
The effects of British restrictions on Anglo-American relations were the
focus of an InterDepartmental Committee on Oil during preparations for an
Imperial Economic Conference in 1923.
Geddes had forwarded an alarmist U.S. Federal Trade Commission report
describing commercial
restrictions against U.S. oil companies by Britain, Holland, and Romania,
and the extent to which
nationals from those countries had interests within the U.S. oil
industry.8 Geddes urged “removing every
possible cause friction in the relations between the two countries,”
while allowing that “American
satisfaction with our oil policy might be too dearly bought by opening
the door completely to foreign
interests in the development of our oil resources.”9 The Petroleum
Department agreed with Geddes. In a
minute to leading officials within the BOT, one official outlined the
reasons why the Petroleum
Department’s position differed from that of the Colonial Office (which
espoused the nationalist position
of preserving imperial resources for the sole benefit of the Empire) and
the Foreign Office (which
considered the matter to be trivial importance). The department still
considered exclusion of foreign oil
companies from Crown Lands to be “unsound in principle, and has very
little practical advantage,”
especially since imperial production was actually declining under the
protection of the “control” clause.
Whether not there was much oil within the empire, “If foreigners like to
come and spend money in
looking for oil, it seems foolish to prevent their doing so; if they were
successful, the oil position of the

“Copy of Colonial Office Memorandum on the Question of British Control of

Empire Oilfields,” no date, enclosed
with: Inter-Department Committee on Petroleum, “Agenda for Seventh
Meeting to be held on Thursday, 24 th
November, 1921,” P.D. 1224, CO 323/880/1.
8
The FTC report was published as: Report of the Federal Trade Commission
on Foreign Ownership in the
Petroleum Industry (Washington, DC: U.S. GPO, 1923).
9
Geddes to Curzon, 23 March 1923, No. 371, enclosed with: H. Llewellyn
Smith (Chief Economic Adviser to the
Government), “Imperial Petroleum Policy (Note by Chairman), 07 June 1923,
Dft. E.C. 24, POWE 33/353.

102
Empire would be strengthened.”10 The department enjoyed the enthusiastic
backing of Shell, which
argued that Britain’s interests were better served by seeking control
over foreign oilfields where
arrangements could be made to supply Britain in the event of war (in the
United States). The last thing
Britain needed was having other countries emulate its model of commercial
restrictions. If that happened,
the British oil companies would be powerless since they, unlike the major
U.S. oil companies, had no
domestic reserves to fall back upon in case access to foreign fields was
curtailed.11
There followed a flurry of memoranda clarifying the situation. The papers
put forward by the
Petroleum Department and the Colonial Office recycled many of the
arguments made in previous years.
In the case of the Petroleum Department, its criticism of the British
“control” clause was three-fold: First,
it was hindering the development of imperial oil reserves by preventing
inflows of foreign capital and
expertise. Second, it had engendered “friction and suspicion as to our
general policy in regard to oil” with
the United States. Third, Britain had more to lose from trade
retaliation, since “[no] country is really as
interested as we are in the maintenance of the open door.”12
The Colonial Office now shifted its position to supporting the so-called
“Admiralty Clauses”: that the
Royal Navy should retain the right to call upon any oil produced in the
event of war or a national
emergency. The Colonial Office also still believed that the empire might
yet yield more oil “if we are
patient,” while warning that it was unreasonable to expect that U.S. oil
would always be forthcoming
under any and all circumstances. It also had no reason to doubt that “in
time of emergency, it makes a
difference whether the [British] Government is dealing with its own
subjects or with potential enemies or
possibly unfriendly neutrals,” since British ownership would “mean that,
other things being equal, there is
10

J.C.C. to Wills, Chapman, and the President (of the Board of Trade,
Lloyd-Greame?), “Petroleum Policy: Minute
by Mr. Clarke,” 21 April 1923, P.D. 195, enclosed with: Llewellyn Smith,
“Imperial Petroleum Policy,” 07 June
1923, Dft. E.C. 24, POWE 33/353.
11
R. Waley Cohen (Managing Director, Anglo-Saxon Petroleum Company) to the
Director of the Petroleum
Department, 15 May 1923, enclosed with: Clarke to the Under Secretary of
State, Colonial Office, 18 May 1923,
P.D. 198/23, CO 323/903/25.
12
“Nationality Restrictions in oil leases on public lands in British
territory (Statement of the present position by the
Petroleum Department),” 18 July 1923, P.D. 267/23, enclosed with:
Llewellyn Smith, “Imperial Petroleum Policy,”
07 June 1923, Dft. E.C. 24, POWE 33/353. The date of the Petroleum
Department memorandum was added by
hand, which implies that the enclosed copy was a revised version of the
memorandum first considered by the InterDepartmental Committee the
previous June.

103
a tendency to buy and sell here which may operate to the advantage of
both parties.” Nevertheless, the
Colonial Office was willing to concede the benefits of reciprocity, so
long as other nations were
“prepared to enter into agreements to place British subjects on an
equality [sic] with their own nationals,”
which was an important consideration in view of the fact that the United
States would treat the British
Empire as a single “unit” (expect that the entire empire would adopt the
same standard for U.S. firms).13
The Admiralty had never been unalterably opposed to the principle of
foreign development of the
empire’s oil reserves. Nevertheless, it believed that there was a
compelling strategic rationale for
maintaining certain commercial restrictions, such as having the British
Government retain the right “to
secure complete control” over any foreign firm producing oil within the
empire in the event of an
emergency.14 The Admiralty preferred to draw supplies from sources under
British control, which could
be produced in accordance with the Royal Navy’s technical specifications.
Although it did not accept the
argument that existing restrictions had resulted in the underdevelopment
of oil reserves in Trinidad and
India, the Admiralty conceded “that in special cases some relaxation of
the regulations may have to be
allowed to secure proper development of the [imperial] oilfields,” so
long as doing so did not jeopardize
the Royal Navy’s access to such supplies in wartime.15
The British “control” clause survived for the moment, but demands for
financial retrenchment in the
face of stubbornly high postwar public expenditures provided a more
compelling incentive to reevaluate
British oil policy, particularly London’s expensive decision in 1919 to
create a naval stockpile equal to
one year’s wartime consumption by the Royal Navy. In August 1921, the
Lloyd George Government
established a Committee on National Expenditure (chaired by former First
Lord of the Admiralty Eric
Geddes) to curtail government spending, which reported in December 1921
that “considerable savings”

13

“British Control of Oil Mining Companies (Memorandum by the Colonial

Office),” June 1923, Dft. E.C. 23,
enclosed with: Llewellyn Smith, “Imperial Petroleum Policy,” 07 June
1923, Dft. E.C. 24, POWE 33/353.
14
R.E. Wemyss (First Sea Lord), “Investment of Foreign Capital in the
British Empire Development of Oil –
Production in Private Lands in Crown Colonies: Admiralty Memorandum for
the War Cabinet,” 22 December 1918,
G.T. 6541, CAB 24/72.
15
“Admiralty Memorandum on Imperial Petroleum Policy,” no date, POWE
33/353. The developments before 1923
are summarized in: Petroleum Department, “Oil Concessions in British
Colonies and Protectorates: British Control
of Companies,” no date (circa 1929), POWE 34/1.
104
might be carved out of the Admiralty’s stockpiling plan.16 Prime Minister
David Lloyd George thereafter
established a cabinet committee chaired by Colonial Secretary Churchill
to review the proposed
reductions in defense spending.
Churchill was in complete accord with the Admiralty’s stockpiling policy.
The rise of oil had
eliminated the advantages Britain had enjoyed thanks to its coaling
stations during the “Coal era.”
Britain’s position in the Pacific was extremely vulnerable – the lynchpin
of its defense was Singapore
(Hong Kong being indefensible), but without sufficient oil on-hand in the
Far East and Indian Ocean, the
fortress could not be held. Since the U.S. Navy would be unable to assist
for logistical reasons
irrespective of Washington’s attitude, “[if] Singapore fell in the first
two or three months of a war, the
whole of the Pacific would fall under the complete supremacy of Japan,
and many years might elapse
before either Britain or the United States could re-enter that ocean in
effective strength.”17 With great
reluctance and assurances that a war in Europe could be discounted,
Churchill and the Admiralty bowed
to the demands for austerity and reduced the amount of oil to be
stockpiled by 861,000 tons, from
9,000,000 tons to 8,139,000 tons (4,500,000 tons in Britain, 1,000,000
tons of commercial reserves, and
2,639,000 tons around the world). The savings would come primarily at the
expense of reserves to be
accumulated in the Mediterranean, North America, and the Caribbean.18
As of March 1923, fuel oil reserves in Britain had reached almost
2,500,000 tons, which was more
than six months of wartime consumption prior to the Washington Naval
Conference. Although it had
supported the Admiralty’s “expensive scheme” to accumulate reserves in
the Far East in the event of a
war with Japan, the Treasury now questioned the need for “unnecessary
precautions at extravagant cost in
16

M.P.A. Hankey (Committee of Imperial Defence, CID), “Reserve of Oil Fuel

for the Navy: Note by the
Secretary,” 02 February 1924, 479-B, CAB 4/10. For background on the work
of the Geddes Committee, see: Henry
Higgs, “The Geddes Reports and the Budget,” Economic Journal 32: 126
(1922): 251-264; and Andrew McDonald,
“The Geddes Committee and the Formulation of Public Expenditure Policy,
1921-1922,” Historical Journal 32: 3
(1989): 643-674.
17
Winston Churchill, “Report of Committee Appointed to Examine Part I
(Defence Departments) of the Report of
the Geddes Committee on National Expenditure,” 04 February 1922, C.P.
3692, CAB 24/132.
18
L of F., “Reserves of Oil Fuel on the Eastern Route: Memorandum by the
First Lord of the Admiralty,” 07 July
1922, 175-C, CAB 5/4. The reserves would be accumulated in secret to
avoid raising Japanese suspicions, and the
Admiralty agreed “with apprehension” to delay completion of the scheme to
1931 (or 1933 if the need arose).
Secretary of the Admiralty to the Secretary of the CID, “Reserves of Oil-
Fuel on the Eastern Route,” 03 October
1922, 180-C, CAB 5/4.

105
acquiring a second six months’ supply” of reserves within Great Britain:
“There is no reason to suppose
that except in the event of a war with United States of America there
would be any serious difficulty in
obtaining Oil Fuel: and immediate hostilities with the United States of
America are surely not a believable
supposition.”19 Before the Admiralty could respond, the Government of
Stanley Baldwin fell in January
1924 after a vote of no confidence. The new Labour First Lord of the
Admiralty, Lord Chelmsford,
vigorously challenged the Treasury’s suggestion. The Treasury did not
understand that the 4,500,000 ton
reserve within Britain was “an integral part of the 8,139,000 tons which
is the year’s supply necessary to
enable the Fleet to carry on a war in other than Home and Mediterranean
waters.” Chelmsford also
disagreed with the belief that there was no need to worry about acquiring
supplies from the United States.
Aside from the fact “that dependence on the United States of America for
such a vital supply in time of
war would place in the hands of that Power a diplomatic weapon of first
importance,” Britain lacked
enough tankers both to supply its fleet and to import oil from the United
States.20
The Treasury did not dispute the need for reserves. The amount to be
stockpiled, the rate of
accumulation, and the location of reserves, were, on the other hand,
matters worthy of closer
consideration. The Treasury pointed out the inconsistency at the heart of
the Admiralty’s position: in
1919, it had claimed that 4,500,000 tons equaled on year’s wartime
consumption. The fact that it had
asked in 1921 to double the amount of be accumulated implied that British
naval planning “was based on
a combination of two alternative hypotheses”: a war against the United
States in the Atlantic and another
war against Japan in the Pacific. The latter was no longer under
consideration, while the Admiralty was
overstating the threat posed by Japan, which could not disrupt British
oil imports. Why then was Britain
accumulating a reserve equal to two years wartime consumption (based on
the size of the Royal Navy
19

W.J-H. (William Joynson-Hicks), “The Home Reserve of Oil Fuel for the
Navy (Memorandum by the Financial
Secretary of the Treasury),” 14 August 1923, C.P. 384/23, CAB 24/161.
20
C. “Reserve of Oil Fuel for the Navy: Memorandum by [the] First Lord of
the Admiralty,” 30 January 1924, 476B, CAB 4/10. Even if APOC shortly
boosted Iranian production to over 5,000,000 tons, Abadan, the best-
positioned
refinery in the event of a war against Japan, could only produce
1,500,000 tons of fuel oil. British and Australian
refineries could double the amount of fuel oil available, but their
employment depended upon the availability of
sufficient tankers to move the oil from Iran to either Britain or
Australia. “The Admiralty view is that there would be
few available for this purpose and possibly none.” B. (Admiral of the
Fleet David Beatty), “Oil Fuel: Memorandum
by the First Sea Lord and the Chief of Naval Staff,” 14 February 1924,
482-B, CAB 4/11.

106
before the Washington Naval Conference) to fight a war against Japan
alone? Surely 5,000,000 tons of
reserves, divided equally between Britain and overseas stations, was a
more reasonable figure.21
In spite of the Treasury’s objections, the Admiralty prevailed in
February 1924, when the Committee
of Imperial Defence (CID) upheld the original decision by the War Cabinet
in 1919 to establish a oneyear war reserve, although in future “the
reserve should be considered as a whole,” with no distinction
between Home and overseas reserves.22

21

P.S. (Philip Snowden), “Reserve of Oil Fuel for the Navy: Memorandum by
the Chancellor the Exchequer,” 31
January 1924, 477-B, CAB 4/10.
22
The Earl of Birkenhead (Secretary of State for India; Chairman of the
Naval Programme Committee), “Report on
Naval Fuel Oil Reserves,” 20 February 1928, C.P. 47 (28), CAB 24/192.

107
Safeguarding and Expanding the British Presence in Iraq, 1921-1925
The key to meeting Britain’s rapidly expanding oil consumption was
encouraging production in the
Middle East beyond just Persia. The most promising area, and an objective
of British grand strategy since
the World War, was the former Ottoman provinces of Mesopotamia. British
troops had occupied Mosul
before the war ended, but numerous obstacles delayed prompt exploitation
of the expected oil riches of
the fledgling nation of Iraq. By the end of 1920, two of the most
pressing difficulties had been resolved:
London and Paris had come to an understanding in April during the San
Remo Conference over the
division of oil-related spoils from the war, and by the end of the year,
British occupation forces had
managed to quell the nationalist uprisings that had broken out across
Iraq in the summer. That left the
United States (both Washington and the U.S. major oil companies), which
opposed Anglo-French efforts
to monopolize Iraq’s oil wealth and was determined to frustrate London’s
plans until Britain appeased
U.S. interests.
Britain’s entire claim to predominance within Iraq and the exclusion of
U.S. capital except on British
terms rested upon the contention that the TPC possessed a valid oil
concession. In fact, the TPC had only
received the promise of a concession in 1914 from a government that no
longer existed. To have admitted
U.S. oil companies without any preconditions would have defeated the
primary objective of British
policy: to gather as many sources of oil under British control as
possible. The United States was naturally
hostile to such a policy. In the wake of the war, when fears of an oil
shortage abounded, U.S. oil
companies had hounded Washington to support U.S. access to overseas oil
reserves.23 U.S. pressure on
behalf of the “Open Door” continued even as domestic production boomed –
except now the impetus was
on finding oilfields for U.S. companies to supply their overseas markets.
What changed after 1920 was that London realized it needed U.S. help. The
start of oil production in
Iraq was essential to what one historian calls the “Cairo Strategy,”
championed by Colonial Secretary

23

John DeNovo, “The Movement for an Aggressive American Oil Policy Abroad,
1918-1920,” American Historical
Review 61: 4 (1956): 854-876.

108
Churchill following the Cairo Conference of April 1921.24 In the wake of
the Iraqi uprisings of 1920,
Britain had to find some way of maintaining its predominance within Iraq
in face of massive cutbacks in
government expenditures and the need to create at least the fig-leaf of a
nominally independent Arab
government. This would be accomplished by withdrawing its existing
contingent of regular and imperial
troops and using royalties from oil production to create a standing Arab
army and stabilize the Hashemite
client dynasty. The latter two would, in turn, be backed up by Royal Air
Force (RAF) fighter squadrons, a
“cheap but effective alternative to military occupation” that could, as
demonstrated during the 1920
uprisings, terrorize intransigent natives and deter foreign threats such
as the Turks or the Saudi Ikhwan
(militia) at only a fraction of the cost of ground troops; British
advisers scattered throughout the native
government; and a High Commissioner who would effectively rule the
country as a proconsul.25 For the
system to be self-financing, Iraq needed oil revenues, which would then
cover the costs of Britain’s de
facto occupation under the guise of the 1921 Anglo-Iraqi Treaty.26
The question of how to move forward was addressed by the Colonial
Secretary, Churchill, in March
1922. He argued that there were three avenues open to Britain. One, the
government could give in to the
U.S. demand that the TPC’s preemptive right to a concession be nullified.
Two, London could allow the
TPC’s claim to be submitted to international arbitration. Three, the
British could find some way to
convince the Americans to accept the validity of the TPC’s position and
“not to object to it as

24

William Stivers, Supremacy and Oil: Iraq, Turkey, and the Anglo-American
World Order, 1918-1930 (Ithaca:
Cornell University Press, 1982), 76-79. The official report detailing the
work of the conference only made
occasional references to oil: Colonial Office, Report on the Middle East
Conference Held in Cairo and Jerusalem,
March 12th to 30th, 1921, June 1921, CO 935/1. It is clear on the basis
of a close examination of other British
planning documents, however, that London hoped that oil would eventually
provide Iraq with a substantial source of
revenue that would simultaneously promote economic development and cover
the costs of Britain’s enduring
political and military presence in the country.
25
The use of airpower in Iraq is detailed in: David Omissi, Air Power and
Colonial Control: The Royal Air Force,
1919-1939 (Manchester: Manchester University Press, 1990), 18-38. Omissi
also explains how the employment of
air power was a means of reconciling the interests of a variety of actors
within both Britain and Iraq, including:
Churchill, who hoped that success in Iraq would boost his political
chances; Hugh Trenchard, the Chief of the Air
Staff, who wanted to maintain an independent Royal Air Force (RAF);
British officials, who wanted to retain access
to Iraqi oil reserves cheaply; and Sunni elites within Iraq, who could
use the British to crush local challenges to their
rule.
26
The genesis of the “Cairo Strategy” is described in: Stivers, Supremacy
and Oil, 75-109. For a contemporaneous
description of British policy and aims in Iraq, see: L.S. Amery, “The
Situation in Iraq: Memorandum by the
Secretary of State for the Colonies,” 11 May 1925, C.P. 235 (25), CAB
24/173.

109
monopolistic.” Churchill rejected the first option on the grounds of
national prestige. The second was
undesirable because it risked exposing the shaky legal foundation of the
TPC and London’s position, and
an international arbitration panel might render a decision inimical to
Britain’s overriding objective in Iraq.
Furthermore, even if the panel produced a decision favorable to Britain,
the U.S. Government would
likely still protest. Churchill therefore backed a proposal suggested by
the Foreign Office (and supported
by both the Petroleum Department and APOC) that the TPC’s partners offer
U.S. oil companies a portion
of the shares equal to that received by the French at the San Remo
Conference (roughly 25%) in exchange
for assurances from Washington that it would accept the TPC’s special
position in Iraq.27
The first major breakthrough came in April 1922, when Greenway (APOC
Chairman), Cadman (now
an APOC Director), and Arthur Bedford (Chairman of the Standard Oil
Company of New Jersey – Jersey)
came to a preliminary understanding that U.S. companies would join the
TPC. Both sides wished to
remove the dispute from “political channels” and handle it as a
“commercial transaction.”28 (This was
also the position of the British Government.29) The only difficulty was
getting the three governments
involved (the U.S., British, and French) on board. The French might
complain, since the inclusion of U.S.
oil companies into the TPC would compel them to yield a portion of their
share. They were not
contractually obligated to do so under San Remo Oil Agreement unless the
Iraqi Government received a
share in the TPC.30 Negotiations in the summer of the 1922 yielded an
agreement in principle between the
existing members of the TPC (APOC, Shell, and the French Government) and
a consortium of U.S. oil
companies led by Jersey (the so-called “American Group” – reformed as the
Near Eastern Development
Corporation in 1928) on the matter of U.S. membership in the TPC.
Although the exact details of U.S.
participation had yet to be formalized, for the time being, “there seems
little doubt that the Anglo27

W.S.C. (Churchill), “Iraq Oil: Circulated by the Secretary of State for

the Colonies,” 13 March 1922, C.P. 3832,
CAB 24/134.
28
Cadman, “Memorandum of a meeting held at Stambridge Earls on 9th April,
1922 […],” enclosed with: Letter to
the Under Secretary of State, Foreign Office (Cecil Harmsworth), author
unclear (Petroleum Department?), S. 542,
21 April 1922, POWE 33/95.
29
Lancelot Oliphant to the Secretary to the Board of Trade (Petroleum
Department), 28 December 1922, E
14034/132/65, POWE 33/95.
30
Letter to the Under Secretary of State, Foreign Office (Cecil
Harmsworth), author unclear (Petroleum
Department?), S. 542, 21 April 1922, POWE 33/95.
110
American oil controversy will for all practical purposes be at an end.”31
The denouement came in
December 1922, when APOC and Anglo-Saxon signed a memorandum of
understanding wherein APOC
would yield half of its existing shares in the TPC to the “American
Group” in exchange for a 10%
overriding royalty on all oil produced by the TPC (reduced to 7.5% under
the revised 1931 concession
with Iraq) and assurances from the State Department that the new
arrangement “satisfies American claims
in respect to the oil resources of Iraq.”32
Resolution of the dispute concerning the TPC, more than other single
factor, appears to have resolved
the tension in Anglo-American oil relations. In a review of the major
developments since the First World
War produced for the Treasury, the Petroleum Department explained that
fears in the United States over
its declining oil reserves and “active propaganda… against an alleged but
quite imaginary British attempt
to corner the oil resources of the world,” had combined to create a sense
of hostility and suspicion toward
Britain. According to the Petroleum Department, the “chief inspiration”
for the dispute “was the desire of
the big oil interests and particularly the Standard Oil to obtain some
kind of footing in Mesopotamia.”
Since it was vital for British interests that oil production in Iraq
commence sooner rather later, the
government adopted the policy of mollifying Standard Oil by offering it a
share of the TPC and the
chance to acquire a concession (in concert with APOC) for the five
northern provinces of Persia not
covered by APOC’s 1901 concession.33
As acrimonious as the dispute over the “Open Door” in Iraq between 1920
and 1922 was, Britain and
the United States cooperated more often than not following the First
World War on issues such as the

31

J.C.C. (Clarke), “Anglo-American Oil Relations,” 16 October 1922,

enclosed with: Clarke to P.J. Grigg
(Treasury), 17 October 1922, T 172/1268. It should be pointed out the
disagreement with the United States was only
one of many threats to the future of the TPC.
32
“Memorandum of Agreement between Anglo-Saxon Petroleum Company Ltd., and
Anglo-Persian Oil Company,
Ltd., regarding participation in the Turkish Petroleum Company,” 12
December 1922, attached to: H.E. Nichols
(TPC) to the Director of the Petroleum Department (Clarke), 13 December
1922, enclosed with: Clarke to the Under
Secretary of State, Foreign Office, 13 December 1922, S. 610, FO 839/10.
The Foreign Office made it clear,
however, that it had no intention of convincing the French Government to
sign off on the new agreement, lest Paris
use this as an excuse to renegotiate the San Remo Agreement. Lancelot
Oliphant to the Secretary to the Board of
Trade (Petroleum Department), 28 December 1922, E 14034/132/65, POWE
33/95.
33
J.C.C. (Clarke), “Anglo-American Oil Relations,” 16 October 1922,
enclosed with: Clarke to P.J. Grigg
(Treasury), 17 October 1922, T 172/1268. As explained below, the
disagreement with the United States was only
one of many threats to the future of the TPC.

111
exploitation of foreign sources of oil. Even when the two governments
were still at odds, John Cadman
(after he retired from government service) reassured U.S. officials “that
the policy of the British
Government was one of the open door,” and lamented the “folly in our
opposing each other beyond the
point where healthy and natural competition should prevail.”34 Once the
TPC had accommodated U.S.
participation in December 1922, the U.S. Government tacitly recognized
British predominance within the
Middle East. Washington also extended reciprocal considerations to London
in Latin America.35 Selfinterest was certainly one, if not the most
important, consideration. Washington considered the British
presence in the Middle East as a civilizing influence and was happy to
let Britain handle the political and
military burden beyond the Western Hemisphere if U.S. firms could enjoy
the commercial benefits.36
London believed that infusions of U.S. capital and technical expertise
would solidify Britain’s hold over
Iraq by improving the financial solvency of the new country through
higher oil revenues. Like the United
States in 2003, Britain essentially hoped that these oil revenues would
fund both the occupation of Iraq
and its economic development.
Britain’s troubles were not over yet, as the U.S. oil companies were not
the only headache for
London. Between 1908 and 1913, Colby Chester (a former admiral in the
U.S. Navy) had tried to acquire
a railroad concession through Anatolia and Mesopotamia in exchange for
mineral rights. The Ottomans
were willing to consider a concession in exchange for U.S. diplomatic
considerations and arms sales, but
the Germans blocked the proposal by claiming that Chester was a front-man
for Standard Oil.37 Chester

34

Interestingly, Cadman also confided to State Department officials that he

was strongly opposed to the British
Government’s continued ownership of shares in APOC, and “that he for one
wished that they would get out
entirely.” Dearing, Memorandum of Conversation, 23 December 1921,
National Archives and Records
Administration, Record Group 59: General Records of the Department of
State (hereafter cited as: NARA, RG 59),
841.6363/188; Arthur Millspaugh (Foreign Trade Adviser, U.S. State
Department), “Memorandum of a
Conversation between Sir John Cadman and Mr. Millspaugh, January 16,
1922,” 17 January 1922, NARA, RG 59,
841.6363/203.
35
Michael Hogan, “Informal Entente: Public Policy and Private Management in
Anglo-American Petroleum
Affairs,” Business History Review 48: 2 (1974): 187-205, passim.
36
William Stivers, “International Politics and Iraqi Oil, 1918-1928: A
Study in Anglo-American Diplomacy,”
Business History Review 55: 4 (1981): 517-540 (esp. 519-526); and
Stivers, Supremacy and Oil, 19-48, 75-107.
37
Pre-WWI developments are summarized in: Henry P. Starrett, no date,
enclosed with: Stanley K. Hornbeck
(Office of the Economic Adviser) to Leland Harrison (Assistant Secretary
of State) and William Phillips (Under
Secretary of State), 02 December 1922, NARA, RG 59, 867.602 OT81/338. See
also: John DeNovo, “A Railroad for
Turkey: The Chester Project, 1908-1913,” Business History Review 33: 3
(1959): 300-329; and John DeNovo,

112
tried again in the spring of 1920: playing on the post-WWI conception of
oil’s significance in “carrying
on the industrial development of the country and for its national
defense,” he now sought Washington’s
backing in securing an oil concession for Mosul, going so far as to offer
any oil found at “nominal”
prices, and even minority participation, to the U.S. Navy.38 Officially,
the department did not go farther
than saying that it “would look with favor on American participation in
economic activities” within the
former Ottoman Empire.39 Privately, the State Department maintained a
negative, if not contemptuous
attitude toward the Chester Concession.40 How could the department
support a monopolistic concession
for Chester when it opposed one for the TPC? There was also the fact that
Chester had only received the
promise of a concession rather than an actual agreement – again, exactly
like the TPC.41
The State Department’s Foreign Trade Adviser, Millspaugh, opposed
granting U.S. support to any
one group seeking a concession in Mesopotamia, for access to its oil
reserves was a diplomatic problem
that would have to be worked out by the United States and the Europeans.
Since the solution would
probably entail the creation of an international syndicate to develop the
oil, Millspaugh suggested “the
formation of a strong representative group of American financial and oil
interests.”42 Millspaugh was not
indifferent to U.S. participation in the development of Middle Eastern
oil and had pushed the State
Department to block British efforts to monopolize control of the region’s
oil reserves.43 He believed that

American Interests and Politics in the Middle East, 1900-1939

(Minneapolis: University of Minnesota Press, 1963),
58-86.
38
Rear Admiral C.M. Chester (U.S. Navy, retired) to the Secretary of the
Navy, “Oil for the Navy,” 14 June 1920,
enclosed with: R.E. Coonty (Acting Secretary of the Navy) to the
Secretary of State (Bainbridge Colby), 07 July
1920, 13668-788-Eng., NARA, RG 59, 867.602 OT81/163; Office of the
Foreign Trade Adviser (Wesley Frost?),
“Petroleum in the Near East for the United States: Interview with Mr. H.
Howe, Assistant to the Assistant Secretary
of the Navy, by the Acting Foreign Trade Adviser, September 8, 1920,” 17
September 1920, NARA, RG 59,
867.602 OT81/168.
39
Edward Lauterbach to Bainbridge Colby, 19 November 1920; and Norman H.
Davies (Acting Secretary of State)
to Lauterbach, 03 January 1921; both in: NARA, RG 59, 867.602 OT81/169.
40
Fiona Venn vastly overstates the State Department’s support for Chester,
which remained pro forma: Venn,
“Oleaginous Diplomacy: Oil, Anglo-American Relations and the Lausanne
Conference,” Diplomacy and Statecraft
20 (2009): 414-433 (esp. 424).
41
Warren Delane Robbins (Chief, Division of Near Eastern Affairs),
“Memorandum for the Secretary,” 18 April
1921, NARA, RG 59, 867.602 OT81/172; Division of Near Eastern Affairs,
“Memorandum for Dr. Millspaugh,” 24
May 1921, NARA, RG 59, 867.602 OT81/181.
42
Arthur C. Millspaugh, “Memorandum,” 29 November 1920, NARA, RG 59,
867.602 OT81/170.
43
Millspaugh, “Memorandum on the Near Eastern Oil Question,” 09 April 1920,
NARA, RG 59, 800.6363/166.

113
U.S. interests could be best served through two measures. The first was a
“combine” of U.S. oil
companies that would participate in the development of the region’s oil
reserves.44
Second, and more importantly, Millspaugh considered the resolution of the
Anglo-American oil
rivalry as the first step toward to building a more stable postwar world
order. Both Britain and the United
States understood that oil was vital to their economic and national
security, but Millspaugh argued the
best way to satisfy their needs was through an international oil
agreement based on the “Open Door” and
Anglo-American reciprocity.45 Following consultations with other
government departments (the
departments of the Navy and Commerce) and private industry (Jersey),
Millspaugh pressed for
negotiations with London and even completed a draft of his proposed oil
agreement in May 1921 in
advance of the upcoming Washington Naval Conference.46 Millspaugh’s
outlook was based on his
concerns about the depletion of domestic reserves and the United States’
sudden dependence upon
imports from Mexico, which had increased from 7,383,000 barrels in 1912
to 108,782,000 barrels in 1920
(or from 3.1% of U.S. consumption to 20.5%). He likened the escalating
commercial competition
between the great powers over oil to the prewar armaments race.
Millspaugh advised the U.S. delegation
at the Naval Conference to make an issue of the “petroleum question” and
push for “the establishment of
suitable guarantees of equality of opportunity in all countries, together
with reasonable assurances

44

Millspaugh to the Hughes, “Proposed Combination of American Oil Companies

for Operation Abroad,” 13 May
1921, NARA, RG 59, 811.6363/73.
45
Millspaugh first broached the matter in a paper for Secretary Charles
Evans Hughes: Millspaugh, “Informal and
Provisional Memorandum on the General Petroleum Situation, Outstanding
Petroleum Questions, and the Position
Taken by the Department Relative Thereto,” 19 February 1921, enclosed
with Merle-Smith to Hughes, 11 March
1921, NARA, RG 59, 800.6363/325.
46
Millspaugh to Hughes, “Petroleum Negotiations with Britain,” 29 March
1921, NARA, RG 59, 890G.6363/69.
For correspondence to and from the State Department concerning an
international oil agreement, see: NARA, RG
59, 800.6363/242a, 243h, 250, 254-255, 257, 268, 270, 272, 278, 295, 296,
329, and 811.6363/71. For a copy of
Millspaugh’s Anglo-American oil agreement, see: “Draft,” 12 May 1921,
enclosed with: Minute to Millspaugh, 10
[sic] May 1921, NARA, RG 59, 811.6363. The exact provenance of these
documents is something of a mystery. The
note of 10 May 1921 has a declassification stamp (dated 01 June 1993),
even though it originated in the period
before the Department of State adopted a formal classification system.
Evidently, these documents were inserted
sometime between 1993 and 2003 without the knowledge of NARA archivists.
A version of Millspaugh’s draft oil
treaty also found its way into Herbert Hoover’s papers: “Draft. Strictly
Confidential. Not to be communicated to any
except Government officials.” 14 April 1921, no author, Herbert Hoover
Presidential Library, Commerce Files, Box
452.

114
regarding supplies of oil essential to national security.”47 The idea of
establishing an Anglo-American
“trust” to “deal justly and reasonably between themselves and the
producing and consuming nations”
enjoyed some support within Britain.48 But the British Government was not
interested: once news leaked
that the United States would push for an oil agreement during the Naval
Conference, Prime Minister
Lloyd George made it clear that Britain’s overseas oil assets were “much
too important to be used as
diplomatic counters” and promised to rebuff any attempt “to give them
away.”49
One half of Millspaugh’s model for reorganizing Anglo-American oil
relations had collapsed, but the
idea of an international syndicate that would promote U.S. interest in
maintaining an “Open Door” did
not: indeed, it was the basis for the creation of the “American Group” of
oil companies that would join the
TPC after 1922. There was no room within such a vision of Anglo-American
cooperation for independent
and unreliable actors such as Chester, even if the U.S. Government
cynically used his “quasi-legal
claims” to frustrate “British claims” in the Middle East.50 Chester did
not see things this way and
complained that Washington was kowtowing to the British.51 The Turks were
willing to play along with
Chester, if only to secure leverage against Britain at the Lausanne
Conference during negotiations over
Turkey’s postwar boundary with Iraq. Ankara awarded Chester’s company the
oil concession for Mosul
in April 1923, even though the area was under British occupation. The
British resented Chester’s attempts
at blackmail and warned that Chester’s efforts could derail the
contemporaneous negotiations to admit

47

A.C.M., “Memoranda for the American Delegation to the Conference on

Limitation of Armament: The Petroleum
Situation with Reference to the Far East,” 1921, Hoover Institute, Papers
of Stanley K. Hornbeck, Box 436.
48
Paymaster Lieutenant Commander E. Kennedy, “Oil Imperialism: The Struggle
for Petroleum,” no date
(sometime following the 1922 Genoa Conference), ADM 203/58.
49
Lloyd George to Pretyman, 25 November 1921, POWE 33/93.
50
Millspaugh, “The Chester Project in Turkey,” 01 March 1921, NARA, RG 59,
867.602 OT81/180. Millspaugh
also opposed Chester’s efforts to merge with the TPC, since his company
(the Ottoman-American Exploration
Company) was in financial shambles. Rear Admiral C.M. Chester (USN,
retired) to the Secretary of the Navy, “Oil
Concession in Mesopotamia,” 30 March 1921, attached to: R.E. Coonty to
the Assistant Secretary of the Navy, 02
April 1921, Op-10 Hu, enclosed with: Theodore Roosevelt Jr. (Assistant
Secretary of the Navy) to the Henry Prather
Fletcher (Under Secretary of State), 02 April 1921, NARA, RG 59, 867.602
OT81/175; and Millspaugh,
“Memorandum,” 27 April1921, NARA, RG 59, 867.602 OT81/173. Chief of the
Near Eastern Affairs Division
Allen Dulles also warned that the company’s shoddy finances could damage
U.S.-Turkish relations if it did receive a
concession but collapsed thereafter. G. Howland Shaw (Special Mission of
the United States of America, Lausanne)
to Allen W. Dulles (Chief, Division of Near Eastern Affairs), 11 June
1923; Dulles to Hughes, 26 June 1923; and
Dulles to Shaw, 03 July 1923; all in: NARA, RG 59, 867.602 OT81/378.
51
Millspaugh, “Memorandum,” 30 November 1920, NARA, RG 59, 867.602
OT81/171.

115
U.S. oil companies into the TPC. Their complaints found some sympathy in
Washington, and at least one
official (Allen W. Dulles, then serving as Chief of the Near Eastern
Affairs Division) shared the British
perspective that Chester and the Turks were trying to foment “bad blood
between the United States and
Great Britain.”52 In any event, the Turks cancelled their concession in
December 1923 after Chester’s
company failed to start prospecting and the whole venture disappeared
from view.53
Even before the furor over the Chester Concession of 1923, the Colonial
Office had been convinced
that both the French and Standard Oil were aiding and abetting Turkish
nationalists over control of
Mosul. The Colonial Office claimed that the Turks had promised to repay
French assistance with “priority
rights” in the awarding of oil and railway concessions if Ankara
recaptured Mosul. Meanwhile, Standard
Oil was “inciting the Turks to attack Iraq” as a means of putting
pressure on London to accede to U.S.
demands for participation in the TPC. The Colonial Office was uncertain
whether Standard Oil’s actions
had the blessing of the U.S. Government but surmised that Washington
“would not regret the return of the
Turks to Iraq if it gave the United States oil interests a hold in the
Iraq oil-fields.”54
During the Lausanne Conference of 1922-1923, Britain had tried to work
out a new peace treaty with
a resurgent Kemalist Turkey that would preserve London’s gains in Iraq,
specifically by forcing Ankara
to abandon its claim to the province of Mosul and confirm all prewar
concession agreements or promises
with the Ottoman Empire and its successor states. This would have
sanctioned the claims of the TPC, so
the U.S. Government supported Turkey in blocking the inclusion of such
terms into the new peace
treaty.55 (Britain and Turkey agreed to submit the dispute for
arbitration by the League of Nations. When

52

Dulles to Assistant Secretary Harrison, 12 February 1923, NARA, RG 59,

867.602 OT81/250; Dulles,
“Memorandum,” 12 April 1923, NARA, RG 59, 867.602 OT81/271; William R.
Castle (Chief, Division of Western
European Affairs) to Dulles, 13 April 1923, NARA, RG 59, 867.602
OT81/269; Dulles to Castle, 16 April 1923,
NARA, RG 59, 867.602 OT81/270; Geddes to Hughes, 30 April 1923, and
Hughes to Geddes, 01 May 1923, both
in: NARA, RG 59, 867.602 OT81/300.
53
The entire episode is covered in: DeNovo, American Interests, 191-196,
210-228; and Stivers, Supremacy and Oil,
154, 157-158, 169 186-187, and 190.
54
Colonial Office, Middle East Department, “Foreign Incitement of the Turks
to Attack Iraq: Circulated by the
Secretary of State for the Colonies,” C.P. 3566, 13 December 1921, CAB
24/131. See also: “The Mosul Question,”
26 October 1925, Editorial Research Reports: 1925, vol. 4 (Washington,
DC: CQ Press).
55
The Anglo-American “oil war” at Lausanne is described in: Venn,
“Oleaginous Diplomacy,” 414-433. Venn is
also of the opinion that control of Mosul’s presumed oil deposits was a
central aim of Britain’s negotiating strategy
during the conference. See also: DeNovo, American Interests, 191-196.

116
the League agreed with Britain that Iraq should receive Mosul even though
Turkey still enjoyed legal
rights to the province, Ankara protested but relented in 1926 in exchange
for 10% of the oil royalties from
the disputed province for the next twenty-five years.56) Nevertheless,
the Petroleum Department was
pleased with the course of developments by early-1924 and even
“[suggested] that it may be sound to
policy to encourage” international cooperation in major oil ventures, as
opposed to allowing oil
companies to compete with one another, thereby “provoking jealousies and
competing with more or less
success for concessions, and provoking jealousies and recrimination which
have of recent years been
unduly frequent on oil questions.” Responding to charges that the TPC’s
monopolistic position in Iraq
precluded meaningful competition, the Petroleum Department countered that
“it is very debateable [sic]
whether competitive development of an oilfield produces the best
results,” contrasting the “colossal
waste” that accompanied such practices in the United States with the
managed development undertaken
by APOC in Persia.57 The department seriously miscalculated, however, by
claiming that it was unlikely
the TPC would restrict oil production in Iraq for commercial purposes.
The Colonial Secretary, Leo Amery, took a rather more cynical view. Like
many in the British
Government, he was contemptuous of the “sacred principle of the ‘open
door’.” Now that the Americans
had received their cut, London was “likely to hear nothing more about the
State Department’s qualms on
the subject of a Mandate […].” The Iraqis were out of luck, though:
although the San Remo Agreement
left open the possibility of the Iraqi Government receiving a 20% share
in the TPC, during the
negotiations for the 1925 oil concession, none of the TPC’s partners was
willing to see their share in the
company reduced to accommodate Baghdad’s participation.58 Amery also made
the extraordinary
admission that the major oil companies “had absolutely no interest in
securing a particularly high rate of
56

In reality, Ankara was desperate for cash and agreed in a separate

exchange of notes with London that it had the
option to trade its rights to oil revenues in exchange for a lump sum
payment of £500,000. Turkey exercised this
option almost immediately, much to Britain’s delight: not only was the
sum “ridiculously small” according to the
Foreign Office, but London made the Iraqis pay it. Geoff Berridge,
British Diplomacy in Turkey, 1583 to the
Present: A Study in the Evolution of the Resident Embassy (Leiden:
Martinus Nijhoff Publishers, 2009), 145-151.
57
J.C.C. (Clarke), “The Turkish Petroleum Company and Iraq Oil Policy,” 04
February 1924, P.D. 13, POWE
33/183.
58
Edith Penrose and E.F. Penrose, Iraq: International Relations and
National Development (London: Ernest Benn,
1978), 60-66.

117
profit” from the TPC, since they wanted to avoid paying corporate taxes
in Britain. Although Amery did
not say so explicitly, it made more sense for the companies to pay as
little as possible for crude oil, as
they could make their profits downstream rather than share them with each
other or Baghdad.59
With the U.S. companies on board, the TPC acquired a seventy-five year
concession from the Iraqi
Government in 1925 (originally for only 192 square miles but extended to
most of Iraq east of the Tigris
in 1931). Besides the fact that no oil had yet been discovered in Iraq, a
number of problems remained. As
one financial mission to Iraq reported to the Colonial Secretary, as much
as “[we] may hope that Iraq may
in the future derive a large revenue from oil… it would be rash to regard
this as a certainty,” especially in
the short run. Not only was the border dispute between Iraq and Turkey
still unresolved, but there was
also the small matter of a constructing a pipeline to the Mediterranean.
The commission concluded that
Baghdad was unlikely to “receive any appreciable revenue” from the TPC
“for another seven years,”
which meant that Britain would have to wait a little bit longer before
oil revenues would pay for the
British presence in Iraq, one of the lynchpins of its entire Middle
Eastern policy.60
Britain had nonetheless after years of political, diplomatic, and
commercial wrangling finally
established the preconditions for Iraq to become a major supplier of oil
to the British oil empire. But
London’s success at pacifying the many national and private interests
within an interest in the future of
the Iraqi oil industry was shadowed by a major setback that shattered one
of the pillars of Britain’s oil
policy since 1918.

59

L.S.A. (Amery), “Iraq: Turkish Petroleum Company: Memorandum by the

Secretary of State for the Colonies,”
C.P. 108 (25), 23 February 1925, CAB 24/172. See also: Amery, “Iraq:
Turkish Petroleum Company,” C.P. 171
(25), 18 March 1925, CAB 24/172.
60
After running a budget deficit its first two years, Iraq had a healthy
surplus in the 1923-24 of 9,000,000 rupees
(£670,320), but this would be quickly wiped out since Iraq was obligated
under the terms of the 1923 Treaty of
Lausanne to pay its share of the Ottoman public debt, as well as
massively increase its military spending in order to
comply with a 1924 Military Agreement with Britain that would allow
London to begin drawing down its forces in
Iraq. Colonial Office, “Iraq: Report of the Financial Mission appointed
by the Secretary of State for the Colonies to
enquire into the Financial Position and Prospects of the Government of
’Iraq, 1925,” Middle East No. 6, May 1925,
CAB 24/173.

118
The Shell-Burmah-APOC Merger Proposals, 1922-1924
Expanding the British presence in the Middle East and forming an “all
British” major oil company
had been the foundations of the Britain’s postwar oil policy. Disputes
with France and the United States
over the future of Iraq had delayed implementation of the former, but all
obstacles appeared to have been
overcome by 1922. Britain had not been so fortunate when it came to the
formation of an “all British”
major company. London had expected that the economic fruits of its labors
in Iraq would accrue to a
mighty “all British” Shell, which would then challenge the heirs of the
Standard Oil Trust for commercial
dominance not just within the British Empire, but around the world.
Efforts had stalled following the
failure of the Harcourt-Deterding Agreement in 1919, but in spite of the
reluctance of various interest
groups that were committed to preserving the status quo, elements within
the British Government, not to
mention Shell and Burmah, were determined to try at least once more.
The last, and most ambitious, attempt to create a “British” Shell took
place in 1922.61 This effort
entailed a merger between all three of the major British oil companies:
Shell, APOC, and Burmah. Shell
and Burmah worked out complicated formula whereby the latter would
purchase the government’s shares
in APOC and combine with Shell Transport and Trading to “extinguish” the
Dutch majority within the
Shell Group, again excepting those subsidiaries operating within Dutch
territory.62 The final product
would have created a true British competitor to Standard Oil’s global
predominance. Under the proposed
amalgamation, shares within the reorganized Shell Group would be divided
as follows: 10.68% to
Burmah, 33.24% to Shell Transport and Trading, and 6.25% to APOC,
totaling 50.17% to British
interests. The remaining 49.83% would remain in Dutch hands.63 The
British Government estimated that
61

The discussion of this episode in Shell’s official history is completely

inaccurate and riddled with errors. It claims
that the “Harcourt Committee” resurrected the idea of orchestrating
British control of Shell through a merger with
APOC. Joost Jonker and Jan Luiten van Zanden, From Challenger to Joint
Industry Leader, 1890-1939, vol. 2 of A
History of Royal Dutch Shell (Oxford: Oxford University Press, 2007),
256. This would have been some feat for
Lewis Harcourt, who committed suicide in February 1922 following
accusations of pedophilia.
62
Philip Lloyd-Greame, “Proposed Amalgamation of the Royal Dutch, Shell,
Burmah and Anglo-Persian Oil
Companies: Memorandum by the Minister in Charge of Petroleum,” 06 January
1922, C.P. 3637, CAB 24/132.
63
“Constitution of Royal Dutch-Shell group and proposed basis of formation
of [the] new amalgamated group,” no
date, Appendix I to: Lloyd-Greame, “Proposed Amalgamation of the Royal
Dutch, Shell, Burmah and AngloPersian Oil Companies: Memorandum by the
Minister in Charge of Petroleum,” 06 January 1922, C.P. 3637, CAB
24/132.

119
Shell, APOC and Burmah produced about 13,107,910 tons of oil, about 12%
of global oil production,
compared to the 15,857,000 tons produced by the various Standard Oil
companies, about 14% of global
production.64 Completion of the merger would have also eliminated any
need for London to retain its
stake in APOC, which had been a source of discomfort within both the
government and the company.
The British Government first began studying the matter in January 1922,
when the Petroleum
Minister, Philip Lloyd-Greame, raised the matter before the Cabinet. His
report included an impassioned
defense of the merger by the Managing Director of Burmah, John Cargill.
Besides recapitulating the
commercial benefits of the agreement (such as a 50% reduction in capital
costs and operating expenses),
Cargill tried to convince the government that a Shell-AIOC-Burmah would
enhance Britain’s strategic
position by eliminating its reliance upon the Persian oilfields to
fulfill its military requirements. Rather
than securing its fuel oil requirements just through the supply contract
with APOC, a British-controlled
Shell would guarantee Britain’s “full requirements of all Petroleum
products.” British companies could
then pool their resources against Standard Oil rather than each other.
Although Burmah was enthusiastic
about merging with Shell in any event, it lacked the financial weight to
ensure a British majority without
the inclusion of the government’s shares in APOC. 65 Lloyd-Greame
conceded from the start that the
Shell Group was a tempting prize. It was a global enterprise comprising
over 100 subsidiaries and
capitalized at £300,000,000, while its British competitors were “at
present considerably its inferiors in
experience and in knowledge of all phases of the petroleum industry
[…].”66

64

Petroleum Department, “Production of Petroleum by the Under-Mentioned

Companies According to Latest
Figures Available,” 20 March 1922, O.S.C. 7, ADM 116/3452.
65
“Proposed Combination of the Royal Dutch/Shell, Burmah, &Anglo-Persian
Companies: Memorandum by the
Managing Director of the Burmah Oil Company,” no date (according to a
copy of the memorandum enclosed within
ADM 116/3452, it was dated 29 July 1921), Appendix III to: Lloyd-Greame,
“Proposed Amalgamation of the Royal
Dutch, Shell, Burmah and Anglo-Persian Oil Companies: Memorandum by the
Minister in Charge of Petroleum,”
06 January 1922, C.P. 3637, CAB 24/132. Emphasis in the original.
66
Lloyd-Greame, “Proposed Amalgamation of the Royal Dutch, Shell, Burmah
and Anglo-Persian Oil Companies:
Memorandum by the Minister in Charge of Petroleum,” 06 January 1922, C.P.
3637, CAB 24/132. Shell produced
almost three times more oil than APOC and Burmah combined (9,667,910 tons
vs. 3,440,000 tons). Shell-Mex –
established following the merger of Shell and Mexican Eagle’s British
marketing subsidiaries in 1921 – was also the
largest importer in Great Britain at 1,243,614 tons (28%), almost twice
as much as APOC and British Petroleum
with 653,389 tons (15%). The three firms lagged behind the Standard Oil
companies when it came to combined oil
production (15,857,000 tons) but were comfortably ahead in terms of their
share of Britain’s oil imports: 60%
including the Admiralty vs. 26% for the Anglo-American Oil Company, the
British subsidiary of the Standard Oil

120
The Admiralty still was not interested. The Royal Navy received 40% of
its annual fuel requirements
through its supply contract with APOC, and aside from a small contract
with Burmah in the Far East, it
purchased the remainder on the open market. By reducing the number of
potential sellers, the Admiralty
believed that the merger would hinder its ability to purchase oil on the
market at a reasonable price. The
only way to win Admiralty support was to ensure that Shell signed a new
agreement with the Admiralty
that provided the latter with greater amounts of oil than under its
existing APOC contract at a discounted
rate. Specifically, the Admiralty demanded a “perpetual” contract for
250,000 tons with an option to
purchase an additional 150,000 tons at 20/- per ton (30/- minus a 10/-
rebate on any excess profits, which
was the existing arrangement with APOC), to be delivered at facilities of
the Admiralty’s choosing and at
the same specifications as provided by APOC. The Admiralty even admitted
that it had drafted the terms
with the specific intention of provoking their rejection by Shell.67
As far as British foreign policy was concerned, the merger could
antagonize the United States by
creating the impression that the British Government was attempting to
create a competitor to Standard
Oil. Lloyd-Greame surmised that U.S. acquiescence would have to be bought
through an arrangement
with U.S. oil companies over their demands for concessions in Northern
Persia, Romania, and Iraq. On
the other hand, elimination of the government’s stake in APOC would
remove a major source of irritation
in Anglo-American oil relations. There were also major savings in public
expenditure. Unless the
government was willing to spend the extra capital required to fund APOC’s
continued development, the
only recourse was to raise money through the issuing of public stock,
which would eliminate the
government’s majority stake. Immediately selling the government’s shares
was not advisable, since “the
present is the worst possible time for realising an adequate price.”
Lloyd-Greame suggested that the
government should accept “the risk of diplomatic difficulties” until
APOC’s share price improved.

Company of New Jersey (Jersey). Committee on Oil Companies Amalgamation,

“Memorandum from Petroleum
Department,” 20 March 1922, O.S.C. 7, CAB 27/180.
67
“Note on proposal tentatively put forward by the Admiralty with regard to
additional supplies from the new group
if the amalgamation scheme is approved,” no date, Appendix IV to: Lloyd-
Greame, “Proposed Amalgamation of the
Royal Dutch, Shell, Burmah and Anglo-Persian Oil Companies: Memorandum by
the Minister in Charge of
Petroleum,” 06 January 1922, C.P. 3637, CAB 24/132.

121
Retaining the shares also gave the government continued leverage over
APOC to prevent a merger with
Shell on terms unacceptable to London. Ultimately, however, the
government would have to yield any
meaningful interest in the operations of APOC, as Shell executives had
made it clear that “[they] refuse to
be partners with the government in the marketing business,” and would
only accept having the
government participate as a “sleeping partner,” which was unacceptable to
London, since it would still
have entailed financial obligations without any effective managerial
control.68
Another consideration was the possible reaction of Shell and APOC if the
merger fell through. LloydGreame doubted that APOC “would remain in
isolation in competition with both the Royal Dutch-Shell
group and the Standard,” and was, in fact, “confident that the Anglo-
Persian will enter into closer
relations with the Standard,” because APOC was flush with crude oil but
lacked the downstream capacity
to dispose of it, unlike Standard Oil. So long as this did not result in
a diminution of the government’s
control of APOC, a closer working arrangement between APOC and Standard
might actually “be good
policy as well” by forestalling the worst case scenario, a rapprochement
between Shell and Standard,
which would almost certainly squeeze APOC into submission. Lloyd-Greame
considered this unlikely but
warned that “conditions might easily change, and if the commercial
attractions of co-operation become
sufficiently strong to outweigh oil rivalries, it might come about
quickly.”69
In March 1922, the government established special Cabinet Committee on
Oil Companies
Amalgamation chaired by the President of the BOT and future Prime
Minister, Stanley Baldwin, to render
a decision as to whether the government should support the merger.
Several British ministries including
the Foreign Office, Treasury, Admiralty, Colonial Office, India Office,
and the BOT participated in the
deliberations.70 The proposed merger drew fire from across Whitehall.71
One critical analysis conceded

68

Lloyd-Greame, “Proposed Amalgamation of the Royal Dutch, Shell, Burmah

and Anglo-Persian Oil Companies:
Memorandum by the Minister in Charge of Petroleum,” 06 January 1922, C.P.
3637, CAB 24/132.
69
P. Lloyd-Greame, “Proposed Amalgamation of the Royal Dutch, Shell, Burmah
and Anglo-Persian Oil
Companies: Memorandum by the Minister in Charge of Petroleum,” 06 January
1922, C.P. 3637, CAB 24/132.
70
T. St. Quintin Hill (Secretary), “Committee on Oil Companies
Amalgamation,” 06 March 1922, O.S.C. 1, CAB
27/180. See also: “Committee on Oil Companies Amalgamation: Heads for
Discussion,” 10 March 1922, O.S.C. 3,
CAB 27/180, which offers a list of the possible benefits for the British
Government from the scheme.
122
that, although Shell controlled several sources of production, it “cannot
supply Admiralty quality oil from
Mexico, California, Trinidad, Venezuela, Egypt, etc. and the Admiralty
would not want oil from these
sources instead of Persia except in an emergency.” Furthermore, the
government could not afford to
ignore the political dimensions, for it would be assenting to the
creation of a gigantic British industrial
conglomerate after it had justified the original purchase of APOC shares
in 1914 to prevent such an
outcome. Critics would also claim that the merger was yet another step
toward creating a global oil
monopoly in case Shell and Standard ever reached an accommodation.
Ultimately, the merger was a poor
idea that “does not appear to offer [the] prospect of anything but a
shadow of British control over Shell
operations,” while inviting Dutch participation in two British companies
that heretofore were free of any
degree of foreign ownership.72
The Admiralty laid out its objections more fully in March 1922.73 The
Admiralty dismissed the
argument that a merger was necessary to contain Standard Oil, which was
not as “all-powerful” as
alleged. Besides, most of the Admiralty purchases of U.S. oil came from
suppliers other than Standard
Oil. The merger would, however, create a monopoly for Shell in the Far
East by allowing it to absorb
Burmah. The Admiralty also reiterated its complaint that Shell’s sources
of oil were too dispersed and not
of the requisite quality, unlike those of APOC, which “are suitably
situated strategically.” The Admiralty
also believed that the merger would jeopardize the future of its supply
contract with APOC. Finally, the
Admiralty pointed out that the merger did not actually increase the
amount of oil owned by Britain, since

71

The Admiralty first took up cudgels, but it was joined by the Treasury,
Board of Trade, Colonial Office, India
Office, and Foreign Office as the debate wore on. Director of Contracts
(Admiralty), Minute for the Fourth Sea
Lord, 28 November 1922, ADM 116/3452.
72
C.W., “Proposed Amalgamation of Royal Dutch Shell, Burmah and Anglo-
Persian Oil Companies: Memorandum
for Board,” 08 February 1922, ADM 116/3452. The provenance of the
memorandum is unclear, but it appears to be
a product of the Board of Trade. The memorandum argued that the merger
had only been proposed because Shell
was anxious to preserve its connection with APOC once their 1912
marketing agreement expired. In 1912, APOC,
then in a period of extraordinary financial difficulties, agreed to
market most of its crude oil and gasoline through
the Asiatic Petroleum Company, a Shell subsidiary. The agreement did not
include APOC’s fuel oil production,
which went to the Admiralty after 1914.
73
The matter had been discussed during meeting of the Admiralty Board on 02
March 1922, when they considered a
paper on the proposed merger by Fourth Sea Lord. I have been unable to
locate a copy of this paper, but the board
was unimpressed by the thought that the merger would provide only
“shadow” British control of Shell while
allowing “an intrusion of Dutch influence” into both Burmah and APOC.
“Extract from Board Minutes: Proposed
Amalgamation of Royal Dutch, Shell, Burmah and Anglo-Persian Oil
Companies,” 02 March 1922, ADM 116/3452.

123
many of Shell’s assets were located in foreign countries that had no
formal ties to Britain. Accordingly,
“[it] appears to them [the Admiralty] to be an unfortunate suggestion
that H.M. Government should at this
stage surrender one of its valuable investments in private enterprises
which has repaid them handsomely
in the past six years and promise to be highly lucrative in the
future.”74
Another factor militating against the merger was the fact that the 1914
share purchase had turned out
to be a windfall for London. The British Government’s initial investment
of £2,200,000 in 1914 had
yielded an exceptional rate of return. One 1922 calculation estimated
that the government had already
earned £17,410,000 from its 1914 share purchase based on additional tax
receipts, appreciation in the
value of its original shares, savings by the Admiralty’s contract with
APOC, and the Admiralty’s potential
savings from its dealing with other suppliers thanks to competition from
APOC.75
The Cabinet committee considering the merger reached a decision in June
1922. The committee
concluded that, whereas the 1914 agreement with APOC had succeeded in
“[placing] the Admiralty in a
position to draw a large nucleus of their naval requirements of oil fuel
from a source which was
independent of Foreign Trusts and under Government control,” the proposed
merger did not offer an
alternative means of acquiring “effective and permanent control, which
would be exercised continuously
in British National interests […].” The committee agreed with the
Admiralty that the merger would
undermine the basis of the latter’s existing arrangements with APOC,
while resulting in monopoly control
of Far Eastern oil reserves in Borneo and Sarawak (today a part of
Malaysia). An enlarged Shell group
would also have little interest in developing high-cost fields, which
would curtail any increases in
imperial production and probably leave India dependent on imported oil.
Finally, the merger would harm
Anglo-American relations, since Washington would probably object to any
arrangement that gave the

74

Committee on Oil Companies Amalgamation, “Proposed Amalgamation of Royal

Dutch Shell, Burmah and
Anglo-Persian Oil Companies: Statement of Admiralty Views,” 11 March
1922, O.S.C. 5, CAB 27/180.
75
This figure did not include investments made by the British Government
after 1914, which “will in due course
give large additional gains.” “Estimate of Return obtained by His
Majesty’s Government on their original
investment of £2,200,000 in the Anglo-Persian Oil Co., Ltd.,” no date or
author (circa June 1922), ADM 116/3452.
By contrast, Iran’s royalties between 1912 and 1924 added up to only
£3,700,000, largely as a result of APOC’s
efforts to pay as little to Iran as possible. Mostafa Elm, Oil, Power,
and Principle: Iran’s Oil Nationalization and its
Aftermath (Syracuse: Syracuse University Press, 1992), 17-22.

124
appearance of “setting up an organisation in opposition to the Standard
Oil Company […].” Bearing in
mind APOC’s assurances that its share price would increase in the future,
the committee recommended
that the government retain its shares in APOC and oppose the merger with
Shell.76
The following September, Baldwin confided to the Managing Director of
Burmah (Robert Watson,
who had favored the merger) that the political obstacles were too
daunting. In spite of the obvious
commercial benefits, too many members of his own Conservative Party,
Baldwin conceded, were
personally invested in the success of APOC, while the Labour Party was
unlikely to support selling off
the government’s stake in such a profitable enterprise. Moreover, there
was bound to be cross-party
opposition to the formation of yet another major oil “trust,” while the
Americans would complain about
the creation of a rival to Standard Oil.77
Although the committee’s report was the death-knell of the six-year
project to bring Shell under
British control, the government continued to examine the possibility of
selling of its shares in APOC.
Matters came to a head in late-1923 following accusations of
mismanagement at APOC and a renewed
effort by Shell and Burmah to push through a merger with APOC along the
lines suggested in 1922. This
effort was backed by, of all people, Winston Churchill, who was probably
the only person capable of
winning over the Admiralty. The former First Lord had been
unceremoniously dumped by the electors of
Dundee in 1922. After being approached by R. Waley Cohen (the Managing
Director of Anglo-Saxon
Petroleum) in the summer of 1923 and desperate for cash while searching
for a new parliamentary seat,
Churchill asked Shell and Burmah for £10,000 if his services proved
unsuccessful and for £50,000 in case
the merger went through.78
Churchill turned out to be a failure as a lobbyist, as the Admiralty was
unimpressed by his arguments.
The latter were determined to maintain their favorable supply contract
(which at the time still included a
76

Committee on the Proposed Amalgamation of Royal Dutch, Shell, Burmah and

Anglo-Persian Oil Companies,
“Report,” 12 June 1922, enclosed with: S.B. (Stanley Baldwin) to the
Cabinet, 23 June 1922, C.P. 4050, CAB
24/137.
77
T.A.B. Corley, A History of the Burmah Oil Company, 1886-1924 (New York:
Heinemann, 1983), 296-297.
78
Although Churchill managed to broker a draft agreement between Shell,
APOC, and Burmah in October 1923,
fearful of the consequences for his political future, Churchill resigned
in December to run as the “Constitutionalist”
candidate in Epping and returned his £5,000 advance from Burmah. Corley,
History of Burmah, 298-304.
125
rebate based on APOC’s profits), and there was no guarantee that the new
combine would agree to such a
rebate or to a lower contract price for fuel oil.79 Since it supplied the
Royal Navy with 40% of its annual
fuel requirements and placed it in an advantageous position regarding the
purchase of the remainder, the
Admiralty had no reason to complain about the government’s relationship
with APOC.80 Sticking with
APOC required confidence in the continued productivity of the Persian
oilfields, and supporters of a
merger pointed to the “sudden failure” of the Mexican oilfields, where
production between 1921 and 1923
dropped from 193,398,000 barrels to 149,585,000 barrels (more than
22%).81 The Admiralty discounted
the possibility of an imminent collapse in Persian output since APOC was
the sole concessionaire in south
Persia, which gave the government “full knowledge, and also control, in
regard to the rate at which the
fields are depleted.” If anything threatened the future of the Persian
oilfields, it was the possibility of
Shell gaining control of the APOC concession. Shell would doubtless boost
Persian production on
account of its low cost, whereas London had no interest in depleting
Persia’s reserves quickly.82
The Admiralty again concluded that a merger would be “entirely
unsatisfactory from the Naval point
of view.” The primary objections still revolved around the lack of
control the government would exercise
over the operations of the enlarged Shell Group, the latter’s monopoly
over Far Eastern production, and
the likelihood that the merger would eventually provoke “a substantial
increase in the prices of oil
79

“Questions on Mr. Churchill’s Scheme,” no date or author (circa November

1923); and note to the First Lord of
the Admiralty (Amery), “Mr. Churchill’s Replies on the Oil Fuel
Question,” 14 November 1923, no author
(probably the First Sea Lord, Beatty); both in: ADM 1/8658/55.
80
APOC’s annual sales of fuel oil to the Admiralty between 1921/22 and 1932
averaged over 500,000 tons (peaking
at 621,118 tons in 1930), although the Admiralty’s share of the company’s
total fuel oil sales declined from onequarter to one-seventh during this
period. R.W. Ferrier, The Developing Years, 1901-1932, vol. 1 of The
History of
the British Petroleum Company (Cambridge: Cambridge University Press,
1982), 668.
81
Everette Lee DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum
Statistics (Dallas: DeGolyer and
MacNaughton, 2004), 5. Contrary to much of the existing historical
literature, the decline in Mexican oil production
after 1921 was almost entirely the product of geological factors, rather
than any concerns’ on the part of the oil
companies about their property rights. Foreign companies dominated the
industry and could retaliate against
“revenue expropriation” through production cutbacks and by appealing to
Washington. Mexican governments of the
1920s could neither afford the loss of tax revenue (as much as one-third
of government receipts), nor could they risk
that the U.S. Government or the oil companies would support rival
political factions within Mexico. Consequently,
the major oil companies continued to invest large amounts money searching
for new oilfields for several years (until
1926) after the postwar peak in production (1921): “They simply could not
find sources of petroleum that could be
extracted at a reasonable price using existing technology.” Stephen
Haber, Noel Maurer, and Armando Razo, “When
the Law Does Not Matter: The Rise and Decline of the Mexican Oil
Industry,” Journal of Economic History 63: 1
(2003): 1-32, passim (quotation from pg. 3).
82
L.S.A. (Leo Amery), “Admiralty Views on the Proposed Sale of the
Government’s Holding in the Anglo-Persian
Oil Company: Memorandum by the First Lord of the Admiralty,” 10 January
1924, C.P. 20 (24), CAB 24/164.

126
products generally,” which the Admiralty could hardly avoid since it
would have to purchase 60% of its
oil requirements on the open market, where Shell would recoup any losses
it made fulfilling APOC’s
supply contract. The First Lord of the Admiralty had taken it upon
himself to consult with Shell
executives to inquire if they would be willing to conclude a new, long-
term supply contract with the
Admiralty to compensate London for the loss of the APOC rebate.83 Finding
“that in no circumstances
would the [Shell] group bind itself by a long-term contract to supply at
a fixed sum,” the First Lord
concluded that “[the] differences of opinion on this point seems to me to
be decisive, and to show that our
interests and those of the Group are not in harmony and cannot be
harmonized.”Any talk of a merger
should therefore be halted, if only because “the Anglo-Persian Company is
hampered in its management,
by the fact of having this possibility of virtual extinction constantly
hanging over its head.”84
In the meantime, the Baldwin Ministry fell and was replaced by the first
Labour Government. The
change in governments did not have any effect on policy, as opposition to
the merger was shared across
party lines and by both politicians and officials. The Admiralty enjoyed
the enthusiastic support of the
Treasury, which had traditionally been ambivalent or hostile to the
government’s stake in APOC. In spite
of the change in ministers (Philip Snowden instead of Neville
Chamberlain), the Treasury judged the
Burmah-Shell merger proposal as an attempt by a “not too scrupulous
[Shell] combine” to eliminate a
promising competitor. Although the sagging international price of oil,
and a possible mismanagement,
had caused a significant drop in the value of the APOC stock (from £4 to
£2½), the Treasury advised
against any precipitate dumping of the government’s shares, reckoning
APOC’s assets were valuable
enough to cover any short-term losses in earnings and share prices. Like
the Admiralty, the Treasury
placed little credence in fears of any sudden collapse in Persian output
as in Mexico, pointing to “the
scientific advice received… that so far from their being any indication
of failure all the signs go to show
83

The terms are not listed in the memorandum, but they were 1,200,000 tons
per year from any oilfield within the
new oil combine (the point of supply to be determined by the Admiralty)
at a cost of 20/- per ton, which was what
the Admiralty were paying APOC after deducting the rebate. Note to the
First Lord of the Admiralty (Amery), “Mr.
Churchill’s Replies on the Oil Fuel Question,” 14 November 1923, no
author (probably the First Sea Lord Beatty),
ADM 1/8658/55.
84
L.S.A. (Leo Amery), “Admiralty Views on the Proposed Sale of the
Government’s Holding in the Anglo-Persian
Oil Company: Memorandum by the First Lord of the Admiralty,” 10 January
1924, C.P. 20 (24), CAB 24/164.
127
the existence of an exceedingly large and extensive supply of oil which
may well last for the full period of
the concession” (until 1961).85 The Treasury did, at least, devote a
cursory mention to the political
situation in Persia, concluding that “the obvious interest of the Persian
Government in the maintenance of
a reliable source of revenue… [is] the best protection against political
disturbance.” The Treasury
concluded that any merger with Shell should be “unhesitatingly rejected”
and urged the government to
make a public announcement “that on no account” would 86
On a pure profit-loss basis, the government’s decision continued to pay
dividends. Between 1922 and
1928, savings through the Admiralty’s supply contract and the
government’s rebate on APOC’s profits
totaled £2,935,000, plus £4,272,000 in dividends and interest payments.
In 1926-1927 alone, the British
Government realized a profit of £8,125,000 when it received half of the
5,000,000 bonus shares
distributed by the company, not including £11,250,000 worth of
appreciation on its existing shares.87 But
the British Government did pay a heavy price for these profits, for
London’s refusal to part with its shares
in APOC doomed efforts to bring about British control of the Shell Group
in 1918/19 under the
“Harcourt-Deterding” Agreement and again in 1922/24 when Shell and Burmah
worked out their own
plan independent of London. As of 1924, one of the key tenets of
Britain’s postwar oil strategy – the
creation of an “all British” major oil company capable of servicing the
requirements of the British Empire
and breaking the power of the major U.S. oil companies – had sputtered.
In hindsight, London’s
preoccupation with eliminating “foreign” control of Shell seems peculiar.
Shell had rendered yeoman
service to the Allied cause between 1914 and 1918, and there was no
reason to think this would not be the
case in future, which probably reduced the urgency of bringing the Shell
Group under British control if it

85

One of APOC’s great technical successes of this period was implementing

“unit operation” of its Iranian fields
starting in 1927 that maximized extraction rates. Ronald Ferrier, “The
Iranian Oil Industry,” in: From Nadir Shah to
the Islamic Republic, ed. Peter Avery, Gavin Hambly, and Charles
Melville, vol. 7 of The Cambridge History of
Iran (Cambridge: Cambridge University Press, 2008), 646-647.
86
P.S. (Philip Snowden), “Anglo-Persian Oil Company: Note by the Chancellor
of the Exchequer,” 26 January
1924, C.P. 32 (24), CAB 24/164. Emphasis in the original.
87
Cadman to Commander I.E.G. Maund (Royal Navy, CID), 14 March 1928,
British Petroleum Archive, Arc. Ref.
71044 (hereafter cited as: BP, No.).

128
jeopardized the Admiralty’s fuel oil contract with APOC and promoted
further cartelization within the
international oil industry.

129
The Creation and Early Years of the Oil Board, 1925-1931
By the mid-1920s, British policymakers had embraced an optimistic view of
global oil supplies.
While refraining from making any firm projections concerning future oil
production, in a global survey
from 1926, the Petroleum Department noted “that up to the present supply
has always been equal to the
demand.”88 Unfortunately, the Empire’s contribution had heretofore been
negligible. In 1926, imperial
production (concentrated primarily in India, Trinidad, and Sarawak) was
only 1.8% of global production
and only 3.8% of Great Britain’s total imports (1,730,000 barrels out of
46,000,000 barrels). This figure
would contract to only 3.2% in 1927 (1,560,000 barrels out of 49,000,000
barrels).89 But London could
take comfort in the increase in Persian production, which the Petroleum
Department expected would
double over the next decade, with the surplus going to Britain since
there was no other market for it. The
department also placed great hopes on Iraq: “It is obvious that the
discovery of a field with a production
equivalent to that of Persia, in Iraq, with the completion of pipe lines
to the Mediterranean would have a
great effect on the oil situation.”90
New discoveries and improved extraction and refining techniques had
rejuvenated the industry since
the postwar “oil scare,” and there was even cautious optimism in London
about the prospects for
conservation within the United States.91 The Petroleum Department also
took note of efforts by Jersey
88

Oil Fuel Board, “Oil Supplies of the World: Memorandum prepared in the
Petroleum Department, Board of
Trade,” July1926, O.B. 19, CAB 50/3.
89
By 1928, the British Government had to concede that “on present evidence
the possibility of any considerable
increase in Empire production… appears remote.” Petroleum Department,
“Petroleum Industry in the British
Empire,” February 1928, POWE 33/253. Part of the problem was that only
one-tenth of imperial production
actually found its way to Great Britain. In trying to find a way to
address this imbalance, a supplementary note to the
aforementioned report concluded that “it is very doubtful whether a
preferential rate of duty on empire produced oil
would have any useful effect.” “British Empire Production: Supplementary
note in reply to [the] points raise by Mr.
Grylls,” no date or author (handwritten notation reads: “H.P.W.G.[,] Feb:
1928”), POWE 33/253.
90
Oil Fuel Board, “Oil Supplies of the World: Memorandum prepared in the
Petroleum Department, Board of
Trade,” July1926, O.B. 19, CAB 50/3. Of course, Middle Eastern oil could
only be used if the major oil companies
holding the concessions in Persian and Iraq invested in expanding local
pipeline capacity. Accordingly, the Oil
Board was pleased to note in February 1927 that Anglo-Persian would
complete later that year a third pipeline from
its Persian oilfields to the APOC refinery and port at Abadan, increasing
the amount of oil that could be pumped
from 4,750,000 tons to 7,000,000 tons per annum. APOC was also devoting
“close attention” to the matter of
expanding the output of its Abadan refinery. C.P. Hermon-Hodge (Joint
Secretary, Oil Board), “Persian Oil Field –
Increase in the Potential Trans [sic] from Oil Field to Abadan and
Refinery Facilities to Deal with the Extra Crude,”
26 February 1927, O.B. 22, CAB 50/3.
91
Such hopes proved unduly optimistic. As the Oil Board’s Fifth Annual
Report explained, the U.S. Government’s
efforts to limit production in 1929 to the 1928 level had incurred the
wrath of independent producers. Until

130
Standard, Shell, and APOC to control over-production during a conference
at the Achnacarry Castle in
the autumn of 1928 (the so-called “As Is” Agreement).92 In order to avoid
future outbreak of price-cutting
due to overproduction, signatories of the original agreement (plus
supplements signed in 1930, 1932, and
1934) agreed to respect existing markets for oil “as is” in order to
stabilize the existing market.
Signatories also agreed to abide by a complicated pricing formula that
used the price of oil at the Gulf of
Mexico as the benchmark.93 Since the United States was the largest
producer of oil at the time and the
largest exporter until it was overtaken by Venezuela in the late-1920s,
it made sense to use the price in
Gulf of Mexico as a benchmark. Companies operating in the Middle East had
little incentive to
undercharge their customers when they could always add the “phantom
freight” from Texas to the price
they added to the f.o.b. price to equalize the c.i.f. price with that of
oil from the Gulf of Mexico. Until a
second basing-point in Abadan was established in 1945, every government
“strong” or not, paid for “oil
as if it had been pumped and shipped from Texas, a costly fantasy to
which all the great powers of the era,
capitalist and noncapitalist alike, duly adhered.”94
The fact that Britain was dependent on foreign supplies, while not
desirable, was not considered
crippling. Only two great powers, the United States and Soviet Union,
enjoyed the luxury of significant
Washington secured legal authority to enforce conservation, “it is [too]
early to say whether it is likely to be finally
successful.” Lord Thomson (Secretary of State for Air; President of the
Oil Board), et al., “Oil Board: Fifth Annual
Report,” 01 July 1930, O.B. 51 (also C.I.D. Paper No. 1007-B), CAB 50/3.
As late as 1931, with the U.S. oil
industry in the midst of an existential crisis following the discovery of
the East Texas field the previous October,
industry executives such as Arthur Hearn (formerly of the Admiralty and
now a member of APOC’s Board of
Directors) continued to hope that the United States was “slowly attaining
a great comprehension of its
responsibilities in regard to oil” to the rest of the world. “The Oil
Industry in the Post-War Period,” 05 June 1931, no
author (almost certainly Hearn, since the file enclosing the article
bears his name), enclosed with H.T. Kemp to T.L.
Jacks (APOC representative in Persia), 26 June 1931, BP 30153.
92
Petroleum Department (Board of Trade), “Oil Production and Development:
General review of outstanding points
of importance,” no date (circa 1929), O.B. 32, CAB 50/3.
93
U.S. Senate, Select Committee on Small Business, International Petroleum
Cartel (Reprint), 94th Congress, 1st
Session (Washington, DC: U.S. GPO, 1975), 197-210, 352-356. A copy of the
agreement is reprinted as Appendix
III to: J.H. Bamberg, The Anglo-Iranian Years, 1928-1954, vol. 2 of The
History of the British Petroleum Company
(Cambridge: Cambridge University Press, 1994), 528-534.
94
Gregory Nowell, Mercantile States and the World Oil Cartel, 1900-1939
(Ithaca: Cornell University Press, 1994),
199, 221-222. Even companies or countries that did not join the
Achnacarry cartel (e.g. the Soviet Union) ended up
abiding by its provisions, since they had much to gain from selling oil
at an artificially established price and lacked
the downstream capacity to challenge the majors through price-cutting.
Bamberg, History of BP, 107-117; John
Blair, The Control of Oil (New York: Pantheon Books, 1976), 54-63, 113-
115; Jonker and Zanden, History of Shell,
278-282; Nowell, World Oil Cartel, 191-200; Sampson, Seven Sisters, 105-
108; and Mira Wilkins, The Maturing of
Multinational Enterprise: American Business Abroad from 1914 to 1970
(Cambridge: Harvard University Press,
1974), 87-88, 233-234.

131
domestic production, and there was no expectation by the early-1930s that
Britain would be fighting
either of them. Most of Britain’s possible rivals – Japan, Italy, and
Germany – lacked London’s relatively
easy access to overseas supplies, and its close relationship to a major
oil-producer such as the United
States. The latter was still a major supplier of Britain: well over 40%
of U.S. oil exports in 1927
(6,859,505 tons) went to the British Empire, and roughly 40% of Great
Britain’s imports in 1926 came
from the United States.95 Even if the United States banned exports to the
British Empire, the British still
expected to deal with U.S. oil companies in Latin America and import U.S.
oil indirectly from those
markets into which it would be diverted if it was denied entry into the
empire.96
Close scrutiny of British planning documents reveals, however, a more
alarming picture. In 1925, the
CID established the Oil Fuel Board (renamed the Oil Board in 1927)
chaired by a cabinet minister and
staffed by representatives from both the armed services and various
government departments to gauge
Britain’s oil and tanker requirements in wartime, determine sources of
supply, and to offer
recommendations to the CID to rectify any shortfalls.97 In 1924, the
Admiralty had tried to bludgeon its
way into controlling the allocation of both “oil fuel” (fuel oil and
diesel) and tanker tonnage in wartime.
The Admiralty based it claim on the fact that it would be Britain’s
single-largest consumer of petroleum
products in wartime. Britain’s survival also depended on the Admiralty’s
ability to keep the sea lanes
open, particularly imports of food. The Board of Trade (backed by
departments such as the Air Ministry)
took umbrage at the idea of granting control over a vital resource to the
military. Since oil was as vital to
the civilian economy as it was to the military, it made sense to create
an interagency committee
answerable to the Cabinet that would scrutinize Britain’s wartime oil
requirements and determine

95

J.J. Llewellin (Civil Lord of the Admiralty; Chairman of the Oil Board),
et al., “Oil Board: Thirteenth Annual
Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B), CAB
50/7. Figures for 1927 are unavailable.
96
“Some brief notes on the possible effect of a prohibition by the United
States Government of [the] export of
Petroleum to British Empire countries,” no author or date (probably the
Petroleum Department; circa 1928), POWE
33/765.
97
C.P. Hermon-Hodge (Joint Secretary), “Oil Fuel Board: Composition and
Terms of Reference,” 01 May 1925,
O.B. 1, CAB 50/3. The Oil Fuel board was initially chaired by James
Stanhope (Civil Lord of the Admiralty), while
William Peel (First Commissioner of Works) served as the president.
132
allocations between the military and civilian economy.98 No action was
taken to resolve this impasse until
1925, when the Principal Supply Officer’s Committee (the logistical
planning arm of the CID) completed
an alarming assessment of Britain’s oil supply position.99
This committee estimated Britain’s military and civilian oil requirements
in wartime during the first
year of operations at 11,169,620 tons fuel oil; 355,025 tons of aviation
fuel (plus 97,509 tons of benzol, a
type of synthetic fuel derived from the burning of coal in coke ovens);
1,680,760 tons of motor fuel;
415,762 tons of kerosene; and 166,000 tons of lubricants. The largest
single consumer was the Admiralty,
whose annual requirements of fuel oil during a war against a major rival
naval power totaled 7,139,000
tons, whereas Britain’s existing stocks throughout the empire amounted to
3,260,000 tons. As for the
Army, assuming a starting force of five infantry and one cavalry
divisions that would swell to 39
divisions by the end of the first year of hostilities, its annual demand
for motor fuel would total 600,000
tons. The RAF would require 473,924 tons worth of aviation and motor
fuel, and benzol. Finally, the
BOT estimated civilian, industrial, and merchant marine demand at
approximately 5,550,000 tons of oil
products. Another pressing issue was the tanker shortage. The report
estimated that Britain would require
470 tankers, with an average carrying capacity of 7,300 tons. In 1923,
Britain could only rely upon 312
tankers, whose gross carrying capacity was 1,691,257 tons, about half of
what was required. By the time
war broke out, even if Britain’s tanker fleet expanded, the best the
committee could hope for was that the
tonnage deficit “might be improved by assistance forthcoming from America
or other sources […].”100

98

C. (Chelmsford), “Oil Fuel: Admiralty Control in War Time: Memorandum by

the First Lord of the Admiralty,”
03 July 1924, 500-B; S.W. (Sidney Webb), “Oil Fuel: Control in War Time:
Memorandum by the President of the
Board of Trade,” 16 July 1924, 501-B; C., “Oil Fuel: Admiralty Control in
War Time: Memorandum by the First
Lord of the Admiralty,” 23 July 1924, 506-B; T. (Lord Thomson), “Oil
Fuel: Control in War Time: Memorandum
by the Secretary of State for Air,” 25 July 1924, 507-B; and S.W., “Oil
Fuel: Control in War Time: Memorandum by
the President of the Board of Trade,” 25 July 1924, 509-B; all in: CAB
4/11.
99
The key source on the operations of the Oil Board is Orest Babij’s “The
Royal Navy and Inter-War Plans for War
against Japan: The Problem of Oil Supply,” in: Merchant Marine in
International Affairs, 1850-1950, ed. Greg
Kennedy (London: Frank Cass, 2000), 84-106. The only shortcoming of this
article is its narrow focus on logistical
issues, as Babij does not relate his findings to Britain’s overall
postwar oil policy.
100
Noel Birch (Chairman of the Principal Supply Officer’s Committee, CID),
et al., “Control of Oil Fuel in War:
Report,” 28 February 1925, P.S.O. 37 (also 579-B), enclosed with: Hermon-
Hodge (Oil Board) to the CID, 01 May
1925, O.B. 2, CAB 50/3. The report’s major recommendation to the CID was
it “should appoint a Standing SubCommittee, to be called the Oil Fuel
Board,” to make annual reports to the CID in peacetime, and, in wartime,
advise the CID and all concerned departments how “to conserve and
maintain adequate supplies [of oil], including

133
The tanker shortfall was especially troubling to the Royal Navy. The
Admiralty estimated that it
would need 1,603,000 tons worth of tanker tonnage to convey the Royal
Navy’s annual requirements of
fuel oil. A further 24,000 tons would be required to carry the 83,000
tons of light petroleum products
required by the Admiralty annually in wartime. The Admiralty’s own tanker
fleet only totaled 260,000
tons, while the combined tonnage of every British tanker larger than
3,000 tons only equaled 2,300,000
tons. In other words, the Admiralty would tie up almost 70% of Britain’s
available tanker tonnage,
leaving the other the armed services and the civilian sector to divide up
the remaining 30% and whatever
neutral tonnage Britain could lay its hands on.101
One year later, the Admiralty advised the Oil Fuel Board that, under
ideal circumstances, its reserves
should equal “approximately 7 million tons laid down in suitable
strategic locations” to cover an
estimated wartime demand of 7,451,990 tons. During the first year of
hostilities in the Far East, 48% of
the Admiralty’s requirements (3,558,100 tons) would be drawn from
reserves while the remainder
(3,893,890 tons) would be imported. Existing stocks on January 1926 were
3,190,800 tons short of the
desired figure, which meant that if war broke out that year, the
Admiralty would have to import an
additional 3,768,740 tons on top of the aforementioned 3,893,890 tons to
make up the existing shortfall in
reserves (as well as fuel British tankers). This doubling of the Royal
Navy’s oil import requirements
meant that a further eighty-three tankers would have to be enlisted into
Admiralty service for that year
(either to carry the oil or serve as floating storage tanks). As for the
additional oil itself, the entire amount
would have to be imported from the United States, Mexico, or Venezuela,
with 2,243,650 tons (almost
60%) going to Great Britain, while the remainder was divided between
eleven different stations, the most
important of which was Singapore, which would require an additional
680,000 tons.102
the provision of tanker tonnage,” with special emphasis on fulfilling the
needs of Admiralty. The report also
suggested “that every effort should be made to encourage and expedite
research on the problem of [domestic] Oil
Production,” including synthetic production.
101
“Departmental Requirements of Oil Fuels,” Appendix A to: Birch (Chairman,
Principal Supply Officer’s
Committee, CID), et al., “Control of Oil Fuel in War: Report,” 28
February 1925, P.S.O. 37, CAB 50/3.
102
W.A. Egerton (Director of Plans) and J.W.L. Oliver (Director of Stores),
“Admiralty Estimate of Requirements
of Oil Fuel during the First Year’s Hostilities for a War in the Far East
(Previous Reference O.B. 4): Note by
Admiralty as to modifications necessary on the stock position on 1st
January 1926,” 22 March (Oliver) and 25
March (Egerton) 1926, O.B. 16, CAB 50/3.
134
In 1927, the CID assigned the Oil Board with the task of evaluating the
requirements of the Admiralty
(and, eventually, the War Office and Air Ministry) during a Far Eastern
War (i.e. Japan).103 For the next
eight years, the Oil Board confined itself to examining “at a rather
leisurely pace” Britain’s oil needs in
the event of a war against either Japan or (after 1929) the Soviet Union
in Afghanistan.104 The Oil Board
operated from 1926 until its dissolution at the outbreak of the Second
World War, when the Petroleum
Department assumed its functions. During its existence, the Oil Board
produced thirteen annual reports,
while its various sub-committees produced dozens of studies concerning
everything from synthetic oil
production to the size and shape of oil containers to be used by the
Army.105 The annual reports also
included estimates from the armed services and from the BOT or Petroleum
Department regarding
wartime military and civilian consumption and requirements, as well as
the number of tankers needed and
available to haul the oil.
In its first Annual Report from 1926, the Oil Board provided the
following estimates for oil
consumption in the event of a Far Eastern War in 1937: 7,451,900 tons of
fuel oil for the Admiralty;
226,500 tons of gasoline for the Army; and 181,250 tons of aviation fuel,
fuel oil, gasoline, and benzol for
the RAF. Civilian consumption would rise from 4,879,000 tons of all oil
products to 7,459,000 tons
between 1925 and 1937. Britain would require 467 tankers of over 3,000
tons to transport the necessary
imports (221 for military needs, 136 going to Great Britain for civilian
purposes, and 110 to supply the
civilian needs throughout the empire). The Oil Board estimated that, by
1937, 482 tankers of British,
Admiralty, and neutral registry (including U.S. vessels) over 3,000 tons
would be available, leaving a
surplus of fifteen tankers. As of 1926, however, there was a shortage of
sixty-two tankers: 459 required

103

Hermon-Hodge (Oil Board), “First Annual Report: Note by the Secretary,”

25 February 1927, O.B. 21, CAB
50/3.
104
The official historian of the British oil industry the Second World War
criticizes the Oil Board for its lack of
productivity during its decade in operation: the board took four years to
draft a supply plan in the event of a Far
Eastern War with Japan and met only three times between 1926 and 1930.
Payton-Smith, Oil, 40.
105
The early history of the Oil Board is summarized in: Payton-Smith, Oil,
39-40. The annual reports are numbered
and located as follows: O.B. 20, 24, 33, 39, 51 (CAB 50/3); 71, 83 (CAB
50/4); 122, 134, 147 (CAB 50/5); 184, 230
(CAB 50/6); and 294 (CAB 50/7).

135
versus 397 available.106 As of 1925, only 7,000,000 tons out of the
18,000,000 tons of oil consumed
within the empire came from imperial or British-controlled sources. The
Oil Board concluded that while
the “safety and control” of the Persian oilfields was “a matter of vital
importance,” Britain had to
maintain the goodwill of the United States, since “a very large part of
the total requirements of the Empire
has to be met by the imports of refined products from the United States
of America.”107
Among the perennial issues mentioned within the Oil Board’s reports was
the constant shortage of
tankers. Higher than expected increases in civilian consumption
exacerbated these shortages, which meant
that even the imposition of rationing would not eliminate the deficit.
The shortage of tankers was endemic
throughout the interwar period, and between 1926 and 1935, the shortfall
(even assuming civilian
rationing) ranged from a low of three in 1929 to a high of ninety-eight
in 1935. Only in 1930 did Britain’s
tanker requirements not exceed the available supply:
No. of Annual Report
(Date)
First Annual Report (1926)
Second Annual Report (1928)
Third Annual Report (1929)
Fourth Annual Report (1929)
Fifth Annual Report (1930)
Sixth Annual Report (1931)
Seventh Annual Report (1932)
Eighth Annual Report (1933)
Ninth Annual Report (1934)
Tenth Annual Report (1935)

106

Deficit
(With Civilian
Rationing)
62 (35)
60 (14)
49 (3)
64 (10)
56 (0)
85 (16)
74 (9)
83 (28)
69 (19)
98 (46)108

The Second Annual Report of the Oil Board added that if the British
Government had, in 1926, implemented
“severe rationing of Civil requirements… the deficit would have been
reduced to 35.” In 1927, the overall tanker
deficit was estimated at sixty tankers (fourteen in the event of “drastic
rationing”). William Peel (President of the Oil
Board), et al., “Oil Board: Second Annual Report,” 26 March 1928, O.B. 24
(also C.I.D. Paper No. 859-B), CAB
50/3.
107
Peel (President, Oil Board), et al., “Oil Fuel Board: First Annual
Report,” 31 December 1926, O.B. 20 (also
C.I.D. Paper No. 755-B), CAB 50/3.
108
These figures are drawn from the Oil Board’s annual reports (CAB 50/1 to
CAB 50/7). Figures in brackets refer
to the deficit remaining following the enactment of civilian rationing.

136
Britain’s Most Important Source of Oil: Venezuela, 1914-1933
Britain’s major success during the 1920s at diversifying its sources of
supply came not in the Middle
East, but rather, in South America. Before and immediately after the
First World War, Shell had
dominated the Venezuelan oil industry.109 Under Henri Deterding’s
leadership, the group had adopted the
“straight-line” strategy of supplying markets from the nearest available
source. Since Shell wished to
expand its presence in the Western Hemisphere, it moved aggressively to
acquire upstream operations in
the United States, Mexico, and most importantly Venezuela. Having
acquired an pre-existing concession
in 1913, Shell started production in 1916 and found one of the world’s
richest oilfields (Barroso No. 2)
around Lake Maracaibo in 1922.110 Meanwhile, U.S. major companies such as
Jersey floundered for years
despite expenditures of $27,000,000 until it finally struck oil in
commercial quantities in 1928 and took
control over a successful independent British oil company in Venezuela
(Creole Petroleum).111
Before the war, Standard Oil and its subsidiaries (such as Waters-Pierce)
had dominated the Latin
American oil trade either as an exporter of U.S. crude or through
marketing agreements with small British
companies active in South America (Peru) until independent operators such
as Weetman Pearson and
Edward Doheny struck oil in Mexico and built their own vertically
integrated companies after 1909.
Nevertheless, the prewar British economic and financial presence in the
region dwarfed that of the United
States. In 1913, Britain sent 10% of its exports to Latin America, and it
received an equivalent percentage
of the latter’s exports. Latin America also received 25% of Britain’s
direct and portfolio investment,
which had increased from £80,000,000 to £1,100,000,000 between 1890 and
1913. U.S. foreign
109

Except where indicated, the following discussion is based upon: Jonathan

Brown, “Why Foreign Oil Companies
Shifted Their Production from Mexico to Venezuela during the 1920s,”
American Historical Review 90: 2 (1985):
375-386; Jonathan Brown and Peter Linder, “Oil,” in: The Second Conquest
of Latin America: Coffee, Henequen,
and Oil During the Export Boom, 1850-1930, ed. Steven Topik and Allen
Wells (Austin: University of Texas Press,
1998), 126-187; Jonker and Zanden, History of Shell, 244-251; Henrietta
Larson, Evelyn Knowlton, and Charles
Popple, New Horizons, 1927-1950, vol. 3 of History of Standard Oil
Company (New Jersey) (New York: Harper &
Row, 1971), 132-144; B.S. McBeth, British Oil Policy, 1919-1939 (London:
Frank Cass, 1985), 86-120; B.S.
McBeth, Juan Vicente Gómez and the Oil Companies in Venezuela, 1908-1935
(Cambridge: Cambridge University
Press, 1983), 1-4, 65-66, 205-206; and Stephen G. Rabe, The Road to OPEC:
United States Relations with
Venezuela, 1919-1976 (Austin: University of Texas Press, 1982), 3-93.
110
Brown and Linder, “Oil,” 135-139 and 146-149.
111
Jonker and Zanden, History of Shell, 244-246; Larson, Knowlton, and
Popple, New Horizons, 41-42, and 134.
Jersey would end up spending about $40,000,000 before it finally began
exporting Venezuelan crude: Brown,
“Shifted Their Production,” 377-379.

137
investment during this period also grew impressively (from $308,000,000
to $1,600,000,000 between
1897 and 1913), but it still lagged far behind that of Britain as of
1914.112
The World War sped up the process by which the United States came to
exercise political and
economic predominance over Latin America, as Britain liquidated its
foreign assets to pay for the war
effort. By 1929, U.S. foreign investment in Latin America had increased
to $3,462,000,000, which was
probably the year that the United States surpassed Britain in this
category.113 That year, U.S. investment
in the Venezuelan oil industry was more than double the figure in 1924
($75,000,000 vs.
$161,600,000).114 After the postwar “oil scare,” the U.S. Government and
major oil companies also
sought to expand the U.S. presence within the oilfields of South America,
especially Venezuela.115
Having run into British obstinacy in Iraq, the U.S. Government tried to
dislodge the British from
Venezuela. Relations had warmed after 1922 when Britain consented to U.S.
participation in the Turkish
Petroleum Company (TPC), and although it tolerated Shell’s “initial
economic predominance” in
Venezuela, according one historian, Washington continued to press for
“U.S. economic hegemony,” for
example by helping to block APOC from acquiring a concession.116
Shell’s position was secure but in decline. As of 1928, it controlled
125,000 barrels worth of
production in Venezuela per day, compared to nil for Jersey, and 148,000
barrels per day across Latin
America (including 25,000 barrels per day in Mexico), compared to 89,300
barrels per day for Jersey.117
But Shell’s market share (particularly in the United States) did not keep
pace with its share of production,

112

Paul Garner, British Lions and Mexican Eagles: Business, Politics, and
Empire in the Career of Weetman
Pearson in Mexico, 1889-1919 (Stanford: Stanford University Press, 2011),
16-18.
113
Rabe, Road to OPEC, 195. U.S. investment in Central America was greater
than that of Britain as early as 1919,
while Canada followed in 1922. Wilkins, Maturing, 155.
114
Brown, “Shifted Their Production,” 380.
115
In 1919, U.S. oil companies maintained 28% of their capital in North
America and 17% in South America,
whereas in 1939, the figures were 12% in North America and 42% in South
America. Brian McBeth, “Venezuela’s
Nascent Oil Industry and the U.S. Tariff on Crude Oil Imports, 1927-
1935,” Journal of Iberian and Latin American
History 27: 3 (2009): 435.
116
Rabe, Road to OPEC, 22-33. APOC had expressed interest in purchasing
concessions in Latin America,
particularly in Venezuela, but had to back off due to the prevalence of
legislation prohibiting the sale or operation of
concessions by companies associated with a foreign government. Ferrier,
History of BP, 551-561; and Bamberg,
History of BP, 144-146.
117
The imbalance was even more pronounced in terms of refining throughput:
318,000 barrels per day for Shell
compared to 47,000 for Jersey. Brown and Linder, “Oil,” 139.

138
and it slowly lost ground to capital-rich competitors such as Jersey,
which gobbled up smaller companies
such as Creole.118 Over the course of the 1920s and 30s, Gulf Oil,
Jersey, and the Standard Oil Company
of Indiana (before it sold its Venezuelan and Mexican subsidiaries to
Jersey in 1932, the former – Lago
Petroleum – being the largest U.S.-owned producing company in Venezuela
that year) eroded Shell’s
position, from 99% of Venezuelan output in 1922, to 51% in 1933, and only
one-third by 1939, even
though the group’s production in 1939 was double that of 1928.119 In just
twelve years (1927 to 1939),
Jersey’s production went from nil to 273,000 barrels per day – about 40%
of its entire global output.120
U.S. investment in Venezuela (overwhelmingly concentrated in the oil
industry) more than doubled from
$75,000,000 to $161,600,000 in just five years (1924 to 1929).121 From
1929 until nationalization in 1976,
U.S. companies accounted for more than half of Venezuela’s production,
and by 1945, the largest
operator in Venezuela was Jersey’s subsidiary (Creole), which alone
accounted for half of the country’s
output, whereas Shell still produced only one-third.122
The oil companies’ investments in Venezuela paid off handsomely.
Production started slowly at
121,000 barrels in 1917, the year that exports began. Venezuelan output
skyrocketed following the major
oil strike on the shore of Lake Maracaibo. Between 1921 and 1935,
Venezuelan production rose from
240,000 tons to 15,100,000 tons, and the country became the world’s
second-largest oil producer for two
years before the Soviet Union overtook it in 1931.123 In 1928, oil wells
in Venezuela were three times
more productive than the most prolific state in the United States,
California (1,252,900 barrels per year
vs. 454,000 barrels), with over 80% of all wells drilled producing oil
before 1935, and a cost of
production less than one-third that of the United States ($0.65 vs. $1.98
in 1931).124 Mexico was not even
118

Brown and Linder, “Oil,” 148.

Jonker and Zanden, History of Shell, 249-251; McBeth, “Venezuela’s
Nascent Oil Industry,” 430; McBeth,
Venezuela, 64; Rabe, Road to OPEC, 33-42; and Wilkins, Maturing, 32.
120
Larson, Knowlton, and Popple, New Horizons, 144.
121
Brown and Linder, “Oil,” 148. U.S. oil investment in Venezuela averaged
roughly 95% of total U.S. investment
in the country between 1929 and 1940. McBeth, “Venezuela’s Nascent Oil
Industry,” 435-436.
122
Brown and Linder, “Oil,” 169-171; McBeth, British Oil Policy, 92-93; and
Rabe, Road to OPEC, 34.
123
Jonker and Zanden, History of Shell, 249; McBeth, Venezuela, 63; Rabe,
Road to OPEC, 196-197.
124
McBeth, Venezuela, 1-2. Between 1922 and 1935, each oil well in Venezuela
yielded 72,769 barrels of oil,
whereas the average U.S. well produced only 2,804 between 1933 and 1935.
McBeth, “Venezuela’s Nascent Oil
Industry,” 430-431.
119

139
close: per day production of new wells drilled in 1928 was 268 barrels
compared to 1,376 barrels in
Venezuela. The major oilfields in Venezuela were also closer to New York
and Britain than the major
Mexican oil port (Tampico), and only 644 miles from the Panama Canal,
which meant that Venezuelan
oil was “favorably situated” to supply markets around the world,
including the eastern United States,
where it was cheaper than domestic crude oil.125
Shell and Pan American Petroleum and Transport (a subsidiary of Indiana
Standard since 1925) built
major refineries on the islands of Curaçao during the First World War and
Aruba in the 1920s,
respectively, to process Venezuelan crude oil and facilitate exports to
Europe.126 In 1928, Venezuela
replaced the United States as the world’s largest oil exporter, and by
1936, it exported almost as much oil
(43,050,000 tons) as the next seven leading exporters combined – the
United States, Peru, Iran, Romania,
the Dutch East Indies, Iraq, and the Soviet Union (44,390,000 tons).127
Venezuela’s exports in 1930
(20,000,000 tons) were more than double Britain’s entire imports
(9,000,000 tons) that year.128
Political conditions in Venezuela were also much more favorable to the
oil companies than in either
Mexico or even the Middle East (much less the Soviet Union).129 In the
case of the Mexico, besides
endemic political instability after 1910, output from existing oilfields
within the “Golden Lane” collapsed
over the course of the 1920s due to saltwater contamination. Mexico also
received twice as much in
125

Brown, “Shifted Their Production,” 381-382; McBeth, British Oil Policy,

93; and McBeth, Venezuela, 1-2. The
U.S. Tariff Commission estimated that deliveries of U.S. oil to the
Eastern Seaboard cost $1.89 per barrel, compared
to $0.87 from Venezuela. McBeth, “Venezuela’s Nascent Oil Industry,” 441;
and Rabe, Road to OPEC, 59.
126
By the end of the 1920s, the Curaçao refinery handled 80% of Shell’s
Venezuelan production (140,000 barrels
per day). Brown and Linder,” 147-148. Jersey and Shell’s refineries had a
combined throughput of 17,000,000 tons
per year by 1935: 8,000,000 tons each for Jersey’s Aruba facility and
Shell’s Curaçao refinery, plus another
1,000,000 tons at a smaller Shell installation at Aruba. “Brief Survey of
the Principal Oil Producing Countries,” no
date or author, enclosed with: G.W.C. Norfolk (Joint Secretary, Sub-
Committee on Petroleum Products Reserves,
Oil Board, CID), 26 June 1936, O.B. (P.R.) 14, CAB 50/14.
127
Helmut Mejcher, “The International Petroleum Cartel (1928), Arab and
Turkish Oil Aspirations and German Oil
Policy towards the Middle East on the Eve of the Second World War,” in:
Oil, the Middle East, North Africa and the
Industrial States, ed. Klaus Jürgen Gantzel and Helmut Mejcher
(Paderborn: F. Schöningh, 1984), 32-33; and
Reichs-Kredit-Gesellschaft AG, Ke/Schr., “Treibstoffwirtschaft in der
Welt und in Deutschland,” April 1938,
NARA, RG 242, T-84/51 (EAP 66-c-2-10/22).
128
Petroleum Department, “International Control of Petroleum,” 24 October
1932, POWE 33/461.
129
For a contemporaneous perspective on the shift in the geographical
distribution of world production during the
1920s (from Mexico and Russia to Venezuela and Persia), see: Arthur Huber
Redfield (U.S. Bureau of Mines),
“Petroleum Resources of Foreign Countries and Outlying Possessions of the
United States,” Appendix C to:
Department of the Interior, Report III of the Federal Oil Conservation
Board (Washington, DC: U.S. GPO, 1929),
52-53.

140
revenues per barrel as did Venezuela between 1922 and 1930, and even
after 1931, the latter’s revenues
per barrel were still less than 80% those of the former, largely because
the Venezuelan oil laws of 1922
and 1928 only increased royalties on properties leased after 1922.130
Although Venezuela’s oil laws
granted Caracas a larger share of share of revenues per barrel than
Middle Eastern governments received
($0.23 per barrel vs. $0.21 per barrel), they also encouraged competition
and investment in Venezuela. By
contrast, most of the Middle Eastern concessions were held by a single
firm or joint venture, which
allowed the concessionaries to stifle production to promote price
stability. The cost of production was
slightly higher in Venezuela than in the Middle East ($0.52 vs. $0.44),
which meant that the companies
earned a higher per barrel profit from the latter than the former ($0.88
vs. $0.66).131
Venezuela was, however, better suited geographically to supply world
markets due to its close proximity
to markets in the United States and Europe. Since the oilfields also lay
close to the Atlantic Ocean, output
could be moved relatively easily without expensive pipelines.132 The
absence of any antitrust regulations
in the country allowed companies to pool their properties and implement
unit operation, which
maximized the long-term yield of the oilfields.133
Venezuela also benefitted from developments in the United States, where
Venezuela had already
surpassed Mexico by 1927 to become the largest source of U.S. oil imports
(31,468,000 barrels including
exports from the Dutch West Indies vs. 26,019,000 barrels) and accounted
for 70.6% of U.S. imports by
130

Brown, “Shifted Their Production,” 381-382; and McBeth, Venezuela, 66.

McBeth does not specify whether the
revenues paid by the oil companies in Mexico went to the Federal
Government or to various landowners, who
retained ownership of subsoil resources on territories leased prior to
the promulgation of 1917 Constitution. Exact
figures about how much land the British and U.S. oil companies leased as
opposed to owned is unavailable.
According to the most detailed survey of land tenure by the foreign oil
companies in Mexico before 1938, anywhere
between half to three-quarters of the land held by the oil companies (as
much 24,000,000 acres prior to
nationalization) was leased. Myrna Santiago, The Ecology of Oil:
Environment, Labor, and the Mexican Revolution,
1900-1938 (Cambridge: Cambridge University Press, 2006), 67-70. See also:
Brown, “Shifted Their Production,”
368-369; and Linda Hall, Oil, Banks, and Politics: The United States and
Postrevolutionary Mexico, 1917-1924
(Austin: University of Texas Press, 1995), 18. Rents varied widely, from
$2.50 to $200 per acre, while royalties
“usually” fluctuated from 5% to 15% of the value of the oil produced. As
with land tenure patterns, hard figures on
the amounts of money paid by the oil companies in rents and royalties are
sketchy: by the “mid-1930s,” Mexican
Eagle was paying $1,100,000 to $1,250,000. Lorenzo Meyer, Mexico and the
United States in the Oil Controversy,
1917-1942 (Austin: University of Texas Press, 1977), 18.
131
McBeth, Venezuela, 65-66.
132
Venezuela was an outlier even within South America, where many of the
existing oilfields lay within jungles that
were relatively inaccessible. Ernst Jung, “Ölleitungen Früher und Jetzt,”
Vierjahresplan, 1942: II.
133
Larson, Knowlton, and Popple, New Horizons, 138.

141
1929-1930.134 In June 1932, U.S. independent producers finally convinced
the U.S. Congress to impose a
major tariff on imported oil. The tariff varied from $0.21 per barrel for
crude oil to $1.05 per barrel of
gasoline and $1.68 per barrel of lubricants.135 U.S. companies could also
still freely import crude oil into
the United States for refining before re-exporting it to Europe.136 By
closing access to U.S. markets, the
tariff redirected Venezuelan oil to Europe. Venezuela now replaced the
United States as the most
important source of imports until 1948, when the Middle East came on-
stream.137 Venezuela’s share of
European crude oil imports rose from 13.4% in 1928 to 21.4% in 1933,
while the U.S. share fell from
38.8% to 18.6%. This trend was most noticeable in Britain, where
Venezuela’s share of imports rose from
17% to 49% during the 1930s.138
Britain was now awash in oil from a source besides the United States and
Iran. The only problem was
that this new source – Venezuela – was not the one London had been
counting upon. In spite of its
promise and the discovery of a massive oilfield near Kirkuk in 1927, as
the 1930s began, Iraq had yet to
deliver any meaningful quantities of oil to Europe.

134

Brown, “Shifted Their Production,” 384; and McBeth, “Venezuela’s Nascent

Oil Industry,” 432. After taking into
account the varying transportation costs and the value of the refined
products extracted (U.S. crude oil being
significantly more expensive to produce and transport but more valuable
in terms of the refined products it yielded),
Venezuelan crude oil enjoyed a price advantage over U.S. crude oil of
$0.45 before the 1932 tariff and $0.25
afterwards. McBeth, “Venezuela’s Nascent Oil Industry,” 442 and 455.
135
McBeth, “Venezuela’s Nascent Oil Industry,” 452-454. Consider that U.S.
crude oil prices in 1931 varied from
$0.39 per barrel to $0.83 per barrel (with East Texas at $0.56).
DeGolyer, Petroleum Statistics, 107.
136
McBeth, “Venezuela’s Nascent Oil Industry,” 455.
137
Fears of a tariff also prompted Standard of Indiana to sell off its major
upstream, transportation, and refining
operations in Latin America (including its oil refinery in Aruba) to the
Standard Oil Company of New Jersey
(Jersey) in April 1932 – a month before passage of the tariff – for
$140,000,000 due to fears that it would soon lose
access to its major downstream market (the United States). This move also
helped Jersey to overtake Shell as the
major producer in Venezuela. Larson, Knowlton, and Popple, New Horizons,
47-50; and Wilkins, Maturing, 207211. See also: Rabe, Road to OPEC, 55.
Shell’s official history mistakenly claims that the U.S. Government
“banned foreign oil imports” and misses the true significance of the
tariff upon the international oil trade and
Venezuela in particular. Jonker and Zanden, History of Shell, 251.
138
McBeth, “Venezuela’s Nascent Oil Industry,” passim (esp. 453-454);
McBeth, British Oil Policy, 93-94; and
McBeth, Venezuela, 204-205. The tariff was modified twice: first in 1939
under the terms of a trade agreement with
Venezuela, which halved the duty on imports of Venezuelan crude up to a
figure less than or equal to 5% of the total
U.S. supply that year (55,000,000 barrels in 1938); and again in 1942,
when Washington halved the duties on
imported crude and fuel oil while lifting existing import quotas for “all
friendly countries.” “Note on United States
Tariff Policy,” Appendix II (B) to: Ministerial Oil Committee, “Oil
Policy,” no date (circa April 1944), M.O.C. (44)
5, POWE 33/1399.

142
Pipeline Politics, 1929-1931
Britain, Iraq, and Turkey finally reached a settlement on the Mosul
question in 1926, and in October
1927, the TPC struck oil at Baba Gurgur, near Kirkuk. The British
presence in Iraq, long an albatross
around the neck of postwar governments, might finally yield significant
strategic and commercial
benefits. Whereas London had been spending £20,000,000 per annum on Iraq
in 1920-1921, by 1929 the
cost of the British presence would be a mere £500,000. The discovery of
oil in 1927 had “transformed the
economic aspect of the question. We have now to consider our position in
relation to what may well
become one of the principal oil-fields of the world.”139 Before Britain
could reap the rewards of its
investment, however, a pipeline to transport this new oil from northern
Iraq to the Mediterranean would
have to be constructed. The route of the IPC pipeline – finally completed
in1934 – proved to be a thorny
matter. The British Government (prompted by the Admiralty and the
Colonial Office) pushed for the
pipeline to pass through British mandates of Transjordan and Palestine
before terminating at Haifa for a
variety of strategic and economic reasons. The French Government, by
contrast, preferred the northern
route via their mandates in Syria and Lebanon with a terminus at Tripoli.
Each side wanted its particular
mandates to enjoy the economic benefits of hosting the pipeline
(employment for local workers and
transit revenues), while the Admiralty expected to use Haifa as an
alternative source of fuel in Eastern
Mediterranean, assuming the IPC went ahead with its plans to build a
refinery there.
King Faisal of Iraq backed the British for a variety of reasons including
to support the fellow
Hashemite dynasty in Transjordan ruled by his brother, Abdullah. Faisal
also wanted to get even with the
French, who had ignominiously ejected him from Damascus in 1920 when he
had tried to establish an
independent Kingdom of Syria. To make matters even more complicated,
there was the Zionist

139

P (Sidney James Webb, Lord Passfield), “Our Position in Iraq: Memorandum

by the Secretaries of State for the
Colonies,” 18 July 1929, C.P. 214 (29), CAB 24/205. Hopes that oil would
place Iraq on its own feet financially
proved optimistic, at least before the war. That was only possible if
Iraq’s oil wealth encouraged foreigners to invest
in developing the country’s irrigation system. Dr. Paul Ruprecht,
“Finanzwesen und Erdöl im Irak,” MilitärWochenblatt, 126. Jahrgang,
Nummer 2 (11 July 1941).

143
“international brotherhood,” which hoped that a pipeline to and refinery
in Haifa would convince Britain
to “retain indefinitely the mandate for Palestine, without which Zionism
must perish.”140
The British Government’s policy was based on a variety of political and
military considerations, but
its support for a terminus at Haifa conflicted with the commercial
interests of the TPC/IPC. Since the
Tripoli line was shorter than the Haifa route (529 miles vs. 640 miles),
it would cost less to construct and
reduce the average cost per mile of pipeline (£8,500,000 vs. £11,000,000,
and £16,070 vs. £17,200).141
Due to the 100 mile differential, the cost to transport one ton of oil
worked out to 7/6d in the case of a
Tripoli terminus and 10/6d for a Haifa terminus. No matter where the
pipeline terminated, however, its
existence would do much to restore the cost competitiveness of Middle
Eastern oil compared to
production from the Gulf of Mexico. The issue was not the actual fob
price (cost exclusive of freight),
since the major oil companies had used the price at the Gulf of Mexico as
the benchmark for oil produced
anywhere around the world since 1921 (the so-called “Gulf-plus” pricing
system). Even if the companies
priced oil identically, there was still a significant price differential
between oil produced in the Western
Hemisphere from that of the Middle East. The major drawback of the latter
was the cost of transportation:
oil moving from the Persian Gulf to Britain had to travel 1,500 miles
farther than oil from the Gulf of
Mexico (6,500 miles vs. 5,000 miles). Suez Canal tolls also added 5/- per
ton to the final cost. Overall, the
cost of transportation per 100 miles was identical for oil from either
gulf (7/-) but because of the longer
journey from the Persian Gulf, Middle Eastern oil cost 37/6d per ton to
import to Britain, compared to
28/6d from the Gulf of Mexico.142
In March 1928, the Cabinet delegated responsibility for formulating the
government’s position to a
sub-committee of the CID chaired by James Stanhope (Civil Lord of the
Admiralty), which completed its
140

Good contemporary summaries of the issues at stake and players in

involved may be found in: L.S.A. (Amery),
“The Oil Position in Iraq,” 11 March 1929, C.P. 73 (29), CAB 24/202; and
“A Note on Possible Alignments of a
Trans-Desert Pipeline System,” 20 January 1930, no author, BP 68387.
141
Cadman, “Memorandum on Possible Alignments of a Trans-Desert Pipeline
System from Iraq to the
Mediterranean,” no date (circa 1930), enclosed with: “Letter and
Memorandum by Sir John Cadman to the Secretary
of State for Foreign Affairs [Arthur Henderson],” 20 March 1930, B.H.
(30) 2, Appendix I to: Committee on the
Baghdad-Haifa Railway and Pipeline, “Report,” 01 May 1930, C.P. 136 (30)
(also B.H. (30) 6), CAB 24/211.
142
Iraq Oil Committee, “Some Notes on the Present World Oil Situation in
Relation to the Iraq Oilfield and
Proposed Pipeline to a Mediterranean Port,” no date (circa May 1930),
I.O.C. (30) 5, CAB 27/436.

144
report three months later. The sub-committee concluded “that the Iraq
field had been far more completely
proved than had the Anglo-Persian Oil Company’s fields at the time when
the government decided to
invest in that company,” and “that the prospects of the future production
of large quantities of oil in Iraq
are sufficiently assured to justify the British Government in
endeavouring to secure the Baghdad-Haifa
alignment for the pipelines.” Cadman testified that the APOC was
interested in building a supplementary
line along the same route to transport Persian crude to the Mediterranean
in order to save money on Suez
Canal tolls, which were costing APOC £880,000 each year. Despite the fact
that a Tripoli terminus would
cost approximately £2,000,000 to £3,000,000 less to construct, along with
lower maintenance fees, the
government was determined to have a Haifa terminus “from the point of
view of security and the present
terminal facilities.” Britain’s partner in the Middle East, France,
presented numerous headaches. Besides
the possibility that the Royal Navy might not be able to take supplies of
oil delivered to Tripoli during a
war in which France was neutral, there was also the inconvenience of the
San Remo Agreement, which
guaranteed France 25% of the oil piped from Persia to the Mediterranean
through French mandates. The
sub-committee counseled patience, informing the Cabinet that it did “not
think that any action is
necessary, or indeed desirable, at the moment,” when it came to extending
official financial support for
the construction of a pipeline. Rather, it recommended that the
government wait until the TPC reached a
decision and was willing to meet certain political and economic
conditions, such as agreeing to construct
simultaneously a railway that ran alongside the pipeline (with the
British, Iraqi, and Palestinian
governments sharing ownership of the railway with the TPC).143
The “strategical considerations” were most decisive. According to the
British Chiefs of Staff, Iraq
needed to be developed as an alternative source of the supply for the
Royal Navy, since oil production in
Persia “may, on account of political developments, become uncertain.” The
fact that the pipeline would
give Britain “virtual control over the output of what may well prove to
be one of the richest oil-fields in
143

CID, Sub-Committee on the Construction of the Proposed Haifa-Baghdad

Railway and/or Pipeline, “Report,” 13
June 1928, 886-B (also Paper No. C.B.R. 19), enclosed with: Hankey
(Cabinet Secretary) to the Cabinet, “The
Proposed Baghdad-Haifa Railway and Pipeline,” 07 March 1929, C.P. 68
(29), CAB 24/202. Cadman’s report
(“Evidence of Existence of Oil in Iraq: Memorandum by Sir John Cadman,”
28 March 1928, C.B.R. 7) is appended
as Appendix I.

145
the world” might help realize the elusive dream of reducing Britain’s
reliance upon imports of U.S. oil.
Oil supplies from the Levant were 1,000 miles closer to Great Britain
than any other British-controlled
source of oil, could be easily accessed in the event of a Mediterranean
conflict, and were conveniently
located along Britain’s imperial lines of communication. A parallel APOC
pipeline from Persia to the
Mediterranean would also offer the Admiralty considerable savings in
tanker costs while increasing the
amount of oil available in close proximity to a future area of
operations. Finally, the Chiefs envisaged the
pipeline as a vital link in a chain linking British military and economic
assets in the Middle East from
Cairo to Basra that “should greatly strengthen the whole of our defensive
organisation in the Near East by
facilitating the transport of men and munitions to Iraq for the defense
of our interests in those regions.”144
The British Government’s decision to support the Iraqis in having a
pipeline to Haifa provoked the
wrath of the French Government.145 The two sides traded accusations of
bad faith for an entire year, with
Paris complaining about British meddling in a purely commercial matter,
while London pleaded
ignorance, claiming that the initiative for a pipeline and railway to
Haifa had not come from the TPC, but
rather, a rival oil company, the British Oil Development Corporation
(BOD), which had been angling for
an oil concession in Iraq since 1928.146 Moreover, the Iraqis had
announced their preference for a Haifa
144

The CID relied on the expert of opinion of the British Chiefs of Staff in
arriving at these conclusions. H.
Trenchard, Chas. E. Madden, and G.F. Milne, “The Baghdad-Haifa Pipeline
and Railway: Strategic Importance and
Defence,” 24 May 1928, C.I.D. Paper No. 884-B (also Paper No. C.O.S.
157), Appendix II to: CID, Sub-Committee
on the Construction of the Proposed Haifa-Baghdad Railway and/or
Pipeline, “Report,” 13 June 1928, 886-B (also
Paper No. C.B.R. 19), CAB 24/202. German analysts shared the Chiefs’
assessment of Iraqi oil’s potential value to
Britain’s security, even if they tended to be more skeptical of Britain’s
ability to secure supplies from the Middle
East in the event of war. Hptm. (Hauptmann) a.D. Hans Wagner,
“Ölversorgung im Mittelmeer,” Deutsche Wehr,
Nr. 8/7. (38.) Jahrgang (22 February 1934); B.R. (?), “Das irakische
Erdöl – Machtfaktor Englands im Nahen
Osten,” Deutsche Wehr, Nr. 24/45. Jahrgang (13 June 1941).
145
Despite the fact that the Tripoli route was significantly cheaper, Cadman
confided to Amery that APOC
supported the Haifa route, which “will prove in the long run the only
practical one,” but was “handicapped,
however, by the international character of the Company [the TPC] and by
the necessity of carrying his French
colleagues with him.” L.S.A. (Amery), “The Oil Position in Iraq,” C.P. 73
(29), 11 March 1929, CAB 24/202.
Cadman may, indeed, have felt that way, but APOC had yet to commit to
either a Haifa or Tripoli terminus as late as
January 1930. “A Note on Possible Alignments of a Trans-Desert Pipeline
System,” 20 January 1930, no author, BP
68387.
146
Initially a British venture headed by former First Sea Lord Wemyss and
established in 1928, the British Oil
Development Corporation (BOD) gradually expanded to include Italian,
German, and French partners, and it
received a concession from the Iraqi Government in 1932 for most of Iraq
west of the Tigris River (the IPC’s
revised 1931 concession covered the area east of the Tigris). The BOD
tried to break the IPC’s monopoly in Iraq by
offering to construct a railway from Baghdad to Haifa at no cost to the
Iraqi Government, which helped it to secure
the concession in 1932. The BOD’s concession would be operated by a
wholly owned subsidiary, Mosul Oilfields,

146
terminus in August 1928 of their own volition, a most “fortunate identity
of British and Iraqi interests”
from London’s perspective. The hardening of the French position was
dictated foremost by political
developments in France the previous year, when the French Government
purchased a 35% share in the
CFP, the French partner in the IPC, and passed an oil law imposing strict
import quotas and spurring the
development of a French refining industry. Unlike the British, the French
were not interested in importing
refined oil products. Rather, crude oil piped to Tripoli would be shipped
on French tankers to
metropolitan France and processed in French refineries.147
The British, on the other hand, planned to construct a refinery in Haifa
(jointly owned and operated
by APOC and Shell) to refine Iraqi crude prior to shipment. Although the
British Government was
unanimous in its support for a Haifa terminus, divisions appeared over
the diplomatic repercussions, with
the Foreign Office counseling compromise, while the Colonial Office
fulminated against any
appeasement of the French. After months of back and forth, the Cabinet
finally determined on 20 March
1929 that London should dispense with the charade that it was a
disinterested player and inform Paris that
the British Government “did not conceal their desire for the adoption of
Haifa as the terminus of a pipeline and railway, and that they reserved
their full right to promote this end.” Privately, Colonial Secretary
Amery urged his colleagues to offer official financial support for a
Haifa-pipeline and railway and no
longer “allow the execution of a vital Imperial purpose to depend upon
the vagaries of Iraqi local

Ltd. L.S.A. (Amery), “Conflicting Oil Interests in Iraq: Memorandum by

the Secretary of State for the Colonies,”
C.P. 164 (28), 22 May 1928, CAB 24/195; Petroleum Department, “Mosul
Oilfields Limited and the British Oil
Development Concession in Iraq,” 01 June 1933, enclosed with: C.C.A.
Allen (Oil Board), “Mosul Oil Fields, Ltd.,
and the British Oil Development Concession in Iraq: Proposed Pipeline
from the Mosul Area to the Mediterranean:
Note by the Joint Secretary,” 14 June 1933, O.B. 116, CAB 50/5. See also:
Helmut Mejcher’s Die Politik und das Öl
im Nahen Osten: I. Der Kampf der Mächte und Konzerne vor dem Zweiten
Weltkrieg (Stuttgart: Klett-Cotta, 1980),
102-210. The IPC secured a concession for southern Iraq in 1938 (operated
by the subsidiary Basrah Petroleum
Company) and bought out the BOD-owned Mosul Oilfields in 1937 after the
BOD’s concession proved to be
unprofitable and the Italian partners sold out rather than take majority
control with the Germans. In 1941, the IPC
transferred the old BOD concession to another IPC subsidiary, the Mosul
Petroleum Company. Bamberg, History of
BP, 166-171; and Penrose and Penrose, Iraq, 138-141.
147
For contemporaneous summaries of French oil policy during the 1930s (with
special reference to Iraq), see:
“Frankreichs Ölversorgung,” Deutsche Wehr, Nr. 48/7. (38.) Jahrgang (29
November 1934); and Hptm. a.D. Hans
Wagner, “Zweimal Erdöl: Der mandschurische Ölstreit – Frankreichs
Iraköl,” Deutsche Wehr, Nr. 5/39. Jahrgang
(31 January 1935).

147
politics,” as there was nothing stopping Baghdad from cutting a deal with
the French.148 With a General
Election looming, the Cabinet opted to delay making a final decision.
The toppling of the Baldwin Ministry following the 1929 General Election
complicated matters.
Although many senior cabinet ministers appointed by newly elected Prime
Minister Ramsay MacDonald
to study the issue supported the position articulated by Amery in April,
there was strong opposition by
lower-level Labour ministers to the idea of spending £100,000 on a survey
of the route for the pipeline
and railway, much less the more than £1,500,000 worth of loans and
guarantees for between £10,000,000
to £12,000,000. In September 1929, a new committee, led by the Colonial
and Dominions Secretary, Lord
Passfield, informed the Cabinet that it “has proven impossible to present
an [sic] unanimous report,” in
spite of “the danger that, if we do not ourselves move in this matter…
the French authorities in Syria will
forestall us” by constructing their own railway from the Mediterranean to
the Iraqi border, its “avowed
object being to induce the Iraq Petroleum Company to adopt that alignment
for their trans-desert pipeline.” Passfield, along with Thomas Shaw and
Lord Thomson (the secretaries of War and Air,
respectively), concluded that support for a pipeline would not entail any
new political or military
responsibilities for Britain in the region. Rather, Britain would reap
the benefits of not only bringing Iraqi
oil production on-line, but also expanding production in Persia (which,
Cadman informed them, was at
only 50% capacity), since APOC was inclined to support construction of a
pipeline connecting Abadan to
148

L.S.A. (Amery), “The Oil Position in Iraq: Trans-Desert Pipe-Line and

Railway to the Mediterranean,” 30 April
1929, C.P. 134 (29), CAB 24/203. The debate, which consumed the attention
of the Baldwin Government until its
collapse in May 1929, is detailed in: L.S.A., “The Oil Position in Iraq,”
11 March 1929, C.P. 73 (29), CAB 24/202;
Foreign Office, Eastern Department, “The Attitude of the French
Government regarding the proposed Bagdad-Haifa
Railway and Pipeline,” 09 March 1929, enclosed with: A.C. (Austin
Chamberlain), “The Attitude of the French
Government regarding the Proposed Bagdad-Haifa Railway and Pipeline: Note
by the Secretary of State for Foreign
Affairs,” 12 March 1929, C.P. 78 (29), CAB 24/202; Colonial Office,
Middle East Department, “Historical Note,”
16 March 1929, enclosed with: L.S.A., “Oil Position in Iraq: Memorandum
by the Secretary of State for the
Colonies,” 16 March 1929, C.P. 80 (29), CAB 24/202; and L.S.A., “Oil
Position in Iraq: Memorandum by the
Secretary of State for the Colonies,” 24 April 1929, C.P. 125 (29), CAB
24/203; and L.S.A., “The Oil Position in
Iraq: Trans-Desert Pipe-Line and Railway to the Mediterranean,” 30 April
1929, C.P. 134 (29), CAB 24/203.
Although the Foreign Office came around to supporting the position
advanced by the Colonial Office, Foreign
Secretary Austen Chamberlain took exception to Amery’s admonition that
Britain must act quickly before Baghdad
changed its mind as “we can no longer very well bring political pressure
to bear on the Iraq Government.”
Chamberlain objected to this description of British policy, noting that
it contradicted the entire basis of the British
response to the French protests. A.C. (Chamberlain), “The Oil Position in
Iraq: Trans-Desert Pipeline and Railway
to the Mediterranean: Memorandum by the Secretary of State for Foreign
Affairs,” 07 May 1929, C.P. 145 (29),
CAB 24/203.

148
the IPC line to Haifa. This would cut the distance Iranian oil needed to
travel by sea to reach Europe by
6,400 miles (round-trip) and reduce APOC’s expenditures on Suez Canal
tolls (£900,000 in 1927).149
The President of the BOT, the Chancellor of the Duchy of Lancaster, and
the Financial Secretary to
the Treasury each raised a number of domestic and foreign policy
objections. William Graham and F.W.
Pethwick-Lawrence (Trade and Treasury, respectively) cast doubt about the
likelihood that the French
Government had any serious intention to construct a rival railway, and
whether the project would do
anything to stimulate employment within Britain.150 Oswald Mosley levied
the most detailed objections.
He explained that the government would have to announce to the Commons
that it was undertaking the
cost of the survey, which would be interpreted “as a definite commitment
of policy which is connected
both with oil and with military strategy.” The new government would
thereby be committing itself to a
host of policies that ran directly counter to its electoral promise of
“reducing and liquidating our
commitments of every kind” in the Middle East. Whatever the strategic
merits of the case, Mosley
cautioned against “[dissipating] resources in remote and speculative
projects which may soon be urgently

149

Passfield, Shaw, and Thomson, “Committee on the Baghdad-Haifa Railway

and/or Pipe-line: Report,” 11
September 1929, B.H.R. (29) 11, enclosed with: P. (Passfield), “Baghdad-
Haifa Railway and Trans-Desert PipeLine: Memorandum by the Secretary of
State for the Colonies,” C.P. 247 (29) (also C.I.D. Paper No. 959-B), CAB
24/205. Passfield also circulated to the Cabinet memoranda produced by
the Colonial Office summarizing the
historical origins of the pipeline dispute and the strategic benefits, as
articulated the previous year by both the
special CID subcommittee and the Oil Board. The latter made explicit
reference to Britain’s need to diversify its
future wartime supplies “in event of either (i) the United States of
American being unfriendly, or (ii) the maximum
output of the South Persian Fields being unobtainable for any reason.”
Colonial Office, Middle East Department,
“The Berlin-Haifa Railway and Trans-Desert Pipeline” and “Historical,”
both dated 12 July 1929 and enclosed with:
P. (Passfield), “The Berlin-Haifa Railway and Trans-Desert Pipeline:
Memorandum by the Secretary of State for the
Colonies,” 18 July 1929, C.P. 215 (29), CAB 24/205. For the CID reports
quoted in the Colonial Office’s report,
see: CID, Sub-Committee on the Construction of the Proposed Haifa-Baghdad
Railway and/or Pipeline, “Report,”
13 June 1928, 886-B (also Paper No. C.B.R. 19), enclosed with: Hankey
(Cabinet Secretary) to the Cabinet, “The
Proposed Baghdad-Haifa Railway and Pipeline,” 07 March 1929, C.P. 68
(29), CAB 24/202; and Peel (Oil Board),
et al., “Oil Board: Third Annual Report,” 26 April 1929, 937-B (also
Paper No. O.B. 33), CAB 50/3.
150
The following October, the Air Ministry forwarded troubling intelligence
reports suggesting the French
authorities in Syria “have placed French military aircraft at the
disposal of a survey party in the employ of the Iraq
Petroleum Company.” Air Staff, “Summary of Recent Information concerning
the French Projects for a Railway and
Pipe-Line from Syria to the Iraq Frontier,” 18 October 1929, enclosed
with: T. (Thomson), “Baghdad and Haifa
Railway and Pipe-Line: Memorandum by the Secretary of State for Air,” 21
October 1929, C.P. 286 (29), CAB
24/206.

149
required for sound propositions of home development,” while sparking
“nothing less than a scramble for
oil against the French.”151
In order to break the impasse, the government formed yet another
committee, this one chaired by the
Foreign Secretary, Arthur Henderson. The committee did not question the
strategic significance of the
pipeline: “It is pointed out that the mobility of the Fleet is dependent
on adequate supplies of oil under
British control: if the supplies are in foreign hands, there is [a] grave
danger of interruption of supply,”
whereas “our share of Iraq oil would go far to render us independent of
foreign supplies […].” The Royal
Navy remained opposed to a Tripoli terminus, and its hostility was
understandable considering the poor
state of naval reserves, which only covered six months of wartime
operations and were not supplemented
by any civilian reserves. In 1930, the Royal Navy estimated its annual
requirements of oil at 7,139,000
tons, but a mere 14% came from sources under British control (Trinidad,
Burma, Borneo, and Persia, the
last one being “liable to interruption”). Shipping Iraqi oil to Abadan
was undesirable in light of the costs
entailed through shipment overseas and Suez Canal dues (now £1,000,000
per annum). There was also the
quandary posed by the San Remo Agreement, which would guarantee France a
share of Persian crude oil
piped through French mandates. The Navy was strongly in favor of having
an additional pipeline
connecting the Persian and Iraqi oilfields, noting that it would shave
thousands of miles off the journey
between Abadan and Britain while freeing up fifty tankers for service in
other theaters.152
The Henderson Committee was not sympathetic to the Royal Navy’s position.
For one thing, it was
unlikely that Britain could defend the Haifa pipeline in the event of a
war with France, which had
151

See annexures 1-3 to: Passfield, Shaw, and Thomson, “Committee on the
Baghdad-Haifa Railway and/or Pipeline: Report,” 11 September 1929, B.H.R.
(29) 11, enclosed with: P (Passfield), “Baghdad-Haifa Railway and
TransDesert Pipe-Line: Memorandum by the Secretary of State for the
Colonies,” C.P. 247 (29) (also C.I.D. Paper No.
959-B), CAB 24/205.
152
As the Henderson Committee’s report to the Cabinet explained, “[The]
Naval Staff regard the possible loss of all
Iraqian [sic] Oil as so disastrous that it might in their view be well
worth while for Great Britain to pay the bulk of
the cost to ensure the Haifa alignment.” For more on the Navy’s position,
see: C.E.M. (Charles Edward Madden),
“Baghdad-Haifa Railway and Pipeline: Memorandum by the Chief of the Naval
Staff,” 05 April 1930, attached to:
A.V.A. (Albert Victor Alexander), “Note by the First Lord of the
Admiralty,” 05 April 1930, B.H. (30) 4, enclosed
with: Committee on the Bagdad-Haifa Railway and Pipeline, “Report,” 01
May 1930, C.P. 136 (30) (also B.H. (30)
6), CAB 24/211. Some of the concerns raised by the Navy bordered on
hysterical. The aforementioned report
relayed a comment by John Cadman to the effect that the construction of a
Tripoli pipeline was “certain to result in
the absorption of Iraq by the more virile [sic!] Syrians.” This would
hasten the collapse of the British position in the
Middle East and cause “a break in our Air Communications with India and
the East, which would be disastrous.”

150
stationed large numbers of ground and aerial forces in Syria.
Furthermore, the Treasury was unwilling to
offer the financial assistance needed to make the Haifa terminus a viable
alternative to Tripoli. Although
the Iraqis were opposed to a Syria-Lebanon pipeline, it was in their best
interests that a pipeline be
completed no matter what, since that was the only way Baghdad could
expect to collect significant oil
revenues. When one considered such economic and political factors, it
became evident that “the Haifa
alignment would prove the least advantageous from the point of view of
the marketing of Iraqi oil […].”
Although it did not dispute the strategic considerations raised by the
Navy, the new Labour Government
broke with its Conservative predecessor by adopting the position that
“satisfactory arrangements” could
be reached with France to ensure adequate supplies of oil in the event of
a war in which France was
neutral, while there no was point in having a Haifa terminal for security
reasons since Britain could not
defend it from the only plausible enemy in the region, France.153
The Colonial Office still put forward a note of opposition to a Tripoli
terminus. It challenged
Cadman’s argument that the Tripoli pipeline was more economical than the
Haifa alternative and even
questioned where his loyalties lay, suggesting that his counsel may been
“prompted as much by the desire
to promote the commercial interests of his company as by any solicitude
for British interests.” In the
event that the IPC went ahead with a Tripoli terminus, the Colonial
Office advised that the IPC “can no
longer be considered as a British interest. To all intents and purposes
it is now a French concern,
following a policy dictated by the French Government.” The Colonial
Office even questioned whether it
was wise to entrust the development of Iraq’s oil solely to the IPC: “A
little healthy competition in the
Iraq oil-fields could scarcely operate to the disadvantage of Iraq, and
by advising the Iraq Government not

153

Committee on the Bagdad-Haifa Railway and Pipeline, “Report,” 01 May

1930, C.P. 136 (30) (also B.H. (30) 6),
CAB 24/211. See also: Iraq Oil Committee, Cabinet, “Some Notes on the
present World Oil Situation in relation to
the Iraq Oilfield and proposed Pipeline to a Mediterranean Port,” no date
(circa 1930), I.O.C. (30) 5, AIR 9/43,
which offers some interesting suppositions concerning the future of the
international oil industry and the role of Iraq
in particularly, not to mention useful data such the cost of shipping oil
from the Persian Gulf to Britain (37/6d per
ton to traverse the 6,500 miles, including Suez Canal dues).

151
to grant a virtual monopoly to the Iraq Petroleum Company, His Majesty’s
Government would not be
sacrificing Iraqi to British interests.”154
The British Government did not follow through with such a radical
departure from its established
policy of favoring APOC and the IPC. As the Foreign Office explained, the
position of the IPC by 1930
was the product of intense negotiations between Britain, the United
States, and France, and the latter two
would not support any change in London’s policy on behalf of the
interlopers such as the BOD. Besides,
the IPC had no leverage to force anyone to accept a pipeline through
Syria since Iraq had made its
preferences quite clear. The consequences of defying Baghdad, even if
they did not result in the loss of
the IPC concession, would probably “outweigh the economic advantages” of
a pipeline to Syria.155
Luckily, the IPC partners arrived at a resolution of the dispute that
satisfied all parties. In 1931, they
agreed to a compromise, brokered by Jersey’s Chairman, Walter Teagle,
whereby the TPC would build a
pipeline that bifurcated at Haditha (240 km northwest of Baghdad) and
terminated at both Tripoli and
Haifa. Each line would be constructed simultaneously, completed by no
later than the end of 1935, and
share equally any oil produced by the IPC.156 The pipeline to Tripoli was
actually completed a year early,

154

Middle East Department, Colonial Office, “Oil Policy in Iraq,” 05 May

1930, Appendix B to: P. (Lord Passfield),
“Oil Policy in Iraq: Memorandum by the Secretary of State for the
Colonies,” 16 May 1930, C.P. 164 (30), CAB
24/212. The suspicion of the Colonial Office toward the IPC was shared by
British intelligence in Iraq. One report to
RAF Iraq Command bluntly concluded: “[As] a matter of fact, neither the
Anglo Dutch partners nor the American
interest [in the IPC]… are in the least anxious to draw oil from Iraq.
They prefer to look upon Iraq Oil fields as a
large potential petroleum reserve to be tapped only as and when existing
oilfields throughout the world… shows
[sic] signs of becoming exhausted.” Like the Colonial Office, after some
initial skepticism, British officials in Iraq
began to looking favorably upon the rival BOD, whose competition might,
they hoped, cajole the IPC into
developing Iraq’s oil faster. Special Service Officer, Baghdad, to Air
Staff Headquarters, Air Headquarters, [RAF]
Hinaidi, “Oil Interests,” 02 August 1930, AIR 23/393.
155
Foreign Office, “Oil Policy in Iraq,” 29 May 1930, Annex to: Iraq Oil
Committee, “Note by the Secretary of
State for Foreign Affairs,” no date, I.O.C. (30) 6, E. 2777/51/93, CAB
27/436.
156
Jersey’s chairman, Walter Teagle (representing the U.S. interests in the
IPC), was happy to support the French
plan if it would convince the French to stop their purchases of
expropriated Soviet oil and grant Jersey a preferential
import quota for the French domestic market. The best treatments of this
complex issue, both from the point of view
of the British and French governments, but also the major oil companies
(including the Americans), are in: Edward
Peter Fitzgerald, “Business Diplomacy: Walter Teagle, Jersey Standard,
and the Anglo-French Pipeline Conflict in
the Middle East, 1930-1931,” Business History Review 67 (2): 207-245;
Eric Melby, Oil and the International
System: The Case of France, 1918-1969 (New York: Arno Press, 1981), 113-
141; and Nowell, World Oil Cartel,
268-276. The Iraqis were none too pleased by London’s willingness to
compromise with Paris. For Baghdad’s
objections and London’s attempts to strong-arm the former into accepting
the plan to bifurcate the pipeline at
Haditha, see: “Paraphrase Telegram from the High Commissioner for Iraq to
the Secretary of State for the
Colonies,” No. 176, 16 June 1928,” Appendix I to: Henderson (Chairman of
the Iraq Oil Committee), “Interim
Report,” 20 June 1930, C.P. 209 (30), CAB 24/213; and “Draft Telegram for
Despatch to the High Commissioner,

152
in 1934, and the line to Haifa followed a year later. Their combined cost
exceeded £10,000,000, while
throughput in 1938 reached 4,300,000 tons.157
The British Government understood that there was little demand for Iraqi
oil because of the surplus in
global production, primarily from the United States.158 The British and
U.S. partners in the IPC would
probably stifle production for the time being, even if the Iraqis and the
French were pushing for more.159
Although London probably did not know it at the time, the throttling of
Iraqi production was a direct
consequence of the “Red Line” Agreement signed in July 1928. The
agreement reorganized the
ownership structure and operations of the TPC: the partners included
APOC, Shell, the CFP, and the Near
Eastern Development Corporation (NEDC: Jersey, the Standard Oil Company
of New York, Gulf, Pan
American Petroleum Transport & Trading, and Atlantic Refining). Each of
the companies received
23.75% of the TPC’s shares with the remaining 5% going to Gulbenkian.160
The most important aspect of
the agreement was the retention of the “self-denying” clause from the
“Foreign Office” Agreement of
March 1914, which forbade the individual partners of the TPC from seeking
or accepting oil concessions
anywhere within the “red line” area (the Arabian Peninsula, the Levant,
Mesopotamia, and Anatolia)
without the consent of all the other partners, who also enjoyed the
option of sharing an equal part of any
new concession.161 In order to prevent the CFP or Gulbenkian from
flooding the market with cheap oil
Iraq,” no date or author, enclosed with: A.H. (Henderson), “Baghdad-Haifa
Railway and Pipeline: Report by the Iraq
Oil Committee,” 05 February 1931, C.P. 36 (31), CAB 24/209.
157
Ernst Jung, “Ölleitungen Früher und Jetzt,” Vierjahresplan, 1942: II.
158
Consequently, there was “no real evidence to support” the idea that world
production would peak anytime soon.
Petroleum Department, “International Control of Petroleum,” 24 October
1932, POWE 33/461.
159
Iraq Oil Committee, “Some Notes on the Present World Oil Situation in
Relation to the Iraq Oilfield and
Proposed Pipeline to a Mediterranean Port,” no date (circa May 1930),
I.O.C. (30) 5, CAB 27/436.
160
Between 1930 and 1934, Gulf, Pan American, and Atlantic Refining sold
their interests in the Near Eastern
Development Company (NEDC) to Jersey and the Standard Oil Company of New
York, which divided the shares of
the NEDC equally.
161
Portions of the “Red Line” Agreement are reprinted as Appendix III to:
Payton-Smith, Oil, 32-37. For
background on the negotiations leading up to the signing of the
agreement, see: William Stivers, “A Note on the Red
Line Agreement,” Diplomatic History 7: 1 (1983): 23-34. Nowell claims the
“self-denying” clause was basically a
way to protect “undercapitalized firms of overcapitalized ones.” If the
latter found oil in a plot beside one owned by
the TPC, it could buy that plot and use its veto over the operations of
the TPC to keep production down, thus
reserving for itself all of the profits while forcing the former (i.e.
the poorer firm) to eat the loss. The weakest
members of the TPC (the Deutsche Bank in 1914, and Gulbenkian and the
Compagnie Française des Pétroles
in 1928) were therefore the ones who insisted on the inclusion of the
clause. Nowell, World Oil Cartel, 187. If this
was indeed the rationale, then it failed miserably: three stronger
members of the TPC (APOC – Anglo-Iranian after
1935 – Shell, and the NEDC) all had significant interests located
elsewhere in the world, and they conspired to

153
from Iraq, the NEDC, Shell, and APOC ensured that any resolution before
the TPC’s board could only
pass with the approval of three of four voting members (the CFP being the
forth). This gave the major
companies veto power over any decision to boost Iraqi production.162
Unaware of the actual situation, London was confident that conditions in
the international oil market
would improve: global consumption had doubled between 1920 and 1930, and
by the time the IPC
pipeline was finished, the Cabinet Committee on Iraqi Oil believed that
“there should be no difficulty in
absorbing the whole of Iraqi production.” The IPC partners would also
have every incentive to ratchet up
Iraqi output to amortize the costs of building their pipeline. Iraqi oil
shipped by pipeline to the
Mediterranean and sold in Europe would also enjoy a significant cost
advantage compared to oil sent by
tanker from either the Gulf of Mexico or the Persian Gulf, thereby saving
the major oil companies
thousands of miles worth of overseas transportation costs. In the case of
Shell, the reduction in distance
worked out to: 1,000 miles compared to Venezuelan and Mexican oil; 2,000
miles for U.S. oil from the
Gulf of Mexico; and 5,000 miles for Californian oil (through the Panama
Canal). In the case of APOC,
the savings reached 3,500 miles compared to oil shipped from Abadan.
Iraqi oil would displace Persian
oil from Europe, but APOC could use this oil to supply its growing
markets south and east of the Middle
East, “in which the Company is already getting a much firmer footing by
recent arrangements with the
Burmah Oil Company and Shell Group.”163

suppress Iraqi production until nationalization in 1972. The “self-

denying” clause was repealed in 1948 as part of a
wider reorganization of the IPC and the Middle Eastern oil industry the
previous year. Anand Toprani, “The French
Connection: A New Perspective on the End of the Red Line Agreement, 1945-
1948,” Diplomatic History 36: 2
(2012): 261-299.
162
Theodore Moran, “Managing an Oligopoly of Would-Be Sovereigns: The
Dynamics of Joint Control and SelfControl in the International Oil
Industry Past, Present, and Future,” International Organization 41: 4
(1987): 580583.
163
Iraq Oil Committee, “Some Notes on the Present World Oil Situation in
Relation to the Iraq Oilfield and
Proposed Pipeline to a Mediterranean Port,” no date (circa May 1930),
I.O.C. (30) 5, CAB 27/436. The
“arrangements” in question were marketing agreements between APOC, Shell,
and Burmah. In 1927-1928, the three
companies divided up the Indian market between them. The following year,
APOC and Shell established a jointly
owned marketing subsidiary (Consolidated Petroleum), which would operate
in Egypt, East and South Africa, and in
the Indian Ocean. Bamberg, History of BP, 106-107.

154
Britain’s Oil Position at the End of the 1920s
The Admiralty had fended off the Treasury’s attempts in 1923/24 to trim
the Royal Navy’s oil
reserves by half. But when the Admiralty revised its consumption
estimates upward in 1927, opponents
used it as an opportunity to revisit the issue. Under the terms of the
Ten-Year Rule, the Admiralty
estimated that, in the event of a war with Japan in 1937, it would
require 7,150,250 tons of fuel oil
annually. This meant that 3,300,000 tons would have to be added to
existing reserves over the following
decade. The Oil Board of the CID upheld the Admiralty’s decision, but not
the Chancellor, Winston
Churchill, who had come full circle from his position in 1922 and
considered such expenditures
unwarranted in view of “the excellent relations between ourselves and
Japan now existing and likely to
continue […].” New sources of supply would soon be available in Iran and
Iraq, while Britain was in
serious economic difficulties (which he had exacerbated through a return
to the Gold Standard in 1926).
The government had to consider “the great importance of restricting
expenditure at the present time on
this service within the narrowest practicable limits.” The Naval
Programme Committee, set up to consider
Britain’s strategic posture in the Far East, sided with Churchill and
advised the Cabinet that, “[in] view of
the present serious financial position,” reserves should only be
increased by 100,000 tons per annum for
the moment.164
Even this compromise proved short-lived: in 1929, the new Labour
Government suspended all further
purchases of fuel oil for naval reserves.165 With its reserves totaling
only 4,000,000 tons (against an
estimated 7,500,000 tons required per year in a war against Japan), the
Admiralty could only fume
impotently at the government’s decision. Britain’s position (a six-month
reserve) compared unfavorably,
164

The Earl of Birkenhead (Secretary of State for India; Chairman of the

Naval Programme Committee), “Report on
Naval Fuel Oil Reserves,” 20 February 1928, C.P. 47 (28), CAB 24/192. The
First Lord of the Admiralty, William
Bridgeman, did not take defeat graciously. At the end of 1928, Bridgeman
worked out an agreement with Churchill
that an additional 100,000 tons would be added in 1929 (as in 1928),
while additional orders for “the normal
instalment [sic] of 323,000 tons” would be deferred until “further
consultation” with the Treasury. Bridgeman
acceded to this arrangement against his better judgment and wrote a
strongly worded minute to his colleagues
reminding them that British energy security was “for financial reasons,
being retarded much beyond the limit which
the Board of Admiralty think safe […].” W.C.B. “Oil Fuel Reserve for the
Navy: Notice of Agreement between the
Chancellor of the Exchequer and the First Lord of the Admiralty as to
expenditure in 1929,” 18 December 1928,
C.P. 410 (28), CAB 24/109.
165
The debate over naval fuel oil reserves between 1921 and 1929 is
summarized in: Babij, “Problem of Oil
Supply,” 87-90.

155
the Sea Lords complained, with that of the United States (where the navy
actually owned oilfields), Japan
(currently accumulating a two-year reserve), Germany (eleven months), and
France (nine months). “Italy
alone,” the Sea Lords mocked, “stands relatively at our present reserve.”
The Admiralty warned that the
government was taking a grave risk – imperial oil production was
“swallowed up by India,” while Persian
production was vulnerable: “[Our] position is, to say the least, far from
reassuring unless we collect a
reserve to rely upon.”166
London could only contemplate a reduction in the size of its naval oil
reserves because of the
promising global supply situation, particularly after the discovery of
oil in Iraq in 1927. Completion of an
IPC pipeline to the Mediterranean, although it would open up a valuable
new source of supply, could
hardly redress all of Britain’s strategic vulnerabilities. The third
report of the Oil Board in April 1929,
which relied upon a detailed evaluation produced by a special Sub-
Committee on Supply in Time of War,
laid bare the weakness of Britain’s oil position. In the event of a
global war at the “present time” (using
1927 figures as a baseline), and assuming that the United States was
“friendly,” the Oil Board concluded
that Britain’s oil requirements “could eventually be met,” but that
“there would be a critical period
following the declaration of hostilities during which time it would be
impracticable to ensure full supplies
to all parts of the Empire.” Canada, for example, would rely on the
United States for its oil needs even if
the United States was “unfriendly.” (This would not be a problem for the
U.S. oil industry: the largest oil
company in Canada, Imperial Oil, was a subsidiary of Jersey.) In the
event of an “unfriendly” United
States, “the situation would be precarious,” while “the critical period
during which full supplies could not
be assured for the Empire would probably be of considerable length […].”
The Oil Board also concluded
that Britain’s oil security depended on Persia, which would supply 37%
(7,000,000 tons) of the
166

“Oil Fuel Reserve,” no date or author, enclosed with: F.L.F. (Admiral

Frederick Field), 12 February 1931,
attached to: A.V.A. (Albert Victor Alexander), “Oil Fuel Reserve,” 17
February 1931, C.P. 51 (31), CAB 24/220.
See also: Thomson (President, Oil Board), et al., “Oil Board: Fifth
Annual Report,” 01 July 1930, O.B. 51 (also
C.I.D. Paper No. 1007-B), CAB 50/3, especially Appendix No. 5: Roger M.
Bellairs (Director of Plans) and J.W.L.
Oliver (Director of Stores), “Revised Estimate of Oil Fuel and Tankers
Required by the Navy for the First Year of
Hostilities (Based on Stock Position of 01 April 1930),” 11 June 1930.
The CID decided to re-establish to a naval
reserve equal to twelve months of consumption (half of which would be
stored at home) in 1936. Earl De La Warr
(President of the Oil Board), et al., “Oil Board: Twelfth Annual Report,”
28 December 1937, O.B. 230 (also C.I.D.
Paper No. 1390-B), CAB 50/6.
156
19,336,000 tons required across the British Empire in wartime. Every
effort should also be made to
increase the refining capacity of the empire. Most importantly, unless
the Royal Navy amassed reserve
stocks equal to one year of wartime consumption, “the requirements of the
Fleet… cannot be assured.”167
According to figures provided by the Sub-Committee on Oil Supply in Time
of War, the British
Empire’s annual wartime requirement in 1927 was 19,336,000 tons
(11,888,000 tons west of Suez),
although this shrank to 17,384,000 tons if Britain imposed civilian
rationing.168 Assuming that neither
domestic nor external forces disrupted either Persian or Iraqi oil
production, and that an IPC pipeline to
Haifa was completed, approximately 9,137,500 tons of the empire’s
requirements would be supplied from
the Middle East. Since it was impractical to transport Far Eastern oil
west of Suez, most of the remaining
50% would have to come from the Western Hemisphere (Russia being
discounted as a future supplier),
primarily from the United States, Mexico, and Venezuela.169 The United
States was still the most
important supplier, having exported to 6,859,000 tons to the British
Empire in 1927 (2,591,000 tons of
which went to Canada). Assuming the United States was “unfriendly,” there
would be no choice but to
impose strict rationing, while Venezuela would have take up the slack to
an “alarming” extent: 5,500,000
tons of crude and refined oil products (32% of British requirements).
“The dependence of the Empire on
the U.S.A. and Venezuela… gives cause for great uneasiness,” the sub-
committee concluded, but there
was simply no alternative. Without full production in Persia and probably
Iraq, in addition to the
connivance of the United States, Britain could only wage a global war if
the conflict was short.170

167

Peel (President, Oil Board), et al., “Oil Board: Third Annual Report,” 26
April 1929, 937-B (also Paper No. O.B.
33), enclosed with: Hankey to the Cabinet, “Oil Fuel: Supply and
Control,” 06 May 1929, C.P. 142 (29), CAB
24/203. By “unfriendly,” the Oil Board assumed that the Americans would
only limit oil exports from the United
States itself, and refrain from either “restrictions on the activities in
other countries of United States nationals,” or
limitations on the number of tankers available for British chartering.
Brian McBeth mistakenly claims that the
British expected than even an “unfriendly” United States would continue
“supplying crude oil… for military use and
not for civilian consumption […].” McBeth, “Venezuela’s Nascent Oil
Industry,” 454.
168
The sub-committee warned that the “main disturbing factor is the
additional 6 ½ million tons of Fuel oil required
for the Navy during the first year of hostilities, which alone represent
an increase of about 100 per cent over the
peace-time imports of Fuel Oil for all Empire services […].”
169
Besides which, exports from Sarawak and the Dutch East Indies in 1925,
and India in 1925-1926, only equaled
2,553,416 tons, and the Oil Board disregarded both Sarawak and the Dutch
East Indies as wartime sources of supply
on account of their vulnerability to a Japanese attack.
170
On the other hand, “[if] the United States withheld oil from Japan it is
difficult to see how the latter could obtain
adequate supplies, Japan’s position being infinitely worse than our own
[…].” Sub-Committee on Oil Supply in

157
The Oil Board also weighed in on the issue of a pipeline to carry Iraqi
oil to the Mediterranean and
pushed for the completion of a Haifa terminus so as to lay the groundwork
for an additional outlet for
Persian crude. Besides avoiding the journey around the Persian Gulf and
through the Suez Canal, a
pipeline reduced “the possibilities of interference by Persia […].” The
construction of a pipeline for Iraqi
was a matter of “immense importance” in the event that supplies from
either Persia or the United States
were not forthcoming. The Oil Board estimated that Britain could count on
2,000,000 tons per annum
from Iraq (excluding the oil owned by the U.S. partners in the IPC), or
10% of its total wartime
requirements. All of these calculations would be upset if the IPC
pipeline terminated in Tripoli, which
reduced the likelihood of a complementary APOC pipeline, since France was
entitled to 25% of any
Persian oil transported through the French mandates under the San Remo
Oil Agreement, while Syrians
could levy an export tax.171
A war against Japan would probably not threaten British access to Persian
oil, according to the Oil
Board’s joint secretaries following a query from the CID, but the same
could not be said of a war against
the Soviet Union. Under such circumstances, Britain would have to find
some way of replacing the oil
imported from Persia, Romania, and the Soviet Union, while meeting an
estimated military and civilian
demand of 19,452,000 tons. The biggest hurdle would be the loss of Persia
as a supplier, which had
exported 3,175,000 tons to the British Empire in 1929 (1,784,000 tons to
Great Britain, itself). The
elimination of Persian and Soviet oil from the world export market would
affect more than just Britain, as
other customers would also have to find alternative supplies to replace
the 2,144,000 tons of Persian and
2,840,000 tons of Soviet oil that were no longer available. Combined with
the 8,000,000 tons of new oil

Time of War, March 1929, Annexure A to: Peel (President, Oil Board), et
al., “Oil Board: Third Annual Report,” 26
April 1929, 937-B (also Paper No. O.B. 33), enclosed with: Hankey to the
Cabinet, “Oil Fuel: Supply and Control,”
06 May 1929, C.P. 142 (29), CAB 24/203. The report was also published
separately as: Stanhope (Chairman), et al.,
“Sub-Committee’s Report on Oil Supply in Time of War,” 20 March 1929,
O.B. 27, CAB 50/3. Both the CID and
the Cabinet approved the Oil Board’s Third Annual report in May 1929. The
CID also directed “the Oil Board to
revise the scheme for meeting Empire oil requirements in time of war
triennially,” and to determine “how the oil
supplies of the British Empire could best be met in the event of a war
with Russia in Afghanistan.” L.E.H. Maund,
“Oil Board: Third Annual Report – Approval Of (Note by the Secretary),”
10 May 1929, O.B. 35, CAB 50/3.
171
Peel (President, Oil Board), et al., “Oil Board: Third Annual Report,” 26
April 1929, 937-B (also Paper No. O.B.
33), enclosed with: Hankey to the Cabinet, “Oil Fuel: Supply and
Control,” 06 May 1929, C.P. 142 (29), CAB
24/203.

158
Britain would have to acquire, the Oil Board estimated that an Anglo-
Soviet war that halted Persian
exports could result in an overall disruption of world supplies totaling
13,000,000 tons. British oil
requirements west of Suez could be satisfied through higher imports from
the United States, Mexico,
Trinidad, Peru, and Venezuela.172 But east of Suez, “the difficulties to
be overcome would be
considerable.” On the other hand, the tanker situation would not be as
dire: Admiralty requirements in
war against the Soviet Union (4,480,000 tons) were substantially lower
than in a war against Japan
(7,500,000 tons), and Britain would only have to charter eighteen neutral
tankers. Unfortunately, the
entire edifice depended on the neutrality of Japan, as most of the
British Empire east of Suez depended
upon oil from the East Indies if Persian supplies were unavailable.173
Although the Oil Board approved the findings of its joint secretaries in
its Sixth Annual Report, it
concluded “that it would be hazardous to rely upon supplies from Roumania
[sic] being available in such
a war […].” The Oil Board expected “that the supply situation should be
considerably improved” by the
completion of the IPC pipeline from Iraq to the Mediterranean by 1936
(although it seems unlikely that
Iraq would still be producing oil for Britain if Persia was not), which
would offset the loss of Romania.174
In its Seventh Annual Report, the Oil Board remarked that no changes had
been made to the previous
year’s study of Britain’s oil requirements in an Asiatic War but
indicated that the “scheme” would “be
reviewed annually.”175 The following year, the Oil Board completed a
revision: Britain would now need
to import 20,969,500 tons (15,935,800 for civil requirements, 12,016,100
tons of which went west of
Suez), on 358.5 tankers, which required the chartering of 35 neutral
vessels. The loss of Persia and Iraq
172

Although the Peruvian oilfields had been developed by British

entrepreneurs starting in the 1870s, Jersey
(through its Canadian subsidiary, Imperial Oil) had purchased control by
1913. Apparently, the British Government
did not realize that the new company created to manage production in
Peru, the International Petroleum Company,
was actually owned by a U.S. firm until 1919. Brown and Linder, “Oil,”
137.
173
“Memorandum by Joint Secretaries,” 22 September 1930, enclosed with:
C.C.A. Allen (Joint Secretary, Oil
Board), “Proposed Scheme for Providing the Empire Requirements of
Petroleum and Benzol During the First Year
of a War in an Asiatic Theatre,” 23 June 1931, O.B. 60 (Revise), CAB
50/4. A copy of the report is appended to the
Oil Board’s Sixth Annual Report as Annexure A: Lord Amulree (Secretary of
State for Air; President of the Oil
Board), et al., “Oil Board: Sixth Annual Report,” 30 September 1931, O.B.
71 (also C.I.D. Paper No. 1068-B), CAB
50/4.
174
Amulree (President, Oil Board), et al., “Oil Board: Sixth Annual Report,”
30 September 1931, O.B. 71 (also
C.I.D. Paper No. 1068-B), CAB 50/4.
175
Londonderry (President, Oil Board), et al, “Oil Board: Seventh Annual
Report,” 26 October 1932, O.B. 82 (also
C.I.D. Paper No. 1096-B), CAB 50/4.

159
would not seriously impair Britain’s war effort, for an Asiatic War did
not threaten British access to
Western Hemispheric oil production. The Admiralty’s requirements of fuel
oil (4,480,000 tons, which
dwarfed the petroleum requirements of the Army and RAF) would come from
five sources: Venezuela
(1,637,000 tons), Mexico (947,000 tons), Texas (850,000 tons), Trinidad
(746,000 tons), and the East
Indies (300,000 tons).176

176

“Empire Requirements of Petroleum and Benzol during the First Year of a

War in an Asiatic Theatre,” no date or
author, Annexure A to: Londonderry (President, Oil Board), et al., “Oil
Board: Eighth Annual Report,” 31 July
1933, O.B. 122 (also C.I.D. Paper No. 1117-B), CAB 50/5. Another revised
study is appended as Annex A to:
Londonderry (President, Oil Board), et al., “Oil Board: Ninth Annual
Report,” 31 October 1934, O.B. 134 (also
C.I.D. Paper No. 1153-B), CAB 50/5. The empire’s total requirements had
increased by 560,500 tons (virtually all
of which was additional civilian consumption), but the total number of
tankers required had dropped by almost
twenty (although twenty-seven neutral tankers would still have to be
chartered).

160
The End of the British “Control” Clause, 1930-1932
Although the quest for energy independence from the United States would
not be abandoned until the
late-1930s, Britain’s continuing reliance upon imports of U.S. oil, and
its failure to encourage greater oil
production within the empire, forced London to abandon one of the key
pillars of its postwar oil policy. In
1930, the British Government returned to the matter of the British
“control” clause for oil companies
operating within the empire when a U.S. firm, the Standard Oil Company of
California (SOCAL), sought
to purchase an oil concession to Bahrain.177
In 1913, the Shah of Bahrain had agreed never to grant a concession to
any foreign company without
British approval. During the mid-1920s, Frank Holmes, an enterprising
prospector originally from New
Zealand, purchased concessions throughout the Persian Gulf, including
Kuwait and Bahrain. Holmes had
planned to sell these concessions to British oil companies such as APOC
and Burmah, but he found no
takers. APOC had an appalling track record when it came to finding oil
and its geologists were convinced
that none existed on the Arabian side of the Persian Gulf (they only
changed their tune in 1932 when
SOCAL proved them wrong in Bahrain).178 Holmes had also bought an option
for the al-Hasa district
from Ibn Saud in 1923, when the latter was only the Sultan of the Nejd,
with the proviso that he could not
sell the concession to APOC, which had humiliated Ibn Saud the year
before. The Saudi concession
expired in 1925 before Holmes could find any takers.179 Holmes eventually
sold the Bahrain concession
to the Gulf Oil Company in 1927, which had to relinquish the concession a
year later since, as a member

177

Events concerning Bahrain between 1925 and 1929 are summarized in:
Petroleum Department, “Oil Concessions
in British Colonies and Protectorates: British Control of Companies,” no
date (circa 1929), POWE 34/1. The
Standard Oil Company of California (SOCAL) had traditionally been a
“self-sufficient” company that relied on its
holdings in the United States. The company aggressively sought overseas
concessions after the First World War but
had been unsuccessful until it purchased the Bahrain concession. Irvine
Anderson, ARAMCO, the United States, and
Saudi Arabia: A Study in the Dynamics of Foreign Oil Policy (Princeton:
Princeton University Press, 1981), 21-23.
178
Years later, the Treasury lamented that U.S. oil companies had managed to
acquire concessions in Bahrain and
Saudi Arabia only “because the Anglo-Iranian was technically incompetent
to find the oil.” Wilfrid Eady (Second
Secretary, Head of the Finance, Treasury) to Thomas Padmore (Principal
Private Secretary to the Chancellor of the
Exchequer), “Oil Conference,” 17 February 1944, T 161/1195. In fairness,
Shell’s track record was hardly better: it
too had passed on Holmes’ concessions and turned down an offer to have
the IPC join SOCAL in Saudi Arabia in
1934. Jonker and Zanden, History of Shell, 283.
179
The story of Holmes, who was the first man to map the al-Hasa oilfield
and was known to the Arabs as “Abu al
Naft” (“the Father of the Oil”), is recounted in: Keating, Mirage,
passim.

161
of the TPC, it was bound by the “Red Line” Agreement of 1928 and
obligated to search and produce oil
within the Arabian Peninsula only with the consent of its partners.180
The Petroleum Department again led the charge for a modification of
existing policy and did not
mince words: Britain was still dependent on foreign supplies of oil, and
if the United States and other oilproducing countries where British
companies were active adopted legislation similar to that which applied
to the British Empire, “the result would be disastrous to British
Commercial interests.” The exclusion of
foreign capital from imperial oil development had yielded no discernible
benefits and was “actually
harmful in so far as it prevents foreign capital from assisting in the
search for oil in the Empire.” “If
foreigners like to come and spend money in searching for oil,” the
Petroleum Department reasoned, “it
seems foolish to prevent them from doing so,” since their success would
only redound to the benefit of
the empire, while undiscovered oil deposits “are of no use to anyone
[…].”181 The Petroleum Department
urged the government to adopt a policy of reciprocity if foreign
companies provided certain guarantees in
the event that they wished to sell imperial concessions, register their
companies in British territories,
ensure that a majority of their employees and some directors (including
the Managing Director) were
British subjects, make provision that their refineries on British
territory could produce fuel at Admiralty
specifications, and offer the British Government the “right of pre-
emption in case of emergency.”182

180

Aileen Keating, Mirage: Power, Politics, and the Hidden History of

Arabian Oil (Amherst: Prometheus Books,
2005), 207-315, is good on the personalities involved (particularly
Holmes), although the role of the U.S. and British
governments is not well defined.
181
Petroleum Department, “Enclosure,” 25 July1930, attached to: Hankey,
“Policy Regarding Oil Concessions in
British Territory,” 16 September 1930, 1017-B, enclosed with: Hankey,
“Policy Regarding Oil Concessions in
British Territory,” 07 October 1930, C.P. 328 (30), CAB 24/215. The
language is almost identical to that of
memoranda produced during interagency debates in the early-1920s. See:
J.C.C. to Wills, Chapman, and the
President (of the Board of Trade, Lloyd-Greame?), “Petroleum Policy:
Minute by Mr. Clarke,” 21 April 1923, P.D.
195, enclosed with: Llewellyn Smith, “Imperial Petroleum Policy,” 07 June
1923, Dft. E.C. 24, POWE 33/353.
182
Petroleum Department, “Enclosure,” 25 July1930, attached to: Hankey,
“Policy Regarding Oil Concessions in
British Territory,” 16 September 1930, 1017-B, enclosed with: Hankey,
“Policy Regarding Oil Concessions in
British Territory,” 07 October 1930, C.P. 328 (30), CAB 24/215. The
Petroleum Department had actually completed
the report the year before. Petroleum Department, “Oil Concessions in
British Colonies and Protectorates. British
Control of Companies,” July 1929, enclosed with: H.W. Cole (Petroleum
Department) to R.V. Vernon (Colonial
Office), 06 July 1929, P.D. 169, CO 323/1063/6. The CID concurred with
the Petroleum Department and “[referred]
the memorandum to the Cabinet [and Dominion representatives], with a
recommendation that there was no objection
to the policy proposed from the point of view of Imperial Defence.” CID,
“Extract from the DRAFT Minutes of the
250th Meeting, held on September 29, 1930. (8.)—Policy Regarding Oil
Concessions in British Territory,” 29
September 1930, enclosed with: Hankey, “Policy Regarding Oil Concessions
in British Territory,” 07 October 1930,

162
London allowed SOCAL to take up the concession after it agreed to use a
subsidiary – the Bahrain
Petroleum Company, BAPCO – that was registered in Canada and under
nominal British control. The
company struck oil two years later. Adoption of the Petroleum
Department’s recommendations allowed
for the resolution of another dispute with the United States in 1932/3,
this time over Kuwait, where the
Gulf Oil Company was competing with APOC for a concession.183 As in
Bahrain, the Sheikh of Kuwait
had also agreed before the First World War never to grant an oil
concession to a foreign company without
the consent of the British Government in exchange for London guaranteeing
Kuwait’s independence from
the Ottoman Empire. Since the U.S. Government was willing to abide by the
precedent set in Bahrain, the
Foreign Office advised the government to disregard the Admiralty’s demand
that 50% of the capital of all
foreign companies prospecting within in the empire was British.184
The Admiralty was not pleased with how the Bahrain situation had been
resolved. One of the Royal
Navy’s fleet commanders worried that Britain was already “much too
dependent upon the goodwill of
both Persia and Russia” for its oil supplies. Bahrain, by contrast, would
have been invaluable wartime
source of oil because it was an island and could be defended more easily
than APOC’s oilfields in Persia.
But there was still a chance of salvaging the situation if Britain could
develop Kuwait. Although not as
defensible as Bahraini oil, Kuwaiti production “should be much safer,
easer to defend and freer from
political considerations in war than the Anglo-Persian Oil Company
fields, owing to it being in Arabia

C.P. 328 (30), CAB 24/215. The to-and-fro between the Petroleum
Department and the Colonial Office over the
“Open Door” within the Empire is summarized in: McBeth, British Oil
Policy, 122-128.
183
The Anglo-American struggle for the Kuwait concession and the formation
of the Kuwait Oil Company is
detailed in: Fiona Venn, “A Struggle for Supremacy? Great Britain, the
United States and Kuwaiti Oil in the 1930s,”
University of Essex, Department of History, Working Paper Series, Working
Paper II (2000),
http://www.essex.ac.uk/history/Staff_Research/working-papers/fvenn-
paper.pdf. The best source on the complex
negotiations leading to formation of the Kuwait Oil Company (KOC) and its
1934 are concession is: Bamberg,
History of BP, 146-155. See also: DeNovo, American Interests, 202-209;
and Benjamin Shwadran, The Oil and the
Great Powers (New York: Council for Middle Eastern Affairs Press, 1959),
384-388. For the perspective of the
British Government, see: “History of the Kuwait Oil Concession,” Appendix
I (F) to: Ministerial Oil Committee,
“Oil Policy,” no date (circa April 1944), M.O.C. (44) 5, POWE 33/1399.
184
Foreign Office, “American Wish to secure an Oil Concession in Koweit,” 30
March 1932, enclosed with: J.S.
(John Simon), “Koweit Oil Concession,” 02 April 1932, C.P. 120 (32), CAB
24/229.

163
and not Persia.” The problem, however, was APOC, which was not eager to
develop low-cost Arabian
alternatives to its Persian production.185
Admiralty oil policy in the Persian Gulf had revolved around the
maintenance of three conditions for
all concessions: that the concessionaries be “British” in terms of their
leadership and headquarters (but
not shareholders); that the staff working the concession be British; and
that all companies agree to
construct both a refinery and afford the Admiralty “the right of pre-
emption” during wartime. The
agreement with the Americans over Bahrain included the first two clauses,
but the not third, and this had
to be avoided in the case of Kuwait. Interestingly, APOC was trying to
have these stipulations waived in
order to push through an agreement with Gulf.186 In the case of Kuwait,
like the Iraqi pipeline years
before, the commercial interests of APOC came into conflict with the
strategic imperatives of its most
important patron, the Admiralty. The Admiralty was not averse to the idea
of Anglo-American
cooperation in Kuwait, for “it seems desirable that approval should be
given” to Gulf, which had “a very
deeper pocket than the Anglo-Persian Oil Company […].” What irked the
Admiralty was “the fact that
the Foreign Office have given the American Government an understanding
which practically amounts to
an open door arrangement in that area.” The Admiralty also complained
that the former U.S. Ambassador
to Britain, Andrew Mellon, “seems to have made a very improper use of his
position as Ambassador.”187
APOC had been caught napping twice over the past few years: the company
had passed on the
concessions for both Bahrain and Kuwait when Holmes offered them,
believing that there was no oil in
the Arabian Peninsula. APOC and the IPC lost out to SOCAL again the
following year for the concession
to the Saudi province of al-Hasa, although the primary reason why the IPC
fell short in this instance
185

Admiral M.E. Dunbar-Nasmith (C-in-C, East Indies) to First Sea Lord

Admiral A. Ernle M. Chatfield, 11
December 1933, ADM 1/8773/57. Chatfield concurred with Dunbar-Nasmith’s
analysis, even if he considered the
possibility of the Persians blocking oil exports during wartime to be
remote (leaving aside the question of Soviet
interference). Chatfield was also confident that Britain would be able to
pre-empt Bahraini oil production in wartime
through the intervention of the Sheikh. Chatfield to Dunbar-Nasmith, 05
February 1934, ADM 1/8773/57.
186
Military Branch, Admiralty, “Oil in the Persian Gulf – Admiralty Policy,”
no date, enclosed with: Plans Division,
Admiralty, no title or date (handwritten notation reads: “Persian Gulf.
The Oil Situation. Dated: 8.1.34”), ADM
1/8773/57.
187
Military Branch, Admiralty, “Oil in the Persian Gulf: Short Summary up to
January, 1934,” no date, enclosed
with: Plans Division, Admiralty, no title or date (handwritten notation
reads: “Persian Gulf. The Oil Situation.
Dated: 8.1.34”), ADM 1/8773/57. Mellon’s bank was a major shareholder in
Gulf, but the company was founded
and operated by another branch of the Mellon family.

164
appears to have been Ibn Saud’s desire to encourage the United States to
maintain a larger presence in
Saudi Arabia in order to counterbalance Britain.188 By 1933, therefore,
APOC had every incentive to
avoid being shut out of Kuwait, while the British Government was
disinclined to see a replay of the 1930
dispute with the United States over the Bahrain concession. After 1932,
Britain could not afford to
antagonize the United States when it was the verge of defaulting on its
war debt, and it again abandoned
its insistence upon the application of the British “control” clause.
One historian argues that British appeasement of U.S. oil ambitions in
Bahrain and Kuwait between
1929 and 1934 was motivated by the desire of the Foreign Office to
reverse the deterioration in AngloAmerican relations once Britain sought
relief on its wartime debt to the United States. Her excessive
emphasis on Foreign Office records obscures the degree to which Britain’s
parlous oil supply situation
also demanded a rapprochement with the United States.189 German analysts
understood that the entrance
of U.S. interests in the Persian Gulf, even if they posed a challenge to
British commercial supremacy,
actually strengthened Britain’s strategic position by giving the United
States a stake in the region’s
security, particularly in the case of Bahrain, over which the Iranians
claimed sovereignty.190 Whatever the
shape of Britain’s finances, there was no viable short-term alternative
to cooperation with the United
States on oil matters. Since the mid-1920s, the assessments of agencies
such as the Oil Board and the
Petroleum Division had demonstrated that Britain’s policy of seeking
energy independence from the
United States was failing, and that Britain would have no option but to
acquire more than half of its
wartime oil supplies from the U.S.-dominated Western Hemisphere.
After the Sheikh of Kuwait rejected individual bids by both APOC and
Gulf, the companies came
together to form the Kuwait Oil Company (KOC) in December 1933 with
London’s blessing.191 The
188

Anderson, ARAMCO, 21-34; Edward Peter Fitzgerald, “The Iraq Petroleum

Company, Standard Oil of
California, and the Contest for Eastern Arabia,” International History
Review 13: 3 (1991): 441-460; and Clive
Leatherdale, Britain and Saudi Arabia, 1925-1939: The Imperial Oasis
(Frank Cass: Abingdon, 1983), 193-208.
189
Fiona Venn, “‘A Futile Paper Chase’: Anglo-American Relations and Middle
East Oil, 1918-1934,” Diplomacy
& Statecraft 1 (1990): 165-184.
190
“Ölwirtschaft im Iranischen Golf,” Vierjahresplan, 1938: X.
191
In March 1934, the KOC also signed a “political agreement” with London,
promising the latter that it would not
transfer the concession without the permission of the British Government,
which would also have pre-emptive rights
to Kuwaiti oil during wartime. “Political Agreement Between His Majesty’s
Government in the United Kingdom
165
following December, the KOC (like BAPCO, technically a British company)
received a 75-year
concession for all of Kuwait except the “Neutral Zone” with Saudi Arabia.
Although ownership of the
KOC was shared 50/50, in practice, effective control of output rested in
the hands of APOC since both
parties had to agree upon and share equally any production, while APOC
could supply its partner with oil
from its fields in Iran or Iraq if Gulf required additional supplies.192
The KOC discovered oil in 1938, but
Kuwait was of marginal consequence before the Second World War, and
Cadman did not bother to
mention the AIOC’s activities there during the company’s annual meeting
in 1939.193
Although the Cabinet accepted the recommendations of the Petroleum
Department and CID
concerning the modification of the British “control” clause in October
1930, no official announcement
was made until July 1936, and the relevant legislation was not passed
until 1938. The most important
change in policy was that foreign-controlled companies could now purchase
previously restricted
concessions so long as their host governments reciprocated to British
firms. The new policy also met the
Admiralty’s demands by forcing concessionaires to refine at least 50% of
their production within the
empire beyond an unspecified level of output and allowing the British
Government to “pre-empt”
production during an emergency.194
The reasons for the delay in announcing the shift in policy were two-
fold: First, Britain had to pass
model legislation in 1934 and 1935 eliminating the old “control” clause
within Great Britain itself.
Second, Britain needed to bring along the self-governing dominions
because of the terms of the U.S.
Minerals Leasing Act of 1920. Passed during early stages of the Anglo-
American “oil war” after 1918,
the bill prohibited the granting of oil leases on Federal lands to any
company whose home country
discriminated against U.S. firms. Now that Britain had abandoned the
“control” clause in the Persian
Gulf, there was no point in maintaining it elsewhere, particularly if its
elimination allowed Britain to

and the Kuwait Oil Company, Date 5th March, 1934,” Appendix VII (B) to:
Ministerial Oil Committee, “Oil Policy,”
no date (circa April 1944), M.O.C. (44) 5, POWE 33/1399; and Bamberg,
History of BP, 150-151.
192
Blair, Control of Oil, 42-43.
193
Wilkins, Maturing, 213-214. Wilkins misdates the discovery of oil at
Burgan as occurring in 1937.
194
J.H.T. (James Henry Thomas), “Oil Development in the Colonial Empire:
Policy of British Control:
Memorandum by the Secretary of State for the Colonies,” 27 April 1936,
C.P. 119 (36), CAB 24/262.

166
qualify as a “reciprocating country” under Minerals Leasing Act.
Officials had long argued that Britain’s
case for “reciprocity” would only be strengthened if the entire empire
abandoned the “control” clause.195
There was also little to lose: by 1936, London had concluded that there
was not much oil to be had within
the empire. As one Treasury official observed, “it would appear that we
stand to gain more than we offer
by this reciprocity business.”196 London’s flexible policy on Bahrain and
Kuwait, and the gradual
elimination of the “control” clause thereafter, ensured that Washington
raised no complaints in 1935
when London queried if Britain was a “reciprocal country” under the
Minerals Leasing Act, which meant
that British firms could once again prospect for oil on Federal lands.197
By then, Britain was going to need
all the help it could get.198
***
The fate of the policy of British “control” of imperial oil reserves was
symbolic of the uninspiring
track record of British oil policy between 1921 and 1932. The one triumph
– Venezuela – was not
applicable because the country fell within the U.S. sphere of influence,
and Shell operated there at
Washington’s sufferance. Iraq was only a partial success: London had
secured the predominance of the
TPC/IPC within the Iraqi oil industry, as well as British political
control over Iraq as a whole, in the face
of widespread opposition. But Iraqi oil exports had yet to arrive in
Europe as of 1932 – five years after the
discovery of oil at Baba Gurgur. The mixed results in Iraq had to be set
against the failure to increase oil
production within the empire significantly, in spite of the preferential
treatment afforded to British oil
companies and the harm inflicted upon Anglo-American relations. The plan
to Shell under majorityBritish ownership had been both fruitless and
misguided (in view of the group’s past and future
contributions to Britain’s survival). Despite more than a decade of
effort, Britain was nowhere near
195

BOT, “Treatment of Foreigners and Foreign Enterprises,” 28 October 1932,

POWE 33/461.
Edward E. Bridges, “Oil Development in the Colonial Empire: C.P. 119
(36),” 06 May 1936, T 161/172.
197
The matter ended up being the subject of a voluminous exchange of
correspondence between the British Embassy
in Washington, and departments of State, Interior, and Justice, since the
latter two had to contribute legal opinions.
See the materials enclosed within: NARA, RG 59, 841.6363/412 to
841.6363/425.
198
Developments between 1930 and 1938 are summarized in: Petroleum
Department, “Oil Concessions: The
Position of Aliens and Foreign Controlled Companies in Regard to the
Granting of Oil Concessions in Great Britain
and the Colonial Empire,” September 1938, POWE 34/1. See also: Charles
More, Black Gold: Britain and Oil in the
Twentieth Century (London: Continuum, 2009), 65-66.
196

167
realizing the dream of energy independence from the United States, which
had appeared feasible in the
aftermath of the World War but was becoming increasingly elusive. The
relatively benign international
atmosphere of the 1920s had masked the underwhelming results of Britain’s
oil policy. But starting in
1932, events would take a distinctly ominous turn and expose the gap
between London’s ambitions and
the reality of Britain’s oil position.

168
Map 3: Standard Oil Company of New Jersey, “Export Movements of Crude
Petroleum and its Products
among Continents – 1938 [in barrels per day],” December 1942
Source: National Archives and Records Administration (NARA), Record Group
59: General Records of
the Department of State (RG 59), Lot File 77D141, Records of the
Petroleum Division (PED), Box 3.
169
Illustration 4: “World Consumption vs. World Production [of] Petroleum,”
1938
Source: NARA, Record Group 107: Records of the Office of the Secretary of
War (RG 107), Entry 141,
Office of the Under Secretary for War, Administrative Office, Classified
Decimal File, Box 251.

170
Illustration 5: “Financial Control by Countries of Proven Petroleum
Reserves Inclusive of U.S.A.,”
Western Hemisphere, no date (circa 1938)
Source: NARA, RG 107, Entry 141, Office of the Under Secretary for War,
Administrative Office,
Classified Decimal File, Box 251.

171
Illustration 6: “Financial Control by Countries of Proven Petroleum
Reserves,” Eastern Hemisphere, no
date (circa 1938)
Source: NARA, RG 107, Entry 141, Office of the Under Secretary for War,
Administrative Office,
Classified Decimal File, Box 251.

172
Map 4: Foreign Office, Research Department, “Oilfields & Concession Areas
in the Middle Eastern
Countries Together with Neighbouring Oilfields in the U.S.S.R.,” March
1945
Source: British National Archives, FO 371/45274.

173
Map 5: Areal Comparison of Major Oil Concessions in the Middle East
against the United States, no date
(circa 1939/41)
Source: NARA, RG 107, Entry 141, Office of the Under Secretary for War,
Administrative Office,
Classified Decimal File, Box 251.
174
Map 6: Oilfields, Pipelines, and Refineries of the Middle East, no date
(circa 1943)
Source: NARA, RG 107, Entry 141, Office of the Under Secretary for War,
Administrative Office,
Classified Decimal File, Box 251.
175
Illustration 7: Petroleum Administration for War, “Petroleum Reserves of
the World,” 22 February 1945
Source: LOC, Harold L. Ickes Papers, Box 221.
176
Illustration 8: Petroleum Administration for War, “Division of Proved
Reserves,” 22 February 1945
Source: LOC, Harold L. Ickes Papers, Box 221.

177
Illustration 9: Petroleum Administration for War, “Refining Capacities –
Worldwide,” 22 February 1945
Source: LOC, Harold L. Ickes Papers, Box 221.
178
Chapter III
The Reality of Dependence: Britain, 1932-1939
Britain’s Narrow Margin for Security
In 1925, Admiral Edmond Slade offered a thoughtful analysis of Britain’s
oil situation in a lecture
before the Royal United Service Institution. Britain depended on three
nations to supply more than 85%
of its oil consumption in 1924 (5,749,577 tons): the United States
(2,413,000 tons – 38%), Persia
(1,439,000 tons – 25%), and Mexico (1,196,000 tons – 21%). Slade was
concerned that increases in U.S.
domestic consumption would reduce the amount of oil available for export
– currently 20,559,000 tons, or
21.6% of its total production, of which Great Britain alone consumed
2,413,000 tons, or 11.7% of total
U.S. exports.1 Persia was the most important overseas asset beyond the
United States, and since supplies
from there were vulnerable to disruption, Britain had “to cultivate and
maintain the most friendly relations
with Persia and to demonstrate to her that it is to her interest to look
to Great Britain for assistance in the
development of her resources,” while also positioning adequate forces to
defend the Persian oilfields. The
size of the Persian oil reserves, combined with the country’s small rate
of domestic consumption, offered
the possibility that “Persia may eventually take the place of the United
States as the principal source of
supply for the United Kingdom […].” Although the British Government
should continue to increase its
reserve stocks and subsidize scientific efforts to develop a cost-
effective means of synthetically producing
oil from either coal or shale, Slade stressed “that it is to the East
rather than to the West that we should
look for supplies, and that we must use every endeavour to cement our
ties with the nations in whose
territories the oil is to be found.”2

There were, for instance, 6.3 people for every automobile in the United
States, compared to 32 people per
automobile in Britain. Admiral Sir E.J.W. Slade, “Oil Supplies in War,”
Journal of the Royal United Service
Institution (hereafter cited as: RUSI) 71: 481 (1926): 129. In another
speech before the Royal Naval College in 1926,
Slade explained that technological advances would probably significant
boost rates of extraction in the United
States. Moreover, it was fair to assume “that the discovery of fresh
pools has not, by any means, yet reached
finality.” Nevertheless, Slade still believed that the U.S. Government
would have no option but to limit oil exports
within a decade. “Strategic Aspect of Oil Supplies in War,” no date
(circa 1926), British Petroleum Archive, Arc.
Ref. 68940 (hereafter cited as: BP, No.). All primary sources cited in
this chapter are from the British National
Archives (BNA), unless otherwise indicated.
2
Slade, “Oil Supplies in War,” 119-135.

179
In an address before the Royal Naval College the following year, Slade
ruled out drawing supplies
from either the Soviet Union or Mexico, the former because it had only a
small exportable surplus, while
the United States would absorb most of the latter’s output.3 Venezuela
could become an important
supplier “by 1930,” which meant that “we are reduced to one country to
which we can look for the supply
of the greater part of our requirements, – namely, Persia.” That country
was capable of producing the
sufficient quantities of oil, but Slade expressed skepticism about
Persia’s reliability in wartime.
Production there could, for example, be disrupted through Soviet
interference. In case supplies were no
longer forthcoming, there was “no escape” from two equally unpalatable
options: either mount a punitive
expedition against Persia to seize control of the oilfields, “or,
alternatively, submit to an ignominious
peace […].” In view of the likelihood “that we are not going to find
‘free’ Petroleum within the Empire,”
Slade again urged a policy of developing substitutes and building
adequate storage capacity (40,000,000
tons worth).4
Slade’s somber evaluation revealed the lack of progress in achieving
energy independence from the
United States. By the late-1920s, the British Government conceded that
“on present evidence the
possibility of any considerable increase in Empire production… appears
remote.” In 1926, imperial
production shrank to 1.8% of global production and only 3.8% of Great
Britain’s total oil imports
(1,726,000 barrels out of 45,542,000 barrels). This figure would contract
to 3.2% in 1927 (1,562,000
barrels out of 48,842,000 barrels).5 Consequently, there was an implicit
understanding in London that
Britain’s oil security in wartime still depended on the benevolent
neutrality of the United States. Even this
3

Soviet exports in 1925 were only 1,250,000 tons (good for sixth place
among oil-exporting nations), but they rose
sharply after 1929, peaking at 6,601,000 tons in 1932 before quickly
declining to only 931,000 tons in 1938. ReichsKredit-Gesellschaft AG,
Ke/Schr., “Treibstoffwirtschaft in der Welt und in Deutschland,” April
1938, National
Archives and Records Administration, Record Group 242: Foreign Records
Seized, National Archives Microfilm
Publication T-84, Reel 51, Item No. EAP 66-c-2-10/22 – hereafter cited
as: NARA, RG 242, Microfilm Publication
No./Reel No. (Item No.); and the Reichstelle für Bodenforschung, Die
wichtigsten Lagerstätten der Erde, Heft 4:
Erdöl in Rußland (Berlin, 1941), Library of Congress.
4
“Strategic Aspect of Oil Supplies in War,” no date (circa 1926), BP
68940.
5
Petroleum Department, “Petroleum Industry in the British Empire,”
February 1928, POWE 33/253. Part of the
problem was that only 10% of imperial production actually found its way
to Great Britain. In trying to find a way to
address this imbalance, a supplementary note to the aforementioned report
concluded that “it is very doubtful
whether a preferential rate of duty on empire produced oil would have any
useful effect.” “British Empire
Production: Supplementary note in reply to points raised by Mr. Grylls,”
no date or author (handwritten notation
reads: “H.P.W.G. Feb: 1928”), POWE 33/253.

180
might prove insufficient if the Middle Eastern oil was completely
unavailable, and such a catastrophe
could not be ruled out in the wake of the events of 1932-1933 in Persia.

181
The Cancelation of the APOC Concession, 1932-1933
Relations between Britain and Persia had not improved after the failure
of the Anglo-Persian
Agreement. They sunk to a new low in 1928, when the Persians had laid
claim to the islands of Abu Musa
and the Greater and Lesser Tunbs, which are located at the eastern end of
the Persian Gulf and sit athwart
the Strait of Hormuz. Britain had the islands and allowed them to be
administered by their Trucial clients
(Sharjah in the case of Abu Musa and Ras al-Khaimah in the case of the
Tunbs). The Persians also started
claiming sovereignty over Bahrain, Muscat (Oman), and the Trucial States
themselves. The Secretary of
State for India, the Earl of Birkenhead, advised his Cabinet colleagues
in 1928 “that Persia has definitely
thrown down the glove,” and was aiming at nothing less than the
elimination of the British presence in the
Persian Gulf. Since it was “axiomatic” that “the maintenance in the Gulf
of British supremacy is of vital
importance,” Birkenhead advised the government to go on “the diplomatic
offensive against Persia.”6
The Persian Gulf Sub-Committee of the Committee of Imperial Defence
(CID), of which Birkenhead
was a member, stipulated that the significance of the Persian Gulf to
Britain arose from three factors. The
first was its value as a trade and communications link to India and the
imperial possessions in the Far
East. The second was the development of both the Persian and Iraqi
oilfields. The third was “the advent of
air-power,” which necessitated the construction of airbases linking
Britain’s empire on both sides of Suez:
“The Persian Gulf is a vital link in that chain and its rupture would
cripple the Air Force to no less a
degree than the closing of the Suez Canal would cripple the Navy.”7
Another member of the committee,
Leo Amery, focused on the sub-committee’s suggestion that Britain might
“adopt the attitude that the
Persian Gulf is a special interest, comparable to the Monroe Doctrine,”
and refuse to accept any
international meddling in Gulf affairs. Although the subcommittee went no
farther than stopping any
foreign power from establishing naval or air bases in the region and
maintaining the political status quo,
Amery urged his Cabinet colleagues to consider the more radical approach.
In terms similar to those of
6

Earl of Birkenhead, “British Policy in the Persian Gulf: Memorandum by

the Secretary of State for India,” 11
October 1928, C.P. 299 (28) (Also C.I.D. Paper No. P.G. 14), CAB 24/197.
7
Committee of Imperial Defence (CID), “The Persian Gulf: Interim Report of
a Sub-Committee,” 29 October 1928,
169-D, enclosed with: Hankey, “The Persian Gulf: Note by the Secretary,”
30 October 1928, C.P. 321 (28), CAB
24/198.

182
the Carter Doctrine of 1980, Amery wanted London to adopt the position
that “we regard the Persian Gulf
as an area where interference with our supremacy or with our established
rights will be resisted as a direct
act of aggression upon ourselves.”8
Birkenhead believed that Britain should not allow itself to be dissuaded
by threats to the APOC
concession: “Once Persia realises… that our anxiety as to the position of
the Anglo-Persian Oil Company
and our anxiety to stand well in the eyes of the League… she may be
relied on to blackmail us through
them.” Although Birkenhead did not dispute the strategic significance of
Persian oil, he advised his
colleagues to call Tehran’s bluff if it cancelled the APOC concession.
Not only did Tehran depend upon
oil revenues, but international opinion would run against Persia if it
violated British rights. “I suggest,” he
reassured his colleagues, “that the possible Persian threat to the Anglo-
Persian Oil Company is more of a
bugbear than a reality.”9 Other departments were more skeptical. Four
years later, on the eve of the
cancellation of the APOC concession, the Foreign Office pressed for a
treaty with Persia, partially out of
fears of Persian “retaliatory action,” since “it is impossible to rely on
the Persians… acting in their own
best interests.”10
The 1901 concession had long been a source of resentment in Persia. After
he deposed the Qajar
dynasty in 1925, the new Shah, Reza Khan, pressured APOC to renegotiate.
The Persians were incensed
by the decline in royalty payments, which had been set at 16% of the net
profits of the company and all of
8

L.S.A., “The Persian Gulf: Interim Report of a Sub-Committee of the

Committee of Imperial Defence: Note by the
Secretary of State for the Colonies,” 29 October 1928, C.P. 322 (28), CAB
24/198. Compare with President Carter’s
warning that any “attempt by any outside force to gain control of the
Persian Gulf region will be regarded as an
assault on the vital interests of the United States of America, and such
an assault will be repelled by any means
necessary, including military force.” “The State of the Union Address
Delivered Before a Joint Session of
Congress,” 23 January 1980, The American Presidency Project,
http://www.presidency.ucsb.edu/ws/index.php?pid=33079.
9
Birkenhead, “British Policy in the Persian Gulf: Memorandum by the
Secretary of State for India,” 11 October
1928, C.P. 299 (28) (Also C.I.D. Paper No. P.G. 14), CAB 24/197.
10
Although the Foreign Office was skeptical that Britain could secure a
treaty that satisfied its objectives with
regard to Bahrain or the use of Hengam Island (at the mouth of the Strait
of Hormuz) as a naval base, it nonetheless
supported continuing negotiations for a variety of reasons, including
“avoiding friction… in the strategically
important area of the Persian Gulf,” blunting Soviet attempts to exert
influence in Persia, and protecting Britain’s
“important vested interests in Persia,” such as the 1901 concession of
the Anglo-Persian Oil Company (APOC). J.S.
(John Simon, Foreign Secretary), “Anglo-Persian Relations,” 24 October
1932, C.P. 358 (32), E 5481/208/34, CAB
24/234. The India Office, now under the leadership of Samuel Hoare, had
taken a slightly softer line and was willing
to compromise on Hengam, but not Bahrain, in the interest of securing an
Anglo-Persian treaty. S.H., “AngloPersian Relations: Memorandum by the
Secretary of State for India,” 31 October 1932, C.P. 371 (32), CAB
24/234.

183
its subsidiaries under the original concession.11 Production had
continued its wartime ascent, from
2,327,221 tons in 1921/22 to 5,939,302 tons in 1930, but the cost per ton
of production had dropped from
13/10d to 8/8d between 1920/21 and 1925/26.12 The fluctuations in royalty
payments frustrated the
modernization program begun by the new Shah, Reza Pahlavi, which required
annual revenues of at least
£1,000,000. Between 1918 and 1927, the royalties had steadily increased
from £418,627 to £1,400,269.13
In 1928, after they cratered to £502,080, the Shah abrogated the
Armitage-Smith Agreement of 1920 and
his government started negotiations on a new agreement. The Persians’
overriding objective was a share
of the company (25%), plus 2/- per ton of oil produced, in order to
guarantee revenues of at least
£1,000,000 per year – well below the £1,400,000 received in 1927,
although APOC Chairman John
Cadman warned the lead Persian negotiator, Abdul Husayn Timurtash, that
Persia “may not see [such
royalties] again for some time in view of overproduction today and more
to come.”14
Cadman, who was genuinely interested in reaching a long-term arrangement
with Tehran, managed to
sell the British Government and his board of directors on sharing
ownership of APOC with Tehran, so
long as the Persians agreed that they would not be able to sell those
shares in future. Cadman went to
Persia in February 1929 and offered Tehran a 20% stake in APOC, the 2/-
royalty, and a reduction of the
company’s concession area to 100,000 miles if it added another thirty
years to the 1901 concession. The
Iranians refused to budge on their demand for a 25% stake (which they
would retain even after the
concession expired) and a minimum payment. They also offered only a 20-
year extension of the
concession. APOC’s board rejected the Tehran’s demands and the
negotiations collapsed. The Persians
had overplayed their hand, not realizing that the bump in royalties to
£1,436,764 tons in 1929 was an

11

The 1901 concession was revised in 1920 under the so-called Armitage-
Smith Agreement to exclude APOC
subsidiaries operating beyond Iran, which would pay royalties only on
those profits APOC “defined and calculated”
as stemming from the company’s Iranian operations, even though all of
them had originally been founded by the
profits from APOC’s operations in Iran. Mostafa Elm, Oil, Power, and
Principle: Iran’s Oil Nationalization and its
Aftermath (Syracuse: Syracuse University Press, 1992), 21.
12
R.W. Ferrier, The Developing Years, 1901-1932, vol. 1 of The History of
the British Petroleum Company
(Cambridge: Cambridge University Press, 1982), 370, 601, 415.
13
Ferrier, History of BP, 370, 601.
14
Ferrier, History of BP, 602.
184
outlier. Even critics of APOC concede that the country had “gambled for
high stakes and Iran lost.”15 By
the time negotiations restarted in 1931, the world was in the throes of
the Depression and APOC’s
leadership was irrevocably opposed to sharing ownership with Tehran. The
Persians’ objectives during
the new round of negotiations were more limited than before (20% of the
company’s profits). Although
the two sides signed a provisional agreement in May 1932, it soon
unraveled. Royalty payments for 1931
had slumped by more than three-quarters from those of 1929 as APOC’s
profits sagged under the weight
of the Great Depression (although only by 44%).
Year
1929
1930
1931

Oil Production in Iran

5,460,955 tons
5,939,302 tons
5,750,498 tons

Royalty (£)
1,436 764
1,288,312
306,382

Royalty per ton

5/3d
4/4d
1/1d

APOC Profits (£)

4,274,000
3,786,000
2,413,000

Frustrated by the course of negotiations, the Shah abrogated the 1901

concession on 27 November 1932.16
The Shah did not, however, nationalize the industry. He informed APOC’s
local manager that his aim was
to negotiate, and oil production continued without interruption
throughout the crisis.17 London still
protested and warned Tehran that it would “not hesitate if the necessity
arises to take all legitimate
measures to protect their just and indisputable interests.”18
The British were fortunate that they never had to back up their bluster.
Once the crisis had broken out,
it became apparent that British military forces could accomplish
little.19 Although Britain enjoyed
massive superiority, both the Chiefs of Staff and APOC warned against any
“provocation.” Neither the
dispatch of troops from Iraq, nor over-flights by Royal Air Force (RAF)
aircraft, nor a “demonstration”
15

Elm, Oil, Power, Principle, 30. Ferrier, on other hand, considers

Cadman’s flirtation with a partnership with
Persia to have been “impractical. The centrifugal realities which kept
them apart were stronger than the centripetal
attractions which bound them together.” Ferrier, History of BP, 629-630.
16
This summary of events between 1928 and 1932 is based on: Elm, Oil,
Power, Principle, 18, and 28-31; and
Ferrier, History of BP, 599-631.
17
Ronald Ferrier, “The Iranian Oil Industry,” in: From Nadir Shah to the
Islamic Republic, ed. Peter Avery, Gavin
Hambly, and Charles Melville, vol. 7 of The Cambridge History of Iran
(Cambridge: Cambridge University Press,
2008), 645-646.
18
The Persians were not impressed, replying the following day that the 1901
concession was “not in accord with the
legitimate interests of Persia […].” For Eden’s note to Persia of 02
December 1932 (which he read out before the
House of Commons) and the Persian reply, see: “Persian Oil Concessions,”
08 December 1932, no author, BP
69287.
19
Peter Beck, “The Anglo-Persian Oil Dispute, 1932-1933,” Journal of
Contemporary History 9: 4 (1974): 148-149.

185
by the Royal Navy at Abadan would strengthen the hand of APOC, which
hoped the situation could be
resolved through negotiation.20 In the event that violence broke out,
existing British forces in the region
were too paltry to do anything more than evacuate British nationals from
Abadan. Nothing could be done
to protect the oilfields themselves “and recapture could not be effected
until reinforcements on a large
scale were provided from India or Home, i.e., for several months.”
British defense of the oilfields was
hamstrung further by the fact that reinforcements would have to be
comprised of white rather than Indian
troops in order not to offend the sensibilities of the allied Bakhtiari
tribes. To make matters worse, the
Joint Planning Staff feared that unrest could spread if the Persians
attacked Iraq or stirred up “trouble in
the Kurdish area.” There was also the matter of Iraq’s Shia, who “might
seize the opportunity of giving
trouble as a means of gaining their own ends and assisting their co-
religionists, the Persians.” The most
worrying outcome was intervention by the Soviet Union under the terms of
its existing treaties with
Persia, which “would result in an incalculable extension of our
commitments.”21
An armed response was also impractical because British public sentiment
ran strongly against any
unilateral application of force (as Japan had used against China in
Manchuria). In view of the political and
logistical hurdles, London’s only option was to refer the matter for
arbitration by the League of Nations,
which was the course championed by the Foreign Office. The Permanent
Under Secretary of State for
Foreign Affairs, Robert Vansittart, reassured the Cabinet in December
1932 that Britain had nothing to
fear from international arbitration. He advised against any escalation
until all options in Geneva and The
Hague had been expended, “even under the strongest provocation on the
part of the Persian Government,”
lest the British find “themselves in a position in which the tables could
be completely turned on them by
Persia […].” Like the Chiefs, Vansittart was also troubled by the
prospect that Persia might make use of
20

G.F. Milne (Chief of the Imperial General Staff), F.L. Field (First Sea
Lord), and J.M. Salmond (Chief of the Air
Staff), CID, Chiefs of Staff Sub-Committee, “Protection of the South
Persian Oilfields,” 02 December 1932, C.O.S.
300 (Also C.I.D. Paper No. 381-C), enclosed with: Hankey, “Protection of
the South Persian Oilfields,” 03
December 1932, C.P. 419 (32), CAB 24/235.
21
R.H. Haining, J.H.D. Cunningham, C. Portal, and G.L. Pepys, “Protection
of the Anglo-Persian Oil Company’s
Property: Report of the Joint Planning Sub-Committee of the Chiefs of
Staff Committee,” 10 December 1932,
C.O.S. 300 (J.P.) (Also Paper No. J.P. 81), enclosed with: G.F. Milne
(Chief of the Imperial General Staff), F.L.
Field (First Sea Lord), and J.M. Salmond (Chief of the Air Staff), CID,
Chiefs of Staff Sub-Committee, “Protection
of the South Persian Oilfields,” 12 December 1932, C.O.S. 301, attached
to: Hankey, “Protection of the South
Persian Oilfields,” 13 December 1932, C.P. 430 (32), CAB 24/235.

186
its 1921 and 1927 treaties with the Soviet Union, which guaranteed the
former’s territorial integrity and
afforded the latter the right to intervene militarily if Tehran was
unable to defend itself. Although “[such]
a contingency is admittedly remote,” Vansittart warned that Soviet
intervention, with or without Tehran’s
approval, could not be ruled out.22
After the matter was referred to the League of Nations, the Persian
Government (by now desperate for
some revenue) and APOC agreed on a new concession in April 1933. The
Persians had originally sought
a one-quarter stake in APOC, a minimum annual payment of £1,000,000 in
gold on APOC’s first
6,000,000 tons of production, and 16% of the profits on any additional
oil produced. They ended up
settling for much less. APOC’s new concession area shrank by 80% (from
500,000 square miles to
100,000 square miles), and the company agreed to pay the Persian
Government a fixed sum (four gold
shillings) per ton of oil extracted plus an annual minimum payment of
£750,000. The company also
forfeited the right to own and operate pipelines within the concession
area and would pay Tehran a sum
equivalent to 20% of the company’s dividend payments beyond £671,250. As
a result, Persia’s royalty for
1931 increased from £306,872 to £1,339,132 and more than doubled between
1932 and 1937 from
£1,339,132 to £3,545,313. In exchange, the Persian Government gave up its
right to 16% of the APOC’s
annual profits (as guaranteed under the original 1901 concession),
extended the life of the concession
from 1961 to 1993, and most importantly, did not receive any shares in
the company.23
The surge in royalties following the 1933 settlement – 38% just between
1936 and 1937 – stemmed
from a 3,500,000 ton increase in production between 1933 and 1938
(6,446,000 tons to 10,196,000 tons),
but it turned out to have regrettable consequences. “Such a spectacular
rate of growth could not possibly
be sustained,” according to AIOC’s official history, but “the peak year
excited hopes and aroused

22

Vansittart, “Cancellation of Anglo-Persian Oil Company’s Concession:

Memorandum by the Permanent UnderSecretary of State for Foreign Affairs,”
06 December 1932, C.P. 421 (32); and Vansittart, “Memorandum by
Permanent Under-Secretary of State for Foreign Affairs Respecting the
Cancellation of Anglo-Persian Oil
Company’s Concession,” C.P. 428 (32), E 6607/388-/34, 13 December 1932;
both in: CAB 24/235.
23
The best treatments of the episode are: Bamberg, History of BP, 27-62;
Beck, “APOC Dispute,” 123-151; Elm,
Oil, Power, and Principle, 23-43. Benjamin Shwadran, The Oil and the
Great Powers (New York: Council for
Middle Eastern Affairs Press, 1959), 41-56, is good on the legal issues,
but his judgment as to which side benefitted
most from the concession – that neither enjoyed a “decided advantage” –
is questionable.
187
expectations which stood not the remotest chance of being fulfilled.” The
British had only boosted
production in order to gather stockpiles in the event of war, and
Tehran’s royalties declined by £200,000
tons in 1938. Only Cadman’s direct intervention (including the promise of
export credits from the British
Government) dissuaded the Shah from cancelling APOC’s concession again in
the spring of 1939.24
This crisis should have provided London with definite evidence that
Britain’s hold over Middle
Eastern oil was tenuous. Instead, the events in Persia prompted no major
reassessment of Britain’s oil
position.25 The sanguine analysis provided by the Oil Board was confined
to the favorable nature of the
new concession. Although the concession area had shrunk by 80%, APOC
retained control of all of the
most promising oil-bearing territories in South Persia. As far as the Oil
Board was concerned, “[the]
Company regard their position under the new Concession as very much
stronger in many respects than
under the old, and they have a period of 60 years from now, which will
enable them to plan their activities
for a long period ahead.”26
Cadman reported his satisfaction to the Foreign Secretary, John Simon,
and even bragged about how
“he has successfully resisted the demand for the appointment to the board
of any Persian director.”27 A
few days before, during a board meeting to review the agreement, APOC’s
General Counsel lauded the
work of Cadman and his deputy (and successor), William Fraser, observing
“that it was the best
Concession he had ever seen and the best that could be devised.” Another
director gushed “that the

24

J.H. Bamberg, The Anglo-Iranian Years, 1928-1954, vol. 2 of The History

of the British Petroleum Company
(Cambridge: Cambridge University Press, 1994), 57-62, 69.
25
This was not the position taken by the author of the British Official
History covering oil, who observed that the
1932/3 crisis with Persia, followed less than six years later by Mexican
nationalization, provided ample evidence
that British policy “was built on shaky foundations.” D.J. Payton-Smith,
Oil: A Study of War-time Policy and
Administration (London: HMSO, 1971), 24-25.
26
Marquess of Londonderry (Secretary of State for Air; President of the Oil
Board), et al., “Oil Board: Eighth
Annual Report,” 31 July 1933, O.B. 122 (also C.I.D. Paper No. 1117-B),
CAB 50/5.
27
“Memorandum,” enclosed with: J.S., “Anglo-Persian Relations,” 19 May
1933, C.P. 135 (33), CAB 24/241.
Cadman also assured Simon (both in May and again in December) that the
moment was ripe to seek a settlement of
broader issues bedeviling Anglo-Persian relations. J.S., “Persia,” 08
December 1933, C.P. 297 (33), E 7623/1329/34
G, CAB 24/245. As a result, in exchange for Tehran recognizing the
independence of Bahrain and the Trucial States,
and granting Britain a 25-year lease to Hengam, the British Government
was now willing to write off Persia’s debt
to Britain and cede ownership of a 60-mile stretch of railway in Persia
connecting the Persian and Indian lines
constructed by the Government of India during the war. John Simon,
“Anglo-Persian Relations: Proposed
Negotiations with the Shah: Report by the Standing Ministerial Sub-
Committee for Questions concerning the
Middle East,” 23 January 1934, C.P. 18 (34), CAB 24/247.

188
negotiations had resulted not merely in a Concession good in the
circumstances but in a really satisfactory
Concession […].” The board unanimously approved the new agreement, since,
on a commercial basis, it
was indeed extremely favorable to APOC.28 That same year, the company
announced a 7.5% dividend in
spite of the crisis and the Depression.
The British had won a short-term victory at the expense of their long-
term energy security. The
Persians remained resentful toward APOC and would again challenge the
concession once they felt that
their share of revenues was inadequate. Although APOC had emerged from
the events of 1932/33 in a
stronger position than before, Britain’s most valuable single overseas
asset (both in terms of its economic
and national security) remained in jeopardy – and not just because of the
animosity simmering in Tehran.
Britain’s entire strategy of seeking energy independence from the United
States by developing the Middle
East as an alternative supplier assumed safe passage between the Persian
Gulf and Great Britain through
the Mediterranean due to the constant shortage of tankers. The
elimination of any rival naval force in the
Mediterranean after 1918 had afforded Britain a welcome degree of
security, and even the advent of the
Third Reich in 1933 did not pose a major threat to Britain’s oil
supplies. The only plausible risk came
from Britain’s former wartime ally – Italy. Any souring of Anglo-Italian
relations would jeopardize the
entire basis of London’s oil policy irrespective of whether British oil
companies maintained control of
their oilfields.

28

“Anglo-Persian Oil Company, Limited: Board Meeting, 15th May, 1933,” BP

88373.

189
The Italian Threat to Britain’s Oil Lifeline, 1935-1936
After 1933, Britain found itself in an increasingly unfavorable strategic
position. Britain’s most likely
military opponent in the 1920s had been Japan, which, although a
formidable naval power, lacked the
ability to project power farther than the Pacific or to threaten
Britain’s oil supplies beyond the East Indies
and Burma. The rise of the Third Reich and the fracturing of Britain’s
relationship with Italy over its
invasion of Abyssinia in 1935 shifted the strategic balance against
London. Germany and Italy, although
inferior to Britain at sea, could sever access to the Middle East through
the Mediterranean and possibly
even invade the Middle East. Prior to 1935, Italy had every incentive to
contain Germany in order to
thwart its ambitions in Austria following the failed National Socialist
coup d’état of 1934. Anglo-FrenchItalian cooperation flourished briefly
after April 1935 with the formation of the “Stresa Front” after
Germany abrogated the military restrictions of the Versailles Treaty and
began rearming openly. London
spent the rest of year undermining any chance for cooperation with Italy,
first by signing a naval
agreement with Berlin in June without bothering to inform either Paris or
Rome. Any lingering hopes
were dashed as a result of the League of Nations’ attempt to apply
economic sanctions on Italy after the
start of the Second Italo-Abyssinian War in October 1935.29
The latter gravely damaged Britain’s security without any tangible
results. Historians have debated
the potential efficacy of a League oil embargo against Italy for decades.
The prevailing consensus is that a
League boycott on oil exports to Italy could, if combined with a pledge
by U.S. oil producers to keep
exports at peacetime levels, have disrupted the Italian war effort.30
There is considerable disagreement,
however, as to whether such an embargo was ever politically feasible.
Critics of Anglo-French policy
have observed that Paris was desperate to appease Rome, while London was
willing to play along because
of its perceived military vulnerability in the Mediterranean.31 Defenders
of British policy (then and now)

29

Zara Steiner, The Triumph of the Dark: European International History,

1933-1939 (Oxford: Oxford University
Press, 2011), 100-136.
30
Cristiano Andrea Ristuccia, “The 1935 Sanctions against Italy: Would Coal
and Oil Have Made a Difference?”
European Review of Economic History 4 (2000): 85-110.
31
The Service Chiefs were willing to go along with military action, but
warned that French military support and at
least two months of preparation would be required beforehand. CID, Chiefs
of Staff Sub-Committee, “Italo-

190
have pointed out that the League could not guarantee the compliance of
the United States, much less
openly hostile powers such as Germany or Japan.32 Washington lacked the
power to impose a proper
embargo, and although the major U.S. oil companies were willing to limit
their exports to peacetime
levels, smaller independent oil companies had both the spare production
and transportation capacity to
supply Italy if the major companies backed out. In other words, both
critics and defenders of British
policy agree that British policy hinged upon securing U.S. and League
support.33
Both the Petroleum Department and representatives from Shell and AIOC
made clear that a complete
embargo on oil would cripple Italy within a few months – a finding
affirmed by the special League of
Nations’ “Committee of Experts,” which had been established to study the
feasibility of oil sanctions in
January 1936. Neither formal sanctions by the League, nor a “voluntary”
restriction of exports to Italy to
prewar levels would have any meaningful effect without the full
cooperation of Romania, the Soviet
Union, and most importantly, the United States.34 Unfortunately, the
United States, unlike Romania and
the Soviet Union, was not a member of the League, and even if the major
U.S. companies restricted
exports to Italy, Shell and AIOC warned that smaller U.S. independent
companies (which accounted for

Abyssinian Dispute: Memorandum,” 09 August 1935, C.O.S. 392, enclosed

with: Francis Hemming (Cabinet
Office), “Italo-Abyssinian Dispute,” C.P. 166 (35), 19 August 1935, CAB
24/256. See also: Evan A. North, “Oil for
Italy: Great Britain and the Demise of the League of Nations, 1935-36,”
08 December 2008, unpublished paper in
the author’s possession.
32
CID, Advisory Committee on Trade Questions in Time of War, Sub-Committee
on Economic Pressure,
“Economic Pressure on Italy: Revised Draft Report,” no date (circa July
1934), A.T.B. (E.P.) 29 (4th Revise),
enclosed with: Francis Hemming, “Economic Pressure on Italy,” 21 August
1935, C.P. 169 (35), CAB 24/256. The
most recent defense may be found in: Bruce Strang, “‘The Worst of all
Worlds’: Oil Sanctions and Italy’s Invasion
of Abyssinia, 1935-1936,” Diplomacy and Statecraft 19 (2008): 210-235.
33
This was London’s policy, at least within the economic realm, by October
1935: CID, Advisory Committee on
Trade Questions in Time of War (W.E. Elliot), “Economic and Financial
Sanctions: Provisional Report,” 03 October
1935, A.T.B. 131, enclosed with: M.P.A. Hankey, “The Italo-Abyssinian
Dispute: Economic and Financial
Sanctions,” 04 October 1935, C.P. 186 (35), CAB 24/257.
34
In 1934, those three countries accounted for two-thirds of Italy’s oil
imports, and 77.6% during the period
between August and 13 November 1935. “Memorandum by the Oil Companies:
Oil Sanctions and Italy,” December
1935, Annex I to: W.R. (Walter Runciman), “Oil Supplies for Italy:
Memorandum by the President of the Board of
Trade,” 09 December 1935, C.P. 236 (35), CAB 24/257. According to a copy
of the memorandum in the BP Archive
(ArcRef. 68621), the author of the oil company memorandum was Andrew
Agnew, the former Managing Director of
Shell Transport and Trading. In view of the dismal prospects for a formal
oil embargo, Shell and the Anglo-Iranian
Oil Company (AIOC) were reluctant to bear the brunt of Italy’s wrath by
imposing voluntary exports, noting that the
Italians would probably retaliate by nationalizing their properties and
cutting them out of the lucrative Italian
market.

191
80,000 tons of production each day) could fill in, as Italy’s daily
consumption only totaled 8,000 tons.35
(This turned out to be an accurate forecast: sales from U.S. oil exports
to Italy in November 1935
increased by 50% from the figure in October and were three times larger
than normal monthly average
even though many of the major companies abided by the U.S. Government’s
“moral embargo.”36) Even a
diversion of oil tankers away from Italy would only have a negligible
effect without the support of the
Scandinavian nations, which controlled the third-largest bloc of tanker
tonnage behind Britain and the
United States. At worst, Italy might have to pay above-average oil prices
and freight rates. The best
Foreign Secretary Anthony Eden could suggest to his Cabinet colleagues
was that Britain should express
its willingness to join a formal League embargo for purely symbolic
reasons, as there was no hope of
actually doing anything meaningful to help Abyssinia, or “join in an
announcement that the
ineffectiveness of the oil sanction in present circumstances precludes
its’ imposition.”37
This was the course adopted by London in February 1936. Addis Abba fell
to Italian forces the
following April. Neither Britain nor France had been prepared to risk a
war with Italy (and potentially
Germany).38 Nor could Britain rely on the support of the dominions. The
nationalist William Lyon
Mackenzie King had returned to power in Canada in October 1935. King had
resisted any sort of imperial
military cooperation since the “Chanak Crisis” of 1922, and he was
unlikely to change course after

35

Both the Standard Oil Company of New Jersey (Jersey) and Royal
Dutch/Shell (Shell) attempted to do just that,
limiting exports to their Italian subsidiary to prewar levels. Henrietta
Larson, Evelyn Knowlton, and Charles Popple,
New Horizons, 1927-1950, vol. 3 of History of Standard Oil Company (New
Jersey) (New York: Harper & Row,
1971), 336; and Joost Jonker and Jan Luiten van Zanden, From Challenger
to Joint Industry Leader, 1890-1939,
vol. 1 of A History of Royal Dutch Shell (Oxford: Oxford University
Press, 2007), 461.
36
Robert Divine, The Illusion of Neutrality (Chicago: University of Chicago
Press, 1962), 129-130.
37
S.H. (Samuel Hoare, Foreign Secretary) and A.E. (Anthony Eden,
Parliamentary Under Secretary of State,
Foreign Office), “Dispute between Italy and Abyssinia: Embargo on Oil
Supplies for Italy,” 27 November 1935,
C.P. 212 (35), CAB 24/257 (see, especially, Annex I: “Proposed Embargo on
Supplies of Oil to Italy: Memorandum
by Petroleum Department of the Board of Trade,” 20 November 1935);
Runciman, “Oil Supplies for Italy:
Memorandum by the President of the Board of Trade,” 09 December 1935,
C.P. 236 (35), CAB 24/257; and Eden,
“Dispute between Italy and Abyssinia: Oil Sanction,” 22 February 1936,
C.P. 53 (36), CAB 24/260. See also BP
68621, which includes a variety of correspondence concerning the issue of
possible oil sanction against Italy,
including a copy of Agnew’s report to Runciman, which the former
forwarded to Cadman on 04 December 1935.
38
The British Government also placed extraordinary demands before it would
join an embargo: as Chancellor of the
Exchequer Neville Chamberlain explained during a debate in the House of
Commons, the government would only
support a League embargo after it was “satisfied that all members of the
League are not only prepared to give
assurances but to take part in meeting an attack” by Italy. B.W. Patch,
“Oil in World Politics,” 24 December 1935,
Editorial Research Reports: 1935, vol. 2 (Washington, DC: CQ Press).

192
1935.39 His Liberal Party depended on votes from Quebec (where anti-
British sentiment ran high), and
King wanted to devote his political capital to fighting the Depression.40
The Australian Government of
Joseph Lyons only reluctantly agreed to support sanctions and privately
indicated to London their
preference that Britain not antagonize Italy for the sake of the League
when the British Empire already
had to deal with the more pressing threats posed by Japan and Germany.41
If we reframe the issue to
consider the long-term strategic ramifications, British policy was self-
defeating. The League with British
support did impose sanctions against Italy in February (by which time it
was far too late to help the
Abyssinians), and although the sanctions covered weapons, rubber, and
metals, they did not include oil.
This ensured the future hostility of Italy without improving the
credibility of the League.
By 1935, there was every indication that Italy could pose a significant
naval and aerial threat to
Britain’s dominance within the Mediterranean.42 Inexplicably, documents
concerning London’s policy
vis-à-vis sanctions make no mention of the long-term risk to Britain and
France’s oil supplies.43 Just prior
to the war, an interdepartmental committee surmised that Italian control
of Abyssinia might “constitute a
more serious threat than at present to our strategical position in the
Red Sea.”44 The Foreign Office
concurred, but only in a limited sense – they too were concerned about
Italy’s potential for mischief with
British lines of communication between the Mediterranean and the Indian
Ocean if it occupied all of
39

King’s success (abetted by the South Africans) at sabotaging Britain’s

attempts to promote closer strategic
cooperation with the “white” dominions after 1921 is summarized in:
Correlli Barnett, The Collapse of British
Power (London: Eyre Methuen, 1972), 166-233.
40
B.J.C. McKercher, “From Isolation to Intervention: Anglo-Canadian Defense
Relations from the Canadian
Perspective, 1935-1939,” in: Multinational Operations, Alliances, and
International Cooperation Past and Future:
Proceedings of the Fifth Workshop of the Partnership for Peace
Consortium’s Military History Working Group, ed.
Robert Rush and William Epley (Washington, DC: Center for Military
History, 2006), 85-87.
41
Christopher Waters, Australia and Appeasement: Imperial Foreign Policy
and the Origins of Appeasement (New
York: Palgrave, 2012), 11-15.
42
B.W. Patch, “Anglo-Italian Rivalry in the Mediterranean,” 13 April 1937,
Editorial Research Reports: 1937, vol.
1 (Washington, DC: CQ Press).
43
One study of Britain’s strategic position before the Second World War
notes that as a “result of the Ethiopian
mess… British military planners had to consider the possibility that
Italy might cut the lines of communication to
the Far East at the onset of war with Japan.” Williamson Murray, The
Change in the European Balance of Power,
1938-1939: The Path to Ruin (Princeton: Princeton University Press,
1984), 51-52. Unfortunately, there is no
evidence of such thinking during the Abyssinian Crisis, nor does Murray
discuss how that the closure of the
Mediterranean would have Britain during a war against Germany.
44
J.L. Maffey (Chairman; Permanent Under Secretary of State for the
Colonies), et al., “Report of InterDepartmental Committee on British
Interests in Ethiopia,” 18 June 1935, enclosed with: S.H. (Samuel Hoare),
“Italo-Ethiopian Dispute: Note by the Secretary of State for Foreign
Affairs,” 16 August 1935, C.P. 161 (35), CAB
24/256.

193
Abyssinia.45 It took the Dominions Secretary, of all people, to point
that Britain might have “to
contemplate diverting British shipping form the Mediterranean to the Cape
Route,” but again, he was
talking only in the short term.46
For reasons that remain unclear, Britain’s inability or unwillingness to
base its handling of the
Abyssinian War on a more ruthless calculation of national self-interest
merely alienated rather than
crippled Italy. Britain and France would now have to face Germany without
a secure line of
communication to one of their primary sources of oil, the Middle East.
The repercussions for British
strategy were hard to miss. Colonel W.A. Bristow, the President of the
Low Temperature Coal Distillers
Association, surveyed the grim circumstances in a lecture before the
Royal United Service Institution in
late-1935. As a representative of the coal industry, Bristow had every
reason to accentuate the
unreliability of imported supplies, but his analysis was sound. He noted
that although Britain had
succeeded in developing Iran and Iraq to the point where they supplied
more than half of Great Britain’s
crude oil imports, it was unreasonable to expect that a peacetime rate of
supply could be maintained in the
event of war. Assuming that Persian oil even made it out of the Persian
Gulf and through the Suez Canal,
it still “would have to run the gauntlet of the Mediterranean, every yard
of which would be within range
of attack […].” Persian or East Indies oil would almost certainly have to
be diverted around the Cape of
Good Hope – “a very unhappy prospect” considering the fourteen-week
transit period – but this was more
than could be said for Iraqi oil, which was unlikely even to make it to
the Mediterranean considering the
vulnerability of the Iraq Petroleum Company (IPC) pipelines and the
coastal ports. “It would appear,”
Bristow concluded, “that the fate of the British Empire will probably lie
in the hands of the United States,

45

Foreign Office, “Points for Consideration by His Majesty’s Government in

Connexion [sic] with the Imminent
Discussions Between the United Kingdom, France, and Italy Concerning
Abyssinia,” 09 August 1935, enclosed
with: S.H., “Italo-Ethiopian Dispute: Note by the Secretary of State for
Foreign Affairs,” 16 August 1935, C.P. 162
(35), CAB 24/256. The Foreign Office also put forward its own analysis,
which again, was limited to the immediate
diplomatic consequences of an Italo-Abyssinian War (particularly if the
League undertook punitive economic
measures), not of the risk to Britain of antagonizing Italy. Foreign
Office, “Memorandum on Problems Likely to
Arise in the Event of Outbreak of War between Italy and Abyssinia,” 13
August 1935, enclosed with: S.H., “ItaloEthiopian Dispute: Note by the
Secretary of State for Foreign Affairs,” 20 August 1935, C.P. 167 (35),
CAB 24/256.
46
J.H. Thomas to Samuel Hoare, 15 August 1935, enclosed with: J.H.T.
(Thomas), “Italo-Abyssinian Dispute: Note
by the Secretary of State for Dominion Affairs,” 20 August 1935, C.P. 168
(35), CAB 24/256.

194
Mexico, Venezuela, and the Dutch East Indies.”47 Subsequent re-
evaluations of Britain’s oil position by
the Oil Board would demonstrate the accuracy of this assessment.

47

Colonel W.A. Bristow, “Oil from Coal in War Time,” RUSI 81: 521 (1936):
40-54. Bristow also made special
reference to the United States, where “it is now being hinted in official
circles… that further power should be given
to the President in order to enable him to veto the shipment of oil to
nations at war […].” German analysts took note
of Bristow’s critique, a version of which appeared in the Wehrtechnische
Monatshefte in April 1937: NARA, RG
242, T-77/425 (Wi/IF 5.3444).

195
Planning for War: The Reorganization of the Oil Board, 1935-1937
At its inception in 1925, the Oil Board had been charged by the CID with
evaluating Britain’s oil
needs in the event of a war against Japan in the Far East, and shortly
thereafter, against the Soviet Union
in the “Asiatic” theater (Afghanistan). The evolving strategic situation
after 1930 had forced Britain to
reconsider its oil position even before the break with Italy. Following
the Manchurian Crisis (1931-1932)
and the failure of the World Disarmament Conference in Geneva after
Germany withdrew (October
1933), in March 1934, the British Chiefs of Staff, with the support of
key bureaucrats, pushed for an
increase in defense spending.48 The following November, the Chiefs
advised the CID to begin
preparations for a war against Germany in five years. In February 1935,
the Oil Board’s President (Lord
Londonderry, Lord Privy Seal) suggested that, in view of the worsening
situation in Europe – as
evidenced by the abandonment of the Ten-Year Rule in 1932 – the Oil Board
should also undertake
responsibility for determining the oil requirements of Britain and its
empire in the event of either a Far
Eastern or European War, or both, by 01 January 1940. The CID agreed the
following day and eliminated
consideration of a war against the Soviet Union in Afghanistan, since the
increased allocations of oil to
the Army and RAF in a European War, and to the Admiralty in a Far Eastern
War, would easily cover the
lower requirements of the armed services in an Asiatic War.49
48

Although the British Government was in many respects a model of

bureaucratic efficiency, with clearly defined
lines of authority and communication, the machinery often functioned at
an excruciatingly slow place. The
committee in question, the Defense Requirements Committee, took four
months to issue its recommendations, which
the Cabinet only approved in July 1934: “The whole process had taken
eight months, countless discussions, and vast
amounts of paperwork to reach… a rather modest increase in defense
spending.” Another notable shortcoming was
the lack of coordination between the armed services and the Foreign
Office in drawing up strategic assessments.
Murray, Balance of Power, 55-57, 62-64 (quotation from pg. 57). A more
thorough critique of Britain’s strategic
planning infrastructure may be found in Paul Kennedy’s “British ‘Net
Assessment’ and the Coming of the Second
World War,” in: Calculations: Net Assessment and the Coming of World War
II, ed. Alan Millet and Williamson
Murray (New York: Free Press, 1992), 19-59.
49
These developments are summarized in: L (7th Marquess of Londonderry),
“Proposals for the Future with Regard
to the Contents of the Oil Board Annual Reports: Memorandum by the
President of the Oil Board,” 22 February
1935, O.B. 140 (also C.I.D. Paper No. 1165-B), CAB 50/5; and Londonderry
(President, Oil Board), et al., “Oil
Board: Tenth Annual Report,” 26 November 1935, O.B. 147 (also C.I.D.
Paper No. 1196-B), CAB 50/5. In January
1939, the CID decided that, in wartime, the Oil Board’s executive
functions would be transferred to the Petroleum
Department. J.J. Llewellin (Civil Lord of the Admiralty; Chairman of the
Oil Board), et al., “Oil Board: Thirteenth
Annual Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B),
CAB 50/7. This change did not last for
long – in November, Neville Chamberlain established the Oil Control Board
as a replacement for the Oil Board.
Since the latter was only an “advisory body,” Chamberlain intended that
the Oil Control Board should “take the
necessary action to conserve and maintain adequate supplies of petroleum
products,” while enjoying the right to

196
The following year, the Oil Board established a new Sub-Committee on
Petroleum Products Reserves
(PPR) to evaluate Britain oil requirements in view of the “entirely new
problem” of a war against
Germany.50 As the Vice Chairman of the PPR explained in March 1936, the
problem of fulfilling Britain’
oil needs in a war against Japan “was a comparatively simple one” when
compared to a conflict with
Germany.51 In the event of a Pacific War, the brunt of the fighting would
fall upon the Royal Navy, which
would have to engage the Japanese Navy. A war against Germany, by
contrast, would be primarily and
land and aerial affair. The RAF would defend Great Britain while the Army
sent another small
expeditionary force to the Continent. In either event, the Royal Navy
would be responsible for guarding
Britain’s overseas lifelines.52
In the case of a war against Japan, there was no need to build up and
protect sizable stocks of oil
within Great Britain or most of the empire since Army and RAF
requirements were comparatively low.
Meanwhile, the “the security of supplies to this country for civil and
industrial maintenance was not
seriously threatened,” since Japan lacked the ability to either strike
directly at Britain or most of its major
suppliers of oil. This obviated the need for a civilian rationing scheme,
at least west of Suez. Britain
would enjoy none of these benefits in a war against Germany, during which
time oil requirements among
all of the branches of the armed services “will be a maximum,” while
industrial and civilian requirements
would probably also be higher. Most importantly, “we cannot be certain
that the security of the supplies
adjudicate (subject to the approval of the War Cabinet) “priority claims
for oil products and tanker tonnage.” The
new board would be chaired by the Secretary of Mines (Geoffrey Lloyd),
and its members would include
representatives from the armed services and the Petroleum Department, as
well as an “expert adviser” (the
ubiquitous Cadman, until his death in 1941). Because the government
lacked the necessary information or
competence, AIOC and Shell’s joint-marketing subsidiary in Britain,
Shell-Mex-BP, initially handled the actual
organization of supplies. This lasted until 1940, when the government
upgraded the status of the Petroleum
Department, which effectively absorbed the Shell-Mex-BP into its orbit.
Chamberlain, “Oil Control: Memorandum
by the Prime Minister,” 09 November 1938, (G) (39) 78, CAB 67/2/29. Lloyd
also led the Petroleum Department,
initially as Secretary of Mines, and later as Petroleum Secretary when
the department (renamed the Petroleum
Division in 1942) was moved first to the Board of Trade in 1940 and then
to the Ministry of Fuel and Power two
years later. His liaison with the oil industry was Andrew Agnew, the
chief executive of Shell-Mex-BP. Bamberg,
History of BP, 206-210; Payton-Smith, Oil, 114-118.
50
A.W. Clarke and G.W.C. Norfolk (Joint Secretaries to the Sub-Committee),
“Sub-Committee on Petroleum
Products Reserves: Composition and Terms of Reference,” 21 February 1936,
O.B. (P.R.) 1, CAB 50/14. See also:
Payton-Smith, Oil, 40-41.
51
Kenneth Lindsay (Civil Lord of the Admiralty), “Sub-Committee on
Petroleum Products Reserves: Memorandum
by the Vice-Chairman,” 24 March 1936, O.B. (P.R.) 2, CAB 50/14.
52
Payton-Smith, Oil, 45.

197
to this country and to the Armed Forces can be guaranteed with equal
certainty.” Besides pushing each of
the armed services to accumulate stocks, reserves would also have to be
available to civilian consumers,
since “the war can be lost as much by having inadequate fuel for industry
as having, for example, an
inadequate supply for the Navy.”53
In June 1936, the PPR prepared a preliminary assessment of the Britain’s
requirements in either a
European or Far Eastern war. The Petroleum Department concluded that
Great Britain’s oil requirements
in a Far Eastern War totaled 19,536,440 tons (12,232,507 tons west of
Suez, 7,253,933 east of Suez), as
compared to 17,952,210 tons in a European War (16,605,530 tons west of
Suez, 1,346,680 east of Suez),
with the lack of civilian rationing in Great Britain during a Far Eastern
War accounting for the difference.
If one included the requirements of the empire as a whole, the totals
rose to 25,250,000 tons in a Far
Eastern War and 23,750,000 tons in a European War.54
The First Report of the PPR, produced the following month, was dedicated
to finding the sources and
means to satisfy these requirements by 1940. The President of the Oil
Board, William Ormsby Gore
(Colonial Secretary), urged in his covering letter to the report that the
most important step Britain could
take would be to complete the accumulation of a six-month reserve of oil
products for the armed services
by 1939-1940. Ominously, he noted that the PPR’s favorable assessment of
Britain’s tanker position was
predicated on the Mediterranean being open to British trade, “and the
[Oil] Board would be glad to know
whether they can base their plans on this assumption.”55
A war against Germany posed different problems from one against Japan: in
the case of the latter, the
needs of the Royal Navy would vastly exceed those of the other services,
whereas with the former, the
needs of the RAF and Army would be “substantially” higher while Admiralty
requirements would be
53

Lindsay, “Sub-Committee on Petroleum Products Reserves: Memorandum by the

Vice-Chairman,” 24 March
1936, O.B. (P.R.) 2, CAB 50/14.
54
“Summary of Oil Requirements and Stocks,” no date or author, enclosed
with: G.W.C. Norfolk (Joint Secretary,
Sub-Committee on Petroleum Products Reserves – PPR), 26 June 1936, O.B.
(P.R.) 13, CAB 50/14. Norfolk’s cover
letter indicates that the Petroleum Department produced the attached
report. The report makes reference to another
study (also numbered O.B. (P.R.) 13) concerning the sources of Britain’s
wartime oil supplies. This report appears
to have been subsequently renumbered as O.B. (P.R.) 14.
55
William Ormsby Gore (Colonial Secretary), “Reserves of Petroleum
Products: Memorandum by the President of
the Oil Board,” 27 July 1936, O.B. 162 (also C.I.D. Paper No. 1257-B),
CAB 50/5.
198
unchanged. Moreover, the PPR reckoned that “the provision of the
requisite security” in oil supplies was
“a rather more difficult matter” in a war against Germany rather than
Japan. The PPR estimated the
British Empire’s total oil consumption during the first year of combat
operations at
European War
Far Eastern War

28,500,000 tons
30,500,000 tons

or 23,750,000 tons and 25,750,000 tons of “new supplies” in a European

and Far Eastern war,
respectively, since the balance would be met by drawing upon commercial
stocks and reserves. Within
Great Britain itself, the figures were:
Total Requirements for Great Britain
European War
17,999,700 tons
Far Eastern War
19,747,000 tons

Requirements West of Suez

16,645,400 tons
12,340,300 tons56

Before addressing the question of how and where Britain would make up
this shortfall, the PPR
observed that Britain enjoyed “an advantage as compared with other
important countries such as
Germany, Japan, Italy, and France,” as British oil companies were active
“in most important oilproducing countries,” possessed a large tanker
fleet, and boasted of “a highly efficient organisation
which, given freedom from political interference in the countries of
production, the keeping open of the
trade routes and the maintenance of reasonable stocks or reserves, should
be able to ensure that our
essential needs for oil are met.”57 The primary consideration was the
disposition of the United States –
whether it was “friendly” or “unfriendly.” In the case of the latter, the
sub-committee still believed that
the United States would continue to supply Canada, while U.S. oil
companies “might be counted upon” to
sell oil they produced outside of the United States to Britain. Although
“the position will be more
difficult” in the event of an “unfriendly” United States, the PPR was
convinced that, except possibly for
56

Harry Crookshank (Secretary for Mines; Chairman of the PPR), “First

Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore, “Reserves of Petroleum Products: Memorandum
by the President of the Oil Board,”
27 July 1936, O.B. 162 (also C.I.D. Paper No. 1257-B), CAB 50/5.
57
The Royal Navy had been relatively successful in meeting its target
objective of accumulating within Great
Britain stocks equivalent to six months of wartime consumption (3,500,000
tons) and was only 500,000 tons short
by 1936. The Army and Royal Air Force (RAF) had, until 1939, tried to
gather an equivalent reserve, when the Air
Ministry raised its reserve requirements to one year’s wartime
consumption. For more on the accumulation of
reserve stocks in the late-1930s, see: Payton-Smith, Oil, 61-64.

199
lubricating oils and aviation fuel, “sufficient supplies” would be
available to Britain so long as “there is
no interference with the South American oil-producing countries […].”58
Irrespective of which country was Britain’s enemy, or the disposition of
the United States, “[the]
principal single source of supply” was Iran, which would provide Britain
with approximately 10,000,000
tons of oil per year (roughly 40% of the empire’s requirements). The
second and third largest suppliers
would be a “friendly” United States and Venezuela, both of which would
contribute around 4,000,000
tons. The East Indies, Iraq, and Trinidad would provide a further
3,500,000 tons. The PPR concluded that
it could scrape together approximately 24,000,000 tons of oil, which
would suffice in the event of war
against either Germany or Japan. The disposition of the United States
actually made little difference,
since most of its exports were allocated to Canada in any event. The
tanker situation was rather grimmer.
By 1940, the PPR estimated that Britain would require 420 tankers against
the 354 currently owned by
either British firms or the Admiralty – a net deficit of sixty-six. This
shortfall could be covered if Britain
made use of the roughly 110 neutral tankers that would by then be in
service and available for
chartering.59
A major problem would arise in the event of a “closed” Mediterranean.
Diverting tankers around the
Cape of Good Hope would significantly add to the distance they had to
travel. The distance between
Abadan and London using the Suez Canal is approximately 6,600 miles –
compared to 11,200 miles when
going around the Cape of Good Hope (70% farther).60 A tanker travelling
from the Persian Gulf to
Liverpool via the Suez Canal required twenty-five days to make trip,
while the route around the Cape
added fifteen days to the journey.61 Forcing tankers to take the longer
route around the Cape of Good
58

Crookshank (Chairman, PPR), “First Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore,
“Reserves of Petroleum Products: Memorandum by the President of the Oil
Board,” 27 July 1936, O.B. 162 (also
C.I.D. Paper No. 1257-B), CAB 50/5. The potential shortage of lubricants
had been ameliorated by the development
of the solvent refining process, which enabled the production of required
lubricants from high-sulfur Middle Eastern
and Latin American crudes. For more on Britain’s supply of lubricating
oils and aviation fuel on the eve of the war,
see: Payton-Smith, Oil, 53-57.
59
Crookshank (Chairman, PPR), “First Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore,
“Reserves of Petroleum Products: Memorandum by the President of the Oil
Board,” 27 July 1936, O.B. 162 (also
C.I.D. Paper No. 1257-B), CAB 50/5.
60
Bamberg, History of BP, 217.
61
Dr. Flemmig, “Englands Ölmacht im Abstieg,” Militär-Wochenblatt, 125.
Jahrgang, Nummer 47 (23 May 1941).

200
Hope to Britain would increase the tanker deficit from sixty-six to 230,
which was more than twice the
number of neutral tankers then in service.62
The PPR concluded that, “[there] should be no difficulty in securing
supplies to meet the remaining
[outstanding] requirements if the United States of America is
‘friendly’,” but in the event that it was not,
“sufficient supplies of oil should be available,” assuming that the U.S.
Government did not prevent either
its own nationals or Latin American oil producers from continuing to
supply Britain. There was also the
unpleasant fact that roughly half of Britain’s expected supplies (those
from Iran and later Iraq) in any
major war might be unavailable in the event that enemy forces blocked
transit through the
Mediterranean.63 The best the PPR could suggest was “[that] in the event
of the Mediterranean being
closed to shipping the question of special arrangements for convoying
tankers ought to be considered.” In
other words, the PPR admitted that Britain might have no option but to
risk moving a considerable
portion of its oil requirements through an enemy-infested Mediterranean
in wartime.64 The CID approved
the report on 30 July 1936, adding that the six-month military reserve
should be accumulated as soon as

62

Crookshank (Chairman, PPR), “First Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore,
“Reserves of Petroleum Products: Memorandum by the President of the Oil
Board,” 27 July 1936, O.B. 162 (also
C.I.D. Paper No. 1257-B), CAB 50/5.
63
This fact did not escape the notice of the U.S. Government. As one
military intelligence report from December
1936 noted, at least 31% of Britain’s gasoline imports (6,399,888 barrels
from Iran, 2,140,086 from Romania, and
1,027,343 from Russia), and 45% of its crude oil imports (3,449,828
barrels from Iraq and 2,262,057), between 01
January and 31 October 1936 travelled through the Mediterranean. The
situation was even more disturbing in the
case of France, since 58% of its total imports came via the
Mediterranean. U.S. Military Attaché, Paris, “Fuel
Situation in France & England,” 02 December 1936, Report No. 22,9890W,
University Publications of America,
U.S. Military Intelligence Reports: France, 1919-1941 (Frederick:
University Publications of America, 1986), Reel
10. By 1939, roughly 75% of French imports originated in Iraq, with the
Compagnie Française des Pétroles
accounting for 949,000 tons, and British and U.S. majors the remainder.
Eric Melby, Oil and the International
System: The Case of France, 1918-1969 (New York: Arno Press, 1981), 146.
64
Crookshank (Chairman, PPR), “First Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore,
“Reserves of Petroleum Products: Memorandum by the President of the Oil
Board,” 27 July 1936, O.B. 162 (also
C.I.D. Paper No. 1257-B), CAB 50/5. The PPR report is based on a separate
study by the Petroleum Department
attached as Appendix III: “Sources of Supply of Petroleum and Petroleum
Products to meet the estimated
requirements of the Services and for Industrial and Civil purposes of the
Empire in the first year (1940) of a
European War,” no date or author. Another copy of the report was
published separately with: G.W.C. Norfolk (Joint
Secretary, PPR), 26 June 1936, O.B. (P.R.) 14, CAB 50/14. Norfolk’s
covering letter indicates that the Petroleum
Department produced the report, which includes an appendix (“Brief Survey
of the Principal Oil Producing
Countries,” no date or author) not included with the official PPR report
(O.B. (P.R.) 21).

201
possible instead of over the next three years, as suggested by the PPR.
The CID also acknowledged the
possibility of the Mediterranean’s closure and the need to expand
Britain’s tanker fleet.65

65

A.W. Clarke, “Reserves of Petroleum Products: Note by the Joint

Secretary,” 12 August 1936, O.B. 166 (O.B.
(P.R.) 24), CAB 50/5.

202
Planning for a “Closed” Mediterranean, 1936-1937
The First Report of the PPR in July 1936 had exposed the Achilles’ Heel
of Britain’s wartime oil
policy, which had always presumed safe transit through the
Mediterranean.66 Few officials responsible for
British oil policy between 1918 and 1935 had questioned the wisdom of
building Britain’s entire strategy
upon this assumption. Nor, during the Abyssinian Crisis, did anyone in
London mention the risk Rome’s
hostility posed to Britain’s oil lifeline. British planning for a
“closed” Mediterranean during a European
War only began in 1936 – in the wake of the Italo-Abyssinian War. The
year before, although alarmed by
the deterioration in Anglo-Italian relations, the Oil Board had been
sanguine about the consequences for
British energy security, possibly because it was only considering
Britain’s requirements in the event of a
war against Italy alone. Closure of the Mediterranean “would necessitate
a considerable diversion of
traffic in the case of Persian and Dutch East Indies supplies,” over and
above the loss of Soviet,
Romanian, and Iraqi exports. Nevertheless, Britain could cope by
importing larger amounts of oil from
Venezuela, the United States, Mexico, and Peru.67
Matters would not be so simple in the event of a war against Germany. In
response to the PPR’s
troubling report of July 1936, the CID determined, “That it was not
possible to give an assurance that the
Mediterranean route would be open to shipping” and instructed the Oil
Board to “give further
consideration to alternative sources of supply and to any steps deemed
necessary to ensure adequate
tanker tonnage.”68 The major problem to be surmounted was not one of
overall supply: Britain had control
of ample supplies of oil in the Middle East but lacked the tanker
capacity to transport enough of it around
the Cape of Good Hope. As the Director of Sea Transport, W.G. Hynard,
explained to the Petroleum
Department, if Britain replaced 6,000,000 tons of oil from Iran and Iraq
with oil from the Western
Hemisphere, this would result in a savings of 218 tankers. He queried the
Petroleum Department as to
66

Crookshank (Chairman, PPR), “First Report,” 21 July 1936, O.B. (P.R.) 21,
enclosed with: Ormsby Gore,
“Reserves of Petroleum Products: Memorandum by the President of the Oil
Board,” 27 July 1936, O.B. 162 (also
C.I.D. Paper No. 1257-B), CAB 50/5.
67
Londonderry (President, Oil Board), et al., “Oil Board: Tenth Annual
Report,” 26 November 1935, O.B. 147 (also
C.I.D. Paper No. 1196-B), CAB 50/5.
68
A.W. Clarke (PPR), “Reserves of Petroleum Products: Note by the Joint
Secretary,” 12 August 1936, O.B. 166
(O.B. (P.R.) 24), CAB 50/5.

203
whether it was “we can reasonably increase our drawings from [the] U.S.A.
East Coast, Dutch West
Indies, Gulf [of Mexico], etc., in order to relieve the tonnage
difficulty from Abadan and Haifa,” as there
was no “possibility of our meeting the situation which would arise if we
had to retain our present
allocation of sources of supply with the Mediterranean closed and the
consequential increase in our tanker
requirements of 164.”69
The Petroleum Department replied that, in the event of a “friendly”
United States, “there is no doubt
that the productive capacity in the U.S.A. could be increased far beyond
the present output,” since U.S.
refineries had 55,000,000 tons worth of slack refinery capacity.
Likewise, imports from the Venezuela
could be increased from 4,500,000 tons to 5,500,000 tons per annum, as
the Dutch West Indies had a total
refinery capacity of 17,000,000 tons, of which 9,000,000 tons was owned
by Shell. There was no prospect
of increasing production in Trinidad, whereas increased imports from
other Latin American countries
such as Mexico were undesirable since these countries lacked the refinery
capacity to send anything other
than crude oil. The matter of replacing Iranian oil was more complex than
simply finding alternative
supplies. Iranian oil was the primary source of fuel for the Admiralty,
providing approximately 70% of its
wartime requirements during the first year of hostilities. In the event
of a “closed” Mediterranean and an
“unfriendly” United States, the Petroleum Department concluded that “any
allocating of sources of supply
for the Empire which leaves out Iran seems to be out of the question.”70
In the autumn of 1936, officials from the Petroleum Department, the
Mercantile Marine Department,
and the Admiralty demonstrated that Britain was incapable of replacing
Middle Eastern oil completely in
the event of a European War with a “closed” Mediterranean and an
“unfriendly” United States. They
explained that the disposition of the United States in a future war was
of minor importance assuming the
Mediterranean was “open,” especially if the United States continued to
supply Canada with up to
3,900,000 tons of oil per annum. The United States would, ideally,
provide Britain with 6,800,000 tons of

69

Hynard to Starling (Petroleum Department), 07 September 1936, enclosed

with: G.W.C. Norfolk (PPR), no date,
O.B. (P.R.) 26, CAB 50/14.
70
“Note by Petroleum Department on Mr. Hynard’s letter of 7th September
[1936],” enclosed with: G.W.C. Norfolk
(PPR), no date, O.B. (P.R.) 26, CAB 50/14.

204
oil (including the amount going to Canada). In the event that Washington
was “unfriendly,” the remaining
2,900,000 tons that would normally have gone to Britain would have to be
replaced by higher imports
from the Dutch West Indies (5,000,000 tons instead of 3,900,000 tons),
the Dutch East Indies (1,700,000
tons instead of 1,500,000 tons), Mexico (1,500,000 tons instead of
400,000 tons), Venezuela (900,000
tons instead of 500,000 tons), and Peru (400,000 tons instead of 300,000
tons).71
The situation was more precarious in the event that the Mediterranean was
“closed.” The British
expected that Iran would normally supply one-third of the empire’s oil
needs (8,400,000 tons out of
23,800,000). Unfortunately, “there are not many alternative places in the
Empire to which Iranian oil can
be sent” to offset the effects of any closure of the Mediterranean, while
“there is such a shortage of
tankers as to preclude the oil being taken via the Cape.” At best,
2,000,000 tons of Iranian oil could be
replaced by exports from the Dutch West Indies, Venezuela, Mexico, and
Peru, but this would come at
the expense of Britain’s allies, who might also wish to draw additional
supplies from Latin America. That
left 7,250,000 tons of oil still to be imported from Iran and Iraq,
4,000,000 tons of which was allocated to
Great Britain. This oil was irreplaceable, but there were not enough
tankers to transport it around the
Cape of Good Hope since Britain already had a deficit of fifty-six
tankers. Britain could move 2,000,000
tons per annum through the Mediterranean by convoying forty tankers each
month (twenty going in each
direction). Every 1,000,000 tons of Iranian and Iraqi oil that could be
transported through the
Mediterranean rather than around the Cape would result in a savings of
twenty-seven tankers. Unless
some means could be found of moving oil through the Mediterranean, the
authors advised the PPR that
“steps should be taken to increase the reserves to be kept for civil
purposes in this country.”72
The PPR presented its report on a “closed” Mediterranean to the Oil Board
in December 1936. This
study was a revised version of the report that had been produced by the
Petroleum Department,

71

Report by the Sub-Committee on Petroleum Products Reserves, no date, O.B.

(P.R.) 34, CAB 50/14.
Report by the Sub-Committee on Petroleum Products Reserves, no date, O.B.
(P.R.) 34, CAB 50/14. Based on
context, the report must have been written following the aforementioned
exchange of letters between Hynard and the
Petroleum Department (O.B. (P.R.) 26, CAB 50/14) and before the PPR
completed its Third Report, which
considered the ramifications of a “closed” Mediterranean on Britain’s oil
position: O.B. 183 (Section B) also part of
Paper No. O.B. (P.R.) 39, CAB 50/6.
72
205
Mercantile Marine, and Admiralty earlier that year. The PPR concluded
that, in the event of a “closed”
Mediterranean, Iranian and Iraqi oil could not fulfill their primary
function west of Suez (supplying the
Royal Navy), while the overall shortage of tankers ruled out the
transportation of Middle Eastern oil to
Great Britain around the Cape of Good Hope. The shortfall west of Suez
presented “no insuperable
difficulty” if the United States was “friendly” and unused Middle Eastern
oil could be reallocated east of
Suez, thereby freeing up U.S. exports to be allocated west of Suez.73 If
the United States was
“unfriendly,” the PPR surmised that the 2,000,000 tons of Iranian oil
previously allocated to Great Britain
could be replaced by additional imports from Latin America, since that
region would no longer be
exporting to Germany and Italy, which had imported 7,200,000 tons from
there in 1935. Total demand for
Iranian and Iraqi oil with a “closed” Mediterranean would drop to
7,500,000 tons, with 4,000,000 tons
going to Great Britain. Some of this allocation would have to be pushed
through the Mediterranean via
convoying at a rate of twenty tankers per month (ten going each way). How
this was to be accomplished,
and what would happen if tanker losses proved prohibitive, was not
spelled out. On the bright side, the
supply of tankers had increased according to a new estimate of the number
of neutral tankers that would
be available by 1940: 150 instead of 110. This lowered the deficit in the
event of a European War with a
“closed” Mediterranean and an “unfriendly” United States to only sixteen
tankers. Any remaining
shortfall could be covered by returning obsolete vessels to service
(twenty-four being the estimate of the
PPR) and seizing enemy tankers (twenty-three of which were likely to be
at sea or within reach of the
Royal Navy in the event of war).74 The President of the Oil Board
cautioned, however, that “[it] is

73

As the relative importance of the United States as an oil supplier rose

in late-1930s, the PPR questioned whether
the United States still had the productive and infrastructural capacity
“to increase her oil exports beyond the
maximum quantity hitherto exported in any year, which was about 20
million tons in 1929.” The Petroleum
Department reassured that PPR “that the potential capacity of United
States ports for exporting oil is substantially in
excess of the figure of 20 million tons […].” Petroleum Department,
“Capacity of the United States’ Ports to handle
Oil Products for Exportation,” November 1937, O.B. (P.R.) 91, CAB 50/15.
Nor was there much doubt following
the adoption of pro-rationing (limiting oil production to market demand)
across much of the United States that the
country’s oil industry was capable of rapidly boosting output if demand
increased substantially. “Brief Survey of
the Principal Oil Producing Countries,” no date or author, enclosed with:
G.W.C. Norfolk (Joint Secretary, PPR), 26
June 1936, O.B. (P.R.) 14, CAB 50/14.
74
Crookshank (Chairman, PPR), “Effect on Supplies and Tanker Position of a
Closed Mediterranean: Third Report
(Section B) of the Sub-Committee on Petroleum Products Reserves,” 11
December 1936, O.B. 183 (Section B) (also
part of Paper No. O.B. (P.R.) 39), enclosed with: Ormsby Gore (President
of the Oil Board), “Effect on Supplies and

206
nevertheless obvious that in the contingency of the Mediterranean being
entirely closed to the passage of
British ships and the United States of America being ‘unfriendly,’ the
Empire’s tanker position would be
bound to become a very difficult one.”75
The CID formally accepted the PPR report in February 1937 and
“[instructed] the Oil Board to report
as to how the contingent shortage of tankers can best be met.”76 A
supplementary study by the Board of
Trade on Britain’s tanker requirements the following year estimated a net
increase of 200 tankers by
1940: fifty under British registry and 150 neutrals that would fall into
British hands. Britain would
thereafter have a surplus of nineteen tankers, but this could turn into a
deficit of three or more, “because
in the event of the Mediterranean being closed the Admiralty would
require 22 commercially owned
ocean-going tankers for the transfer of oil fuel from Naval depots
abroad.”77 Another Board of Trade
study from March 1938 posited a surplus of twenty-two tankers, although
the Oil Board – heeding the
advice of its Tanker Tonnage Committee – suggested to the CID that the
British Government might want
to accumulate an Admiralty reserve of as many as twenty-five surplus
vessels.78
Even as the Oil Board and its subcommittees grappled with the
consequences of a “closed”
Mediterranean, they could not afford to ignore events in the Far East,
which had been strained since
Japan’s invasion of Manchuria in 1931 and would escalate into all-out war
after Japan invaded in China
in July 1937. In its Fifth Report of May 1937, the PPR, with the
assistance of the Petroleum Department,
produced an assessment of Britain oil position in a Far Eastern War with
the United States either
“friendly” or “unfriendly.” During such a conflict, the PPR estimated
that the British Empire would have
Tanker Position of a Closed Mediterranean,” 22 February 1937, O.B. 189
(also C.I.D. Paper No. 1310-B), CAB
50/6.
75
Ormsby Gore (President, Oil Board), “Effect on Supplies and Tanker
Position of a Closed Mediterranean,” 22
February 1937, O.B. 189 (also C.I.D. Paper No. 1310-B), CAB 50/6.
Emphasis in the original.
76
A.D. Nicholl (PPR), “Note by Joint Secretary,” 10 March 1937, O.B. (P.R.)
54 (also Paper No. O.B. 193), CAB
50/15.
77
Board of Trade, “Allocation of British tanker tonnage to meet the
Empire’s oil needs as set out in the First and
Third Reports of the Petroleum Reserves Sub-Committee of the Oil Board
assuming the Mediterranean closed and
the U.S.A. unfriendly,” November 1937, enclosed with: G.W.C. Norfolk
(Joint Secretary, PPR), 23 November 1937,
O.B. (P.R.) 94, CAB 50/15.
78
The reports of the Sea Transport Division of the Board of Trade (March
1938) and Tanker Tonnage Committee
(07 April 1938, O.B. (T.T.C.) 14, Also Paper No. O.B. 248) are both
appended to: Earl De La Warr (President of the
Oil Board), “Oil Tankers: Best Means of Meeting a Possible Deficiency:
Note by the Oil Board,” 09 May 1938,
O.B. 251, CAB 50/7.

207
to import 25,681,000 tons (15,436,000 tons west of Suez and 10,245,000
tons east of Suez). Britain’s
major oil suppliers would be Iran (almost 11,000,000 tons of refined and
crude oil), the Dutch West
Indies/Venezuela, the United States, Mexico, Peru, Trinidad, Iraq,
Bahrain, and Romania (the latter two
serving as replacements for the East Indies, which had to be written off
due to their exposed position).
Minor adjustments were also made concerning the supplying of British
possessions and dominions in the
Pacific. The PPR assumed that a “friendly” United States would be the
primary supplier to Australasia. If
the United States were “unfriendly,” it would still supply Canada, but
additional imports would have to be
drawn from the Dutch West Indies (6,000,000 tons – the maximum figure),
Iraq (1,800,000 tons), Bahrain
(400,000 tons), and Romania (800,000 tons) to replace U.S. exports to
elsewhere in the empire. The
tanker situation was reassuring: against the 407 and 436 tankers required
if the United States were
“friendly” or “unfriendly, respectively, if one included the 150 tankers
expected to be in service by 1940,
Britain enjoyed a surplus of ninety-seven and sixty-eight.79
In its covering letter to the PPR study, the Oil Board warned that,
although Britain could probably
find enough oil to meet its overall requirements, the supply of aviation
fuel was troubling. The most
important source of aviation fuel in the Far East was the Burmah Oil
refinery at Rangoon, which
produced 216,000 tons of aviation fuel and accounted for more than 125%
of the Britain’s total
requirements of aviation fuel east of Suez. The Oil Board surmised that,
during a Far Eastern War,
“Japanese ships would [initially] be able to operate freely in the
Eastern Indian Ocean and the Gulf of
Siam,” and that the Rangoon refinery and neighboring facilities would
present “attractive” targets. The
loss of this refinery, in addition to the East Indies, would eliminate
Britain’s sources of aviation fuel in

79

Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum

Products to Meet the Estimated
Requirements of the Services and for the Estimated Requirements of the
Services and for the Industrial and Civil
Purposes of the Empire in the First Year (1940) of a Far Eastern War,” 26
May 1937, O.B. 195 (also Paper O.B.
(P.R.) 63), CAB 50/6. The original report produced by the Petroleum
Department (dated January 1937) was
published under the same title as O.B. (P.R.) 52, CAB 50/15.

208
the Far East. The Oil Board concluded that “it is of the highest
importance” to accumulate local stockpiles
while there was still time.80
A few months later, the Petroleum Department reassessed its original
January 1937 study of Britain’s
requirements during a Far Eastern War (which had been adopted by the PPR
as its Fifth Report in May),
but now taking into account the possibility of the Mediterranean being
“closed” and supplies from the
Rangoon refinery being unavailable.81 The covering letter from the
Chairman of the PPR to the Oil Board
endorsing the Petroleum Department’s findings insisted that “[the]
possibility of a ‘closed’ Mediterranean
during a Far Eastern War could, it would seem, only arise from the
intervention of a hostile European
power[…].” Since it lacked authorization from the CID to collect
information regarding British
requirements during such a “dual contingency,” the best the PPR and the
Petroleum Department could do
was to stick closely to their original instructions to determine
Britain’s oil needs during a Far Eastern War
with a “closed” Mediterranean. Whatever else happened, Britain could not
afford to lose the Rangoon
refinery. Its elimination would create a global “deficiency” in supplies
of aviation fuel (216,000 tons), and
Britain would be incapable of satisfying its requirements of aviation
fuel in a Far Eastern War, which
were already less than those of during a European War.82
The supply situation by the autumn of 1937 appeared promising according
to the Petroleum
Department. The Empire’s total oil requirements in a Far Eastern War were
23,077,000 tons if the United
States was “friendly,” and 23,155,000 if it was “unfriendly” (the
difference being slightly higher demand
west of Suez if the United States was “unfriendly”). The Petroleum
Department assumed that if the

80

Crookshank (in the absence of the President and Chairman of the Oil
Board), “Sources of Supply of Petroleum
and Petroleum Products to Meet the Estimated Requirements of the Services
and for the Estimated Requirements of
the Services and for the Industrial and Civil Purposes of the Empire in
the First Year (1940) of a Far Eastern War,”
08 February 1938, O.B. 233 (also C.I.D. Paper No. 1404-B) CAB 50/6. The
aforementioned study – O.B. 195 (O.B.
(P.R.) 63) – is also appended.
81
For original January 1937 report, see: Petroleum Department, “Sources of
Supply of Petroleum and Petroleum
Products to Meet the Estimated Requirements of the Services and for the
Estimated Requirements of the Services
and for the Industrial and Civil Purposes of the Empire in the First Year
(1940) of a Far Eastern War,” January 1937,
O.B. (P.R.) 52, CAB 50/15.
82
Crookshank (Chairman, PPR), “Estimated Requirements in First Year (1940)
of a Far Eastern War: Allocation of
Supplies in the Event of (a) A Closed Mediterranean, (b) Supplies from
Rangoon Not Being Available:
Memorandum by the Sub-Committee of Petroleum Products Reserves,” 18
November 1937, O.B. (P.R.) 95 (also
Paper No. O.B. 225), CAB 50/6.

209
Mediterranean was “closed” during a Far Eastern War, rationing would be
implemented at least in Great
Britain, which reduced total demand by “almost 2½ million tons of
products.” Since there were sufficient
crude oil supplies east of Suez thanks to Iran (and even more if some way
could be found of transporting
Iraqi oil from Haifa south through the Suez Canal and Red Sea), the major
problem was finding some
way of getting enough oil to British consumers west of Suez. There was no
problem if the United States
was “friendly,” but if it was not, at least 452,000 tons of kerosene and
motor fuel would have to be
transported from Abadan around the Cape of Good Hope to Great Britain,
while another 1,600,000 tons
of petroleum from Latin America would be required east of Suez. The
supply of aviation fuel would be
extraordinarily tight if the Rangoon refinery was not operational, with
Trinidad providing 37% of Britain
needs east of Suez (65,000 tons out of 177,000 tons) and 40% west of Suez
(85,000 tons out of 217,000
tons). In view of the “obvious disadvantage of relying on Trinidad as a
source of supply east of Suez,” the
department urged that resources be committed to strengthening the air
defenses of the Rangoon refinery.83
Although Trinidad was a negligible factor in terms of world oil
production (with a mere 1,853,200
tons in 1936), due to the dearth of oil within empire, it still accounted
for roughly 40% of imperial
production, with approximately 92% of its production – 1,665,200 tons –
being exported. But its role as a
supplier of aviation fuel gave it a strategic value out of all proportion
to its overall share of global oil
production. Although Trinidad’s contribution to British oil consumption
in the event of either a European
or Far Eastern War “may appear to be relatively small,” as the Oil Board
observed, its refineries would
supply one-quarter of the RAF’s total annual requirements of high-octane
aviation fuel in a European
War, and all of Britain’s aviation fuel requirements west of Suez in the
event of a Far Eastern War.
Unlike Rangoon, Trinidad was relatively secure from enemy attack.
Trinidad was also one of the few
83

“Estimated Requirements of the Services and for Industrial and Civil

Purposes of the Empire in the First Year
(1940) of a Far Eastern War; Allocation of Supplies in the Event of (a) a
“Closed” Mediterranean, and (b) Supplies
form the Rangoon Refineries being unavailable: Memorandum by the
Petroleum Department,” November 1937,
enclosed with: Crookshank (Chairman, PPR), “Estimated Requirements in
First Year (1940) of a Far Eastern War:
Allocation of Supplies in the Event of (a) A Closed Mediterranean, (b)
Supplies from Rangoon Not Being
Available: Memorandum by the Sub-Committee of Petroleum Products
Reserves,” 18 November 1937, O.B. (P.R.)
95 (also Paper No. O.B. 225), CAB 50/6. The Petroleum Department’s
original draft, completed the month before,
was published under the same title as document O.B. (P.R.) 84, CAB 50/15,
before being submitted to the PPR for
consideration.

210
sources within the British Empire of 100-octane gasoline. Finally, it was
actually the closest source of oil
to Great Britain, and because of its imperial status, neither its
production nor exports to Britain would be
affected by any “political interference.” The Oil Board therefore
concluded that “the maintenance of
supplies from Trinidad is of paramount importance […].”84

84

De La Warr (President, Oil Board), “The Importance of the Trinidad Oil

Supply in an Emergency: Memorandum
by the Oil Board,” 25 (?) November 1937, enclosed with: A.D. Nicholl,
“Trinidad: Degree of Importance as a
Source of Oil Supply in Time of War,” 30 November 1937, O.B. 226, CAB
50/6. Both the Oil Board’s report and
the Appendix I (a letter from the Commander-in-Chief of the Americas and
West Indies Station, Admiral Matthew
Best, to the Admiralty from January 1937 concerning the “desirability” of
upgrading the air, land, and sea defenses
at Trinidad) were published separately as enclosures to O.B. 198 and O.B.
221, both in: CAB 50/6. Shell’s wartime
production in Trinidad peaked at 750,000 tons, which was beyond what the
company’s engineers was the ideal rate
to preserve the health of its fields. Stephen Howarth and Joost Jonker,
Powering the Hydrocarbon Revolution, 19391973, vol. 2 of A History of
Royal Dutch Shell (Oxford: Oxford University Press, 2007), 37.

211
The U.S. Neutrality Acts and British Oil Supplies, 1935-1937
Britain had made great progress at reducing the U.S. share of its oil
imports – from 33.9% in 1922 to
only 10.6% in 1935. But little had been achieved to reduce Britain’s
imports from the Western
Hemisphere (61.9% as of 1935). Mexican imports had been replaced by
Venezuelan, and the only new
supplier from the Eastern Hemisphere (38.1% of imports) by 1935 was
Iraq.85 Ironically, this meant that
the potential closure of the Mediterranean during any future war would
not cripple Britain so long as it
could continue to import the bulk of its oil requirements from the
Western Hemisphere. London now
needed the backing of Washington and U.S. oil companies more than ever –
just when the passage of the
first U.S. Neutrality Act in August 1935 reopened the question of the
reliability of the United States.
Isolationist sentiment had been building due to the revelations of the
U.S. Senate’s Special
Committee on Investigation of the Munitions Industry (the so-called “Nye
Committee”) between 1934
and 1936, which investigated the role of U.S. financiers and arms
manufacturers in precipitating the
United States’ entry into the World War in 1917. Public anger over many
nations’ defaulting on their
wartime debts to the United States as a result of the Great Depression
also led to the passage of the
Johnson Act of 1934. This law prohibited U.S. loans to any nation that
had defaulted on its debt to the
United States. The law gave the U.S. Government little flexibility, since
debtor nations could not preserve
their eligibility by making token payments. The most egregious offender
was Great Britain, which still
owed $4,400,000,000 in war debts when it effectively defaulted in 1932.
Even though he was not an isolationist, President Roosevelt initially
supported neutrality legislation
for a variety of reasons. Besides a desire to outflank the Nye Committee
(whose chairman was pushing
for even more radical legislation such as the nationalization of the U.S.
arms industry), and expand
executive power by allowing the White House to set the terms of U.S.
trade with belligerent nations,
Roosevelt wished to avoid being dragged into a war simply to defend U.S.
neutral rights. But he
requested that any neutrality legislation allow him to distinguish
between aggressor nations and victims

85

Ormsby Gore (President, Oil Board), et al., “Oil Board: Eleventh Annual
Report,” 31 December 1936, O.B. 184
(also C.I.D. Paper No. 1294-B), CAB 50/6.

212
when levying embargos. Isolationist senators outmaneuvered him and
introduced legislation that imposed
a blanket arms embargo to both sides in any war once the President
certified that hostilities had
commenced.86
At the end of 1935, the U.S. Military Attaché in London bragged that the
United States enjoyed the
power to use its oil supply “to exert a major influence” over matters in
Europe including “purely
American interests” and even “war.” The neutrality acts were a
manifestation of this tremendous power.
Britain still drew 14% of its oil imports from the United States, and the
attaché surmised that it would be
easy for the United States to exert pressure on other suppliers in the
Western Hemisphere (who supplied
another 49% of Britain’ imports) to halt exports. The attaché advised
Washington to consider ways of
exploiting its newfound power “as a means of advancing American interests
and welfare […].”87
In January 1936, the Industrial Intelligence Centre (IIC), the agency
responsible for gathering and
analyzing foreign economic intelligence for the CID, produced a grim
assessment of the draft legislation
submitted by the Roosevelt Administration to the U.S. Congress to replace
the original 1935 act. Since
the administration’s draft gave the President the authority to limit
exports of items “used for war
purposes” such as oil to “normal” levels (which was aimed against Italy),
the IIC warned that “no foreign
country can place any reliance upon receiving any raw material, commodity
or manufactured article
whatsoever from the United States in time of war in greater quantities
than was normally received by the
country in peace,” especially because President had wide latitude to
determine what constituted a

86

For a summary of the legislation and its origins, see: George Herring,
From Colony to Superpower: U.S. Foreign
Relations since 1776 (New York: Oxford University Press, 2008), 502-519.
The legislation is described more fully
in: B.W. Patch, “Neutrality vs. Sanctions,” 21 October 1937, Editorial
Research Reports: 1937, vol. 2 (Washington,
DC: CQ Press); B.W. Patch, “American Neutrality Policy and the Balance of
Power,” 01 April 1939, Editorial
Research Reports: 1939, vol. 1 (Washington, DC: CQ Press); and B.W.
Patch, “Present and Proposed Neutrality
Legislation,” 03 October 1939, Editorial Research Reports: 1939, vol. 3
(Washington, DC: CQ Press). The key
study of the neutrality acts is still: Divine, Illusion of Neutrality,
81ff.
87
Lt. Col. Raymond E. Lee (Military Attaché), “Oil and Its Effect on
British Warmaking Capacity,” 11 December
1935, Report No. 37765, NARA, Record Group 59: General Records of the
Department of State (hereafter cited as:
RG 59), 841.6363/413. Lee observed that few in Britain grasped that the
new legislation would apply equally to all
belligerents in any conflict, but he mistakenly thought that oil exports
would be immediately curtailed along with
arms.

213
“normal” level of exports.88 Isolationists opposed this draft because it
gave the U.S. Government the right
to apply export restrictions selectively between belligerents if both the
President and the Congress agreed
– in other words, to avoid penalizing the victims of aggression equally
as the aggressors. The two sides
compromised with a bill that basically renewed the 1935 act.
Unlike the two previous acts, 1937 Neutrality Act was permanent (except
in one regard) and did
affect exports of raw materials. Previously, isolationists and peace
groups had tried and failed to extend
the arms embargo to include all strategic commodities, including oil.89
The new legislation specifically
excluded raw materials from the list of contraband items, but some
restrictions on their export did apply.
As the Foreign Office explained, the bill distinguished between
“implements of war,” whose sale was
prohibited, and goods “essential for the conduct of a war” but not
actually weapons (oil being the most
important). Section 2 of the 1937 act prohibited the export of
“essential” items to belligerents on U.S.
ships. But such items could be exported on belligerent ships after title
had been transferred to the foreign
purchaser. This section of the 1937 Neutrality Act – so-called “cash and
carry” provision – would expire
in two years. As one historian sardonically observes, “cash and carry”
represented an effort by the United
States to continue to profit from international trade in wartime without
incurring the kinds of risks that
contributed to U.S. belligerency in 1917.90 The “cash and carry”
provision, while preferable to a blanket
embargo, was still a “nuisance” according to the Foreign Office because
it required Britain to organize the
shipping of goods to Europe and would strain its reserves of hard
currency. Ultimately, Britain’s “relative
immunity” to the legislation could only be realized if the British built
up adequate stocks of war material,
created “industries capable from the start [of hostilities] of
manufacturing all our needs,” and enjoyed
both “command of the sea” and “solvency and stability.”91
88

Desmond Morton (Director of Industrial Intelligence Center), “Some Notes

on the American Neutrality Bill and
the Supply of Material to Belligerents,” 16 January 1936, ICF/558,
enclosed with: A.W. Clarke, “U.S.A. Neutrality
Bill: Supply of Material to Belligerents,” 22 January 1936, O.B. 155, CAB
50/5.
89
Divine, Illusion of Neutrality, 122-161 (esp. 134-136 and 166).
90
Divine, Illusion of Neutrality, 162-199 (esp. 163 and 193-195).
91
Foreign Office, “Memorandum on United States Neutrality,” 10 May 1937, A
4581/448/45, POWE 33/765. See,
especially, Annex II to the aforementioned report (despite its somewhat
misleading title): G.G. Fitzmaurice,
“Memorandum on the Extent to which the American Neutrality Legislation is
likely to assist in keeping the United
States out of War,” 10 May 1937.
214
Britain’s access to U.S. oil exports had nevertheless survived. The
Petroleum Department concluded
“that under the Neutrality Act the supply of oil to the United Kingdom
from [the] U.S.A. in an emergency
would not be prejudiced,” although it conceded that the situation might
change when the original “cash
and carry” provision expired in May 1939. The Petroleum Department now
assumed that it was unlikely
that the United States would be “unfriendly” during any future war, and
it saw no reason to challenge the
assurances of the British Ambassador to the United States that “the
general opinion [in Washington]
seemed to be that the latitude given to the President ensures that he
will apply the Act in such a way as to
favour democratic nations if attacked by dictators.” As long as Britain
had the money to buy U.S. oil, the
Petroleum Department was confident “that while the existing legislation
is in force the possibility of [the]
U.S.A. withholding supplies can be disregarded in any future calculations
that may be made.” Citing
earlier reports by the PPR, the Petroleum Department noted that a
“friendly” United States reduced the
number of neutral tankers required by Britain if the Mediterranean was
“closed” to fewer than sixty-six –
a reasonable deficit considering that the PPR estimated that 150 neutral
tankers (not including those under
U.S. registry) would be available for service by 1940.92
In view of this positive assessment by the Petroleum Department, the PPR
felt there was no reason to
revise its assumption that the United States would continue to supply
Canada if it was “unfriendly.”93 The
CID concurred and agreed to revisit the matter in 1939 after the
expiration of the “cash and carry”
provision. It also accepted the Oil Board’s recommendation that British
planning should continue to
allocate U.S. oil to Canada even if the United States was “unfriendly.”94

92

Petroleum Department, “U.S.A. Neutrality Legislation,” July 1937, O.B.

208 (O.B. (P.R.) 69), enclosed with:
A.D. Nicholl and G.W.C. Norfolk, “Note by Joint Secretaries,” 21 July
1937, O.B. 208, O.B. (P.R.) 70, CAB 50/6.
The report appears to be incorrectly numbered – other copies of the
report in CAB 50/15 and POWE 33/765 are
numbered O.B. (P.R.) 70 and dated 09 July 1937. See also Orest Babij’s
“The Royal Navy and Inter-War Plans for
War against Japan: The Problem of Oil Supply,” in: Merchant Marine in
International Affairs, 1850-1950, ed. Greg
Kennedy (London: Frank Cass, 2000), 100-101.
93
A.D. Nicholl and G.W.C. Norfolk, “Note by Joint Secretaries,” 21 July
1937, O.B. 208, O.B. (P.R.) 70, CAB
50/6.
94
A.D. Nicholl (PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for the Estimated Requirements of the
Services and for the Industrial and Civil
Purposes of the Empire in the First Year (1940) of a Far Eastern War:
Note by the Joint Secretary,” 15 March 1938,
O.B. (P.R.) 118 (also O.B. 241), CAB 50/16.

215
Leaving aside the obvious disabilities imposed by the arms embargo, the
1937 Neutrality Act was a
mixed bag for Britain. Contrary to the fears of the IIC, the U.S.
Government did not adopt any legislation
limiting exports of raw materials. The 1937 legislation erased – at least
for the next two years – the
longstanding fear that the United States might embargo oil exports to
Britain. The oil would be available
but only under the terms of “cash and carry.” By preventing the
chartering of U.S. tankers and forcing
Britain to pay cash in advance for any U.S. oil it purchased, the 1937
Neutrality Act did impose additional
expenditures in two items that London could not afford to spare: tanker
tonnage and foreign exchange.
Britain was now caught in a vice: addressing the shortage of the latter
by increasing imports of Middle
Eastern oil would increase the deficit of the former. On the other hand,
saving tanker tonnage by drawing
more of Britain’s imports from the Western Hemisphere would accelerate
the draining of Britain’s hard
currency reserves since much of the oil would have to be purchased from
U.S. companies. Whatever else
happened, Britain could not afford to lose access to its major sources of
oil in the Western Hemisphere,
which was the most efficient source of supply both in terms of logistics
and Britain’s balance of
payments, as British firms in Latin America would accept payment in
sterling rather than in dollars.

216
The Specter of Nationalism: Mexico, 1938-1941
Italy’s hostility did not reduce the amount of oil available to Britain.
Rather, the issue was the
perennial problem of logistics. Any closure of the Mediterranean would
force Britain to fall back on the
Western Hemisphere since it could not transport enough oil from the
Middle East around the Cape of
Good Hope. The loss of U.S. imports was not decisive, but it was
imperative that access to other sources
in the Western Hemisphere was not jeopardized. In view of this situation,
the Petroleum Division was not
exaggerating when it called President Lázaro Cárdenas’ decision in March
1938 to nationalize the
Mexican oil industry and expropriate the assets of the major U.S. and
Anglo-Dutch oil companies as “[an]
event of considerable importance which may, directly or indirectly, have
serious repercussions on the
problem of the supply of oil to this country […].”95
Prior to the labor dispute between the foreign oil companies and
Petroleum Workers’ Union that
precipitated nationalization, the main British company (Mexican Eagle, a
subsidiary of Shell since 1919)
seemed to enjoy a secure position in Mexico. The company had concluded an
agreement with Mexico
City in November 1937 guaranteeing the Mexican Government up to 35% of
the its production from the
rich Poza Rica oilfield. With more than 500,000,000 barrels worth of
reserves, 41% of the oilfield lay
within lands owned by the Mexican Government.96 Mexican Eagle also agreed
to produce oil at Poza Rica
according to stringent conservation measures that would lengthen the
lifespan of the field – something the
Mexican Government had been promoting unsuccessfully since 1925.97 Most
significantly, the company
finally recognized the Mexican Government’s ownership of national subsoil
resources (Article 27 of the

95

Petroleum Department, “The Expropriation by the Mexican Government of the

Properties of the Oil Companies in
Mexico,” 08 April 1938, O.B. 247, Annex to: De La Warr (President, Oil
Board), “Expropriation of the Properties of
the Oil Companies in Mexico: Note by the Oil Board,” 09 May 1938, O.B.
252 (also C.I.D Paper No. 1428-B), CAB
50/7.
96
Noel Maurer, “The Empire Struck Back: Sanctions and Compensation in the
Mexican Oil Expropriation of 1938,”
Journal of Economic History 71: 3 (2011): 595; and Myrna Santiago, The
Ecology of Oil: Environment, Labor, and
the Mexican Revolution, 1900-1938 (Cambridge: Cambridge University Press,
2006), 287-288.
97
Even if the agreement with Mexican Eagle was overtaken by events the
following year, the concessions made by
the company regarding oil conservation were significant because they
represented the government’s first major
victory in the fight for “wise use” of Mexico’s oil reserves, and which
became the mantra of the industry after
nationalization. Santiago, Ecology of Oil, 256-290 and 354.

217
1917 Constitution).98 Mexican Eagle had signed the agreement (never
implemented because of the
nationalization the following year) over the opposition of the U.S. oil
companies.99 But it squandered any
goodwill the following year when it sided with the U.S. oil companies
against the Mexican petroleum
workers’ union, the national arbitration board, and the Mexican Supreme
Court. Not for the first or the
last time, the British would pay dearly for their intransigence in the
face of what they perceived to be an
infringement of their legal rights.100
During the World War, when production had increased between 4,000,000
tons to 9,000,000 tons
each year, Mexico had been Britain’s second-largest supplier behind the
United States. By 1937,
however, Mexico’s oil production of 46,907,000 barrels was only one-
quarter the 1921 peak of
193,398,000 barrels.101 During this period, Mexico had also fallen from
second to seventh in the
international ranking of oil producers, contributing only 2.5% of global
output in 1937. Thanks to the
discovery of the Poza Rica oilfield in 1930 by Mexican Eagle, Britain
accounted for two-thirds of

98

Article 27 replaced a series of four laws passed between 1884 and 1909
during the Profiriato (1876-1911) that
eliminated government ownership of subsoil mineral resources, and which
had prevailed since the period of Spanish
colonial rule. Linda Hall, Oil, Banks, and Politics: The United States
and Postrevolutionary Mexico, 1917-1924
(Austin: University of Texas Press, 1995), 18; and Santiago, Ecology of
Oil, 62-64. By encouraging foreign
companies to search for oil, the dictator Porfirio Díaz hoped to reduce
Mexico’s crippling dependence upon imports
of U.S. and British coal (4,500,000 tons by the end of the nineteenth
century). Jonathan Brown and Peter Linder,
“Oil,” in: The Second Conquest of Latin America: Coffee, Henequen, and
Oil During the Export Boom, 1850-1930,
ed. Steven Topik and Allen Wells (Austin: University of Texas Press,
1998), 157.
99
Jonker and van Zanden, History of Shell, 455.
100
The key historical treatment of Mexican nationalization is: Lorenzo
Meyer, Mexico and the United States in the
Oil Controversy, 1917-1942 (Austin: University of Texas Press, 1977),
149-228. See also: Stephen Haber, Noel
Maurer, and Armando Razo, “When the Law Does Not Matter: The Rise and
Decline of the Mexican Oil Industry,”
Journal of Economic History 63: 1 (2003): 1-32; Howarth and Jonker,
History of Shell, 39-40; Catherine Jayne, Oil,
War, and Anglo-American Relations: American and British Reactions to
Mexico’s Expropriation of Foreign Oil
Properties, 1937-1941 (Westport: Greenwood Press, 2001); Jonker and van
Zanden, History of Shell, 453-456;
Clayton Koppes, “The Good Neighbor Policy and the Nationalization of
Mexican Oil: A Reinterpretation,” Journal
of American History 69: 1 (1982): 62-81; Larson, Knowlton, and Popple,
New Horizons, 127-132; Maurer, “Empire
Struck Back,” 590-615; Lorenzo Meyer, “The Expropriation and Great
Britain,” in: The Mexican Petroleum
Industry in the Twentieth Century, ed. Jonathan Brown and Allan Knight
(Austin, University of Texas Press, 1992),
154-172; Santiago, Ecology of Oil, 326-341; and Mira Wilkins, The
Maturing of Multinational Enterprise:
American Business Abroad from 1914-1970 (Cambridge: Harvard University
Press, 1974), 225-230. Meyer
concluded that Mexican Eagle had erred grievously by taking a hard line
against Mexican labor unrest: had the
company adopted a more conciliatory position, “it is highly likely that
its presence in Mexico would have lasted a
good many years longer, and that the nature of the Mexican oil industry
would not be what it is today.”
“Expropriation and Great Britain,” 168.
101
Everette Lee DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum
Statistics (Dallas: DeGolyer and
MacNaughton, 2004), 5.

218
Mexican oil production on the eve of nationalization.102 Unfortunately
for London, Mexico was no longer
a major exporter. In 1920, it had exported roughly 175,000,000 barrels,
but after 1930 exports had
shriveled to less than 25,000,000 barrels per year. Domestic consumption
within Mexico was negligible
and fairly static: in 1921, 18,227,846 barrels (1%) of total production
was consumed locally. By 1937,
consumption equaled 18,293,576 barrels, or 39% of production. But thanks
to the collapse in production,
the balance between exports and domestic consumption had shifted
noticeably: in 1922, 99% of Mexico’s
production went abroad, but by 1937, only 61% did.103 In fact, one of
Mexico’s major attractions for the
oil companies was the growth of domestic consumption, which they
satisfied after 1925 through imports
of U.S. crude from California, which was cheaper than Mexican crude on
the Mexico’s western coast.104
In 1935, Mexico still exported 1,100,000 tons to Britain, but this figure
slumped to 631,000 tons in
1937 – from 10.1% of Britain’s total imports to 5.5%, although it
remained the fourth-largest supplier,
well behind the United States but slightly ahead of Romania. By 1937,
London expected that Mexico
would supply no more than 1,800,000 tons of oil to Britain in the event
of war. Although Mexican oil
production had retained a strategic significance out of proportion with
its size thanks to its relative
security and accessibility, the President of the Oil Board concluded that
the loss of Mexican imports

102

De La Warr (President, Oil Board), “Expropriation of the Properties of

the Oil Companies in Mexico: Note by
the Oil Board,” 09 May 1938, O.B. 252 (also C.I.D Paper No. 1428-B), CAB
50/7. By comparison, U.S. interests
accounted for only 20%, with the remainder belonging to Mexican
interests. “Mexican Oil Dispute,” Appendix V
(A) to: Ministerial Oil Committee, “Oil Policy,” no date (circa April
1944), M.O.C. (44) 5, POWE 33/1399.
103
Jonathan Brown, “The Structure of the Foreign-Owned Petroleum Industry in
Mexico, 1880-1938,” in: Mexican
Petroleum Industry, ed. Brown and Knight, 10; and Meyer, Oil Controversy,
3-19. According to Clayton Koppes,
prior to nationalization, Mexico’s domestic consumption “remained about
the size of that of Des Moines, Iowa.”
Koppes, “Nationalization,” 64. This seems to be an understatement: in
1937, the Mexican domestic economy
claimed 16.86% of the country’s heavy oil production, 43.50% of its
refined products, and 99.9% of its light crude
oil. Santiago, Ecology of Oil, 334.
104
By 1930, Mexico was the second-largest consumer of petroleum products in
Latin America behind Argentina.
Jonathan Brown, “Why Foreign Oil Companies Shifted Their Production from
Mexico to Venezuela during the
1920s,” American Historical Review 90: 2 (1985): 373-375. As of 1933,
four companies controlled the entire
Mexican market for gasoline:
Company
Market Share
Shell
33.7%
Jersey
24.3%
Sinclair
21.6%
Standard Oil
20.4%
of California
Source: Brown and Linder, “Oil,” 166-167.

219
“would probably not present an insoluble problem.” At the same, he
conceded that Mexico “possesses
much greater possibilities [for increased production] than are indicated
by the output of recent years,”
thanks to the discovery of the Poza Rica oilfield.105
There is a great deal of mythology surrounding the expropriation, which
appears in hindsight
(erroneously) as a harbinger of the resource nationalism of the 1970s.
After the events of March 1938,
London sniffed that nationalization had merely been a pretext to seize
control of the Poza Rica oilfield.106
In fact, there is no evidence that Cárdenas had engineered the
nationalization. Rather, the impetus came
from the increasingly radical labor movement, which often feuded with
Cárdenas, who (much like his
predecessors) sought to promote “equilibrium” between capital and labor
while rejecting socialism in
favor of managed capitalism.107 Rather than striking premeditated blow
against foreign ownership of
Mexico’s natural resources, Cárdenas had only acted to prevent the
wholesale collapse of the industry
after most of the oil companies refused abide by the 1937 ruling of the
Federal Labor Board (upheld by
the Mexican Supreme Court) granting a major wage and benefit increase as
well as greater control over
hiring to the petroleum workers’ union. The companies reacted by ceasing
to pay their workers, who
retaliated by seizing control of the oil infrastructure and halting
production altogether, thus paralyzing the
entire industry and forcing Cárdenas’ hand. Ironically, Mexican
Government proved to be an
unsympathetic employer: it refused to implement fully the 1937 labor
ruling, and although the number of
workers and their nominal wages increased, inflation wiped out any gains
by 1944. Union representatives
also received only three of out of the nine chairs on the board of the
new government oil monopoly,
Petróleos Mexicanos.108

105

De La Warr (President, Oil Board), “Expropriation of the Properties of

the Oil Companies in Mexico: Note by
the Oil Board,” 09 May 1938, O.B. 252 (also C.I.D Paper No. 1428-B), CAB
50/7. See also: Jonker and Zanden,
History of Shell, 453.
106
“Mexican Oil Dispute,” Appendix V (A) to: Ministerial Oil Committee, “Oil
Policy,” no date (circa April 1944),
M.O.C. (44) 5, POWE 33/1399.
107
The role of the labor unions as the driving force behind nationalization
is stressed in: Santiago, Ecology of Oil,
291-341.
108
Maurer, “Empire Struck Back,” 611-612; and Santiago, Ecology of Oil, 349-
353.

220
Another myth is that the political situation following the Revolution of
1910, “revenue expropriation”
in the form of tax increases by the Mexican Government during the 1920s
and 1930s, and doubts about
their long term property rights discouraged the major oil companies from
exploring for oil, which led to
the collapse in oil production after 1921 as the companies extracted
whatever they could before they lost
control of the oilfields. Recent studies have demonstrated that the
opposite is the case: real taxes on the
oil companies decreased after 1923 (while the companies avoided the
increase on gasoline excise taxes by
exporting crude overseas for refining), and investment by the major oil
companies peaked somewhere
between 1924 and 1928, or several years after the collapse in production.
Although the companies did
reduce their investment in Mexico, the cause was geological rather than
political: they had tried and failed
to find new oilfields to replace the production from the “Golden Lane”
that had become contaminated by
salt water. The discovery of Poza Rica led to a stabilization and even
modest increase in production after
1932, but investment continued to plummet after 1926, even if the
companies drilled a higher percentage
of successful new oil wells (from around 40% in 1926 to almost 70% by
1930). Mexico would not return
to its 1921 levels of production until the 1970s, but even this was
accomplished using state-of-the-art
technology unavailable before 1938.109
While under “ordinary circumstances Mexico might therefore have been
expected to become again of
considerable importance as a supplier to this country,” in the wake of
nationalization, the Petroleum
Department lamented that “[these] possibilities are likely to disappear
if the Mexican Government adhere
to their present intentions.” The British believed that the Mexicans
lacked the skills not only to boost
production, but perhaps even to maintain output at levels sufficient to
meet domestic demand. The
greatest cause of discomfiture in London, however, was the possibility
that Mexico’s actions might
embolden other oil producers. If the Mexicans managed to convince other
Latin American producers to

109

For 1921-1929, see: Haber, Maurer, and Razo, “When the Law Does Not
Matter,” passim (esp. 1-3 and 9-16); for
1938, see: Maurer, “Empire Struck Back,” passim. The analysis of Haber,
et al., “When the Law Does Not Matter,”
does not necessarily conflict with that of Brown in “Shifted Their
Production.” The latter overlooks the major
investments made by foreign oil companies in Mexico during the 1920s to
stabilize production, while the former
does not mention the importance of Mexico as a budding oil consumer,
which was especially important in an era of
declining prices and demand globally.

221
implement “a similar policy… a serious situation would arise.” Britain
could not afford to make do
without the oil of Latin America, with almost 28,000,000 tons worth of
production in 1936 between
Venezuela, Colombia, and Peru, to which Britain enjoyed secure access,
unlike the oil of either the
Middle East or Romania. The Petroleum Department therefore urged that,
irrespective of whether Mexico
reversed its policy, “it is hardly necessary to emphasise the need of
making every effort to ensure that the
Mexican policy is not followed by other Latin American countries.”110
Most of the major oil companies – U.S. and British – adopted a hawkish
position and collaborated
(unsuccessfully beyond Britain) to boycott sales of expropriated oil.
They could afford to use the
nationalization to establish a “precedent” for other producers such as
Venezuela because they had little
money at stake in Mexico, from where they had already divested during the
1920s. Total revenues in
1937 ($7,000,000, not including depreciation and depletion) were less
than cost of the new agreement
mandated by the Federal Labor Board.111 The leader of the U.S. companies,
the Standard Oil Company of
New Jersey (Jersey) – which owned the largest U.S. producer in Mexico
before nationalization, Mexican
Petroleum – had not even wanted a share of Mexican production when it
bought out the Standard Oil
Company of Indiana’s foreign properties in 1932.112 Indiana had, however,
insisted that Jersey take
Mexican Petroleum as the price for acquiring its more valuable Venezuelan
subsidiary, Lago
Petroleum.113
On the eve of nationalization, Mexican Eagle had been prepared to accept
the ruling of the Mexican
Supreme Court but stuck by the U.S. oil companies after Jersey’s
subsidiary refused to compromise.114
Having suffered the greatest loss in Mexico as a result of the
nationalization, Shell thereafter supported a
110

Petroleum Department, “The Expropriation by the Mexican Government of the

Properties of the Oil Companies
in Mexico,” 08 April 1938, O.B. 247, Annex to: De La Warr (President, Oil
Board), “Expropriation of the Properties
of the Oil Companies in Mexico: Note by the Oil Board,” 09 May 1938, O.B.
252 (also C.I.D Paper No. 1428-B),
CAB 50/7.
111
Maurer, “Empire Struck Back,” 601-603.
112
Mexico’s share of U.S. oil investment had collapsed since 1929, from
18.5% to 6.4% by 1936. Brian McBeth,
“Venezuela’s Nascent Oil Industry and the U.S. Tariff on Crude Oil
Imports, 1927-1935,” Journal of Iberian and
Latin American History 27: 3 (2009): 436.
113
Maurer, “Empire Struck Back,” 596-599. In 1931, the Standard Oil Company
of Indiana’s Mexican properties
had a daily production of 16,000 barrels per day, while those in
Venezuela produced 88,000 barrels per day with
estimated reserves of 550,000,000 barrels. Larson, Knowlton, and Popple,
New Horizons, 49.
114
Brown and Linder, “Oil,” 168.

222
hard-line position, which entailed that any settlement with Mexico City
must include “restitution” (for
future profits now lost) rather than just “compensation.” The company’s
executives were convinced the
Mexicans would see the folly of their ways and invite Shell back once
they realized they were incapable
of running their own oil industry.115 But the really big stakes were not
in Mexico, but rather in Venezuela,
which accounted for almost 40% of the Shell’s total worldwide production
by January 1940 (12,000,000
tons out 31,000,000 tons).116 Shell was determined to maintain high
production in the region, not only
because Caribbean oil “has always been recognized as a great source of
security in the matter of oil
supply,” but also to keep the Venezuelans happy in terms of oil revenues:
“Any deterioration of the
Venezuelan and West Indian activities,” the company warned, “might prove
a calamity.” If the
Venezuelans followed the Mexican example, “the consequences would be
vastly more far-reaching in
their effect than has been the withdrawal of Mexican supplies upon the
oil supplies of this country and on
British revenues.”117
Although the company supported a hard-line on Mexico and continued to
profit from its position in
Venezuela, Shell’s leadership could not have known that the events of
1938 marked the beginning of the
end of the company’s history as a firm that produced more crude than it
sold – the nationalization in
Mexico would be exacerbated two years later by the effective seizure of
its assets in Romania (which the
Soviets nationalized in 1948) and the loss of its East Indies oilfields
in 1942. By 1943, Shell had lost 37%
of its prewar production, and whereas its production in 1937 was equal to
that of Jersey (30,000,000
tons), by 1945, Jersey had a 22,000,000 ton advantage.118

115

Shell’s official history implausibly claims that Shell’s plan could have
worked with “concerted diplomatic
support,” but U.S. pusillanimity destroyed any chance of success. Howarth
and Jonker, History of Shell, 39-40.
116
The many advantages of Venezuelan oil in comparison to both Mexican and
Middle Eastern oil are summarized
in: Brown, “Shifted Their Production,” 362-385; B.S. McBeth, British Oil
Policy, 1919-1939 (London: Frank Cass,
1985), 86-120; B.S. McBeth, Juan Vicente Gómez and the Oil Companies in
Venezuela, 1908-1935 (Cambridge:
Cambridge University Press, 1983), 1-4, 65-66; and Jonker and van Zanden,
History of Shell, 453.
117
Shell Transport and Trading Co., “Memorandum: Shell/Royal Dutch Group,”
16 January 1940, CAB 63/117.
Although Caracas was not above using legal means to collect what it
claimed were unpaid back taxes and royalties
from the company before 1938, the Venezuelan Government opposed the
nationalization, as the country was far too
dependent on oil revenues (already one-quarter of total tax revenues by
1928) to risk any disruption. Maurer,
“Empire Struck Back,” 602-603; McBeth, “Venezuela’s Nascent Oil
Industry,” 429; and Stephen Rabe, The Road to
OPEC: United States Relations with Venezuela, 1919-1976 (Austin:
University of Texas Press, 1982), 60-61.
118
Howarth and Jonker, History of Shell, 34-35.

223
In view of what was at stake for Britain economically and strategically,
particularly in Venezuela and
Iran, the British Government opposed the resumption of diplomatic
relations with Mexico, which had
been terminated in April 1938, until a favorable oil settlement had been
reached. A Foreign Office
assessment completed two years later remarked that London’s
uncompromising position on compensation
for Mexican Eagle had “been conditioned not so much by the hope of saving
what could be saved from
the wreck as by the determination to avoid any move which could be
constructed as condoning the
original act of spoliation,” which might have emboldened Venezuela or
Iran to undertake similar action
“with infinitely greater economic and strategic damage to the national
interests.” The Foreign Office
derived a smug satisfaction from “the growing economic difficulties in
Mexico,” which London believed
“vindicated the policy of leaving that country to stew in her own juice
as a deterrent to others from
following her example.” […].” Premature reconciliation should be avoided,
as “it would inevitably be
interpreted elsewhere as a first step toward a compromise solution of the
oil dispute dictated by motives
of weakness.” The need to make an example out of Mexico to “deter” other
oil producers and refusing to
countenance the Mexican “banditry” trumped any desire to regain quick
access to Mexico’s oil industry
even as Britain was fighting for its life following the surrender of
France and prior to Pearl Harbor.119
The British Government’s uncompromising stance was at odds with that of
the U.S. Government,
whose refusal to maintain a hard line raised suspicions in London that
Washington wanted to purge
foreign interests from Mexico before securing the readmission of the U.S.
oil companies. Unlike the
United States, which acknowledged the right of sovereign states to
nationalize foreign-owned property
with prompt compensation, Britain never accepted the legality of any
nationalization undertaken without
due cause. According to Foreign Secretary Eden, the question of whether
or not adequate compensation
was forthcoming was of secondary concern. Rather, the British Government
rejected the very
“justifiability of the expropriation.” In London’s eyes, the actions of
the Mexican Government were an
affront since the oil expropriation had been “essentially arbitrary in
character” and not really in “any true

119

Rodney Gallop (Foreign Office), “Mexican Oil Dispute: Summary of

Developments from 1939 to August 1940,”
07 October 1940, A 4486/57/26, T 160/1263.

224
interest of Mexico.” Not only had labor conditions in the oilfields not
been as poor as alleged, and the
arbitration ruling against the oil companies unfair and excessive, but
the British Minister in Mexico
surmised that the Supreme Court ruling concerning the arbitration award –
and whose refusal by the oil
companies supposedly prompted the nationalization decree – had been
rigged by the Mexican
Government, which was acting purely on the basis of “political
considerations.” Therefore, the British
Government, unlike the U.S. Government, could not accept the idea of
expropriation with adequate
compensation as a prerequisite for a settlement. “[The] essential issue,”
according to Eden, “is the
justifiability of the expropriation itself, and the situation is of a
character which can only be remedied by a
restitution of the [oil companies’] properties.”120
The British would fight expropriation by a combination of diplomatic and
economic pressure to
prevent the sale of Mexican oil, such as blocking financing, forbidding
British merchants from trading
expropriated oil, embargoing the sale and transport of Mexican oil by the
major oil companies, and
discouraging private industrial firms from supplying the Mexican oil
industry.121 The primary aim of such
measures, according to the Petroleum Department, was less to secure “the
reinstatement of the [Oil]
Companies” (a difficult proposition since Britain was running a trade
deficit with Mexico), than “to serve
as a deterrent to the other South American oil producing countries, which
otherwise might be encouraged
to follow Mexico’s example.” Nationalization had also impressed upon
London the importance of
maintaining a close watch over other oil producers and eliminating
possible sources of “friction,” perhaps
through “more frequent visits… by His Majesty’s Ships with the object of
cultivating good relationships,”

120

The Foreign Secretary (Eden) to the British Minister in Mexico (Owen St.
Clair O’Malley), 06 April 1938,
quoted in: Petroleum Department, “The Expropriation by the Mexican
Government of the Properties of the Oil
Companies in Mexico,” 08 April 1938, O.B. 247, Annex to: De La Warr
(President, Oil Board), “Expropriation of
the Properties of the Oil Companies in Mexico: Note by the Oil Board,” 09
May 1938, O.B. 252 (also C.I.D Paper
No. 1428-B), CAB 50/7. Eden’s note was rewritten and submitted to the
Mexican Government on 08 April 1938.
The key diplomatic exchanges between London and Mexico City between 08
April 1938 and 20 May 1938 are
reprinted in: Correspondence with the Mexican Government regarding the
Expropriation of Oil Properties in
Mexico, Cmd. 5758 (London: HMSO, 1938), ADM 116/4815.
121
The measures undertaken by the British Government and Mexican Eagle are
summarized in: Llewellin
(Chairman, Oil Board), et al., “Oil Board: Thirteenth Annual Report,” 24
January 1939, O.B. 294 (also C.I.D. Paper
No. 1529-B), CAB 50/7.

225
and having British diplomats offer suggestions concerning the “directions
in which they consider that
action might be taken which would strengthen our position […].”122
Like the major oil companies, the British Government could afford to
adopt an uncompromising
concerning Mexican nationalization because Venezuela had already emerged
as a superior source of
supply. By the eve of the Second World War, besides the being the world’s
largest exporter, Venezuela
was also Britain’s most important oil supplier, providing 39% of its
imports in 1937 (4,422,000 tons out
of 11,249,000 tons). Production had increased by 10,000,000 tons just
between 1932 and 1937, and
British companies (affiliates of Shell) produced 38% of its output.
During wartime, Venezuela would
have to supply the British Empire with 9,634,000 tons assuming the
Mediterranean was “closed” (or
6,304,000 tons if was “open”), but this was a manageable figure
considering that total production in 1937
was 27,700,000 tons.123 In fact, once the war began, Venezuela was
eclipsed by the United States as
Britain’s most important supplier because Venezuelan crude was not as
suitable as U.S. oil for being
refined into high-octane gasoline.124 Nonetheless, Venezuela was an
indispensable supplier once Iran
stopped exporting west of Suez after 1940.125 Venezuela ultimately
reclaimed its position as the world’s
second-largest producer in 1945 when Soviet oil production, hammered by
wartime devastation and
material shortages, collapsed by half between 1944 and 1945.

122

Petroleum Department, “The Expropriation by the Mexican Government of the

Properties of the Oil Companies
in Mexico,” 08 April 1938, O.B. 247, Annex to: De La Warr (President, Oil
Board), “Expropriation of the Properties
of the Oil Companies in Mexico: Note by the Oil Board,” 09 May 1938, O.B.
252 (also C.I.D Paper No. 1428-B),
CAB 50/7. The CID broadly embraced the recommendations of the Oil Board
and the Petroleum Department but
narrowed their application to Latin America only. A.D. Nicholl,
“Expropriation of the Property of the Oil
Companies in Mexico: Note by the Joint Secretary,” O.B. 260, 26 May 1938,
CAB 50/7.
123
“Supply of Petroleum and Petroleum Products from Venezuelan Oilfields,”
no date or author (circa 1938;
probably Admiralty), ADM 1/10072.
124
Howarth and Jonker, History of Shell, 36. Before the war, about 60% of
the yield of the Shell and Jersey
refineries at Curaçao and Aruba had been fuel oil and only 23% motor
fuel. “Brief Survey of the Principal Oil
Producing Countries,” no date or author, enclosed with: G.W.C. Norfolk
(Joint Secretary, Sub-Committee on
Petroleum Products Reserves, Oil Board, CID), 26 June 1936, O.B. (P.R.)
14, CAB 50/14.
125
Outside of the United States, Venezuela was also the only supplier to the
Western Allies capable of replacing the
East Indies, which had produced more than 227,000 barrels per day in
1941. Thanks to Venezuela, the output of the
Caribbean increased from 624,100 barrels per day in 1938 to 824,100
barrels in 1944. Overall, however, Allied
production beyond the United States and Soviet Union was actually lower
in 1944 than in 1941 (1,744,400 barrels
vs. 1,798,600 barrels). John Frey and Chandler Ide, History of the
Petroleum Administration for War (Washington,
DC: U.S. GPO, 1946), 438.

226
The British did not let up even after the start of the war, or when the
Mexicans gradually moved into
the Allied camp after 1940. As a Petroleum Department summary from 1941
explained, acquiescing to
expropriation would undermine the position of British oil companies
around the world, whose success
depended on their ability “to operate with as little political
interference as is possible by the Government
of the countries where they operate.” Government interference in the oil
industry, by contrast, tended to
curtail oil production, since most governments lacked the technical
expertise or financial wherewithal to
run such complex enterprises. This had to be avoided at all costs from
Britain’s perspective since the
success of British oil companies “affords the only basis on which the
Empire can hope to have any
assurance of securing the large supplies [of oil] needed.”126 In effect,
the British had boxed themselves in
a corner: their uncompromising stance vis-à-vis Mexico City had been
implemented with an eye to
impressing Caracas and Tehran. Once the war began, however, it was the
Venezuelans and Iranians that
held the whip-hand: neither had any interested in settlement between
Britain and Mexico, which might led
to a resumption of Mexican exports that would cut into their own oil
revenues, which had already been
harmed as a result of the war.127
The Roosevelt Administration, led by U.S. Ambassador to Mexico Joseph
Daniels, had advocated a
less intransigent approach than London, The Hague, or even hardliners
elsewhere in Washington
preferred.128 Although Washington shared London’s desire to see the re-
entry of the major oil companies
into Mexico, it believed that this could be accomplished through
negotiation, a matter that took on added
urgency once the war broke out.129 The Mexicans certainly enjoyed greater
leverage than before: the
drying up of global foreign investment due to the Depression meant that
the Mexicans did not worry
126

“Mexican Oil Dispute,” no date or author, probably 07 September 1941

(handwritten notation reads: “P 7-9-41”
and “Note by Petroleum Department”), ADM 116/4815. Of course, by 1941,
the British had no need of Mexican
crude and rather feared allowing it back into world markets at the
expense of Venezuela and Iran. Meyer,
“Expropriation and Great Britain,” 161.
127
Maurer, “Empire Struck Back,” 607-608. Maurer misinterprets the
additional royalties paid by Britain to Iran
during the war by implying there was a relationship to events in Mexico.
In fact, the British needed to compensate
the Iranians for AIOC’s reduced off-take after 1940 due to the
implementation of the “short-haul” policy after May
1940 to save tanker tonnage after Italy closed access through the
Mediterranean.
128
Howarth and Jonker, History of Shell, 39-40
129
Besides David Painter, Oil and the American Century: The Political
Economy of U.S. Foreign Oil Policy, 19411954 (Baltimore: Johns Hopkins
University Press, 1986), 22-31, the key work on the U.S. approach to
nationalization is: Koppes, “Nationalization,” passim (esp. 68-81).

227
about how nationalization would affect their credit rating. This gave
Mexico City, rather than the oil
companies, the freedom to determine the terms of any financial
settlement, which they calculated on the
basis of the oil companies’ own tax returns.130
London’s hard-line policy began to crumble in August 1941, after the
British caught wind that the
State Department was brokering settlement between the Mexican Government
and a group of U.S. oil
companies led by Jersey. These negotiations culminated in the Cooke-
Zevada Agreement of November
1941, the details of which were hammered out the following April although
the oil companies did not
accept the agreement until 1943. The U.S. companies received roughly
$30,000,000 over four years, not
including the money that went to Sinclair Oil under the terms of a
separate agreement in 1940
($8,000,000, plus 20,000,000 barrels at $0.25 discount). Much of the
delay stemmed from the oil
companies’ overvaluation of their nationalized assets, and their desire
that the dispute be settled through
international arbitration rather than direct negotiations with Mexico
City.131 In fact, Jersey received
roughly as much (in 1938 dollars) as it had paid to acquire Mexican
Petroleum in 1932 ($19,000,000).132
The person who pushed for a reassessment of British policy was none other
than Eden. On 28 August
1941, he began urging colleagues to convince Shell to accept the terms
that would be granted to the U.S.
oil companies.133 There was still some opposition. Geoffrey Lloyd
(Chairman of the Oil Control Board)
still advised against any resumption of relations until after a
settlement had been worked out.134 The
Admiralty was dead set against any change in policy. Even if the oil
companies returned to Mexico to
manage the oilfields, they would be mere “middlemen,” thus placing
Britain “in a far weaker position”
than if the oilfields were in British hands. Since Mexican oil was “not
of vital importance to our war
effort,” the Fourth Sea Lord continued to urge that Britain make an
example of Mexico in order to set an
130

“Die Enteignung der Erdölkonzerne im Gesamtbild der

nationalrevolutionären Politik,” Vierjahresplan, 1938:
VII.
131
Larson, Knowlton, and Popple, New Horizons, 131-132.
132
Maurer, “Empire Struck Back,” 607, 609. As one German analyst ruefully
noted, “Without the current war and
the severing of the [trade] connections with the Europe, Mexico would not
have felt the same urgency to negotiate.”
Dr. Walter Flemming, “USA. einigt sich mit dem Mexiko-Öl,” Deutsche Wehr,
Nr. 51/45. Jahrgang (19 December
1941).
133
“Proposed agreement between British Oil Companies and Mexican Government,
and resumption of diplomatic
relations,” no date or author (on or after 28 August 1941), ADM 116/4815.
134
Lloyd to Eden, 01 September 1941, ADM 116/4815.

228
example for Venezuela and Iran.135 Eden was not dissuaded, and with the
support of the Ministry of
Economic Warfare and the Petroleum Department, he advised the Cabinet
“that we ought to take such
steps as we could obtain for our own Oil Companies not less good than
those which the American
Companies would be having to accept” by using the State Department’s good
offices. The aim of this
shift in policy went beyond just ending the dispute with Mexico. London
should adopt more a
conciliatory tone vis-à-vis Mexico in order to win Washington’s goodwill
when it came to the defense of
British interests elsewhere in the world. “We are asking much of them,”
Eden advised, “and we shall be
asking more in parts of the world where we consider our interests
primary.”136
Britain and Mexico restored diplomatic relations on 22 October 1941 in
spite of the absence of a
settlement concerning Mexican Eagle’s claims, and Mexico declared war
against the Axis on 22 May
1942. Nonetheless, the British Government continued to maintain its hard
line against Mexico. When he
announced the resumption of diplomatic relations, Eden stressed that
nothing had changed concerning
Britain’s attitude toward the nationalization. The Petroleum Department
also opposed any attempt to lift
the embargo on oil equipment to Mexico, for London had always “regarded
it as of vital importance that
no effect should be spared to prevent the Mexican Government making a
success of their policy of
expropriation […].” Even now, Britain had to avoid showing any “sign of
weakening and a willingness
on our part to compromise.” Whether or not the embargo was working was
irrelevant: the gains to be had
from a resumption of industrial exports to Mexico would “be comparatively
small and insignificant in
relation to the important issues of principle at stake.”137
The Anglo-Mexican oil dispute was not resolved until 1947. Earlier that
year, London had, with
Mexican Eagle’s blessing, abandoned its embargo against Mexican petroleum
products and grasped the
135

Fourth Sea Lord (Vice Admiral John H.D. Cunningham) to the First Sea Lord
(Admiral of the Fleet A. Dudley
P.R. Pound), 08 September 1941, ADM 116/4815.
136
“Mexico: Resumption of Diplomatic Relations and Settlement of the Oil
Dispute: Memorandum by the Secretary
of State for Foreign Affairs,” 06 September 1941, W.P. (41) 215, CAB
66/18/38. The Cabinet backed Eden on the
assumption that reopening relations with Mexico City would secure U.S.
support during future negotiations, but it
also stipulated that Britain would “not necessarily accept the same terms
as the United States oil companies.”
“Conclusions of a Meeting of the War Cabinet […],” 08 September 1941,
W.M. (41), 91 st Conclusions, CAB
65/19/27.
137
Petroleum Department, “Question whether British Companies should be
discouraged from trading with the
Mexican Oil Administration,” 28 February 1942, T 160/1263.

229
opportunity to reach a settlement before Mexico City’s dollar reserves
evaporated. At the start of the
negotiations, the British claimed that Mexican Eagle’s nationalized
physical properties were now worth
$76,000,000 and its oil and gas reserves (2,800,000,0000 barrels of
proven and probable reserves) over
$310,000,000. Under the terms of its August 1947 agreement with Mexico
City, Shell would collect
$81,250,000 retroactive to the date of the nationalization at 3% interest
(the same rate the U.S. companies
received under the 1941 Cooke-Zevada Agreement). Mexico would pay this
figure in fifteen annual
payments, which worked out to $8,689,258 per installment.138 By the time
of the final payment in 1962,
Shell had received over $130,000,000 in nominal compensation. One scholar
calculates the real value of
the 1947 settlement in 1938 dollars at $43,600,000 tons, which was 3.6
times greater than Mexican
Eagle’s market value in 1938 and 2.6 times greater than the company’s
book value that year.139 Not
surprisingly, according to its official history, the Shell “considered
the settlement ‘very satisfactory.’”140

138

Meyer, “Expropriation and Great Britain,” 163-168; and William Wynne,

Selected Case Histories of
Governmental Foreign Bond Defaults and Debt Readjustments, vol. 2 of
State Insolvency and Foreign Bondholders
(New Haven: Yale University Press, 1951), 94-95.
139
Maurer, “Empire Struck Back,” 607-610.
140
Howarth and Jonker, History of Shell, 40.

230
Opting for Imports: The Decision against Synthetic Fuel
Mexico’s nationalization of its oil industry in 1938, coming less than
six years after the Shah had
abrogated the D’Arcy Concession, exposed the fragility of any oil policy
based upon supplies from
British-owned oilfields abroad. The Italian threat to British passage
through the Mediterranean since 1936
added a logistical handicap that was insurmountable without reverting to
abject dependence upon the
United States. One would think that the emergence of so many grave
threats to Britain’s foreign oil
concessions during the 1930s would have spurred efforts to develop
synthetic sources of petroleum. But
this was not the case.
British crude oil production remained miniscule until the discovery of
the North Sea oilfields in the
1960s, but an alternative domestic source of petroleum did exist:
synthetic fuel. Although the nation
most-identified with synthetic fuel is the Third Reich, Britain also had
the option of following Germany’s
example by virtue of its large coal reserves and heavy industrial sector
(which could produce the immense
quantities of steel necessary for the construction of synthetic fuel
plants). The British Government’s
Department of Scientific and Industrial Research had established a Fuel
Research Board in 1917 to study
methods of synthesizing petroleum. Of particular interest was the process
developed during the early1920s by the German chemist Friedrich Bergius
for liquefying coal (hydrogenation). In 1927, the largest
British chemical company, Imperial Chemical Industries (ICI), acquired
control of the British Bergius
Syndicate, which had purchased the patent and marketing rights for
hydrogenation in the British Empire
in 1924.141 Meanwhile, the British Government levied a series of tariffs
on imported gasoline to
encourage the production of synthetic gasoline. And yet, in spite of the
myriad risks entailed by importing
virtually all of its oil requirements, in 1938 the British Government
decided against developing an
indigenous synthetic fuel industry.142

141

Until 1925, the rights to hydrogenation were held by the International

Bergin Corporation, a joint-venture
established in 1921 between a German consortium (including Bergius) and
Royal Dutch. Anthony Stranges,
“Friedrich Bergius and the Rise of the German Synthetic Fuel Industry,”
Isis 75: 4 (1984): 663-665.
142
For overviews of the synthetic fuel industry in interwar Britain, see:
Bamberg, History of BP, 179-182; Charles
More, Black Gold: Britain and Oil in the Twentieth Century (London:
Continuum, 2009), 62-65; Payton-Smith, Oil,

231
Although the superiority of oil vs. coal as a source of fuel was not
challenged within the British
military establishment following the First World War, the strategic
liabilities that flowed from Britain’s
need to import oil spurred much debate. While acknowledging that Britain
enjoyed an enviable position
through its control of the oil resources of the Middle East, many
analysts lamented that the transition from
coal to oil had robbed Britain of the leverage it had once enjoyed over
international trade through its
control of a worldwide network of coal bunkering stations, without
lessening Britain’s need to maintain
control of the seas.
As late as 1923, one writer still cautioned against completely converting
the Royal Navy to burning
oil, warning that Britain would be defenseless in the event that it lost
access to overseas oil. Britain
should guard against such a calamity by keeping some coal-burning ships
in service.143 Another writer
concluded that oil had “reduced our independence… by reliance on fuel
obtainable only on foreign
sufferance,” while “the present almost undignified stampede in favour of
oil fuel” had introduced an
element of friction within international relations that created new
“political entanglements” and military
obligations for an overstretched British Empire in places like the Middle
East.144 Still others urged the
armed services to extend financial support for research into the
conversion of coal into oil, since Britain’s
synthetic fuel capacity “surely should not be left largely undeveloped
until an emergency arises, when, as
happened in the Great War, other considerations blocked the way to
development.”145 It was the
Admiralty that made the case for oil most forcefully: naval technology
had advanced too far to revert to

19-24; and Anthony Stranges; “From Birmingham to Billingham: Synthetic

Fuels in Great Britain, 1910-1945,”
Technology and Culture 26 (1985): 726-57.
143
Captain R.J. Wilkinson (12th Pioneers, Indian Army), “The Influence of
Oil on Imperial Organization,” RUSI 68:
469 (1923): 109-114. Wilkinson also mentioned how the shift to oil had
damaged the British export trade by robbing
British merchant ships of the luxury of using coal as “an outward freight
certain of sale in almost any country.” See
also: W.H.L. (Walter Long, First Lord of the Admiralty) and H.G. (Hamar
Greenwood, Secretary of Overseas
Trade), “Oil Fuel Reserve for British Oil-Burning Merchant Ships:
Memorandum Prepared by the Admiralty and the
Petroleum Executive for the Cabinet,” 05 February 1920, C.P. 601, BNA,
CAB 24/98.
144
“It emerges then that not only have our naval responsibilities on the
Mediterranean route been added to, but all
our Empire sea routes… require a higher degree of naval policing than
heretofore.” Captain G. MacLeod Ross,
“Imported Oil or Native Coal?” RUSI 72: 485 (1927): 137-143. Ross was an
energetic supporter of increased
Government research spending to develop low-temperature carbonization as
a cost-effective means of producing
fuel.
145
J.S.S. Brame, “Power Fuel for the Services,” RUSI 76: 501 (1931): 64-77.
Brame was the Professor of Chemistry
and Metallurgy at the Royal Naval College, Greenwich.

232
coal – a move that “could not now be undertaken without grave prejudice
to the strength of the fleet and
its operational efficiency.”146 The former Engineer-in-Chief of the Royal
Navy warned that returning to
coal would “render the fleet useless for defense of our Empire.”147 But
that still left open the possibility of
exploring synthetic alternatives to crude oil.
The British Government first took up the question of whether to lend
government support to the
synthetic fuel industry in November 1929, when Prime Minister MacDonald
established a special subcommittee to consider the viability of using
various processes (low-temperature carbonization, pulverized
fuel, and hydrogenation) to meet Britain oil requirements. In considering
the sub-committee’s report, the
Oil Board concluded “that the process of hydrogenating coal is the only
one which can reduce the
dependence of this country on imported oil supplies to any extent,”
especially in wartime, when it might
prove to “be of great military advantage […].” The Oil Board was
cognizant of the economic risks,
remarking that it was still unclear whether synthetic fuel could compete
with natural oil even with
government subsidies (such as the existing oil import duty). Furthermore,
the Oil Board warned that some
arrangement would have to be worked out with the major oil companies
beforehand, as they might react
to the development of a synthetic fuel industry by dumping crude oil on
to the British market to drive
synthetic competitors out of business.148
It was unlikely that a British synthetic fuel industry could develop
organically, since synthetic fuel
would cost at least twice as much as imported oil. The government would
have to impose preferential
tariffs on imported oil and bankroll the construction of synthetic fuel
plants. Supporters of synthetic fuel
stressed its benefits in terms of stimulating employment, particularly
within the ailing British coal and
steel industries. They also contended that the loss in government
revenues from import duties on foreign
146

C.G. Ammon (Admiralty Board), “Coal or Oil as a Fuel for the Navy,”
Journal of the Royal United Service
Institution (hereafter cited as RUSI) 76: 503 (1931): 634-637.
147
Engineer Vice-Admiral Reginald W. Skelton, “Coal Versus Oil for the
Navy,” RUSI 79: 514 (1934): 241-255.
German analysts took note of Skelton’s conclusions. Waldener-Harz, “Kohle
oder Öl,” Militär-Wochenblatt, 119.
Jahrgang, Nummer 15 (18 October 1934).
148
Lord Thomson (President of the Oil Board), et al., “Oil Board: Fifth
Annual Report,” 01 July 1930, O.B. 51 (also
C.I.D. Paper No. 1007-B), CAB 50/3 (the report of the sub-committee is
appended as Annexure B); and Thomson,
“Production of Oil from Coal: Memorandum by the President of the Oil
Board,” 22 July 1930, C.P. 267 (30), CAB
24/214.

233
oil would be offset by reducing the financial burden of supporting
unemployed British miners and
workers, and improving Britain’s balance of payments. Synthetic fuel
could also free the British economy
from the extreme fluctuations in oil prices, not to mention the
machinations of the major oil companies,
while offering a secure source of petroleum in wartime. Opponents
countered that the costs of
subsidization would remain prohibitive barring any major technological
breakthroughs. Therefore,
government support was likely to be a permanent fixture. Considering that
the Germans had little to show
for their early investments in synthetic fuel, there was also
considerable skepticism in the early-1930s as
to whether hydrogenation on a commercial scale was even technically
feasible. A rival synthetic fuel
industry, sheltered by protective tariffs, would also have a negative
effect on the financial position of the
British oil companies and related industries such as shipbuilding, and
their potential losses in terms of
capital and employment could wipe out any gains made by subsidizing
synthetic production.149
Developing a synthetic fuel industry was not just an economic matter but
also affected Britain’s
strategic position. The former Managing Director of Shell Transport and
Trading, Andrew Agnew,
pointed out in 1935 that producing enough gasoline to cover Britain’s
annual requirements would require
an expenditure of £160,000,000, plus the loss of an additional
£40,000,000 in tax revenues. Agnew was
hardly an impartial observer, but he still raised a number of valid
concerns. Domestic production of
synthetic fuel did nothing to alleviate the energy needs of the British
Empire as a whole. Agnew was also
troubled that synthetic fuel “tends to create in the minds of those in
authority an impression that the
necessity for protection of trade routes has appreciably diminished.” It
was unwise to mortgage Britain’s
security when, for a “mere fraction of the cost of making even the
British Isles independent of imported
petroleum supplies,” the government could instead “provide defensive
armaments in a the way of cruisers
and aircraft ample to protect not only our own supplies of oil, but those
required for the peoples of the
149

The arguments for and against State support of the synthetic fuel
industry during between 1930 and 1933 are
well-summarized in the following documents: “Oil from Coal,” no date or
author; “Memorandum: Hydrogenation,”
01 December 1932, no author; “Hydrogenation,” 07 February 1933, no
author; all in: T 160/536. The provenance of
these documents is unclear. They appear to be briefing papers for senior
civil servants or Cabinet ministers, and they
are all included within the same Treasury folder, which carries the
following title: “Production of oil from coal by
hydrogenation. Papers leading up to [a] Bill providing for preference in
respect of Customs and Excise duties on
home product.”
234
whole Empire.”150 German analysts envied Britain’s luxury of choice –
Britain unlike Germany could
afford to continue importing oil since “problem of foreign exchange” was
“unknown” there.151
Starting in 1928, the British Government began placing duties on imported
gasoline. The initial duty
was 4d, but this was raised to 6d in 1931 and to 9d in 1938. Domestic
synthetic fuels produced either
from shale or oil were, however exempt. In 1935, the British Government
moved from providing indirect
to direct support and passed the Hydrocarbons Oil Production Act in 1935,
which granted synthetic
producers preferential treatment vis-à-vis imported fuel cumulatively
worth 36d over nine years. In
October 1935, ICI, which had purchased the British patent rights to
hydrogenation in 1927, constructed a
plant in Billingham to liquefy coal into over 100,000 tons of petroleum
per year.152 And, of course, there
was example set by Germany.153 The question of whether the government
should undertake even more
vigorous support of synthetic fuel was only resolved in 1937, when a sub-
committee of the CID chaired
by Lord Falmouth delivered its report on the “economic possibilities”
afforded by synthetic fuel
production, “and on the advantages to be obtained by way of security of
oil supplies in emergency.”154
The Falmouth Committee doubted that synthetic production could be
ratcheted up swiftly enough in
the event of an emergency, whereas “[in] the case of imported supplies…
the possibilities of rapid
expansion of output are much greater,” not the least because Britain
already had a developed
150

Andrew Agnew, “Empire Oil Supplies in War,” RUSI 80: 518 (1935): 278-292.
Dr. M.B., “Öl aus Kohle in England,” Vierjahresplan, 1937: VII.
152
Payton-Smith, Oil, 21-22; and Anthony Stranges, “Friedrich Bergius and
the Rise of the German Synthetic Fuel
Industry,” Isis 75: 4 (1984): 664-665. There were two major processes by
which oil products could be produced
from coal: hydrogenation and the Fischer-Tropsch Process. The former,
developed prior to the First World War and
embraced by I.G. Farben after 1925, could be used to produce high-octane
gasoline, whereas the later, developed in
1926, yielded diesel fuel, fuel oil, and lubricating oils. German
analysts were unimpressed by the quality of work
performed at Billingham. Imperial Chemical Industries used hard coal
rather than brown coal to produce petroleum
but no other byproducts: “[It] appears that the English character
attaches little value to the complicated chemical
task of recovering byproducts.” Dr. M.B., “Öl aus Kohle in England,”
Vierjahresplan, 1937: VII.
153
A.W. Clarke (Oil Board), “Steps to Render Germany Independent of Foreign
Supplies of Fuel,” 13 January 1936,
O.B. 154, CAB 50/5. German opinions in the early-1930s regarding the
viability of a British synthetic fuel program
were mixed. See the following exchange in Deutsche Wehr: Honke (?) vom
Rhyn, “Englands Treibstoff-Autarkie?
Die Renaissance der Kohle? Nr. 6/7. (38.) Jahrgang (07 February 1934);
and Kapitän zur See a.D. v. WaldenerHarz, “Englands flüssige Kohle,” Nr.
9/7. (38.) Jahrgang (28 February 1934).
154
CID, “Production of Oil from Coal: Report of a Sub-Committee,” 29
November 1937, 272-A (also Paper No.
O.C.C. 38), enclosed with: T.W.H.I. (Thomas Inskip, Minister for
Coordination of Defence) to the Cabinet, “Report
on the Sub-Committee of the Committee of Imperial Defence on the
Production of Oil from Coal: Note by the
Minister for Co-ordination of Defence,” 03 February 1938, C.P. 19 (38),
CAB 24/274. The 8th Viscount Falmouth
(Evelyn Hugh John Boscawen) was actually an engineer by training who
later served as Chairman of the Governing
Body of Imperial College, London.
151

235
infrastructure for transporting, distributing, and refining imported oil.
Imported supplies were also less
vulnerable to attack due to Britain’s naval strength, and domestic
stockpiles could be concealed. The
same could not be said of hydrogenation plants, which were “conspicuous
targets and… extremely
vulnerable to air attack.” Although the sub-committee was unable to
render a judgment regarding “the
relative costs of the two alternatives in war time,” it did conclude that
imported supplies were “the most
reliable and economical means of providing for an emergency.” One
synthetic fuel plant capable of
producing 150,000 tons of fuel a year would cost around £8,000,000.
Although it would directly or
indirectly employ approximately 6,000 men, it would do so at a cost of
about £5 per man each week,
which was greater than the average weekly wage in Britain at the time.
There were also still many doubts
about whether Britain could take “the step from technical achievement to
economic success,” and it
would have been foolhardy to have gambled Britain’s oil security on such
an uncertain prospect.155
Although it recommended that Britain continue to explore the
technological possibilities of synthetic fuel,
the sub-committee went no further than suggesting that the minimum import
duty on oil be doubled from
4d to 8d, and that such duties be maintained for another twelve years,
with the aim of spurring the
development of all forms of indigenous oil production.156

155

This was the experience of Japan, which rushed into synthetic production
prior to the Second World War without
adequate technical preparation with disastrous results. Anthony Stranges,
“Synthetic Fuel Production in Prewar and
World War II Japan: A Case Study in Technological Failure,” Annals of
Science 50 (1993): 229-65.
156
CID, “Production of Oil from Coal: Report of a Sub-Committee,” 29
November 1937, 272-A (also Paper No.
O.C.C. 38), passim (esp. 29-52), enclosed with: T.W.H.I. (Inskip) to the
Cabinet, “Report on the Sub-Committee of
the Committee of Imperial Defence on the Production of Oil from Coal:
Note by the Minister for Co-ordination of
Defence,” 03 February 1938, C.P. 19 (38), CAB 24/274. The government
produced classified and unclassified
versions of the report, the latter being disseminated to the public. Both
versions are enclosed within CAB 24/274 but
all quotations provided here are from the classified report. A summary of
the published report was reprinted as:
“”Oil from Coal and Wartime Supplies,” RUSI (1938): 385-391. For an
internal analysis of the Falmouth
Committee’s report circulated within the Cabinet, see: H.C. (Harry
Crookshank), “Falmouth Committee’s Report:
Consideration of Recommendations included in published Report (Cmd.
5665): Memorandum by the Secretary for
Mines,” 10 May 1938, enclosed with: O.F.G.S. (Oliver Stanley),
“Production of Oil from Coal: Falmouth
Committee’s Report: Note by the President of the Board of Trade,” 13 May
1938, C.P. 114 (38), CAB 24/276.
German analysts found it peculiar that the committee recommended
additional evaluation of foreign methods of
synthetic fuel production but refrained from suggesting that “the oldest
industrial nation” should participate in this
endeavor. “Der Falmouth Bericht,” Vierjahresplan, 1938: VI.

236
Unlike in Germany after 1933, the debate in Britain over whether the
government should sponsor the
establishment of a synthetic fuel industry primarily revolved around
economic factors.157 Strategic factors
were not entirely absent from the debate, but they were of secondary
importance for three reasons. Unlike
all other oil-poor industrial nations, Britain enjoyed relatively easy
access to foreign sources of oil thanks
to its maritime power and the strong position of British oil companies,
which meant that Britain could
also pay for a significant portion of its imports in sterling or have the
dollar profits remitted home.
Britain, unlike Germany, was no longer an aggressive military power bent
on a program of conquest that
could threaten its access to overseas sources of raw materials.
Accordingly, it had the option of choosing
between imports or synthetic production, whereas Germany’s hands were
basically tied.
Autarky was, by contrast, never a viable option for Britain. Even if
British industry had succeeded in
making synthetic fuel production commercially viable, oil was only one of
many items that Britain had to
import. Britain’s survival during a conflict in either European or Far
Eastern war would still depend upon
preserving its overseas lines on communication. That task became much
more difficult after 1939 –
Britain was no longer planning for an either/or situation, as the risk of
a simultaneous conflict in different
sides of globe was substantial. Britain could have coped with the closure
of the Mediterranean in a
European War, but the requirements for a global war in Europe and the
Pacific simultaneously revealed
London’s inability to guarantee the security of the empire without the
active support of the United States.

157

Leaving aside the fact that the Reich, unlike London, did more than just
offer financial incentives and guarantees:
it also threatened coercion if firms did not comply with its’ directives
concerning the expansion of synthetic output.
Rainer Karlsch and Raymond Stokes, Faktor Öl: Die Mineralölwirtschaft in
Deutschland, 1859-1974 (München:
C.H. Beck, 2003), 199.

237
Planning for a “Dual Contingency,” 1938-1939
During its planning in 1937 for a war against Japan, PPR had not bothered
to consider the possibility
that the Mediterranean might be “closed.”158 The Oil Board logically
concluded that the closure of the
Mediterranean to British shipping “during a Far Eastern War could only
arise from the intervention of a
hostile European Power,” thus raising the specter of a “dual
contingency”: a war against both Germany
and Japan. By February 1938, it seemed about time for the CID to abandon
the existing practice of
assessing Britain’s oil position during a European War and a Far Eastern
War “separately.” The Oil Board
could not start planning for such a “dual contingency” since the “other
Sub-Committees of the Committee
of Imperial Defence have not, as yet, thought it necessary to formulate
their requirements on such a dual
contingency […].” The Oil Board urged the CID to take action.159
Authorization from the CID came in
March 1938.160 In other words, as late as 1938, the British Government
had yet to determine how it would
satisfy its oil requirements in the event of a war against both the
European and Pacific Axis powers.
By the beginning of 1939, the seriousness of Britain’s predicament was
apparent. Germany and Japan
were poised to go on the offensive in Europe and East Asia. Italy had
broken with Britain and France over
Abyssinia in 1935. After some initial reluctance, it joined Germany in
sending aid to the Nationalists in
the Spanish Civil War in 1936, abandoned its defense of Austrian
sovereignty, and signed on to the AntiComintern Pact with Germany and
Japan in 1937. Meanwhile, it was doubtful if United States would be
able to lend material assistance to Britain and France after July 1939,
when the Roosevelt Administration
tried and failed to repeal the embargo on arms sales and place all trade
with belligerents on a “cash and

158

Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum

Products to Meet the Estimated
Requirements of the Services and for the Estimated Requirements of the
Services and for the Industrial and Civil
Purposes of the Empire in the First Year (1940) of a Far Eastern War,” 26
May 1937, O.B. 195 (also Paper O.B.
(P.R.) 63), CAB 50/6.
159
Crookshank (in the absence of the President and Chairman of the Oil
Board), “Sources of Supply of Petroleum
and Petroleum Products to Meet the Estimated Requirements of the Services
and for the Estimated Requirements of
the Services and for the Industrial and Civil Purposes of the Empire in
the First Year (1940) of a Far Eastern War,”
08 February 1938, O.B. 233 (also C.I.D. Paper No. 1404-B) CAB 50/6.
160
A.D. Nicholl (PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for the Estimated Requirements of the
Services and for the Industrial and Civil
Purposes of the Empire in the First Year (1940) of a Far Eastern War:
Note by the Joint Secretary,” 15 March 1938,
O.B. (P.R.) 118 (also O.B. 241), CAB 50/16.

238
carry” basis (although it finally succeeded in November).161 Finally, in
April 1939, the Nationalists
triumphed in the Spanish Civil War. If Spain formed an alliance with
Germany, British control of
Gibraltar, and with it access in and out of the Mediterranean, would be
in jeopardy.
The unfavorable strategic situation was reflected in the final planning
paper produced by the Oil
Board in December of 1938, which had finally been instructed by the CID
the previous March to assess
Britain’s oil position and requirements in the event of it “being engaged
in a major war simultaneously in
Europe and the Far East,” with the Mediterranean either “open” or
“closed.”162 The armed services
forwarded to the Oil Board their revised oil requirements in the event of
a “dual contingency” the
following April and July. The Admiralty had already returned in 1936 to
the postwar standard
(temporarily halted as an austerity measure in 1929) of accumulating a
twelve-month operational reserve,
half of which would be stored in Great Britain.163 In 1938, the Admiralty
estimated the Royal Navy’s
requirements at 8,682,000 tons with the Mediterranean either “open” or
“closed.” This figure was
considerably larger than previous estimates due to the recent expansion
of the fleet and the fact that all
Royal Navy ships would be operating under wartime footing in the event of
a “dual contingency.” In view
of its longstanding policy of maintaining a fuel oil reserve sufficient
to meet its entire wartime
requirements for one year, the Admiralty requested that the Royal Navy’s
fuel oil reserves be increased
from 7,000,000 tons to 8,500,000 tons, and that this reserve should never
fall below 50% capacity.164

161

The Administration’s efforts throughout 1939 are summarized in: B.W.

Patch, “Present and Proposed Neutrality
Legislation,” 03 October 1939, Editorial Research Reports: 1939, vol. 3
(Washington, DC: CQ Press).
162
A.D. Nicholl (PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for the Estimated Requirements of the
Services and for the Industrial and Civil
Purposes of the Empire in the First Year (1940) of a Far Eastern War:
Note by the Joint Secretary,” 15 March 1938,
O.B. (P.R.) 118 (also O.B. 241), CAB 50/16. Accordingly, it could not
take into account the Nationalist victory in
the Spanish Civil War in the spring of 1939, which posed a threat to
British access into and out of the
Mediterranean.
163
De La Warr (President, Oil Board), et al., “Oil Board: Twelfth Annual
Report,” 28 December 1937, O.B. 230
(also C.I.D. Paper No. 1390-B), CAB 50/6.
164
“Royal Air Force Requirements of Petroleum Products in the First Year of
a Combined European and Far Eastern
War: Memorandum prepared by the Air Ministry,” 13 April 1938, O.B. (P.R.)
128; “Estimated Requirements of the
War Office in the First Year of a Major War Simultaneously in Europe and
the Far East: Note by the Joint Secretary
Covering Statement Forwarded by the War Office,” 29 April 1938, O.B.
(P.R.) 129; and “The Navy’s Oil
Requirements for the First Year of a War in Europe and the Far East
Simultaneously,” 09 July 1938, O.B. (P.R.)
144; all in: CAB 50/16.

239
On the basis of these figures, the Petroleum Department estimated that
civilian and military
requirements throughout the Empire in a “dual contingency” would total
28,562,360 tons (19,198,000
tons in the case of Great Britain alone), against 28,342,700 tons in a
European War and 29,116,900 tons
in a Far Eastern War. Both the Admiralty and the War Office had higher
oil requirements during a “dual
contingency” than in a one-ocean war (1,000,000 tons higher in the case
of the Admiralty and just under
200,000 tons greater in the case of the War Office), while the RAF
required approximately 10,000 tons
less in a “dual contingency” than it did during a European War.
Consumption throughout the British
Empire (excluding Britain itself) was identical in the case of either a
“dual contingency” or a Far Eastern
War (9,364,000 tons), and almost 1,000,000 less than during a European
War (10,343,000 tons).
Consumption in Britain was identical in the event of “dual contingency”
and European War (8,945,000
tons), and substantially higher during a Far Eastern War (11,420,000
tons), since rationing would not be
imposed in this case.165 As for supplies, production in Venezuela had
increased by 5,000,000 tons
between 1936 and 1937, which would off-set the loss of Mexican oil
following nationalization. The
Petroleum Department also concurred with earlier assessments of the
United States: while an “unfriendly”
United States “would make the position of supplies… very difficult” for
Britain during any “dual
contingency,” “such an event is so unlikely that it is not necessary to
make calculations on such a basis.”
Provided that these assumptions held, the Petroleum Department was
satisfied that, “even if the
Mediterranean is closed, there should be no difficulty in meeting the
Empire [sic] requirements.”166

165

In the Oil Board’s final report, the figures were slightly revised:
28,625,000 (European War); 30,298,400 tons
(Far Eastern War); 29,109,360 tons (“Dual Contingency”). The primary
difference between the two figures was
lower civilian consumption in Great Britain during either a European War
or “dual contingency” and significantly
higher consumption throughout the rest of the Empire (i.e. well over
1,000,000 tons in all eventualities). The
Empire’s import requirements worked out as: 24,382,000 tons (European
War, U.S. “friendly” or “unfriendly,” and
the Mediterranean “open” or “closed”); 25,681,000 tons (Far Eastern War,
U.S. “friendly” or “unfriendly,” and the
Mediterranean “open”); and 24,897,000 tons (“Dual Contingency,” U.S.
“friendly,” and the Mediterranean “open”
or “closed”). Great Britain’s requirements amounted to: 17,131,610 tons
(European War); 19,510,400 tons (Far
Eastern War); and 18,321,360 (two-ocean war, Mediterranean “closed” or
“open”). Llewellin (Chairman, Oil
Board), et al., “Oil Board: Thirteenth Annual Report,” 24 January 1939,
O.B. 294 (also C.I.D. Paper No. 1529-B),
CAB 50/7.
166
Petroleum Department, “Estimated Requirements of the Services and for
Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major War simultaneously in Europe
and the Far East,” no date (sometime
between July and December 1938), O.B. (P.R.) 146, CAB 50/16.

240
The PPR presented its findings to the CID in December 1938 in its eighth
(and final) report. The PPR
accepted the judgment of the Petroleum Department that the United States
would not be “unfriendly”
during any “dual contingency.” The PPR therefore confined itself to
examining Britain needs based on the
situation in the Mediterranean. Thanks to revised estimates of civilian
oil consumption after rationing,
requirements in Great Britain had dropped by more than 870,000 tons from
the initial figure presented by
the Petroleum Department (18,321,000 tons vs. 19,198,000 tons). The total
import requirement for the
entire Empire came to almost 25,000,000 tons. The PPR considered Iran,
the United States, and the Dutch
West Indies (refined crude oil from Venezuela) to be most important
sources of supply, and each would
supply the following totals depending on the status of the Mediterranean:
Source
Iran
United States
Venezuela

“Open”
8,900,000 tons
9,300,000 tons
4,600,000 tons

“Closed”
7,200,000 tons
10,600,000 tons
4,300,000 tons167

Other sources of supply included Peru, Trinidad, Iraq, and Bahrain, but
the PPR excluded Mexico,
Romania, and the East Indies from the list potential suppliers. More than
half of the empire’s
requirements of aviation fuel – 340,000 tons out of 668,000 tons – would
come from just one source, the
Dutch West Indies, after AIOC scaled back its estimated output at Abadan
from 150,000 tons to 53,000
tons (the other sources being Burma and Trinidad).168
On the positive side of ledger, the British tanker situation had improved
considerably. The number of
tankers required with an “open” Mediterranean was now 364, or 332 in case
of a “closed” Mediterranean
(the journey from the Gulf of Mexico to Britain being shorter than that
from the Persian Gulf). The

167

It is unclear why the allocation for Venezuela is lower in the event of a

“closed” Mediterranean than if it were
“open.”
168
Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Eighth Report of the Sub-
Committee on Petroleum Products
Reserves,” 23 December 1938, O.B. 290 (Revise) (also Paper No. O.B.
(P.R.) 168 (Revise)), enclosed with:
Llewellin (Chairman, Oil Board), “Sources of Supply of Petroleum and
Petroleum Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Note by the Oil Board,” 22
February 1939, O.B. 304 (also C.I.D.
Paper No. 1514-B), CAB 50/8.

241
British expected to have a comfortable surplus (114 tankers) whatever the
state of the Mediterranean due
to the vast expansion in the number of neutral, converted, and newly
constructed tankers (206).169 The
latter figure did not include either captured enemy tanker or the 202
tankers under U.S. registry, some of
which could be made available for the transatlantic haul (only forty-six
serviced Europe at the time).
Another factor contributing to the favorable tanker position was the
ability to rely more heavily upon U.S.
and Venezuelan oil exports, which were significantly easier to transport
than Middle Eastern oil. The
throughput of APOC’s Abadan refinery had increased from 9-10,000,000 tons
to 13-14,000,000 tons.170
By 1937, the Persian Gulf was already the busiest oil transit artery in
the Eastern Hemisphere, handling
over 12,000,000 tons (about 15%) of all overseas oil exports.171 Abadan’s
capacity had increased so much
that it was unlikely that it would have to operate at 100% capacity if
the Mediterranean was “closed,” as
there was no way to allocate the additional production. Likewise,
Bahrain’s output in 1937 had topped
1,000,000 tons, and even though the throughput of the local Bahrain
Petroleum Company refinery
equaled existing production, it was only possible to allocated 569,000
tons of refined products with an
“open” Mediterranean and 351,000 tons if it was “closed.” Oil production
had also begun in Saudi
Arabia, and there were excellent prospects of finding new sources in
Kuwait and Qatar. Unfortunately, it
was impossible to make complete use of this bounty due to the higher
transportation costs of moving
Middle Eastern oil compared to imports from the United States.172

169

At the start of any “dual contingency,” the PPR estimated that Britain
would have 293 tankers at its disposal. If
the Mediterranean were “closed,” the PPR expected to lose fifty-three
tankers to enemy action in the Mediterranean,
Baltic, North Sea, and Far East, thereby leaving 240 tankers to meet an
expected demand of 332. In the
Mediterranean were “open,” the number initially expected lost to enemy
action would drop to twenty-one, thus
leaving 272 to meet a demand of 364. In both cases, the initial deficit
would be ninety-two tankers, plus 206 new
vessels (mostly from neutral nations), thus resulting in a surplus of
114.
170
AIOC had also made great investments to improve the quality and volume of
petroleum produced by the refinery,
such that output had doubled from 5,000,000 tons to 10,000,000 tons
between 1932 and 1938, just short of the
12,000,000 tons the company considered the maximum throughput within the
space available. Bamberg, History of
BP, 69-75.
171
“Ölwirtschaft im Iranischen Golf,” Vierjahresplan, 1938: X.
172
Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Eighth Report of the Sub-
Committee on Petroleum Products
Reserves,” 23 December 1938, O.B. 290 (Revise) (also Paper No. O.B.
(P.R.) 168 (Revise)), enclosed with:
Llewellin (Chairman, Oil Board), “Sources of Supply of Petroleum and
Petroleum Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major

242
It was possible for Britain to reduce its requirements from the Western
Hemisphere by raising the
throughput of the Abadan refinery to 100%. This would require importing
into Great Britain 4,618,000
tons of Iranian oil on an additional twenty-five tankers if the
Mediterranean was “open,” and 3,310,000
tons on an extra 105 tankers if the Mediterranean was “closed.” In the
case of the former, there would still
be a tanker surplus of eighty-nine, but in the case of the latter (when
the oil would have to travel around
the Cape of Good Hope), the surplus would only be nine. Adoption of this
scheme was unlikely, not the
least because France’s tanker fleet would “need to be considerably
supplemented […].” In spite of two
decades of effort, the United States would again become Britain’s largest
supplier in wartime. The U.S.
and Venezuelan allocation with an “open” Mediterranean exceeded that of
Iran by 5,000,000 tons
(13,900,000 tons vs. 8,900,000 tons) and was more than twice as large if
the Mediterranean was “closed”
(14,900,000 tons vs. 7,200,000 tons).173

War Simultaneously in Europe and the Far East: Note by the Oil Board,” 22
February 1939, O.B. 304 (also C.I.D.
Paper No. 1514-B), CAB 50/8.
173
Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum
Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Eighth Report of the Sub-
Committee on Petroleum Products
Reserves,” 23 December 1938, O.B. 290 (Revise) (also Paper No. O.B.
(P.R.) 168 (Revise)), enclosed with:
Llewellin (Chairman, Oil Board), “Sources of Supply of Petroleum and
Petroleum Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Note by the Oil Board,” 22
February 1939, O.B. 304 (also C.I.D.
Paper No. 1514-B), CAB 50/8. As mentioned above, these figures were
incorporated into the final report of the Oil
Board before they were presented to the CID: Llewellin (Chairman, Oil
Board), et al., “Oil Board: Thirteenth
Annual Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B),
CAB 50/7. See also: Payton-Smith,
Oil, 45-46. The Oil Board’s finding undermine Murray’s claim that the
“central theme running through British
strategic planning” before the war “was the belief that Britain was not
and would be able to face war” against
Germany, Italy, and Japan “simultaneously or even singly.” Murray,
Balance of Power, 62.

243
The Price of Failure, 1939-1942
With the benefit of hindsight, it seems clear that there was little
British policymakers could do by
1939 other than rely on the oil reserves of the Western Hemisphere. In
the wake of the First World War,
British policymakers had spent years chasing after the chimera of energy
independence from the United
States by creating “all British” companies that could supply the empire
exclusively from sources under
British control. AIOC, the only proper British major oil company and the
recipient of significant
government support since 1914, could contribute little to the Allied war
effort west of Suez following the
closure of the Mediterranean in 1940 since its sources of supply lay
entirely within the Middle East (Iran,
Iraq, and Kuwait). Although the fall of France temporarily eased
Britain’s tanker burden by eliminating
exports to the Continent, escalating tanker losses in the second half of
1940 forced Britain to embrace the
principle of the “short-haul,” which all but ended Iran’s exports to
Great Britain even before the AngloSoviet invasion (from 1,526,000 tons
in 1940 to only 324,000 tons by August 1941) and rendered Middle
Eastern oil superfluous for operations west of Suez (beyond North Africa,
of course).174
On the other hand, after 1939, the Royal Dutch/Shell Company again
expressed its desire that London
should “derive… the maximum benefit from the resources which the
petroleum companies, and more
especially the Shell group, are able to place at the disposal of the
Allies in the present war.” Shell’s value
to the Allied war effort at this early stage far exceeded that of any
other oil company in the world, British
or not. Shell boasted of an annual production of 31,028,000 tons per
annum across four continents, which
was greater than the estimated oil demand of the entire British Empire
during the first year of either a
European or Far Eastern War. Unlike AIOC, Shell’s production beyond the
United States was
concentrated in Latin America (Venezuela and Trinidad), which represented
“a great source of security in
the matter of oil supply because of the large quantities available, the
capacity for easy and rapid
expansion, the high quality of the products obtainable and the favorable
geographical position.” Shell also
174

The Admiralty briefly closed the Mediterranean to Allied shipping in

August 1939 due to fears that Italy would
immediately enter the war on Germany’s side. Two weeks after the start of
hostilities in Poland, once it became
clear that the Italians were holding off, the Admiralty lifted the ban,
until the imminent collapse of French resistance
in 1940 forced it to re-route all transit around the Cape. The Allies did
not re-open the Mediterranean until after July
1943. Bamberg, History of BP, 216-220, 232.

244
owned and operated 36 refineries with an annual throughput of 35,750,000
tons, controlled the world’s
largest tanker fleet, and was the largest supplier of high-octane
aviation fuel. Except for its U.S. receipts,
the company repatriated 97% of its earnings – including those from
Venezuela – back to London (not The
Hague), to the tune of £260,000,000 per annum by 1940, with the remaining
3% going to the Royal Dutch
shareholders in the form of dividends.175 It was also company policy “to
place all possible order for
material within the sterling area,” thus reducing the drain on British
hard currency reserves.176 Most
importantly in wartime, the tanker requirements to transport Shell’s West
Indies production were lower
than those of sterling sources (the Middle East) and did not cost Britain
additional foreign exchange since
the company’s profits in the Western Hemisphere (except the United
States) were “all distributed in
sterling.”177 After the war began, Shell’s Dutch partners also agreed to
abide by the Treasury’s foreign
exchange controls. The fact that Anglo-Saxon (Shell’s British subsidiary”
served as the entire Shell
Group’s treasurer meant that its wartime foreign earnings went to the
Treasury, which exchanged them
for sterling or distributed dollars whenever the need to import U.S.
goods arose.178
Shell’s assets were tangible, but they did not correspond to the
objectives of British foreign oil policy
after 1918. This judgment has nothing to do with whether Shell was
“British” or not, or if it collaborated
with U.S. companies in fixing prices and allocating production as a
member of the Achnacarry oil cartel.
One historian contends that Britain’s interwar oil policy was a failure
not only because the empire proved
barren of oil, but also because Britain continued to rely on oil produced
by “foreign” companies such as

175

These dividends were dominated in Dutch guilders, which the British

Government treated as a hard currency
until the Netherlands joined the Allies, at which point they became
freely convertible for sterling. Prior to the war,
they amounted to £9,000,000 per annum. Payton-Smith, Oil, 149-150.
176
Nonetheless, roughly 60% of the British oil companies’ purchases of
technical equipment and materials, not to
mention royalty payments on patents held by U.S. firms (including,
presumably, the Standard-IG Farben cartel) and
wages for U.S. employees, were denominated in dollars. Local currency
requirements depended upon the region: in
Venezuela, Shell needed dollars, to the tune of $58,000,000 in the twelve
months after June 1940 (or half of
Britain’s dollar expenditures on purchases from U.S. firms). Payton-
Smith, Oil, 150. In the Middle East, the British
could use sterling. In practice, this contributed to the accumulation of
the massive “sterling balances” in London that
were seven times greater than Britain’s total hard currency reserves by
war’s end and hindered the government and
the City’s efforts to restore full convertibility until 1972. P.J. Cain
and A.G Hopkins, British Imperialism: Crisis and
Deconstruction, 1914-1990 (London: Longman, 1993), 269-285.
177
Shell Transport and Trading Co., “Memorandum: Shell/Royal Dutch Group,”
16 January 1940; and “Shell
Memorandum,” 18 January 1940, provenance unclear; both in: CAB 63/117.
178
Howarth and Jonker, History of Shell, 31.

245
Shell and Jersey 1939 as it had after 1914.179 The nature of Shell’s
nationality seems insignificant. The
fact that Dutch shareholders exercised majority control over Shell is
only significant if it can be proven
that a British-owned company would have operated any differently.180
The findings of this study disprove the notion that the British
Government in the 1920s enjoyed a
“strong” position vis-à-vis corporate oil interests relative to that of
the U.S. Government in the 1940s
(when elements within Washington sought to expand the U.S. presence
within the Middle Eastern oil
industry).181 If we consider the behavior of APOC/AIOC, we see that the
company was not burdened by
any excessive sentimentality for its majority shareholder and most
important customer – the British
Government. “Foreign” or not, a major international oil company was
always going to safeguard its
commercial interests, and APOC/AIOC was no exception. Far from
challenging Shell and Jersey,
APOC/AIOC joined them in 1928 when it signed both the Achnacarry “As Is”
Agreements. The company
also charged the British Government the same inflated prices and freight
rates that it charged to all other
consumers until the British Government discovered what the companies were
up to during the Second
World War.182 Also in 1928, APOC and Shell (with London’s blessing)
formed a jointly owned marketing
subsidiary, Consolidated Petroleum Co., to supply Egypt, Sudan, East and
South Africa, Ceylon, and
Mauritius.183 In 1931, APOC even merged its domestic marketing operations
(BP, once the cornerstone of

179

McBeth, British Oil Policy, 148-149.

Nor was there any doubt, at least among Britain’s enemies, about where
Shell’s loyalties lay. During an imperial
conference in September 1940 to discuss an alliance with Germany, the
pro-German former Foreign Minister of
Japan, Yōsuke Matsuoka, tried to reassure the Navy that Germany could
compel Holland into agreeing to increase
the amount of oil sold to Japan from the East Indies. The Chief of Staff
of the Navy, Prince Fushmi, was not
impressed: “Since the Dutch Government has fled to Britain, can Germany
freely dispose of the Indies’ oil?”
Michael Barnhart, Japan Prepares for Total War: The Search for Economic
Security, 1919-1941 (Ithaca: Cornell
University Press, 1987), 168.
181
Lawrence Frank, “The First Oil Regime,” World Politics 37: 4 (1985): 588-
590 and 597-598.
182
Blair, Control of Oil, 113-114; and IPC, 352-356.
183
Not only did the British Government not object, but in order to forestall
U.S. criticism, but the Treasury even
suggested that APOC consider avenues for cooperation with U.S. oil
companies in places like China. APOC was
happy to oblige. See the contents of T 161/284, esp. H.M. Treasury to the
Government Directors, APOC (George
Barstow and Edward Packe), 28 February 1928, S. 33045. APOC’s
participation in a series of cooperative
agreements with the other major oil companies including the “Red Line”
and Achnacarry agreements was part of a
wider shift in company policy following Cadman’s replacement of Greenway
in 1927. Bamberg, History of BP, 106141.
180

246
Slade and Greenway’s ambitions to form an “all British” rival to Shell)
with Shell’s primary marketing
subsidiary following its acquisition of Cowdray’s Mexican interests
(Shell-Mex).184
Even APOC’s relations with its closest customer, the Admiralty, were not
always smooth. Problems
had arisen as early as 1920 over the company’s rebate to the Admiralty,
and one official there fumed in
1925 “that the Company are exerting every effort and seeking very
possible device to pare down the
rebate which is properly due to the Admiralty.”185 Overseas, APOC and the
Admiralty butted heads in
1929 when the former supported the construction of an IPC pipeline to
Tripoli purely on economic
grounds, and again in 1933/34 when it suddenly opted to cooperate with
Gulf in Kuwait.
Interwar British oil policy was a failure due to the fact that the
outcome did not correspond to the
objectives laid out in 1918-19, with the consequence that Britain’s oil
position at the start of the Second
World War was in many ways inferior to that at the outbreak of the First
World War. This is the implicit
verdict of the otherwise apologetic British Official History, whose
author concludes that the policy of
excluding foreign capital from oil development in the empire “may well
have made” Britain’s position
“worse by reducing the supply of would-be developers, and by encouraging
reprisals against British
companies.” He is more charitable when it comes to the British
Government’s success in establishing
partnerships with sympathetic oil companies such as Shell and APOC, not
to mention their subsidiaries
such as the TPC/IPC and Kuwait Oil Company. “It must be observed,” he
concedes, however, “that the
oil resources on which these companies had been founded were still
largely undeveloped.”186
The reasons have less to do with economics than they do with geography.
Britain’s ideal source of
supply from an imperial and financial perspective (the Persian Gulf) was
1,500 miles farther than the USdominated Gulf of Mexico even if British
tankers travelled through the Mediterranean.187 After 1939,

184

Bamberg, History of BP, 183-188. By 1938, three firms – the so-called

“combine” – accounted for 85% of all
downstream operations in Britain: Shell-Mex: 40%; BP: 15%; and the Anglo-
American Oil Company (Jersey’s
subsidiary: 30%. Payton-Smith, Oil, 43-44.
185
Geoffrey Jones, State and the Emergence of the British Oil Industry
(London: Macmillan, 1981), 227-228 and
238-239.
186
Payton-Smith, Oil, 24-25.
187
Iraq Oil Committee, “Some Notes on the Present World Oil Situation in
Relation to the Iraq Oilfield and
Proposed Pipeline to a Mediterranean Port,” no date (circa May 1930),
I.O.C. (30) 5, CAB 27/436.
247
Britain would be fighting a global war that imposed the maximum strain on
its tenuous oil supplies due to
the distances involved and advances in military technology. At the
beginning of 1939, the British
Government estimated that the empire would have to import roughly
25,000,000 tons of oil a year,
roughly 90% of which would come from three sources (Iran, the United
States, and Venezuela), the first
of which gave every indication of being unreliable as early as 1932,
while the second was the supplier
British policy had ostensibly been geared toward avoiding after 1918.188
The number of consumers had
also increased exponentially – not just due to the emergence of new
weapons platforms, but also the
continuing conversion of coal-fired ships to oil-burners.189 This
combination of higher requirements and
more difficult logistics meant that Britain’s oil supply was arguably
more vulnerable to disruption than
that of Germany, which could at least fall back on its burgeoning
synthetic fuel industry, overland imports
from within Europe, and limited domestic oil production. The Axis also
had the ability to strike at
Britain’s oil reserves in the Middle East and East Indies or deny Britain
access to these resources by
closing vital trade routes such as the Mediterranean.
Assuming Britain could retain control of and access to its foreign oil
reserves, there was still the
matter of paying for and transporting the oil. Even if the world was
awash in oil by the mid-1920s,
transporting it to Britain, its overseas empire, or the Royal Navy was no
simple matter. Britain entered the
war with only a narrow margin of safety when it came to oil tankers, and
London could only hope that
British and neutral shipbuilders would keep pace with the losses caused
by German U-boats and
commerce raiders.190

188

Crookshank (Chairman, PPR), “Sources of Supply of Petroleum and Petroleum

Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Eighth Report of the Sub-
Committee on Petroleum Products
Reserves,” 23 December 1938, O.B. 290 (Revise) (also Paper No. O.B.
(P.R.) 168 (Revise)), enclosed with:
Llewellin (Chairman, Oil Board), “Sources of Supply of Petroleum and
Petroleum Products to Meet the Estimated
Requirements of the Services and for Industrial and Civil Purposes of the
Empire in the First Year (1940) of a Major
War Simultaneously in Europe and the Far East: Note by the Oil Board,” 22
February 1939, O.B. 304 (also C.I.D.
Paper No. 1514-B), CAB 50/8.
189
During the World War, the bulk of the merchantmen bringing exports to
Britain had been coal-fired. By 1937,
due to the “flood of cheap fuel oil” of the 1920s, roughly half of the
world’s merchant fleet was oil-burning,
although a good portion could consume either coal or fuel oil. Payton-
Smith, Oil, 46-47
190
Between September 1939 and January 1945, AIOC lost forty-four tankers to
enemy action, which equaled 46%
of its fleet at the start of the war. Bamberg, History of BP, 216. Shell
Transport and Trading lost sixty-six tankers, or

248
The question of payment was even more knotty. Thanks to the vast amounts
of oil available to British
consumers prior to 1939 from British firms, paid for in sterling and
produced either within the empire or
the British sphere of influence, Britain had significantly reduced its
peacetime dependence upon imports
from the United States. But preserving this situation in wartime was
possible only if Britain retained
access to sterling sources of oil, particularly in the Middle East.
Strangely, the question of how Britain
would pay for the oil it needed was never addressed before the Second
World War.191 This was in spite of
the fact that British planners knew full well that Britain would need to
import considerable quantities of
dollar oil, and that it would after 1937 have to pay immediately in hard
currency for any imports from the
United States under the “cash and carry” provision of the 1937 Neutrality
Act. And yet, the Chamberlain
Government took no action to staunch “the steady hemorrhage” of hard
currency from Britain between
1938 and 1939 until reserves had dropped by one-quarter (from
£800,000,000 to £600,000,000).192 In
1938, roughly half of Britain’s oil imports (by value) had to be paid for
in hard currency: £27,380,000 out
of £46,040,000.193
By the spring of 1939, the Treasury was warning that the entire basis of
Britain’s military strategy
against Germany (a long war of economic strangulation) was untenable:
“while the Treasury warned that
she [Britain] could only afford a short war, the Chiefs of Staff stated
she could only win a long one.”194
One historian considers the failure to reconcile the demands of Britain’s
rearmament effort with its
financial position in 1938 and 1939, which culminated in Britain’s
effective bankruptcy by 1941, to be
“perhaps [the] most egregious error” in British planning on the eve of
the Second World War.195

40% of its prewar fleet, while the Dutch and Mexican Eagle lost a
combined forty-seven ships, thus leaving the
entire Shell Group with a smaller fleet at the end of the war than in
1939. Howarth and Jonker, History of Shell, 57.
One can only imagine the scale of losses had these tankers been compelled
the traverse the narrow confines of the
Mediterranean, at the mercy of continuous Axis aerial and naval attacks.
191
Even the Official History concedes that “[not] until the spring of 1939
had the foreign currency aspect of supply
come even briefly to the attention of the [CID’s] Oil Board.” Payton-
Smith, Oil, 147-148.
192
Murray, Balance of Power, 72-73.
193
Eady to Padmore, “Oil,” 13 June 1944, T 161/1195.
194
Correlli Barnett, Strategy and Society: The Spencer Wilkinson Memorial
Lecture, 1974 (Manchester, 1975), 7.
Emphasis in the original.
195
Prior to the passage of the Lend Lease Act, British hard currency
reserves amounted to a grand total of
$12,000,000. Kennedy, “British Net Assessment,” 54-56. The Anglo-French
strategy to exploit Germany’s
economic vulnerability is summarized in: Murray, Balance of Power, 311-
314.

249
In many respects, particularly in terms of planning and coordination,
“the lessons of the First World
War had been learned and absorbed.” Thanks to the CID, the examination
and maintenance of Britain’s
oil supply position had undergone a welcome degree of
“professionalization,” and the Oil Board proved
more than capable of transitioning from the relatively simple
circumstances of the 1920s “to the more
complex threat environment of the 1930s.”196 The true audit of Britain’s
oil policy, however, came not in
peace but rather in war. And it is within the context of a struggle for
survival that the inadequacy of
British oil policy during the interwar period becomes incontrovertible.
Roughly 60% of the oil imported by Britain by “the middle of 1940” came
sterling sources, while the
remainder came from either the United States or U.S.-owned oilfields.
Every barrel of oil purchased from
U.S. sources required payment in dollars that were sorely needed to
import of any number of other vital
products. Although the Treasury tried to prioritize imports of sterling
oil at the war’s outbreak, the
shortage of tankers ruled this out. Consequently, total hard currency
expenditures related to oil during the
first six months of the war (not including freight) reached
$200,000,000.197 What made the situation so
egregious was that, whereas Britain might have been incapable of
producing enough of many of the items
it imported from the United States, the same cannot be said of oil, where
Britain’s access to overseas
sources was immeasurably superior to that of any great power besides the
United States. Britain’s balance
of payments position during the 1930s was already weak: London ran a
deficit every year but one (1935)
between 1931 and 1938, as well as a negative balance of trade between
1929 and 1938.198 The last thing
Britain needed was the burden of importing dollar oil, particularly when
its current account deficit
stemmed partially from its military and economic commitments in the
Middle East, which had been
undertaken largely to secure the region’s oil wealth.
By the start of the Second World War, the British could not even
guarantee the safety of one of their
most important suppliers. One Admiralty memorandum concerning the defense
of British oil installations
196

Babij, “Problem of Oil Supply,” 101. For a similarly laudatory evaluation

of the Oil Board’s efforts, see: More,
Black Gold, 65-68.
197
Payton-Smith, Oil, 147-153.
198
Luckily, the flight of capital from the Continent had increased British
hard currency reserves from £121,000,000
in 1931 to £825,000,000 six years later. Murray, Balance of Power, 52-55.

250
in the Caribbean noted that 50% of Britain imports originated in the
region, much of which could be
purchased in sterling. Just as important as the oil were the local
refineries, whose destruction would
render the “oil from these areas… of little further use to the Allies as
there are no alternative refineries in
this country or France.” The loss of access to Latin American oil would
be a disaster for Britain and
France, because even if the oil could be replaced, “alternative sources
have either to be paid for in dollars
or carried far greater distances.” In surveying the inadequate defenses
in the area, the Admiralty
suggested that the British Government approach the United States with a
request that the U.S. Navy
undertake the defense of Aruba, since “[an] American Cruiser, paying a
courtesy visit would be a greater
deterrent than almost any weapon to a marauding German Cruiser!”199 The
security of the West Indies
took on an additional degree of urgency by May 1940 with France reeling
and Italy on the verge of
belligerency. The Chiefs of Staff now observed, “The degree of importance
of this source of supply
would be considerably increased in the event of the Mediterranean route
being closed.” The Chiefs
therefore supported the recommendation of the British Ambassador the U.S.
that Britain should extend “a
formal invitation to the U.S.A. Government to share in the occupation” of
Aruba and Curaçao.200
(Ironically, Adolf Hitler forbade the German Navy from attacking the
refinery at Aruba in May 1940
because it was owned by “Standard Oil, the American corporation.”201)
Following the surrender of France, the foreign exchange position became
truly disastrous. In February
1940, the Treasury estimated that Britain’s dollar reserves could last as
long as two years. This was no
longer possible after August: the Treasury now concluded that British
dollar expenditures over the
coming year would reach $3,200,000,000, against only £490,000,000 in
foreign exchange and U.S.
securities.202 Britain’s hard currency requirements had effectively
doubled through the need to import

199

Vice Admiral Binney’s Committee, “Oil Supplies in Caribbean Sea:

Importance and Vulnerability,” no date,
I.D.C. 9, enclosed with: Binney, “Defence of Oil at Trinidad and
Curacao,” 06 October 1939, ADM 1/9982.
200
Dudley Pound (First Sea Lord), et al., “Aruba and Curacao: Protection of
Oil Refineries in the Event of a German
Invasion of Holland: Report by the Chiefs of Staff Committee,” May 1940,
W.P. (40) 148 (also C.O.S. (40) 329),
CAB 66/7/28.
201
Holger Herwig, “Prelude to Weltblitzkrieg: Germany’s Naval Policy toward
the United States of America, 193941,” Journal of Modern History 43: 4
(1971): 653.
202
Barnett, Collapse of British Power, 12-14.
251
both war materiel and dollar oil (estimated at $170,500,000 for the next
twelve months after September
1940) in order to reduce the burden on Britain’s tanker fleet. All
Britain could do was pray for
Roosevelt’s re-election, and that the country’s remaining foreign
exchange reserves did not evaporate
before the United States came to the rescue.203
The British Government’s hands were tied even if it tried to substitute
dollar oil for sterling oil. The
Bank of England warned in November 1939 that the major oil companies
“would not co-operate willingly
in any scheme which completely disregarded their hard-won [marketing]
agreements […].” The U.S. oil
companies would feel particularly aggrieved, as they were already
suffering from the loss of their markets
on the European Continent. Nor would Britain’s savings in 1940/41 –
estimated at $50,000,000 after
“drawing up to the hilt from sterling sources” – make much of a dent in
its foreign exchange deficit.
Finally, even if British oil companies did attempt the modest measure of
substituting their purchases of
U.S. materials and equipment with British goods, British industry was
incapable of meeting the additional
demand. In fact, Britain’s share of the industrial requirements of its
oil companies dropped during the war
from 40% to 10%.204
Perhaps the situation would have been better if France had not succumbed
and Italy not entered in the
war in 1940, but things did not turn out that way. One historian argues
that although “by September 1939
the practical preparations for Britain’s oil needs were still far from
complete [,] there can still be no doubt
that in the forthcoming war Britain would have been at a far greater
disadvantage had it not been for the
careful planning of the interwar years and especially of the later
1930s.”205 This seems overly generous.
True, Britain enjoyed a favorable oil position compared to Germany even
after the collapse of France, but
this had little to do with British preparation. Even if the Mediterranean
had remained open to Allied
203

The British Official History makes this point explicitly: “By the summer
of 1940 however it had become clear
that the scope of the British war effort would be drastically curtailed
unless Britain could obtain American supplies
without payment.” London was so sure that Washington would come to its
rescue that it made no effort to limit U.S.
imports until August 1940. Payton-Smith, Oil, 148-149. The Sterling
Area’s net dollar expenditures on oil between
1941 and 1945 reached $505,400,000. This figure was dwarfed by amounts of
oil provided under Lease-Lease:
$320,000,000 to the Sterling Area between 1941 and 1942, and
$1,500,000,000 just to Great Britain by June 1945.
Payton-Smith, Oil, 470-471.
204
Payton-Smith, Oil, 147-153.
205
Marian Kent, Moguls and Mandarins: Oil, Imperialism, and the Middle East
in British Foreign Policy, 19001940 (London: Frank Cass, 1993), 163.
252
tankers, the Western Hemisphere would have still been an indispensable
source of supply for the British
Empire, if only because the British could not spare the resources to
supply the white dominions and
hoped that even an “unfriendly” United States would pick up the slack.
It was the oil of Venezuela and most importantly the United States that
allowed the British to write
off most of their oil production in Middle East after Italy turned
against the Allies. Although the United
States was far and away the world’s most significant oil producer by the
eve of the Second World War,
the supply and demand balance was not as favorable as in 1914. Domestic
U.S. consumption had
increased by 50% since the First World War, and the share of U.S.
production being exported had shrunk
from 20% to 13% since 1913. For the United States again to supply 80% of
the Allies’ wartime oil
requirements (double their peacetime consumption) as it had during the
First World War, not to mention
cover a 20% rise in domestic consumption as a result of the war, U.S. oil
production would have to
increase by more than 30% – roughly 50,000,000 tons. One a “purely
economic-technical” level, German
analysts concluded, such as increase was possible, but it “presupposes a
reasonably extensive regulation
of the U.S. domestic oil industry and certainly restrictions in
consumption.”206
Between May 1940 and April 1941, the Oil Control Board estimated that the
United States would
supply 23% of the empire’s requirements (6,291,200 tons out of 27,762,000
tons). But this number
understates the value of the United States. Britain had already claimed
all available non-U.S. sources of
high-octane gasoline, and the United States was the only other producer
available if anything happened to
Britain’s existing suppliers (which turned out to be the case with Iran
in 1941 and the East Indies and
Burma the year after).207 Imports of U.S. oil into Great Britain rose
from 1,857,796 tons in 1940 to
13,006,938 tons in 1944, and those from Venezuela peaked at 6,712,772
tons in 1944. Imports from those
two countries comprised approximately two-thirds of the total import
figure in 1940 and 93% in 1944.208

206

Der amerikanische Kontinent – Wehrwirtschaftlicher Versorger der

Demokratien? Vierjahresplan, 1939: XVI.
Oil Control Board, “American Oil Policy and Empire Supplies: Memorandum
by the Petroleum Department,” 15
August 1940, O.C.B. (40) 71, enclosed with: Cecil Kirsch (Petroleum
Board) to Horace Seymour (Treasury), 15
August 1941, FO 371/25212.
208
“Petroleum Statistics of the UK for the War Years, 1939-1945,” no date,
BP 60205.
207

253
These figures, Shell’s official historians concede, are “slightly
misleading,” for Venezuelan
production at war’s end was only 200,000 tons higher than it had been
when the war began. Although
Venezuela had been the world’s largest exporter since 1928 and was
supposed to be Britain’s primary
supplier, its production turned out to be far less important than that of
the United States because of the
threat posed by U-boats (which reduced production between 1940-1942), as
well as the fact that
Venezuelan crude oil was more suited to being refined into fuel oil than
high-octane gasoline.209
Meanwhile, Britain’s wartime imports from Iran peaked in 1940 at
1,389,827 tons in 1940 before ending
altogether following the Anglo-Soviet invasion of August 1941 due to the
shortage of tankers.210
Throughout much of the interwar period, the British had also taken it for
granted that, even if U.S. oil
was not available to Britain directly, the United States would continue
to supply at least Canada and not
disrupt exports from other suppliers Western Hemispheric suppliers. By
the end of the 1930s, the British
had assumed in their planning for a “dual contingency” against Germany
and Japan that the United States
would be “friendly.” Their only hedge against an “unfriendly” United
States had been the exclusion of
U.S. tankers after 1936 from the pool of neutral vessels available to
Britain, although British warplanning assumed that U.S. oil tankers
would, in fact, be available for chartering. Most crucially, it was
U.S. charity in the form of Lend-Lease that allowed the British to import
dollar oil following the
surrender of France, by which time its dollar reserves had dwindled to
virtually nothing.211
The British record in the Middle East – the basis upon which “British oil
independence rested” – was
deplorable.212 The Persian Gulf was 1,500 miles farther away from Britain
than the Gulf of Mexico when
traveling by sea around the Arabian Peninsula and through the Suez Canal.
In view of the logistical
hurdles, exploiting this source would be a herculean task. Nonetheless,
the British had expended
considerable time, energy, and resources to hold and develop Iranian and
Iraqi oil production, only to see
neither play any meaningful role in the European theater of operations.
209

Howarth and Jonker, History of Shell, 36.

“Petroleum Statistics of the UK for the War Years, 1939-1945,” no date,
BP 60205.
211
The contribution of Lend Lease to Britain’s oil supply ($1,500,000,000 by
June 1945 just for Great Britain itself)
is analyzed in: Payton-Smith, Oil, 195-198, 467-472.
212
Payton-Smith, Oil, 25.
210

254
Although Iraq was capable of producing oil in quantities similar to those
of Iran, Iraqi production
lagged consistently behind other major producers. The geographic
obstacles were considerable. Although
oil was discovered until 1927, it would uneconomical to transport it
without first constructing a pipeline.
The IPC pipeline did not go into operation until 1934, and although
little Iraqi oil went to Britain
(546,000 tons), France imported a sizable quantity (2,548,000 tons). The
primary consequence of Iraqi
oil’s introduction onto the French market was the displacement of
Venezuelan, East Indian, Russian, and
Iranian imports, which dropped from 425,000 tons to 4,000 tons between
1934 and 1935.213 The
completion of the pipeline prompted the First Lord of the Admiralty,
Samuel Hoare, to press the CID to
investigate the possibility of constructing a refinery at Haifa that
could serve as an alternate source of
supply for Royal Navy ships.214 Although the Admiralty understood that
importing crude oil into Great
Britain could spur the development a domestic refining industry, it was
“committed to the policy of
importing their main requirement (fuel oil) in a refined state.” Finished
petroleum products available to
Royal Navy ships on-station were, for obvious reasons, preferable than
crude oil that needed to be
shipped to Britain and then re-exported, as Britain was already short on
tankers. Nevertheless, the
Admiralty recognized “that any supplies of oil from Haifa must inevitably
depend upon the integrity of
the [IPC] pipe-line […].” The vulnerability of the pipeline ruled out
considering supplies from Iraq as
“vital supplies. They must therefore be regarded only as a very welcome
addition to other sources.”215
But the main reason why Iraqi production lagged behind other producers
was the machinations of the
world oil cartel, which used Iraq as the world’s “swing producer” before
the war. All of the major
companies in the TPC, with the exception of the French Compagnie
Française des Pétroles (CFP), had
interests beyond Iraq, so they had an interest in curtailing production
there in order to protect the prices

213

Ormsby Gore, et al., “Oil Board: Eleventh Annual Report,” 31 December

1936, O.B. 184 (also C.I.D. Paper No.
1294-B), CAB 50/6.
214
A.D. Nicholl, “Oil Board: Eleventh Annual Report: Note by Joint
Secretary,” 23 February 1937, O.B. 190, CAB
50/6.
215
“Establishment of Refineries at Haifa: Memorandum prepared in the
Admiralty,” 15 June 1937, O.B. 203, CAB
50/6. Emphasis in the original.

255
for their production in Iran – in case the case of AIOC – or Venezuela –
in the case of Jersey or Shell.216
The British and U.S. companies also thwarted the CFP’s attempts to expand
the IPC’s pipeline throughput
capacity to Tripoli after 1934.217 Furthermore, Iraq’s annual production
of 4,500,000 tons on the eve of
the war had to be shared with France and the existing refinery in Haifa
(jointly owned by AIOC and
Shell) could refine less than half that amount.218 AIOC’s share of Iraqi
production rose only slightly, from
1,110,000 tons in 1935 (the first full year of the operation by the IPC
pipeline) to 1,240,000 tons in 1938.
By contrast, during the same period, the company’s production in Iran
increased from 7,490,000 tons to
10,200,000 tons. Between 1939 and 1941, however, AIOC’s share of
production dropped from 1,180,000
tons to only 570,000 tons, and British troops sabotaged all but six
producing wells in Kirkuk the
following year to present their seizure by the Axis.219 Shell’s share of
production, meanwhile, dropped by
two-thirds between the late-1930s and 1941, to 320,000 tons. IPC
production only regained prewar levels
in 1944.220
Problems arose in Iraq well before the danger of an Axis invasion. The
Iraqis had actually received a
relatively favorable concession agreement with IPC in 1931.221 Baghdad
received both a minimum
payment of £400,000 irrespective of how much oil was produced (“dead
rent”) and royalties in gold
sterling. Baghdad’s oil revenues therefore maintained their constant
value even as sterling depreciated
during the 1930s. Although the IPC monopolized production throughout the
country by 1939, it also
owed Baghdad substantial quantities of “dead rent” (£400,000) under the
terms of the old British Oil
Development (BOD) concession of 1932 east of the Tigris (which it had
purchased in 1937) and the new

216

Walter Adams, James Brock, and John Blair, “Retarding the Development of
Iraq’s Oil Resources: An Episode in
Oleaginous Diplomacy, 1927-1939,” Journal of Economic Issues 28: 1
(1993): 69-93; Blair, Control of Oil, 80-85;
Nowell, World Oil Cartel, 270-275; and Edith Penrose and E.F. Penrose,
Iraq: International Relations and National
Development (London: Ernest Benn, 1978), 72-74 and 141-144.
217
Daniel Silverfarb, Britain’s Informal Empire in the Middle East: A Case
Study of Iraq, 1929-1941 (New York:
Oxford University Press, 1986), 97-98.
218
For details concerning the Haifa refinery, see: Llewellin (Chairman, Oil
Board), et al., “Oil Board: Thirteenth
Annual Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B),
CAB 50/7.
219
The IPC still searched for oil within the old British Oil Development
concession west of the Tigris and in the
south around Basra. Exploratory drilling also continued in Kuwait until
1942 in order to confirm the extent of the
Burgan field. Bamberg, History of BP, 168, 219-223.
220
Howarth and Jonker, History of Shell, 37.
221
Penrose and Penrose, Iraq, 69-71.

256
Basra concession of 1938. The IPC managed to evade its obligation to
start exporting oil from the BOD
concession only by offering Baghdad a favorable loan of £3,000,000 in May
1939. In order to cover its
increased expenses, the IPC finally decided to double the capacity of its
pipeline in July 1939, which
would have also doubled Baghdad’s royalties from £800,000 to £1,600,000.
These plans had to be abandoned once the war began. The French were still
eager to expand the
output of their only overseas oil asset, which only required a journey of
only 1,700 miles from Tripoli to
southern France, as opposed to 5,400 miles from the Gulf of Mexico. Paris
also contended that the initial
dollar expenditures would be offset over the long run by higher purchases
of sterling oil from Iraq (each
1,000,000 tons of imports from Iraq saving the Allies $12,000,000 in
foreign exchange). London
nevertheless blocked the IPC’s application for hard currency to purchase
the necessary industrial goods
from the United States: whereas France’s savings in tanker tonnage was
marginal (3.75 tankers per
1,000,000 tons), Britain could neither afford the additional drain of
foreign exchange nor risk angering
Venezuela by reducing production there to accommodate higher Iraqi
output. The British also feared that
if the French increased imports from Iraq, they would be less inclined to
support the British policy of
buying up Romania’s output in order to deny it to the Germans. And there
was also the threat posed by
Italy, which became a reality in June 1940. On 11 June 1940 (one day
after Italy joined the war), London
instructed the IPC to shut down the pipeline to Tripoli and reduce the
throughput from Haifa to 800,000
tons, which meant that Iraq’s total exports collapsed by around 80% from
prewar levels. This resulted in a
33% drop in Iraq’s oil revenues, from £1,200,000 to £800,000 (gold). The
only reason London did not
dispense with Iraq altogether was a shortage of tankers to increase
liftings from Iran. The British
Government also forbade the IPC from starting production in its Basra
concession in October 1940, as it
was contractually obligated, which further irked Baghdad. In taking these
actions, the British had never
bothered to consult with the Iraqis, which doubtless contributed to the
spread of pro-Axis sympathy that
culminated in the coup d’état by Rashid Ali in April and the Anglo-Iraqi
War the following month.222

222

Silverfarb, Britain’s Informal Empire, 94-105, 118-119.

257
The case of Iran was even more disappointing: the expansion of Iranian
production was not hampered
by any cartelistic restrictions, and London expected Iran to be the
single largest supplier of oil to Britain’s
war effort. Iran could have supplied almost the entire wartime
requirements of the Royal Navy.223
Instead, Iran’s exports dropped from 9,119,000 tons in 1938 to 5,420,000
tons in 1941 (by more than
40%), and it exported virtually no oil west of Suez following the Anglo-
Soviet invasion of August
1941.224 Between 1939 and 1942, the average amount of “royalty” tonnage
produced by the company in
Iran was 10% less than the 1938 average. Production had to be throttled
to an amount that could be
absorbed by markets that were still accessible (Africa, the Middle East,
India, and Australasia), as there
was a great demand for Iranian oil east of Suez following the loss of the
Dutch East Indies and Burma in
1942. AIOC claimed that “[almost] the sole reason” behind this decline
was the “shortage of tankers.”
This is somewhat misleading – there was no absolute shortage of tankers,
only one that prevented Iranian
exports from being sent to England around the Cape of Good Hope.225 The
Iranians were not in a
forgiving mood: they were still unhappy with renegotiation of the APOC
concession in 1933 and
continued to clash with Britain over Bahrain.226 Now that APOC would be
contracting Iranian production
due to the shortage of tankers, Tehran demanded that the company provide
“make-up” payments to cover
the difference between royalties on projected and actual production.
Although AIOC attempted to placate
the Iranians with a loan, the British Government supported a grant in
order to avoid stirring up
resentment.227 AIOC and Tehran signed an agreement in August 1940 whereby
the company agreed to
pay £1,500,000 in “make-up” payments for lost royalties in 1939 and
whatever sums were required to
boost Iran’s total royalties in 1940 and 1941 to £4,000,000 per annum
(which worked out to roughly

223

Payton-Smith, Oil, 16.

Bamberg, History of BP, 220.
225
AIOC, “Notes for History of Company’s Activities during 1939/1945 War,”
22 December 1943, BP 63800;
AIOC, “Memorandum on the A.I.O.C.’s Operations during the War…,” 04
February 1944, BP 71146.
226
“Das Bahrein-Öl,” Militär-Wochenblatt, 125. Jahrgang, Nummer 19 (08
November 1940).
227
German analysts believed that Britain’s weak strategic position had
convinced London to appease Tehran’s
demands for additional compensation. “Die Anglo Iranian Oil Company, ein
Pfeiler des britischen Einflusses im
Orient,” Vierjahresplan, 1940: XXII.
224
258
£1,200,000 in 1940 and £2,000,000 in 1941).228 This did not include the
£3,000,000 Iran was allowed to
convert into gold every year under the terms of a June 1940 agreement.
Although London could hardly
afford the additional pressure this placed on the position of sterling,
it had no option since oil was
Tehran’s only means of accumulating gold.229
British policymakers did not have to weigh the strategic drawbacks of
Middle Eastern oil during the
1920s because there was no plausible external threat of interdiction.
London addressed the issue after
1935 by shifting the burden of supply from the Middle East to the Western
Hemisphere. But even if most
of Britain’s wartime imports came from the United States and Venezuela,
Iran would still provide
supplies east of Suez that were irreplaceable due to the savings in
tanker tonnage.
The AIOC refinery at Abadan was doubly important not only because it was
one of the few sources of
100-octane gasoline within the empire, but also because Abadan was
relatively secure compared the other
major refinery east of Suez, the Burmah facility at Rangoon. In 1940,
there was only one source of 100octane gasoline within Great Britain
(Stanlow).230 The other sources available to Britain were Abadan
(after 1940), Trinidad, the West and East Indies, and the United
States.231 Prior to 1935, the RAF had
consumed 77-octane gasoline before switching to 87-octane. By 1938, the
newest aircraft engines
required 100-octane gasoline, and the British Government established a
committee to report on how
Britain could increase its supply of the additives necessary for the
production of 100-octane gasoline (isooctane).232 It made sense to
develop Abadan as an additional supplier of aviation fuel east of Suez
due to
the vulnerability of the East Indies, but London did not make any
substantial investment to expanding
Abadan’s capacity for producing 100-octane aviation gasoline (initially
only 100 barrels per day) until
228

Half of the payments were covered by the British Government, which also
allowed the Iranians to exchange
£3,000,000 a year into gold. The company renewed the agreement in 1943
for the remainder of the war over the
objections of the British Government, whose forces now occupied Iran and
considered the original demand for
“make-up” payments to be a form of “blackmail.” The actual payments for
1942 and 1943 totaled only £572,067
and £382,083, and they ceased altogether in 1944/45, when royalties
exceeded £4,000,000. AIOC’s wartime
operations in Iran are summarized in: Bamberg, History of BP, 218-219,
230-257; and Payton-Smith, Oil, 151.
229
Payton-Smith, Oil, 151.
230
Howarth and Jonker, History of Shell, 12.
231
Gavin Bailey, “The Narrow Margin of Criticality: The Question of the
Supply of 100-Octane Fuel in the Battle of
Britain,” English Historical Review 123: 501 (2008): 402-409.
232
Bamberg, History of BP, 182-183; and Payton-Smith, Oil, 53-57.

259
October 1939, and the Air Ministry did not certify Abadan’s production
until June 1940. Exports of 100octane gasoline from Abadan commenced in
July 1940 but production for the rest of 1940 amounted to
only 23,000 tons. Major expansion of Abadan’s output of 100-octane
gasoline did not start until after
1941, when production rose twelve-fold from 67,000 tons in 1941 to
858,000 tons in 1944.233
Even so, by July 1941, the British military warned that the empire could
not afford the loss of
Abadan, because this would leave the empire east of Suez dependent on the
East Indies, which were
vulnerable to Japan.234 By the winter of 1941/42, Allied intelligence
concluded that the Third Reich not
only recognized the Allies’ dependence upon Middle Eastern oil but was
poised to exploit this
vulnerability.235 Remarkably, the British Government did not plan for the
contingency that Britain would
completely lose access to Middle Eastern oil until the summer of 1942, by
which time the Afrikakorps
was within striking distance of the Suez Canal, and Army Group A was
poised to enter the Caucasus.
In May 1942, the Petroleum Department warned the British Chiefs of Staff
that replacing lost
production in Iraq and Iran with U.S. imports would impose a 2,500,000
ton increase in Britain’s tanker
requirements. The Petroleum Department concluded that these requirements
“could not be met.” Even a
15% reduction in Great Britain’s civilian consumption (1,000,000 tons per
year) would save only 300,000
tons of tanker tonnage, while a 20% reduction in overseas consumption
(1,250,000 tons) would save only
500,000 tons of tonnage. Not only would these extraordinary measures fall
short, but projected increases
in military consumption would probably wipe out any savings extracted
from the civilian economy. The
Petroleum Department also warned that the loss of Abadan’s production of
100-octane gasoline would
“be little short of catastrophic,” since global supplies were already
short and Abadan was expected to
increase its output from 240,000 tons to 800,000 tons by late-1943.236
One official worried that “the war
with Japan, and in the Middle East against Germany, cannot be waged
unless we can rely on supplies
233

Bamberg, History of BP, 241-246; Payton-Smith, Oil, 270-272.

“Situation in the Middle East: Aide Memoire by Joint Planning Staff,” 23
July 1941, J.P. (41) 580, enclosed with:
W.A. Howkins (Joint Planning Staff), “Arab Federation: Note by the
Secretary), J.P. (41) 961 (8), CAB 95/1.
235
Coordinator of Information (William Donovan), “Oil and German Strategy,”
05 March 1942, Bulletin 8, Franklin
Delano Roosevelt Library, Papers of Harry L. Hopkins, Box 154.
236
“Oil Supplies in the East in the Event of the Destruction of the Persian
Oilfields: Memorandum by the Ministry
of Fuel & Power,” 01 July 1942, Ex. O.C.B. (42) 16, POWE 33/1349.
234
260
from Abadan,” and he urged his colleagues to reconsider the existing
“Scorched Earth policy.”237
Considering the consequences for the entire Allied war effort, “[it] is
inferential that there should be a
maximum concentration on the military effort needed to safeguard the
Persian oilfields.”238
Using the Petroleum Department’s findings as a baseline, the Oil Control
Board calculated that, in the
event that the Germany invaded Iran and Iraq from the Caucasus, Britain
would lose 13,626,000 tons of
the 14,585,000 tons (93%) it expected to receive from the Middle East
(excluding Bahrain and Egypt)
over the next twelve months. Even if production in Bahrain was doubled,
Britain would still require an
additional 10,666,000 tons from the Caribbean and California, in addition
to another 200 tankers to
transport it. If Bahrain ceased production, the amount of oil required
from the Western Hemisphere would
rise by another 2,750,000 tons, plus seventy additional tankers. The
United States and Venezuela could
probably replace most of the missing oil, although there would probably
be a shortfall of aviation fuel and
fuel oil. Again, the overall supply of oil was not the issue, “but the
impossibility of finding the additional
shipping capacity that would cause the real difficultly.” Britain would
have to institute an across-theboard cutback in oil consumption of at
least 20% to compensate for the expected tanker shortage even
though previous reductions “represented the utmost that could be achieved
without adverse effect to our
war effort.”239
The fact that Britain was short of tankers rather than oil is a
distinction that escapes many historians.
One naval historian is at a loss to explain why the Royal Navy committed
so many resources to the
Mediterranean during the first nine months of the war, even though Italy
was neutral.240 Another historian
claims that the closure of the Mediterranean was a mere “nuisance” to the
Allies, and that Middle Eastern
237

“Vital Importance of Abadan,” no date or author, POWE 33/1349.

“Oil Supplies in the East in the Event of the Destruction of the Persian
Oilfields: Memorandum by the Ministry
of Fuel & Power,” 01 July 1942, Ex. O.C.B. (42) 16, POWE 33/1349. This is
not the original Petroleum Department
study (dated 26 May 1942), which I have been unable to locate. Besides
offering a précis of the original study, the
July paper is the Petroleum Department’s assessment of the consequences
of a specific strategic scenario: that
German forces overran Iran from the north and halted production in
northern Iraq without occupying either Bahrain
or the Suez Canal.
239
G.L. (Geoffrey Lloyd, Chairman), “Oil Supplies in the East in the Event
of the Destruction of the Persian
Oilfields: Report by the Oil Control Board,” 21 July 1942, C.O.S. (42)
352 (also O.C.B. (42) 70), enclosed with E.E.
Bridges (Cabinet Secretary), “Oil Supplies in the East in the Event of
the Destruction of the Persian Oilfields: Note
by the Secretary of the War Cabinet,” 04 August 1942, W.P. (42) 338, CAB
66/27/18.
240
Kennedy, “British Net Assessment,” 52-53.
238

261
oil “was vital, not for the Allied war effort in general, but as the only
nearby and convenient source of
supply for the British forces in the Mediterranean and Indian Ocean
areas.” This assertion overlooks the
lack of tanker tonnage to haul additional supplies of oil from the
Western Hemisphere.241 The Oil Control
Board left no doubt as to the danger confronting Britain in the summer of
1942: “[It] is of vital
importance that there should be a maximum concentration on the military
effort needed to safeguard the
Persian oilfields. Their loss would be calamitous, inasmuch as it would
enforce a drastic reduction in our
total war capacity, and probably the abandonment of some of our present
fields of action.”242

241

Alan Levine, “Was World War II a Near-run Thing?” Journal of Strategic

Studies 8: 1 (1985): 58-59.
G.L. (Geoffrey Lloyd, Chairman), “Oil Supplies in the East in the Event
of the Destruction of the Persian
Oilfields: Report by the Oil Control Board,” 21 July 1942, C.O.S. (42)
352 (also O.C.B. (42) 70), enclosed with E.E.
Bridges (Cabinet Secretary), “Oil Supplies in the East in the Event of
the Destruction of the Persian Oilfields: Note
by the Secretary of the War Cabinet,” 04 August 1942, W.P. (42) 338, CAB
66/27/18. In the event of an Axis
breakthrough, the British could at least implement extensive plans to
sabotage oil installations in Iraq and Iran. Due
to U.S. opposition, however, Saudi Arabia was off limits. Daniel
Silverfarb, “Britain, the United States, and the
Security of the Sa’udi Arabian Oilfields in 1942,” Historical Journal 26:
3 (1983): 719-726.
242

262
Oil and British Decline
Works challenging the “declinist” trend in British historiography have
performed an invaluable
service by forcing scholars to reconsider the mythology of Britain as a
broken power after the First World
War that entered the Second World War laboring under “imperial
overstretch” and equipped with an
obsolete military-industrial complex.243 But it appears that the pendulum
has swung too far in the opposite
direction. One historian argues that Britain was in a better strategic
and financial position after the First
World War than after the Napoleonic wars. Although it is plausible to
claim that “Great Britain was the
only world power” during the interwar period (if only because no other
power had any interest in being a
global power before 1939), the argument is untenable because it rests
upon the dubious assertion that “by
the standards of economy and geography,” the position of the British
Empire “had never been safer.”244
Another historian has gone so far as to claim that Britain ended the
1920s “pre-eminent in the world
because, for ten years, its leaders inside and outside of government had
resisted the American challenge,”
not to mention the fact that war had eliminated two of the three greatest
threats to the empire, Germany
and Russia (Japan, of course, was another matter). He concedes that
Britain only enjoyed this position
because the United States refused to translate its preponderant economic
power into strategic influence,
but nowhere does he acknowledge that the basis of Britain’s “armed
strength (resting on the potency of
the RN [Royal Navy])” operated at the pleasure of the United States both
before and during the
“transition of power” from Britain to the United States.245

243

The “declinist” history of the British Empire is exemplified by such

works as: Correlli Barnett, The Collapse of
British Power (London: Eyre Methuen, 1972); and Paul Kennedy, The Rise
and Fall of the Great Powers (New
York: Random House, 1987). For a pungent critique of Rise and Fall as
“anglocentric,” “a series of clichés
embedded in a mountain of facts,” and “riddled with inconsistencies,
contradictions, and ambiguities,” see: Gordon
Martel, “The Meaning of Power: Rethinking the Decline and Fall of Great
Britain,” International History Review
13: 4 (1991): 662-694 (quotations from pgs. 668, 676, and 670). Martel
has little use for Kennedy, whom he accuses
of using a flawed analysis of Britain’s relative decline before 1945 as
the intellectual blueprint for the rise and fall of
all great powers. Martel’s analysis of Britain’s failings is, however,
not dissimilar from that of Barnett. The former
ascribes Britain’s decline to the post-WWI “erosion of will and in the
deterioration of imagination” that prevented
London from taking advantage of its “extremely advantageous position”
after the First World War to build an
effective imperial commonwealth and modernize its economy (pgs. 689-692;
quotations from pgs. 689 and 691).
244
Martel, “Meaning of Power,” 686-693 (quotations from pgs. 692 and 687).
245
Brian McKercher, Transition of Power: Britain’s Loss of Global Pre-
eminence to the United States, 1930-1945
(Cambridge: Cambridge University Press, 1999), 1-31, 339-343 (quotations
from pgs. 30, 340). One is left
wondering what to make of the supposed “rivalry” between the U.S. Navy
and Royal Navy. Surely the latter could

263
The failure of many historians of the British Empire to consider the
connection between fuel and
British military and economic power is puzzling. How exactly any summary
of the “true roots of British
power between 1815 and 1914” can fail to mention coal is a mystery.246
Similarly, overlooking the role of
oil in the gradual collapse of British power during the twentieth century
makes for inaccurate history.
How else to explain an historian’s boast that “[it] is impossible to find
one instance in the 1930s when,
over a major policy decision concerning Great Britain’s protection of its
external interests, the United
States was able to persuade London to adopt a policy Washington thought
best.”247 This would have come
as a surprise to the Colonial Office, which spent the 1920s defending the
British “control” clause only to
suffer two successive defeats in 1930 and 1934, when U.S. firms secured
access to Bahrain and Kuwait,
respectively. Considering the abundance of documents demonstrating
London’s preoccupation with oil
and energy security after 1912, it appears that too many historians have
missed something that was
plainly obvious to policymakers. As Britain’s Sea Lords explained in
1931, “Fuel was a large factor in
England’s greatness,” from wind in the eighteenth century to coal in the
nineteenth century and oil
potentially thereafter if the country could acquire secure sources of
supply at home and abroad.248
Conversely, Americans understood that the control of oil could serve as a
lever to coerce Britain into
serving U.S. interests.249
Another historian, by contrast, makes a compelling case that Britain’s
assets within its formal and
informal empire could serve as a source of strength if Britain could
import raw materials from its imperial
periphery rather than produce them inefficiently at home. But this alone
does not substantiate his claim

not hope to fight the former for anything more than a brief campaign when
the United States controlled Britain’s
supply of oil. It appears that McKercher uses the term “rivalry” to refer
to a peaceful, if expensive, competition to
see which navy could build a larger fleet, irrespective of its actual
use.
246
John Ferris, “The Greatest Power on Earth: Great Britain in the 1920s,”
International History Review 13: 4
(1991): 733.
247
Brian McKercher, “Our Most Dangerous Enemy: Great Britain Pre-Eminent in
the 1930s,” International History
Review 13: 4 (1991): 783.
248
“Oil Fuel Reserve,” no date or author, enclosed with: F.L.F. (Admiral
Frederick Field), 12 February 1931,
attached to: A.V.A. (Albert Victor Alexander), “Oil Fuel Reserve,” 17
February 1931, C.P. 51 (31), CAB 24/220.
See also: Lt. Cmdr. G.J.A. Miles (Royal Naval Staff College), “The Supply
of Oil Fuel for Fleets and Squadrons
Abroad in the Future,” 14 April 1920, ADM 203/48.
249
Lt. Col. Raymond E. Lee (Military Attaché), “Oil and Its Effect on
British Warmaking Capacity,” 11 December
1935, Report No. 37765, NARA, RG 59, 841.6363/413.

264
that Britain had nothing to worry about when it came to oil because “it
could import oil rather than waste
resources on synthetic oil […].”250 Moreover, his claim that only the
military disasters of 1942 in North
Africa and Singapore “made the Empire dependent on the United States,
which only now emerged as
what Britain had until recently been, a great global power,” is not
plausible when considering oil. The
assertion that Britain started the war seeking “to avoid the neutral USA
as a source [of oil]” is only
narrowly true before 1938.251 Great Britain did not depend on oil imports
from the United States before
1938, but the same cannot be said of the empire (especially Canada).
Moreover, British planning for a
“dual contingency” after 1938 was predicated on the idea that the United
States would be “friendly,”
since the shortage of tankers ruled out importing Iranian oil to Britain
in favor of U.S. or Venezuelan
production. Long before Britain depended on the U.S. financial assistance
to pay for its oil imports
through Lend Lease, its energy security rested in no small part on access
to U.S. domestic oilfields.
The findings of this work suggest that critics of the “declinist” school
understate the handicaps Britain
operated under due to its need to import oil. Whether or not Britain was
in fact a relatively efficient
“warfare state” when it came to arms production and development meant
little if it did not have the oil
required to wage war effectively. Even if we accept that Britain did have
a more formidable military
establishment on the eve of the Second World War than the “declinists”
would contend, it proved
manifestly incapable of “[meeting] the obligations laid on her by the
existence of the empire,” which one
prominent “declinist” described as “a sprawl which entangled Britain in
great-power rivalries both in the
Mediterranean-Middle East region and in the Far East.”252 Most
importantly – and this cannot be
emphasized strongly enough – at no point during the interwar period could
Britain have contemplated a
war against any of its major rivals without U.S. oil deliveries. Too many
historians have focused their
attention on British suspicions of Roosevelt’s motives rather than
assessing the United States’ tangible

250

David Edgerton, Warfare State: Britain, 1920-1970 (Cambridge: Cambridge

University Press, 2006), 57.
David Edgerton, Britain’s War Machine: Weapons, Resources, and Experts in
the Second World War (New
York: Oxford University Press, 2011), 4-5, 76-78, and 84-85.
252
Barnett, Strategy and Society, 6-7. See also: Murray, Balance of Power,
91-92.
251

265
contributions to Britain’s security even before the war began.253
Illuminating the “human” dimensions
behind Britain’s decline is a doubtless a valuable exercise and certainly
not odds with the general thrust of
this study, which emphasizes that oil is necessary but not sufficient
explanation for Europe’s relative
decline vis-à-vis the United States and Soviet Union. But the curious
hostility of some scholars to the
study of great power politics on the basis of “components that appear to
lend themselves to weighing and
measuring” can be just as mistaken the narrow-minded economic determinism
they decry.254
This study should not be read as an argument in favor of Britain
developing a synthetic fuel program.
The decision against synthetic fuel made strategic and economic sense in
view of the resources already
committed to importing oil, not to mention the fact that Britain would
still be dependent on imports of any
number of other commodities even if oil was excluded. That being said,
there is a difference between
simple ownership of foreign oilfields and the ability to exploit such
resources, particularly in wartime.
The risks entailed by basing Britain’s energy security on Middle Eastern
oil were obvious soon after the
First World War. The German Foreign Office observed in 1920 that if
Britain tried importing oil during a
“future war” from Mesopotamia or Persia, British “tankers would be as
exposed to sinking as in the last
war.”255 German military analysts of Britain’s oil position chortled over
its vulnerability to interdiction in
the Mediterranean or aerial and submarine attack throughout the 1930s and
early-1940s. Although some
argued as late as 1934 that Britain, unlike France, had the means to
exploit the oil of the Middle East in
wartime, they all changed their tune eventually.256 One 1940 analysis
accurately described “England’s oil
supply… [as] a purely transport problem,” while a 1936 piece argued,
“[One] is fully justified in
considering a secure supply of oil for England in a possible war as a
question of life and death for its
world empire, especially since its cohesion depends entirely upon English
mastery of the seas,”
253

For example, see: Kennedy, “British Net Assessment,” 41-42, 51-52.

Martel, “Meaning of Power,” 679.
255
“Britische Erdölpolitik,” 08 September 1920, no author, Politisches
Archiv des Auswärtigen Amtes, R 97745.
256
Hptm. (Hauptmann) a.D. Hans Wagner, “Ölversorgung im Mittelmeer,”
Deutsche Wehr, Nr. 8/7. (38.) Jahrgang
(22 February 1934). The Germans were not alone in reaching to this
conclusion, although they too vastly
overestimated the combat effectiveness of the Italian Navy. One 1936
paper posited that “Italy’s naval –strategic
position in the Mediterranean” was “by far” superior to that of Britain
and France, and surmised that Italy might
already possess the means to win “a bitter struggle” at sea against the
Western Allies. Feldmarshalleutnant d.R.
Schäfer, “Die geographischen Gegebenheiten der Ölversorgung der Seemächte
England, Frankreich und Italien und
deren Auswirkungen auf die Maβnahmen der Landesverteidigung,” Wissen und
Wehr, Siebzehnter Jahrgang (1936).
254

266
particularly the Mediterranean.257 Again, the problem was not so much the
quantity of oil, but rather,
logistics: British tanker capacity was insufficient to cover even the
country’s peacetime demand, and
Britain depended upon the availability of neutral tankers.258 In the
event that Britain lost access to the
Middle East, its only alternative was the United States, although the
Germans were unsure if the latter
was “in the position to provide the western powers as much oil as they
must require in case the
Mediterranean was blocked.”259 By 1941, it was clear to the Germans that
Britain had no choice but to
reorient the “center of gravity” of its oil imports to the Western
Hemisphere.260
U.S. military intelligence assessments between 1940 and 1941 were equally
accurate when it came to
describing London’s predicament. Britain was dependent on imports to
satisfy basically 100% of its
requirements within the United Kingdom. Imperial production, only 2.5% of
global production, was
negligible, but British firms nonetheless controlled approximately 20% of
world production, and the
tanker situation appeared satisfactory. If one included supplies
available from U.S. firms, there was ample
oil to fuel the British war effort. The “weak chain in the link” of
Britain’s oil supply was its need to
preserve its overseas lines of communication and keep tankers losses at
an acceptable level.261

257

Britain’s oil position was, for example, a frequent topic of discussion

in the semi-official military journals such as
Deutsche Wehr: Dr. Paul Ruprecht (Dresden), “Englands Versorgung mit Öl
im Kriege,” Nr. 22/40. Jahrgang (28
May 1936); Fr. Az, “Wachsende Ölzufuhr-Sorgen Englands,” Nr. 8/44.
Jahrgang (23 February 1940); and
“Englands wachsende Ölsorgen,” Nr. 19/45. Jahrgang (09 May 1941). At the
same time, other German analysts
expressed admiration for Britain’s success in acquiring such a vast
portion of the world’s oil reserves beyond their
empire, not to mention its constant awareness of the interrelationship
between economic and military power, as well
its willingness to abandon its liberal orthodoxy for state-directed
economic policy when the circumstances
demanded it. F.W. Fernau, “Erdölversorgung und Erdölpolitik im britischen
Weltreich,” Wissen und Wehr,
Zwangzigster Jahrgang (1939). See also: F.W. Fernau, “Die britische
Oelmacht,” provenance unclear (possibly
Wehrwirtschaftliche Umschau), date unknown (circa 1938), NARA, RG 242, T-
77/437 (Wi/IF 5.3689). France
received somewhat less, but equally critical, attention: “Frankreichs
Erdölversorgung im Kriege,” Wehrtechnische
Monatshefte, 2 u. 3; and “Frankreichs Erdöl-Politik,” Die deutsche
Volkswirtschaft, Nr. 16 (1936); both in: NARA,
RG 242, T-77/425 (Wi/IF 5.3444).
258
By contrast, “[the] incredible successes” of German petroleum policy
ensured that its “demand was covered,”
while reserves swelled with imports from Romania and the Soviet Union.
Vortragsmanuskript, “Rohstoff- und
Versorgungslage Englands zu Beginn des Weltkrieges,” no author or author
(probably Dr. Leisse, Director of the
Reich Office for Defense-Economy Planning – Reichsamt für
wehrwirtschaftliche Planung; circa 1940),
Bundesarchiv, Berlin-Lichterfelde, R 3102/3401.
259
Dr. Paul Ruprecht, “Das Mittelmeer und die Ölversorgung der Westmächte,”
Militär-Wochenblatt, Nr. 124,
Nummer 51 (21 June 1940).
260
Dr. Flemmig, “Englands Ölmacht im Abstieg,” Militär-Wochenblatt, 125.
Jahrgang, Nummer 47 (23 May 1941).
261
For representative samples of the attitude of U.S. military intelligence,
see: Col. John Magruder to the Assistant
Chief of Staff, G-2, “Petroleum products situation in Great Britain,” 21
March 1940, NARA, Record Group 165:
Records of the War Department, Military Intelligence Division, “Regional
File,” 1922-1944 (hereafter cited as: RG

267
“Fortunately for Britain,” as one informed observer of international
petroleum affairs noted, “the United
States were willing and able to correct” the most pressing
deficiencies.262
Ultimately, the British proved better at acquiring titular control of
foreign oilfields than they did in
tailoring their foreign and defense policy to reflect the oil position of
the Empire. How else to explain the
fact that Britain only considered the ramifications of a “closed”
Mediterranean after the break with Italy
and not before? Important studies such as the British Official History of
the Second World War offer a
misleading picture of British oil policy and its results after 1918.263
Subsequent historians have also failed
to distinguish between Britain’s success at supplying itself and its
empire during the Second World War
and London’s expectations following the First World War. The fact that
Britain muddled through the war
in spite of losing access to its Middle Eastern oilfields between 1940
and 1943 has obscured the long-term
damage done to Britain’s economic position. U.S. economic assistance
(once Britain could no longer
afford to pay for its imports) and the remarkable resiliency of the U.S.
oil industry allowed the Allies to
fuel the vast war machine that bludgeoned the Axis into submission.
Britain survived the Second World
War, but not on terms of its own choosing and incapable of escaping the
fate that now awaited it:
bankruptcy and subordination to the United States.

165, MID), Box 1400; C.S. Snodgrass (Office of Naval Intelligence), “Near
East Oil Concessions, Development and
Facilities,” 12 February 1941, NARA, Record Group 38: Records of the
Chief of Naval Operations, Foreign
Intelligence Branch, Reports on Worldwide Petroleum Situation, 1940-2,
Box 3;“Oil Supplies in the British
Empire,” 26 August 1941, no author, NARA, RG 165, MID, Box 1400; Untitled
report (“4115 – Foreign Fields”),
27 December 1941, NARA, RG 165, MID, Box 1400.
262
Walter Levy, “Oil in this War’s Strategy,” undated speech (sometime
between the fall of France and the start of
Operation Barbarossa), American Heritage Center (University of Wyoming),
Papers of Walter Levy, Box 1. See
also: Walter Levy, “Axis Launches Desperate Offensive at Allied Oil
Sources,” World Petroleum (April 1942), 2934; reprinted in: Walter Levy,
Oil Strategy and Politics, 1941-1981 (Boulder, Westview Press: 1982), 36-
43.
263
Contrast the analysis presented in Chapters One and Twenty-Two of Payton-
Smith, Oil, 1-24 and 472-479.
Edgerton’s Britain’s War Machine, 181-194, has an excellent summary of
the supply situation during the war.

268
Chapter IV
Making Do with Less: Germany, 1918-1936
A reconsideration of oil’s relationship to German grand strategy prior to
1939 challenges the
prevailing historical narrative of crisis and scarcity.1 Following its
defeat in 1918, Germany was down but
not out. Although the country had been at the forefront of the Second
Industrial Revolution, it had always
been short of most essential raw materials besides coal, not to mention
arable land. The discrepancy
between its industrial might and weak raw materials and agriculture
position nurtured the development of
both a dynamic export sector to pay for necessary imports and a
predilection for an aggressive foreign
policy. The outcome of the First World War did not bring about any
significant change in what one
historian considers the traditional “responses to Germany’s uneven
resource base – commerce and
conquest […].”2
Between 1933 and 1939, the Third Reich embraced a multi-faceted policy to
secure the petroleum it
would need to realize the first stage of Adolf Hitler’s “Programme”: the
destruction of France and the
colonization of the Soviet Union (with Britain forced to the sidelines).
German policy included providing
government incentives to increase Germany’s tiny domestic oil production;
accumulating domestic
reserve stocks; and even acquiring overseas concessions in countries such
as Iraq and Mexico, which

See the appendix to this study for additional discussion of secondary

sources. Unless otherwise indicated, all
German-language sources are from the National Archives and Records
Administration, Record Group 242: Foreign
Records Seized (NARA, RG 242). Since all documents included within RG 242
are available only on microfilm, I
have used the following citation format: Microfilm Publication No./Reel
No. (Item No.). Given that the bulk of my
archival research with German documents was completed at the National
Archives II, College Park MD, I have
usually cited the U.S. microfilm copy in preference to the original paper
copy in the Bundesarchiv, BerlinLichterfelde (BA-B), the Bundesarchiv-
Militärarchiv, or the Politische Archiv des Auswärtigen Amtes (PAAA).
NARA citations may be crosschecked against the holdings of the
Bundesarchiv by comparing the “alte Signatur”
used by the former (which was based on the filing system created by U.S.
and British historians following the
Second World War during the process of cataloguing and microfilming
captured German records) against the new
archival signatures developed by the latter following the documents’
repatriation to Germany, when German
archivists broke up the NARA filing system in order to reconstruct the
records of agencies in those instances when
the originals had either been destroyed during the war or disappeared
thereafter. For example, the NARA citation for
“‘Die Mineralölwirtschaft im Vierjahresplan’: Vortrag gehalten am 12.
Januar 1938 im Haus der Flieger,” is: T77/107 (Wi/IF 5.469); while the
Bundesarchiv citation is: BA-B, R 3112/167.
2
Peter Hayes, “Carl Bosch and Carl Krauch: Chemistry and the Political
Economy of Germany, 1925-1945,”
Journal of Economic History 47: 2 (1987): 353.

269
could supply Germany with oil in peacetime either on a barter basis or
against payment in “Askimarks.”3
The most important decision, especially by comparison with Britain (whose
overall oil position was
equally precarious), was to harness the power of Germany’s cutting-edge
chemical industry to produce
among other things synthetic fuel from coal.4 Chemistry, abundant
supplies of coal, and the mother of all
invention – necessity – would allow the Germany to become “independent”
of imports of many raw
materials, even after it had been “robbed” of its former overseas
colonies.5
This was not empty boasting. Synthetic fuels had already proven
invaluable during the First World
War, when domestic production of benzol have proven indispensable in
keeping the German Air Force
(Luftstreitkräfte) in the air, since prior to its collapse in 1916, the
Romanian Government had forbidden
the major German concessionaire, Steaua Romana, from exporting either
crude oil or gasoline to the
Central Powers.6 Even if the Third Reich still sought to acquire oil
through conventional means such as
imports, it could hardly afford to base its entire petroleum policy on
such measures. Overseas imports
during wartime were out of the question if Britain was an opponent. Even
in peacetime, however, there
were limits to how much oil Germany could import, the most important
obstacle being the country’s
chronic shortage of foreign exchange. Until the 1970s, the major U.S.,
British, Dutch (and later French)
oil companies controlled much of the international oil trade beyond the
Communist bloc. Purchasing oil
3

Briefly, the Germans used three methods of financing overseas trade

during the Third Reich: clearing agreements;
barter agreements; and payment in blocked currency. Clearing agreements
are basically pools of money within a
country into which a nation’s exporters deposit the hard currency
proceeds of their sales. Importers thereafter draw
from these pools in order to finance their purchases. Barter agreements
are transactions denominated entirely in
finished or unfinished goods. Finally, the Reich created special
“Askimarks” (Ausländer-Sonderkonten für
Inlandszahlung) to finance trade with Latin America, and which could only
be used to purchase certain goods
produced by Germany. David Haglund, “‘Gray Areas’ and Raw Materials,”
Inter-American Economic Affairs 36: 3
(1982): 34.
4
Germany’s chemists produced more than just petroleum through synthesis.
They also synthesized ammonia,
methanol, rubber, acetylene, ethylene, benzol, and toluene, all of which
were vital to the German war effort.
Nuernberg Military Tribunal, Trials of the War Criminals (Washington, DC:
U.S. GPO, 1953), viii: 1253-1254 –
hereafter cited as: NMT.
5
Oberstleutnant Dr. rer. pol. W. Hedler, “Kampf um Rohstoffe,” Militär-
Wochenblatt, 124. Jahrgang, Nummer 18
(27 October 1939). Hedler was also attached to the Defense-Economy and
Aramaments Office of the Armed Forces
High Command (Wehrwirtschafts- und Rüstungsamt of the Oberkommando der
Wehrmacht – WiRüAmt, OKW) as
a raw materials analyst.
6
“Die Bedeutung der deutschen Beteiligung an der Steaua Roman während des
Krieges,” no date or author, BA-B,
R 8119/8364; Ausrüstungsamt, Allgemeine Abteilung, “Deutschlands
Rohstofflage,” April 1920, T-84/142 (EAP
66-c-12-62/6); and Ausrüstungsamt, Allgemeine Abteilung (II Fb),
“Deutschlands Rohstofflage,” May 1920, T84/142 (EAP 66-c-12-62/5).

270
from these companies compelled Germany to dip into its meager reserves of
hard currency. Germany
could not afford these expenditures in the wake of the global financial
downturn. By reducing demand for
German exports, the Great Depression preventing Germany from earning
trade surplus to fund vital
imports and pay off the reparations imposed by the Versailles Treaty.
After 1933, when Germany’s
economic position improved due to rearmament and the gradual recovery of
the global economy,
importing significant quantities of oil remained problematic because
Germany still lacked the means to
pay for the oil: rearmament soaked up increasing amounts of German
industrial production, leaving less
available for export to earn hard currency. Even Hitler understood that
trade with the United States was
unfeasible since the country was economically self-sufficient and had
accumulated much of the world’s
gold through its trade surpluses, which hindered other nations from
purchasing U.S. goods.7
Synthetic fuel offered a way out at least in the short term.8 It would,
Hitler hoped, obviate any need
for Germany to depend upon international trade, which had “plunged”
Germany into “the mire” that
climaxed with the Great Depression.9 But German policymakers and analysts
also understood that
synthetic fuel – production of which was miniscule compared to crude oil
– could not make their
European empire independent of oil.10 Synthetic fuel could, however,
provide the means for Germany to
take what it needed, first in the Caucasus and then in the Middle East.11
The costs were enormous: tens of
7

Norman Cameron and R.H. Stevens, trans., Hitler’s Table Talk: His Private
Conversations (New York: Enigma,
2000) : No. 25 (25 September 1941) and No. 35 (13 October 1941).
8
And possibly over the long term, too, in the event of the exhaustion of
global crude oil reserves. Fritz Seidenzahl,
“Erschöpfung der Erdölvorkommen?” Die deutsche Volkskraft: Beilage zur
“Deutschen Wehr,” Nr. 13, 7. Jahrgang
(09 December 1937). The move to offshore drilling, or drilling at greater
depths, might also make synthetic fuel
more cost-competitive with crude oil. Dr. Ruprecht, “Erschöpfung der
Erdölvorräte,” Deutsche Wehr, Nr. 39, 44.
Jahrgang (27 September 1940). German analysts also worried as early as
1938 that world oil production would be
unable to keep up with demand once China began to motorize. Hauptmann
a.D. Dr. phil. Ruprecht, “Ölsuche und
Ölgewinnung in ihrer Bedeutung für die Wehrpolitik,”
Militärwissenschaftliche Rundschau 3: 3 (1938).
9
The Führer mistakenly believed that the Reich had continued to import
rubber and petroleum after 1918 even
though it already possessed means of producing both synthetically. Table
Talk: No. 45 (18 October 1941). Industrial
production of synthetic fuel was not possible until the late-1920s, while
U.S. and German scientists did develop
processes for synthesizing rubber until the 1930s.
10
Consider that, in 1937, synthetic fuels accounted for only 3% of global
consumption of light petroleum products;
2,830,000 tons out of 89,150,000 tons. W.F. Kiewitt, “Öl und
Ölersatzstoff in der Wehrwirtschaft,” Deutsche Wehr,
Nr. 42, 43. Jahrgang (27 October 1939).
11
One should not overlook the financial benefits, for gasoline was a major
source of indirect taxation in Germany
even before the Third Reich. Between 1930 and 1936, the government raised
the duty on imported gasoline from
8.6¢ to $0.36. Raymond Stokes, “The Oil Industry in Nazi Germany, 1936-
1945,” Business History Review 59: 2
(1985): 260. By 1936, gasoline taxes accounted for one-third of the
regime’s customs revenue (421,000,000 RM).

271
millions of tons of coal, millions of tons of steel, the labor of tens of
thousands of workers and miners,
and billions of Reichmarks, not to mention all manner of indirect
subsidies such as limiting imports
through currency controls and tariffs to keep high-cost synthetic
petroleum competitive with cheap
imported crude oil and slow the growth in domestic consumption.12
This was a cost that Germany’s civilian and military leadership was
willing to pay even before the
National Socialist “seizure of power.” Existing histories of synthetic
fuel in German have demonstrated
that government support for the industry was the product of civilian
economic considerations, such as the
alleviation of unemployment by creating new demand for German coal and
steel, improving Germany’s
balance of payments, and promoting motorization of German society.13 In
the event that German
scientists managed to make synthetic fuel production cost competitive,
Germany would be poised to reap
immense economic advantages.14 Military considerations were not absent,
however: German planners
recognized after the First World War that their military’s operational
effectiveness depended upon the
development of synthetic alternatives to Germany’s lost sources of crude
oil in Romania and Galicia.
Germany’s economic position on the eve of the Second World War was hardly
ideal, least of all with
regard to raw materials. German analysts understood that although Germany
was in certain respects better
prepared in 1939 than it had been in 1914, the Reich was still dependent
on imports it could not afford,
while rearmament had been conducted “in breadth and too little in
depth.”15 Nevertheless, considering the

Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi
Economy (New York: Viking,
2006), 151.
12
One article in a German military journal that an unnamed country whose
force structure was suspiciously like that
of Germany (300 divisions – mainly infantry with a strong mechanized core
– 9,000 military and civilian aircraft,
and a navy comprised largely of small craft and submarines) would require
12,650,000 tons of petroleum annually in
wartime. Substituting synthetic fuels for natural petroleum products
would require an additional 37,000,000 tons to
40,000,000 tons of coal production, a capital expenditure of
4,000,000,000 RM, and the labor of 250,000 men. H.
Steinberger, “Der Treibstoffverbrauch im Kriege,” Die Deutsche
Volkskraft: Beilage zur “Deutschen Wehr,”
Nummer 1, 6 Jahrgang (16 January 1936). Steinberger’s estimates for
capital expenditure and coal production turned
out to be close to the figures adopted by the regime in 1938.
13
Thomas Parke Hughes, “Technological Momentum in History: Hydrogenation in
Germany, 1898-1933,” Past and
Present 44: 1 (1969): 106-132. Hughes’ work ought to be read in
conjunction with: Peter Hayes, Industry and
Ideology: IG Farben in the Nazi era (Cambridge, 1987), 37-42.
14
Verbandssyndikus Kurt Bronk, “Deutschlands Erdöl-Selbstversorgung,
militärisch gesehen,” MilitärWochenblatt, 120. Jahrgang, Nummer 16 (25
October 1935).
15
Compare Maj. a.D. Dr. W. Hedler, “Deutsche Rohstofflage und die
Rohstoffwirtschaft im Kriege,” MilitärWochenblatt, 120. Jahrgang, Nummer
32 (25 February 1936) with OKW, WiRüAmt, Stab Ib 5, “Deutschlands

272
overall precariousness of Germany’s strategic position, one cannot help
but concede that German bluster
in 1939/40 that the Third Reich’s petroleum position was stronger than
that of Great Britain and France
was not entirely without merit.16 Petroleum consumption in Germany on the
eve of the war was relatively
small – covering only 3% of the country’s energy requirements, compared
to 90% for coal – which meant
that even the Third Reich’s wartime requirements were moderate compared
to those of Britain (much less
the United States and the Soviet Union).17 Although certain kinds of
petroleum products, mainly heavier
oils such as diesel and fuel oil for the Navy (Kriegsmarine), were in
short supply throughout the war, the
primary instruments of the German armed forces (Wehrmacht), the Army
(Heer) and the Air Force
(Luftwaffe), were not handicapped by any lack of fuel during the first
two years of the operations.18
Early postwar analyses of the German war economy claimed that Germany had
been inadequately
mobilized prior to Albert Speer’s appointment as Armaments Minister in
1942. This view – known as the
“Blitzkrieg” thesis – gained prominence following the publication of two
articles in 1945 by John

Wehrwirtschaftspotential bei Kriegsausbruch,” no date (signed: “Tomberg,

26.2.40.”), T-77/425 (Wi/IF 5.3442).
Emphasis (from the latter) in the original.
16
Maj. a.D. Mende, “Zur Treibstofflage,” Deutsche Wehr, Nr. 6, 44. Jahrgang
(09 February 1940).
17
Stokes, “Nazi Oil Industry,” 254.
18
This was the conclusion of two major WiRüAmt retrospectives of Germany’s
petroleum policy. At the start of
1942, one paper observed that, thanks to Germany’s reserves at the onset
of the war (2,409,000 tons), booty captured
during the 1940 campaigns (800,000 tons), imports from Romania, the
Soviet Union, and Galicia, and rising
domestic production, “until the beginning of the Russian campaign,
serious difficulties in the supply of fuel did not
arise.” WiRüAmt, Stab Z/SR, “Die deutsche Treibstoffversorgung im Kriege.
Abgeschlossen um die Jahreswende
1941/42. Versuch einer Darlegung der Gesamtproblematik unserer
Treibstoffversorgung im Kriege unter Verzicht
auf die Darstellung der Einzelheiten,” 16 February 1942, T-77/668 (Wi/VI.
216). Emphasis in the original. Two
years later, another study reached a similar conclusion: although
military and civilian demand consistently outpaced
advances in natural and synthetic production, “in spite of increasing
demand, the supply situation in the years before
the war and even during certain circumstances during the war until the
end of 1940 proved on average to be
progressively healthier.” OKW, Gen.z.bV.1., “Die Arbeiten des WiRüAmtes
an der Mineralöl-Versorgung,” no date
(handwritten notation reads: “vom Dezember 1944”), T-77/183 (Wi/IF 5.751)
– here after cited as “Die Arbeiten des
WiRüAmtes.” This study and its invaluable Anlagen (most of which may be
found in T-77/341 (Wi/IF 5.2164,
2687) and is comprised of many of important documents on German petroleum
policy between 1933 and 1940) and
others like it provide this chapter with its organizational and
statistical backbone. Unfortunately, it had less to say
about high-level policy or long term objectives than short term supply
and demand considerations. Furthermore, the
study, which was supposed to cover the period before June 1943, is
incomplete, ending in the summer of 1941
during Barbarossa. It was also a key source for Georg Thomas’ Geschichte
der deutschen Wehr- und
Rüstungswirtschaft, 1918-1943/1945 (Boppard am Rhein: Boldt, 1966), which
only deals with petroleum policy
peripherally. According to Thomas (pg. 43), the 1944 study was completed
by one Oberstleutnant Sadewasser. See
also: OKW, WiRüAmt (Oberst Dr. Hedler), “Die Mineralöle und die
Versorgungslage im Kriege,” Abgeschlossen
31August 1941, T-77/438 (Wi/IF 5.2726). Also of particular in terms of
providing a broad overview of the state of
the petroleum industry in Germany on the eve of the war is: Reichs-
Kredit-Gesellschaft AG, Ke/Schr.,
“Treibstoffwirtschaft in der Welt und in Deutschland,” April 1938, T-
84/51 (EAP 66-c-2-10/22).

273
Kenneth Galbraith, a member of the United States Strategic Bombing Survey
(USSBS).19 “The
“Blitzkrieg” school came under fire in the 1970s and 1980s by historians
who argued that Adolf Hitler
had always planned for “a massive and longer-term war of the continents,”
and that the Reich had been on
a “war” footing since 1938/9 at least. The fact “that Hitler did not get
value for money” had more to with
feuding over armaments priorities, inefficient production practices, the
need to rebuild Germany’s fixed
military infrastructure, the lag between weapons R&D and actual
production, and the fact that capital
intensive programs such the Four-Year Plan (Vierjahresplan, VJP) were
still in their infancy. Moreover,
critics of the “Blitzkrieg” school argued that the regime had not
synchronized rearmament with the
Reich’s foreign policy. Germany went to war against the other great
powers earlier than expected, and
even after the start of the war, far too many resources were still
committed to long-term, capital-intensive
projects (such as the synthetic fuel program) that would yield little in
the short run.20
Most recently, the debate has been reframed by a new wave of historians
who make the case that
“[the] chief problems of the Nazi war economy were not political,” but
rather “objective,” since there was
no way for Germany to reconcile the Third Reich’s “vast ambition and the
modest military and economic
means at its disposal.”21 These historians have incorporated into their
analyses aspects of the “Blitzkrieg”
19

John K. Galbraith, “Germany Was Badly Run,” Fortune 32: 6 (1945): 173-
200; and John K. Galbraith and George
Ball, “The Interrogation of Albert Speer: Germany’s Wartime Production
Minister Tells the Inside of the Nazi
Collapse,” Life (17 December 1945): 57-66. For additional background, see
Galbraith’s memoirs, Life in Our Times
(Boston: Houghton Mifflin, 1981), 192-227. Galbraith’s sensationalistic
argument was subsequently refined by
various economists and historians. Nicholas Kaldor, “The German War
Economy,” Review of Economic Studies 13:
1 (1945-1946): 33-52; Burton Klein, Germany’s Economic Preparations for
War (Cambridge: Harvard University
Press, 1959); and Alan Milward, German Economy at War (London: Athlone
Press, 1965).
20
Berenice Carroll, Design for Total War: Arms and Economics in the Third
Reich (The Hague: Mouton, 1968),
passim (esp. 179-190); Richard Overy, “Hitler’s War and the Germany
Economy: A Reinterpretation,” Economic
History Review 35: 2 (1982): 272-291 (quotations from pgs. 274, 280);
Richard Overy, “Mobilization for Total War
in Germany, 1939-1941,” English Historical Review 103: 408 (1988): 613-
639; and Richard Overy, War and
Economy in the Third Reich (Oxford: Oxford University Press, 1994), 188-
200. The evolution in our understanding
of the German war economy is summarized in: Mark Harrison, “Resource
Mobilization for World War II: the
U.S.A., U.K., U.S.S.R., and Germany, 1938-1945,” Economic History Review,
2nd Series, 41: 2 (1988): 171-192.
Williamson Murray also took up arms against the “Blitzkrieg” thesis, but
he stressed the shortage of hard currency
as a factor inhibiting German rearmament: Murray, The Change in the
European Balance of Power, 1938-1939: The
Path to Ruin (Princeton: Princeton University Press, 1984), 12-19.
21
Adam Tooze, “No Room for Miracles: German Industrial Output in World War
II Reassessed,” Geschichte und
Gesellschaft 31 (2005): 439-464 (quotation from pg. 464); and Tooze,
Wages of Destruction. The emerging thesis
that “[the] key gulf in 1939 – both in Hitler’s mind and in retrospect –
was not between what Germany was doing
and what he wanted, but what Germany could do and his growing
requirements,” is elegantly expressed in Peter
Hayes’ “Polycracy and Policy in the Third Reich: The Case of the
Economy,” in: Reevaluating the Third Reich, ed.

274
thesis – namely Germany’s inability to fight a long war in 1939 – while
demonstrating how short, sharp
campaigns (most notably Barbarossa) were geared toward preparing the
Third Reich for a generational
struggle against the United States. The following chapters incorporate
oil within our evolving
understanding of the German war economy and National Socialist grand
strategy in general.
Germany experienced its first oil crisis not in 1939, but following its
great wartime triumph – the
victory over France and the Low Countries in June 1940.22 As even
contemporary analysts recognized, in
defeating France but not Britain, Germany achieved a major operational
success but not a decisive
strategic victory.23 Key German economic policymakers such as General
Georg Thomas – the Chief of
the Defense-Economy and Armaments Office (Wehrwirtschafts- und
Rüstungsamt, WiRüAmt) of the
Armed Forces High Command (Oberkommando der Wehrmacht, OKW), which
assessed the raw
materials requirements of the armed forces – recognized that Germany was
in uncharted territory.24
Thomas Childers and Jane Caplan (New York: Holmes & Meier, 1993), 190-210
(quotation from pg. 196).
Emphasis in the original.
22
For example, Paul Kennedy claims that the Germany “greatly expanded its
available supplies of oil and raw
materials” after its victories in 1940. Even if the total supply of the
latter did increase (it certainly did not in the case
of the former), that still leaves out the fact that Germany’s
requirements also increased because of its new empire.
Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and
Military Conflict from 1500 to 2000
(New York: Random House, 1987), 341. One secondary work (perhaps the only
one) that makes this point explicitly
is: Tooze, Wages of Destruction, 411.
23
Walter Levy, “The Paradox of Oil and War,” Fortune (September 1941),
69ff, American Heritage Center
(University of Wyoming), Papers of Walter Levy (hereafter cited as: Levy
Papers), Box 1; reprinted in: Walter
Levy, Oil Strategy and Politics, 1941-1981 (Boulder: Westview Press,
1982), 9-23. Levy swam against the tide, as
plenty of other analysts bought into the illusion of German strength,
including the normally perceptive Ferdinand
Friedensburg, who concluded in the autumn of 1940 that “[the]
surprisingly auspicious [petroleum supply] position,
which was established following the conclusion of the Western offensive,
will probably continue during the next
few months.” Friedensburg warned that aerial attacks on the synthetic
plants could pose a threat, but he was not
terribly concerned about any reduction in imports from Romania during the
winter since he assumed that Germany
would have accumulated large enough reserves before then. Overall, he
surmised that existing production and
imports could supply Germany “almost indefinitely” (fast unbegrenzt). Dr.
F. Friedensburg, Regierungspräsident a.
D., “Die deutsche Roh- und Treibstofflage,” Abgeschlossen am 03 October
1940, T-77/344 (Wi/IF 5.2199).
24
Between 1918 and 1934, the Supply Staff (Nachschubstab) – after 1925, the
Economics Division
(Wirtschaftsabteilung) – of the Army Ordinance Office (Heereswaffenamt,
HWA) handled all matters pertaining to
the “defense-economy,” such as raw materials requirements. The Economics
Division was transferred to the newly
formed Armed Forces Office (Wehrmachtsamt) in 1935 and renamed the
Defense-Economy Staff
(Wehrwirtschaftsstab, WStb). In November 1939, the WStb was renamed as
the WiRüAmt, and its chief (Georg
Thomas) reported directly to the chief of the OKW (Wilhelm Keitel).
Following Albert Speer’s appointment as
Minister for Armaments and Munitions (Reichsminister für Bewaffnung und
Munition) and General Plenipotentiary
for Armaments Tasks (Generalbevollmächtigter für Rüstungsaufgaben im
Vierjahresplan) in March 1942, those
portions of the WiRüAmt dealing with armaments were transferred to the
Armaments Ministry while the remainder
(again renamed WStb) stayed with the OKW. Thomas remained in charge of
both halves, but in November 1942
Speer removed him from his post in the Ministry of Armaments, and Thomas
left active service the following
February, ostensibly to complete the task of writing a history of the
German war economy (which he did not finish

275
Germany’s improvised petroleum supply infrastructure, combining domestic
crude oil production, reserve
stocks imported from abroad before the war, synthetic production, and
imports from Romania and the
Soviet Union, made no allowance for any country’s requirements except its
own. After the summer of
1940, however, the Third Reich was responsible for the oil requirements
of the entire European
Continent, now cut off from its traditional sources of supply in the
Western Hemisphere and the Middle
East. On the basis of 1938 production and consumption figures, the
“Greater German area and German
sphere of influence” following the fall of France consumed 9,558,000 tons
more than it produced.25
Germany not only had to pick up the slack left by former suppliers such
as the United States, Venezuela,
and Iraq, but it had to do so under wartime conditions. Invading the
Soviet Union would only exacerbate
the situation in the short run, as Moscow provided the Reich with more
than 686,000 tons of petroleum
products in 1940 under the Nazi-Soviet Commercial Agreement of February
1940 and would send
982,000 tons by August 1942 under the terms of a second agreement of
January 1941.26
Nevertheless, an invasion of the Soviet Union was the only viable
option.27 Careful appraisal of
Germany’s petroleum position in 1940/41, balanced against the strategic
and ideological imperatives of
its leadership, reveals that Germany had no option except to invade the
Soviet Union and later the Middle
East if Britain continued to fight. Germany’s tiny petroleum industry,
although inconsequential by the
standards of its adversaries, had nonetheless fulfilled its primary
objective: the Third Reich had enough
but was published in 1966). One of Thomas’ former deputies, General
Ludwig Becker, replaced him at the Chief of
the WStb, which was renamed once more in March 1944 as the Field Economy
Office (Feldwirtschaftsamt). See the
organizational chart, “Die Entwicklung der militärischen
Wehrwirtschaftsorganisation 1924-1945,” reprinted in:
Thomas, Geschichte, between 54-55. The sprawling system of oversight of
the German war economy in 1939 is
summarized in: Murray, Balance of Power, 19-27.
25
Statistisches Reichsamt, Abteilung VIII, “Die Mangelstoffe des mittel-
europäisch-großdeutschen
Wirtschaftsraumes,” June 1940, T-84/70 (EAP 66-c-12/11).
26
In fact, Germany only received 876,000 tons from the Soviet Union during
their brief partnership, compared to
8,820,000 tons from Romania from 1940 until mid-1944. OKW,
Feldwirtschaftsamt (Bearbeiter: Dr. W. Tomberg),
“Wehrwirtschaftliche Erkenntnisse von 5 Kriegsjahren,” Abgeschlossen:
November 1944, T-77/429 (Wi/IF 5.3517).
The gap was slightly narrower between January 1940 and August 1941:
910,873 tons vs. 2,477,071 tons. OKW
WiRüAmt/Ro, Az. 11 k 2209 V 1s [?], “Mineralöl-Einfuhr im 1. Und 2.
Kriegsjahr,” 22 December 1941, Imperial
War Museum (Duxford), Foreign Documents Collection (hereafter cited as:
IWM, FD) 4809/45. The various kinds
of petroleum products imported from the Soviet Union and Romania between
January and September 1940 are listed
in: Ro V, Az. 11 k 2209 Vs, “Aufteilung der geschätzten Mineralöl-Einfuhr
nach Sorten (ohne Einfuhr in das
Protektorat),” no date, IWM, FD 4809/45.
27
Norman Rich, Hitler’s War Aims: Ideology, the Nazi State, and the Course
of Expansion (New York: W.W.
Norton & Company, 1973), 204-211.

276
petroleum for the German military to reverse the judgment of Versailles.
Germany also had barely enough
petroleum to launch Operation Barbarossa. Victory against the Soviet
Union would allow Germany to
escape the strategic dilemma afflicting it since the summer of 1940 and
realize the geopolitical and
racialist fantasies of the National Socialist worldview (Weltanschauung).

277
Prologue: Petroleum and the First World War
During both of the world wars, Germany fought at significant disadvantage
in terms of manpower,
economic, financial, and materiel resources. Ironically, the Central
Powers entered the First World War
with a better oil position than the Western Allies, who lost access to
Russian oil following the closure of
the Turkish Straits when the Ottoman Empire joined the Central Powers in
October 1914. Domestic
consumption was tiny, as evidenced by the fact that there were only
83,000 trucks and cars in Germany in
1913, less than either France or Britain.28 Germany started the war with
a reserve of roughly 343,000 tons,
which equaled one-quarter of its annual peacetime demand, or roughly 10%
of its entire wartime
consumption. Gasoline stocks amounted to 76,000 tons, against an
estimated annual wartime demand of
105,000 tons.29 Once these prewar stockpiles had been expended, Germany
had to “anchor” its fuel
supply on an early form of synthetic fuel, benzol, which is a byproduct
from the burning of coal in coke
ovens.30 Domestic production of benzol increased from 130,000 tons in
1913 to 230,000 tons in 1917 (or
80% of Germany’s total gasoline imports in 1913 – 275,000 tons). The
balance between the consumption
and domestic production of kerosene (in this case, “Petroleum,” although
“Leuchtöl” was the more
common term), lubricating oils, and diesel fuel (Treiböl) was less
favorable. Against roughly 800,000
tons of imported kerosene, 300,000 tons of lubricating oils, and 130,000
tons of bunker fuel in 1913,
Germany’s domestic producers that year could muster only 50,000 tons each
of kerosene and lubricants,

28

There were 61,000 cars in Germany in 1913, compared to 91,000 in France

and 209,000 in Britain. Rainer
Karlsch and Raymond Stokes, Faktor Öl: Die Mineralölwirtschaft in
Deutschland, 1859-1974 (München: C.H.
Beck, 2003), 93; and Joost Jonker and Jan Luiten van Zanden, From
Challenger to Joint Industry Leader, 18901939, vol. 1 of A History of
Royal Dutch Shell (Oxford: Oxford University Press, 2007), 173.
29
In 1913, about two-thirds of Germany’s imports had come from the United
States and Russia, while Galicia and
Romania supplied about 27%. Ferdinand Friedensburg, Erdöl im Weltkrieg
(Stuttgart: Ferdinand Enke Verlag,
1939), 67-80; Dr. Leonhardt, “Der kriegsentscheidende Treibstoff,”
Militär-Wochenblatt, 124. Jahrgang, Nummer
26 (22 December 1939); and Hauptmann Walter Suβdorf, “Das
Feldkraftfahrwesen,” in: Der groβe Krieg, 19141918, ed. M. Schwarte
(Leipzig: Johann Ambrosius Barth, 1921), viii: 340 and 346.
30
Alcohol could also be utilized as a power fuel after mixing it with
benzol, but the supply of the former was
circumscribed by the fact that the essential feedstock (potatoes) had to
be used to feed the population first and
foremost. Suβdorf, “Das Feldkraftfahrwesen,” 353-354. For more about
benzol, see: Gregory Nowell, Mercantile
States and the World Oil Cartel, 1900-1939 (Ithaca: Cornell University
Press, 1994), 227-228.

278
plus 90,000 tons of bunker fuel.31 Germany domestic crude oil production
also collapsed, from a prewar
peak of 114,000 tons to only 35,000 tons by 1920.32
Unlike the Western Allies, which possessed virtually no indigenous
sources of crude oil, Germany
and Austria-Hungary could draw from two nearby sources: Romania and
Austrian Galicia. In 1909, the
latter was briefly the world’s third-largest producer oil at just over
2,000,000 tons a year.33 Production in
Romania was 1,886,000 tons in 1913, of which 1,036,000 tons was
exported.34 Nearly 40% of Romanian
exports went to Britain and France, and less than 20% went to Germany and
Austria-Hungary. 35 Since
combined German-Austrian wartime consumption peaked at 2,320,000 tons in
1918 and did not rise
above 2,000,000 tons until 1917, the Central Powers would appear to have
been in a strong position.36
Things did not work out as planned. The Russians occupied Austrian
Galicia in September 1914.
When they retreated in May 1915, the Russians burned 350,000 tons worth
of stocks, but they also left
480,000 tons of stocks plus the region’s refineries untouched. The
Austrians estimated that the occupation
had cost them approximately 1,000,000 tons worth of damage and lost
production – hardly an
insignificant amount since German-Austrian consumption was only 1,130,000
tons in 1915.37 A more
important problem, however, was that Galician production had peaked in
1909 and then declined rapidly.

31

Ausrüstungsamt, Allgemeine Abteilung, “Deutschlands Rohstofflage,” April

1920, T-84/142 (EAP 66-c-12-62/6).
Heinrich Gönningen, “Verstärkte Schmierölversorgung aus deutschem Erdöl,”
Vierjahresplan, 1937: XI.
33
The best work on the history of the Galician oil industry is: Alison
Frank, Oil Empire: Visions of Prosperity in
Austrian Galicia (Cambridge: Harvard University Press, 2005).
34
Friedensburg, Erdöl, 26, 21.
35
Friedensburg, Erdöl, 52, 51. Germany’s oil imports in 1913 totaled
1,296,000 tons, 93% of which came from the
following sources:
Source
Quantity (Tons)
United States
693,000
Austria-Hungary
232,000
Russia
158,000
Romania
117,000
Source: Friedensburg, Erdöl, 70. See also: Karlsch and Stokes, Faktor Öl,
93.
36
Friedensburg, Erdöl, 14.
37
Friedensburg contrasts the Russians’ oversight in Galicia with the
thoroughness of the British in Romania two
years later, where a small group of British and French saboteurs
demolished the oilfields just prior to the arrival of
German troops: “The destructive work of a few English officers… doubtless
constituted one of the most significant
individual successes of the World War. Friedensburg, Erdöl, 126-127. See
also: Frank, Oil Empire, 185-189; and
Suβdorf, “Das Feldkraftfahrwesen,” 362-363 and 384.
32

279
Between 1914 and 1918, Austro-Hungarian production averaged only 850,000
tons a year.38 The cause
was geological: the Austrians had been producing oil since the 1850s, but
they wasted huge amounts of
oil through inefficient production techniques. Rather than conserve their
oil before the war, the Austrians
had inadvertently hastened the depletion of their reserves by encouraging
the consumption of oil, which
was cheaper than coal.39
Romania also proved to be an unreliable source. Germany and Austria-
Hungary were desperate for
Romanian oil after the loss of Galicia, but the subsidiaries of the major
U.S. and British oil companies
operating in Romania would not do business with Germany. Although the
major German oil company,
Steaua Romana (owned by a subsidiary of the Deutsche Bank) tried
exporting crude oil to Germany, the
Romanian Government, under pressure from the Allies, forbade the export
of either crude oil or gasoline
soon after the war’s outbreak. This led to a drop in exports from
1,036,000 tons in 1913 to only 429,000
tons in 1915, virtually all of which went to Germany and Austria-Hungary
(155,000 tons and 227,000
tons, respectively).40 Romania’s entry into the war on the side of the
Allies, and the subsequent
destruction of its oilfields in December 1916, set back production
considerably.41 Production dropped
from 1,244,000 tons in 1916 to 517,000 tons in 1917 before recovering to
1,214,000 tons in 1918.42
Between July 1914 and August 1916, Steaua managed to send 161,418 tons of
finished products (mainly
kerosene, lubricants, diesel fuel, and turpentine) to Germany and
Austria-Hungary, and another 318,720
tons to the German occupation authorities prior to the Armistice, or 5%
of Germany and AustriaHungary’s total consumption between 1914 and
1918.43 Exports over the course of 1918 reached 827,295
tons, of which 608,543 tons went to Germany, and the remainder to
Austria-Hungary.44 Total exports to

38

Friedensburg, Erdöl, 21.

Frank, Oil Empire, passim (esp. 173-204).
40
Friedensburg, Erdöl, 52, and 27.
41
Besides the physical damage, the officer who led the Allied demolition
estimated that they had destroyed roughly
210,000,000 gallons (5,000,000 barrels) of oil products. Lt. Col. J.
Norton-Griffiths, “Report on the Destruction of
the Roumanian Oilfields,” 22 January 1917, G.T. 25, British National
Archives (BNA), CAB 24/6.
42
Friedensburg, Erdöl, 26.
43
“Die Bedeutung der deutschen Beteiligung an der Steaua Roman während des
Krieges,” no date or author, BA-B,
R 8119/8364.
44
Maurice Pearton, Oil and Romanian State (Oxford: Clarendon Press, 1971),
76-95.
39

280
the Central Powers during the twenty-month occupation amounted to
1,141,000 tons, 78% (890,000) of
which went to Germany, and monthly deliveries had peaked at 110,000
tons.45
Two weeks after the signing of the Armistice, Lord George Curzon (a
member of the British War
Cabinet) memorably claimed that “the Allies floated to victory on a wave
of oil.”46 Allied supplies
dwarfed those of the Central Powers: by 1918, Allied oil consumption was
more than quadruple that of
the Central Powers (2,000,000 tons vs. 9,000,000 tons).47 The ability to
draw from such a surplus
certainly played a key role at pivotal points in the war, such as when
the French used taxis to ferry to
troops to the Battle of the Marne in September 1914 and lorries four
years later to contain then repel the
German offensives of 1918.48 At sea, the German High Seas Fleet was
limited to a cruising radius of only
eleven days, and German ships could not operate safely beyond the North
Sea due to Britain’s control
over the international coal trade.49 In spite of its considerable
successes in developing synthetic
alternatives to gasoline such as benzol (production of which totaled as
much as 2,000,000 tons over the
entire war), Germany only managed to acquire enough petroleum during the
war to meet 85% of its
peacetime requirements, which were already disproportionately low
compared to the Allies. By 1918, the
disparity in tanks, mechanized transport, and aircraft had tilted
decisively against Germany, even as it
launched its last-ditch offensives in the spring.50 German estimates put
the Allied advantage in the air at
45

Ro V, Az. 11 k 2209 (Vs), “Notiz für Chef W Ro anläβlich Besprechung in

Karinhall am 15. February 1940,” 14
February 1940, T-77/123 (Wi/IF 5.533); and Wi VII, “Niederschrift:
Sitzung in Karinhall am 2. Januar 1940 unter
Vorsitz von Generalfeldmarschall Göring,” 29 January 1940, T-77/400
(Wi/IF 5.3063). For more information about
Romania’s oil industry before and during the First World War, see: Dr.
F/F., Vowi 3386, “Das rumänische Erdöl,”
11 April 1939, T-77/611 (Wi/IC 4.16).
46
Quoted in: Anton Mohr, The Oil War (New York: Harcourt, Brace and Co.,
1926), 155-156. Curzon’s assertion
has been upheld by official historians of Royal Dutch/Shell (Shell), who
argue that the lack of motorized transport
put excessive strain on Germany’s stock of railways cars and horses. A
shortage of the former reduced coal output,
as much production could not be moved from the pithead. Demand for the
latter also exacerbated the food crisis,
itself partially a product of a lack of mechanization within German
agriculture. Jonker and Zanden, History of Shell,
173-178.
47
Friedensburg, Erdöl, 14-16. The Allies’ advantage is explained in more
detail in: Jonker and Zanden, History of
Shell, 163-173.
48
Paul Foley, “Petroleum Problems of the World War: A Study in Practical
Problems,” United States Naval Institute
Proceedings 50: 261 (1924): 1816.
49
W.G. Jensen, “The Importance of Energy in the First and Second World
Wars,” Historical Journal 11: 3 (1968):
544.
50
Jonker and Zanden, History of Shell, 175-177. Although the Allies did
enjoy an overwhelming advantage in terms
of mechanization, the Shell historians overlook the fact that simple
numerical superiority means little unless soldiers
have developed operations and tactics designed to exploit the
capabilities of such weapons. Combined arms tactics

281
slightly more reasonable 3:1 ratio, although the situation was hopeless
with regard to tanks – 45:3,000.51
Just as importantly, whereas the Allies could deploy 200,000 lorries by
1918, the Germans had only
25,000.52 Even had Germany managed to survive the defeats of the autumn
of 1918, the future was bleak.
Using the so-called “Plan 1919” drafted by Col. J.F.C. Fuller (one of the
pioneers of armored warfare) as
a starting point, the Allies were planning a massive onslaught for the
coming July backed by tens of
thousands of tanks and aircraft. “Had this come about,” one historian
surmises, the Reich “would have
been unable to offer effective resistance” since its oil shortage had
constrained both its production of
aircraft and its development of tanks, “despite being the country of
Daimler, Diesel, and Benz.”53 Of
course, such hypotheses cannot be tested since Germany collapsed in 1918,
before it ran out of petroleum.
The most effective rebuttal to Curzon’s claims came from Germany, in a
1939 book by a former
mining engineer-turned politician, Ferdinand Friedensburg. Erdöl im
Weltkrieg remains the only focused
study on the subject.54 In his discussion of “Crude Oil’s Significance
for the Outcome of the World War,”

were only their infancy by 1918, and while tanks, planes, and lorries
might have breached the German lines, the
Allies had no understanding how to use those weapons to effect a decisive
victory.
51
Dr. Leonhardt, “Der kriegsentscheidende Treibstoff,” Militär-Wochenblatt,
124. Jahrgang, Nummer 26 (22
December 1939).
52
Much of the credit went to the tremendous capacity of the U.S. automobile
industry. The number of vehicles in
the United States had exploded from 23,000 in 1902 to over 1,000,000 by
the start of the war. During the war, the
production of trucks increased from 23,500 in 1913 to 227,300 in 1918
(which was one-quarter of total automobile
production that year). By the end of the war, the U.S. automobile fleet
stood at 6,000,000 vehicles and increased a
further 2.5 times over the next five years. A.A. Fursenko, The Battle for
Oil: The Economics and Politics of
International Petroleum Conflict over Petroleum, 1860-1930 (Greenwich,
1990), 179-180, 192.
53
Jensen, “Importance of Energy,” 542-545 (quotation from pg. 543).
54
It is indicative of the esteem in which Friedensburg’s work was held by
the German military that perhaps the only
detailed analysis produced by the latter on the subject of oil and the
First World War was taken verbatim from Erdöl
im Weltkrieg: Maj. Gieche (?), G.L. 5 (I), “Studie: Mineralölversorgung
und Kriegsentscheidung,” 01 February
1940, enclosed with: Der Reichsminister der Luftfahrt und
Oberbefehlshaber der Luftwaffe (Ob.d.L. – Göring;
signature illegible) an das OKW, Wi.RüAmt/Ro. z.Hd. v. Herrn Oberst
Becht, GL 5, Min.Öl-Abt. Az./Nr. 2530/2.40
(I), T-77/231 (Wi/IF 5.1180). See also the laudatory review of Erdöl im
Weltkrieg in: Militär-Wochenblatt, 124.
Jahrgang, Nummer 3 (14 July 1939). Friedensburg was an unrepentant critic
of the regime and actually spent time in
Gestapo custody in 1935, which might explain why the Air Ministry did not
want to draw attention to the fact that it
was plagiarizing his work. The British also took notice of Friedensburg’s
book, as it appeared immediately prior to
the outbreak of the Second World War. Arthur C. Hearn, a former Anglo-
Iranian Oil Company director, produced a
summary of Friedensburg’s book for the company prior to re-entering
government service as the Admiralty’s
leading adviser on oil policy: “Das Erdöl im Weltkrieg (Petroleum
Information Bureau) by Dr. Ferdinand
Friedensburg (1939)...,” 11 August 1939, British Petroleum Archive,
Archival Reference No. 72492. According to
Hearn’s summary, Friedensburg’s primary contribution was his “very
natural reflection that – mutatis mutandis –
strategists of the future have much to learn from the knowledge and
experience, painfully gained over two decades
ago, in respect to the need for assigning to the economic issues their
full and proper place in the general strategic
plan.” During the Second World War, the Ministry of Economic Warfare also
produced a summary for the benefit of

282
Friedensburg contended that existing analyses had been influenced by
assumptions about oil’s future
importance.55 The Allies did, indeed, have an overwhelming superiority in
terms of overall supplies. This
imbalance did not, however, determine the outcome of the war. Military
consumption had increased
dramatically, even before the war. In 1911/12, the Army estimated that it
would require 20,000 tons per
year in wartime, but this figured had more than tripled by 1913/14 and
could reach as much as 180,000
tons by 1919. Nonetheless, Germany was still able to cover roughly 80% of
its requirements during the
war (as compared to peacetime consumption).56 The German military still
possessed adequate stocks by
war’s end: the U-boat fleet had enough reserves to continue operations
for another four to five months,
and although the Air Force and Army were not awash in oil, supplies were
“adequate” and “sufficient.”57
Indeed, according to one immediate postwar assessment, domestic benzol
production and imports from
Romania and Galicia “sufficed to meet the most urgent requirements.”58
The German fuel position only
became intolerable after the collapse of Bulgaria severed imports from
Romania, which rendered any
discussion of restarting the war after the Armistice out of the
question.59

the U.S. Government: “Some Notes on ‘Das Erdöl im Weltkrieg’ by Dr.

Friedensburg,” no date, enclosed with: O.F.
Thompson (Ministry of Economic Warfare) to S. Kilbey (British Embassy,
Washington DC), “The German Oil
Position,” 21 January 1943, NARA, Record Group 169: Record of the Foreign
Economic Administration, Entry 361,
Box 2202.
55
Friedensburg, Erdöl, 121-128.
56
Karlsch and Stokes, Faktor Öl, 93, 111.
57
What Friedensburg failed to note was that Germany had to make do with
benzol “stretched” with either gasoline
or alcohol. Maj. H.H. Zornig (Assistant U.S. Military Attaché, Berlin),
“The German Motor Fuel Situation and Its
Effect on Motor Design,” Report No. 9947, 22 January 1929, in: University
Publications of America, U.S. Military
Intelligence Reports, Germany 1919-1941 (Frederick: University
Publications of America, 1983), Reel 8. This was
hardly ideal, for the benzol-mixture resulted in lower performance for
German combat aircraft. Erich Ludendorff,
Meine Kriegserinnerungen (Berlin: Ernst Siegfried Mittler und Sohn,
1919), 273. Benzol also had the unfortunate
tendency to freeze in cold conditions unless it was mixed with toluol and
gasoline. Supplies of the latter in particular
were always in short supply and had to be reserved primarily for aircraft
consumption. Suβdorf, “Das
Feldkraftfahrwesen,” 354. “Every German soldier at the front,” one author
recalled, could “remember the
uncomfortable situation” that ensued when their motors failed as a result
of the inferior fuel being used: “It dawned
upon the more reflective that here lay a problem that could decide the
war.” Verbandssyndikus Kurt Bronk,
“Deutschlands Erdöl-Selbstversorgung, militärisch gesehen,” Militär-
Wochenblatt, 120. Jahrgang, Nummer 16 (25
October 1935).
58
Ausrüstungsamt, Allgemeine Abteilung (II Fb), “Deutschlands
Rohstofflage,” May 1920, T-84/142 (EAP 66-c12-62/5).
59
Friedensburg, quoting Ludendorff, contends that the surrender of
Bulgaria, and the “doubtful” prospects for
stabilizing the Austro-German flank in order “to preserve Romania’s oil
deliveries to us,” hastened the Army High
Command’s demand that the German Government request an armistice.
Friedensburg, Erdöl im Weltkrieg, 124;
Ludendorff, Kriegserinnerungen, 579. See also: Suβdorf, “Das
Feldkraftfahrwesen,” 394.

283
Friedensburg denied that “there was any direct connection between the
collapse of 1918 and the
supply of petroleum.”60 The consequences of the Central Powers’ relative
dearth of oil were more subtle.
Inadequate supplies of industrial lubricating oils probably played a role
in the decline in industrial
productivity by the closing stages of the war. The oil shortage may also
have contributed to the crisis of
confidence both at the front and in Germany.61 Years later, former
soldiers still complained about their
“bitter” experience at coping with fuel shortages. “A poor man’s economy
[Armeleutewirtschaft],” was
the verdict of one officer.62 A lack of oil also contributed to the
relative decline of the Germany Army, as
evidenced by Germany’s inability to match the Allies in the production of
important new weapons such as
submarines, tanks, and aircraft.63 “Even if the oil crisis in Germany in
no way reached the most severe
magnitude,” Friedensburg concluded that “it was doubtless one of the
primary causes for the gradual and
then ever faster breakdown in strength.” Of greater significance were the
lessons to be drawn from the
experiences of 1914-1918, for the war had demonstrated “the connection
between the conduct of war and
the economy, most notably the importance of raw materials questions and
in particular the importance of

60

This was also the opinion of at least one of Germany’s economic warfare
planners, who challenged an approving
reference to Curzon’s assertion by one of his colleagues. Although
“during the World War Germany [enjoyed] no
surplus of crude oil, there was in any case no shortage that would have
played a significant role in the outcome of
the war.” Aktennotiz, “Stellungnahme von W Wi VI d zur Ausarbeitung
Mineralölversorgung Deutschlands unter
dem Gesichtspunkt des Wirtschaftskrieges (von W Ro V),” no date, author’s
signature illegible, T-77/526
(Wi/I.156).
61
Friedensburg based this part of his argument on Ludendorff’s memoirs. One
is tempted to ascribe to Ludendorff
an ulterior motive – as an outspoken proponent of the “Dolchstoβlegende,”
he had every reason to blame the public
for not persevering through the war’s privations. In this case, however,
Ludendorff praised the resilience of the
German people: “It is representative of our circumstances in Germany how
little this evil [the lack of fuel] was the
subject of discussion.” Ludendorff, Kriegserinnerungen, 274.
62
Obrstlt. a.D. Scholz Roesner, “Die Treibstoff-Frage in ihrer Bedeutung
für die Landesverteidigung,” MilitärWochenblatt, 118. Jahrgang, Nummer 44
(25 May 1934). See also: Verbandssyndikus Kurt Bronk, “Deutschlands
Erdöl-Selbstversorgung, militärisch gesehen,” Militär-Wochenblatt, 120.
Jahrgang, Nummer 16 (25 October 1935).
63
Friedensburg’s conclusions do not conflict with those of Walter Suβdorf,
although the latter claimed (since he
provided no citations) that the gradual motorization of the German Army,
higher than anticipated operational
consumption, and civilian requirements produced “a kind of shortage of
fuels, particularly benzol,” as early as the
summer of 1915. This shortage forced the High Command to impose rationing
on the Army starting 01 September
1915. These efforts proved unsuccessful because nothing could be done to
stem “the progressive motorization” of
warfare due to the emergence of motor vehicles and aircraft: Suβdorf,
“Das Feldkraftfahrwesen,” 353-354 an 363.
As of 1925, Suβdorf was a Privy Councillor (Regierungsrat) in the Reich
Ministry of Transportation
(Reichsverkehrsministerium).

284
petroleum supplies […].”64 Germans would take this lesson to heart after
1918 as they grappled with
challenges posed by the shift from coal to oil and plotted their revenge.

64

Friedensburg, Erdöl, 121-128. This section was also reprinted in one of

the many military journals in circulation
during the Third Reich, whence it caught the attention of the WiRüAmt:
“Die Bedeutung des Erdöls für die
Entscheidung des Weltkrieges,” provenance unclear (possibly
Wehrwirtschaftliche Umschau), date unknown, T77/437 (Wi/IF 5.3689). For a
complementary analysis, see also: Maj. F.G. Tryon (Office of the U.S.
Assistant
Secretary of War), “Raw Materials Supplies of Germany during the World
War,” 16-29 June 1930, NARA, Record
Group 107: Records of the Secretary of War (hereafter cited as: RG 107),
Entry 191, Box 45; Karlsch and Stokes,
Faktor Öl, 96-112; and Charles More, Black Gold: Britain and Oil in the
Twentieth Century (London: Continuum,
2009), 17-22.

285
Picking up the Pieces: 1918-1925
After the Treaty of Versailles, German policymakers had to achieve their
ambitions in the face of
even greater scarcity. Before the war, German oil and banking interests
seemed poised to break AngloAmerican control of at least the European
petroleum market. Germany’s fledging oil companies,
Deutsche Petroleum A.G. (DPAG) and Deutsche Erdöl (DEA), backed by their
banking patrons, the
Deutsche Bank and Disconto-Gesellschaft, respectively, posed a serious
threat to Standard Oil’s
domination of the European market.65 Germany also enjoyed a strong
position within the Romanian oil
industry, where a Deutsche Bank subsidiary, Steaua Romana (acquired in
1903), was the country’s
second-largest oil company in terms of production in 1913 and the largest
with regard to both
capitalization and refining capacity.66 The German banks were also hard
at work building partnerships
with Russian suppliers in order to eliminate the need for imports from
the United States. These efforts
culminated in 1906 with the formation of the Europäische Petroleum Union
(EPU), whereby the Deutsche
Bank, in partnership with the two largest Russian oil companies, Branobel
and the Rothschilds, would
market Caucasian oil in Europe. When efforts to drive Standard Oil from
the European market failed, the
EPU formed a cartel with the U.S. giant, receiving 20% of the European
kerosene trade.67 Building upon

65

DPAG and DEA merged in 1925, with the latter holding a 54% stake in the
new company (also called DPAG),
while their patrons followed suit in 1929. The Deutsche Bank’s official
history briefly covers the pre-1918 history of
the bank’s involvement in the oil industry, as well as the failed attempt
to merge DPAG and DEA in 1920, but not
the final merger itself. Lothar Gall, et al., The Deutsche Bank (London:
Weidenfeld & Nicolson, 1995), 64-67, 146150, 171-172, and 181. The unique
relationship between banking and oil in Germany, which persisted until
the end
of the Third Reich, is considered in: Helmut Mejcher, The Struggle for a
New Middle East in the 20 th Century:
Studies in Imperial Design and National Politics (Piscataway: Transaction
Publishers, 2007), 259-269.
66
The other German firm, Concordia (a subsidiary of the Disconto-
Gesellschaft), occupied the fifth-place among
Romanian oil producers in 1913. In 1907, German capital controlled 62% of
the Romanian oil industry, against only
10% for Britain. The Germans later claimed that their displacement by
British and French interests had harmed the
Romanians, since the major oil companies had no desire to develop Romania
at the expense of their more profitable
possessions elsewhere. “Rumäniens Öl unter deutschem Schutz,” Militär-
Wochenblatt, 125. Jahrgang, Nummer 26
(27 December 1940); and W.F., “Neuordnung der rumänischen
Erdölwirtschaft,” Deutsche Wehr, Nr. 48, 45.
Jahrgang (28 November 1941). For a detailed statistical overview of the
Romanian oil industry from the turn of the
century until 1939, see: Werner Trees, Untitled Memorandum, 09 August
1940, PAAA, R 105989.
67
The agreement broke down in 1912, after the Deutsche Bank spearheaded
efforts to establish a monopoly over the
kerosene trade in Germany by cutting out Standard Oil and replacing it
with oil from the Nobels, the Rothschilds
(now owned by Shell), and U.S. rivals of Standard. The war intervened
before these developments could play out.
Alfred Chandler, Scale and Scope: The Dynamics of Industrial Capitalism
(Cambridge: Harvard University Press,
1990), 435-441; Thilo Dähne, Hptm. a.D., Dipl. Volkswirt., “Die Bedeutung
von Kohle und Öl in
weltwirtschaftlicher und politischer Hinsicht,” Wissen und Wehr, Sechster
Jahrgang (1925); Fursenko, Battle for Oil,

286
its longstanding relationship with the Ottoman Empire since 1888 through
the construction of the
Baghdad to Berlin railway, the Deutsche Bank also secured a one-quarter
share of the Turkish Petroleum
Company (TPC). The TPC had been in the process of signing a concession to
explore the Ottoman
vilayets (provinces) of Mosul and Baghdad when the First World War broke
out.
Oil played a prominent role within German strategy during the First World
War. Thanks to its
military successes in the east, in 1918, Germany coerced Romania into
signing an favorable petroleum
agreement in addition to the Treaty of Bucharest, which would give a
German-Austrian holding-company
a dominant position within the Romanian oil industry. Finally, in August
1918, even as the Western Front
buckled under the weight of Allied counteroffensives, the Reich signed a
supplementary agreement to the
Treaty of Brest-Litovsk with the fledgling Bolshevik regime, giving it up
to one-quarter of all of the oil
produced in the Caucasus.68
After 1919, Germany was left with nothing. The loss of Germany’s overseas
colonies was not
especially harmful.69 But Germany’s new borders cut into its already
meager domestic oil production:
50,000 tons out of the 120,000 tons produced in 1913 had been lost.70
More damaging was the abrogation
of the punitive treaties with Romania and Russia under the terms of the
Versailles Treaty, and the

107-125; Nowell, World Oil Cartel, 59-65; and Harold Williamson and Ralph
Andreano, American Petroleum
Industry: The Age of Energy, 1899-1959 (Evanston: Northwestern University
Press, 1963), 242-260.
68
Both U.S. and British analysts were quick to spot the economic as well as
the strategic rationales behind the
Treaty of Bucharest. For U.S. analysis, see the collection of papers
concerning the treaty in: Yale University
Library, Manuscripts and Archives, Inquiry Papers, Series III, Box 20,
especially: “The Bucharest Treaty as
Affecting Rumanian Petroleum Resources,” no date or author; “Strategic
and Economic Aspects of the Treaty of
Bucharest: Summary of Major D.W. Johnson’s Memorandum,” no date or
author; and “Abstract of the Petroleum
Agreement between Rumania and the Central Powers, 7 May 1918, no author.
For British analysis of the treaty, see:
Political Intelligence Department, Foreign Office, “Memorandum on the
Meaning and Effect of the Bucarest [sic]
‘Peace Treaty,’” 19 September 1918, Rumania/002, BNA, CAB 24/67. The
supplementary agreement to BrestLitovsk is reprinted in: U.S. Senate,
Bolshevist Movement in Russia: Letter from the Secretary of State
Transmitting
to the Senate Committee on Foreign Relations a Memorandum on Certain
Aspects of the Bolshevist Movement in
Russia, 66th Congress, 2nd Session, Document No. 172 (Washington, DC:
U.S. GPO, 1920), 49-55.
69
There was considerable debate in Germany over the economic value of the
lost colonies. Supporters of the
colonies’ return to Germany in the 1930s such as Heinrich Schnee (the
last Governor of German East Africa)
claimed that their meager economic contributions to Germany stemmed from
fact that they had only been under
German rule for a generation and were still “wild and undeveloped.”
Although the former colonies subsequently
exported considerable quantities of raw materials that would have gone a
long way to covering Germany’s import
requirements in the mid-1930s, none of them produced oil. Gouverneur a.D.
Dr. Schnee, “Rohstoffe und Kolonien,”
Militärwissenschaftliche Rundschau 1: 6 (1936).
70
Oblt. Löhr, “Deutsche Treibstoffversorgung,” Militär-Wochenblatt, 117.
Jahrgang, Nummer 47 (18 June 1933).

287
expropriation of the Deutsche Bank’s assets in Romania, Galicia, and the
former Ottoman Empire.71
Many of these properties went to France as spoils of war, and Paris used
the Deutsche Bank’s shares in
the TPC to establish the first French major oil company, the Compagnie
Française des Pétroles (CFP).72
The Deutsche Bank’s marketing subsidiary in Britain, ironically named
British Petroleum (BP), was also
expropriated. The British Government sold BP off to the Anglo-Persian Oil
Company (APOC) in 1917,
thereby giving the fledgling company whose only prior assets were its
under-developed upstream
operations in Persia a new lease on life by vastly expanding its
downstream presence.73
Within Germany itself, the outcome of the war gave a decisive edge to
foreign oil companies, not just
the U.S and British major companies, but also outsiders such as the
Benzol-Verband, which marketed
Soviet exports. Deprived of stable sources of supply, DPAG and DEA sold
off their marketing subsidiary
(OLEX) to APOC between 1925 and 1931. As late as 1938, the petroleum
trade in Germany remained
largely in the hands of the German subsidiaries of the U.S. and British
major oil companies:
Subsidiary (Parent Company)
Deutsche-Amerikanische Petroleum Gesellschaft
(Standard Oil Company of New Jersey – Jersey)
Rhenania-Ossag Mineralölwerke (Royal Dutch/Shell)
OLEX (APOC)

71

Share of German Market

26.1%
22%
9.6%

For the perspective of the leadership Deutsche Petroleum Aktien

Gesellschaft (the Deutsche Bank subsidiary that
owned Steaua between 1903 and 1918) on its postwar misfortunes, see:
“Geschäfts-Bericht der Deutschen
Petroleum-Aktien-Gesellschaft über das sechzehnte Rechnungsjahr (1.
Oktober 1918 bis 30. September 1919),”
March 1920, PAAA, R 89383. The DPAG’s Managing Board (Vorstand)
considered the Versailles Treaty to be just
a fig leaf for the Allies to eliminate a dangerous commercial competitor:
Germany’s enemies “were determined to
exterminate root and branch [mit Stumpf und Stiel auszurotten]” the
German corporate presence overseas, which
had heretofore developed “respectable enterprises of world renown.”
Leading Deutsche Bank executives, most
notably Emil Georg von Strauss and Kurt Weigelt (both of whom served on
DPAG’s Managing Board), never
reconciled themselves to the loss of the bank’s assets Romania and Iraq,
and they would seek redress throughout the
Weimar Republic and Third Reich. Due to space constraints, it was
impossible to include consideration of the
Deutsche Bank’s efforts to reacquire its lost “rights” in Romania and
Iraq after 1918. See, instead: Dietrich
Eichholtz, Deutsche Ölpolitik im Zeitalter der Weltkriege: Studien und
Dokumente (Leipzig: Leipziger
Universitätsverlag, 2011), 96-167 and 404-405.
72
Richard Kuisel, Ernest Mercier: French Technocrat (Berkeley: University
of California Press, 1967), 21-44; and
Nowell, World Oil Cartel, 148-222.
73
R.W. Ferrier, The Developing Years, 1901-1932, vol. 1 of The History of
the British Petroleum Company
(Cambridge: Cambridge University Press, 1982), 217-219.

288
The Benzol-Verband and the Standard Oil Company of New York claimed much
of the remainder.
Meanwhile, the tiny Deutsche Gasolin, an IG Farben subsidiary that sold
synthetic gasoline, accounted
for less than 4% of the German petroleum trade.74
At the beginning of 1920, the Armaments Office (Ausrüstungsamt) of the
Army High Command
(Heeresleitung) in the newly constituted Defense Ministry
(Reichswehrministerium, RWehrM) completed
what may have been the military’s first postwar assessment of Germany’s
fuel supply. The most
important domestic source of fuel was benzol, the supply of which at the
time was 85,000 tons per annum
(35,000 tons of which went to the Allies), with only 10,000 tons
available for common consumption,
although a “gradual increase” in overall production was “to be expected.”
Imports of gasoline, handled by
the subsidiaries of Jersey and Shell, stood at 20,000 tons per month but
were “dependent upon the supply
of foreign exchange.”75 Only a fraction of total civilian and military
demand for fuel could be satisfied
from the existing monthly supply of 20,000 tons available in January
(6,000 tons of benzol and 14,000 of
gasoline). The Armaments Office estimated the requirements of a 200,000-
man Army at 1,200 tons per
month, and 700 tons in the case of a 100,000-man Army. Deliveries,
however, totaled only 500 tons in
January and 600 tons in February. During the war, Germany’s average
civilian and military requirements
reached 28,000 tons per month (half of which went to the Army), although
supplies reached as much as
50,000 tons during “periods of major military operations” thanks to
supplies “looted” from Romania.76
Three months later, the Armaments Office produced a more thorough
evaluation of Germany’s raw
materials position. The lessons of the World War were on the minds’ of
its authors. They lamented that,
in the years before the war, little attention was placed on the fact that
Germany’s burgeoning economic
power increasingly relied upon the importation of vital raw materials.
Petroleum clearly “plays a pivotal
74

Chandler, Scale and Scope, 519-521.

For prewar figures concerning imports and domestic production of major
petroleum products, see:
Ausrüstungsamt, Allgemeine Abteilung, “Deutschlands Rohstofflage,” April
1920, T-84/142 (EAP 66-c-12-62/6);
and Auswärtiges Amt (AA, Auβenhandelsstelle), Abschnitt XI B, Chemie
(Rohstoffe), “Die Weltlage des Erdöls im
Jahre 1919,” Blatt Nr. 43/II (20 June 1920 [?]), PAAA, R 97787. The AA
study provided a total 1913 import figure
of 1,300,000 tons (750,000 tons of kerosene, the remainder divided
equally between gasoline and crude oil), valued
at 183,000,000 RM.
76
Reichswehrministerium (RWehrM), Heeresleitung, Ausrüstungsamt,
“Uebersicht über die Betriebsstofflage,”
February 1920, T-84/142 (EAP 66-c-12-62/6).
75
289
role within both the peace and wartime economy.” When it came to the
civilian economy, “[even] if all
other raw materials are available in large quantities,” the process of
converting unfinished goods into war
materiel was impossible “if fuels for motors and lubricating oils for
machines and railways was lacking.”
On the military side, the “increasing motorization” of the armed services
ensured for oil a “steadily
growing significance. Its shortage in the last war became all too
noticeable for all of us.” Unfortunately,
nature had been a “stepmother” to Germany when it came to crude oil.
Prewar production had only
reached 120,000 tons, nearly half of which came from Alsace and had to be
written off following its
return to France in 1918.77 Imports on the other hand (primarily from the
United States) were more than
twelve times greater.78 On the plus side, postwar imports of kerosene had
dipped sharply as a result of
electrification, while Germany’s territorial losses had the unintended
consequence of reducing its total
consumption.79 The overall situation was grim: “As a result of this
decisive dependence upon foreign
imports our [supply] of fuels and lubricating oils would quickly become
difficult during a war.”80
Benzol was not necessarily the problem, although its supply was tied to
the production of hard coal
(anthracite or bituminous). The same could not be said of diesel fuel or
lubricating oils. Only half of the
180,000 tons of the former required in 1913, which was the primary source
of fuel for the U-boats, was
produced domestically through the low-temperature carbonization of coal.
Prewar research had indicated
that carbonization could be used to produce both gasoline and lubricating
oils, but little had been to done
to develop this capacity in view of the cost advantage enjoyed by natural
petroleum. Although synthetic
fuels had proven inadequate during the previous war, the report counseled
that “it should not be said that
this must be the case in the future.” Germany could now produce so-called
“Reichskraftstoff” (literally,
77

A handwritten addition indicates that production elsewhere in Germany

(primarily around Hannover) dropped to
only 40,000 tons by 1922.
78
In view the infancy of motorization, only 170,000 tons was gasoline.
79
AA (Auβenhandelsstelle), Abschnitt XI B, Chemie (Rohstoffe), “Die
Weltlage des Erdöls im Jahre 1919,” Blatt
Nr. 43/II (20 June 1920 [?]), PAAA, R 97787. The report acidly observed
that “[whether] the stark impoverishment
of Germany will have as a consequence a considerable shrinking of the
automotive and aeronautical sectors is not
yet apparent.” Import costs had also increased markedly as a result of
the loss of Germany’s civilian oil tankers.
Finally, the relinquishment of German interests in the Romanian and
Galician oil industries, besides ending the
threat to the Standard Oil’s “monopoly efforts,” could not be redressed
since the dearth of foreign exchange
precluded any efforts to search for and develop new sources of oil
abroad.
80
Ausrüstungsamt, Allgemeine Abteilung (II Fb), “Deutschlands
Rohstofflage,” May 1920, T-84/142 (EAP 66-c12-62/5).

290
Reich power fuel) by combining benzol with alcohol (57% to 34%), plus an
additional 9% of tetralin
(itself a derivative of coal tar), thereby alleviating the strain on
benzol production.81 New facilities for the
production of coal tar (which could subsequently turned into fuel) were
being constructed, “and research
and development into the task of improving the methods for treating our
hard and soft coal” was being
pursued “tirelessly.” Assuming it was possible reach a solid to liquid
fuel conversion rate of 7%,
23,500,000 tons of coal would “suffice to cover our entire demand for
oil.”82
At the same time, defeat had rendered Germany irrelevant to the postwar
struggle for oil according to
a widely circulated study of global oil politics from the summer of 1920.
The author, one Professor
Schlawe (who had previously taught the Technische Hochschule in Bucharest
and then led one of the
German oil companies in Romania) stressed that that the “mastery of crude
oil is synonymous with world
leadership.” This was the most recent manifestation of a recurring theme:
“the emergence and growth of
British dominance first in Europe and then the world led back to its
former mastery over certain important
raw materials,” including coal. It was fair to say “that thanks to the
control of crude oil, British world
domination is definitively secured.” Which was fine for Britain, but less
so for the rest of the world. Oilpoor states that could not purchase
adequate supplies at “acceptable prices” would “lose the ability to
compete economically,” while nations “whose supply of crude oil was not
unconditionally secured could
no longer conduct war.” Like the military, Schlawe believed that the most
useful step Germany could take
would be “the sharpest and most technically accomplished utilization of
domestic raw materials,” most
notably the development of synthetic substitutes for crude oil. Success
in this endeavor “must be the aim
of German industry and research,” for it alone offered the possibility of
“freeing Germany to a large
extent from imports of crude oil products.”83

81

A crossed-out portion of the report, which appears to have been a working

draft, even surmised that the day was
not far off that alcohol could itself be used as a “full-fledged” fuel,
thereby contributing to the “complete selfsufficiency
[Selbstständigmachung] of Germany… at the very least during periods of
emergency.”
82
Even then, another crossed out portion read, “we stand better prepared
today in the event of a cut-off from
overseas sources of oil than in 1914.” Ausrüstungsamt, Allgemeine
Abteilung (II Fb), “Deutschlands Rohstofflage,”
May 1920, T-84/142 (EAP 66-c-12-62/5).
83
Abschrift W 1832, Prof. Schl/Str., 29-6-1920, “Das Erdöl in seinen
Beziehungen zur äussern Politk [sic],” 08 July
1920, PAAA, R 94461. Schlawe’s paper made its way from the Office of the
President to the Foreign Minister.
291
German scientists developed two methods of synthetically producing
petroleum products: the Bergius
Process (hydrogenation, 1913) and the Fischer-Tropsch Process (F-T,
1923).84 The former, which seemed
to be most promising economically, was the handiwork of the German Nobel
Laureate, Friedrich
Bergius.85 Through hydrogenation, coal is liquefied by combining it with
hydrogen under high pressure.
The liquefied hydrocarbons can then be refined into various kinds of
petroleum products, including highoctane motor and aviation fuel. If it
turned out to be industrially feasible and cost-competitive (and this
was not yet clear, since Bergius had been unable to find a suitable
catalyst and could not demonstrate that
large-scale production was possible), hydrogenation would transform
Germany’s economic and military
position. The results during the World War had been disappointing, but
the Germans had already
confounded expectations once before by developing the Haber-Bosch Process
for the fixation of nitrogen,
and U.S. military analysts warned that “[the] next war may find the
Germans’ able to make their own oil
as the last one found them able to make their own nitrates.”86 At one
stroke, Germany could eliminate
both its need for oil imports (thereby saving hard currency and freeing
it from economic blackmail by
Britain) and its unemployment problem by creating a vast new market for
German coal and steel
producers. Moreover, hydrogenation yielded better results with low-
quality lignite rather than more
expensive bituminous or anthracite coal.87 Between 1924 and 1933, Germany
accounted for 20% of the
world’s coal production (behind only the United States) and 75% of its
lignite production.88

Minute from [Illegible] (Ministerialdirektor, Büro des Reichspräsidenten)

to Reichsauβenminister Dr. Walter
Simons, 21 September 1920, PAAA, R 97745.
84
For further explanation concerning the differences between the two
processes, including their costs and coal/steel
requirements, see: H. Koppenberg, “Mineralölgewinnung aus Kohle,”
Vierjahresplan, 1937: V; British Intelligence
Objectives Subcommittee, B.I.O.S. Final Report No. 1697 (Interrogation
No. 667), Item No. 30, “Synthetic Oil
Production in Germany: Interrogation of Dr. Bütefisch,” Fischer-Tropsch
Archive (hereafter cited as: F-T Archive);
and Stokes, “Nazi Oil Industry,” 264-272. During the Third Reich, the
Bergius Process was referred to as
hydrogenation (Hydrierung), which will be the practice in this chapter
for all sections dealing with the period after
1933.
85
For more on Bergius himself, see: Anthony Stranges, “Friedrich Bergius
and the Rise of the German Synthetic
Fuel Industry,” Isis 75: 4 (1984): 642-667.
86
Maj. F.G. Tryon, “Raw Materials Supplies of Germany during the World
War,” 16-29 June 1930, NARA, RG
107, Entry 191, Box 45.
87
Documents from this period usually referred to both anthracite and
bituminous coal as “Steinkohle,” and lignite
(or soft coal) as “Braunkohle.” The terms lignite and brown coal will be
used interchangeably.
88
Hughes, “Technological Momentum,” 116.

292
In view of the possible gains, it should not come as a surprise it was
the Weimar Republic – not the
Third Reich – that took the first steps toward constructing Germany’s
synthetic fuel industry. As early as
1925, the matter of state support for the construction of one or more
large-scale industrial Bergius
production facilities was the subject of discussions throughout the
German Government and between the
national and federal states. In March of that year, the
Reichsarbeitsministerium (RArbM) invited
representatives from across the government to participate in a conference
to discuss whether or not to
offer Bergius state assistance to establish a factory in Lower Saxony.
The invitation made reference to the
existing “sales crises” besetting the German coal industry and suggested
that hydrogenation offered a
viable, long-term means of support for the industry: “[This matter] has
the appearance of being an
invention of the greatest economic and social significance.”89
During the conference, the RArbM took the position that the government
had to find a new means of
providing effective support for the coal industry, whose financial
difficulties were less the product of
short term economic difficulties than long term systemic challenges,
including its increasing replacement
by oil. For those reasons, the RArbM had been “following for some time
with great interest stronger
chemical applications for coal, most of the all the discovery of Dr.
Bergius […].” The RArbM believed
that hydrogenation was capable of converting 100 kg of ground coal into
roughly 50 kg of liquid
hydrocarbons (primarily gasoline) – this 50% conversion ratio compared
quite favorably to that of
carbonization (only 7 to 10%), the most commonly used means of synthesis
in Germany at the time.90 The
RArbM also pointed out that, in 1922, 740,000 tons of the 1,330,000 tons
of petroleum consumed by
Germany had to be imported at a cost of 300,000,000 RM: “The oil that has
heretofore been imported
could be for the most part replaced by the Berginization [sic] of
3,000,000 tons of coal dust.” This was
89

Der Reichsarbeitsminister (Im Auftrage gez. Dr. Oscar Weigert) an den

Herrn Reichsminister der Finanzen, et al.,
IV Nr. 3310/25, “Förderung eines Verfahrens zur Verflüssigung der Kohle,”
31 March 1925, T-77/82 (Wi/IF 5.372).
Among the parties invited was the Reichswehrminister.
90
The Director of the Silesian Coal Research Institute (Breslau), Prof. Dr.
Fitz Hofmann, modified this calculation
slightly, estimating that the conversation rate “fluctuated depending on
the kind of coal [used] between 35 and 40 kg
of distilled oils.” He was nonetheless quite supportive, pointing out
that Berguis’ work has been “examined very
critically 10 to 12 times.” Hofmann also produced a favorable advisory
opinion supporting the disbursement of
“state financial support” for the project in Lower Saxony. Hofmann,
“Gutachtliche Aeuβerung über ein Verfahren
zur Gewinnung von Mineralölen aus Kohle nach Bergius,” no date, T-77/82
(Wi/IF 5.372). See also: “Das
Berginverfahren und seine Rentabilität,” Quelle: Kulturbeiträge Nr. 94 v.
26.11.25, T-77/82 (Wi/IF 5.372).

293
clearly a matter of economic, social, and military “significance,” for it
would stimulate demand for coal
from depressed mining communities. The necessary production facilities
would also create a customer for
German steel manufacturers (“probably Krupp”). The RArbM therefore
endorsed granting a 2,500,000
RM interest-bearing loan from the Reich to be repaid in six years to
commence industrial production
using hydrogenation “for the first time.”91
The assembled officials (both bureaucrats and scientists) were reluctant
to provide state support for a
private enterprise, but there was a general consensus that it was
justified in the event that private capital
was not forthcoming. The representative of the Ministry of Transportation
(Reichsverkehrsministerium,
RVM) mentioned that the German automobile industry would be reassured by
having a secure supply of
fuel. Overall, he felt that the “Bergius process [was] of the greatest
importance for the German
automotive sector.” Interestingly, the only ministry lacking any “means”
of assisting Bergius was the
RWehrM.92 Nevertheless, its representative agreed that the “[process]
deserved the strongest support from
the standpoint of national defense.”93
Although the RWehrM could not provide Bergius with any direct assistance,
it did make
representations on his behalf to the state government of Baden, where
Bergius already had a plant in
operation (at Rheinau). The RWehrM assured the Government of Baden that
hydrogenation could achieve
91

Dr. Strunden (Reichsarbeitsminister), IV 3310/25., “Betr.: Förderung des

Bergiusverfahrens,” 11 April 1925, T77/82 (Wi/IF 5.372).
92
The minutes do not mention that the officer in question was Hauptmann
Hermann von Hanneken of the HWA,
which handled raw materials questions for the RWehrM until the
establishment of the WStb in October 1935, which
used to comprise the Wirtschaftsabteilung of the HWA. The Marineleitung,
once it heard about the meeting in the
Reichsarbeitsministerium, complained that it had not been consulted and
asked for all copies of all corresponding
“touching upon coal and oil questions.” The HWA reminded the
Marineleitung that, since only preliminary
discussions had taken place, there was no reason to send more than one
representative – Hanneken – who had
subsequently briefed other officials in the RWehrM, including the Navy,
about hydrogenation on 28 May 1925.
RWehrM, Chef der Marineleitung, Allgemeines Marineamt (signature
illegible) an Heeresleitung (Wa A), BB Vb
3973, 29 May 1925; and HWA to the Chef der Marineleitung, Allg.
Marinesamt, Nr. 299/25 Nachschubstab, zu
dort. BB Vb 3973 vom 29. V. 25., 10 June 1925; both in: T-77/82 (Wi/IF
5.372). Hanneken later served as Göring’s
Plenipotentiary for Iron and Steel Production in the Four-Year Plan
(Vierjahresplan, VJP) and head of the raw
materials division of the Ministry of Economics
(Reichswirtschaftsministerium, RWM).
93
Dr. Strunden (Reichsarbeitsminister), IV 3310/25., “Betr.: Förderung des
Bergiusverfahrens,” 11 April 1925, T77/82 (Wi/IF 5.372). The participants
agreed to meet a week later with a mining official from Lower Saxony –
one
Dr. Gärtner. No record of this meeting exists within this particular
file. Left unresolved was the question, raised by
the representative of the Finance Ministry (Reichsfinanzministerium,
RFM), Schwerin von Krosigk – later Finance
Minister during the Third Reich – of whether the support solicited on
behalf of Bergius should be drawn directly
from the national budget or from the funds set aside for unemployment
benefits [aus der produktiven
Erwerbslosenfürsorge].”

294
a coal-to-liquid fuel conversion rate of 60% – the end product behind
either light (gasoline and diesel
fuel) or heavy oils (fuel oil and lubricants). This was of “great
significance for the oil-poor Reich,” which
currently depended on imports to fulfill three-fifths of its annual oil
consumption of 1,300,000 tons.
“Through the construction of a sufficient number of large facilities for
the Bergius Process,” the RWehrM
hoped, “it would be possible to make the Reich independent of oil
imports.” The Reich and Prussian
governments were convinced of the project’s economic viability and
prepared to offer a loan guarantee to
construct a new facility in Lower Saxony. They nonetheless hoped that the
Government of Baden “might
want to collaborate as much as possible.”94 The topic soon came to the
attention of Baden’s Minister of
the Interior, who signaled his willingness to inspect Bergius’ Rheinau
facility.95 The RWehrM also made
arrangements with state and private representatives of the Bavarian coal
industry to ascertain if that
state’s low-grade pitch coal could be utilized during hydrogenation.96
Bergius had formed a partnership with Shell in 1921 through the
International Bergin Company (IBC)
to support his research at Rheinau.97 Although Bergius made progress in
demonstrating the commercial
viability of hydrogenation, a lack of funds and resources forced him to
sell control of the IBC to the
Badische Anilin- und Soda-Fabrik (BASF) in 1925 for 2,850,000 RM. BASF
improved upon Bergius’
existing process by increasing the yield of lighter fuels that could be
refined into high-octane gasoline.98
94

RWehrM, [?], J.A. (gez. Wurzbacher) an die Badische Gesandtschaft, Nr.

248. 7 .25 Wa. A. Stab, 07 July 1925,
T-77/82 (Wi/IF 5.372). A minute included at the bottom of the letter
states that the RWehrM had initially broached
the subject orally with a representative of Baden’s Minister, who was
absent at the time.
95
Badische Gesandtschaft an das RWehrM, Nr. 3819, auf gefl. Schreiben vom
7. Juli 1925, Nr. 248. 7. 25., Wa.A.
Stab, 15 August 1925, T-77/82 (Wi/IF 5.372).
96
Generalleutnant [signature illegible], HWA, to Professor Dr. Friedrich
Bergius, Nr. 503 [?]/8. 25/Wa Stab, 20
August 1925, T-77/82 (Wi/IF 5.372).
97
Bergius’ post-WWI work is summarized in: Stranges, “Friedrich Bergius,”
660-663.
98
Stranges, “Friedrich Bergius,” 665-666. In December 1925, BASF merged
with Bayer, Hoechst, Agfa, and two other
companies to form the Interessen-Gemeinschaft Farbenindustrie AG (IG
Farben). The date when BASF took control of
the International Bergin Corporation is not clear: Hughes, “Momementum,”
does not provide an exact date; Stranges,
“Friedrich Bergius,” 665, says 26 May 1925; Raymond Stokes, “From the IG
Farben Fusion to the Establishment of
BASF AG (1925-1952),” in: Werner Abelshauser, et al., German Industry and
Global Enterprise: BASF: The History of
a Company (Cambridge: Cambridge University Press, 2004), 192-193, says
July 1925; and Wolfgang Birkenfeld,
“Leuna 1933,” Tradition: Zeitschrift für Firmengeschichte und
Unternehmerbiographie 8 (1963): 97-98, mentions 1926.
According to Rainer Karlsch, BASF bought the German patent rights in
1925, 60% of the international patent rights
from Shell the following year, and the remaining 40% in 1931. Karlsch and
Stokes, Faktor Öl, 135-136.
Contemporaneous documents indicate that the sale went through in 1925
before the creation of IG Farben. “Kennwort:
‘Naphta,’ Offizier – Preisaufgabe 1927/28: Kraftfahrwesen,” Gruppe IV a,
March 1928, T-77/418 (Wi/IF 5.3329). The
history and operations of IG Farben are summarized in: NMT, viii: 1246-
1254. Bergius sold the international marketing

295
The Army Ordinance Office (Heereswaffenamt, HWA – responsible for
military’s economic
requirements until 1934) therefore persevered in its faith that synthetic
fuels would one day redress the
strategic balance in Germany’s favor. “The progressive motorization” of
society compelled nations
without adequate domestic crude oil reserves “to look for alternatives.”
Germany’s domestic output was
woefully inadequate and benzol production appeared to have reached its
ceiling at 200,000 tons per year.
The HWA was following developments in synthetic technology “with
particular interest and believes in
the essential necessity of making Germany self-reliant in the supplying
of its own fuel.” Hydrogenation
offered the most effective means of accomplishing this aim. It produced
more than five times as much
liquid fuel as carbonization without requiring the same kinds of high-
quality coal – if anything, “marginal
quality coal, such as coal dust, produces better results.” Equally
important was the variety of finished
petroleum products available through hydrogenation, since a modern
economy or war machine could not
function on a single kind of fuel. One ton of coal could be converted
into roughly 500 kg of oil, which in
turn could be refined into 140 kg of gasoline, 80 kg of lubricating oils,
and 300 kg of fuel oil. 7,000,000
tons of coal (a trivial amount when Germany was producing almost
140,000,000 tons of lignite) could
theoretically “suffice to cover an enormously enlarged demand for fuels
in our own nation.”99
By the early-1920s (before he sold out to BASF), Bergius was able to
convert one ton of coal at a cost
of 71 RM into as much as 650 kg of liquid fuel worth 141 RM,
theoretically realizing a profit of 70
RM.100 By that measure, German scientists had surpassed the planned 50%
conversion rate from coal to
liquid fuel. But such figures are misleading because they only take into
account the coal to be liquefied –
they make no allowance for the fact that coal was also necessary for a
variety of supplementary tasks
including power generation and hydrogen production. By 1937, the regime
admitted that synthetic fuel
producers required as much as twenty-two tons of brown coal or 4.5 tons
of hard coal to produce one ton

rights to Shell, but he held onto the German rights, which passed to BASF
in 1925. Shell briefly held onto a minority
stake at the insistence of its Chairman, Henri Deterding. Jonker and van
Zanden, History of Shell, 340.
99
“Das Bergius-Verfahren: Seine Bedeutung für die Betriebstoffversorgung
Deutschlands,” no date or author (circa
1925; the originating agency is clearly the HWA considering both the
content of the letter and the description in the
NARA finding aid), T-77/82 (Wi/IF 5.372).
100
Stranges, “Friedrich Bergius,” 663.

296
of gasoline.101 Although the process of synthesizing petroleum continued
to progress throughout the war,
it remained expensive both in terms of financial and raw materials costs.
According to a leading IG
Farben engineer interrogated after the war, less than 1.6 tons of hard
coal could be liquefied into one ton
of petroleum through hydrogenation. But once one incorporated the coal
burned for power generation and
hydrogen production into their calculations, the total coal expenditure
reached about seven tons per ton of
liquid fuel. The financial cost worked out to between 260 RM and 310 RM
per ton of liquid fuel
including fixed capital expenditures for plant construction. The F-T
Process was even more expensive:
about eight tons of coal at a cost of as much as 360 RM to produce one
ton of petroleum.102
In the 1920s, however, the military was convinced that synthesis could be
remunerative and estimated
a profit of 30 RM per ton of coal extracted, converted into liquid fuels,
and sold as finished petroleum
products. Although there was considerable skepticism about synthesis, the
HWA was certain that the
critics would come around – they placed particular hopes in lignite
producers and expected that Bergius’
current work would “bind” the two together. In any event, the HWA would
continue to devote “particular
attention” to the matter of Germany’s fuel supplies, with “the strong
hope that the liquefaction of coal
may be carried through without difficulties and that thereby at least
insofar as fuel supplies are concerned
Germany will be able to stand on its own two feet within the next few
years.”103 IG Farben, in particular,
would take the lead role in reducing Germany’s need to import oil,
although it operated under an entirely
different set of considerations than the German military.

101

H. Koppenberg, “Mineralölgewinnung aus Kohle,” Vierjahresplan, 1937: V.

B.I.O.S. Final Report No. 1697, “Synthetic Oil Production in Germany:
Interrogation of Dr. Bütefisch,” F-T
Archive. See also: Karlsch and Stokes, Faktor Öl, 137; and Stokes, “Nazi
Oil Industry,” 269-270. Stranges,
“Friedrich Bergius,” 666, puts forward a much lower figure of 190 RM per
ton (or $0.24 per gallon of gasoline) of
fuel produced by hydrogenation, but he does not appear to incorporate
ancillary costs into his calculations.
103
“Das Bergius-Verfahren: Seine Bedeutung für die Betriebstoffversorgung
Deutschlands,” no date or author (circa
1925; the originating agency is clearly the HWA considering both the
content of the letter and the description in the
NARA finding aid), T-77/82 (Wi/IF 5.372).
102

297
IG Farben and the World Hydrocarbon Cartel, 1927
Following the war, the role of IG Farben in fueling the German war effort
was a central component of
the prosecution’s case against the company during the so-called “IG
Farben trial” at Nuremberg of 19471948.104 While on the dock, Carl
Krauch, who oversaw Germany’s synthetic fuel program between 1938
and 1945, claimed that his initial dealings with the regime had not been
motivated by rearmament
considerations. Krauch had every incentive to make this claim to
establish his innocence, but there is no
reason to doubt his assessment that the new regime was concerned
initially with tackling the
unemployment and foreign exchange problem. Indeed, as Krauch pointed out,
IG Farben had been
negotiating increases in synthetic production in exchange for government
assistance with the Brüning
Government in 1932. When IG Farben first decided to invest in
hydrogenation in 1925, the world price
for gasoline was about 16 Pfennig per liter, against an estimated cost of
20 Pfennig per liter of synthetic
gasoline. By 1931, the figures had diverged considerably: natural
gasoline cost only 5.2 Pfennig per liter,
while synthetic gasoline cost 23 Pfennig per liter, and IG Farben was in
trouble.105 In October, IG Farben
had invited representatives of the German press and the major political
parties (including the National
Socialists) to Leuna “to convince [them] of the advantages and of the
national-economic significance of
hydrogenation.”106 In June 1932, IG Farben executives approached Hitler
to gauge his intentions and were
surprised by their warm reception. Hitler stressed that “an economy
without oil is not to be thought of in a
Germany which wishes to remain independent” and urged the company to
continue its work.107

104

NMT, vii: passim, esp. the indictment (pgs. 11-80).

NMT, vii: 607-614. The Reich also reduced internal the tax on Leunabenzin
from 3.80 RM per 100 kg to 1.00
RM. Karlsch and Stokes, Faktor Öl, 135-138.
106
Heinrich Gattineau, “Bericht über den Besuch der Leuna-Werke durch Presse
und Politik (1. -9. 10. 1931),” 12
October 1931, NARA, Record Group 238: National Archives Collection of
World War II War Crimes Records,
National Archives Microfilm Publication T-301, Reel 123, Document NI-
15257– hereafter cited as: NARA, RG
238, T-301/Reel No. (Document No.). One of the National Socialists
present was Hitler’s personal economic
adviser, Otto Wagener (misspelled “Wagner” in the report), who assured
his hosts “that the further supplying of the
German market with German gasoline fully accords with the aims of his
movement.” IG Farben had been forced to
cultivate more conservative elements of the Nationalsozialistische
Deutsche Arbeiterpartei (NSDAP) after falling
victim to vicious press attacks by party radicals. Hayes, Industry and
Ideology, 64-67.
107
Dr. Walter Greiling, “25 Years Leunawerke,” no date, NARA, RG 238, T-
301/116 (NI-14304); and NMT, vii:
535-554.
105

298
East German scholarship on the Third Reich emphasized the culpability of
leading IG Farben
executives in the planning and direction of the German war economy,
particularly Krauch.108 More recent
studies have argued that the unprofitability of hydrogenation (for the
company’s early agreements with
the Third Reich did nothing to cover IG Farben’s financial losses prior
to 1933) forced IG Farben into the
role of a supplicant to the regime.109 Since IG Farben had to recoup its
losses by producing synthetic
rubber, it depended on the regime’s largesse in providing the company
with a monopoly over production
and guaranteeing a price that was competitive with that of natural
rubber.110
There is no doubt that the company had initially pursued hydrogenation
for purely commercial
reasons. BASF had excess capacity for hydrogen production as a result of
the manufacture of ammonia
(which could then be converted into synthetic nitrates) that could also
be used to create synthetic fuel
through hydrogenation. If natural crude oil supplies became scarce,
hydrogenation would offer the
company entrée into the petroleum industry. In the event that oil
supplies remained plentiful, the company
could still make money if it created a protected market within Germany by
convincing policymakers that
hydrogenation could serve as a work-creation measure and improve
Germany’s balance of payments – in
108

See for example: Dietrich Eichholtz, “Zum Anteil des IG-Farben-Konzerns

an der Vorbereitung des zweiten
Weltkriegs: Ein Dokument zur staatsmonopolistischen Kriegsplanung des
faschistischen deutschen Imperialismus,”
Jahrbuch für Wirtschaftsgeschichte 1969/2, 83-105.
109
According to Karlsch, IG Farben’s expenditures between 1924 and 1932 ran
to between 330,000,000 RM and
430,000,000 RM. Karlsch and Stokes, Faktor Öl, 137. See also: Birkenfeld,
“Leuna 1933,” 108-110. Total
investment in the construction of synthetic fuel facilities during this
period was only 108,000,000 RM. In fact, 88%
of IG Farben’s total expenditures on construction between 1925 and 1944
(786,000,000 RM out of 894,000,000
RM) took place after 1932, 65% (586,000,000) of which just between 1941
and 1944. Gottfried Plumpe, Die I.G.
Farbenindustrie AG: Wirtschaft, Technik und Politik (Berlin: Duncker &
Humblot, 1990), 292-293.
110
The company’s “ambivalent” relationship to the Third Reich is a central
theme of Hayes’ Industry and Ideology,
the most important findings of which are summarized in his: “Industrie
und Ideologie: Die IG Farben in der Zeit des
Nationalsozialismus,” Zeitschrift für Unternehmensgeschichte, 32: 2
(1987): 124-136. See also: Plumpe, I.G.
Farbenindustrie, 281-296; and Henry Ashby Turner, German Big Business and
the Rise of Hitler (New York, 1985),
246-249. Hayes’ argument has much to commend it, although it should be
noted that contemporaries even within the
VJP complained that “the influence of the IG Farbenindustrie is very
large,” particularly within the Office for
German Raw and Basic Materials (Amt für deutsche Roh- und Werkstoffe),
whose R&D division – Abteilung III,
led by Krauch and staffed largely with IG Farben employees – was “the
soul of the office.” “Über die Organisation
der Vierjahresplan,” 27 January 1938, Nr. 24 in: Akten der Reichskanzlei:
Regierung Hitler, 1933-1938, ed. KarlHeinz Minuth and Friedrich
Hartmannsgruber (Boppard am Rhein: Boldt, 1983-2008), v: 90 – hereafter
cited as:
Akten der Reichskanzlei. Moreover, Hayes’ explanation cannot account for
IG Farben’s participation in Kontinentale
Öl AG after 1941, which expanded rather than reduced the firm’s
investment in the petroleum industry, or the
prominence of a number of IG Farben officials within the economic
policymaking apparatus of the Third Reich
beyond just Krauch, most notably Ernst Rudolf Fischer, Göring’s chief
adviser on petroleum affairs. For a more
balanced perspective that acknowledges the company’s “absolutely unique
place in the Third Reich,” see: Tooze,
Wages of Destruction, 227-230.

299
which case, IG Farben could achieve even more of a stranglehold over the
Germany economy through
horizontal integration with coal and steel producers who needed new
customers in the wake of the global
economic downturn and the spread of economic nationalism within the
industrialized world.
The fact that hydrogenation also served a strategic purpose was an
ancillary consideration before the
Third Reich. Since fears of an imminent exhaustion of global oil reserves
were widespread, BASF/IG
Farben quite reasonably saw a hydrogenation as an opportunity to corner
an emerging market while
enhancing the profitability of its existing operations.111 Through a
process of what another historian calls
“transnational structuring,” the company would manufacture the necessary
political rationale to mask its
pursuit of self-interest, all the while continuing its partnerships with
companies from the very powers
against which the Third Reich was rearming.112
IG Farben began its business relationship with Jersey in 1926/27, when
the two companies reached an
agreement over oil refining in the United States.113 IG Farben proved an
invaluable partner to Jersey since
hydrogenation could also be used to refine heavy crude oil, which would
give Jersey an edge in the event
that reserves of lighter oil dried up.114 The success of this early
partnership (which “had fulfilled all
expectations,” according to one internal IG Farben history) created the
foundation for negotiations to
establish a partnership “upon a wider basis” in 1928. Jersey was eager to
share the benefits of
hydrogenation with its foreign subsidiaries and partners, while IG Farben
wanted to promote “the further
development of our process [hydrogenation] through its greatest possible
application,” and stood to earn
enormous profits in countries rich in coal but poor in oil in the event
of “a future shortage of natural crude
111

Hughes, “Momentum,” passim.

“One historian argues that transnational firms perceive nations “as
resources to protect conditions amenable to
business” and use any manner of “tactics” to achieve commercial
advantage. While states pursue their own national
interest (most notably during wars), transnational firms may seek to
profit from inter-state rivalry by clothing
themselves “in the rhetorical garb of supporting the ‘national
interest.’” Gregory Nowell, World Oil Cartel, 1-44 and
280-288 (quotations from pg. 43). For good example of the kind of
propaganda IG Farben put out to demonstrate its
utility to the regime, see: “Leunas Bedeutung als deutsches Chemiewerk:
Vortrag von Dr. W. Boesler, Leuna,” June
1937, BA-B, R 8128/3293. Boesler described company’s task as “[defending]
the independence of our Fatherland”
from foreign oil. Boesler also spoke of “the chance to use Chemistry as a
weapon that will fight our Germany and,
after the difficult times beforehand, allow it to acquire the place in
the world that we all desire.”
113
For the origins of the partnership, see: Henrietta Larson, Evelyn
Knowlton, and Charles Popple, New Horizons,
1927-1950, vol. 3 of History of Standard Oil Company (New Jersey) (New
York: Harper & Row, 1971), 152-159.
114
Although hydrogenation turned out to be a commercial failure in terms of
coal liquefaction, it made a notable
long-term contribution to the refining of heavy crude and residual oils.
Plumpe, I.G. Farbenindustrie, 295.
112

300
oil.” Under a 1929 agreement, the two companies created a jointly owned
holding company, Standard-IG
(split 80/20 in favor of Jersey), to which both companies transferred
their most important petroleum
patents, with IG Farben receiving a cash payment ($35,000,000) and
546,011 shares in Jersey. The
following year, the two companies set up another firm, JASCO (Joint
American Study Company), which
functioned in the same manner as Standard-IG, except that it held the
rights for numerous petrochemical
patents, including synthetic rubber (Buna). Standard-IG, in cooperation
with Shell (which had been a
backer of hydrogenation since 1921 and owned a minority share of the
international patents rights through
the IBC until 1931), issued licenses for these patents through the
International Hydro Patents Company
after 1931, which operated around the world with the exception of
Germany. Although Jersey would take
over leadership of Standard-IG, IG Farben expected to earn “significant
revenues” through licensing fees
from the use of hydrogenation abroad, while preserving its privileged
role within the German petroleum
industry, since it had only relinquished its international patent rights
under the 1929 agreement.115
These partnerships predated the rise of Hitler and “cannot be explained
as a function of Nazi strategic
interests,” so much as economic advantage or necessity.116 As early as
1933, German military analysts
warned that IG Farben’s production of synthetic gasoline might be “tied
to commercial agreements
[Interessenverträge] with foreign concerns.”117 Between 1937 and 1940,
Shell’s German subsidiary
agreed to subsidize (along with IG Farben and Jersey, with whom it also
partnered within Germany
through joint ownership of a major distributor, Deutsche Gasolin) the
construction of a synthetic fuel
plant (Pölitz, with a planned capacity of 600,000 tons per year) in order
to preserve its market share.118 In
fact, the impetus for the construction of Pölitz came not from IG Farben,
which was relatively
115

Dr. B./Kl., Vowi 6023, “Chronik der Auslandsinteressen der I.G.,” 13

December 1944, BA-B, R 8128/817. In
1926, IG Farben, the Standard Oil Company of New Jersey (Jersey), and
Shell also entered into a partnership
through Deutsche Gasolin, a marketing firm established out of the ruins
of Hugo Stinnes’ industrial empire
following the magnate’s death in 1924. BASF bought the firm in 1925 and
offered the two major oil companies a
25% stake each in order to secure a short-term supply of crude oil until
synthetic production could be ramped up.
The relationship between the three companies was not warm: Jersey and
Shell only wanted an additional outlet for
their imported products, while IG Farben tried to use Deutsche Gasolin to
dispose of its synthetic gasoline. Karlsch
and Stokes, Faktor Öl, 138-140.
116
Nowell, World Oil Cartel, 241.
117
Oblt. Löhr, “Deutsche Treibstoffversorgung,” Militär-Wochenblatt, 117.
Jahrgang, Nummer 47 (18 June 1933).
118
The oil companies needed to participate secretly since outside of Germany
they posed as opponents of synthetic
gasoline and autarky. Jonker and van Zanden, History of Shell, 473-474.

301
uninterested in synthetic fuel after 1933/34, but rather, from Jersey and
Shell, which saw the project as a
means of investing their blocked funds earned from sales in Germany.
Consequently, Jersey and Shell
intended that Pölitz would use hydrogenation not to liquefy coal, but
instead, to refine crude oil that they
imported into Germany.119
Within the United States, after 1930, licenses to Standard-IG patents
were issued by the Hydro
Patents Corporation and supervised by another Standard-IG subsidiary
(Hydro Engineering and Chemical,
which also received all patents registered by licensees developed from
the original patents held by
Standard-IG), with Jersey receiving 80% of the royalties and the
remainder going to IG Farben. The
outbreak of the war forced the companies to terminate their research and
development partnership, IG
Farben transferred 2,000 of its patent rights vested under Standard-IG
and JASCO within the United
States, Britain, France, and their respective spheres of influence to
Jersey to avoid their confiscation as
enemy property in September/December 1939.120 Although Jersey bought out
IG Farben’s shares in
Standard-IG and JASCO for nominal fees, the latter could repurchase them
and its patent rights after the
war ended. When representatives of AIOC (a member of the international
patent pool) complained in
1939 about making royalty payments to IG Farben, a Jersey executive
brushed aside the objection with
the observation that “technology has to carry on – war or no war […].”
The Hydro Patents Corporation,
which counted eighteen U.S. oil companies as members (due to the value of
its patents for refining and
the fact that Standard charged non-members higher licensing fees),
remained in operation until March
1942, when Jersey signed a consent decree dissolving the its agreements
with IG Farben under pressure
from the U.S. Government.121
119

Plumpe, I.G. Farbenindustrie, 289.

Larson, Knowlton, and Popple, New Horizons, 405-408.
121
Larson, Knowlton, and Popple, New Horizons, 428-433. IG Farben’s role in
the formation of a gigantic world
“hydrocarbon cartel” including oil, chemical, and coal companies (as well
as the patents for both hydrogenation and,
by 1938, the F-T Process, when the owner of its patent, Ruhrchemie AG,
joined the cartel) in Germany, Britain,
France and the United States during the 1930s designed to stabilize oil
prices in the face of overproduction,
decreased demand due to the Depression, and the threat of competition by
synthetic producers, is detailed in:
Nowell, World Oil Cartel, 223-279 (esp. 235-251 – quotations from pgs.
240-241). Nowell’s key source (which
includes reproductions of many of the key documents) was: U.S. Senate,
Hearings before the Committee on Patents,
77th Congress, 2nd Session (31 July and 03-04 August 1942), Part VII
(Washington, DC: U.S. GPO, 1942), passim
(esp. 3279-3429). Summaries of the IG Farben-Standard Oil cartel
agreements, as well as their relationship to the
120

302
Both companies claimed to have gotten the better of the other once news
of their agreement became
public knowledge during the war. Jersey was subjected to remorseless
criticism within the United States,
and the U.S. Justice Department even blamed the cartel agreement with IG
Farben for contributing to the
current shortage of rubber in the United States by delaying the
production of Buna.122 In the wake of this
fiasco, the company went on a public-relations offensive to salvage its
reputation. One Jersey engineer,
part of the original team that visited Germany in 1927 to investigate
hydrogenation, pointed out that the
patent-sharing agreement provided the Allied war effort with numerous
benefits, including the ability to
produce 100-octane gasoline, in addition to synthetic toluene and
rubber.123 An internal IG Farben
assessment contended that these claims were nonsense: neither the
production of iso-octane (used to raise
the octane-rating of gasoline) nor of synthetic toluene had anything to
do with hydrogenation. By
contrast, IG Farben had managed to acquire indispensable technical
information, such as the method for
producing tetraethyl-lead, without which “the present method of warfare
would be impossible.”124 IG
Farben’s efforts during the 1920s and 30s, although not motivated by
strategic considerations, had
nonetheless facilitated the adoption of a more aggressive German foreign
and military policy after 1933.

wider cartelization of the oil industry in the 1920s and 30s, may be
found in: Gabriel Kolko, “American Business
and Germany, 1930-1941,” Western Political Quarterly 15: 4 (1962): 713-
728; and Helmut Mejcher, “The
International Petroleum Cartel (1928), Arab and Turkish Oil Aspirations
and German Oil Policy towards the Middle
East on the Eve of the Second World War,” in: Oil, the Middle East, North
Africa and the Industrial States, ed.
Klaus Jürgen Gantzel and Helmut Mejcher (Paderborn: F. Schöningh, 1984),
35-37. Anthony Sampson presents a
somewhat sensationalistic picture of relations between the major oil
companies and the Third Reich: Sampson, The
Seven Sisters: The Great Oil Companies and the World They Shaped (New
York, 1975), 77-83. There is, however,
some truth to his verdict that cooperation between the majors and the
Reich was not “evidence of any special moral
turpitude on the part of the oil leaders […]. But their ruthless and
autocracy did reveal very sharply the basic
uncontrollability of oil, and the ability of the industry to defy
national governments” (pg. 77).
122
Larson, Knowlton, and Popple, New Horizons, 433-452.
123
“Secrets Turned into Might War Weapons through I.G. Farben Agreement,
Discussed by R.T. Haslam, Standard
Oil Company (N.J.),” Petroleum Times (25 December 1943), reprinted as:
Partial Copy of Document von Knieriem
17, NMT, vii: 1297-1303.
124
“Comments on Professor Haslam’s Article in the ‘Petroleum Times’ of
25/12/1943,” 06 June 1944, enclosed
with: Knieriem to Dr. Schmitz, et al., “Haslam Article,” 06 June 1944,
Translation of Document NI-10551, NMT,
vii: 1303-1311.

303
Synthetic Fuel and the Prospect of Energy Independence before the Third
Reich
Germany’s abysmal raw materials position after 1919 meant that the
country could not even
contemplate rearmament, much less another war. One 1925 appraisal of
Germany’s raw materials
requirements for a sixty-three division army pointed out that, thanks to
the Versailles Diktat, Germany
could only rely upon those assets located between the Rhine and Oder
rivers (“rump Germany”), with
everything else being written off due to its vulnerability to enemy
attack.125 According to a later study,
part of the allure of synthetic fuel was its physical security against
overland attack unlike most of
Germany’s other sources of raw materials. 70% of production before 1929
took place within Germany’s
interior rather than its border regions.126 By contrast, the 1925
resource study pointed out that only 3,500
tons of Germany’s benzol production took place within “rump Germany.”)
The armed forces would, upon
mobilization, have the following immediate requirements (“1.
Ausstattung”):
Type of Product
Benzol
Gasoline
Lubricants

Quantity
91,123 tons
2,121 tons
11,078 tons

Annual military and civilian demand for benzol, even assuming the
“throttling” of civilian consumption,
was 1,300,000 tons: 1,053,076 tons for the services, another 300,000 tons
for the civilian economy.
Existing production was woefully inadequate: total output in 1924 was
only 180,000 tons, and “[a]
significant increase of this production is not possible,” as the supply
of benzol depended entirely on the
production of coke. Imports were out of the question due to the shortage
of global tanker capacity. There
was also the matter of 9,515 tons of diesel and 122,275 tons of fuel oil
required by the Navy during its
first year of operations. Using gasoline as a motor fuel was impossible,
since annual production from
German domestic crude oil was only 4,000 tons – but even this was less
than half of the estimated
125

“Denkschrift über den Rohstoffbedarf und die Rohstoffdecke für ein 63

Divisionenheer sowie eine entsprechende
Luft- und Seemacht,” no date or author, enclosed with: Nahe, Nr. 576/25
[illegible], 15 December 1925, NARA, T73/4 (RMfRuK/69). The study’s
authors acknowledged the 63 division program was no longer even under
consideration due to its recognized “unfeasibility.” They nonetheless
based their study around such an ambitious
rearmament objective in the hope of delineating “the borders of what is
possible for us.”
126
Stichwort Bismarck (HWA), “Preisaufgaben 1929 des Reichswehrministeriums,
Grupp VI b,” 12 March 1929, T77/296 (Wi/IF 5.1601).

304
requirement of 8,751 tons. While it was possible “to stretch” the
domestic production of lubricating oils
to around 100,000 tons per year, just below the estimated military
demand, that still left another 200,000
tons of civilian consumption unfilled, even after rationing.127
The only conclusion to be drawn was that developing a modern, mechanized
army was a fantasy:
when it came to oil-fueled engines, “the supply of the armed forces with
fuels in reference to the lasting,
progressive motorization cannot be carried out.” Hydrogenation offered
the most promising means “of
producing oil in meaningful quantities,” either from coal or crude oil,
but construction of the necessary
facilities would take time. Until then, “the demand for fuel… can in the
event of intervening
developments in no case be met within the short term,” for Germany could
expect to produce only
roughly 200,000 tons of fuel per year “for at least the next 10
years.”128
Hydrogenation never lived up to the billing promised by its
proponents.129 Synthetic production
between 1928 and 1931 increased by 80,000 tons – from 40,000 tons to
120,000 tons.130 But there is
ample evidence that, during the 1920s at least, the German military
considered it to be their salvation in
an age of machine warfare. The author of one 1928 paper was in no doubt
about the lessons of the last
war: “The World War, the longer it lasted, increasingly demonstrated the
decisive value of machines – be
they planes, U-boats, or tanks – by multiplying several-fold the killing
power of the personnel required to
operate them.” After the war, the world’s armies had continued to develop
these platforms, and Germany
ought to expect that “war in the future would to a much larger extent be
a contest of technology – of
machines.” Of course, Germany could only hope to fight such a war if it
possessed the requisite quantities
and types of fuel – “a matter of life and death in the event of war.” The
motorization of society was
transforming civilian life, too. A country that managed to free itself
from oil imports would enjoy an

127

“Denkschrift über den Rohstoffbedarf und die Rohstoffdecke für ein 63

Divisionenheer sowie eine entsprechende
Luft- und Seemacht,” no date or author, enclosed with: Nahe, Nr. 576/25
[illegible], 15 December 1925, NARA, T73/4 (RMfRuK/69).
128
“Denkschrift über den Rohstoffbedarf und die Rohstoffdecke für ein 63
Divisionenheer sowie eine entsprechende
Luft- und Seemacht,” no date or author, enclosed with: Nahe, Nr. 576/25
[illegible], 15 December 1925, NARA, T73/4 (RMfRuK/69).
129
BASF/IG Farben’s difficulties between 1926 and 1933 are summarized in:
Birkenfeld, “Leuna 1933,” 98-100.
130
Oblt. Löhr, “Deutsche Treibstoffversorgung,” Militär-Wochenblatt, 117.
Jahrgang, Nummer 47 (18 June 1933).
305
“incalculable” advantage. In view of the unfavorable distribution of
world oil reserves, the European
“great powers” had only two options from which to choose: they could
either acquire foreign oil
concessions or find “other, suitable replacement fuels in order to avoid
dependence on foreigners.”131
Germans had not appreciated the precariousness of their fuel situation
before the last war and had
paid a heavy price, for a lack of oil was “among the causes of our
defeat.” Ten years later, the situation
had not improved in spite of introduction of new forms of synthetic
production due to the increase in
consumption as a result of motorization. By 1927, there were 724,000
motor vehicles in Germany, a 30%
increase from 1926. Oil demand in 1926 had been 1,100,000 tons, and in
spite efforts to improve
efficiency, consumption would probably rise by 300,000 tons in 1927.132
Only one-third of Germany’s
motor fuel supply (250,000 tons) and half of its lubricating oils
(170,000 tons), however, were produced
domestically. This total was also shrinking now that the major U.S. and
British oil companies were
aggressively marketing their products in Germany. “If this share is not
capable of being raised,” the
author warned, “conditions would continue developing to our disadvantage”
due to motorization. In 1928,
there were 173 people per vehicle in Germany, against forty-three in both
Britain and France.133 Although
Germany still did not have an air force, it did have several airlines in
operation, including Lufthansa,
whose total inventory ran to 207 planes with an annual consumption of
30,000 tons, primarily of lighter
aviation fuel, although the Junkers aeronautical firm had enjoyed some
success building engines designed
to burn heavier oils. Total consumption of fuel oil was 330,000 tons
(almost doubling over the past five
years), 60% of which went to the merchant marine and 25% (80,000 tons) to
the Navy.134
As imports increased relative to domestic production, so would the
financial costs of importdependence, perhaps to as much as 300,000,000 RM
per year by 1930. According to the 1928 Army
131

“Kennwort: ‘Naphta,’ Offizier – Preisaufgabe 1927/28: Kraftfahrwesen,”

Gruppe IV a, March 1928, T-77/418
(Wi/IF 5.3329).
132
Of course, all of these calculations would be upset in the wake of the
Depression, whose effects in terms of
placing downward pressure on prices (by slowing the process of
motorization) was exacerbated by chaotic
conditions within the oil market itself due to oversupply. “Zur Lage des
Erdölmarketes,” no date or author (circa
1932; probably RWM or RFM), BA-B, R 2/16815.
133
“Kennwort: ‘Naphta,’ Offizier – Preisaufgabe 1927/28: Kraftfahrwesen,”
Gruppe IV a, March 1928, T-77/418
(Wi/IF 5.3329).
134
For a detailed study of the division of Germany’s consumption of various
kinds of oil by 1930/31, see: “Das
deutsche Ölmarkt,” no date or author (circa 1931; probably HWA), T-77/183
(Wi/IF 5.762).

306
study, Germany’s only hope in escaping this trap was through efforts of
its chemists and engineers, who
had to improve existing methods of producing synthetic fuel, develop new
processes, and introduce more
fuel-efficient engines to limit the growth in consumption. The
possibilities offered by hydrogenation were
most attractive: a coal-to-liquid fuel conversion rate of almost 50%
(1000 kg coal = 490 kg of oil, which
could refined into 350 kg of motor fuels, 80 kg of fuel oil, and 60 kg of
lubricating oil); an outlet for
Germany’s massive supplies of low-quality coal; and possible
profitability through some manner of
financial alchemy (15 RM worth of coal being transformed into 65 RM worth
of petroleum products).
There was also the possibility that the conversion-yield could be boosted
from 50% to 65%. The fact that
IG Farben had recently purchased Bergius’ patent was a welcome
development in view of that company’s
considerable technical expertise through the Haber-Bosch process.135 The
new Bergius facility in Leuna,
in the midst of some of Germany’s largest lignite reserves, heralded
great things, assuming that natural
crude oil prices remained steady at their current level of 30 RM per
ton.136 It was hard to say when these
efforts would bear fruit – assuming everything went “smoothly,” perhaps
only ten to twelve years. The
possibility of failure was not even considered: “We have therefore
through the liquefaction of coal finally
found the means to manufacture fuel as the primary product of our mineral
reserves and have called into
life an economical supply of fuel […].” Synthetic fuel was the latest
chapter in the glorious history of
Germany’s chemists and engineers, who “through the conversion of coal
into oil had achieved a great
deed, whose value will only continue to increase with continued
motorization.”137
The Great Depression reversed the growth in German petroleum consumption
and reduced imports.
By 1927, Germany’s automobile fleet of 679,000 vehicles was growing at a
rate of 25% per annum, with
135

IG Farben had also let it be known that “on the basis of the Bergius
process [it] could begin the profitable
production of [synthetic] rubber within the near future.”
136
The report estimated the cost of establishing and running a large Bergius
facility at roughly 400,000,000 RM but
was confident that such funds could be raised through private industry
and banks once the profitability of the
process had been demonstrated at Leuna. Foreign oil companies certainly
recognized its potential, as evidenced by
Shell’s initial purchase of the international patent rights, and the
negotiations between IG Farben and “leading
American crude oil firms” (Jersey).
137
The only risks foreseen were commercial, such as the possibility that the
major international oil companies might
take preventative action by wiping out the market for expensive synthetic
gasoline “through a ruthless cutting of
price, the most beloved tool of the oil companies […].” “Kennwort:
‘Naphta,’ Offizier – Preisaufgabe 1927/28:
Kraftfahrwesen,” Gruppe IV a, March 1928, T-77/418 (Wi/IF 5.3329).

307
the import bill for all forms of petroleum totaling 238,000,000 RM that
year alone.138 Between 1930 and
1932, total German petroleum consumption dropped from 3,445,000 tons to
2,655,000 tons (by 23%), and
demand for gasoline and benzol from 2,000,000 tons to 1,500,000 tons
(25%). The decline was borne
entirely by petroleum imports, which fell from 2,805,000 tons to
2,020,000 tons (28%). Although
domestic production increased its share of total consumption from 19% to
24%, the total volume held
steady at roughly 640,000 tons (60% of which was gasoline and benzol).
Germany’s dependence upon
imports had not lessened, the Ministry of Economics
(Reichswirtschaftsministerium, RWM) warned,
“with all of the attendant dangers, [including a] heavier burden on
Germany’s trade balance and higher
foreign exchange commitments,” once the economy recovered and
motorization resumed.139

138

Maj. H.H. Zornig (Assistant U.S. Military Attaché, Berlin), “The German
Motor Fuel Situation and Its Effect on
Motor Design,” Report No. 9947, 22 January 1929, in: University
Publications of America, U.S. Military
Intelligence Reports, Germany 1919-1941 (Frederick: University
Publications of America, 1983), Reel 8. According
Zornig, Germany’s onerous import bill “will do more towards stimulating
the developments which may eventually
make Germany independent… for her supply of motor fuel than any amount of
effort that the military authorities
can possibly exert.”
139
Vermerk, zu Rk. 12081, 21 October 1933, BA-B, R 43 (II)/486 (reprinted as
Nr. 25 in: Akten der Reichskanzlei,
i: 918-920); and RWM, I A 13000, “Begründung,” no date, enclosed with:
der Reichswirtschaftsminister (Schacht)
an den Herrn Staatssekretär in der Reichskanzlei, I A 13000, 27 October
1934, T-120/5677. See also: Oblt. Löhr,
“Deutsche Treibstoffversorgung,” Militär-Wochenblatt, 117. Jahrgang,
Nummer 47 (18 June 1933); and “Deutscher
Kraftstoff,” Militär-Wochenblatt, 119. Jahrgang, Nummer 12 (25 September
1934).

308
Setting a New Tone: The National Socialists, 1933
Within months of taking power, the National Socialists, backed by the
military, pressed for the
expansion of domestic petroleum output irrespective of the cost. State
Secretary Gottfried Feder, one of
the founders of the German National Socialist Workers’ Party
(Nationalsozialistische Deutsche
Arbeiterpartei, NSDAP) and now responsible for petroleum affairs at the
RWM, pledged that all available
measures would be utilized to fulfill Hitler’s plan to promote
motorization, including increasing the
production of synthetic fuel, expanding existing refinery capacity, and
raising the output of domestic
oilfields.140 Feder had initially backed the construction of additional
oil refineries, but by the autumn of
1933, he was committed to higher synthetic fuel production.141 Policy
would not be determined solely by
trade and foreign exchange considerations or even cost (since synthetic
fuel cost through three times as
much as imported gasoline – about 20 RM vs. 6 RM), but also employment
and strategic factors, and
synthetic production and importation of crude oil would be encouraged
“simultaneously.”142
The bureaucracy was, on the other hand, risk averse. The RWM acknowledged
that the foreign
exchange burden imposed by oil imports rendered “the expansion of
domestic production necessary

140

Many in the NSDAP shared this sentiment. According to one 1934 study by
the NSDAP’s Auβenpolitisches
Amt, roughly 40% of Germany’s consumption of lubricating oils was
imported (112,000 tons out of 250,000 tons),
the remainder being refined out of domestic or imported crude. Refining
all of Germany’s oil imports would save
13,200,000 RM just in terms of lubricating oils (at a cost saving of 12
RM per 100 kg) and offer direct employment
for several thousand workers, not just in the refineries, but also in
related industries and in German ports. Moreover,
well over half (753,000 tons out of 1,338,000 tons) of German crude oil
imports in 1930 came through Belgian or
Dutch ports and travelled to Germany along the Rhine. These supplies were
vulnerable to interdiction either in
foreign ports or along the Rhine. NSDAP, Reichsleitung, Auβenpolitisches
Amt, Abteilung III/Aussenhandel, an die
Reichzkanzlei (cc’d to ministers of Economics, Defense, and Aviation, and
the HWA), “Betr. Massnahmen zur
Förderung der Veredlung von Erdöl in deutschen Raffinerien,” 18 January
1934, BA-B, R 43 (II)/486.
141
Karlsch and Stokes, Faktor Öl, 167. Years later, Hitler claimed that he
“broke with Feder” on account of the
latter’s opposition to synthetic fuel, but no evidence survives to
support this claim. Table Talk: No. 68 (12
November 1941).
142
The early differences in outlook between the National Socialists (backed
by the Army) and the civilian ministries
are apparent from the minutes of an interdepartmental conference in
August at the RWM: Zu II 17438/33,
“Niederschrift über die Ressortsbesprechung betreffend Neuordnung der
Mineralölwirtschaft im
Reichswirtschaftsministerium am 8. August 1933,” enclosed with: der
Reichswirtschaftsminister (im Auftrag:
Mulert, Ministerialrat) an den Herrn Reichsminister der Finanzen, Abt.
II, et al., II 17438/33, 01 September 1933, T120/5677. The following
month, Feder stated that developing Germany’s synthetic capacity was
“enormously
important from the perspective of purely national-economic
considerations.” He insisted that the government would
serve “as the initiator and inspirer” (for example, by preventing
friction within the coal industry and between it and
the oil industry) but not exercise direct control. “Erste Sitzung des
Generalrats der Wirtschaft. 20 September 1933,
10.15 Uhr,” Nr. 213 in: Akten der Reichskanzlei, i: 794-795.

309
above all on strategic [Wehrpolitischen] grounds.”143 It considered the
primary tasks of the Reich to be
expanding domestic synthetic and crude production in order to reduce the
cost of fuel, promoting
stockpiling, importing crude oil rather than finished petroleum, and
managing imports to control
expenditures of foreign exchange. But this should be accomplished through
only “the most necessary
interference in the petroleum industry.”144 The RWM was reluctant to
assist “high-risk” projects and
wished to limit state support to price and marketing guarantees, plus
targeted tariff reductions to
encourage the construction of refineries (although this had to be done in
such a way as to discourage overconsumption and not “to hinder the
development of coal hydrogenation”).145 Direct participation in the
German crude oil industry was out of the question because the costs were
not commensurate with the
rewards, and few officials had much faith in it. The RWM was, however,
willing to provide limited
support for the construction of refineries to process imported crude oil
from Iraq or Romania. The RWM
also spoke favorably of IG Farben’s offer to expand synthetic production
at Leuna if the Reich offered
price and marketing guarantees. The military and the RVM, by contrast,
wanted the impetus to go to
synthetic fuel since refineries would be of little value if imports of
crude oil stopped.146 “The only
worthwhile solution” to Germany’s dependence on oil imports, one popular
military journal declared in
1934, “is high-pressure hydrogenation of soft and hard coal […].”147

143

Vermerk, zu Rk. 12081, 21 October 1933, BA-B, R 43 (II)/486; reprinted as

Nr. 25 in: Akten der Reichskanzlei, i:
918-920.
144
Abschrift II 17438, “Vorschläge für die Neuordnung der
Mineralölwirtschaft,” no date, enclosed with: der
Reichswirtschaftsminister (in Vertretung, Dr. Posse, Staatssekretär) an
den Herrn Reichsminister der Finanzen,
Abteilung II, et al., II 17438/33, 17 July 1933, T-120/5677.
145
Vermerk, zu Rk. 12081, 21 October 1933, BA-B, R 43 (II)/486; reprinted as
Nr. 25 in: Akten der Reichskanzlei, i:
918-920. The original paper copy includes a minute indicating that it was
forwarded to the State Secretary of the
RWM (Gottfried Feder), with the request that he bring it to Hitler’s
attention. A copy also went to Wilhelm Keppler,
then serving as Hitler’s personal representative on economic matters.
146
Zu II 17438/33, “Niederschrift über die Ressortsbesprechung betreffend
Neuordnung der Mineralölwirtschaft im
Reichswirtschaftsministerium am 8. August 1933,” enclosed with: der
Reichswirtschaftsminister (im Auftrag:
Mulert, Ministerialrat) an den Herrn Reichsminister der Finanzen, Abt.
II, et al., II 17438/33, 01 September 1933, T120/5677. Higher domestic
crude oil production was a laudable aim, but military analysts worried
that little could be
done in view of the capital requirements, in spite of the danger that
foreign oil companies would just buy up any
promising land and leave it undeveloped in order to protect the market
for their imports. Oblt. Löhr, “Deutsche
Treibstoffversorgung,” Militär-Wochenblatt, 117. Jahrgang, Nummer 47 (18
June 1933).
147
“Deutscher Kraftstoff,” Militär-Wochenblatt, 119. Jahrgang, Nummer 12 (25
September 1934).

310
The new regime refused to be constrained by fiscal considerations, but
progress was slow.148 Years
later, during the invasion of the Soviet Union, Hitler was still fuming
over the RWM’s early opposition to
synthetic fuel and lamented “not having thrown all that crew
overboard.”149 Although all-out measures to
boost petroleum production did not begin until after the inauguration of
the VJP in 1936, in fact, the
armed forces, NSDAP agencies, and IG Farben were already making
preparations to implement a
“Vierjahresplan” as early as the summer of 1933.150 The point man for
these discussions was Ernst Rudolf
Fischer, the head of the IG Farben subsidiary that sold synthetic
gasoline produced at Leuna
(Leunabenzin), Deutsche Gasolin AG.151 In June 1933, Fischer was also
handling fuel matters as a
Division Chief (Referent) within the NSDAP’s Economic Policy Office
(Wirtschaftspolitisches Amt)
until its dissolution the following month.152 Also in June 1933,
following negotiations with various
German oil producers, Fischer unveiled an ambitious, four-year plan to
officials at both the HWA and the
Ministry of Aviation (Reichsluftfahrtministerium, RLM). The plan would
raise German domestic
production by more than 1,300,000 tons, from roughly 750,000 tons to over
2,100,000 tons (most of the

148

The first two years’ developments (from the Benzin-Vertrag to the

foundation of Braunkohle-Benzin AG –
BRABAG) are summarized in: Tooze, Wages of Destruction, 115-120.
149
Table Talk: No. 68 (12 November 1941) and No. 128 (27 January 1942).
150
This is not to be confused with the “first” VJP of 1933. After 1936, the
regime claimed that it had waged a VJP
since taking power in 1933, even though the term did not exist until
1936. The “first” VJP was supposed to
encourage “the recovery of the economy, the re-establishment of German
military strength [Wehrhoheit] and the rise
of Germany to great power status,” whereas the “second” VJP focused on
securing “the food and raw materials
freedom of the German people.” Alfred-Ingemar Berndt, Gebt mir vier Jahre
Zeit! Dokumente zum ersten
Vierjahresplan des Führers (München: Zentralverlag der NSDAP. Franz Eher
Nachf., G.m.b.H., 1937), passim (esp.
211-219 – quotation from pg. 212). The “second” VJP of 1936 should not be
confused with the “second” VJP of
1940, which was an expansion of the 1936 program. “Decree on the Further
Duties of the Plenipotentiary for the
Four Year Plan, 18 October 1940,” Translation of Document NI-125, NMT,
xii: 535.
151
Fischer’s biography before 1940 is summarized in: Titus Kockel, Deutsche
Ölpolitik, 1928-1938 (Berlin:
Akademie Verlag, 2005), 82, n. 82; and Titus Kockel, “Eine Quelle zur
Vor- und Gründungsgeschichte der
Kontinentale Öl AG aus dem Jahr 1940: E. R. Fischer
(Reichswirtschaftsministerium, II Min. Öl), ‘Die Versorgung
Europas mit Mineraloel vor dem Kriege, Ermittlung des
Nachkriegsverbrauchs und Sicherung der Belieferung,
1940,’ September 1940,” Jahrbuch für Wirtschaftsgeschichte 2003/1: 176-
178.
152
Verbindungstab der NSDAP, Abteilung: Wirtschaft (Wilhelm Keppler) to
Fischer, 16 July 1933; Fischer to Paul
Völmicke (Direktor, Kohlenveredlung und Schwelwerke Atk. –Gas.), 8 June
1933; and Wirtschaftspolitisches Amt,
Treibstoff, to the Reichsverband der Garagenbetsitzer, 23 June 1933; all
in: BA-B, R 8128/10352

311
increase being concentrated in gasoline, whose output would triple). By
1937, Fischer estimated that
Germany ought to be able to produce 60% of its petroleum consumption.153
A few months later, following an introduction by the industrialist Albert
Vögler, Krauch, then still
employed only by IG Farben (where he led “Sparte I,” which handled
synthetic fuel), also presented State
Secretary Erhard Milch of the RLM with “a four-year plan” to increase
Germany’s petroleum production
by 1,300,000 tons.154 Krauch estimated the project would cost
approximately 400,000,000 RM, but
further increases in output would be relatively more expensive since they
would require the construction
of new facilities to produce additional hydrogen. Krauch assured Milch
that IG Farben was now capable
of using hydrogenation to produce high-octane aviation fuel and specialty
lubricants.155
Milch was enthusiastic about Krauch’s proposal and forwarded it to the
head of the HWA, General
Alfred von Vollard-Bockelberg, with the suggestion that the
“[appointment] of a Commissar would be
necessary to carry out the necessary steps.”156 Bockelberg appears to
have agreed with Milch, for he

153

Wirtschaftspolitisches Amt, Treibstoff (signature illegible, although the

address belongs to Fischer), to the HWA
(c/o Hauptmann Becht), 21 June 1933; and Wirtschaftspolitisches Amt,
Treibstoff (signature illegible), to the Reich
Ministry of Aviation (c/o of Oberstleutnant Wimmer), 27 June 1933; both
in: BA-B, R 8128/10352.
154
Vögler to Herrn Direktor Dr. Krauch, I.G.-Farbenindustrie A.G., 10 August
1933, NARA, RG 238, T-301/44
(NI-5930). Vögler was a great supporter of government assistance for
hydrogenation, which he believed would
improve both the country’s foreign exchange and employment situation.
During a meeting with the ministers of
Economics and Finance (Kurt Schmitt and Krosigk) the year before, Vögler
estimated that a “solution of the oil
problem… can lead to the long-term employment of an additional 150,000
people in Germany.” “Erste Sitzung des
Generalrats der Wirtschaft. 20 September 1933, 10.15 Uhr,” Nr. 213 in:
Akten der Reichskanzlei, i: 779. There were
two other “Sparten” at IG Farben: No. II handled dyestuffs and No. III
was responsible for explosives.
155
Krauch to Milch, 14 September 1933, Partial Translation of Document NI-
4718, NMT, vii: 571-573; for the
original German document, see: NARA, RG 238, T-301/34 (NI-4718). The
report referred to by Krauch in his letter
to Milch was not reproduced, but I managed to procure a copy from the
BASF Archive courtesy of Ray Stokes. In
addition to the aforementioned cost and production figures, the plan
would require the labor of approximately
46,000 workers. The report confidently claimed that the potential of
hydrogenation was “practically unlimited,” and
afforded Germany the means “of producing heavy or light fuels and other
oils in any manner” desired (in beliebiger
Weise). On the basis of the program formulated by IG Farben, 800,000 tons
of the new production would come
through hydrogenation. The company expected that these increases would
allow Germany by 1937 “to cover around
63% of its demand [for motor fuels], which would have risen by 50%
against existing consumption.” “Die deutsche
Treibstoffwirtschaft,” June 1933, BASF Archive, IG Farben, M02/1. This
paper might have also played a role in
Feder’s conversion from supporting refinery construction to synthetic
fuel. Karlsch and Stokes, Faktor Öl, 166-167.
The U.S. occupation government’s first postwar investigation of IG Farben
includes virtually nothing about its
activities in the synthetic fuel industry: Col. B.B. Bernstein, Director,
Finance Division, U.S. Group Control Council
(Germany) to Lt. Gen. Lucius D. Clay (Deputy Military Governor of
Germany), “Report on Investigation of I.G.
Farbenindustrie,” 12 September 1945, NARA, Record Group 466: Office of
the High Commissioner for Germany,
Office of General Counsel, Decartelization Division, Cartel Subject
Files, 1947-55, Box 26.
156
Bockelberg agreed with Milch’s request that the services act in unison on
the matter of the “domestic raw
materials basis.” Bockelberg, “Besprechung im Reichsluftfahrtministerium
am 15.9.33,” NARA, RG 238, T-301/55

312
impressed upon the Economics Minister (Kurt Schmitt) the need to support
the construction of
hydrogenation facilities (not to mention storage facilities and
compelling existing suppliers to expand
their inventories).157 There is also circumstantial evidence that even
Hitler supported the plan.158 In any
event, in December 1933 came the signing of the “Benzin-Vertrag”
(otherwise known as the Feder-Bosch
Abkommen). IG Farben agreed to more than triple Leuna’s production by
1935 in exchange for a
guarantee that the Reich would, starting in 1934, purchase any
Leunabenzin left unsold for the next ten
years at a fixed price (18.5 Pfennig) that covered the company’s existing
investment plus a five percent
profit margin, with any additional profits being returned to the
Reich.159

(NI-7123). Emphasis in the original. Thanks to Krauch’s efforts with

Milch, IG Farben and the Ministry of Aviation
(Reichsluftfahrtministerium, RLM) eventually worked out the “Flugbenzin-
Vertrag” of 10 June 1936, whereby the
former guaranteed the latter in exchange for financial support to boost
Leuna’s output of aviation fuel to 200,000
tons per annum until the end of 1950. Der Reichsminister der Luftfahrt
(gez. i.V. Kesselring), Bütefisch and Fischer
(IG Farben), “Vertrag zwischen dem Deutschen Reich… und der Ammoniawerk
Merseburg… betreffend Erstellung
von Anlagen zur Herstellung von Flugbenzin,” 10 June 1936, enclosed with:
der Reichsminister der Luftfahrt (Im
Auftrag, gez. v. Heinz) an den Herrn Reichskriegsminister (WStb), z.Hd.
des Herrn Kapitänleutnant Rieve, LD I 1 D
Nr. 5405/36 g., 14 September 1936, NARA, RG 238, T-301/64 (NI-7836). For
background, see: Hayes, Industry
and Ideology, 139-142.
157
“Vortragsnotizen für die Besprechung mit dem Reichs-Wirtschafts-
Minister,” 04 November 1933, no author; and
Wa Wi, “Ergebnis der Besprechung beim R.Wirtschafts-Min. am 6. 11. 1933,”
07 November 1933; both in: NARA,
RG 238, T-301/64 (NI-7828).
158
Hitler referred to a proposal by Vögler, but he was probably referring to
Krauch’s “four-year plan.” Table Talk:
No. 68 (12 November 1941).
159
For a copy of the agreement, see: “Benzin-Vertrag,” 14 December 1933,
NARA, RG 238, T-301/9 (NI-881). The
Reich Cabinet approved the agreement on 08 December 1933. See point VI
(“Regelung der Mineralölwirtschaft”) of
the “Kabinettsstizung vom 8. Dezember 1933, 16.15 Uhr,” Nr. 264 in: Akten
der Reichskanzlei, i: 1012-1013. The
deal was important enough that the RWM forwarded a copy to Hitler the
following month: zu Rk. 14390 II,
Vermerk, 10 January 1934 (signature illegible), RG 238, T-301/4 (NI-320).
The negotiations between the Reich and
IG Farben in 1933 are detailed in: Birkenfeld, “Leuna 1933,” 103-108. See
also: Hayes, Industry and Ideology, 115120; and Karlsch and Stokes,
Faktor Öl, 167-168.

313
National Socialist Petroleum Policy, 1933-1935
The Third Reich’s petroleum policy before 1939 was not synonymous with
the development and
expansion of a synthetic fuel industry sponsored by IG Farben. These
misconceptions are the legacy of
two factors. First, in the West, most scholars relied upon the reports of
the United States Strategic
Bombing Survey (USSBS) as their primary source.160 These studies
considered Germany as a gigantic
target-system of interlocking production nodes. USSBS analysts, many of
whom had identified bombing
targets during the war, were less interested in understanding how the
German economy functioned than
identifying the most sensitive nodes (or chokepoints) within the system,
whose destruction would have a
ripple effect throughout the war economy and shatter Germany’s capability
to resist. The synthetic fuel
industry, along with the transportation infrastructure and the Air Force,
was an attractive target during the
war precisely because its destruction would contribute to the paralyzing
of the entire German war effort.
Second, East German scholars considered the Third Reich to be an
instrument of German monopoly
capitalism. IG Farben was the largest German corporation before the war,
and perhaps fourth largest in
the world, behind General Motors, Jersey, and U.S. Steel.161
That the Third Reich devoted immense resources to the construction of a
synthetic fuel industry that
privileged the company’s interests seemed to be irresistible proof of the
underlying validity of the Marxist
critique of the Third Reich. (In fact, the company’s share of German
petroleum production between 1933
and 1943 – 5.9% - was meager. Its output peaked in 1942 at 560,910 tons,
and after Leuna, it never
constructed another synthetic fuel facility except in partnership with
another private firm.162) Many
scholars also made extensive use of records collected as evidence during
the Nuremberg trials, where

160

See especially: United States Strategic Bombing Survey (USSBS), Oil

Division, Final Report (Washington, DC:
U.S. GPO, 1945).
161
Turner, German Big Business, xvi.
162
Plumpe, I.G. Farbenindustrie, 284, and 287-288.

314
prosecutors targeted IG Farben as a criminal enterprise because it
appeared that the company’s interest in
synthetic fuel had been a key element in the forging of an alliance with
the National Socialists.163
Many of the same interest groups that had competed for favor during the
latter years of the Republic
remained in the picture after 1933.164 At the start of the Third Reich,
there was still some doubt over
whether synthetics could live up to expectations.165 These reservations
quickly disappeared once the new
regime made clear its determination to boost consumption while reducing
the foreign exchange burden
imposed by imports – 438,000,000 RM in 1928 and up to four times as much
if the number of
automobiles in Germany reached that of Britain or France.166
The new regime was not indifferent to commercial and financial
considerations. In May 1933, Hitler
himself met with independent representatives of the German oil industry
and Feder to discuss a
100,000,000 RM plan to expand Germany’s refinery capacity. When Hitler
asked his guests if this
proposal would “secure Germany’s supply of necessary crude oil,” he meant
this is in a commercial rather
than strategic sense. Hitler and his advisers were less concerned about
autarky than Germany’s
dependence first on costly imported petroleum products and second on the
major oil companies, which
controlled the market for finished products and about 80% of Germany’s
existing refinery capacity. The
international market for crude oil was far more diversified, but
processing the oil was only possible if
163

See especially: Office of United States Chief of Counsel for Prosecution

of Axis Criminality, Nazi Conspiracy
and Aggression (Washington, DC: U.S. GPO, 1946), iii: 871-874 (hereafter
cited as: NCA), volumes vii and viii; and
NARA, RG 238, T-301.
164
Aside from the major oil companies, Titus Kockel identifies no less than
eight different groups as of 1932,
including IG Farben, independent U.S. and British oil producers, the
German partners in the British Oil
Development Company in Iraq, and small German producers in Lower Saxony
(Hannover). Dietrich Eichholtz and
Titus Kockel, Von Krieg zu Krieg: Zwei Studien zur deutschen Erdölpolitik
in der Zwischenkriegzeit (Leipzig:
Leipziger Universitätsverlag, 2008), 114-119.
165
Maj. a.D. Otto Lehmann, “Der wehrpolitische Kampf um das Öl der Welt,”
Deutsche Wehr, Nr. 6/6. (37.)
Jahrgang (10 February 1933); and Oblt. Löhr, “Deutsche
Treibstoffversorgung,” Militär-Wochenblatt, 117.
Jahrgang, Nummer 47 (18 June 1933).
166
“The only full-fledged solution” to the Germany petroleum difficulties
“is the high-pressure hydrogation of
brown and black coal,” even if “complete independence” would not be
feasible “for the foreseeable future.” G.
Heberlein, “Deutscher Kraftstoff,” Deutsche Wehr, Nr. 6./7. (38.)
Jahrgang (07 February 1934). Emphasis in the
original. A more practical policy was to pair expansion of synthetic fuel
output with financial incentives for crude
oil exploration within Germany – it was, however, vital “not to become
impatient.” Lehmann, “Öl aus Kohle als
deutsches Problem,” Deutsche Wehr, Nr. 48/7. (38.) Jahrgang, (29 November
1934). Moreover, it was wise for oilpoor countries not to overlook the
continued use of animal power whenever possible in order to save fuel for
those
emerging weapons systems dependent on petroleum. Lehmann, “Ölpolitik
1935,” Deutsche Wehr, Nr. 5/40.
Jahrgang (30 January 1936).

315
independent refineries existed. Eliminating Germany’s need for imports of
finished products (much as
France, the model, had done after 1928) would result in a savings of
200,000,000 RM worth of foreign
exchange – a figure that would only increase as German consumption
increased due to motorization.167
That same day, oil played a prominent role in a presentation by Hitler on
economic affairs before
leading German industrialists. Much of the talk was devoted to the
construction of the Autobahnen, which
had little strategic relevance.168 Rather, Hitler considered their
construction to be primarily a workcreation measure and economic stimulus
(funded largely by gasoline taxes and savings in welfare
payments).169 But as he explained to the assembled businessmen, the
Autobahnen were a means of
developing a German petroleum industry freed from foreign influence.
Instead of allowing foreign oil
companies to establish gas stations along the Autobahnen, German firms
would enjoy a monopoly under
the supervision of the Reichsbahn-Automobilgesellschaft. Not only “would
[this] be the best means of
167

Even then, Hitler wished to solicit the use of private capital, including
from foreigners, in order to reduce the
exposure of the Reich. One of his people the Führer met with was
Professor Leo Ubbelohde of the Technische
Hochschule, Berlin (today the Technische Universität, Berlin), the former
Secretary General of the International
Petroleum Congress (an unofficial association of petroleum engineers) and
founder of the German Deutsche
Gesellschaft für Mineralölforschung (today the DGMK Deutsche
Wissenschaftliche Gesellschaft für Erdöl, Erdgas
und Kohle e.V.). Ubbelohde had co-authored a Denkschrift outlining his
proposal in consultation with Feder. I have
been unable to locate a copy, but the details are summarized in the
minutes of the meeting. Reichskanzlei (signature
illegible), Rk. 6588, “Vermerk über den Empfang der Herrn Gottfried
Feder, Professor Dr. Ubbelohde und Freiherr
von la Roche-Starkenfels am 29. Mai 1933,” 31 May 1933, NARA, RG 238, T-
301/6 (NI-549). See also:
Birkenfeld, “Leuna 1933,” 102; and Eichholtz and Kockel, Von Krieg zu
Krieg, 120-121; Karlsch and Stokes,
Faktor Öl, 165. By the end of 1934, French refinery capacity would reach
34,000,000 barrels per year, compared to
22,700,000 barrels in Britain, and 13,800,000 barrels in Germany.
“Deutscher Kraftstoff,” Militär-Wochenblatt, 119.
Jahrgang, Nummer 12 (25 September 1934). French efforts at regulating the
importation of crude oil rather than
finished petroleum products, and stimulating the development of both a
domestic refining industry (primarily to
process France’s share of crude oil production in Iraq) and a French
tanker fleet, culminating in the passage of the
1928 Oil Law and additional legislation the following year, which
guaranteed the government virtually a
controlling-interest (25% – increased to 35% in 1931) in the main French
oil company, the Compagnie Française
des Pétroles, are summarized in: Richard Kuisel, Ernest Mercier: French
Technocrat (Berkeley: University of
California Press, 1967), 21-44; Nowell, World Oil Cartel, 148-222 (esp.
170-183 and 200-217); Eric Melby, Oil and
the International System: The Case of France, 1918-1969 (New York: Arno
Press, 1981), 88-104, 141-148;
Mohamed Sassi, “The Emergence of the French Oil Industry between the Two
Wars,” Business and Economic
History On-line 1 (2003),
http://www.thebhc.org/publications/BEHonline/2003/Sassi.pdf; and Mira
Wilkins, The
Maturing of Multinational Enterprise: American Business Abroad from 1914
to 1970 (Cambridge: Harvard
University Press, 1974), 235-236. For a positive German assessment, see:
Verbandssyndikus Kurt Bronk,
“Deutschlands Erdöl-Selbstversorgung, militärisch gesehen,” Militär-
Wochenblatt, 120. Jahrgang, Nummer 16 (25
October 1935).
168
The Army, in particular, evinced little enthusiasm for the Autobahnen.
The Reich often chose the routes of roads
on the basis of political rather than strategic calculations. Besides,
even if the armed forces wished to use the
Autobahnen to ferry troops or equipment, it was impossible due to
shortage of gasoline and rubber. R.J. Overy,
“Transportation and Rearmament in the Third Reich,” Historical Journal
16: 2 (1973): 390-400.
169
Table Talk: No. 201 (18 July 1942).

316
encouraging” German crude oil and synthetic fuel production, but it would
also give the Reich both an
“economic” and “political instrument of pressure” that could be wielded
against countries like Britain in
the event of diplomatic scuffles. A reinvigorated German oil industry
servicing the Autobahnen would
also indirectly stimulate the flagging German automobile industry. Of
course, it was out of the question
for the Reich to enjoy the same rates of car ownership as the United
States due to foreign-exchange
considerations. Hitler expected that the country would increase its auto
fleet to between 3,000,000 and
4,000,000, which would have positive ripple effects throughout the
economy.170 There was not a moment
to lose: oil prices would surely rise in the future, and as Feder warned
during a 1933 speech, Germany’s
import bill if possessed the same number of automobiles as France (four
times as many) would reach
800,000,000 RM.171
Three points need to be emphasized here. First, the National Socialists
justified their early support for
hydrogenation as an employment measure.172 Continuing and expanding the
Reich’s support for IG
Farben by having the latter provide between 10% to 25% of Germany’s
petroleum supply would create
employment for 12,000 workers and inject 45,000,000 RM worth of orders
into the economy. Second, the
regime was not eager to advertize its objectives: not out of any fear of
alerting the Allies to Germany’s
aggressive foreign policy ambitions, but rather, because the entire
leadership of the Reich (including
Hitler) was wary of incurring the wrath of the major oil companies.173
Accordingly, Hitler suggested

170

“Besprechung mit führenden Industriellen. 29. Mai 1933, 16.15 Uhr,” Nr.
213 in: Akten der Reichskanzlei, i: 512513. The German automobile sector
was in severe decline before the National Socialist takeover: the number
of
automobiles actually declined by half between 1930 and 1932, from 81,000
to 41,000. In April 1933, the regime
eliminated all taxes on the purchase of cars, which led to a three-fold
increase in the number of registered cars
between 1932 and 1938 (486,001 and 1,271,000 – well below Hitler’s
expectations). Birkenfeld, “Leuna 1933,”
100-101; and Tooze, Wages of Destruction, 150-151.
171
Limiting imports under such circumstances to their 1932-levels would have
required a 13.5-fold increase in
domestic petroleum production. Obrstlt. a.D. Scholz Roesner, “Die
Treibstoff-Frage in ihrer Bedeutung für die
Landesverteidigung,” Militär-Wochenblatt, 118. Jahrgang, Nummer 44 (25
May 1934).
172
A point Hitler reiterated during the war: Table Talk: No. 68 (12 November
1941) and No. 128 (27 January 1942).
173
The appeasement of the major oil companies would continue until 1938 and
was a major bone of contention
between the German Navy and the RWM. The former supported an aggressive
policy of seeking oil concessions in
Iraq and then Mexico in concert with independent oil companies, while the
latter preferred cooperated with the
major oil companies. Der Oberbefehlshaber der Marine (Ob.d.M. – Raeder)
an den Chef des OKW (Keitel), et al.,
B. Nr. A IV, “Betr.: Ölversorgung der Kriegsmarine,” 06 May 1940, T-
1022/3405 (PG 31762/B). In 1936, one of
the reasons Hitler sided with RWM in opposing a stronger German presence
in Iraq was his fear of “[incurring] for
us the enmity of powerful international oil interests.” Keppler
(Staatssekretär z.b.V.im AA) to Herrn Reichsminister

317
during one of his infrequent cabinet meetings that German firms would
have to be informed about the
regime’s intentions .174 Third, synthetic fuel was one aspect of a three-
pronged approach before the war
that also included stockpiling imported oil and encouraging domestic oil
producers to redouble their
search for crude oil within Germany.175
With regard to stockpiling, the regime had initially hoped to secure the
connivance of the major U.S.
and British oil companies. Originally, the RWM intended that the oil
companies would be mandated to
stockpile a fixed amount of oil within Germany at all times. Indeed,
Economics Minister Hjalmar Schacht
was convinced that the oil companies would welcome the opportunity to
dispose of their excess
production in a saturated world market.176 The regime tried also to
convince the companies to expand
their storage capacity in exchange for the Reich covering amortization
and interest on the new
construction. Both efforts failed due to the opposition of the oil
companies, and by 1934, the RWM had to
concede that the Reich would have to undertake such efforts on its
own.177

Funk (RWM), 15 May 1940, enclosed with: der Reichswirtschaftsminister

(Funk) an den Ob.d.M. Herrn
Groβadmiral Raeder, II Min.-Öl 116/40 g. Rs., 06 June 1940, T-77/211
(Wi/IF 5.1082).
174
The Soviets were also major distributors and needed to be kept in the
dark because the Reich would not be
supporting the renewal of existing delivery contracts that would expire
in 1934. See point V (“Entwurf eines
Gesetzes zur Förderung der Deutschen Mineralölwirtschaft”) of the
“Kabinettssitzung vom 1. Dezember 1933,
17.30 Uhr,” Nr. 258 in: Akten der Reichskanzlei, i: 987-989 (esp. pg.
988, n. 11, for the Soviet Union). Military
analysts considered imports from the Soviet Union were undesirable
because they gave Moscow “an effective
economic and political weapon.” “Erdöl als Wirtschafts- und Wehrfaktor
der Sowjetunion,” Militär-Wochenblatt,
119. Jahrgang, Nummer 20 (25 November 1934).
175
There were other means of producing fuel synthetically – not necessarily
as a replacement for hydrogenation, but
rather to complement it. One such method was the aforementioned Fischer-
Tropsch Process. There was also the
“Schwelen” (destructive distillation) of coal, which was championed by
Ubbelohde. Prof. Dr. Ubbelhode, “Über die
Gewinnung von Treibstoffen durch Schwelen von Braun- und Steinkohle,”
attached to: Ubbelhode to Feder, 23 July
1934, BA-B, R 3101/20320. Emphasis in the original. The memorandum is
summarized in: Akten der Reichskanzlei,
i: 918, n. 4. Ubbelhode also presented his case before the annual
convention of Deutsche Gesellschaft für
Mineralölforschung in April 1934 – the report of which offers a good
overview of the various efforts then under way
to boost domestic petroleum production. Angewandte Chemie 47: 21 (1934):
345-348. The Chancellery dismissed
Ubbelhode’s recommendations as a ploy to assist the coal tar industry.
Rk. 9537, Vermerk, 07 November 1934, no
author, BA-B R 43 (II)/486.
176
Eichholtz and Kockel, Von Krieg zu Krieg, 133.
177
See the summary of the work of the Kraftausschuss (power commission),
which then handled all war-related
measures concerning fuel for the RWM: “Teil A: Bericht über den Stand der
Arbeiten für eine wirtschaftliche
Mobilmachung am 30. September 1934 einschliesslich kurzer Begründung des
beigefügten Verordnungswerks,”
Document 128-EC, reprinted in: International Military Tribunal, Trial of
the Major War Criminals (Nuremberg, 19471949), xxxvi: 176-178 – hereafter
cited as: IMT. The report stipulated that providing Germany with a secure
supply was
“the most import realm of responsibility of the power committee”
precisely because of oil’s relationship to military
power, which “must suffer through any shortage of fuel the most sever
disruptions.” Overall, the RWM estimated

318
In September/October 1934, the new Economics Minister, Schacht, forced
the major German coal
producers into a “compulsory association” with IG Farben and DEA (the
largest German independent oil
company) answerable to the RWM to pool resources to expand synthetic fuel
production.178 After
October, the new conglomerate came into existence as the Braunkohle-
Benzin AG (BRABAG), with
Krauch serving on its Managing Board (Vorstand) and the Führer’s economic
adviser, Wilhelm Keppler,
on its Supervisory Board (Aufsichtsrat). The following month, the
Managing Board of BRABAG agreed
that the company would construct three new hydrogenation facilities under
license to IG Farben.179 This
was significant because although IG Farben’s direct share of German
petroleum production during the
Third Reich – 5.9% or 30% of synthetic fuel production – was relatively
small, its indirect share through
BRABAG, which accounted for 26.9% of synthetic production by 1942/43, was
much higher.180
In December 1934, Schacht proposed new legislation granting the RWM joint
authority with the
Finance Ministry (Reichsfinanzministerium, RFM) to provide economic
guarantees to the textile,
petroleum, metallurgical, and chemical industries “in the interest of
reducing our raw materials imports
with the aim of [encouraging] the greatest possible independence for
Germany from overseas raw
materials.” In a note to his cabinet colleagues, Schacht explained that
the previous year’s agreement with
IG Farben (which would be covered retroactively under the bill) would
serve as the model for future
guarantees made by the Reich. With regard to the petroleum industry, the
RWM was negotiating for a
95,000 ton per annum increase in addition to the 350,000 tons promised by
IG Farben. Schacht also
Germany’s total supply of fuel (domestic production plus reserves) for
1935 at only 1,000,000 tons vs. an estimated
demand of 1,750,000 tons.
178
Kockel suggests that Schacht undertook this action to head off criticism
by the RKM of the slow pace in
improving Germany’s petroleum supplies. Eichholtz and Kockel, Von Krieg
zu Krieg, 140-141.
179
Bütefisch, “Gründung der Braunkohlenbenzin A.G. und ihre Beziehung zur
I.G. [Farben],” enclosed with:
“Bericht über die 1. Ölbesprechung in Ludwigshafen an Rhein am 10. Januar
1935, nachmittags 3 Uhr,” NARA, RG
238, T-301/62 (NI-7669). For a copy of the license agreement, see:
“Lizenvertrage zwischen der I.G.
Farbenindustrie Aktiengesellschaft… und der Braunkohle-Benzin
Aktiengesellschaft,” 14 June/22 August 1935,
NARA, RG 238, T-301/63 (NI-7767). Many key documents concerning the
foundation and operations of BRABAG
(taken from the files of one of its members, the Anhaltische Kohlenwerke
AG) may be found in: NARA, RG 238, T301/28 (NI-3975). They are
accompanied by a helpful summary: Office of the Military Government for
Germany,
Finance Division, External Assets & Intelligence Branch, Financial
Intelligence Section, “Analysis of Records
Concerning Braunkohlen und Benzin A.G. ‘BRABAG,’” 10 February 1947. See
also: Hayes, Industry and Ideology,
133-135; Karlsch and Stokes, Faktor Öl, 182-184; Plumpe, I.G.
Farbenindustrie, 281-285; and Stokes, “IG Farben,”
258-260.
180
Plumpe, I.G. Farbenindustrie, 281-282, and 287.

319
expected that Germany’s lignite producers (BRABAG) would furnish funds
for the construction of
facilities capable of adding another 500,000 tons of fuel to Germany’s
petroleum supply.181
By the spring of 1934, although it was not the product of any specific
program, the Third Reich had
implemented a multi-faceted petroleum policy that extended beyond just
synthetic fuel. Feder outlined the
situation to Hans Lammers, the Chief of the Reich Chancellery
(Reichskanzlei). IG Farben was in the
process of expanding production at Leuna under the terms of the 1933
agreement with the Reich and
planning (“from its own resources”) to construct two new facilities at
Oppau and in Silesia provided that
no strategic objections were raised. Meanwhile, planning for two new
facilities using the F-T Process (the
patent to which was held by the IG rival Ruhrchemie AG) “are so far
advanced that the beginning of
construction is to be expected within a short time.” German independent
oil companies had also
committed themselves to expanding production and constructing new
refineries (again, through their own
funds), while the Reich would shortly begin providing these companies an
annual subsidy of 5,000,000
RM for the purchase of new drilling equipment to begin the process “of
acquiring a clear picture of the
extent of domestic crude oil reserves.”182

181

“Gesetz über die Übernahme von Garantien zum Ausbau der

Rohstoffwirtschaft,” and “Begründung,” enclosed
with: der Reichswirtschaftsminister und Preuβische Minister für
Wirtschaft und Arbeit an den Herrn Staatssekretär
und Chef der Reichskanzlei (Hans Lammers), II R 838/34, 01 December 1934,
PAAA, R 28806; reprinted as Nr. 51
in: Akten der Reichskanzlei, ii: 194-196 (esp. pg. 194, n. 1). This law
stemmed from a presentation Schacht had
made the previous October before leading officials (including Hitler)
concerning Germany’s worrying foreign
exchange position (the monthly deficit at the time running at about
360,000,000 RM in spite of “all efforts made to
increase exports”). Germany might, he warned, have to dip into its
reserves to save hard currency: in the case of
petroleum, these amounted to only three months, while the “completion of
major installations for the production of
fuels still required a period of 1¼ to 1½ years.” “Chefbesprechung in der
Reichskanzlei vom 18. Oktober 1934, 12
Uhr,” Nr. 25 in: Akten der Reichskanzlei, ii: 105. The Cabinet gave its
approval to the draft law on 13 December
1934, which went into law that day. “Kabinettssitzung vom 13. Dezember
1934, 16.15 Uhr,” Nr. 64: Akten der
Reichskanzlei, ii: 242 (esp. n. 3).
182
Feder to Lammers, 23 April 1934, BA-B, R 3101/20320; partially summarized
in Akten der Reichskanzlei, i: 919,
n. 5, and 987, n. 9. The need for extensive and coordinated exploration
efforts by the entire German crude oil
industry was a constant refrain from Germany’s leading petroleum
geologist, Alfred Bentz of the Prussian
Geological Institute (Preuβische Geologische Landesanstalt). Even in
areas as rich in crude oil as Texas, he pointed
out, “only about one out of a hundred drillings encounters a new
oilfield.” Alfred Bentz, “Das Erdöl in Deutschland
und seine Aufschlieβung. Planmäβige Erforschung erdölhöffiger Gebiete:
Vortrag gehalten auf der Tagung der
Deutschen Gesellschaft für Mineralölforschung am 17.-19 Sept. 1933,”
Bundesanstalt für Geowissenschaften und
Rohstoffe, Nr. 1953 K 941 (hereafter cited as: BGR #); Alfred Bentz, “Das
Erdöl in Deutschland und die Frage
seiner Aufsuchung,” Sonderabdruck aus Petroleum Zeitschrift 29: 50 (20
December 1933), BGR 1953 K 940; and
Alfred Bentz, “Wie ist die Erdölhöffigkeit Deutschlands heute zu
beurteilen? Vortrag anläβlich der
wissenschaftlichen Tagung der Deutschen Gesellschaft für
Mineralölforschung und der Brennkrafttechnischen
Gesellschaft E.V. am 26. September 1935,” BGR 1953 K 945.

320
Finally, Feder was negotiating with the Europäische Tanklanger- und
Transport AG (Eurotank),
which was controlled by an enigmatic U.S. oil man, William Rhodes Davis.
Through Eurotank and
Davis’ oil interests in Mexico (where he possessed the right to drill
“offset” wells in the vicinity of the
rich Poza Rica field, then under concession to Shell), Feder hoped to
barter Mexican crude oil in
exchange for German finished goods. The crude oil would then be processed
in a modern refinery in
Hamburg being constructed by Eurotank and sold by independent German
distributors. A quarter of
Eurotank’s gasoline production would remain in Germany, while the
remainder would be exported to
either Scandinavia or Britain to earn foreign exchange.183 Feder
described this project as the “first largescale exchange of goods along
the lines set by the National Socialist economic leadership.”184
By now, the major oil companies were becoming suspicious of Germany’s
intentions – not so much
its foreign policy, but rather its commercial policy. As Henri Deterding
(the Chairman of Shell) explained
in September 1934, he had in the past been more than willing to stockpile
at cost 1,000,000 tons of fuel in
Germany, “which corresponds to roughly six months of consumption,”
purchased from the Soviets.185
The plan had fallen through for reasons that even Deterding was unclear
about. When asked if he might
resurrect the plan, he replied in the negative. For one thing, geologists
were raising alarms that existing
rates of production could not be sustained for another “15-20 years,” and
that reserves should be
“husbanded.” More important, though, was the recent Japanese law that
compelled major oil companies
to maintain large stockpiles that could be “impounded” by the state, with
compensation only in yen at a
rate determined by the government alone.186 Italy was also considering
such measures, and Deterding was

183

The whole scheme is summarized in: “Der Davis Plan,” no date or author
(handwritten notation seems to indicate
1934), T-120/5677.
184
“[…] im Sinne nationalsozialistischer Wirtschaftsführung.” Feder to
Lammers, 23 April 1934, BA-B, R
3101/20320; partially summarized in Akten der Reichskanzlei, i: 919, n.
5, and 987, n. 9. See also: Karlsch and
Stokes, Faktor Öl, 168-169. Feder was a crank and eventually replaced as
the RWM’s chief petroleum expert by a
member of his “engeren Mitarbeitstab,” Ernst Rudolf Fischer. Feder’s
economic theories are summarized in: Turner,
Big Business, 62-64. The Eurotank refinery was completed in 1935 but
little Mexican oil ended up coming to
Germany until after nationalization in 1938.
185
“[Weil] er damals in der Lage gewesen ware, dieses gesamte Quantum über
seine damalige Produktion hinaus
von Russland zu kaufen.”
186
For additional details, see “Japanese Oil Law of July 1st, 1934,”
enclosed with: Maj. A.M Jones (General Staff,
AC of S, G-2) to the AC of S (G-2), “Copy of translation of Japanese Oil
Law,” 29 August 1934, 010.91 (G-2); Maj.
E.O. Sawyer to Maj. [Jones?], “New Japanese Oil Law,” 31 August 1934; and
Sawyer to G-2, Ninth Corps Area

321
attempting to get President Roosevelt to lodge a protest in order to
stiffen the backbones of the
Europeans. There was nothing stopping Germany, Deterding surmised, from
adopting a similar policy.187
Although he sympathized with National Socialism, Deterding urged Germany
to refrain from such an
action and, instead, implement its stockpiling policy “in concert” with
the major oil companies.188
The actual story was a little more complex than Deterding let on,
although it sheds light on the
differences between the petroleum policy favored by Schacht under the
“New Plan,” and the kind that
was adopted following the inauguration of the VJP in 1936. Basically, in
July 1934, the RWM
approached the German subsidiaries of Jersey, Shell, and Anglo-Persian
with the following offer. The
companies would, in excess of their existing imports, accumulate
1,000,000 tons of petroleum products in
Germany in new storage facilities they themselves would construct (and
which the Reich would amortize
over the following five years). These 1,000,000 tons would become a
special “national reserve” that
would not enter into circulation except in the event of an emergency. The
companies would also have to
maintain at all times a working surplus equal to four months of
consumption. Finally, the companies
would agree not to repatriate any of their earnings in Germany for five
years. These profits would,
instead, be loaned to German banks and invested in the German economy for
the purpose of infrastructure
development, stimulating consumption, and expanding domestic production
and storage capacity. In

HQ, “Japanese Oil Situation,” date illegible (received on 27 September

1933); all in: University Publications of
America, U.S. Military Intelligence Reports: Japan, 1918-1941 (Frederick:
University Publications of America,
1986), Reel 15. Japan’s “quest for autonomy” is described in: Irvine
Anderson, Standard-Vacuum Oil Company and
United States East Asian Policy (Princeton: Princeton University Press,
1975), 71-103; Michael Barnhart, Japan
Prepares for Total War: The Search for Economic Security, 1919-1941
(Ithaca: Cornell University Press, 1987); and
Michael Barnhart, “Japan’s Economic Security and the Origins of the
Pacific War,” Journal of Strategic Studies 4: 2
(1981): 105-124.
187
“[…] dass keinerlei Grund vorläge, Deutschland von einem ähnlichen
Vorgehen abzuhalten […].”
188
Bericht, “Betr. Benzin- und Treiboellagerung. Besprechung mit Sir Henry
Deterding in Schöneberg/Preussen am
25 – 27. September 1934,” 28 September 1934, no author, T-77/228 (Wi/IF
5.1171). Emphasis in the original.
Although there was great interest within the Reich in using Deterding as
an asset, the Navy’s oil expert was
convinced that this was fruitless since Deterding had lost any influence
over Shell’s management after 1931. W Wi
VI, Nr. 1740/38 gK, “Aktennotiz auf Grund einer Besprechung mit Herrn
Ministerialrat Dr. Fetzer OKM
[Oberkommando der Marine] betr. Oelversorgung,” 17 June 1938, T-77/683
(Wi/VI. 356). Deterding’s \ public
flirtation with National Socialism during the 1930s is detailed in
extensively within Shell’s official history: Jonker
and van Zanden, History of Shell, 475-491.

322
exchange, the Reich would not expand its existing support for the
synthetic fuel industry and allow the oil
companies to maintain their existing market share.189
Shell believed that there was a great deal that was “desirable” in the
Reich’s proposal. As it explained
to the British Petroleum Department, the company had invested much money
(£17,000,000) and resources
in Germany. Although the country’s per capita and absolute consumption
lagged well behind that of both
Britain and France (only 38% of Britain’s consumption, even though its
population was 35% larger),
there was every indication that this would change over the next few years
because of the Reich’s vigorous
economic policy. Moreover, Shell was concerned about “autarchic elements”
in Germany urging the
Reich to expand its support for synthetic fuel at the expense of imports.
By accepting the offer, Shell
believed it could undermine support for autarky within Germany.190 (This
was something Hitler later
suspected, for he believed that Deterding had conspired with Schacht and
the RWM to oppose expansion
of the synthetic fuel industry in 1933.191) Moreover, Shell was not
averse to currency controls, since it
already operated under such constraints elsewhere in the world. Finally,
the company would shortly be
laboring under excess supplies of crude oil, as the French Government was
pushing the major companies
to supply France with imports from Iraq (where the CFP held a minority
interest). The fact that Germany
was eager to increase the size of its reserves stocks was therefore a
welcome development.192
The British Government was less than impressed, and its chief economic
adviser dismissed Shell’s
position as “lamentably weak.”193 Jersey immediately expressed its
opposition to the State Department,
the main objection being the requirement to leave its profits in Germany
with no guarantees concerning

189

The most reliable summary of this episode may be found in: Ernest Brown
(Secretary of Mines) to the President
of the Board of Trade (Walter Runciman), “Supplies of Petroleum and
Petroleum Products to Germany,” 08
November 1934, enclosed with: W.R., “Supplies of Petroleum to Germany:
Note by the President of the Board of
Trade, 09 November 1934, C.P. 252 (34), BNA, CAB 24/251.
190
This was also the opinion of German critics of Shell: “Royal Dutch als
Weltmacht,” Die deutsche Volkswirtschaft
Nr. 21 (1936), T-77/425 (Wi/IF 5.3444).
191
“I’d like to know who wasn’t corrupt in that bucket-shop,” he later
grumbled. Table Talk: No. 128 (27 January
1942). Emphasis in the original.
192
“Memorandum from the Asiatic Petroleum Co.,” 30 July 1934, enclosed with:
F.W. [sic; F.C.] Starling (Director,
Petroleum Department, Mines Department) to Frederick W. Leith-Ross
(Permanent Secretary, Chief Economic
Adviser to the British Government), 31 July 1934, BNA, T 160/602.
193
Leith-Ross to Starling, 04 September 1934, BNA, T 160/602.

323
the exchange rate when the five-year waiting period expired.194 During
subsequent meetings in London to
discuss the proposal, “[the] Anglo-Persian representative had said his
company would probably not take
up the matter with the British Foreign Office which he was sure would
oppose the proposal.” Shell had
modified its position somewhat, in that it was willing to abide by a
three year waiting period on
repatriation of profits ($60,000,000), provided that the Reich guaranteed
a fixed exchange rate and paid
interest.195 Privately, Jersey’s chief legal adviser in Germany explained
to the U.S. Embassy that Shell
was trying to undercut Jersey because of the latter’s partnership with IG
Farben concerning synthetic fuel:
“The former desires to impede its production whereas the Standard
considers that if coal products of this
kind are, economically speaking, viable, their marketing can not [sic] be
stopped […].” Shell was also
attempting to maneuver Jersey and Anglo-Persian into incurring the
Reich’s wrath by stipulating that its
(Shell’s) support was conditional upon the other two companies also
agreeing.196
Unnamed oil executives also tried to convince U.S. diplomats that the
whole scheme had actually
been engineered by Shell because of Deterding’s support for National
Socialism and anti-Communist
hysteria, and that the Reich had initially been reluctant because it
feared that the plan was so obnoxious
that it would harm Germany’s economic relations with Britain and the
United States after the oil
companies complained.197 One should avoid taking such accusations at face
value – in spite of his anticommunism, for example, Deterding was willing
to buy oil from the Soviet Union and store it in
Germany. Nevertheless, it appears that Shell stood to gain
disproportionately: under the plan, companies
wishing to import oil into Germany would have to do so using hard
currency earned through exports or
re-exports, and Shell’s German subsidiary, Rhenania-Ossag Mineralölwerke
AG, just happened to
194

Jersey estimated that the total figure for all three companies at
$250,000,000. William Phillips (U.S. Under
Secretary of State), “Memorandum of conversation with Mr. Chester O.
Swain, of the Standard Oil Company of
New Jersey,” 17 July 1934, NARA, Record Group 59: General Records of the
Department of State (hereafter cited
as: RG 59), 862.6363/152.
195
Office of the Economic Adviser, U.S. Department of State, “Memorandum of
Conversation with Mr. Chester
Swain of the Standard Oil Company of New Jersey,” 25 July 1934, NARA, RG
59, 862.6363/153.
196
J.C. White (Counselor, U.S. Embassy, Berlin) to the Secretary of State,
“Certain Problems of the Standard Oil
Company,” 18 August 1934, No. 1186, NARA, RG 59, 862.6363/154.
197
John G. Erhardt (U.S. Consul General, Hamburg) to William E. Dodd (U.S.
Ambassador to Germany), “Reported
Negotiations Between the Reich Government and the Two Largest German Oil
Importers,” 21 August 1934, NARA,
RG 59, 862.6363/155.

324
dominate the German petroleum export market, accounting for 80% of all
sales of lubricating oils
alone.198 Rumors also reached the U.S. Consulate in Hamburg that the
RWehrM would place orders with
the oil companies “in proportion to the extent to which the various
mineral oil companies have aided the
German export trade,” which the Americans interpreted as a transparent
bid by the military “to award the
bulk of its contracts for mineral oils to the Shell interests […].”199
Shell’s support could not overcome the resistance of not only Jersey and
Anglo-Persian, but also the
British Government, all of which appears to have been motivated purely by
commercial rather than
strategic considerations.200 The Reich reacted to its failure by
introducing a plan in October 1934 to boost
domestic production of motor fuels to 2,000,000 tons within two years,
thereby eliminating Germany’s
need for imports. The British Embassy did not take such threats
seriously. In exchange for a savings of
roughly 50-60,000,000 RM worth of hard currency, the Reich would be
foregoing roughly 200,000,000
RM in import duties and would need to scrape together as much as
1,000,000,000 RM worth of credit to
the chemical and coal companies involved in expanding synthetic output
(BRABAG): “[It] is difficult to
believe that, unless the process of treating lignite and coal can be much
cheapened, the budget difficulties
consequent on the change will not be serious.”201 The Embassy’s guess
that Berlin was bluffing turned out
to be accurate: in November 1934, the Reich again tried to broker a deal
with the oil companies, this time

198

Erhardt to the Secretary of State, “Foreign Interests in German Mineral

Oil Trade,” 15 February 1935, No. 332,
NARA, RG 59, 862.6363/165. Rhenania managed to evade the foreign exchange
controls in place since 1931 by
exporting finished goods to countries such as Britain. As late as 1937,
the company still ran a positive balance of
payments, but its operations became increasingly difficult after the
start of the Four-Year Plan, when the company
was coerced into joining Jersey and IG Farben in the construction of a
synthetic fuel plant at Pölitz. The Reich
finally placed the company under receivership during the war. Jonker and
van Zanden, History of Shell, 464-474;
and Stephen Howarth and Joost Jonker, Powering the Hydrocarbon
Revolution, 1939-1973, vol. 2 of A History of
Royal Dutch Shell (Oxford: Oxford University Press, 2007), 20-21, 78.
199
Erhardt to the Secretary of State, “American Interests in German Mineral
Oil Trade and Industry,” 15 August
1935, No. 523, NARA, RG 59, 862.6363/169.
200
The RWM, by contrast, was convinced that “political” as well as
commercial factors had motivated the
opposition of Anglo-Persian. Der Reichswirtschaftsminister und Preuβische
Minister für Wirtschaft und Arbeit, III.
1026/Mu., “Betr. Mineralölversorgungsplan. Schreiben vom 14. August 1934
– W 6143 –,” 25 August 1934, T120/5677.
201
“Memorandum on the Supply of Petrol to the German Market,” 09 October
1934, Enclosure No. 1 to: Eric Phipps
(British Ambassador to Germany) to John Simon (Foreign Secretary), 12
October 1934, C 6780/3267/18, No. 1214
E., 09 October 1934, BNA, T 160/602.

325
using IG Farben as an intermediary.202 The company would purchase
£4,000,000 worth of petroleum
products (obviously with the consent of the Reich considering the
expenditure of foreign exchange),
equivalent to one million tons at prevailing prices, over the next five
years, although IG Farben would
have the option of demanding delivery within two years. Compensation
would be paid on a biannual basis
and completed within five years of completion of the contract.203
Although it was clear that IG Farben was acting as a proxy for the Reich,
both the oil companies and
London looked upon the proposal favorably for much the same reason as
Shell had supported the earlier
deal: they saw it as a means of weaning Germany away from autarky, which
would harm the interests of
the major oil companies in Germany. Although the major oil companies
chafed at German restrictions on
the remittance of earnings, the companies did not complain too much since
they earned high profits in
Germany and usually managed to find loopholes by using their blocked
accounts to construct physical
assets such as tankers that could also be used to earn hard currency.204
Additionally, London figured that
discouraging autarky would, over the long term, serve Britain’s strategic
interests by keeping Germany

202

According to a postwar interrogation of an IG Farben executive (who

misidentified the date of the transaction),
Schacht and Blomberg had approached Krauch “asking us to try to procure
for them a rather great stock of oil,” in
order to tide Germany over until it had completed construction of the
necessary synthetic fuel plants. Krauch
subsequently travelled to London with a coterie of executives including
Fischer, who appears to have spearheaded
the negotiations with the major oil companies. Only $14-15,000,000 worth
of products ended up being delivered, as
Anglo-Persian backed out. Although the Reich recompensed IG Farben for
its expenditures, the company did not
earn any profits from the deal. “Comments on Professor Haslam’s Article
in the ‘Petroleum Times’ of 25/12/1943,”
06 June 1944, enclosed with: Knieriem to Dr. Schmitz, et al., “Haslam
Article,” 06 June 1944, Translation of
Document NI-10551, NMT, vii: 1303-1311; and “Extracts from an
Interrogation of Defendant von Knieriem, 25
August 1945, Concerning the 20 Million Dollar Purchase of Aviation
Gasoline and Fuels from the United States by
Farben on Behalf of the German Government,” Partial Translation of
Document NI-4690, NMT, vii: 1202-1209; for
the original German document, see: NARA, RG 238, T-301/34 (NI-4690).
Kockel claims, again without any
evidence, that, as a result of its handling of the negotiations, IG
Farben developed a sense of “self-confidence” in its
“capacity… to plan, direct, and administer” oil policy “better than the
Economics Ministry.” Eichholtz and Kockel,
Von Krieg zu Krieg, 143-145 (quotation from pg. 145).
203
Hiram Bingham (Third Secretary, U.S. Embassy in London) to the Secretary
of State, 20 November 1934,
NARA, RG 59, 862.6363/158. Bingham’s telegram enclosed a Foreign Office
memorandum also dated 20
November 1934. IG Farben modified the proposal to incorporate full
payment upon delivery once the companies
started bickering over having British and U.S. banks guaranteeing future
payment. Phillps, Memorandum of
Telephone Conversation, NARA, RG 59, 862.6363/159; and Department of
State to the U.S. Embassy, London, 04
December 1934, NARA, RG 59, 862.6363/158. This latter paper was rewritten
and forwarded to the Foreign Office
the following day. Embassy of the United States of America, London,
“Memorandum,” 05 December 1934, C
8365/3267/18, enclosed with: the Under Secretary of State for Foreign
Affairs (Earl Stanhope) to the Secretary of
the Treasury (Duff Cooper?), “Supply of Petroleum to Germany,” 13
December 1934, BNA, T 160/602.
204
Larson, Knowlton, and Popple, New Horizons, 333-334; and Wilkins,
Maturing, 237-238.

326
dependent on oil imports.205 As officials concluded following an
interagency meeting, it was in Britain’s
interest to avoid “taking any action which would force the German
Government to undertake an intensive
campaign designed to meeting the greater part of her oil requirements
from her own resources. If such a
position arose, Germany’s defence would probably be strengthened.”206

205

Washington played no role since it had chosen to adopt the position of

observer and informed Jersey that it would
have to rely on British official support. H.F. (Herbert Feis, Economic
Adviser, U.S. Department of State), 21
November 1934, enclosed with: NARA, RG 59, 862.6363/158.
206
Ernest Brown (Secretary of Mines) to the President of the Board of Trade
(Walter Runciman), “Supplies of
Petroleum and Petroleum Products to Germany,” 08 November 1934, enclosed
with: W.R., “Supplies of Petroleum
to Germany: Note by the President of the Board of Trade, 09 November
1934, C.P. 252 (34), BNA, CAB 24/251.
The Foreign Office provided the U.S. Embassy in London with a memorandum
that basically recapitulated the
points raised in Brown’s original paper: Hiram Bingham (Third Secretary)
to the Secretary of State, 20 November
1934, No. 595, NARA, RG 59, 862.6363/158. State’s evaluation was driven
by purely commercial considerations: it
agreed that the deal was “very much in the interest of the supply
companies” if it stemmed German support for selfsufficiency, and because
the Reich would probably be able to buy the oil it needed from Romania or
the Soviet
Union if the majors proved difficult. Office of the Economic Adviser, 03
December 1934, NARA, RG 59,
862/6363/160. The idea that Britain, perhaps aided by France,
deliberately pursued a “subtle containment policy on
the oil energy level” aimed at “[keeping] both Germany and Italy
dependent on foreign controlled oil” is central
element of Helmut Mejcher’s analysis of interwar oil policy. Mejcher,
“German Oil Policy,” 47. Emphasis in the
original. There is a dearth of evidence to support this hypothesis, but
in any event, by January 1936, British
scientists and oil executives were warning the Committee of Imperial
Defence (CID) that Germany could be
“Sanctions proof” as early as 1937. A.W. Clarke (Oil Board), “Steps to
Render Germany Independent of Foreign
Supplies of Fuel,” 13 January 1936, O.B. 154, BNA, CAB 50/5.

327
IG Farben and Initial Planning to Meet Wartime Requirements, 1934-1935
Although we should not conflate the National Socialists’ petroleum policy
with that of IG Farben, one
cannot avoid the impression that the latter did exercise considerable
influence with the former considering
the eventual direction of German policy after 1936. For that reason, we
should consider more carefully IG
Farben’s conception of how Germany’s petroleum industry should be
reformed and additional production
be encouraged. In the autumn of 1934, their expert on the industry, the
ubiquitous Fischer, produced a
wide-ranging assessment of Germany’s petroleum position and the various
means for addressing the
existing deficit between production and consumption. He began by noting
that, between 1929 and 1933,
Germany had only managed to fill roughly 25% of its requirements
internally (although the total value
had shrunk significantly, from 134,300,000 RM in 1932 to 120,600,000 RM
the following year). What
little Germany did produce in the way of crude oil was subsequently
refined into gasoline, fuel oil, and
lubricants. Fischer expected that the pace of German motorization (and
presumably, the economic
recovery and rearmament) would contribute to a sharp increase in
transportation-related petroleum
consumption, perhaps by as much as 10% per year until 1938 (from
1,500,000 tons to 2,300,000 tons).207
When it came to meeting the existing and future shortfall, Fischer
dismissed benzol and other, less
advanced forms of synthesis as inefficient. German crude oil production
might be raised significantly, but
it was best suited to being refined into lubricating oils and diesel.208
Overall, however, none of these

207

Der gegenwärtige Stand der deutschen Treibstoffversorgung und die

Ausbaumöglichkeiten der
Inlandsproduktion,” 07 September 1934, no author, enclosed with: Fischer
(Abteilung Oele) to the Ammoniawerk
Merseburg, Leuna-Werke, Direktion, 13 September 1934, BASF Archive, IG
Farben, M02/1. Although 500,000 tons
of this increase would be for gasoline, Fischer expected that increased
utilization of diesel motors, particularly for
military purposes would lead to a 300,000 ton increase in diesel fuel
consumption.
208
Kockel considers the insistence that domestic crude oil be devoted to
filling the deficit of lubricants rather
producing gasoline in new “cracking” facilities as evidence of an IG
Farben conspiracy to eliminate a rival source of
gasoline to hydrogenation. Eichholtz and Kockel, Von Krieg zu Krieg, 148-
149. Of course, even Kockel concedes
that IG Farben only advocated this policy because it believed that
domestic oil production could not be raised
significantly, which turned out to be the case until the discovery of new
oilfields in Austria after 1938. According to
the most optimistic predictions of domestic crude oil producers in
November 1937, maximum output in wartime
would reach only 1,500,000 tons twelve months after the start of
hostilities. A.E. Gunther (British Military
Government, Celle), “British Oil Fields Investigation, Part IV, Section
1: The War Structure of the German Crude
Oil Industry, 1934-1945,” May 1946, BNA, WO 252/1448. Kockel draws
heavily on Gunther’s analysis, which is
highly critical of Krauch’s skepticism of the domestic crude oil industry
and IG Farben’s attempts at creating a
“national oil monopoly” akin to that of Standard Oil in the United States
during previous century. Eichholtz and
Kockel, Von Krieg zu Krieg, 187. By 1939, Krauch had changed in his mind
and planned on boosting domestic

328
options could be expected “to cover Germany’s future increase in demand
for liquid fuels and lubricating
oils, much less to abate Germany’s import requirements.” The solution was
the conversion of soft and
hard coal (which existed “in quantities without limits”) into liquid
fuels, either through hydrogenation or
the F-T Process. Thanks to the experience gained at Leuna, IG Farben was
capable of treating coal, oil, or
tar, depending upon the circumstances, without much difficulty. Moreover,
hydrogenation could be used
to produce either gasoline or, if the need arose, a variety of heavy and
light oil productions. Moreover,
unlike the production of benzol or processing of coal tar, hydrogenation
yielded no unwanted byproducts
such as coke that needed to be disposed of elsewhere in the German
market.209
In addition to the expansion at Leuna, IG Farben was busy converting
existing facilities or building
new ones and expected to reach a total synthetic output of 800,000 tons.
It was impossible to know the
precise division of labor between synthetic fuel and crude oil until the
existing domestic oil exploration
program had been completed. Fischer was nonetheless confident that only
hydrogenation provided a
“long-term” solution. There was certainly no shortage of coal: existing
reserves stood at 22,000,000,000
tons of soft coal and 90,000,000,000 tons of hard coal, although these
figures were doubtless
conservative. Against an annual production of 130,000,000 tons of soft
coal and 150,000,000 tons of hard
coal, Germany’s reserves of soft coal would last for around 170 years and
600 years in the case of hard
coal. Taking a figure of sixteen tons of soft coal and five tons of hard
coal to produce one ton of gasoline,
Fischer estimated that IG Farben would require only 8,000,000 tons of the
former and 1,500,000 of the
latter to produce the required 800,000 tons of fuel.210

crude production (including Austria) to 2,000,000 tons a year by the end

of the Krauch Plan – a fact that neither
Kockel nor Gunther mention. Reichstelle für Wirtschaftsausbau (RWA),
“Arbeitsbericht des
Generalbevollmächtigten des Ministerpräsidenten Generalfeldmarschall
Göring für Sonderfragen der chemischen
Erzeugung Dr. C. Krauch vor den Generalrat,” 20/21 April 1939, T-77/430
(Wi/IF 5.3594)
209
Der gegenwärtige Stand der deutschen Treibstoffversorgung und die
Ausbaumöglichkeiten der
Inlandsproduktion,” 07 September 1934, no author, enclosed with: Fischer
(Abteilung Oele) to the Ammoniawerk
Merseburg, Leuna-Werke, Direktion, 13 September 1934, BASF Archive, IG
Farben, M02/1.
210
“Der gegenwärtige Stand der deutschen Treibstoffversorgung und die
Ausbaumöglichkeiten der
Inlandsproduktion,” 07 September 1934, no author, enclosed with: Fischer
(Abteilung Oele) to the Ammoniawerk
Merseburg, Leuna-Werke, Direktion, 13 September 1934, BASF Archive, IG
Farben, M02/1. I am grateful to Ray
Stokes for sharing this document with me. An excellent statistical
appendix for the period between 1929 and 1934 is
also appended to Fischer’s memorandum.

329
Fischer’s preferences were clear, but he was not obsessed with promoting
hydrogenation and had a
sense of his obligations to the oil industry as a whole, which he
represented as the head of the
government-organized Petroleum Section of the Chemical Industry Trade
Group (Fachgruppe Mineralöle
und Mineralölprodukte der Wirtschaftsgruppe Chemische Industrie). In a
paper co-signed with
representatives of the automobile and mining trade groups, Fischer
expressed concern about the lagging
state of diesel production, in view of the greater efficiency of diesel
engines to gasoline-powered ones.
Diesel engines were also of increasing importance to German automobile
industry, both for the domestic
and export markets. Only one-seventh of Germany’s diesel consumption came
from local sources. There
was evidence, however, “suggesting that certainly the technical basis for
providing Germany with a
sufficient supply of diesel fuels exists,” but an expansion was not
feasible economically under the existing
market price. Fischer therefore suggested raising the price to 16 RM per
100 kg either by increasing
import duties or creating a price-equalization fund (Ausgleichskasse)
while eliminating the export duty on
German petroleum products. Fischer also complained about the
misallocation of German crude oil to
refining products such as gasoline, when it should be preserved as a
wartime reserve of lubricating oils.
More than anything else, the process of motorization in Germany (which
already lagged far behind the
rest of the world – German per capita consumption, forty liters, was half
that of the French, less than onethird that of the British, and less than
one-fifteenth that of the Americans) should never be threatened by a
lack of fuel, particularly through a shortage of foreign exchange.211
Fischer’s assessments were of considerable relevance to German military
planning. IG Farben began
compiling estimates of future supply and demand during peacetime and
mobilization in collaboration with

211

Fischer, et al., “Deutschlands Treibstoff- und Mineralölversorgung:

Gemeinsame Denkschrift und Vorschläge
der Mineralölindustrie, der Automobileindustrie, des Steinkohlen- und
Braunkohlenbergbaues,” no date (circa
1935), T-84/194 (EAP 66-c-12-62/130). See especially Anlagen 1-3, and 7.
Fischer also articulated many of this
paper’s argument in a lecture before the annual conference of the
Deutsche Gesellschaft für Mineralölforschung” in
September 1935: “Nationale Mineralölwirtschaft: Vortrag gehalten von Dr.
E.R. Fischer… 26. September 1935,”
Sonderdruck aus: Die Chemische Industrie: Herausgegeben von
Wirtschaftsgruppe Chemische Industrie…
Nachrichten-Ausgabe, 58. Jahrgang (05 October 1935), enclosed with:
Fachgruppe Mineralöle und
Mineralölprodukte der Wirtschaftsgruppe Chemische Industrie (signature
illegible) to Hauptmann Czimatia
(Reichskriegsministerium, Wehrmachtamt), Dr.My./Ha., II/727, 10 October
1935; and Czimatia to the Fachgruppe
Mineralöle…, 17 October 1935; both in: T-77/416 (Wi/IF 5.3276).
330
the HWA and then the Defense-Economy Staff (Wehrwirtschaftsstab, WStb) as
early as October 1934.212
The first study was revised at least twice (December 1934 and May 1935).
According to the last version,
the aim of German petroleum policy was “[an] expansion of internal
production,” both for the purposes of
freedom from imports and “to support the desired increase of German
automotive sector, such that this
must not be throttled […] through an enforced saving of foreign
exchange.” Planned increases in
domestic output would be focused on expanding the supply of more
expensive petroleum products (such
as high-octane aviation fuel). Although Germany would strive for the
“highest possible increases” over
the next two years, the only way to cover the expected mobilization
demand was through additional
imports and stockpiling. Overall, normal consumption of all manner of
petroleum products would rise
from an estimated 3,680,000 tons in 1934 to only 3,945,000 tons by 1938.
Mobilization demand, on the
other hand, would be 5,675,000 tons. Domestic output would increase by
roughly 50%, from 1,402,000
tons to 2,155,000 tons, thereby allowing Germany to cover 64.6% of its
total consumption by 1938,
against only 28.1% in 1935. Five synthetic plants, one existing (Leuna)
and four under construction
(Böhlen, Magdeburg, Ruhland, and Scholven) would account for any new
production. Germany would
still, however, have to import roughly 7,734,000 tons over the next four
years at a cost of 511,300,000
RM in foreign exchange.213
Interestingly, total output would actually decrease in the event of
mobilization, since the production
of motor fuels would have to be re-routed from supplying automobile to
aviation fuel. Against the
expected demand of 5,675,000 tons, only 1,655,000 tons of domestic
production and 792,000 tons of
stockpiles would be available (i.e. 2,447,000 tons or 43.2% of total
demand). In order to satisfy its
mobilization requirements for an entire year, Germany would need to make
a “one-time, special
212

Dr. (Gerhard) Ritter to Dr. Krauch, 12 December 1935, NARA, RG 238, T-

301/58 (NI-7295). Ritter explained
that the figures concerning mobilization demand provided by the
Wehrwirtschaftsamt were “out of date” (veraltet),
but that IG Farben should make do for the time being, as “the total
demand for the time being for all products cannot
be overlooked.” Nonetheless, Ritter hoped to write a new assessment using
more up-to-date figures shortly. Titus
Kockel claims that IG Farben sought out cooperation with the military
because of it believed that the RWM was
hostile to its synthetic fuel program, even after the creation of BRABAG.
The idea is not unreasonable, considering
Schacht’s hostility to autarky after 1936, but Kockel does not present
any evidence. Eichholtz and Kockel, Von
Krieg zu Krieg, 143.
213
“Zur Deckung des deutschen Mineralölbedarfs,” 22 May 1935, no author,
NARA, RG 238, T-301/58 (NI-7295).

331
importation” of 3,153,000 tons by April 1937 that would be devoted
entirely stockpiling, at a cost of
241,800,000 RM. Further, Germany would require an additional 2,970,000
tons of tanker storage, an
expenditure of 387,400,000 RM. Although the center of gravity of the
German effort was synthetic
production, among the “additional tasks” suggested by the report was
raising German crude oil output,
which would be devoted to the production of lubricants. The report also
placed great emphasis on
expanding output of ersatz fuels using alcohol (Reichskraftstoff) or
methanol, recycling low-quality fuels
remaining from production of aviation fuel, and synthesizing lubricating
oils for aircraft engines. In fact,
this last product presented the most glaring shortfall in terms of its
oil supply – German production of
aviation lubricating fuels was nil in 1935 and IG Farben did not foresee
any change even by 1938.214
Overall, IG Farben was pleased by its current and expected progress. The
aforementioned
collaborative studies with HWA were rewritten and passed along to at
least one other influential observer,
the now-retired General Vollard-Bockelberg, a member of BRABAG’s Managing
Board.215 This study
predicted that, whereas domestic oil production had only managed to cover
between one-fifth and onethird of total consumption between 1930 and
1934, the situation would improve dramatically as a result of
the measures implemented in 1935. Accordingly, “in spite of the
increasing consumption” to be expected
in the years to come, Germany would still enjoy “a clear reduction of
import and thereby a lasting savings

214

“Zur Deckung des deutschen Mineralölbedarfs,” 22 May 1935, no author,

NARA, RG 238, T-301/58 (NI-7295).
These figures differ somewhat from the earlier reports of October and
December 1934 (both of which are appended
with the May 1935 draft), in that estimated demand & supply was
constantly revised upwards (roughly 200,000 tons
and 500,000 tons, respectively) – and with much of the new supply coming
either from synthetic gasoline
production or additional diesel fuel refined from German domestic crude.
See also the revised figures concerning
supply & demand of motor fuel, diesel, and lubricating oils (but not fuel
oil or kerosene), which differ slightly from
those in the May 1935 study, appended to: Ritter to Krauch, 12 December
1935, NARA, RG 238, T-301/58 (NI7295). Published estimates from this
period assumed an increase in domestic production from 850,000 tons in
1933
to 2,025,000 tons by 1936/37. Hans Steinberger, “Kriegswirtschaft und
Selbstversorgung,” Deutsche Wehr, Nr.
5/39. Jahrgang (31 January 1935).
215
Vollard-Bockelburg is certainly an interesting character. A former
General Staff officer attached to Supreme
Army Headquarters in Spa at the end of the First World War, he
subsequently played a major role in promoting
development of Germany’s nascent armored forces during the 1920s and
served as the Chief of the HWA from 1929
until his retirement at the end of 1933. A year later, he joined Krauch
on the Managing Board of BRABAG. He
disappeared into Soviet captivity in 1945.

332
of foreign exchange… will be achieved.”216 By 1937, the company estimated
that the country would only
need to import 35% of its consumption. This turnaround was the result of
additional investment to expand
production of domestic crude oil and from hydrogenation (and hopefully
from the F-T Process in future).
According to IG Farben, synthetic production of both light and heavy
petroleum products “practically
and technically, as well as in terms of raw materials, knows no
boundaries” other than financial
constraints. Once the planned expansion of Leuna and construction of the
new facilities was complete,
Germany would be almost self-sufficient (85-90%) in light motor fuel.
Even where major shortfalls did
exist, such as for diesel fuel or lubricating oils, IG Farben was
confident that a technical means of
addressing the deficit synthetically would be found shortly.217

216

These savings would only come in relation to “normal,” peacetime

demand/consumption: possible mobilization
demand could only be covered by significant stockpiling through imports,
which would undercut the efforts at
saving foreign exchange (“die die erzielte Devisenersparnis annähernd
wieder wettmachen dürfte”).
217
“Die deutsche Mineralölversorgung. Zur Sicherung des Normalbedarfs und
des A-Fall-Bedarfes,” June 1935, no
author, enclosed with: Vollard-Bockelberg to Ritter, 04 December 1935 and
10 March 1936, NARA, RG 238, T301/58 (NI-7295). Emphasis in the original.

333
The Battle for Control of Policy, 1935-1936
Even if its direct role in oil production was limited, the military kept
a close watch over
developments. By 1934, domestic production would have covered 68% of the
country’s consumption in
1930 and half of its current demand.218 The military took a dim view,
however, of the petroleum
industry’s future prospects in view of the bureaucratic and financial
obstacles. In March 1935, the
RWehrM (renamed the War Ministry – Reichskriegsministerium – in May)
summarized Germany’s
wartime raw materials position. Although adequate supplies of coal, iron,
and steel were available,
petroleum imports were still indispensable. Since “autarky is impossible
in the event of war,” Germany’s
survival would depend upon not just open sea lanes but also the
availability of foreign exchange to
finance imports. Germany’s shortage of foreign exchange and the
impossibility of securing foreign credits
left the country’s petroleum supply in a “wholly insufficient” position,
particularly as it had already been
forced to start drawing down its existing stockpiles.219
As War Minister Werner von Blomberg – probably at the prompting of his
chief economic adviser,
then-Colonel Georg Thomas – explained to Schacht in another overview of
the oil position in June 1935,
although tremendous advances in the supply of various petroleum products
had been achieved, “[the]
expansion of supply is not keeping pace with rise in demand, such that
the supply position, rather than
improving, is actually deteriorating.”220 According to Blomberg, by 1938,
petroleum consumption would
have risen by the following amounts:
Type of Product
Aviation Fuel
Motor Fuel
218

Increase
160%
120%

Verbandssyndikus Kurt Bronk, “Deutschlands Erdöl-Selbstversorgung,

militärisch gesehen,” MilitärWochenblatt, 120. Jahrgang, Nummer 16 (25
October 1935).
219
“These weaknesses,” the study concluded, “rule out the possibility of
conducting a war.” RWehrM, “Die
Wehrwirtschaftliche Lage von Deutschland, Frankreich, Belgien, Russland,
Tschechoslowakei, Polen, Italien,” 11
March 1935, Nr. 112 in: Akten der Reichskanzlei, ii: 416-417.
220
Blomberg had first brought the military’s concerns regarding petroleum
(specifically the Reich’s inability to
accumulate a 1,000,000 ton war reserve) to Schacht’s attention during a
conversation on 09 August 1934, shortly
after the latter’s appointment as Reichswirtschaftsminister. See: Nr. 51
in: Akten der Reichskanzlei, ii: 194, n. 1. For
Thomas’ role, see: Eichholtz and Kockel, Von Krieg zu Krieg, 149. Besides
the documents cited below, the
following discussion over responsibility for oversight of the petroleum
industry is based on: Dieter Petzina,
Autarkiepolitik im Dritten Reich: Der nationalsozialistische
Vierjahresplan (Stuttgart: Deutsche Verlags-Anstalt,
1968), 36-39; and Eichholtz and Kockel, Von Krieg zu Krieg, 134-170.

334
Diesel Fuel
Fuel Oil
Aircraft Lubricants
Automobile Lubricants

320%
20%
160%
200%

As of October 1935, domestic output would cover only the following shares
of demand:
Type of Production
Aviation Fuel
Motor Fuel
Diesel Fuel
Aircraft Lubricants
Automobile Lubricants

Share of Demand
52%
62%
42%
0%
43%

By the 1938, the supply position would have deteriorated even further:
Type of Product
Aviation Fuel
Motor Fuel
Diesel Fuel
Fuel Oil
Aircraft Lubricants
Automobile Lubricants

Share of Demand
40%
45%
11%
40%
0%
14%

According to an appended estimate of Germany’s supply position as of 01

April 1937, domestic
production covered less than six months of consumption: 4.3 months in the
case of aviation and motor
fuel, and between 2.6 to 3.5 months in the case of diesel fuel, fuel oil,
and lubricating oils. The absolute
annual shortfall ranged from 840,000 tons in the case of motor fuel to
100,000 tons in the case of aviation
lubricants (not including reserves stocks). Blomberg therefore demanded
that “[in] view of the wardecisive significance of a secure petroleum
supply, it is without a doubt essential that the expansion of
petroleum production be driven forward with all means and in all branches
of the petroleum industry.”
Blomberg believed that any problems could be overcome through better
command-and-control. What he
had in mind was the appointment of a “Fuel Commissar” to provide unified
leadership over the relevant
military and civilian agencies. Blomberg was also concerned about the
financial difficulties and asked
whether more of the burden could be placed upon private industry, and if
overseas interests could

335
contribute more. In any event, the problem of “financing must be
resolved, since the shortage of fuel oil,
diesel fuel and lubricating oils can jeopardize our entire rearmament
over the coming years.”221
The military was clearly thinking along the lines of establishing what
would be known as the VJP one
year later.222 During a meeting at the Reich Chancellery in July 1935,
the RWM resisted any diminution
of Schacht’s powers (he had been appointed “Plenipotentiary for the War
Economy” in May) through the
creation of a new agency to handle fuel policy. The military’s
representative, Thomas, was unimpressed:
the military, supported by Keppler, was uninterested in whether or not
the proposed “Fuel Commissar”
was attached to Schacht’s ministry, only that he had the requisite means
and authority to handle the
task.223 Blomberg backed Thomas and advised Schacht that the “tasks [of
the “Fuel Commissar”] lay to a
great extent within the practical realm and beyond the competence of the
RWM.”224
For reasons that are unclear, Blomberg deferred to Schacht, who
reiterated his objections during a
meeting between the War and Economics ministers and their staffs at the
end of July.225 Schacht pointed
out that Germany still required the assistance of the international oil
companies, who would be unlikely to
cooperate with any “Commissar” intent on bullying them. The military
resigned itself to the situation, but
one of Blomberg’s deputies (Maj. Warlimont, later Alfred Jodl’s deputy at
the OKW’s Operations Staff –

221

Der Reichskriegsminister (Blomberg) an den Herrn

Reichswirtschaftsminister (Schacht), Nr. 292 35. W.A. (W)
g.Kdos., “Förderung der in[ländischen] Treibstoffversorgung,” 03 June
1935, T-77/341 (Wi/IF 5.2164, 2687),
Anlage 6 to: “Die Arbeiten des WiRüAmtes.” Reprinted as Nr. 169 in: Akten
der Reichskanzlei, ii: 611-613.
Emphasis in the original.
222
IG Farben was apparently also in favor of the installation of a “Fuel
Commissar,” but it seems a stretch to argue
that the whole matter “fundamentally amounted to a privatization of oil
policy” on behalf of IG Farben. Eichholtz
and Kockel, Von Krieg zu Krieg, 150-151.
223
The minutes included criticism of the RWM’s handling of petroleum policy:
“[The] elevation of the RWM has
lead to strategic [wehrpolitische] considerations being entirely
ignored.” To wit, the RWM was still including
overseas imports into its figures for German supply & demand, even though
“in case of an emergency one cannot
rely upon overseas oils.” Wi II, Aktz. 66 b 2134/IV Vi (IIb),
“Aktenvermerk über eine Besprechung in der
Reichskanzeli. Am 9. 7. 1935. Thema: Treibstoff-Kommssar,” 11 July1935,
T-77/341 (Wi/IF 5.2164, 2687), Anlage
6a to: “Die Arbeiten des WiRüAmtes.” For Keppler’s appointement, see:
Akten der Reichskanzlei, ii: 194, n. 1.
224
Der Reichskriegsminister und Oberbefehlshaber der Wehrmacht (Ob.d.W. –
Blomberg), to Herrn
Reichsbankpräsident Dr. Schacht, Nr. 1340. 35. g.Kdos. W., 11 July1935,
T-77/341 (Wi/IF 5.2164, 2687), Anlage
6b to: “Die Arbeiten des WiRüAmtes.”
225
No record of Blomberg’s earlier meeting with Schacht (circa 19 or 20 July
1935) appears to exist: Eichholtz and
Kockel, Von Krieg zu Krieg, 154, n. 165.

336
Wehrmachtsführungsstab) pointed out that Germany’s deteriorating supply
position was “the most urgent
reason for the demand to establish a special, independent agency to
handle the fuel question.”226
The RKM and the RWM set about reconciling their divergent views
concerning Germany’s oil
requirements the following month. During a meeting at the RWM, the RWM
representative asked
Warlimont “whether, from the perspective of the armed forces the aim
should be a complete covering of
mobilization demand,” or just peacetime requirements? Warlimont replied
that he “leaned” toward the
latter, since that should suffice “to accommodate the securing of the
armed forces’ supply of fuel to a
large extent.” Against an estimated shortage of motor fuels of roughly
1,000,000 tons per annum during
mobilization, the RWM representative now, finally, expressed doubts about
the synthetic fuel industry.
He “believes that we have overextended ourselves… in reference to
hydrogenation. Production over and
above the existing planning is out of the question.” One other hand, the
new F-T plants could make a dent
into Germany’s meager diesel production, which at present only covered
10% of the Navy’s mobilization
demand of 2,000,000 tons. The RWM also would “not shrink” from raising
the duty on diesel fuel in
order to boost domestic output. “Where the free market [freie
Verhandlungen] fails, state coercion would
be applied as necessary.”227 Warlimont stressed that the petroleum
industry “had to be steered by the
state, which had been one of the reasons for the wish to create a Fuel
Commissar.”228 Following the
meeting, Blomberg wrote to Schacht to request that their two ministries
collaborate in reconciling “the
foundations at this moment concerning the present and anticipated future
supply of fuel in the event of
peace and of mobilization.” Blomberg also reiterated his wishes
concerning future policy, including
“ensuring” that all hydrogenation plants were capable of both producing
exclusively aviation fuel and
using only soft coal as a feedstock, should the need arise. Blomberg also
urged that the search for new oil
226

According to Warlimont, whereas Germany could meet 51% of its

mobilization demand in 1935, by 1938 it
could only cover 40%. “Aktenvermerk über die Besprechung am 27.7.35 im
Reichskriegsministerium betr.
Treibstoffkommissar,” T-77/341 (Wi/IF 5.2164, 2687), Anlage 6c to: “Die
Arbeiten des WiRüAmtes.” Reprinted as
Nr. 193 in: Akten der Reichskanzlei, ii: 693-694.
227
One thing the RWM was unwilling to countenance, however, was displeasing
the international oil companies, for
example by demanding that foreign-born directors at their German
subsidiaries be replaced. Such policies “would
hardly find approval with President Schacht.”
228
Wi II, Aktz. 66 b 34/I Wi (IIb), “Aktenvermerk über eine Besprechung im
R.Wi.Min. am 9. 8. 1935. Thema:
Maβnahmen zur Sicherstellung der deutschen Betriebstoffversorgung im
Mob.-Fall.,” 09 August 1935, T-77/341
(Wi/IF 5.2164, 2687), Anlage 6d to: “Die Arbeiten des WiRüAmtes.”

337
fields within Germany was prosecuted by all means “in order to boost
crude oil production and to replace
those fields that will be exhausted within the next 6-8 years.”229
Unlike the RWM, the RKM could not afford to be complacent in the face of
their depressing
assessments of Germany’s supply position. According to one military
assessment designed to serve as the
statistical basis for future discussions with the RWM, as of 01 January
1936, Germany would produce
only the following shares of its consumption:
Type of Product
Motor Fuel
Aviation Fuel
Diesel Fuel
Fuel Oil
Aircraft Lubricants
Automobile Lubricants

Share of Demand
45%
45%
17.5%
33.5%
0%
18%

When combined with existing stocks, “full supply” was possible for only
six months in the case of
aviation and motor fuel, and roughly three months for all other petroleum
products. Even if the
anticipated production increases by 1938 went through as planned (an
increase of 800,000 tons),
Germany’s overall position would, if anything, deteriorate slightly due
to rises in consumption, in
particular of fuel oil, diesel, and lubricants. Germany’s only hope,
therefore, was to stockpile imports –
but this “depends for the moment decisively upon the foreign exchange
position.” The shortage of hard
currency was posing “considerable difficulties” in the Reich’s
negotiations with Standard Oil and Shell.
German firms such as the industrial consortium within the British Oil
Development Corporation (BOD)
hoped one day to exchange Iraqi crude oil for German industrial goods,
but such “deliveries can hardly be
counted upon before a period of two years.”230 Domestically, there were
no easy options left: “It should

229

Der Reichskriegsminister und Ob.d.W. (Blomberg) an den Herrn

Reichswirtschaftsminister (Schacht), z.Hd. des
Herrn Oberberghauptmann Schlattmann, “Betr.: Programm für die zukünftigen
Maβnahmen auf dem Gebiet der
Mineralölwirtschaft,” Bezug: Besprechung am 9.8.35 im
Reichswirtschaftsministerium, 06 September 1935, T77/341 (Wi/IF 5.2164,
2687), Anlage 6e to: “Die Arbeiten des WiRüAmtes.”
230
Due to space constraints, it was impossible to include an examination of
German efforts to take control of the
British Oil Development Corporation (BOD) between 1932 and 1936 and use
the concession in Iraq as a source of
crude oil that could be imported without expenditure of hard currency.
The German Navy was a key player pushing
for a stronger commitment in Iraq since it had little to gain from a
synthetic fuel program geared around producing
high-octane motor and aviation gasoline rather than naval fuel oil or
diesel. When this plan failed, the Navy tried to

338
not be overlooked, that further expansion of fuel production will be
considerably more difficult than has
so far been the case.” Synthetic production, in particular, was running
into technical and economic
roadblocks. The paper concluded with a frantic warning that only “40-45%
of the wartime consumption of
fuels in 1938 can likely be covered from our own production and reserves
for around three months of full
supply will be on hand.”231
Probably goaded by the concerns of his staff, Blomberg met with the
Führer on 17 October 1935 to
discuss the situation.232 As Blomberg explained to Schacht a week later,
he left the meeting “strengthened
anew in my conviction that within the realm of fuel policy drastic
measures and practical ways must be
found in order to reduce the dangers that I still see at the moment in
reference to the security of freedom
of movement and thereby the striking power of the armed forces.” Blomberg
could not conceive of any
“really progressive improvement of the current situation” under the
existing circumstances and
complained about the lack of any central authority to impose order upon
the myriad agencies “working
within the realm of fuel entirely independent of one another and with
numerous contradictory objectives.”
The War Minister beseeched his colleague to reconsider his position
concerning a new coordinating

parlay the proceeds of the sale of the German interest in the BOD into an
oil concession or supply contract with
Mexico, which was desperate to find buyers for its oil following the
nationalization of its oil industry in 1938. The
key source on Iraq is: Helmut Mejcher’s Die Politik und das Öl im Nahen
Osten: I. Der Kampf der Mächte und
Konzerne vor dem Zweiten Weltkrieg (Stuttgart: Klett-Cotta, 1980), 102-
145. For Mexico, see: Klaus Volland, Das
Dritte Reich und Mexiko: Studien zur Entwicklung des deutsch-
mexikanischen Verhältnisses 1933-1942 unter
besonderer Berücksichtigung der Ölpolitik (Frankfurt am Main: Peter Lang,
1976), 83-174. Both episodes are
summarized in: Eichholtz and Kockel, Von Krieg zu Krieg, 151-160, and
179-192. The Navy’s quasi-independent
perspective on German foreign oil policy is extensively described within
the following memoranda: der Ob.d.M.
(Raeder) an den Chef des OKW (Keitel), et al., B. Nr. A IV, “Betr.:
Ölversorgung der Kriegsmarine,” 06 May 1940;
and der Ob.d.M. an den Reichswirtschaftsminister Herrn Walter Funk, et
al., B. Nr. A IV 170/40 G.Kdos., “Betr.:
Ihr Schreiben B. Nr. II Min.-Öl 116/40 g.Rs. von 6. 6. 1940,” 27 June
1940; both in: T-1022/3405 (PG 31762/B).
The OKM also sent a memorandum on the matter of oil supplies from Iraq
and Mexico to the RWM, Göring, and
the AA on 29 April 1940, which appears to be almost identical to the one
dated 06 May 1940. This document is
summarized in: NARA, RG 238, T-301/18 (NI-2019); and it is reprinted in:
Eichholtz, Deutsche Ölpolitik, 269-274.
For a survey of the Navy’s petroleum policy during the Third Reich, see:
Wilhelm Meier-Dörnberg, Die
Mineralöversorgung der Kriegsmarine 1935 bis 1945 (Freiburg: Rombach,
1973).
231
Wi II, “Vortragsnotiz über die Treibstoffversorgung im Mob.-Fall.,” 23
August 1935, T-77/101 (Wi/IF 5.433).
Emphasis in the original.
232
No record of the meeting appears to have survived. According to a
subsequent summary, Blomberg had pushed
for a “Fuel Commissar” who could devote “their entire energy to the
petroleum industry” but would be under the
supervision (Oberleitung) of the RWM: “Gründe für die Einsetzung eines
Treibstoffkommissars,” no date or author,
T-77/101 (Wi/IF 5.433).

339
agency (which would still be under Schacht’s leadership), darkly warning
that he wanted “to avoid”
having such agency imposed upon Schacht from outside.233
Schacht continued to stall for time by requesting another meeting with
Blomberg to discuss the
matter. He also took the opportunity to forward an update on the status
of the German petroleum industry.
Domestic oil producers, under the aegis of the 1934 “Reich Drilling
Program” (Reichsbohrprogramm),
had received 5,000,000 RM in government assistance in 1934, with a
further 9,000,000 RM set aside for
1935-1936. These contributions would be matched by private industry,
which would provide 4-5,000,000
RM in 1935 and another 5,500,000 to 6,000,000 RM in 1936. The results had
so far, however, been
disappointing: although five new fields had come on-line, with one
exception, total production was a
meager 100 tons per month. The RWM nonetheless advised that judgment
should be reserved: “In no
event have these fields been so developed that one can make a definitive
assessment of their productivity
for the foreseeable future.” In any event, domestic oil production ought
to be held in reserve, and
refineries currently processing German crude should be switched over to
processing imports.234
On the bright side, expansion of synthetic production through
hydrogenation had been completed
according to schedule at Leuna, and a further seven new facilities would
come into operation over the
course of 1936.235 Many of these facilities would be using the new F-T
Process, and the RWM was

233

Der Reichskriegsminister und Ob.d.W. an den Herrn Reichs- und Preuβischen

Wirtschaftsminister, Aktz. 66 b 34
W Wi (II), Nr. 6763/35 geh., “Betr. Einheitliche Treibstoffpolitik,” 25
October 1935, T-77/341 (Wi/IF 5.2164,
2687), Anlage 6f to: “Die Arbeiten des WiRüAmtes.” Blomberg’s letter was
based upon an undated memorandum
by Thomas, which detailed the lack of centralized authority over fuel
policy in greater detail: “Entwurf zu einer
Vortragsnotiz über die Notwendigkeit einheitlich geleiteter
Treibstoffpolitik,” no date or author (22 October 1935?),
T-77/341 (Wi/IF 5.2164, 2687), Anlage 6k (?) to: “Die Arbeiten des
WiRüAmtes.” Another copy of this paper in T77/228 (Wi/IF 5.1171) is
signed by Thomas. See also: Thomas an Wa A, Aktz. 66 b 2134 W Wi (IIb),
Nr. 7089/35
geh., “Betr. Betriebstoffversorgung. Bez.: Wa A Bb. Nr. 3177/35 geh. Prw.
6 VII vom 22.10.35,” 02 November
1935, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6g to: “Die Arbeiten des
WiRüAmtes.”
234
“Übersicht über den derzeitigen Stand der Ölversorgung und die weiteren
Maβnahmen auf dem Gebiete der
Mineralölwirtschaft,” no date or author, enclosed with: Der Präsident des
Reichsbank-Direktoriums, Dr. Hjalmar
Schacht, an den Herrn Reichskriegsminister und Ob.d.W. (Blomberg),
z.Hd.v. Herrn Oberst Thomas oder Vertreter
im Amt, G.B. 323/35 g., 12 November 1935, T-77/101 (Wi/IF 5.433). Monthly
crude oil production had roughly
doubled between 1931 and 1935 (19,391 tons to 35,992 tons), but its share
relative to the total supply was
unchanged due to increased demand. Dr. Victor Pflanz, “Das deutsche
Erdöl,” Die deutsche Volkskraft: Beilage zur
“Deutschen Wehr,” Nr. 3, 6 Jahrgrang (16 April 1936). See also: “Erdöl-
und Treibstoffproduktion in Deutschland,”
Wehrtechnische Monatshefte, Nr. 2 (1936), T-77/425 (Wi/IF 5.3444).
235
Leuna was using 94,000 tons of coal per month, as well as 12,000 tons of
tar and oil, as feedstock. Converting the
plant to producing fuel from coal exclusively would, however, require an
additional expenditure of roughly five to

340
considering further construction of “an array” of F-T plants due to their
ability to produce diesel fuel and
lubricants.236 The RFM was also on board with plans to raise the customs
duty on imports of both
products (from 4 to 8 RM in the case of former, and 10 to 14 RM with the
latter). Roughly 450,000 tons
of light oils had been stockpiled, while an additional 95,000 tons of
aviation fuel would be added through
a “London Agreement.”237 Finally, negotiations were under way to
stockpile additional imports from
Romania (through IG Farben) and the United States (through the Standard
Oil Company of California)
without any expenditure of hard currency.238
The Supreme Commander of the Air Force, Hermann Göring now entered the
fray. Göring assured
Blomberg that he was in full accord with the RKM’s position, adding that
the Air Force had a keen
interest in resolving the fuel problem. Göring was of the opinion that
this could only be accomplished “if
a central agency is entrusted with leadership of this issue. It is self-
evident that this agency is endowed
with considerable powers […].” Göring promised “to undertake steps with
the Economics Minister,
which have as their aim the appointment of a Fuel Commissar.”239 Göring’s
intervention certainly had an
effect, as evidenced by Blomberg’s letter to Schacht following the start
of Italy’s invasion of Abyssinia.
Blomberg observed that solving the shortage of petroleum “encompasses not
only the raising of

8,000,000 RM. The costs in the case of new facilities (Böhlen and
Magdeburg) would be even more expensive:
roughly 40,000,000 RM
236
But it also entailed cooperation with Germany automobile producers, which
had to produce diesel engines
without “demanding” specifications for fuel quality. J. Werlin,
“Rohstoffplan und Motorisierung,” Vierjahresplan,
1937: I.
237
Delivery of an additional 150,000 tons of motor fuel “had been called
into question [in Frage gestellt] due to
foreign exchange considerations.” No further details concerning this
“London Agreement” were provided, although
Schacht was probably referring to the agreement concluded between IG
Farben and the U.S. and British oil
companies in late-1934 (mentioned above).
238
“Übersicht über den derzeitigen Stand der Ölversorgung und die weiteren
Maβnahmen auf dem Gebiete der
Mineralölwirtschaft,” no date or author, enclosed with: Der Präsident des
Reichsbank-Direktoriums, Dr. Hjalmar
Schacht, an den Herrn Reichskriegsminister und Ob.d.W. (Blomberg),
z.Hd.v. Herrn Oberst Thomas oder Vertreter
im Amt, G.B. 323/35 g., 12 November 1935, T-77/101 (Wi/IF 5.433). On 18
November 1935, Thomas met with
Schacht to discuss the points raised in the recent exchange of letters
between Blomberg and Schacht. No record of
the meeting was found other than a summary indicating that the RWM
refused to back down, arguing that the fact
that they were even meeting “should substantiate [dartun] the necessarily
close cooperation between W Stb. und
G.B. [Schacht] on petroleum issues […].” Wi II, Aktz. 66 b 2134.VIII Wi
(IIb), “Vermerk über den Schriftwechsel
und die Besprechungen betr.: ‘Treibstoffkommissar’ vom 3. 6. 1935 ab,” T-
77/101 (Wi/IF 5.433).
239
Der Reichminister der Luftfahrt und Ob.d.L. (Göring; gez. Erhard Milch,
Staatssekretär, RLM) an den Herrn
Reichskriegsminister (Blomberg), LC 12876/35 g.K.Chef-Ing., “Betr.
Treibstoffkommissar. Vorgänge: W.A. (W)
Nr. 292/35 geh.Kdos. vom 3. Juni 1935 [and] RLM, LC Nr. 8725/35 geh.Kdos.
vom 24. Juli 1935,” 15 November
1935, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6f to: “Die Arbeiten des
WiRüAmtes.”

341
production, but rather overall guidance of petroleum and motor production
problems by an agency that
must be endowed with sufficient powers.”240
Schacht realized now that he was fighting a losing battle and tried to
retreat gracefully.241 He
reminded Blomberg that the two of them had discussed the issue of a “Fuel
Commissar” at great length
since the summer, and that Blomberg had already agreed with the RWM that
effective oversight over the
petroleum industry “depends less upon which name such an agency carries,
but rather that it is competent,
regulates the relevant bureaucratic offices and possesses the sense of
authority not to mention the will to
compel the competing interests [to cooperate].” Schacht expressed
astonishment at Blomberg’s
denigration of the existing petroleum policy, since the RKM had
(following conferences in August and
November) twice signaled its “agreement with all aspects of the program”
and “what had been
accomplished in the interim and should be addressed in the future.”
Schacht agreed that order had to be
imposed upon the various competing interests involved in petroleum policy
but pleaded that he had not
yet had enough time to deal with the problem, which would only be
exacerbated by creating yet another
level of bureaucracy in the form of a “Fuel Commissar.”242

240

Der Reichskriegsminister und Ob.d.W. (Blomberg) to Schacht, Nr. 2532.35.

g.K. W.Stb (Wi. II), 30 November
1935, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6i to: “Die Arbeiten des
WiRüAmtes”; reprinted in: Eichholtz,
Deutsche Ölpolitik, 265. The RKM’s critique was developed further in a
short paper by the WStb in December
1935. The military complained that motorization was proceeding without
reference to military requirements.
Emphasis ought to be placed only in those cases where “the supplies of
fuel in the case of war appear secure in
terms of quantity and quality.” W Wi II, “Notiz betr.
Treibstoffkommissar,” 17 December 1935, no author (most
likely Thomas) T-77/341 (Wi/IF 5.2164, 2687), Anlage 6k (?) to: “Die
Arbeiten des WiRüAmtes.” Emphasis in the
original. Another draft of this paper in T-77/101 (Wi/IF 5.433) is dated
08 January 1936, but it is identical to the
December version.
241
As Karlsch observes, one should not have the impression that the dispute
between Schacht and the RKM was
indicative of any dovishness on the part of former, who has been miscast
“as the representative of a modern
economic policy,” while Göring is presented as “unconditional advocate of
autarky and accelerated rearmament.”
Schacht had, after all, “initiated all important autarky projects until
1937,” and his feuding with Blomberg and
Göring had “less to do with tactical differences, much less a
renunciation of rearmament, but rather if anything with
personal ambitions.” Karlsch and Stokes, Faktor Öl, 185-186.
242
Der Reichs- und Preuβische Wirtschaftsminister (Schacht) an den Herrn
Reichskriegsminister und Ob.d.W.
(Blomberg), A.K. 5530/35., “Betrifft: Einheitliche Treibstoffpolitik,” 13
December 1935, T-77/341 (Wi/IF 5.2164,
2687), Anlage 6l to: “Die Arbeiten des WiRüAmtes.”

342
Schacht subsequently met with Thomas and a number of leading military and
economic officials to
inform them that he was appointing one of his deputies as the
Plenipotentiary for Fuel Questions.243
Blomberg quickly acceded to Schacht’s suggestion that the military second
a representative to the
plenipotentiary’s staff and join him in approaching the Führer to request
the requisite executive authority
over any relevant agencies.244 The following month a draft decree was
prepared for Hitler’s signature
using guidelines determined by the WStb. Besides empowering the
plenipotentiary to oversee “that the
supply, refining, distribution, and utilization of petroleum, petroleum
products and all other fuels are
carried out in the most economically appropriate manner with a view to
the common good
[Gemeinwohl],” the decree included a secret portion dealing with the
military aspects of the task: “The
Special Plenipotentiary has to organize the entire petroleum industry
along strategic and defenseeconomic lines. The aim is securing the
foundation for the mobilization of the armed forces and for the
conduct of war.”245 For reasons that are unclear, Hitler never signed the
decree. In any event, the new

243

No record of the meeting itself appears to have survived, just the

invitation: Der Präsident des ReichsbankDirectoriums, Dr. Hjalmar Schacht
als Generalbevollmächtigter, an den Chef des Wehrmachtamtes im RKM (Gen.
Maj. Keitel), et al., GB 424/35 g., 11 December 1935, T-77/101 (Wi/IF
5.433).
244
Der Reichskriegsminister und Ob.d.W. (Blomberg) to Schacht, Aktz. 66 b
2134/VIII W Wi (IIb), 24 December
1935, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6m to: “Die Arbeiten des
WiRüAmtes.” Blomberg settled upon an
Army officer (Hauptmann Sadewasser) to serve as the RKM’s liaison with
the new Plenipotentiary: “Entwurf:
Dienstanweisung für den 2.Verbindungsoffizier beim
Reichswirtschaftsministerium,” no date or author, Anlage to:
der Reichskriegsminister und Ob.d.W. (Blomberg) an den Herrn
Reichswirtschaftsminister (Schacht), z.Hd. der
Herrn Oberberghauptmann Schlattmann and Herrn Min.Rat Godlewski, Aktz. 11
d W W (II), Nr. 540/36 g., “Betr.:
2.Verbindungsoffizier der wehrwirtschaftlichen Abteilung,” 21 January
1936, T-77/341 (Wi/IF 5.2164, 2687),
Anlage 6q (?) to: “Die Arbeiten des WiRüAmtes.” Meanwhile, “the
particular interests of the armed forces” would
be handled by the “Fuel Committee” of the WStb, which would coordinate
when necessary with the military liaison
on the staff of the Fuel Commissar and was already cooperating with the
RLM on matters of mutual interest. In spite
of its “agreement on all significant points” with the RLM, however, the
WStb complained that “the interests of
aviation have always been strongly preferred,” to the effect that “[the]
supply of the Air Force with fuels is several
times better than that of the Army and Navy.” W Wi II, “Vortragsnotiz
über die Zusammenarbeit mit dem
Treibstoffkommissar,” 09 January 1936, T-77/101(Wi/IF 5.433). The Air
Force and Navy quickly put forward their
candidates to serve on the “fuel committee” in its dealings with the new
plenipotentiary. Der Reichsminister der
Luftfahrt und Ob.d.L. (Göring) an den Herrn Reichskriegsminister und
Ob.d.W. (Blomberg), LC Nr. 33 888/35 geh.
Chef-Ing., Bezug: RKM, Nr. 8680/35 geh. Aktz. 66 b 34 W Wi (II b) v.
23.12.35, “Betr. Beauftragten für
Treibstoffragen beim Generalbevollmächtigten der Kriegswirtschaft,” 10
January 1936; and Allgemeines Marineamt
an W A (W Stb), B Wi 3335/35 geh. III, Vorgang: Der R.K.M. und Ob.d.W.
Aktz. 66 34 W Wi (IIb), Nr. 8680/35
geh. Vom 23.12.35., “Betrifft: Beauftragte für Treibstoff-Fragen beim
Generalbevollmächtigten der
Kriegswirtschaft,” 16 January 1936; both in: T-77/341 (Wi/IF 5.2164,
2687), Anlagen 6o to: “Die Arbeiten des
WiRüAmtes.”
245
Erlaβ, January 1936, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6n to: “Die
Arbeiten des WiRüAmtes.” Earlier
drafts prepared by the WStb may be found in: “Entwurf des RKM (W Wi II),
January 1936; and “Entwurf des
R.K.M. (W Wi II): Geheime Ergänzung zu dem Erlaβ über die Einsetzung des
Sonderbeauftragten für die

343
position would have become superfluous following Göring’s ascent to
leadership over the German war
economy later that year.246
***
The end of the World War found Germany in desperate straits. Hobbled by
the military and economic
restrictions imposed by the Treaty of Versailles, the country lacked many
of the means (oil not the least)
to reassert itself as a great power. But a decade before the rise of the
Third Reich, German official and
business circles seized upon the promise of synthetic fuel. The German
Army, in particular, believed as
early as 1925 that synthetic fuel could restore the country’s military
and economic greatness by making
Germany independent of ruinously expensive oil imports. After purchasing
control of the patent rights to
hydrogenation in 1925, IG Farben improved upon the work of Friedrich
Bergius and took major strides in
making large-scale production of synthetic fuel feasible. But progress
had stalled by 1932 due to the high
cost of production for synthetic fuel relative to imported crude oil, the
price of which had started to
collapse even before the Great Depression due to the general state of
global overproduction. Ordinary
economic considerations were of little consequence to Germany’s new
rulers after 1933, who were keen
to eliminate unemployment by stimulating demand for German coal and
steel.247 Although the Third
Reich enthusiastically supported any measure that would reduce Germany’s
oil imports (particularly those
Mineralölwirtschaft,” January 1936; both in: T-77/101 (Wi/IF 5.433). Both
the draft and the confidential addendum
are reprinted as Nr. 21 in: Akten der Reichskanzlei, iii: 101-102.
246
One person who seems to have been left out of the discussions was
Keppler, who was “disappointed” not to have
been informed about the January “proposal of the RKM” and informed Thomas
“that he [Keppler] could not be
placed under the authority of any Fuel Commissar within the RWM.”
“Atkenvermerk über die Besprechung beim
Wirtschaftsberater des Führers am 10. 2. 36.,” no date, author’s initial
illegible, T-77/228 (Wi/IF 5.1171). See also
the commentary included in: Akten der Reichskanzlei, ii: 102, n. 5. For
summaries of the correspondence and
meetings concerning the creation of a “Fuel Commissioner” in 1935, see:
“Gründe für die Einsetzung eines
Treibstoffkommissars,” no date or author; and Wi II, Aktz. 66 b 2134.VIII
Wi (IIb), “Vermerk über den
Schriftwechsel und die Besprechungen betr.: ‘Treibstoffkommissar’ vom 3.
6. 1935 ab”; both in: T-77/101 (Wi/IF
5.433). The former paper mentioned that the RKM intended that the “Fuel
Commissar” should be “an expert from
the fuel industry, richly supplied with expert personnel,” and with a
military liaison reporting to him. According to
Birkenfeld, Blomberg’s initial candidate was none other than IG Farben’s
Ernst Rudolf Fischer, but I have been
unable to locate any documents that mention Fischer since Birkenfeld only
cites the entire folder rather than the
specific document. Birkenfeld, Der Synthetische Treibstoff (Göttingen:
Musterschmidt-Verlag, 1964), 54, n. 10. This
is problematic because virtually all subsequent studies of German
petroleum policy mention Birkenfeld’s claim. See,
for example: Eichholtz and Kockel, Von Krieg zu Krieg, 163.
247
The Führer understood that advances in labor-saving technology such as
machine tools and mass production
forced the government to develop more elaborate methods of utilizing the
surplus labor: “My idea is that we shall
never economise enough on labour. If I found that I need only half as
much labour to build an autobahn, well, I’d
build it twice as wide.” Table Talk: No. 135 (02 February 1942).

344
paid for in foreign exchange), by 1936, energy independence was still a
chimera. The modest increases in
domestic production achieved during the early years of the regime could
not keep pace with the higher
consumption once the economy recovered and rearmament began. More drastic
measures were necessary.

345
Chapter V
Fueling War: Germany, 1936-1939
Synthetic fuel was indispensable to the Third Reich’s long-term grand
strategy: the country could not
continue importing oil while pursuing rearmament, since the latter
reduced the industrial surplus available
for export, which in turned reduced the amount of foreign exchange earned
to pay for the former. The
only way to resolve the impasse was to accelerate the expansion of German
synthetic fuel production on a
massive scale. The Four-Year Plan (Vierjahresplan, VJP) of 1936 and its
successor for petroleum, the
“New Defense-Economy Supply Plan” (Wehrwirtschaftlicher neuer
Erzeugungsplan – otherwise known
as the Krauch Plan) of 1938, represented a radicalization of German
economic policy that mirrored the
increasingly belligerent foreign policy adopted by the Reich. As the
likelihood of war increased, so too
did the need to free the Third Reich from overseas oil imports. This was,
as policymakers understood
from the beginning, impossible through synthetic and domestic crude oil
production alone, which is why
the Third Reich never sought autarky within its own borders, but rather
within those of Europe and
beyond. Therefore, even as the regime poured resources into expanding
domestic output, Berlin’s gaze
returned to the oilfields of Romania, which had played an indispensable
role in fueling the last German
war effort and would do so again shortly. Ultimately, the crash drive for
self-sufficiency in petroleum
between 1936 and 1939 was not an act of self-delusion. Officials at all
levels of the Third Reich believed
that self-sufficiency was in fact possible – and they proved correct. As
war drew near in 1939, whatever
doubts may have existed about Germany’s overall readiness, they did not
extend to its petroleum supply.

346
The Four-Year Plan, 1936
Werner von Blomberg’s criticism of Hjalmar Schacht’s handling of the fuel
question was indicative
of the military’s wider frustration with the opposition of the Ministry
of Economics
(Reichswirtschaftsministerium, RWM) to further rearmament by the first
half of 1936.1 The War
Ministry’s (Reichskriegsministerium, RKM) obsession with bureaucratic
reorganization seems curious in
view of the major problems besetting Germany’s petroleum industry by the
spring of 1936, which did not
appear immediately resolvable by any “Fuel Commissar.” Germany’s
peacetime supply situation actually
appeared rather favorable, at least with regard to light fuels: the Reich
Chancellery (Reichskanzlei)
forecast roughly 1,470,000 tons of production in 1936 (of which 825,000
tons was through hydrogenation
and the F-T Process) against about 2,000,000 tons of demand, which worked
out to between 70 and 75%
of peacetime requirements being covered through domestic production. Of
course, this figure did not
include demand for fuel oil or diesel, supplies of which were
“significantly less favorable.”2
These figures were entirely inappropriate for a country planning to
conduct military operations. As
one Defense-Economy Staff (Wehrwirtschaftsstab, WStb) paper from March
1936 explained, “even with
the greatest efforts and in spite of the planning started for an
additional expansion of production,” the
Reich could not expect any “appreciable relief” of its oil position until
1938. Even then, as outlined in a
statistical appendix, only the supply of aviation and motor fuels would
improve significantly: by 1938,
production would cover roughly 61% of mobilization demands. The supply of
diesel relative to
consumption would double, but it would still stand at only 22% of demand.
The ratio with regard to fuel
oil would, however, noticeably decrease (from 31% to 22%). One bright
light was the future availability
of aviation lubricants: Germany currently produced none of its
requirements, but by 1938, 22% would
1

Richard Overy, War and Economy in the Third Reich (Oxford: Oxford
University Press, 1994), 183-185. Overy
dates the fraying of the Blomberg-Schacht partnership to 1936, but
differences had clearly emerged due to
differences over petroleum policy the year before. Unless otherwise
indicated, all German-language sources are
from the National Archives and Records Administration, Record Group 242:
Foreign Records Seized (NARA, RG
242). Since all documents included within RG 242 are available only on
microfilm, I have used the following
citation format: Microfilm Publication No./Reel No. (Item No.).
2
Ministerialrat Willuhn to Staatssekretär Lammers, 21 January 1936, Nr. 12
in: Akten der Reichskanzlei: Regierung
Hitler, 1933-1938, ed. Karl-Heinz Minuth and Friedrich Hartmannsgruber
(Boppard am Rhein: Boldt, 1983-2008),
iii: 62-63 – hereafter cited as: Akten der Reichskanzlei. According to a
minute by Lammers, Hitler “had taken notice
[of this memorandum] with the greatest of interest.” Akten der
Reichskanzlei, ii: 808.

347
come from domestic sources. Two crises earlier that year, however,
threatened to “shake the very
foundations” of the German economy and rearmament effort: the Soviet
Union’s prohibition of petroleum
exports, and Romania’s refusal to continue trading for oil on a clearing
basis and demand that oil exports
(which accounted for 40% of Germany’s total oil imports at the time) be
paid for either in hard currency
or at significantly higher rates in Reichmarks.3 Since the military could
not afford any slowdown in
motorization or accumulating reserves, the only avenues left open were:
caving into Romanian demands;
boosting “imports from Anglo-Saxon countries” (purchases from the major
oil companies); or
“accelerating or expanding the facilities for German production.” The
Reich was already re-negotiating
the terms of the oil trade with Romania but nothing had been finalized
yet. The second option was out of
the question since it required diverting foreign exchange away from the
purchase of even more urgently
required goods. Finally, there were no means of immediately raising
domestic production.4
As a result, Germany’s foreign exchange deficit due to oil reached
162,000,000 RM in 1936, while
the overall trade deficit ballooned to 500,000,000 RM.5 The grim economic
situation forced Adolf Hitler
in April to grant extensive powers to Hermann Göring, the Supreme
Commander of the Air Force, to
bring about “an improvement of the raw materials and foreign exchange
situation,” supported by but not
answerable to either Schacht or Blomberg.6
3

The impasse was only resolved in October under a new agreement that
reduced Romania’s oil exports to 25% of
total exports to Germany. Romania’s actions are explained more fully in:
Akten der Reichskanzlei, ii: 168, n. 9.
4
“Memorandum on the Supply Situation in the Field of Fuels and its Effect
on the Wehrmacht,” 09 March 1936,
Translation of Document 1301-PS, reprinted in: Office of United States
Chief of Counsel for Prosecution of Axis
Criminality, Nazi Conspiracy and Aggression (Washington, DC: U.S. GPO,
1946), iii: 871-874 (hereafter cited as:
NCA); reprinted as Nr. 40 in: Akten der Reichskanzlei, iii: 166-170. For
the original German document, see: International
Military Tribunal, Trial of the Major War Criminals (Nuremberg, 1947-
1949), xxvii: 128-132 – hereafter cited as: IMT.
According to original German version (as well as the reprint in the
Akten) the author was one Maj. Czimatis. A
handwritten notation indicates that he prepared the memorandum for Hitler
and passed it along to Keitel on 03 March
1936 to deliver to the Führer.
5
Appendix B (“Effects of Control of Oil Economy on Germany’s Foreign Trade
Balance”) to: FEA, “Study of the
Interagency Drafting Committee on the Treatment of the German Petroleum
Industry from the Standpoint of
International Security,” 15 October 1945, NARA, RG 59, 862.6363/7-2946;
and Raymond Stokes, “The Oil
Industry in Nazi Germany, 1936-1945,” Business History Review 59: 2
(1985): 257-258.
6
State Secretary and Chief of the Reich Chancellery to Hess, Keppler, et
al., 06 April 1936, Bundesarchiv, BerlinLichterfelde (BA-B), R 26 I/35.
Göring also established a special “Rohstoff- und Devisenstab” to assist
him, which
later grew into the Office for Economic Development (Reichsamt für
Wirtschaftsausbau, RWM), the primary
executive agency within the Four-Year Plan (Vierjahresplan, VJP). The
division of authority between this new
agency and the WStb is spelled in: der Reichskriegsminister und
Oberbefehlshaber der Wehrmacht an den
Ministerpräsidenten Herrn Generaloberst Göring, W Stb.Abt.W Wi 5460/36 g.
IIz, Aktz. 11 d 35., 23 June 1936, T-

348
The events leading up to the promulgation of the Four-Year Plan have
already been subjected to
intense historical scrutiny, so this discussion will focus only on
matters pertaining to petroleum.7 During
the ensuing interagency conferences to tackle financial and raw materials
crises, Göring and Schacht
clashed repeatedly. With regard to oil, Schacht felt Germany was trapped
between the need to continue
importing significant quantities (hence the negotiations with Standard
Oil of New Jersey and Royal
Dutch/Shell – Jersey and Shell) and its inability to finance such
purchases either through exports or
expenditures of hard currency.8 Göring was uninterested in importing oil:
“If we have war tomorrow, we
must help ourselves by substitutes. […] If that is the case, then we must
be ready to create the
prerequisites for that in peace.”9 During a subsequent meeting, Schacht
agreed that “a solution of the raw
material problem by self-producing is absolutely necessary and agreed
with, theoretically.” The problem
was funding additional investment and “scruples” over supporting
industries that were not “economically
feasible.” When Finance Minister Johann Ludwig von Krosigk suggested a
policy of limited state support
to stimulate the development of “new and cheaper production methods,”
Göring cut him off: “Waiting
upon new methods is no longer appropriate.” Rather (as indicated by the
appended draft proposal for

77/341 (Wi/IF 5.2164, 2687), Anlage 7 to: OKW, Gen.z.bV.1., “Die Arbeiten
des WiRüAmtes an der MineralölVersorgung,” no date (handwritten notation
reads: “vom Dezember 1944”), T-77/183 (Wi/IF 5.751) – here after
cited as “Die Arbeiten des WiRüAmtes.”
7
Besides Adam Tooze’s The Wages of Destruction: The Making and Breaking of
the Nazi Economy (New York:
Viking, 2006), 203-243, for more on the origins of the VJP, see: Richard
Overy, “The Four Year Plan,” European
Yearbook of Business History (2000): 87-106; and Dieter Petzina,
Autarkiepolitik im Dritten Reich: Der
nationalsozialistische Vierjahresplan (Stuttgart: Deutsche Verlags-
Anstalt, 1968), 30-53. There is still some value to
reading Wilhelm Treue’s commentary on the genesis of Hitler’s August 1936
memorandum in his “Hitlers
Denkschrift zum Vierjahresplan, 1936,” Vierteljahrshefte für
Zeitgeschichte, 3: 2 (1955): 188-202. For a
contemporaneous summary, see the relevant portions of Thomas’ internal
history of the German war economy,
summarized as Partial Translation of Document 2353-PS, reprinted in:
Nuernberg Military Tribunal, Trials of the
War Criminals (Washington, DC: U.S. GPO, 1953), vii: 793-798 – hereafter
cited as: NMT.
8
This was the lament of the head of the Überwachungstelle der Mineralöle
during a meeting with Schacht in August
1936. Rather than “striving for complete autarky,” however, he asked for
more freedom to conduct barter or thirdparty trade agreements. He also
fumed at the incompetence of Göring’s Rohstoff- und Devisenstab, which
had
“sacrificed” German “interests” due a lack of “experience”: “One should
only accommodate the foreigners if they
give firm commitments concerning the adequate supplying of the German
market.” “Besprechung des
Reichsbankpräsidenten Schacht mit den Reichsbeauftragten der
Überwachungstellen in der Reichsbank vom 13.
August 1936, 11 Uhr,” Nr. 124 in: Akten der Reichskanzlei, iii: 457-458.
9
“Record of the Council of Ministers on 12 May 1936 1700 hours,”
Translation of Document 1301-PS, NCA, iii:
878-884; for the original German document, see: Nr. 89, Akten der
Reichskanzlei, iii: 317-324. There is
mistranslation in the exchange concerning the major oil companies.
Schacht’s warning that “The foreign relations
must be decreased all of a sudden,” is better translated as: “Foreign
relations must not be abruptly dismantled [Die
ausländische Beziehungen dürfen nicht überstürzt abgebaut werden].”

349
addressing the fuel shortage), Germany’s outstanding mobilization
requirement of just under 3,000,000
tons of all products would be satisfied by the construction of ten new
synthetic plants (six of them F-T
facilities) at a cost of 1,150,000,000 RM.10
The following month, the council discussed the oil situation in greater
detail. Considerable progress
had been insofar as peacetime consumption was concerned. Germany would
most likely be self-sufficient
in gasoline by the beginning of 1937, although imports for 1936 and 1937
would probably exceed
2,500,000 tons (more than 155,000,000 RM, 90% of which was covered
through clearing or barter
agreements, the remainder in foreign exchange). An RWM official also
indicated that the F-T Process
could help redress the shortage of diesel, which was a matter of
particular concern to Göring, who
reminded everyone “that in time there will be in aviation, too, a
steadily increasing conversion from light
gasoline to Diesel oil.” He urged that progress be made in resolving the
technical obstacles: “As soon as
the process has been perfected, it will only be a question of
constructing the necessary installations. The
basic raw material is available in unlimited quantities.” Germany’s fate
rested upon boosting domestic,
especially synthetic production, for in the event of war, “we won’t get a
drop of oil from abroad.”
Germany ability to wage war would depend upon resolving the “problem” of
dependence upon imports.11
Any debate concerning the acceleration of German rearmament was settled
by Hitler in his
Denkschrift of August 1936, which led to the implementation of the Four-
Year Plan the following month.
The 1936 paper was basically an updated reflection on the themes that
Hitler had discussed in his
unpublished “Second Book” of 1928, which dealt largely with foreign
policy and political economy. At
that time, Hitler argued that German landed expansion eastwards was the
prerequisite to providing

10

“Copy of meeting of Minister[ial Council] on 27 May 36, at 1130 o’clock,”

enclosed with Lt. Col. Loeb (Raw
Material and Foreign Exchange Staff) to the Reich Minister of War
(Blomberg), 30 May 1936, Translation of
Document 1301-PS, NCA, iii: 886-891; for the original German document,
see: Nr. 93, Akten der Reichskanzlei, iii:
339-344.
11
“Niederschrift der Sitzung des Gutachter-Ausschusses über Rohstoff-Fragen
am 26.5.36, 16 Uhr,” NARA, Record
Group 238: National Archives Collection of World War II War Crimes
Records, National Archives Microfilm
Publication T-301, Reel 39, Document NI-5380 – hereafter cited as: NARA,
RG 238, T-301/Reel No. (Document
No.).

350
Germans with “a life comparable to that of the American people.”12 A
great admirer of automobiles,
Hitler expressed a certain envy of the United States, whose massive
industries (backed by ample domestic
supplies of raw materials) had, for example, allowed U.S. car
manufacturers to flood the German
market.13 He made one fleeting, yet suggestive remark to oil in the
context of the Soviet Union being “a
possessor of oilfields, which have the same significance today as iron
and coal mines had in the past
century.”14
The popular perception of the VJP (cultivated by the regime) was that it
aimed to make Germany
autarkic within four years, particularly in the case of petroleum.15
Neither Hitler nor the planners behind

12

For more on Hitler’s ambivalence about the United States in his “Second
Book,” see: Tooze, Wages of
Destruction, 9-11 and 658.
13
“My weakness is for motor-cars.” Norman Cameron and R.H. Stevens, trans.,
Hitler’s Table Talk: His Private
Conversations (New York: Enigma, 2000): No. 101 (09-10 January 1942).
Foreign manufacturers controlled 40% of
the German automobile market in 1928, while German production was divided
between 102 firms in 1929, which
rendered German automobiles more expensive. The Depression wiped out a
large number of these firms and as a
result of consolidation between the remainder, prices dropped while the
market share of German firms increased
from 60% in 1928 to 91% in 1934. R.J. Overy, “Cars, Roads, and Economic
Recovery in Germany, 1932-8,”
Economic History Review 28: 3 (1975): 466-483. In 1929, General Motors
acquired an 80% stake in Opel,
Germany’s largest automobile manufacturer, raised to 100% two years
later. Although the company hemorrhaged
money during the Depression, it thrived in the Third Reich thanks to
special tax-exempt status and controlled half of
the German automobile market by 1935. Gabriel Kolko, “American Business
and Germany, 1930-1941,” Western
Political Quarterly 15: 4 (1962): 725-726; and Henry Ashby Turner,
General Motors and the Nazis: The Struggle
for Control of Opel, Europe’s Biggest Carmaker (New Haven: Yale
University Press, 2005), 1-12.
14
Gerhard Weinberg, ed., Hitler’s Second Book: The Unpublished Sequel to
Mein Kampf (New York: Enigma,
2003), 105, 107, 158-159, and 172. Although Hitler apprehended the
economic and strategic value of petroleum, he
also supported increasing natural gas consumption (including by
automobiles) to reduce dependence on petroleum
and was an advocate of alternative energy sources including wind and
tidal power, as well as hydrogen. Table Talk:
No. 1 (05 July 1941), No. 16 (02 August 1941), No. 104 (13 January 1942),
and No. 269 (26 July 1942). An
excellent introduction of Hitler’s understanding of economics (an
eclectic fusion of racism and Social Darwinism)
may be found in: Henry Ashby Turner, German Big Business and the Rise of
Hitler (New York, 1985), 71-83. The
“Second Book” is somewhat of an outlier, for Turner points out that
Hitler rarely made reference to acquisition of
raw materials such as oil prior to the Machtergreifung: “His conception
of economic autarky remained narrowly and
archaically agrarian, assigning at most a secondary status to the vast
and immensely valuable industrial resources
which the realization of his grandiose scheme for conquest would have
placed at Germany’s disposal” (pg. 74).
Carroll stresses that “Hitler’s economic policies were shaped with better
logic, and better information, than his
critics allowed,” in that the Führer recognized Germany could never
overcome its economic deficiencies except by
acquiring “living space” (Lebensraum). Berenice Carroll, Design for Total
War: Arms and Economics in the Third
Reich (The Hague: Mouton, 1968), 93-105 (quotation from pg. 104).
15
See, for example, an article by the head of the German Office for Raw
Materials, Fritz Löb, published in the
VJP’s very own periodical, Vierjahresplan. His agency’s mission was to
implement “the quickest possible
elimination of our fatherland’s dependence on foreign raw materials
wherever this is possible in the present
situation.” Partial Translation of Document NI-6709, NMT, vii: 820-821.
Emphasis in the original. One IG Farben
executive even claimed that, by supporting the process of motorization,
synthetic fuel was “making it possible for
every German to have his own vehicle.” “The Chemical Industry and the
Four Year Plan by Dr. H. Kuehne,” 01
August 1938, Partial Translation of Document NI-15013, NMT, vii: 835. See
also: Krauch, “Tasks and Operations of
the Office of German Raw Materials and Synthetics,” 1937, Translation of
Document NI-6629, NMT, vii: 827-35.

351
the VJP intended this. As one of Göring’s deputies, State Secretary Erich
Neumann, later explained, “Of a
perfect autarchy, however, one did not think,” as opposed to providing
Germany with the tools to achieve
a “large sphere solution” that would allow it to take advantage of the
resources of its neighbors.16 In his
August 1936 memorandum, Hitler ruled out “[producing] artificially or
otherwise to replace individual
raw materials which we do not possess in Germany.” Rather, the aim should
be to provide Germany with
a “temporary easing-up of conditions,” to accomplish the most important
long-term objective, “the
extension of our living space, that is, an extension of the raw materials
and food basis of our nation.”17 In
other words, Hitler had determined that “autarchy” (relative self-
sufficiency to attain wider aims) rather
than “autarky” as the goal of the German war economy in peacetime.18
Since some imports were
unavoidable in the short term, substitutes had to be found wherever
possible in order to save hard
currency for those items that could not be produced domestically.
Financial, rather than purely strategic,
considerations also underlay Hitler’s directive that “German fuel
production must now be developed with
the utmost speed and brought to a definitive completion within 18
months.”19 Hitler understood that
Germany could not contemplate fighting a war until it had surmounted the
remaining technical and
financial obstacles to greater synthetic fuel production, but Göring had
apparently convinced him
beforehand using information provided by IG Farben executive Carl Krauch
that it was possible for
Germany to meet up to 80% of its estimated demand by 1938.20

One group that enthusiastically supported the mission of the VJP, even if
it was becoming increasingly alienated
from the National Socialist regime, was the Pan-German League. One
speaker, during a wider discussion of “Crude
Oil in Politics and Economics,” lauded the supposedly peaceful mission of
the VJP: “Germany is showing that war
is no longer necessary for the sake of peace [um des lieben Friedens
willen keinen Krieg zu führen braucht],”
because the country could now just “produce substitutes.” Excerpt from
Gestapo report on the Pan-German League,
Special Archive (Sonderarchiv) of the Russian State Military Archive,
Fond 500, Opis 3, Vol. 567, pg. 123. I am
grateful to Bjoern Hofmeister for sharing this document with me.
16
“The Four Year Plan,” 29 April 1941, Partial Translation of Document NID-
13844, NMT, xii: 538-542.
17
“Adolf Hitler’s memorandum concerning the tasks of the Four Year Plan –
1936,” Translation of Document NI4955, NMT, xii: 430-439.
18
This is a crucial distinction. Ian Lesser, Resources and Strategy
(Basingstoke: Macmillan, 1989), 51.
19
Hitler added that money was no object when it came to boosting German
economic output for war – all that
mattered was making up lost time since 1933, when Germany could have laid
the foundations for producing
3,000,000 tons of petroleum rather than the existing 700,000 tons to
800,000 tons. “Adolf Hitler’s memorandum
concerning the tasks of the Four Year Plan – 1936,” Translation of
Document NI-4955, NMT, xii: 430-439.
20
“Aus dem geheimen Bericht der Abteilung ‘Forschung und Entwicklung’ des
Rohstoff- und Devisenstabes über
umfassende wirtschaftliche Planungen für den Krieg,” No. 46 in: Dietrich
Eichholtz and Wolfgang Schumann, ed.,

352
Schacht was appalled by Hitler’s decision and urged Blomberg to “warn the
Fuehrer from this step”
before he spoke at the upcoming Party Congress. Schacht claimed that the
only way out of the present
crisis was though “the promotion of export” and ruled out meeting the
Führer’s ambitious target for the
petroleum industry, since “[we] shall have reverses in the field of fuels
until the middle of next year
[…].”21 It was too late. On 04 September 1936, Göring announced the
Führer’s new policy before a
ministerial council including Schacht and Blomberg. Rearmament would “be
sped-up rather than slowed
down,” with the expectation that “conflict with” the Soviet Union was
“inevitable.” After reading aloud
Hitler’s Denkschrift, Göring added that Germany must achieve “autonomy in
all those fields in which it is
technically possible,” as this would save 600,000,000 RM worth of foreign
exchange.22 When the Führer
and leading officials made public pronouncements concerning the VJP, they
made no mention of its
ulterior purpose. Instead, they claimed that the sole aim was to save
foreign exchange in order to fund
imports of other critical items, most notably food.23 Some officials even
had the audacity to claim that
Germany was rendering the world a great service by providing an
alternative supply of fuel once oil
reserves gave out, not to mention contributing to world peace by
eliminating competition over oilfields.24
Private speeches before German industrialists and soldiers, while not
eliding the fact that the VJP was
designed to further rearmament, made no mention of any war against the
Soviet Union.25

Anatome des Krieges: New Dokumente über die Rolle des deutschen
Monopolskapitals bei der Durchführung des
zweiten Weltkrieges (Berlin: VEB Deutscher Verlag der Wissenschaften,
1969), 139-142 (esp. pg. 142, n. 3); also
reprinted in: Dietrich Eichholtz, Deutsche Ölpolitik im Zeitalter der
Weltkriege: Studien und Dokumente (Leipzig:
Leipziger Universitätsverlag, 2011), 266-268.
21
Minute by Thomas, 02 September 1936, Translation of Document 1301-PS,
NCA, iii: 894-895; for the original
German document, see: IMT, xxvii: 153-154. Emphasis in the original.
22
“Minutes of the Meeting of the Ministerial Council of 4 September 1936,
12 Noon,” Translation of Document
EC-416, NMT, xii: 439-442; for the original German document, see: IMT,
xxxvi: 488-491.
23
See the sampling of press clippings included with: Partial Translation of
Koerner Document 140, NMT, xii, 442446
24
H. Koppenberg, “Mineralölgewinnung aus Kohle,” Vierjahresplan, 1937: V;
and J. Werlin, Rohstoffplan und
Motorisierung,” Vierjahresplan, 1937: I.
25
For example, see: “Minister President General Goering on the Execution of
the Four Year Plan: The Speech in the
Big Assembly Hall of the ‘Preussenhaus’ on 17 December 1936,” Partial
Translation of Document NI-051, NMT,
vii: 814-817; and Chef des WStb im Wehrmachtamt (Thomas), “Vortrag vor
der Wehrmachtakademie am 1. XI. 37:
Einführung in die Wehrwirtschaft unter Berücksichtigung der derzeitigen
wirtschaftlichen Lage des Reiches,”
Document 014-EC, IMT, xxxvi: 110-111.

353
Göring did not receive a formal appointment from Hitler to implement the
VJP until October 1936.26
A week later, the self-styled “Plenipotentiary for the Four-Year Plan”
unveiled the executive structure of
the VJP, which included several executive agencies to handle raw
materials production, distribution,
labor, agriculture, price controls, and foreign exchange. The most
important in terms of petroleum was the
Office for German Raw and Basic Materials (Amt für deutsche Roh- und
Werkstoffe), which was an
outgrowth of the existing Raw Materials and Foreign Exchange Staff
(Rohstoff- und Devisenstab)
established in April and would have the same director, Lt. Col. Fritz
Löb. Besides overseeing domestic
output of all manner of raw materials (both natural and synthetic), the
office would also be responsible for
supervising the entire petroleum industry, including both imports and
domestic production.27
Schacht’s reluctance to appoint to a “Fuel Commissar” in the summer of
1935 had came back to
haunt him. The irreconcilability of Schacht’s position as Plenipotentiary
for the War Economy with that
of Göring and the VJP was unmistakable. The RKM warned “that this
situation is untenable,” and rather
than get bogged down in a “fruitless correspondence,” it advised that
Blomberg should wield “executive
power” in wartime, while Schacht exercised such authority in peacetime in
concert with Göring, who
would primarily be responsible for “Safeguarding the independent basis of
the life and economy of the
German people.”28 Blomberg, by contrast, expressed puzzlement at the
suggestion of “overlapping in the
realm of economic mobilization […].” As far as he was concerned, Göring’s
mission “to clear all
bottlenecks” and improve the supply of ore, fuel, and rubber would
complement Schacht’s “task of

26

“Ordinance for the Execution of the Four Year Plan of 18 October 1936,”
Translation of Document 1862-PS,
NCA, vi: 499; for the original German document, see: Document 2827-PS,
IMT, xxxi: 198-199. Hitler renewed
Göring’s mandate exactly four years later: “Decree on the Further Duties
of the Plenipotentiary for the Four Year
Plan, 18 October 1940,” NMT, Translation of Document NI-125, xii: 535.
27
Matters pertaining to the financing of expanding production would be
dealt with in consultation with the Ministry
of Economics (Reichswirtschaftsministerium, RWM) and the Ministry of
Finance (Reichsfinanzministerium).
Minister President, General Göring, Plenipotentiary for the Four Year
Plan, St.M.Dev.265, “Decree on the
Execution of the Four Year Plan,” 22 October 1936, Partial Translation of
Document NG-1221, NMT, xii: 447-452;
for the original German document, see: Nr. 158, Akten der Reichskanzlei,
iii: 559-564. Göring had expressed his
determination that direction of the petroleum industry should be
exercised by the Rohstoff- und Devisenstab a
month before issuing his official decree concerning the structure and
responsibilities of the VJP: “Auszug aus
Aktenvermerk von 23. 9. 36.,” no author, T-77/101 (Wi/IF 5.433).
28
Div. of National Defense, “Report Memorandum on the Four Year Plan and
Preparation of the War Economy,” 30
December 1936, Translation of Document EC-408, NCA, vii: 465-466; for the
original German document, see: IMT,
xxxvi: 478-480. Emphasis in the original.

354
preparing the existing economic forces of Germany for the event of war
[…].”29 This could not have been
any further from Göring’s actual objective: the imposition of centralized
control through the VJP, which
necessarily entailed Schacht’s displacement.30 As of November 1936, the
Office for German Raw
Materials would assume responsibility for supervision of the civilian
petroleum market, which had been
exercised by the RWM since 1934.31
The WStb preserved its existing prerogatives even after the start of the
VJP, specifically with regard
the location and types of fuel to be produced within the new synthetic
facilities, stockpiling, supply
contracts between the military and the oil companies, and most
importantly “the supervision of all work
that is necessary for securing the supply of the armed forces and the
armaments industry.”32 Moreover,
the Naval High Command (Oberkommando der Marine, OKM) managed to carve
out its own sphere of

29

The Reichwehrminister [sic] and Supreme Command of the Armed Forces to

Hitler, WFStG.O. Nr. 599/37
g.K.IaF, 22 February 1937, Translation of Document EC-244, NCA, vii: 342;
for the original German document,
see: IMT, xxxvi: 238-239.
30
Koerner, “Leadership and Economy: The Reorganization and Unification of
the National Economy Leadership,”
Translation of Document NID-12215, NMT, xii: 489-492.
31
The responsibilities of the Office for German Raw Materials vis-à-vis the
petroleum (oil and synthetic fuel)
industry are spelled out in greater detail in: Ministerpraesident General
Goering, Plenipotentiary for the Four-Year
Plan, St.M.Dev.1007., “Jurisdiction re Development of Raw and Synthetic
Materials,” 26 November 1936,
Translation of Document EC-243, NCA, vii: 338-341; for the original
German document, see: IMT, xxxvi: 233-237.
Within the Raw Materials Office, the primary sub-agency responsible for
the petroleum industry would be
Abteilung II (Mineralölwirtschaft), under the command of Maj. Hans Eduard
von Heemskerck. Abteilung III
(Krauch) would handle research & development and, in concert with
Abteilung I (Planung und Statistik), would
“arrange the raw materials basis, the technical means and location
[Standort] for soon-to-be constructed fuel
objectives [neu zu erstellende Treibstoffzwecke].” Finally, Abteilung V
would handle financing in cooperation with
the relevant agencies. Amt für deutsche Roh- und Werkstoffe, Abteilung II
(Mineralölwirtschaft), Heemskerck,
“Richtlinien für die Tätigkeit der Wirtschaftsgruppe Kraftstoffindustrie
bei Durchführung des Vierjahresplans
(Mineralöl),” 27 November 1936, T-77/341 (Wi/IF 5.2164, 2687), Anlage 6q
(?) to: “Die Arbeiten des
WiRüAmtes.” Heemskerck’s organizational memorandum made an important
observation concerning the
fundamentally instrumentalist character of German petroleum policy under
National Socialism: “The already
announced Petroleum Plan is not a program. It merely indicates the
direction by which the desire aim [gesteckte
Ziel] can be accomplished under the currently existing conditions. The
execution of the Petroleum Plan is always to
remain adaptable [anpassungsfähig]. All measures are to be carefully
evaluated, as to whether they allow for this
consideration.” Emphasis in the original.
32
Chef W Ro, “Vorschlag für die Abgrenzung der Arbeitsgebiete zwischen dem
Amt für deutsche Roh- und
Werkstoff und dem W Stb.,” 03 December 1936, T-77/101 (Wi/IF 5.433). In
fact, Göring’s new office soon started
muscling into matters within the military’s purview, such as the
mobilization requirements of the armed services.
Ministerpräsident Generaloberst Göring, Beauftragter für den
Vierjahresplan (BVJP), Amt für deutsche Roh- und
Werkstoffe (gez. Heemskerck), an den Herrn Reichs- und Preuβischen
Wirtschaftsminister, 36 II/3c Dr.Kü/Pe,
“Betr.: Vorbereitungen für den Mob.-Fall auf dem Gebiet der
Mineralölwirtschaft,” 12 January 1937, T-77/101
(Wi/IF 5.433).

355
authority, separate from both the WStb and the VJP, concerning purchases
of imported oil for naval
consumption during peace- and wartime.33
It would take some time before the policy shift heralded by the VJP would
have any tangible effects
on Germany’s petroleum supply. The growth in imports decreased
significantly starting in 1937, but that
had less to do with any increase in the domestic supply rather than a
shortage of hard currency.34
Germany’s foreign exchange position also deteriorated due to the decline
in exports as the VJP and
rearmament consumed ever larger portions of German industrial output. By
April 1937, Schacht pointed
out that Göring’s assurance that increased synthetic fuel production
would ease Germany’s foreign
exchange position was not true: the increase in gasoline production from
570,000 tons in 1933 to
1,240,000 tons in 1936 had been eclipsed by the rise in consumption, from
1,491,000 tons to 2,448,000
tons.35 The following month, however, the first round of planning for the
VJP was ready: between 1937
and 1940, 8,800,000,000 RM worth of government and private funds would be
invested, with the aim of
achieving self-sufficiency in motor and aviation fuel within eighteen
months and complete energy

33

Oberkommando der Marine (OKM) an Ministerpräsident Generaloberst Göring,

BVJP, Amt für Deutsche Rohund Werkstoffe, B.Nr. 20701/BB Vb, “Betr.:
Zusammenarbeit zwischen dem Oberkommando der Kriegsmarine und
dem Amt für Deutsche Roh- und Werkstoffe auf dem Gebiete der Mineralöl-
Bewirtschaftung. Besprechung vom 25.
11. 36,” 06 January 1937, T-77/101 (Wi/IF 5.433). The OKM had also tried
to exert independence from both the
VJP and WStb on other logistical and planning matters, which quickly
squashed such pretensions. Wehrmachtamt
an OKM (B), Az. 11 d 3512, WStb Abt. W Ro 57/37 g.IA, “Betr.:
Zusammenarbeit zwischen dem Oberkommando
der Kriegsmarine und dem Amt für deutsche Roh- und Werkstoffe auf dem
Gebiete der MineralölBewirtschaftung,” Bezug: OKM B.Nr. 20701/BB Vb vom
6. 1. 37., 26 January 1937; and Ministerpräsident
Generaloberst Göring, BVJP, Amt für Deutsche Roh- und Werkstoffe an das
OKM, Tg. B. Nr. 1141/37/II/v.H
[illegible]/Sch., “Betr. Zusammenarbeit zwischen dem Oberkommando der
Kriegsmarine und dem Amt für deutsche
Roh- und Werkstoffe auf dem Gebiete der Mineralölwirtschaft,” Bezug:
Schreiben vom 6. 1. 1937 – B. Nr.
20701/BBVb, Anlage 2 to: OKM an Wehrmachtamt – WStb, B. Nr. 2409 g BB Vb
II. Ang., “Betrifft:
Zusammenarbeit zwischen dem Oberkommando der Kriegsmarine und dem Amt für
deutsche Roh- und Werkstoffe
auf dem Gebiete der Mineralölwirtschaft,” Vorgang: Dort. Schrb. Vom 24.
3. 37, Az. 11 d 3512 – W Stb Abt. W Ro
494/37/g Ia, 21 April 1937; both in: T-77/101 (Wi/IF 5.433).
34
The growth between 1937 and 1939 was a mere 245,562 tons. Az. 015957/44g,
“Mineralöl-Einführ ins Reich in
t.,” Quelle: Planungsamt Hpt. Abt. Statistik, October 1944, T-77/341
(Wi/IF 5.2164, 2687), Anlage 30 to: “Die
Arbeiten des WiRüAmtes.”
35
Schacht to Göring, 02 April 1937, enclosed with Karl Blessing
(Generalreferent, RWM) to Thomas, 02 April
1937, Translation of Document EC-286, NCA, vii: 380-388; for the original
German document, see: NMT, xxxvi:
282-291. Schacht reiterated many of these points in his letter of
resignation later that year: Schacht to Göring, 05
August 1937, Translation of Document EC-497, NCA, vii: 567-575; for the
original German document, see: IMT,
xxxvi: 567-578.

356
independence by 1940.36 Until the promises of the VJP could be fulfilled,
Germany would have to make
do the policies and investments enacted since 1933, which, at the very
least, were doing a good job of
matching the increases in consumption with new production.37
At the beginning of 1937, the WStb estimated Germany’s mobilization
demand in 1937/38
(5,300,000 tons) would be 55% higher than the previous year’s figure –
this increase being almost entirely
the result of higher military consumption, “whose demand had increased
around 80 – 100%.”38 In terms
of supply, there was good news and bad news. On the one hand, overall
production had doubled.
“Particularly noteworthy” was the fact that one of the new facilities,
the Deutsche Raffinerie AG facility
at Misburg, would finally start producing aircraft lubricants out of
German crude oil.39
On the other hand, the percentage of consumption covered by domestic
production had not changed:
36% – against 35% in 1936/37. Whereas Germany’s domestic supply of
aviation and motor fuels was
improving (40% and 60% of demand, respectively), its supplies of diesel
(8%), fuel oil (32%), and
aircraft (18%) and automobile lubricants (25%) remained abysmal.40 Even
the figures for aviation and

36

Rainer Karlsch and Raymond Stokes, Faktor Öl: Die Mineralölwirtschaft in

Deutschland, 1859-1974 (München:
C.H. Beck, 2003), 188-189.
37
Between 1928 and 1937, domestic output had almost quadrupled from 651,000
to 2,264,000 tons, whereas
imports (both of finished products and crude) had almost doubled, from
1,833,000 to 3,374,000 tons. “Abschrift
einer Aufstellung der Überwachungsstelle für Mineralöl vom 3. Mai 1938:
Deutschlands Mineralölbilanz nach Inund Auslandsaufkommen in den Jahren
1928-1937 in 1000 t.,” T-77/341(Wi/IF 5.2164, 2687), Anlage 28 to: “Die
Arbeiten des WiRüAmtes.”
38
The breakdown in the increase between various petroleum products worked
out as follows:
Type of Product
Aviation Fuel
Motor Fuel
Diesel Fuel
Fuel Oil
Aircraft Lubricants
Automobile Lubricants
39

Increase
10%
80%
100%
40%
110%
90%
W Ro, “Vortragsnotiz betr. Stand der Mineralölversorgung,” 11 January
1937, T-77/123 (Wi/IF 5.533). The
regime considered the completion of the Misburg refinery to be a cause
for celebration. Heinrich Gönningen,
“Verstärkte Schmierölversorgung aus deutschem Erdöl,” Vierjahresplan,
1937: XI. The new facility would
immediately double existing domestic production of lubricants (27,600
tons), which only covered 34.5% of total
requirements (80,000 tons).
40
The imbalance between the improvements in the supply of gasoline and that
of fuel oil and diesel led Blomberg to
ask Göring to reorient “the expansion of petroleum supplies more toward
the raising of diesel and fuel oil
production.” Under existing planning, by the end of the VJP, Germany
would be self-sufficient in light fuels and
only produce 55% of its diesel consumption and 30% of its fuel oil
consumption. This was “from the standpoint of

357
motor fuels were somewhat deceptive, since the quality of light fuels
refined from German crude oil was
poor unless combined with benzol and alcohol, whose production was
lagging. The results of stockpiling
were mixed: an additional 250,000 tons had been added during the past
year alone, with two large storage
facilities completed and another six under construction, but little
progress had been in terms of stockpiling
diesel and fuel oil, “since neither the necessary foreign exchange nor
the storage capacity is available.”
Combining production with reserves would only provide for roughly six
months of full consumption of
gasoline and lubricants, and roughly two months of diesel and fuel oil
consumption.41 The situation
would, however, improve dramatically by 1940, when Germany would be able
to meet roughly half of its
estimated mobilization demand (3,300,000 tons out of 7,000,000 tons). The
WStb also looked forward to
adding up to 700,000 tons to the national stockpile, particularly diesel
and fuel oil, “[although] the entire
policy of stockpiling will be significantly influenced by our foreign
exchange position […].” Assuming
all went according to plan, by “1940 roughly 3/4 to 1 year’s worth of
military consumption, with the
exception of the Navy, can be secured.”42

the armed forces intolerable, since it urgently requires all manner of

fuels equally.” Blomberg to Göring, W Stb Ro
Nr. 146/37 geh., 26 January 1937, T-77/594 (Wi/I. 273). Blomberg’s letter
was taken almost verbatim from a WStb
memorandum written the day before: W Stb Ro, “Forderungen der Wehrmacht
zum Ausbau der Mineralöerzeugung
im Vierjahresplan,” 25 January 1937, T-77/229 (Wi/IF 5.1171).
41
For more detailed statistics concerning the supply & mobilization demand
position as of early-1937, see the
Anlagen to: Wehrmachtamt (Thomas), Aktz. 66 b 2134, W Stb Abt.W RO (III),
4760/36 g.Kdos., 15 January 1937,
T-77/341 (Wi/IF 5.2164, 2687), Anlage 32 to: “Die Arbeiten des
WiRüAmtes;” and “Betriebstoff-Bilanz am 1. 4.
1937,” no author, T-77/101 (Wi/IF 5.433). The covering note to the former
expressed the hope that the introduction
of the VJP should lead “to a significant improvement of the supply
situation within all areas,” and looked forward
“to having achieved a wide-ranging adaptability [Umstellbarkeit] from the
manufacture of one kind of petroleum to
others.”
42
W Ro, “Vortragsnotiz betr. Stand der Mineralölversorgung,” 11 January
1937, T-77/123 (Wi/IF 5.533).

358
Carl Krauch’s Ascent and Germany’s Supply Position before the Munich
Crisis, 1938
The second and perhaps most important stage in prewar petroleum policy in
the Third Reich took
place over the course of 1938. The previous November, Hitler had stunned
his military and diplomatic
advisers by suggesting that Germany might need to take advantage of
Anglo-French preoccupation with
Italy over Ethiopia to overrun Austria and Czechoslovakia, thus
eliminating the threat to Germany’s
southern flank when it eventually turned on France and Britain.43 The
sharpening in Germany’s posture
internationally was mirrored by a renewed effort at home to achieve
petroleum autarchy.
In January, Col. Löb of the Office for German Raw Materials delivered a
major presentation on the
future of the petroleum industry under the VJP. He noted that “heightened
motorization” had been
objective of the National Socialist regime since the “seizure of power,”
as evidenced by the construction
of the Autobahnen. It was no longer “bearable,” he believed, “that the
motorization of the economy and
armed forces should continue to be unconditionally dependent on foreign
imports.” Efforts to boost
domestic production had so far been “insufficient,” even though the raw
materials and technical means
were available, which is where the VJP came in. Löb was convinced that
Germany’s fuel problem was
actually “solvable upon a domestic basis,” thanks to both the country’s
existing mineral reserves and the
efforts of the German chemical and mining industries. Not only was
Germany capable of meeting its
expected increase in consumption, but it could do so without comprising
on quality. “The degree to which
demand for power fuels is met depends merely upon the willingness to make
the requisite investment, the
expenditure in labor and steel necessary for the construction of new
supply facilities, and utilization of
experts to provide leadership.” It was essential that planning “be geared
toward” estimated rises in
consumption, which was 4,224,000 tons in 1936 (42% of came from domestic
sources). Löb’s office had

43

Friedrich Hossbach (Hitler’s Military Adjutant), “Notes on the Conference

in the Reichskanzlei on 5 November
37 from 1615-2030 hours,” 10 November 1937, Translation of Document 386-
PS, NCA, iii: 295-305; for the
original German document, see: IMT, xxv: 402-413.

359
determined that, by the end of the VJP, consumption would increase
relative to the 1936 figure by 33%
for gasoline, 50% for diesel, and 25% for lubricants, which worked out to
roughly 6,300,000 tons.44
Löb articulated a multi-faceted strategy for addressing the challenge.
Among the most important were
utilizing synthetic measures that conserved Germany’s reserves of coal
and crude oil, and were capable of
being “adjusted” to evolving technical and economic factors.45 Although
German soft and hard coal
reserves would last for hundreds of years at prevailing rates of
consumption, the regime could not afford
to be profligate with the application of coal since there were limits to
how much could be extracted.
Between 1932 and 1937, production of hard coal production had increased
from 107,740,000 tons to
184,500,000 tons, brown coal from 122,650,000 tons to 184,670,000 tons,
and coke from 19,340,000 tons
to 41,000,000 tons. But the synthetic fuel industry was not the only, or
even the most important, customer
for coal – that honor went to the iron and steel industries. Coal was
also an essential to Germany’s
balance of payments, accounting for 600,000,000 RM worth of exports in
1937.46
Great care had to be exercised over the location for new synthetic fuel
facilities, their funding (which
had to be arranged by the industry itself rather than through the capital
market or by the Reich), and the
material expenditure during construction. In view of the foreign exchange
considerations, “preference”
should be given to raising production of those fuels most expensive to
import. Ultimately, Löb believed
that Germany could eliminate its imports of motor fuel and lubricants.47
He also anticipated the total

44

“‘Die Mineralölwirtschaft im Vierjahresplan’: Vortrag gehalten am 12.

Januar 1938 im Haus der Flieger,” T77/107 (Wi/IF 5.469).
45
“‘Die Mineralölwirtschaft im Vierjahresplan’: Vortrag gehalten am 12.
Januar 1938 im Haus der Flieger,” T77/107 (Wi/IF 5.469).
46
Hermann von Hannekan, “Die Kohle als Wirtschaftsgrundlage,”
Vierjahresplan, 1938: VI.
47
Unfortunately, the slides accompanying his presentation do not appear to
have survived, which means that there is
a dearth of actual statistics. We do, however, have a good idea of
expected increase thanks to a report on industrial
expansion completed by General Hermann von Hanneken, Plenipotentiary for
Iron and Steel Management
(Generalbevollmächtiger für die Eisen- und Stahlbewirtschaftung) and
Under State Secretary in the RWM. As of 01
January 1938, petroleum production stood at 4,390,000 tons, with an
additional 624,000 tons coming on line over
the year, and a further increase of 1,624,000 tons the following year,
thus leaving Germany with a total supply of
6,639,400 tons by 01 January 1940. Hanneken was concerned that these
targets would not be met in view of the
myriad problems, including inadequate allocations of iron, cement, and
lumber; transportation bottlenecks; and
delays in the delivery of needed machinery and electrical equipment.
Hanneken, “Bericht über den Industrieausbau
im Jahre 1938 im Rahmen des Vierjahresplan,” no date, enclosed with:
Hanneken to the Office for Economic
Development (Reichstelle für Wirtschaftsausbau, RWA), 21 January 1939,
BA-B, 3112/36. Unfortunately, the
NARA microfilm copy – T-84/217 (EAP 66-c-12/62/46) – is largely
illegible.

360
savings in foreign exchange at 350,000,000 RM, which would be used to
finance imports to meet new
demand. Interestingly, imports of crude oil would continue – in fact,
they would “experience a systematic,
additional increase,” since Löb intended to process this crude oil in
facilities that could, if necessary, be
quickly switched over to using either German crude oil or coal as a
feedstock. In other words, Löb
expected that Germany would continue importing crude oil (and other
fuels, such as diesel, which had a
low import duty) by the end of the VJP, if only for reasons of expediency
and to conserve German raw
materials.48 Lest there be any misunderstanding, Löb reminded his
listeners that “my office is intent upon
preserving the [German] petroleum industry’s connection with the outside
world and its involvement with
the international petroleum industry, so long as this does not jeopardize
the security of the Fatherland.”49
We have a good overview of Germany’s oil position at the beginning of
1938, thanks to an
intercepted British estimate of German peacetime and mobilization demand
vs. supply, which the WStb
helpfully contrasted with the actual German figures.50 British estimates
for German peacetime demand
between 1936 and 1939 were almost exactly right, and the estimate for
mobilization demand in 1939 was
only slightly higher than the German estimate: 8,600,000 tons vs.
7,800,000 tons. The only major
discrepancy came with regard to German supplies in 1939 – whereas the
British estimated production
plus reserves at 6,300,000 tons, the Germans were only expecting
5,200,000 tons (the main difference
being the 1,000,000 ton gap in each side’s estimate of German storage
capacity). Overall, there was only
a 300,000 tons difference between both sides figures for Germany’s import
requirement: 2,300,000 tons
in the case of the British report, and 2,600,000 tons according the WStb.
British and German estimates
concerning the possible supply of oil from Romania were identical:
2,500,000 tons. When combined with
the “highest” possible Polish exports (100,000 tons), planners in both
Germany and Britain had concluded
48

German crude oil production would be fixed at 450,000 tons for the time
being, but it was essential that “the
maximum possible quantity of lubricants” had to be refined from it.
49
“‘Die Mineralölwirtschaft im Vierjahresplan’: Vortrag gehalten am 12.
Januar 1938 im Haus der Flieger,” T77/107 (Wi/IF 5.469). The NARA finding
aid mistakenly ascribes authorship of the speech to Krauch. Löb’s name
does not appear anywhere on the speech, but the text is virtually
identical to an article published later that year under
his name: Fritz Löb, “Die deutsche Mineralölwirtschaft,” Vierjahresplan,
1938: II. This article does not include the
figures Löb provided for existing and estimated consumption during his
January speech.
50
The provenance of the British report is unclear – a German translation
was appended with the following details:
“Deutschland: Mineralölversorgung im Falle eines Krieges 1939,” I G [?]
F/47, 07 October 1937.

361
by the beginning of 1938 that Germany could, in fact, find enough oil to
fight a war in 1939, but only
with large imports from Romania.51
Following Schacht’s resignation as Economics Minister in 1937, Göring
began a major reorganization
of the VJP, particularly the Office for German Raw Materials, which had
“vainly” attempted to impose
order over the various civilian and military agencies responsible for
petroleum affairs.52 The additional
production of petroleum during the first year of the VJP was valued at
39,700,000 RM (well above the
anticipated savings of 24,800,000 RM through reduced imports).53
Nevertheless, as Göring explained
during a conference at his Karinhall estate on 16 July 1938, although
VJP’s “function consists in
preparing the German economy for total war within 4 years,” progress had
so far been “unsatisfactory in
the fields essential to the war effort, due to too much
decentralization.”54 Implementation of the VJP
during this second stage, which lasted until Albert Speer’s rise in 1942,
would be in the hands of trusted
deputies endowed with wide-ranging powers. In the case of the petroleum,
the most important figure at

51

WStb an Abwehr, Az. 66 b 9010, Abt. W Ro Nr. 172/38 g.K.Ia, “Betr.:

Mineralöversorgung Deutschlands,”
Bezug: Englischer Bericht über Mineralölversorgung Deutschlands im Falle
eines Krieges 1939, 29 January 1938,
T-77/427 (Wi/IF 5.3481). Another British report from later that year, on
the other hand, overstated German wartime
consumption by 1,300,000 and understated its domestic production in 1937
by 700,000 tons. WStb,
Rohstoffabteilung (Griebel) an W Wi über Ro I, Az. 11 k 2216b W Ro V, Nr.
3897/38gK Vc, “Betr.: Stellungnahme
zu dem mit Bezugsschreiben übermittelten englischen Bericht über
Deutschlands Mineralöllage (Abw.III
1727/38gK),” Bezug: W Wi Nr.3897/38gK Id vom 18. 11. 1938, 28 November
1938, T-77/123 (Wi/IF 5.533). The
original British report is not appended.
52
“Über die Organisation der Vierjahresplan,” 27 January 1938, Nr. 24 in:
Akten der Reichskanzlei, v: 84-92.
53
The total value of all increases in production and exports at the end of
the first year of the VJP equaled
367,300,000 RM. The increase in demand had, however, negated any positive
effect on Germany’s overall import
burden. Ministerpräsident Generaloberst Göring, BVJP, Der Chef des Amtes
für deutsche Roh- und Werkstoffe
(Löb), “Ergebnis der Arbeit des ersten Jahres im Vierjahresplan,” 30
Oktober 1937, T-301/70 (NI-8590).
54
Göring was referring to the production of gunpowder/explosives,
petroleum, aluminum, synthetic rubber, and iron
ore. “Business transacted at conference with Field Marshall Goering at
Karinhall on 16 July 1938,” Translation of
Document 1436-PS, NMT, vii: 895-897. The day before, the WStb estimated
that existing production and reserves of
motor fuel and diesel would last for only three months in wartime.
Oberkommando der Wehrmacht,
Wehrwirtschaftsstab (OKW, WStb), W Ro Vc, Az. 11 k 2216, Aktenvermerk für
Chef der 6. Abt. Gen St d H.,
“Betr.: Betriebsstoff-Versorgungslage im Mob-Fall (Stand 1. 7. 1938) für
Wehrmacht und Wirtschaft im Reich
einschl. Ostpreuβen auβer Österreich,” 15 July 1938, T-77/123 (Wi/IF
5.533). Göring elaborated further during a
discussion at the Ministry of Aviation (Reichsluftfahrtministerium) the
following October. He candidly admitted
that Germany was broke (“The treasury is empty”) and vowed “to make
barbaric use of his plenipotentiary power
[…].” Since it was proving impossible to reconcile rearmament with the
need to earn hard currency through exports,
Göring demanded that the emphasis of VJP had to be directed toward those
industries that contributed directly to the
war effort and saved foreign exchange – in both cases, the petroleum
industry fit the bill. “Conference at General
Field Marshal Goering’s at 1000, 14 Oct. 38, in the Reich Air Ministry,”
Translation of Document 1301-PS, NCA,
iii: 901-904; for the original German document, see: Nr. 218, Akten der
Reichskanzlei, v: 738-744.

362
this juncture was Krauch, who at the start of 1938 was still technically
a second-tier official within the
Office for German Raw Materials. This would soon change.55
With regard to petroleum policy, the Raw Materials Office was integrated
into the RWM as the
Office for Economic Development (Reichstelle für Wirtschaftsausbau, RWA –
elevated to the status of
Reichsamt in December 1939). The RWA would become the executive,
planning, and research &
development arm of the VJP.56 The RWA was comprised of four departments,
the most important being
Division F (research and development), under the leadership of Krauch,
who was effectively in charge of
the whole agency and took over formally in December 1939. Geological
matters (both in Germany and
abroad) would, however, be handled by the Office for Soil Exploration
(Reichstelle für Bodenforschung,
RfB – after 1941, Reichsamt für Bodenforschung). This agency was an
outgrowth of the old Prussian
Geological Institute (Preußische Geologische Landesanstalt) and led by
Wilhelm Keppler, with Alfred
Bentz serving as the Director of the Crude Oil Division (having held the
same position with the
Landesanstalt).57 Finally, oversight over the raw materials industry
theoretically returned to the RWM,
and Ernst Rudolf Fischer of IG Farben took over the Petroleum Division in
1939.58

55

According to Peter Hayes, the unprofitability of hydrogenation

($40,000,000 in losses by 1932) had cost Krauch
his chance to replace Bosch as the head of IG Farben, thus encouraging
him to seek opportunities for advancement
within the regime: Hayes, “Bosch and Krauch,” 358-359.
56
Minister President Field Marshal Goering, Plenipotentiary for the Four
Year Plan, St. M. Dev. 11319/39,
“Reorganization of the Reichsstelle for Economic Development,” 05
December 1939, NMT, vii: 963-964; for the
original German document, see: T-401/5 (RBF 96).
57
These developments are summarized Bentz’s self-serving “Supplement to My
Questionnaire,” 11 February 1946,
BNA, FO 1039/496. The postwar recollections of men such as Bentz and
Günther Schlicht (an employee of
Deutsche Erdöl AG, formerly attached to Kontinentale Öl AG and the
Technische Brigade Mineralöl in the
Caucasus) comprised the backbone of Albert E. Gunther’s histories of the
German oil industry during the war. For
the history of the domestic crude oil industry (including Austria), see:
A.E. Gunther (British Military Government,
Celle), “British Oil Fields Investigation, Part IV, Section 1: The War
Structure of the German Crude Oil Industry,
1934-1945,” May 1946, BNA, WO 252/1448; and A.E. Gunther, “The German War
for Crude Oil,” Petroleum
Times (08 November 1947), 1095-1099; ibid (22 November 1947), 1147-1152;
ibid (06 December 1947), 12111215; ibid (03 January 1948), 22-26; and
ibid (08 May 1948), 470-475. For Gunther’s role in the official postwar
investigation of the German oil industry that culminated in his
historical series for the Petroleum Times, see:
Gunther, “A Note on the Oil Fields Investigation under Military
Government at Celle,” Geologisches Jahrbuch,
Reihe A, Heft 102, 13-21 (Hanover, 1987), Bundesanstalt für
Geowissenschaften und Rohstoffe, Z1 A 102
(hereafter cited as: BGR #). Gunther proved instrumental in the postwar
rehabilitation of Alfred Bentz, despite the
latter’s prominent position within the petroleum policymaking apparatus
of the Third Reich.
58
Minister President, Field Marshal Goering, Plenipotentiary for the Four
Year Plan, St. Dev. 1245, “Decree on the
Reorganization of the Reich Ministry of Economics and the Continuation of
the Four Year Plan,” 05 February 1938,
Translation of Document NID-13629, NMT, xii: 482-488; for the original
German document, see: Nr. 36, Akten der
Reichskanzlei, v: 118-124. For an explanation of how Göring’s 1938 reform
worked out in practice, see: Donner

363
Göring also opted to make greater use of his power to appoint
plenipotentiaries to handle matters of
special importance.59 In August/December 1938, Krauch received two
appointments from Göring, first as
Plenipotentiary and then as General Plenipotentiary for the Chemical
Industry.60 The previous July,
Göring appointed Bentz as the Plenipotentiary for Crude Oil Production,
whose brief Göring extended to
cover the former Czech territories and occupied Poland the following
year.61 When it came to the
direction of petroleum policy, Krauch would oversee the synthetic fuel
industry, while responsibility for
the crude oil industry would be divided between Fischer (policy) and
Bentz (geology). Although all three
men were technically subordinate to the new Economics Minister, Walter
Funk, in fact, they all reported
to Göring.62 The quadrumvirate of Krauch (RWA), Bentz (RfB), Fischer
(RWM), and Georg Thomas
(WiRüAmt) would shape Germany’s petroleum policy until 1942, when Speer’s
Zentrale Planung board
sidelined Göring’s VJP.63
In the wake of the annexation (Anschluss) of Austria, Hitler fixed his
attention on Czechoslovakia.
The absorption of Austria had been relatively peaceful (save for
Austria’s Jews and other targets of the
regime) but liquidating Czechoslovakia carried with it the risk of a
wider European conflagration.

(assistant to State Secretary Neumann), “Organizational Questions of the

Four Year Plan,” 27 August (1940),
Translation of Document NID-13894, NMT, xii: 543-548.
59
Minister President Field Marshall Goering, Plenipotentiary for the Four
Year Plan, St. M. Dev. 1008 Rs, 16 July
1938, Translation of Document EC-278, NMT, vii: 900-901; for the original
document, see: Nr. 166, Akten der
Reichskanzlei, v: 548-549 (esp. pg. 548, n. 2).
60
According to the footnote included with the Translation of Document EC-
278 (NMT, vii: 900-901), Krauch
testified that he never received an official letter of appointment to
either position. Copies certainly did survive:
Ministerpräsident Generalfeldmarschall Göring, BVJP, an Herrn Direktor
Dr. C. Krauch, RWA, St.M.Dev. 5598, 22
August 1938, NARA, RG 238, T-301/113 (NI-13901); and Göring (gez.
Neumann) to Krauch, St.M.Dev. 1194 g.,
26 August 1938, NARA, RG 238, T-301/113 (NI-13900). Krauch’s tasks, as
well as the overall mission of the RWA
are spelled out in great detail in: Hans Kehrl (RWM) to Krauch, 30 March
1943, Translation of Document NI-820,
NMT, vii: 971-977.
61
Ministerpräsident Generalfeldmarshchall Göring, BVJP, to Herrn Professor
Dr. A. Bentz, St.M.Dev. 5153, 28 July
1938, NARA, RG 238, T-301/113 (NI-13902) – reprinted in: Eichholtz,
Deutsche Ölpolitik, 268-269 – and Göring
to Bentz, St.M.Dev. 8781, 04 October 1939, BGR 86534.
62
As Funk conceded during his testimony at Nuremberg, as a result of the
1938 reforms, the portion of the RWM
still under his control functioned more like a “Ministry of Commerce,
which dealt only with the distribution of
consumer goods,” whereas all of its functions pertaining to economic
policy fell under Göring’s jurisdiction.
Testimony of 04 May 1946, IMT, xiii: 99-102.
63
Fischer would retain his position following Göring’s eclipse, although he
would now report to Hans Kehrl, chief
of the Raw Materials Office (Rohstoffamt) within the RWM after 1943, who
in turn answered to Albert Speer. Kehrl
had enormous respect for Fischer (nicknamed “Mineralölfischer”). Hans
Kehrl, Krisenmanager im Dritten Reich: 6
Jahre Frieden – 6 Jahre Krieg, Erinnerungen (Düsseldorf: Droste Verlag,
1973), 203 and 227. For a schematic of
the post-1942 administrative structure for petroleum policy, see: Stokes,
“Nazi Oil Industry,” 262-264.

364
Germany had to be prepared for a war in the short term, well before its
ambitious rearmament programs
were complete. Accordingly, it was time for the Reich to begin taking
stock of its existing resources.64
The picture with regard to petroleum was mixed. Although domestic
production had kept pace with
increases in consumption, the overall foreign exchange burden had swollen
from 145,000,000 RM to
230,000,000 RM between 1933 and 1937 to account for the larger volume of
imports (2,478,000 tons to
4,313,000 tons), even if the share of imports relative to demand remained
unchanged (roughly 75%).65
The increase in imports was distributed unevenly, with demand for diesel
(90% of which had to be
imported) and crude oil tripling, and doubling in the case of fuel oil.
On the other hand, Germany had also
gone from the least motorized of the great powers to near parity with
Britain while vaulting past France:
Country
Britain
Germany
France

No. of Automobiles (1937)

688,000
621,000
455,000

(The per capita figure was somewhat less impressive: the German figure
had been halved between 1933
and 1937, from eighty-nine to forty-seven people per vehicle, but it
still lagged behind Britain and France,
which had seen a decline from twenty-nine to twenty-one and twenty-five
to nineteen, respectively.66)
The increase in the number of automobiles was matched by a sharp drop in
gasoline imports:
Year
1932
1936
1937

Imports (Tons)
1,088,000
1,325,000
1,058,000

64

An excellent overview of Germany’s strategic and economic position,

particularly its crippling raw materials
deficiencies and various military shortcomings, on the eve of the Sudeten
Crisis may be found in: Williamson
Murray, The Change in the European Balance of Power, 1938-1939: The Path
to Ruin (Princeton: Princeton
University Press, 1984), 3-49.
65
Germany’s consumption (4,910,000 tons) remained relatively low: as of
1936, it was well behind the United
States (145,200,000 tons), the Soviet Union (18,800,000 tons), Britain
(10,300,000 tons), France (5,500,000 tons)
and even Canada (5,030,000 tons). Reichs-Kredit-Gesellschaft AG,
Ke/Schr., “Treibstoffwirtschaft in der Welt und
in Deutschland,” April 1938, T-84/51 (EAP 66-c-2-10/22).
66
Per capita fuel consumption Germany was also forty liters, compared to
eighty-three liters in France, 144 liters in
Britain, and 609 liters in the United States. Overall, the number of
motor vehicles (including motorcycles and
trucks) had increased from 85,000 in 1914 to 2,158,000 by 1935. “Bestand
an Kraftfahrzeugen in Deutschland,”
Material: Wehrtechnische Monathefte, Nr. 2 (1936), T-77/425 (Wi/IF
5.3444).

365
This reduction in imports was only possible because domestic production
of light petroleum products
(including benzol and alcohol) had quadrupled since the start of the
Third Reich:
Year
1933
1937

Domestic Production (Tons)

386,000
1,480,000

Such increases were indispensable due to the concurrent rise in

consumption:
Year
1932
1937

Consumption (Tons)
1,600,000 tons
2,600,000 tons

Roughly 60% of Germany’s gasoline supply now came from domestic sources,
a figure that would grow
once the expansion of the synthetic fuel industry had been completed.
Even German crude oil production
had also almost doubled: from 230,000 tons in 1932 to 453,000 tons in
1937, most of which was refined
into fuel oil (320,000 tons), lubricants (140,000 tons), diesel (120,000
tons).67
The price of imported gasoline had dropped by two-thirds, from 18.49 RM
per 100 liters in 1927 to
only 6.76 RM in 1936.68 At first glance, the price differential between
synthetic and natural petroleum (16
Pfennig per liter of synthetic fuel vs. 3.45 Pfennig per liter of
gasoline sold at the U.S. Gulf Coast)
seemed immense. But once one subtracted the labor cost from the synthetic
fuel (which stimulated the
domestic economy) and included the freight rates to Hamburg, one liter of
U.S. gasoline cost
approximately 8 Pfennig to import, and one liter of Rumanian gasoline 10
Pfennig. Moreover, the price of
synthetic fuel would probably drop in future as production became more
efficient.69
The Reichs-Kredit-Gesellschaft was therefore confident that “[the] German
petroleum economy is
therefore on its way to fulfilling its’ stated task: to make Germany as
independent as possible from
imports of light fuels.” Whether Germany could find the roughly
12,650,000 tons of petroleum it would

67

Reichs-Kredit-Gesellschaft AG, Ke/Schr., “Treibstoffwirtschaft in der

Welt und in Deutschland,” April 1938, T84/51 (EAP 66-c-2-10/22).
68
“Entwicklung der Durchschnittswerte wichtiger Rohstoffposten der
deutschen Einfuhr 1927-1936,” no date or
author, BA-B, R 8128/488.
69
Reichs-Kredit-Gesellschaft AG, Ke/Schr., “Treibstoffwirtschaft in der
Welt und in Deutschland,” April 1938, T84/51 (EAP 66-c-2-10/22).

366
need in a war “depends not the least upon” upon whether the material and
human labor to expand
synthetic output could be found.70 Germany could not afford to be stingy
in view of its experience during
the war and the current geopolitical situation: “The additional efforts
imposed by Germany’s bid for selfsufficiency and which other industrial
nations with a more favorable raw materials basis or with greater
capital-generating facilities in colonial nations or territories can
avoid, are adequately justified at present
due to the noticeable significance accorded to the progressive
motorization.”71
Until the expansion of synthetic production was complete, however, the
situation would be dire in the
event of a war of extended duration. An examination by the WStb of
Germany’s existing stockpiles and
production in the event of mobilization revealed that the country could
only cover its full requirements for
four months. Monthly consumption of all products would run to 636,000
tons (84,000 tons for the Army;
161,500 tons for the Navy; 174,500 tons for the Air Force; and 216,000
tons for the civilian economy).
Since overall production would shrink slightly as production shifted from
motor fuel to aviation and
diesel fuel, once stockpiles had been expended, the Third Reich would
only satisfy one-quarter of its
consumption. If Germany wished to have enough fuel to cover six months of
consumption, it needed to
import 934,000 tons of petroleum products at a cost of 65,000,000 RM. The
costs of providing one year’s
worth of consumption were even more onerous: 300,000,000 RM, largely in
foreign exchange.72

70

The Reichs-Kredit-Gesellschaft drew this figure from: H. Steinberger,

“Der Treibstoffverbrauch im Kriege,” Die
deutsche Volkskraft: Beilage zur “Deutschen Wehr,” Nummer 1, 6 Jahrgang
(16 January 1936).
71
Reichs-Kredit-Gesellschaft AG, Ke/Schr., “Treibstoffwirtschaft in der
Welt und in Deutschland,” April 1938, T84/51 (EAP 66-c-2-10/22). This
detailed paper is of extraordinary value, not only in terms of describing
the state of
petroleum industry in Germany by 1938, but also contextualizing it within
the global oil industry. For more on
Germany’s overall raw materials position at the start of 1938, see also:
Volkswirtschaftliche und Statistische
Abteilung der Reichsbank, “Die Entwicklung der deutschen
Rohstoffversorgung,” 9 July 1938, Nr. 159 in: Akten der
Reichskanzlei, v: 515-517. The Reichsbank was pleased with the
significant increase in foreign exchange earnings
since 1934 (from 6,000,000,000 RM to 7,740,000,000 RM), which allowed the
country to replenish some of its
stocks of raw materials. The outlook for 1938 did not look so favorable,
as the Reichsbank forecast a significant
decrease in exports even as global commodity prices rose.
72
The situation was probably slightly worse considering the fact that these
figures did not take into account the
consumption in Austria. W Stb W Ro, Az. 11 k 2216 Vc, “Mineralöl-
Versorgung für den Mob-Fall 1938,” 08 June
1938, T-77/341 (Wi/IF 5.2164, 2687), Anlage 33 to: “Die Arbeiten des
WiRüAmtes.” See also: W Stb W Ro, Az. 11
k 2216 Vc, “Bemerkungen zur Mineralöl-Bilanz im Mob-Fall nach dem Stande
vom 1.4.38,” 03 May 1938; and W
Stb W Ro Vc, Az. 11 k 2216, “Schluss – Folgerung,” 17 May 1938; both in:
T-77/123 (Wi/IF 5.533). The latter
document offers a useful comparison of the most recent figures for
production and stockpiles with those of the
previous year.

367
Germany’s petroleum position would not have been a matter of urgency if
there was no chance of war
in the immediate future. But Hitler had already announced his intentions
to speed up his timetable during
the so-called “Hossbach Conference” of November 1937. The purge of the
Army and foreign policy
leadership during the Fritsch-Blomberg Affair between January and March
1938 had been followed by
the annexation of Austria, and Czechoslovakia was next on the menu. The
Third Reich did not have the
luxury of waiting several years for the completion of its existing
synthetic fuel program and would have
to speed up the process of achieving self-sufficiency.

368
The Krauch Plan, 1938
The VJP never really aimed at autarky, at least within Germany’s existing
borders. Even assuming
that self-sufficiency was technologically feasible, there was always the
question of whether the available
resources existed and might not be better expended elsewhere. Supporters
of the synthetic fuel industry
had pointed out that if there was one item in which German truly needed
to be self-sufficient (or close to
it), it was petroleum. Additional resources such as coal, ore, and food
could be bought or taken from
Germany’s neighbors. With the exception of Romania (whose oil production
had already peaked in 1936
and was shared with Germany’s probable enemies, Britain and France,
before 1940), Europe had no
significant oil producers of which to speak. The Continent had depended
and would continue to depend
upon imports from the Western Hemisphere until the massive expansion of
Middle Eastern production
following the Second World War. Oil was a resource that Germany could not
acquire (at least in
meaningful quantities) within its immediate vicinity.
But as war planners from all of the great powers understood, oil was a
commodity that had be
available in sufficient quantities right from the start of the
hostilities. The sheer volume of supplies
required, and the cost and vulnerability of storage facilities, meant
that it was impractical for a country to
stockpile too much fuel in anticipation for a war. The only option when
cut off from imports was to
produce your own petroleum. Such strategic considerations, as well as
contingent factors such as the
bitter competition for natural, labor, and financial resources within the
Third Reich on the eve of the
Second World War, provided the background for the most ambitious
synthetic fuel project ever attempted
– the Krauch Plan of 1938.73
Although the production figures envisaged by the Krauch Plan (roughly
11,000,000 tons) were tiny
by comparison to U.S. and Soviet oil production, they are significant
when one recalls that Germany’s
total petroleum supply peaked in 1943 at 11,300,000 tons including
imports, withdrawals from stockpiles,

73

Karlsch and Stokes, Faktor Öl, 197-198.

369
and booty from the occupied territories.74 Considering Germany’s limited
means and requirements, this
was an ambitious objective – but it should not be confused with autarky.
Germany would require oil
imports for the conceivable future. Knowledgeable analysts of the oil
industry recognized that, even if
Germany reached the targets set by Krauch, this would still fall short of
satisfying all of Axis Europe’s
petroleum consumption.75 Europe’s postwar energy future, no matter who
won the Second World War,
would depend upon imports from the Soviet Union and the Middle East.
Krauch’s proposal, presented to Göring at his Karinhall estate at the end
of June 1938 and formally
initiated as the “New Defense-Economy Supply Plan” a month later,
depended upon a doubling of the
steel allocation to the synthetic fuel industry after December 1938: from
60,000 tons to “at least” 110,000
tons through 1942.76 Krauch also argued in favor of expanding the
capacity of existing “stand-by plants”
(Bereitschaftsanlagen) and stockpiling the surplus rather than the more
costly alternative of constructing
new facilities altogether, which would have to be postponed until the end
of 1942.77 He based his
projections on an estimated 1942 peacetime consumption of 7,200,000 tons
and 13,835,000 tons in the
event of mobilization (which now had to include Austria), with most of
the extra 6,635,000 tons coming
in the form of aviation fuel and fuel oil (5,550,000 tons).78 Since
mobilization demand was about 50%
greater than in peacetime, providing the necessary amounts of fuel
theoretically required only the
construction of a sufficient number of facilities capable of doubling
their output in wartime. Things were

74

United States Strategic Bombing Survey (USSBS), Effects of Strategic

Bombing on the German War Economy
(Washington, DC: U.S. GPO), 75.
75
Alfred Bentz , “Sicherstellung des europäischen Erdölbedarfs,” 24 July
1940, BGR 49459 (reprinted in: Eichholtz,
Deutsche Ölpolitik, 467-469); and Titus Kockel, “Eine Quelle zur Vor- und
Gründungsgeschichte der Kontinentale
Öl AG aus dem Jahr 1940: E. R. Fischer (Reichswirtschaftsministerium, II
Min. Öl), ‘Die Versorgung Europas mit
Mineraloel vor dem Kriege, Ermittlung des Nachkriegsverbrauchs und
Sicherung der Belieferung, 1940,’ September
1940,” Jahrbuch für Wirtschaftsgeschichte 2003/1: 175-208.
76
For background on the “Karinhall Plan” and Krauch’s appointment as one of
Göring’s plenipotentiaries, see
Krauch’s testimony at Nuremberg: NMT, vii: 1002-1010.
77
For details concerning the intended modifications in the both peacetime
and mobilization output (as well as the
necessary feedstock, including coal, oil and its residues), see: Krauch
an das RWM, z.Hd.d.Herrn Ministerialdirigent
von Heemskerk [sic] o.Vertreter i.Amt, Tgb.Nr. 142/38 g.Rs,, “Betr.
Sofortprogramm, Sachgebiet Mineralöl,” (?)
September 1938, enclosed with: Krauch an das OKW, Rohstoff-Abt.,
z.Hd.d.Herrn Oberstleutnant Becht
o.Vert.i.Amt, Tgb.Nr. 142/38 g.Rs., 29 September 1938, NARA, RG 238, T-
301/60 (NI-7471).
78
The addition of Austria (Ostmark after 1938) was not entirely a negative,
as the country had a small crude oil
industry. Production in 1938 was 609,000 tons, up from 174,000 tons in
1930. Vowi 3280, “Tabellen über die
Versorgung Deutschlands mit Mineralölen,” 03 March 1939, BA-B, R
8128/853.

370
not so simple in real life. Krauch quickly ruled out meeting 100% of the
mobilization demand: one could
not simply increase production “at will” (nach Belieben) at facilities
such as Leuna, Böhlen, Scholven,
and Gelsenberg, which meant that it was “not possible to build a
mobilization capacity equivalent to
100% of demand upon the normal supply in reference to continuously
running operations.”79
Rather, Krauch again fell back on seeking self-sufficiency only in those
cases where it was actually
feasible: in this case, diesel and lubricating oils. Meanwhile, motor
fuel would be produced at 85% of
demand, aviation fuel at 75%, and fuel oil at 60%. Overall, Krauch
envisaged a mobilization output of
11,085,000 tons against an estimated demand of 13,835,000 tons (79%).80
Although a gap remained in
wartime, it could be filled in peacetime, when production would reach
9,250,000 tons against 7,200,000
tons worth of demand (128%). The extra capacity would also come in handy
during peacetime once the
process of stockpiling ended, as Krauch expected “further healthy
development” of civilian consumption
following the introduction of the Volkswagen around 1945. The scale of
the investment of natural and
financial resources was staggering: the new facilities would require an
additional 28,800,000 tons of soft
coal and 17,000,000 tons of hard coal, plus a further 1,250,000 kilowatts
of electrical power. The plan as
whole consume 4,460,000 tons of steel and the labor of 77,500 works – all
at a cost of 4,350,000,000
RM.81 To give an idea of the scale of these requirements, consider that
the amount of steel stipulated by
Krauch would have sufficed to build a fleet 3.5 times the size of the
Royal Navy as of 01 January 1940.82
Until the fulfillment of the Krauch Plan, Germany would have to make do
with Romania, as
illustrated by a two-part RWA assessment from August 1938. The first
section considered Germany’s
79

“[Es] ist nicht möglich, auf der normalen Erzeugung in Anlehnung an

dauernd laufende Betriebe eine MobBereitschaft zur 100 %igen Deckung des
Mob-Bedarfs aufzubauen.” RWA, Abt. F 7/P 7, “Neuer Mineralölplan
(Erläuterungen),” 12 July 1938, T-77/423 (Wi/IF 5.3398).
80
By comparison, this figure would satisfy only 25% of estimated British
and French requirements. RWA,
“Verzögerung im wehrwirtschaftlichen neuen Erzeugungsplan vom 12. Juli
1938 durch verringerte Stahlzuteilung,”
29 November 1938, NARA, RG 238, T-301/73 (NI-8838).
81
The figures for requirements of steel, financing, and labor include the
costs of constructing additional storage
facility and boosting coal production. RWA, Abt. F 7/P 7, “Neuer
Mineralölplan (Erläuterungen),” 12 July 1938, T77/423 (Wi/IF 5.3398).
Additional statistics can also be found in: BA-B, R 3112/89.The Krauch
Plan also included
significant increases in the production of synthetic rubber (Buna), light
metals (e.g. aluminum), and gunpowder and
explosives. Office for Economic Development (RWA), Division F (Research),
Division P (Production), “New
Military-Economic Production Plan […],” 12 July 1938, Partial Translation
of Document NI-8800, 12 July 1938,
NMT, vii: 890-893; for the original German document, see: NARA, RG 238,
T-301/72 (NI-8800).
82
USSBS, German Oil Industry, Ministerial Report Team 78 (Washington, DC:
U.S. GPO, 1945), 22.

371
immediate (1938-39) supply position following mobilization in the event
of one of three possible
scenarios: 1) overseas imports being cut off but “existing” imports from
Romania continuing; 2) all
imports being eliminated; and 3) Germany importing “all of Romania’s
export.” The study also
considered “[the] possibilities for covering any gaps in mobilization
supply through a boosting of
domestic production […].” In the first case, Germany would only be able
to meet 61% of its immediate
estimate of demand (6,235,000 tons) and would need to have 2,431,000 tons
stockpiled. In the second
case, the situation would deteriorate only slightly (57%), as only an
additional 233,000 tons of stockpiles
would be required. In the third case, however, there would be no need to
stockpile at all: “The possibility
exists to make available out of Romania’s entire export trade balance the
required finished [petroleum]
products for German consumption in the event of mobilization.” For the
time being, “the single” means of
providing Germany with an assured supply of oil in war was by “keeping
free the Southeast European
economic area for Germany,” which meant claiming at least half of
Romania’s existing exports of oil to
nations besides Germany (4,900,000 tons).83
The second section studied Germany’s prospects during the period
preceding the completion of the
Krauch Plan – 1938-43 – on the basis of the new 1942 mobilization target
established by Göring
(13,835,000 tons). The RWA considered Germany’s position during either of
the following scenarios: 1)
the disruption of all imports; and 2) “recourse to Romania’s entire
export trade balance.” In the case of
the former, Germany would meet between 26% of its requirements in 1939
and 79% by 1943, with any
gap covered by stockpiling – 5,300,000 tons using the estimated
production in 1942-43 as a baseline.
Clearly, “the single way” of coping with any the shortfall until the end
of the Krauch Plan was to claim a
share of Romania’s exports to other countries – from a high of 98% in
1939 to 39% by 1943. Romania
would also remain a “valuable reserve” as German production rose since it
represented “the only
possibility… to procure supplies in the event of a suddenly acute rise in
requirements.” The RWA
recommended that, no matter what its requirements were, Germany should
try to increase production in

83

RWA, F 7/P 7, “Mob-Bedarf u. Versorgungslage auf dem Mineralölgebiet,

1938-43,” 05 August 1938, T-77/500
(Wi/I.54). Emphasis in the original.

372
Austria, explore for oil in Hungary, and ascertain whether additional
exports from Romania “could be
secured politically and militarily.” Even if it secured additional oil,
however, Germany lacked the refinery
capacity to handle Romania’s exports if they were all crude oil. There
was, also, the matter of logistics,
which would eventually bedevil the Germans: everything “depends not only
upon the political and
military situation, but also decisively upon the service capacity of the
transportation lines on the way
from Romania to Germany.”84
The RWA subsequently produced detailed plans for stockpiling the
necessary reserves in case
Romania proved unreliable – roughly 6,000,000 tons over the course of two
years in government, naval,
and private depots (in both above- and underground tanks). The imported
fuel would cost well over
2,000,000 RM, not including the expense of constructing 8,000,000 cubic
meters of storage space and
providing 18,000 railway tank wagons to distribute the petroleum (12,000
of which had yet to be built).85
In the meantime, Krauch’s plan was running to difficulties. The Mining
Division of the RWM made it
clear in August that Krauch’s expectations concerning additional coal
production were unrealistic in
terms of the time, cost, material, and labor required to produce the
additional 38,600,000 tons of hard coal
and 118,300,000 tons of soft coal required each year by 1942.86 More
troubling still was the perennial
shortage of steel. According to Krauch’s original projections, the
synthetic fuel industry would see a
temporary decline in its steel allocation until 01 April 1939, at which
time it would increase sharply to
over 110,000 tons. In November, however, Krauch learned that the
allocation would not be raised until 01
April 1940 if not later. He warned frantically that any reduction could
delay the fulfillment of his plans by
between one to six years depending upon when the full allocation was
restored (eighteen months in the
event of 01 April 1940). He could not understand why this was happening,
considering that, by his

84

RWA, F 7/P 7, “Mob-Bedarf u. Versorgungslage auf dem Mineralölgebiet,

1938-43,” 05 August 1938, T-77/500
(Wi/I.54). Emphasis in the original.
85
RWA, Abt. F. 7, Dr. Sc./Mk., “Ergänzung zum Wehrwirtschaftlichen neuen
Erzeugungsplan vom 12. Juli 1938:
Mineralöl-Bevorratung,” 21 October 1938, T-77/427 (Wi/IF 5.3481). An
earlier draft of the study – T-77/423 (Wi/IF
5.3300) – indicates that it was the product of a joint effort between the
RWA and RWM. The figures provided
within it differ somewhat from those of the later draft but not the
overall recommendations.
86
Bergabteilung des RWM, “Betrifft: Neuer wehrwirtschaftlicher
Erzeugungsplan,” 31 August 1938, Nr. 193 in:
Akten der Reichskanzlei, v: 643-648.
373
calculations, Germany would save as much as much as 144,000,000 RM in
foreign exchange by 1943 if it
carried out his plan, while it would lose as much as 165,000,000 RM if
the steel allocation only went up
in April 1940 and as much as 379,000,000 RM if the allocation stayed at
42,000 tons permanently.87
The following month, Krauch explained how the effects of any reduction in
the steel allocation would
be “significantly greater” than just a chronological delay. A number of
industrial firms had already
committed themselves to providing the necessary machinery over the course
of 1939. Forcing them to
restructure their operations for another year until the Krauch Plan was
implemented in earnest would
probably add another six months to the final completion date: “A reduced
steel allocation will thereby
displace [verschoben] the date of the attainment of the final
construction stage by around one and a half
years!” In that event, Germany could not begin stockpiling excess
synthetic production until 1942.
Krauch also pointed out that any delays would have a disproportionate
effect on the production of highoctane aviation gasoline, which was of
particular importance to now-Field Marshal Göring. Replacing
this production with imports was not possible, not just because such fuel
required precious foreign
exchange, but also because there was none to be had in view of higher
global demand. German efforts to
import greater quantities from Southeastern Europe had to be judged a
failure (“als gescheitert
anzusehen”) and synthetic fuel represented Germany’s hope for developing
“security fuel” for the Air
Force. Replacing the 7,000,000 tons of petroleum whose production would
be delayed would probably

87

The figures were calculated against the estimated market value of the
additional 10,000,000 tons of petroleum
produced by Germany by 1943, against the losses incurred by ceasing
exports of necessary industrial goods, the
export value of the coal to be devoted to synthetic production, the
provision of materials such as a light metals
(aluminum) for plant construction, and the costs of importing petroleum
for both peacetime requirements and
wartime stockpiling. RWA, “Verzögerung im wehrwirtschaftlichen neuen
Erzeugungsplan vom 12. Juli 1938 durch
verringerte Stahlzuteilung,” 29 November 1938; and RWA, “Auswirkungen
einer verminderten Stahlzuteilung,” 14
December 1938; both in: NARA, RG 238, T-301/73 (NI-8838). Krauch claimed
the initial cause of the shortfall was
the construction of the “Westwall” (the Siegfried Line), but that
submarine and tank production caused problems
once the war began, as well. NMT, vii: 1018-1019. The petroleum industry
was not the only sector hammered by the
shortage of steel at the end of 1938. The steel allocation to the war
economy for the first quarter of 1939 was not
reduced from the last quarter of 1938 (306,600 tons), although it was
significantly lower than the required 613,500
tons. In fact, the sector most hurt by the steel shortage was the
military, which actually saw a small reduction in its
allocation (from 584,333 tons to 573,113 tons), which was only 53% of the
required total (1,088,300 tons). Overall,
the entire German economy had to grapple with an almost 1,000,000 ton
shortfall at the start of 1939, with first
priority going to the “upkeep” of existing industries. W.Wi Id.,
“Material for the Conference with Goering on 25
November 1938 (General Keitel, Brig. Gen. Thomas),” 27 October 1938,
Translation of Document 1301-PS, NCA,
iii: 904-906; for the original German document, see: IMT, xxvii: 164-166.

374
cost around 420,000,000 RM in foreign exchange.88 Another paper by Krauch
made the point that even
the 120,000 tons per month figure originally demanded represented only
8.7% of Germany’s current steel
output. While Krauch agreed that diverting steel away from the petroleum
industry to munitions
production would result in a “greater acceleration” in the expansion of
the armed services, what purpose
did this serve if the new weapons were immobilized for lack of fuel? “A
reduction in the steel allocation
for this area [petroleum] is therefore not justifiable on defense-
economic grounds.”89
Steel shortages were not the only specter haunting Krauch – his plans
were also at the mercy of a
general shortage of credit. In January 1939, the WStb came to Krauch’s
defense. Although it was
responsible for overseeing the procurement of all of the military’s
requirements of munitions and raw
materials, the WStb had accepted Krauch’s logic that new weapons systems
would be worthless unless
there was enough petroleum to go around: “Petroleum is as important to
modern warfare as planes,
tanks, ships, arms and munitions. It must therefore be considered [as
seriously] as every other instrument
of war […].”90 The WStb was mortified by the fact that a two-thirds
reduction in the steel allocation to the
petroleum industry would limit German domestic production by 1943 to only
6,500,000 tons, well short
of the expected peacetime demand of 8,300,000 tons and nowhere near the
revised mobilization figure of
21,000,000 tons.91
88

“Verzögerung im wehrwirtschaftlichen neuen Erzeugungsplan vom 12. Juli

1938 durch verringerte
Stahlzuteilung. Sachgebiet: Mineralöl,” 18 December 1938, no author,
enclosed with: Krauch to Keitel, Tgb.-Nr.,
546 (?)/38, 23 December 1938, NARA, RG 238, T-301/60 (NI-7471). Emphasis
in the original.
89
“Zur Auswirkung der verringerten Stahlzuteilung auf den
wehrwirtschaftlichten neuen Erzeugungsplan vom 12.
Juli 1938,” 18 December 1938, no author, enclosed with: Krauch to Herrn
Generaloberst Keitel (Chef des
Wehrmachtsamtes), Tgb.-Nr., 546 (?)/38, 23 December 1938, NARA, RG 238,
T-301/60 (NI-7471).
90
W Ro III, Az. 66 b 2134, “Vortragsnotiz über die Auswirkungen der
Verknappung des Kapitalmarktes und der
Eisenkontigentierung auf den Ausbau der Mineralölerzeugung,” 10 January
1939, T-77/341 (Wi/IF 5.2164, 2687),
Anlage 26 to: “Die Arbeiten des WiRüAmtes.” Emphasis in the original.
Thomas harped upon this point in his
history of the German war economy. Thomas and the WStb had seen eye-to-
eye with the objectives of the VJP and
worked well with Krauch and the RWA. On the other hand, “the military
services and later the Armaments Ministry
were always prone to place the expansion of the petroleum industry behind
their own munitions projects,” even
though WStab insisted “that in a war of the future, the supply of
petroleum will be one of the decisive factors in
terms of the attainment of victory, and that the provision of necessary
fuels can be many times more important [mal
wichtiger] as the production of arms and munitions.” Georg Thomas,
Geschichte der deutschen Wehr- und
Rüstungswirtschaft, 1918-1943/1945 (Boppard am Rhein: Boldt, 1966), 114.
91
W Ro III, Az. 66 b 2134, “Vortragsnotiz über die Auswirkungen der
Verknappung des Kapitalmarktes und der
Eisenkontigentierung auf den Ausbau der Mineralölerzeugung,” 10 January
1939, T-77/341 (Wi/IF 5.2164, 2687),
Anlage 26 to: “Die Arbeiten des WiRüAmtes.” The WStb’s upward revision of
the 1943 mobilization figures (from
13,835,000 to 21,000,000 tons) stemmed from a 2½ times increase in Air
Force consumption after 1941 (from

375
To make matters worse, the scarcity of credit threatened reaching even
the 6,500,000 tons figure. The
WStb warned that bond markets were unwilling to make loans to the
relevant companies whose capital
requirements were “several times greater than their own existing
capital.” In fact, the companies involved
no longer had the resources to finance the few construction projects
already under way. WStb urged the
Reich to step in and make significant loans to the petroleum industry on
the grounds that any “further
construction of planes, ships and combat vehicles is… useless if the
necessary fuels cannot be provided.”
Stockpiling was not a viable alternative due to the shortage of foreign
exchange.92 Therefore, WStb
recommended a one year “postponement of other rearmament measures in the
interest of a strongly
accelerated expansion of petroleum facilities” that would improve
Germany’s supply position during
4,000,000 tons to 10,000,000 tons). Az. 11 k 2216 Vc, “Vorausgeschätzter
Gesamt-Mineralölbedarf im Mob-Fall für
die Jahre 1939-1944,” Anlage to: OKW, Az. 66 b 2133 W Stb/W Ro III,
“Vortragsnotiz für Generalfeldmarschall
Göring über Zielsetzung und Forderungen für die Weiterführung des
Mineralöl-Bauprogramms,” 31 January 1939,
NARA, RG 238, T-301/60 (NI-7471). Following the Munich Crisis, Göring
announced five-fold increase in the
operational strength of the Air Force by 1942 to almost 22,000 combat
aircraft. Adam Tooze describes this plan as
an “absurdity” largely because of the immense fuel requirements
(10,700,000 cubic meters, or 67,303,000 barrels),
although these were by no means “twice the current level of global
production” (which was about 2,000,000,000
barrels in 1938) unless he is referring to high-octane aviation fuel, in
which case the only potential problem was not
the supply of oil but rather that of the necessary additives to boost the
octane-rating of gasoline such as tetraethyl
lead. Tooze, Wages of Destruction, 287-289 and 293-294; and Everette Lee
DeGolyer and Lewis MacNaughton,
Twentieth Century Petroleum Statistics (Dallas: DeGolyer and MacNaughton,
2004), 4. The WStb did not, however,
factor in the additional requirements imposed by the Navy’s “Plan Z,”
which envisaged the creation of a battle fleet
designed to challenge the Royal Navy. Strangely, Krauch continued in 1939
to operate on the basis of the lower
mobilization target established by Göring in June 1938. “Work Report of
Dr. C. Krauch, Plenipotentiary General for
Special Questions of Chemical Production of Minister President, Field
Marshal Goering, Submitted to the General
Council of the Four Year Plan,” 20/21 April 1939, Partial Translation of
Document EC-282, NMT, vii: 944-956; for
the original German document, see: T-77/430 (Wi/IF 5.3594). An August
1939 study by the RWA referenced a
mobilization figure by 1942 of 23,850,000 tons for both “Greater Germany”
as well as Italy, Spain, and
Southeastern Europe. “Moglichkeiten einer Groβraumwehrwirtschaft unter
deutscher Führung,” August 1939, no
author or date, T-77/500 (Wi/I.44). Eichholtz cites the 23,850,000 ton
figure but does not mention that it was for the
entire “Groβraum” rather than just Germany itself. Dietrich Eichholtz,
Deutsche Politik und rumänisches Öl, 19381941 (Leipzig: Leipziger
Universitätsverlag, 2005), 9-10; and Dietrich Eichholtz, Krieg um Öl: Ein
Erdölimperium
als deutsches Kriegsziel, 1938-1943 (Leipzig: Leipziger
Universitätsverlag, 2006), 10-11.
92
It was, for the time being at least, the only recourse left open to the
Navy. Representatives of the OKM had
complained to Krauch in October that his plan did not pay enough
attention to the navy’s fuel oil requirements.
Korv. Kapt. (Ing.) Grossmann (Leiter des Referates I, Min. Öl 7 im RWM),
“Vermerk über die Besprechung beim
Generalbevollmäachtigten des Herrn Ministerpräsidenten
Generalfeldmarschall Göring, BVJP, für Fragen der
chemischen Erzeugung am 12. Oktober 1938,” “Betreff: Sofortprogram
Mineralöl,” 12 October 1938, T-77/228
(Wi/IF 5.1171). On the basis of a study conducted in February 1939, the
Navy estimated that domestic production of
fuel oil and diesel would reach only 2,000,000 tons and 1,500,000 tons,
respectively, by the beginning of 1944. “The
securingof the fuel-oil supply of the Navy must take place through a
major, systematic stockpiling (from imports).”
180,000,000 RM worth of imports (6,000,000 tons) would be needed in order
to create a reserve equivalent to three
years of wartime consumption. “Sicherstellung des Heizöl- und
Dieselkraftstoffbedarfes innerhalb des neuen
wehrwirtschaftlichen Erzeugungsplanes vom 12. Juli 1938. Stand vom 30.
Januar 1939,” 15 February 1939, no
author, enclosed with: W Ro III, [illegible], an Ro V., 22 March 1939,
NARA, RG 238, T-301/60 (NI-7471).
Emphasis in the original.

376
mobilization and save foreign exchange that was currently being
“devoured” by imports and could be reinvested into armament production at
a later date.93
The Armed Forces High Command (Oberkommando der Wehrmacht, OKW) took its
case to Göring
directly later that January, reminding him that Führer’s promises in
October 1936 about completing the
expansion of petroleum production within eighteen months were “nowhere
near” being realized. The
OKW warned that, in the absence of decisive action, Germany could “reckon
upon a thorough collapse of
the further expansion of petroleum production,” with all of the attendant
risks to the armed forces in
wartime and Germany’s precarious foreign exchange position. OKW put
forward, however, a less
ambitious program than the WStb had recommended: a “practical and viable
aim” of increasing
production to 8,000,000 tons by “mid-1942,” while making preparations for
a more extensive expansion
to be completed by the end of 1944, when mobilization requirements would
max out at 22,000,000 tons.
Even accomplishing this limited objective would require Göring to make
“an immediate decision” to put
the petroleum industry “in first place” in terms of economic and
financial resources. The Reich would
also have to provide the necessary 1,500,000,000 RM per year and ensure
that the steel allocation was
raised to 120,000 tons per month – which could only be achieved at the
expense of other sectors of the
armaments industry.94 Göring appears to have gotten the message and
issued a directive on 09 February

93

W Ro III, Az. 66 b 2134, “Vortragsnotiz über die Auswirkungen der

Verknappung des Kapitalmarktes und der
Eisenkontigentierung auf den Ausbau der Mineralölerzeugung,” 10 January
1939, T-77/341 (Wi/IF 5.2164, 2687),
Anlage 26 to: “Die Arbeiten des WiRüAmtes.” Emphasis in the original. See
also: W Ro III, Az. 66 b 2134,
“Entwicklung des Mineralölbedarfs und der Mineralölerzeugung bis 1944,”
20 January 1939, T-77/231 (Wi/IF
5.1180). This paper explained that, with the existing steel allocation of
42,000 tons, the Krauch Plan would not be
completed until 1947, while only 38% of the estimated average
mobilization requirements between 1941 and 1943
would be met internally. Raising the steel allocation from April 1940
onwards would shave three years off the
waiting period, but Germany would still only produce 54% of its
mobilization requirements as of 1944. The paper
also suggested that between 650,000,000 RM and 1,000,000,000 RM would be
required annually for six years to
cover the increases in the production of both petroleum and iso-octane.
94
The petroleum would also require the labor of roughly one-third to two-
fifths of the total number of miners to be
added by the end of 1942. OKW, Az. 66 b 2133 W Stb/W Ro III,
“Vortragsnotiz für Generalfeldmarschall Göring
über Zielsetzung und Forderungen für die Weiterführung des Mineralöl-
Bauprogramms,” 31 January 1939, NARA,
RG 238, T-301/60 (NI-7471). Emphasis in the original. See also the Anlage
(Az. 11 k 2216 Vc, “Vorausgeschätzter
Gesamt-Mineralölbedarf im Mob-Fall für die Jahre 1939-1944”), which
included a breakdown of Germany’s
mobilization requirements between 1939 (9,100,000 tons) and 1944
(23,100,000 tons). The major increase was for
aviation fuel, consumption of which would spike from 2,100,000 tons in
1939 to 10,000,000 tons by 1941. These
figures were only used by the WStb and none of the RWA documents from the
period include such estimates.

377
1939 restoring the full steel allocation to the Krauch Plan starting in
the third quarter of 1939, thus
delaying its completion by only six months.95
Synthetic fuel was not going to make Germany energy independent, or even
autarchic, any time soon.
As of March 1939, the Reich could cover only the following shares of its
wartime petroleum needs:
Type of Product
Motor Fuel
Aviation Fuel
Diesel Fuel
Fuel Oil

Share
42%
30.8%
19.2%
20.5%

These figures worked out to between three to six months of wartime

consumption.96 A month before the
start of the war, the Office for Defense-Economy Planning (Reichsamt für
wehrwirtschaftliche Planung,
RWP) estimated that Germany’s yearly mobilization deficit would be
roughly 117% of its 1937 level of
imports (4,285,600 tons), almost 70% of which had come from nations
deemed “hostile” or “doubtful.”97
If such overseas imports would be out of the question due to an Allied
blockade, the only alternative was
Romania – a point that both the WStb and RWA stressed throughout 1939.

95

RWA, “Wehrwirtschaftlicher neuer Erzeugungsplan vom 12. Juli 1938

(Karinhall): Sachgebiet Mineralöl,” 14
February 1939, T-77/423 (Wi/IF 5.3394, [illegible], 3398, 3400).
96
W Ro V, Az. 11 k 2216 b Vc, “Mineralöl-Versorgungslage im Mob-Fall: Stand
1. 3. 1939,” 22 February 1939, T77/341 (Wi/IF 5.2164, 2687), Anlage 34
to: “Die Arbeiten des WiRüAmtes.” The figures fluctuated widely, as an
evaluation from the following month produced a slightly different result
(e.g. a smaller percentage of aviation
requirements and slightly higher in the case of motor fuel). W Ro V, Az.
11 k 2216 Vc, “Mineralöl-Bilanz (Stand 1.
4. 1939),” 08 May 1939, T-77/341 (Wi/IF 5.2164, 2687), Anlage 36 to: “Die
Arbeiten des WiRüAmtes.” In this
case, the discrepancy probably had to do with a decision to concentrate
on the production of motor fuel at the
expense of aviation fuel, since the overall supply position (production
vs. consumption and reserves) was more
favorable to the latter than the former. Accordingly, one should not
place excessive emphasis on any one particular
balance sheet. One can compare five different assessments between 1937
and 1939 in: OKW, Gen.z.b.V.1,
“Vergleichende Zusammenstellung von Vorkriegs-Mineralöl-Mobbilanzen,”
September 1944, T-77/341 (Wi/IF
5.2164, 2687), Anlage 37 to: “Die Arbeiten des WiRüAmtes.”
97
Reichsamt für wehrwirtschaftliche Planung (RWP), “Die
Einfuhrabhänigigkeit der Achse an kriegs- und
lebenswichtigen Roh- und Halbstoffen und ihre mögliche Sicherstellung im
Kriegsfall,” August 1939, T-84/72 (EAP
66-c-12/32). For a breakdown according to specific petroleum product
(albeit using 1937 domestic production and
consumption figures), as well as potential contributions from Romania,
Poland, and Estonia, see: RWP, “Der
deutsche Auβenhandel im Kriegsfall: I. Die Einfuhrmöglichkeiten für
gewerbliche Rohstoffe und ihre Bedeutung im
Rahmen der deutschen Rohstoffversorgung,” May 1939, T-84/195 (EAP 66-c-
12-62/160).

378
Germany’s Accelerating Preparations for War, 1939
The diplomatic, economic, and financial crises that beset Germany
throughout the latter half of 1938
lent a new urgency to the inadequacies of Germany’s petroleum policy to
that point. Germany had
escaped the Munich Crisis with a diplomatic triumph even though the
country was woefully unprepared
for war. Although there is little doubt that the Czechs would have been
quickly overwhelmed, Germany
would have been denied the use of Czech military hardware, stocks, and
armaments factories, all of which
fell into the Reich’s hands intact when it occupied the country the
following year. Moreover, the
expansion of synthetic production was nowhere near complete, and unlike
in September 1939, the Reich
could not rely on imports from the Balkans and the Soviet Union to fill
any gaps. In fact, the Romanians
had warned the Reich on 03 October 1938 that they would cut off oil
exports in the event of war.98
At the start of the New Year, the chief of the WStb’s Raw Materials
Division insisted that Germany
needed “to push motorization forward” while “strengthening its own
production of petroleum,” since only
this strategy could provide Germany with a secure source of petroleum in
wartime, while ameliorating the
shortage of foreign exchange. The policy of seeking “autarky” in
petroleum – self-sufficiency in terms of
immediate military requirements – had failed: the 500,000 ton increase in
domestic production between
1937 and 1938 was eclipsed by a 600,000 ton increase in imports, and
imports remained almost twice as
high as domestic production (4,400,000 tons vs. 2,400,000 tons), with the
latter only covering 27% of the
expected mobilization demand (8,000,000 tons). Even fulfillment of the
Krauch Plan was in jeopardy due
to the shortage of steel and capital. As of January 1939, Germany could
only rely on production rising to
6,500,000 tons, well short of the original target of 11,300,000 tons,
while mobilization requirements by

98

Williamson Murray surmises that, had war broken out in October 1938,
Germany would not have suffered an
immediate collapse, largely because the Allies were just as unprepared
and unwilling to wage an aggressive war as
Germany was to sustain one. “Instead, the situation would have resembled
the slow steady deterioration which took
place in the Italian economy in the years 1940-42. The Germans would have
had to resort to a series of expedients to
meet present demands,” with deleterious consequences for future war
production and fighting strength. “Once this
vicious cycle had begun, there would have been little chance that Germany
could have escaped the inevitable
consequence: military defeat.” Murray, “Munich, 1938: The Military
Confrontation,” Journal of Strategic Studies 2:
3 (1979), 282-302 (quotation from pg. 294).

379
1943 were expected to rise considerably from the existing figure of
14,000,000 tons due to higher Air
Force requirements.99
When it came to imports, “by far the greatest portion” came from
overseas, namely the Americas.
Even Romanian imports largely travelled by sea to Hamburg rather than
along the Danube. Only one-fifth
(800,000 tons) of Germany’s imports from Southeastern Europe in 1936
(4,000,000 tons) travelled along
the Danube: the remainder was divided almost equally between those
travelling by rail (1,400,000 tons)
or by sea (1,800,000 tons). Besides an Allied blockade, Germany’s lack of
tankers ruled out continuing to
import large quantities from across the seas. Germany therefore needed to
look to its “neighbors,” among
which the only “noteworthy supplier” was Romania, already the source of
10% of Germany’s imports.
Thankfully, Germany’s requirements were so small that “[if] Germany
during mobilization could make
full use of Romania’s exports,” these plus existing domestic production
“would cover Germany’s entire
mobilization demand.” This option was only “theoretical so long as
Romania finds itself beyond the
German sphere of influence.” Since foreign capital now accounted for
roughly two-thirds of Romania’s
production, Germany could not afford to rely upon “Romania’s good will”
to boost exports to
Germany.100 As of 1938, however, the carrying capacity of Germany’s
existing fleet of tugs and barges
was only 950,000 tons each way per year.101 Additional investment was
required before Germany could
expect to exploit Romanian oil in massive quantities, even if supplies
were available.
The military had to be prepared for conflict in the short term and could
not use as a basis the more
long-term (and optimistic) estimates provided by economic planners such
as Krauch. By contrast, it had
to come up with a plan for supplying petroleum using the means at hand.
Synthetics might one day render
Germany virtually independent of imports of certain kinds of petroleum
products, but until then, there
99

Griebel, “Mineralölversorgung Deutschlands unter dem Gesichtspunkt des

Wirtschaftskrieges,” 19 January 1938
(sic; 1939, since the paper refers to the “period of tension in the
autumn of 1938”), T-77/526 (Wi/I. 164).
100
Griebel, “Mineralölversorgung Deutschlands unter dem Gesichtspunkt des
Wirtschaftskrieges,” 19 January 1938
(sic; 1939), T-77/526 (Wi/I. 164). See also the appended: Aktennotiz,
“Stellungnahme von W Wi VI d zur
Ausarbeitung Mineralölversorgung Deutschlands unter dem Gesichtspunkt des
Wirtschaftskrieges (von W Ro V).”
For notes on a presentation Griebel gave concerning his findings, see:
“Aktennotiz über Vortrag von Korv. Kapt.
Griebel am 19.1.39 über Mineralölversorgung,” no date or author
(initialed by Griebel on 19 January 1939), T77/649 (Wi/VI. 39).
101
Oberriegierungsrat Haβmann (Reich Ministry of Transportation –
Reichsverkehrsministerium, RVM), “Betrifft
den Ausbau der Donau-Flotte,” 21 Oktober 1938, Nr. 221 in: Akten der
Reichskanzlei, v: 749.

380
was no substitute for crude oil close at hand. This was the fundamental
point made by the WStb’s most
detailed prewar examination of Germany petroleum position, which appeared
in the spring of 1939. The
aim of the paper was to determine the best means of meeting Germany’s
petroleum requirements “for the
length of a long war,” rather than just a “Blitzkrieg.” Using a worst-
case scenario, the WStb assumed that
Germany would be at war with both the Western Allies and the Soviet
Union, while most of Europe
maintained “hostile neutrality.” Presumably, Romania (listed as
“indifferent”) was excluded because it
was indispensable. Based on the existing state of motorization, WStb
estimated that Germany would
require 673,000 tons of petroleum per month: 210,000 tons of gasoline;
120,000 tons of aviation fuel; the
same amount of diesel; 200,000 tons of fuel oil; and 23,000 tons of
lubricants. According to the WStb’s
calculations (which were significantly more pessimistic than those of the
RWA in its August 1938 study),
as of March 1939, Germany was capable of producing 193,000 tons per month
during mobilization, thus
creating a shortfall of 480,000 tons.102
Combining production with existing stockpiles would keep the German war
machine running for no
more than three to four months. Germany’s total crude oil reserves were
negligible (2,300,000 tons), and
the country accounted for only 0.2% of world production (eighteenth-
place). Even if one could extract all
of them at once, they would not last more than three months in wartime.
Although it was now possible to
refine German crude into gasoline through “cracking,” the WStb believed
producing synthetic fuel was
preferable (probably because crude oil was more useful as a source of
lubricating and heavy oils).
Unfortunately, besides the fact that it consumed inordinate amounts of
labor (about 12,000 workers to
produce the necessary coal), the synthetic industry appeared to have
reached peak production for the time
being at 2,640,000 tons in 1938.103 In view of the inadequacy of domestic
production, filling the more

102

OKW, WStb, Nr. 1010/39 gK W Wi VId, “Die Mineralölversorgung Deutschlands

im Kriege,” April 1939, T77/500 (Wi/I.37).
103
The study excluded any consideration of the Krauch Plan, expectations of
which had been scaled down
dramatically (from 11,300,000 tons to only 6,500,000 tons) due to the
shortage of steel and was years away from
completion anyways. Nor was it possible to even hazard a guess when
Germany might achieve self-sufficiency due
to the “discrepancy” between the process of motorization and “the
interplay of all the measures adopted.”

381
than 5,000,000 ton gap between annual production and requirements
constituted “the most urgent lifeand-death requirements of the armed
forces […].”104
Finding such quantities of oil from beyond Germany’s borders was
difficult. 78% of Germany’s
imports in 1938 came from just three countries: the United States,
Mexico, and Venezuela, and the Allies
would undoubtedly sever transatlantic imports. Nor was it wise to expect
that Germany could import
much indirectly through neutrals. “The most urgent war aim must therefore
unconditionally be the
domination of crude oil territories lying close to Germany and most
removed from enemy interference.”
There was only one option: “Romania!”105 In 1938, Romania provided only
9% of Germany’s oil imports.
Of the 45,000 hectares of oil-producing land currently under concession,
only 5,000 hectares were being
developed, while “around 90% of the Romanian petroleum region has yet to
be exploited.” The WStb
took an optimistic view of Romania’s possible output. Although production
had dropped from 8,700,000
tons in 1936 to 6,600,000 tons 1938, WStb insisted that the latter figure
be used as a “benchmark”
(Maβstab). This was the only plausible way to claim that Romania’s
exports alone could be used to meet
the entirety of Germany’s shortfall. As far as WStb was concerned,
“[here] lies the solution to Germany’s
petroleum supply in war.” The Reich had to use every economic,
diplomatic, and military tool as its
disposal to ensure “[the] domination of the Romanian oilfields and
consequently of the entire Danubian
region as the prerequisite for an adequate German petroleum supply in a
war of a long duration.”106

104

OKW, WStb, Nr. 1010/39 gK W Wi VId, “Die Mineralölversorgung Deutschlands

im Kriege,” April 1939, T77/500 (Wi/I.37).
105
The study made a vague reference to “military means” being “the only
instrument to envisage [ins Auge zu
fassen] the greatest and most profitable aim: The domination of Europe’s
mightiest crude oil territory, the
Caucasus.” WStb put off “[the] question of the utilization of this
distant territory,” which “must remain subject to a
special examination [Sonderbearbeitung vorbehalten].” Eichholtz makes
great use of this document but overstates
the role of the Caucasus, which was of secondary importance compared to
Romania. Eichholtz, Krieg um Öl, 11-12.
Rolf-Dieter Müller similarly misreads this paper as a plea for the
“occupation” of both the Romanian and Caucasian
oilfields, when it says no such thing. Militärgeschichtliches
Forschungsamt, The Attack on the Soviet Union, vol. 4
of Germany and the Second World War (New York: Oxford University Press,
1998), 119.
106
OKW, WStb, Nr. 1010/39 gK W Wi VId, “Die Mineralölversorgung Deutschlands
im Kriege,” April 1939, T77/500 (Wi/I.37). Emphasis in the original. See
also: WStb, Rohstoffabteilung, W Ro III d/Is, Az. 66 b 34 IV,
Vortragsnotiz, “Betr.: Mineralöl Rumänien,” 17 January 1939, T-77/645
(Wi/Vi. 13a, b), which appears to be the
basis for the claim in the April study concerning Romania’s ability to
fill Germany’s entire mobilization demand.
The January paper also suggested that the Krauch Plan be “[driven]
forward with the greatest emphasis,” such that
domestic production reached 8,000,000 tons by 1943. This would allow
Romanian imports to fill the gap between
peacetime and mobilization requirements.

382
While the German petroleum industry ought to continue striving for “wide-
ranging independence
from foreign imports” through synthetic fuel (while finding ways to limit
the cost in labor), the country
was incapable of “covering its petroleum supply in a war of long duration
itself” due to its meager
mineral reserves and a lack of steel and iron for new synthetic output.
Accordingly, Germany’s military,
diplomatic, and intelligence services needed to take every precaution to
preserve access to its “principal
area of supply in war” and ensure that the Axis enjoyed “first right to
Romanian crude oil in wartime.”
The oil refineries in Romania and other neighbors of Germany (Hungary,
Yugoslavia, Poland, “and the
former Czechoslovakia”) also could not be overlooked, since German
refineries only had an annual
throughput of 2,000,000 tons of crude. Most importantly, the Reich had to
be prepared to take direct
action if all other forms of “external military pressure” failed.
Although Germany enjoyed a commanding
position within Romania’s oil industry before 1914, this had not stopped
Bucharest from going over to the
Allies. Military action should only be undertaken “with a view to the
maintenance and operability of the
Romanian crude oil industry,” but there was strong likelihood that this
would lead to sabotage even more
extensive than that of 1916.107 The Reich therefore needed to preserve
“other supply possibilities,” paying
“particular attention” to East Galicia in view of its former
productivity.108
107

The Germans received confirmation of their fears following the surrender

of France, when they captured a
January 1939 memorandum signed by General Charles Huntziger (the former
commander of French forces in the
Levant and a member of the Supreme War Council thereafter) outlining
plans to deny Germany the use of the
oilfields of both Romania and Iraq. Der Oberste Landesverteidigungsrat
(General Huntziger), “Verfügung betreffend
die etwaige Zerstörung der Petroleumfelder im Rumänien und im Irak
(Ergänzung der Verfügung vom 17. 1.
1939),” 30 January 1939, T-77/1058 (Wi/ID. 29).
108
OKW, WStb, Nr. 1010/39 gK W Wi VId, “Die Mineralölversorgung Deutschlands
im Kriege,” April 1939, T77/500 (Wi/I.37); reprinted in: Eichholtz,
Deutsche Ölpolitik, 351-355. The prospects in Galicia were hardly
auspicious: Poland’s petroleum exports had collapsed from 147,000 tons in
1935 to only 34,000 tons in 1938.
OKW/Oberkommando des Heeres (OKH), “Mineralöl-Statistik,” no date, T-
77/658 (Wi/VI.109). Wartime
production remained disappointing: as of July 1942, Galicia’s output was
only 360,000 tons from 4,500 wells (an
average of 0.25 tons per well each day). More problematic was the immense
labor requirements: 36,000
malnourished workers in both production and refining. Min. Öl P. Dr.
[unclear], “Zusammenfassung: Erdöl- und
Erdgasgewinnung in Galizien (Besuch v. 30.6.-4.7.42),” 14 July 1942,
provenance unclear (RWA?), NARA, RG
238, T-301/118 (NI-14577). German plans to exploit Galician oil are
summarized in: Hans Radandt, “Deutsche
Monopole Raubten Polnisches Erdöl,” Jahrbuch für Wirtschaftsgeschichte
1960/2, 301-311; Eichholtz, Krieg um
Öl, 18-21; and Rainer Karlsch, “Ein vergessenes Groβunternehmen: Die
Geschichte der Karpaten Öl AG,” Jahrbuch
für Wirtschaftsgeschichte 2004/1, 95-138. Karlsch’s article is especially
useful in two regards: First, he explains
how the Germans grappled with the need to keep their captive workforce
alive (including Jewish laborers), since
experienced oil workers could not be simply replaced by unskilled labor.
Second, Karlsch pointed out that Reich
officials originally considered the Galician oilfields to be of marginal
value and concentrated their efforts within
Greater Germany, Romania, or the occupied territories. This assessment
changed at the end of 1942 after the failure

383
Oil and German-Romanian Relations, 1933-1939
Romania’s proven reserves on the eve of the war stood at 60,000,000 tons
(perhaps two or three times
as much including probable reserves) and would last for another twenty-
five years at current production
levels. Just as importantly, the country’s refining capacity stood at
12,000,000 tons, while its domestic
consumption (only 1,674,000 tons in 1938) was relatively low.109 It is
easy to see why so many in the
Third Reich considered Romania the answer to Germany’s oil problems – at
least the short term.110 The
Romanian oil industry had suffered greatly during the World War and did
not regain prewar levels of
production until the late-1920s. Although the Reich continued to monitor
developments in Romania, it
evinced little interest in its oil industry until after 1933.111
At the beginning of the Third Reich, the impetus for greater oil exports
to Germany actually came
from Romania, which was worried about losing ground to rivals such as the
Soviet Union. When the
of the Caucasus expedition and the intensification of the Allied bombing
of Germany, after which the Germans
poured resources into Galicia until their retreat in the autumn of 1944.
109
Dr. F/F., Vowi 3386, “Das rumänische Erdöl,” 11 April 1939, T-77/611
(Wi/IC 4.16).
110
For many years, the key source on oil and German-Romanian relations was
Philippe Marguerat’s Le IIIeReich et
le pétrole roumain, 1938-1940 (Genève: Institut universitaire des hautes
etudes internationales, 1977). Andreas
Hillgruber’s Hitler, König Carol und Marschall Antonescu (Wiesbaden:
Franz Steiner Verlag, 1954) is primarily a
political and diplomatic history, although he does reference oil policy
before 1943 briefly (pgs. 81-86 and 157-163).
The best history of the Romanian oil industry (at least in English) is
still: Maurice Pearton, Oil and Romanian State
(Oxford: Clarendon Press, 1971), esp. 223-263 for relations with the
Third Reich. These works have been
supplanted by Dietrich Eichholtz’s Rumänisches Öl. Wartime relations are
also summarized in: Krieg um Öl, 26-39;
and Ende mit Schrecken: Deutsche Ölpolitik und Ölwirtschaft nach
Stalingrad (Leipzig, 2010), 14-21. See also:
Karlsch and Stokes, Faktor Öl, 205-207. For a summary of German-Romanian
economic relations in the 1930, see:
David Kaiser, Economic Diplomacy and the Origins of the Second World War:
Germany, Britain, France, and
Eastern Europe, 1930-1939 (Princeton, Princeton University Press, 1980),
218-283. For a good contemporaneous
overviews of the state of the industry at the start of the war, see:
Busch-Zantner, “Rümanien: Die Zukunft des
rumänischen Erdöls,” Vierjahresplan, 1939: XXIV; and Dr. Paul Ruprecht,
“Rumäniens Erdölwirtschaft,” MilitärWochenblatt, 124. Jahrgang, Nummer 49
(07 June 1940). For details and statistics concerning the Romanian oil
industry during the 1930s and early-1940s, see: Dr. F/F., Vowi 3386, “Das
rumänische Erdöl,” 11 April 1939, T77/611 (Wi/IC 4.16);
“Sonderinformation: Die rumänische Erdölindustrie,” 29 January 1940 (no
author; possibly
Griebel of WiRüAmt), T-77/600 (Wi/IC 4.77); Reichstelle für
Bodenforschung (RfB), Erdöl in Europa und im
Nahen Osten (Berlin, 1940), Library of Congress; OKW (gez. Becker),
WiRüAmt/Wi IIIb, Nr. 5953/40 geh.,
Nachrichtenblatt: Wehrwirtschaft Südosteuropa Nr. 4, “Die Erdölwirtschaft
Rumäniens seit Anfang 1939,” 29
March 1940, T-77/606 (Wi/IC 4.3a); HaPol IVb, 2548/42. “Die rumänische
Mineralölwirtschaft,” no date or author
(1942), T-120/2618; Kontinentale Öl Aktiengesellschaft (Konti),
Mineralöl-Archiv, Do/Re., “Zahlen zur MineralölWirtschaft Rumäniens i.J.
1941,” 16 September 1942, enclosed with: Konti to Herrn Professor Dr. A.
Bentz (RfB),
29 September 1942, T-401/5 (RBF 141).
111
Exports to Germany did not resume to any significant extent until 1921
(27,749 tons, or 7% of total exports).
Minute (Auswärtiges Amt, AA, Abteilung X) to Herrn Ministerialdirektor
Wiedenfeld (?), Herrn Wirkl. Leg. Rat
Dr. Bücher, and [illegible], 14 October 1920, Politisches Archiv des
Auswärtigen Amtes (PAAA), R 97745; and
Hans Freytag (German Minister to Romania), K. Nr. 117., “Inhalt:
Rumänische Petroleumindustrie,” 31 December
1922, PAAA, R 89383.

384
Romanian Minister “pointed to Romania’s great interest in petroleum
exports to Germany” during a May
1934 meeting at the German Foreign Office (Auswärtiges Amt, AA), his
German counterpart reminded
him that, before the war, “the German economy was very interested in the
Romanian petroleum industry.
This is no longer the case.” A larger volume of purchases was impossible
because the Romanian National
Bank was opposed to either barter agreements or an “unfreezing”
(Auftauung) of blocked German credit
accounts. The Romanian Minister replied that one or the other “would be
approved,” and that it was “in
any event a point over which one can speak with the relevant Romanian
agencies.”112
The following year, the two countries signed a trade agreement
guaranteeing Germany that 25% of its
imports from Romania could be oil.113 By 1936, Romania was Germany’s
second-largest source of oil
imports. That year, however, a dispute over payment resulted in a 50%
drop over two years, while
Germany paid exorbitant rates in Reichmarks in order to save foreign
exchange.114 By 1937, only 15.5%
of its exports went to the territories that comprised Greater Germany by
1939.115 The Germans tried
repairing commercial relations after 1937, but to little effect until the
Munich Crisis. In spite of threats to
cut off oil exports to Germany, relations improved significantly during
and after the Crisis, when the
Romanian Government (still ostensibly an ally of France) quietly reached
out to Berlin out of fear of both
the Soviet Union and Hungary.116 Both Hitler and Göring, during separate
meetings with King Carol in
Germany in November 1938, expressed willingness to mend fences in
exchange for greater German-

112

Ritter, Aktenvermerk, Vorzulegen der Abteilung II, 14 May 1934, PAAA, R

89383.
Eichholtz, Rumänisches Öl, 17; and Pearton, Oil, 194.
114
Including Austrian imports but excluding petroleum subsequently
stockpiled, Germany imported 900,500 tons
from Romania in 1936 at a cost of 54,115,000 RM. Two years later, it
imported only 450,400 tons at a cost of
36,024,000 RM. “Deutschlands Mineralöleinfuhr,” Quelle: Monatliche
Nachweise über den auswärtigen Handel
Deutschlands, 21 April 1939, T-77/295 (Wi/IF 5.1589).
115
The Navy was particularly skeptical of Romania. Even though it had a
pressing need for imported fuel oil, during
a conversation with the WStb in June 1938, the Navy’s oil expert, Fritz
Fetzer, expressed skepticism over whether
the Romanians could be convinced to increase their imports of German
finished goods beyond the existing level of
5,000,000 RM, which Fetzer consider “a solid barrier to deliveries from
Romania.” W Wi VI, Nr. 1740/38 gK,
“Aktennotiz auf Grund einer Besprechung mit Herrn Ministerialrat Dr.
Fetzer OKM betr. Oelversorgung,” 17 June
1938, T-77/683 (Wi/VI. 356).
116
Bucharest had no inkling that Berlin would sell out Romania. The 1939
Non-Aggression Pact with the Soviet
Union stipulated Germany’s “disinterest” in the fate of Bessarabia, while
Hungary received half of Transylvania
through the Second Vienna Award arbitrated by Germany and Italy, and
Bulgaria Southern Dobruja a week later.
113

385
Romanian economic collaboration (with Göring making specific reference to
Romania’s oil industry).117
The Romanians were especially anxious to get their hands on German
weapons to defend themselves
against the Hungarians and the Soviets.118
The decline in Romanian production after June 1936 (from 25,330 tons per
day to only 18,500 tons a
year later) had not escaped the notice of the AA, but this was of little
strategic significance to Germany
before 1939, even if it was a matter of economic life-and-death for
Romania.119 Thereafter, German
economic and military planners began to pay much greater attention to
Romania’s economic value to the
Reich. In January 1939, the RWP, although expressing some concerns about
the decline in Romanian
production since 1936, agreed that it was “conceivable” that Romania
could satisfy Germany’s peacetime
petroleum deficit of 5,000,000 tons.120 If war came, so long as Germany
could pursue opportunities to
raise production, one might “reckon that also then German demand could be
satisfied in Romania.”121 Just
as important was Romania’s massive refining industry (whose development
the state had encouraged in

117

See document nos. 228, 254, 257, 293, and 294 in: AA, Documents on German
Foreign Policy, 1918-1945,
Series D (Washington, DC: U.S. GPO, 1949-1964), v: 309-311, 338-342, 344-
347, 392-394, and 394-395 –
hereafter cited as: DGFP (D).
118
Eichholtz, Rumänisches Öl, 17-32. See also: Christian Leitz, “Arms as
Levers: ‘Matériel’ and Raw Materials in
Germany’s Trade with Romania in the 1930s,” International History Review
19: 2 (1997): 312-332.
119
“The export of crude oil products was therefore always the last trump
card [Trumpf] during economic
negotiations with all nations and Romania owes virtually of its
commercial successes to it […].” Abschrift W III S E
5681, Deutsche Gesandtschaft, Bukarest (gez. Fabricius), Tgb. Nr.
1575/37, VI 4, “Inhalt: Rückgang der
rumänischen Erdölförderung,” 08 July 1937, T-77/599 (Wi/IC 4.41). The
German Legation saw the decline as less
the result of any deliberate policy by the major oil companies of
throttling production than as evidence of the
imminent exhaustion of the Romanian oilfields, although the lack of
exploration and the incompetence of the
Romanian Government were also factors. See also: zu Abwehrstelle im
Wehrkreis VII, Az. XXVIII d/A III, Nr.
240/38 I wi geh., “Rumänien: Rückgang der rumänischen Erdölproduktion,”
25 January 1938, T-77/599 (Wi/IC
4.41).
120
The consensus in Germany before 1941/42 was that the decline in
production was due primarily to a lack of
interest and investment on the part of the major oil companies operating
in Romania: “Rumäniens Öl unter
deutschem Schutz,” Militär-Wochenblatt, 125. Jahrgang, Nummer 26 (27
December 1940); and W.F., “Neuordnung
der rumänischen Erdölwirtschaft,” Deutsche Wehr, Nr. 48, 45. Jahrgang (28
November 1941).
121
At least one German geologist (Prof. Karl Krejci-Graf, a professor at the
Bergakadamie Freiburg) was already on
the ground by early-1939, reporting back to Berlin – specifically, to
Keppler of the AA/RfB – and coordinating with
the German Legation. In his first report to Keppler, Krejci-Graf
suggested that German oil interests needed to
establish a partnership with Romanians, since the most promising
territories not already under concession were in
state-controlled lands that could only be worked by “national companies”
with majority Romanian ownership and a
supervisory board (Aufsichtsrat) composed entirely of Romanians. “Betr.:
Möglichkeiten einer deutschen
Beteiligung an der rumänischen Erdölförderung,” 16 February 1939,
enclosed with: Krejci-Graf to Keppler, 17
February 1939, PAAA, R 106220.

386
order to fetch higher prices for its products) – as of 1937, it had a
slack capacity of 40%, which “could in
the event of war be of decisive importance.”122
Another RWP report from March 1939 on the economic value of Southeastern
Europe did raise some
concerns. Even assuming “the stemming” of the downward trend in
production, Germany would probably
have to yield at least one-third of Romania’s oil exports to Italy.123
More troubling was the vulnerability
of the oilfields to a Soviet attack – whereas the Red Army could strike
directly at the oilfields (most of
which were clustered around the producing and refining hub at Ploiești in
Wallachia, about thirty-five
miles north of Bucharest), the path of the German Army would be blocked
by the “bothersome
hindrance” of the Carpathian Mountains, since the oilfields lay either to
the east or south (the Soviet side).
All the more reason to take precautions, since Romania’s 6,600,000 tons
of crude oil production in 1938
(in addition to the 600,000 tons in Greater Germany, not including
synthetic fuel, and 47,000 tons in
Hungary) were irreplaceable against a total consumption of 8,800,000 tons
within Germany and SE
Europe (not including Italy). Although it dismissed fears of the imminent
exhaustion of Romanian oil
reserves as “twaddle” (Zukunftsmusik), in view of the overwhelming
advantage enjoyed by Germany’s
likely enemies in terms of oil supplies, the RWP strongly advised that
Reich continue the “lavish
expansion” of synthetic production as a “matter of national interest.”124
IG Farben, by contrast, put forward a more optimistic analysis the
following month. According to its
economic intelligence, the decline in production since 1936 was due “only
to a limited extent” to “a
natural exhaustion” of the oilfields. Rather, the culprits were
inefficient drilling practices and the

122

RWP, “Rumäniens Rohstoffwirtschaft und ihre Bedeutung für das Deutsche

Reich,” January 1939, T-84/109
(EAP 66-c-12-42/34). See also: Dr. Ruprecht, “Rumäniens Rohstoffbesitz,”
Deutsche Wehr, Nr. 20, 45. Jahrgang
(16 May 1941).
123
Total petroleum consumption in Italy in 1938 was around 2,845,000 tons
(plus another 50,000 tons for East
Africa) of which 2,626,000 tons had to be imported, primarily from the
United States (37%), Romania (20%), Latin
America (16%), and the Middle East (10%). OKW/OKH, “Mineralöl-Statistik,”
no date, T-77/658 (Wi/VI.109).
124
RWP, “Die rohstoffwirtschaftliche Bedeutung des Südostraumes für die
deutsche Wehrwirtschaft,” March 1939,
T-84/80 (EAP 66-c-12-4/24). See also: IG Farben, Vowi 3633, “Der deutsche
Rohstoffbezug aus der UdSSR und
Südosteuropa,” no date (circa 1939), T-84/80 (EAP 66-c-12-4/27); der Chef
des OKW (gez. Becker), WStb W Wi
(III), Nr. 9773/39 geh., “Nachrichtenblatt: Wehrwirtschaft Südosteuropa
Nr. 2: Der Kriegsaussenhandel mit den
südosteuropäischen Ländern,” 26 June 1939; and der Chef des OKW (gez.
Becker), WiRüAmt/Wi IIIb, Nr. 2884/40
geh., “Nachrichtenblatt: Wehrwirtschaft Südosteuropa Nr. 3: Die Zufuhren
Deutschlands aus Südosteuropa im
Kriege und ihre Durchführung,” 15 February 1940; both in: T-77/1060
(Wi/ID. 37).

387
government’s nationalistic oil policy.125 The collapse in production in
1936 had certainly coincided with a
precipitous decline in drilling activity: 395,000 meters drilled in 1937
but only 152,000 meters during the
first seven months of 1939.126
Although Romania began moving toward the Third Reich in 1938, German
interests in its oil industry
remained miniscule. Fifty-six companies participated in oil production,
but in terms of actual output,
seven of the eight largest firms were either wholly or largely foreign-
owned. Just seven companies
accounted for 80% of production and the top three for over 50%.
Company
Astra Romana (Shell)
Romano-Americana (Jersey)
Concordia
Steaua Romana
Unirea (Phoenix Oil and Transport)
Creditul Minier
Colombia
Prahova
Total for Top Seven Companies
Total Romanian Production

Production (1938)
Nationality
1,461,000 tons
Majority British-Dutch
899,000 tons
U.S.
864,000 tons
Romanian-Belgian-French
740,000 tons
French-British-Romanian
671,000 tons
British
381,000 tons
Romanian
377,000 tons
French
335,000 tons
Italian
5,728,000 tons
6,603,000 tons

British, Dutch, French, Belgian, and U.S. nationals accounted for 54% of
the capital invested in the
Romanian oil industry, even greater than the Romanian share (43%), while
Germans claimed a paltry
0.2%.127 The OKW therefore hailed the German-Romanian Economic Treaty of
23 March 1939, which
allowed for “[the] founding of a mixed German-Romanian company that shall
be engaged in the
exploration for petroleum and execution of a drilling and processing
program.”128 This treaty was the first
step toward converting Romania into a German satellite and establishing
the Reich’s economic primacy,

125
Dr. F/F., Vowi 3386, “Das rumänische Erdöl,” 11 April 1939, T-77/611
(Wi/IC 4.16).
Busch-Zantner, “Rümanien: Die Zukunft des rumänischen Erdöls,”
Vierjahresplan, 1939: XXIV.
127
Eichholtz, Rumänisches Öl, 13-15.
128
“Vertrag über die Förderung der wirtschaftlichen Beziehungen zwischen dem
Deutschen Reich und dem
Königreich Rumänien Gezeichnet, in Bukarest, am 23. März 1939,” 1940
League of Nations Treaty Series,
http://www.worldlii.org/int/other/LNTSer/1940/9.html. The German
signatories were Wilhelm Fabricius (Minister
to Romania) and Helmuth Wohlthat (Ministerialdirektor, Preuβisches
Staatsministerium, and Göring’s personal
representative). The treaty was to expire five years after its signing.
Although the treaty promoted closer economic
integration, the Germans failed to expand their presence in the Romanian
oil industry after a group of four German
oil companies was thwarted in their effort to take control of the largest
purely Romanian company, Credit Minier.
Eichholtz, Rumänisches Öl, 23-27.
126

388
which would be of “immense value” in the event of war thanks to the
“tremendous latent capacity”
(Entwicklungsfähigkeit) of Romania’s raw materials sector.129 The British
and French did not stand by
idly: both countries concluded several economic agreements with Romania
over the course of 1939 (the
French securing a doubling of oil imports – 600,000 tons – between March
1939 and March 1940),
offered credits to purchase war materiel, and extended guarantees for
Romania’s security on 13 April
1939. But they were fighting as losing battle as Germany slowly increased
its share of Romania’s foreign
trade and arms purchases.130
Even if Romania devoted its entire export balance to the Axis, one
tremendous obstacle remained:
inadequate transportation capacity.131 Previous historians have focused
on the problems posed by the
Romanians and their excessive demands for compensation.132 Although there
is no doubt that Romania
forced the Reich to pay a premium for oil, disputes over payment were not
intractable, unlike the
problems posed by both geology (Romania’s declining reserves) and
geography.
Of the 5,000,000 tons Romania could probably export – which was equal to
the estimated German
mobilization demand – OKW estimated that Germany could only count upon
3,500,000 tons after the
requirements of Italy (1,150,000 tons), Slovakia, Hungary, and Yugoslavia
(350,000 tons) had been
subtracted. As of 1939, the railways and the Danube could only handle
2,000,000 tons worth of
supplies.133 Adding another 1,500,000 tons of throughput presented a
dilemma – Germany had only two

129

OKW, Az. 3 i/10/32 W Stb W Wi IV, Nr. 2690/39 g, “Übersicht über die
wehrwirtschaftliche Lage Rumäniens,”
31 March 1939, T-77/611 (Wi/IC 4.37). See also a follow up study
completed in mid-1940: OKW, Az. 3 1
13/WiRüAmt/Wi III, Nr. 7600/40 geh., “Die Wehrwirtschaft Rumäniens nach
dem Stand von Anfang 1940,” no
date, T-77/611 (Wi/IC 4.33). By this point, with Britain and France no
longer claimants for Romania’s favor,
Germany was “in the position… to exercise a strong effect upon the
[latter’s] defense-economic development and
thereby [affect] a rise in Romania’s oil and grain deliveries, which are
so important to Germany in wartime.”
130
Eichholtz, Rumänisches Öl, 29-30; and Zara Steiner, The Triumph of the
Dark: European International History,
1933-1939 (Oxford: Oxford University Press), 744-748.
131
This was not an unexpected problem. During the occupation of Romanian
during the First World War, the
Germans had depended upon the Danube when shipping oil back to Germany.
The task was made somewhat more
difficult by the fact that the Germans needed to replace the tankers
scuttled by the Romanians. Hauptmann Walter
Suβdorf, “Das Feldkraftfahrwesen,” in: Der groβe Krieg, 1914-1918, ed. M.
Schwarte (Leipzig: Johann Ambrosius
Barth, 1921), viii: 363.
132
Tooze, Wages of Destruction, 307-308.
133
The RVM had already determined in October 1938 that the existing German
Danubian fleet was “in no way
sufficient for fulfillment” of “the economic and defense demands placed
upon it.” Following an inter-ministerial
conference on 12 August 1938, the Reich decided to expand the existing
fleet by as many as thirty-three barges,

389
options: it could construct an additional 10,000 railway tank wagons,
since the existing railway network
could handle the required freight; or it could construct a pipeline from
Romania to Germany. The former
would require 120,000 tons of steel, take eighteen to twenty-four months
to complete, and cost
40,000,000 RM; the latter, 300,000 tons of steel, twenty to twenty-four
months, and 400,000,000 RM.
Each option had its own benefits and drawbacks. Railway cars were cheaper
to construct and could be rerouted if the need arose, but they increased
the strain on the railway network without increasing the total
throughput since they did not carry any freight on their return journey
to the oilfields. A pipeline, on the
other hand, could transport considerably more oil than railways cars, and
the construction costs could be
amortized quickly thanks to the higher throughput of the pipeline (thus
ensuring lower transportation
costs vis-à-vis rail over the long run).134 Pipelines were, however,
vulnerable to sabotage, could only
handle one particular kind of petroleum product at time, and would
degrade quickly in the absence of
“sufficient and continuous usage.” Ultimately, the expenditure was only
justified in the event of oil
deliveries far in excess of what Romania could deliver – in other words,
only if “the crude oil region of
Baku,” became a supplier.135 Left unsaid was that deliveries along the
Danube (which accounted for
875,000 tons out of the 2,071,640 tons that could be handled at present)
would be disrupted in wintertime
when the river froze. By November, deliveries had dropped to 60,000 tons
per month, “while a minimum
of 100,000 tons per month is required to meet the needs of the absolutely
essential program.”136
In September 1939, the two governments signed a one-year economic
agreement worth 300,000,000
RM, whereby the Reich would exchange captured Polish war materiel for
Romanian foodstuffs and oil in

tankers, and refrigeration ships, but administrative bickering over who

was responsible for funding (5,500,000 RM)
delayed implementation. Oberriegierungsrat Haβmann (RVM), “Betrifft den
Ausbau der Donau-Flotte,” 21 Oktober
1938, Nr. 221 in: Akten der Reichskanzlei, v: 748-754 (quotation from pg.
749).
134
Consider that between 4,000 to 5,000 railways cars (or eighty to 100
train columns) would be needed every day
to move the daily throughput of a single pipeline with an hourly carrying
capacity of 2,000 tons. Paul Ruprecht,
“Erdölbeförderung,” Militär-Wochenblatt, 127. Jahrgang, Nummer 17 (23
October 1942).
135
“Erdöl-Transportfrage von Rumänien nach Deutschland,” 06 July 1939, no
author (probably WStb; type-written
notation indicates that a copy was sent to Thomas), T-77/612 (Wi/IC
4.55).
136
The Director of the Economic Policy Department to the Legation in
Rumania, No. 835, 30 November 1939,
Document No. 402 in: DGFP (D), viii: 467-468.
390
volumes “to the utmost limits of transportation facilities.137 The amount
of oil was not specified until the
signing of a supplementary agreement on 21 December 1939, which set
monthly deliveries for the first
year at 130,000 tons. The Romanians also agreed “to fulfill the
obligation to deliver oil, if necessary
compelling the [foreign] oil companies to sell, possibly even by
resorting to expropriation.”138
As the WStb’s commentary on the September 1939 trade agreement explained,
the “utmost limits”
worked out to 1,500,000 tons per year, which represented a 73% increase
over the 1937 level of imports,
or 30% of Germany’s mobilization requirement (5,000,000 tons).139
Nevertheless, the WStb judged the
agreement to be only a “limited success” with regard to oil, since the
existing transportation infrastructure
was incapable of handling anything more than the agreed total (90,000
tons per month until the addition
of sixty-four new Danubian tankers in July 1940). Assuming this
logistical bottleneck could be cleared,
and that the Romanians limited oil exports to countries besides Germany –
3,500,000 tons in 1937 – the
Germans could acquire 100% of their mobilization requirements (70% if
exports continued to go to
neutral countries). Boosting imports to 3,500,000 tons was only
“conceivable” in the event of a “gradual”
program of expanding the existing transportation infrastructure by
building tankers and railway cars,
expanding the existing railway lines, and constructing a limited
pipeline. There was simply no way,
however, to accommodate the remaining 1,500,000 tons of imports, which
normally went to neutral

137

The Legation in Rumania to the Foreign Ministry, No. 673, 29 September

1939, Document No. 166 in: DGFP
(D), viii: 172-173.
138
Memorandum by the Director of the Economic Policy Department (Wiehl), 03
January 1940; and Foreign
Minister Ribbentrop to Field Marshal Göring, 16 March 1940; document nos.
502 and 678 in: DGFP (D), viii: 598603 and 925-926. Problems arose in
November when the Army refused to make more than 10,000,000 RM worth of
war booty available to Romania on the grounds that it was needed to re-
equip the armed forces following the
invasion of Poland. The matter was not resolved until March 1940, after a
series of meetings between the OKW,
RWM, and AA. Wi VII (Thomas?), Aufzeichnung, “Betr.: Rumänien [/]
Verhandlungen wegen Öllieferungen,” 04
March 1940, T-77/400 (Wi/IF 5.3063). The Germans now agreed to exchange a
number of anti-tank, anti-aircraft
guns, and artillery pieces in exchange for a credit of 600,000,000 lei,
which would be used to finance purchases of
Romanian oil at a cost of 78.1 RM per ton fob Constanța. Document nos.
74, 111, 350, 380, and 660 in: DGFP (D),
xiii: 73-74, 111, 401-402, 435, and 868-869.
139
During conversations with Fabricius and Carl Clodius (the Deputy Chief of
the AA’s Commercial Policy
Division – Handelspolitische Abteilung, HaPol), the Romanian Minister-
President (George Tatarescu) reiterated his
nation’s commitment to sell Germany up to 130,000 tons of oil per month,
and perhaps more in case the Reich
increased the amount of arms it was willing to exchange for the oil. The
two sides bickered, though, over the rate of
exchange, in spite of Tatarescu’s willingness to agree to a modest
devaluation of the lei and guarantee Germany onequarter of Romania’s oil
exports at lower prices. The Legation in Rumania to the Foreign Ministry,
Nos. 963 and
1009, 06 and 14 December 1939, document nos. 422 and 451 in: DGFP (D),
viii: 493-494, and 530-532.

391
nations. Although the WStb supported the agreement, it lamented that
little had been done to assure the
“security” of Romanian oil production and transportation. In view of the
“magnitude of the danger”
(whether to Germany or Romania is not clear), the Reich could not content
itself with “guarantees of the
Romanian state.140 Germany had to insist upon “the reorganization of the
Romanian crude industry under
German leadership and control,” and that that Bucharest cede to Berlin
“its sovereign rights” to
“exercising police power” within the oilfields and directing the oil
transportation network for the duration
of the war.141 Nothing less would suffice, since the Third Reich’s prewar
policy of rendering Germany
independent of overseas oil imports in wartime would only be successful
if it secured access to Romania’s
small but adequate oil production.

140

Germany had an escape clause in the event of sabotage of oil deliveries

either as a result of Romanian
“complacency” or “connivance.” Unfortunately, this would be of limited
value since the “replacement of Romanian
petroleum with Russian in equal volume is not feasible.”
141
W Wi III, “Betrachtungen über die volle Ausnutzung der rumänischen
Ausfuhr für die Versorgung Deutschlands
im Kriege,” 18 October 1939, T-77/612 (Wi/IC 4.71). See Anlagen 2-3 for
additional details.

392
Germany’s Petroleum Position on the Eve of War, 1939
By the spring of 1939, the National Socialist regime could boast of
considerable success in expanding
Germany’s domestic petroleum output. According to the Institute for the
World Economy (Institut für
Weltwirtschaft), “The goal of procuring the entire German fuel
requirements through domestic production
has not yet quite been reached” due to unexpected rises in consumption as
a consequence of the regime’s
policy of encouraging motorization. Between 1933 and 1938, total
petroleum consumption had more than
doubled from 2,920,000 to 6,250,000 tons (tripled in the case of diesel,
from 550,000 to 1,650,000 tons).
This led to an 80% increase imports, from 2,437,000 tons to 4,418,000
tons (largely gasoline, fuel oil, and
diesel), more than two-thirds of which came from Venezuela, the United
States, and Romania by 19371938.142 Nevertheless, since 1932, production
had increased tripled, thanks in large part to a “tenfold
increase in the capacity of hydrogenation and synthetic production
plants.”143 Krauch bragged to the
German public that there was “for the German petroleum and power fuel
supply no longer any basic
unresolved technical problem.” Hinting at the disputes over the steel
allocation, he remarked that only
“economic, commercial and other overriding considerations” would
determine the further expansion of
output. The acquisition of Austria and the Sudetenland the previous year
also promised major dividends.
The oilfields of the latter would allow Germany to triple its existing
output of crude oil (600,000 tons in
1938 including Austria, already a 33% increase since 1937 following the
Anschluss), while the latter
possessed soft coal deposits with an output equal to 10% of the Reich’s
previous production.144
On the other hand, a vast gap between requirements and production had yet
to be filled – 480,000
tons per month during mobilization (673,000 tons of demand minus 193,000
tons of production).145 A
142

Institut für Weltwirtschaft an der Universität Kiel, “Die Versorgung

Groβdeutschlands und Kontinentaleuropas
mit Mineralölerzeugnissen während der gegenwärtigen kriegerischen
Verwicklungen,” February 1940, T-84/72
(EAP 66-c-12/33).
143
[Handwritten Note] Handed to Major Dref on 15 February 1939, Thi
[Regierungsrat Thierer of the OKW],
“Progress made, since the seizure of power in 1933, in the procurement of
chemical raw materials, especially
through the execution of the Four Year Plan,” Translation of Document EC-
144, NMT, vii: 845-849; for the original
German document, see: T-77/428 (Wi/IF 5.3495).
144
Carl Krauch, “Weg und Erfolg der Kraftstoffwirtschaft,” Vierjahresplan,
1939: I/II.
145
W Wi VI d an W Ro, Nr. 429/39 g.K., “Betr.: Sicherstellung des Mob.-
Bedarfs an Mineralöl,” 20 February 1939;
and W Ro V (Griebel) an W Wi VI, Az. 11 k 2216b Vc, Nr. 429/39gK.,
“Betr.: Sicherstellung des Mob-Bedarfs an
Mineralöl,” Bezug: W Wi VI d Nr. 429/39g.K. vom 20. 2. 1939,” 24 February
1939; both in: T-77/649 (Wi/VI. 39).

393
temporary dip in imports of motor fuel and diesel during the first third
of 1939 also wiped out any gains
in output by forcing the country to start drawing on its reserves.146
Consequently, civilian and military
policymakers understood that Germany would have to adopt a balanced
strategy of boosting domestic
production and increasing imports from within its sphere of influence if
it intended to wage war.
One of the most notable exponents of this view was none other than the
apostle of synthetic fuel
himself, Krauch. In an extensive overview of his progress as of April
1939 in implementing Göring’s
directives at the Karinhall Conference of June 1938, Krauch expressed
immense pride with the advances
made in terms of expanding the supply of the raw materials most critical
to any future German war effort:
petroleum, rubber, light metals, and munitions.147 At that time, numerous
criticisms to the effect that his
plans were “exaggerated or impossible” had been levied. The real
challenge had, however, been the
reduced steel allocation.148 Only Göring’s direct intervention in
February 1939 had prevented setbacks
Krauch feared would have been impossible to overcome.149
With the matter resolved to his satisfaction, Krauch was confident that
Germany would reach a
production capacity of 8,300,000 tons by 1942/43 and a further 3,000,000
tons by 1944 according to a
revised target for mobilization capacity (11,495,000 tons) completed on
30 January 1939. This worked
out to 6,590,000 tons of motor and aviation fuel, 1,760,000 tons of
diesel, 2,270,000 tons of fuel oil, and
875,000 tons of lubricants, all of which roughly corresponded with the
RWM’s 1943 estimate for
In response to the initial query, Griebel also pointed out that Germany
still lacked adequate refinery capacity to meet
its supply deficit entirely through imports of crude oil.
146
Aktenvermerk, “Betr.: Mineralöl-Situation,” 09 June 1939, no author, T-
77/123 (Wi/IF 5.533).
147
Krauch had been producing brief progress reports since at least August
1938. These reports varied greatly in the
length of time they covered – anywhere between two to ten weeks. The last
report covered the period between 01
June and 15 August 1939. They may be found in: NARA, RG 238, T-301/72
(NI-8791).
148
Between June and December 1937, the monthly steel allocation for the
petroleum industry had fluctuated
between a low of 27,500 tons to a high of 62,400 tons. During 1938, the
figure peaked in the first quarter at 60,000
tons before dropping to an average of less than 44,000 tons until the
second quarter of 1939, when it was supposed
to rise to 120,000 tons. The actual allocation that quarter turned out to
be only 50,000, but Göring had ensured that
the required amount would be restored the following quarter.
149
RWA, “Arbeitsbericht des Generalbevollmächtigten des Ministerpräsidenten
Generalfeldmarschall Göring für
Sonderfragen der chemischen Erzeugung Dr. C. Krauch vor den Generalrat,”
20/21 April 1939, T-77/430 (Wi/IF
5.3594). Emphasis in the original. Actually, by the start of the war, the
monthly steel allocation was only 90,000
tons, or 75% of the required figure, although the RWA still believed that
this was enough to allow Germany to reach
a total output of 6,950,000 tons in 1942 and 8,350,000 tons the following
year. “Treibstoffversorgung,” 15 January
1940, no author (handwritten notation reads: “Anlage zum Schreiben an
Staatssekr. Körner v. 16. 1. 40.”), T-84/216
(EAP 66-c-12-62/29).

394
peacetime consumption (11,055,000 tons), since it was possible to
reorient production of aviation fuel to
motor fuel, and gasoline and fuel oil to diesel, depending upon the
circumstances. In deference to his
patron, Krauch stressed that the primary objective of his plan was to
fulfill the requirements of the Air
Force. To that end, Germany’s capacity to produce aviation fuel would
rise from 220,000 tons at present
to 2,800,000 tons by the end of 1943. Krauch justified the decision to
focus on the production of aviation
fuel on the not unreasonable grounds that it cost far more than ordinary
gasoline to import (100 RM in
foreign exchange per ton vs. 65 RM). In any event, nowhere near the
amounts required by the Air Force
would be available on world markets. Overall, by 1944, which represented
the “maximum that was
technically feasible,” Krauch expected that Germany would be able to meet
the following shares of its
mobilization demand:
Type of Product
Aviation Fuel
Motor Fuel
Diesel Fuel
Fuel Oil

Share of Demand
100%
75%
60%
40%

None of this would be possible without annual deliveries of 23,700,000

tons of hard coal and 45,300,000
tons of soft coal (12% and 21% of production in 1938, respectively).
Germany’s small crude oil producers
would provide an additional 1,200,000 tons (including Austria) in
peacetime by the end of the program,
or 2,400,000 tons during mobilization.150
Although Krauch accepted that there were “limits” to what could be
accomplished within Greater
Germany, not only was his plan “not a utopia,” but there was no
alternative “[if] Germany as a great
power wishes to secure for itself unconditionally the necessary supply of
petroleum […].” Even if it did
not guarantee independence from oil imports, the plan would provide “full
coverage” of aviation fuel
requirements in wartime and allow the country to amass larger stockpiles,
either through excess domestic
product or through imports. This combination of synthetic production and
stockpiling would, Krauch

150

RWA, “Arbeitsbericht des Generalbevollmächtigten des Ministerpräsidenten

Generalfeldmarschall Göring für
Sonderfragen der chemischen Erzeugung Dr. C. Krauch vor den Generalrat,”
20/21 April 1939, T-77/430 (Wi/IF
5.3594).

395
surmised, allow for “[a] truly ideal fulfillment of mobilization supply”
by 1944/45. But this was not a
long-term solution, he conceded: “[Our] Greater German economic area is
too small [to allow for] a full
satisfaction of defense-economic petroleum claims,” and Germany’s only
“promising possibility” of
meeting its oil requirements over the long run was to be found in
“Southeastern Europe.” The “highest
and most important” task was to expand German control of the region’s oil
reserves and promote
exploration. If Germany succeeded, it would not only free itself from
overseas imports, but it could also
speed up the process of “systematically stockpiling” and expand the range
of petroleum products available
to German consumers by converting hydrogenation plants to process crude
oil rather than coal.151
There is no doubt that Krauch’s ambitions far exceeded those of the
existing petroleum plan – once it
had been “refined” in consultation with industry and military officials,
Krauch expected to move on to the
next “great goal,” which extended far beyond the borders of Greater
Germany. He was already thinking in
terms of “Groβraumplanung,” which would transcend the limitations of the
existing German economic
sphere and lay the basis for an “ideal petroleum supply during
mobilization for the Axis through the
integration of the southeast European economic and raw materials area.”
The “anti-Comintern powers”
now found themselves the target of an “economic war led by England,
France and the U.S.A.”152
Germany could only escape such an “initially economic and political, but
ultimately military
encirclement” by extending its reach into Southeastern Europe through the
“construction of united greater
economic bloc” under German leadership geared toward fighting a
“defensive war.” This German-led
“coalition” would “extend its influence to Romania, Turkey and Iran” –
although Krauch did not rule out
the need for improved commercial relations with the Soviet Union as a
result of “the gradual re-anchoring
of the Germany economic and export center of gravity toward the East
[…].” Once the political and
economic connections across Europe had been forged, Krauch called for his
existing plan “to be

151

RWA, “Arbeitsbericht des Generalbevollmächtigten des Ministerpräsidenten

Generalfeldmarschall Göring für
Sonderfragen der chemischen Erzeugung Dr. C. Krauch vor den Generalrat,”
20/21 April 1939, T-77/430 (Wi/IF
5.3594). Emphasis in the original.
152
The paper made reference to a unified bloc comprised “of the four
European anti-Comintern partners, to which
Yugoslavia and Bulgaria must soon join.” At this point in time, the anti-
Comintern Pact included only one other
European power, Italy. Presumably, the other two were Hungary and Spain,
or perhaps Slovakia.
396
expanded… with the aim of securing the defense-economic autarky of the
anti-Comintern coalition.”
Unless Germany developed “its own war potential and those of its allies”
to the extent that they eclipsed
(gewachsen) those of the rest of the world, “all of the sacrifices in
blood during the next war” would not
save it from the kind of “self-inflicted bitter end” it had already
endured once before.153
Depending on one’s perspective, the outlook for the immediate future
could also appear rather grim.
As Thomas pointed out in a briefing for German diplomats, even if the
Krauch Plan delivered on its
promises over the next few years, Germany could not afford to think only
of its own needs – there was
also Italy of which to think. For the time being, “we must be clear that
even Romanian production,
assuming we get it in our hands undestroyed, together with German
production cannot cover the entire
demand that the Axis Powers will have in an emergency.” There was also
the “as of yet unresolved
transportation question” when it came to Romania. Thomas concluded that
the Axis’ only hope in
“overcoming all possibilities” was to stockpile fuel. By contrast, the
Allies were positively swimming in
oil thanks to the United States, South America, and the Middle East.154
Krauch’s report of April 1939 prompted the RWA to undertake a feasibility
study of a German-led
“Great Economic Area” (Groβraumwirtschaft) including Slovakia, Italy,
Spain, Hungary, Yugoslavia,
Romania, and Bulgaria in the event of a war within the immediate future.
Even assuming that sufficient
quantities of steel and labor would be made available, the Krauch Plan
represented “the higher limits” of
153

RWA, “Arbeitsbericht des Generalbevollmächtigten des Ministerpräsidenten

Generalfeldmarschall Göring für
Sonderfragen der chemischen Erzeugung Dr. C. Krauch vor den Generalrat,”
20/21 April 1939, T-77/430 (Wi/IF
5.3594); for a partial translation, see: NMT, vii, 944-956. Emphasis in
the original. Portions of the document are
reprinted with commentary in: Eichholtz, “Zum Anteil des IG-Farben-
Konzerns,” 83-105. See also the commentary
provided in: Tooze, Wages of Destruction, 307-308. During his trial,
Krauch explained that he produced such
reports every six months, but that they were usually summarized before
being presented to Göring. NMT, vii: 1010.
Accordingly, the surviving reports are nowhere near as insightful as the
April 1939 paper. See, for example:
“Execution of the New Military Economic Production Plan of 12 July 1938,
including the Rapid Plan (powder,
explosives, chemical warfare agents and preliminary products) of 13
August 1938 in the event of mobilization:
Status on 15 October 1939,” Partial Translation of Document NI-8796, NMT,
vii: 958-962; for the original German
document, see: NARA, RG 238, T-301/72 (NI-8796).
154
“Vortrag gehalten von Generalmajor Thomas am 24. May 1939 im Auswärtigen
Amt,” Document 028-EC, IMT,
xxxvi: 112-32. Thomas spelled out the situation for the OKW and OKH more
clearly at the beginning of August:
“full coverage” of gasoline requirements for only four months and 2.5
months in the case of diesel, with roughly
50% coverage thereafter. Thomas demanded the “complete domination” of the
Southeastern Europe, although he
conceded that the region could provide only 60% of the Axis’ import
requirements during mobilization. “Stand der
wehrwirtschaftlichen Lage Deutschlands,” T-77/312 (Wi/IF 5.1788), no
author or date (handwritten notation
indicates the minute was presented by Thomas to Brauchitsch and Keitel on
09 August 1939).

397
what one could “reasonably” expect from the German economy” when it came
to expanding domestic
petroleum production.155
The RWA’s “Groβraumwirtschaft” paper, completed in August, conceded that
the VJP had failed “to
produce blockade-security for a European group of powers standing under
German leadership.”156 The
RWA’s study revolved around the concept of “blockade-security”: Was it
“entirely or even to a large
extent achievable” if Germany developed the “defense-economies” of the
aforementioned countries “to
their fullest extent,” while utilizing the essential economic assets of
other regions (Scandinavia, the
Ukraine, Turkey, and French North Africa) that lay within the orbit of
the “Great Economic Area”?
Greater Germany including Slovakia was incapable of making more than a
dent in the demand for
anything but coal. Peacetime petroleum consumption within the “Greater
Economic Area” in 1938 was
11,500,000 tons, roughly half of which came from continental sources. By
1942, consumption would rise
to 14,950,000 tons in peacetime and 23,850,000 tons in war. Assuming that
German output rose in
accordance with the Krauch Plan, and that Southeastern Europe added more
than 5,000,000 tons of
finished products to their existing production, the peacetime deficit in
1942 would be 1,500,000 tons and
7,900,000 tons during mobilization. In the latter case, Romania would
have to cease its exports beyond
Europe, which at present amounted to 1,500,000 tons. Germany could cover
only 25% of the
consumption of the “Greater Economic Area.” Moreover, the transportation
situation was “extremely
difficult and requires far-reaching, very extensive improvement measures
[…].” The biggest contributor

155

RWA, “Notizen für die Besprechung mit Herrn Staatssekretär Körner,” 16

May 1939, NARA, RG 238, T-301/64
(NI-7858); reprinted as Document 2 in: Dietrich Eichholtz, “Die
‘Grossraumwehrwirtschaft’ für den großen Krieg:
Zwei geheime Memoranden der Reichstelle für Wirschaftsausbau vom
Früjahr/Sommer 1939,” Bulletin des
Arbeitskreises ‘Zweiter Weltkrieg’ (1986): 82-85.
156
A little more than a week before the outbreak of hostilities, another RWA
minute stipulated that existing
production and reserves could cover between five to six months of
mobilization consumption of aviation fuel, motor
fuel, and fuel oil, but only three months for diesel. Thereafter, Germany
could cover around 60% of its gasoline
demand and 29% for fuel oil and diesel. Luckily construction of a number
of synthetic and refining facilities was
nearing completion, which would improve the situation by 1940. RWA, Dr.
Alt/Fe., 23 August 1939, enclosed with:
der Leiter der RWA an das OKW, WStb., z.Hd. Herrn Generalmajor Thomas
o.V.i.A., Tgb.-Nr. 1225/39 g.Rs., 24
August 1939, T-77/123 (Wi/IF 5.533).
398
was Romania, which produced the equivalent of 40% of the necessary
supply. Without Romania, the
“Greater Economic Area” could cover no more than 30% of its petroleum
requirements.157
The situation would become catastrophic if Italy entered a war alongside
Germany. By June 1939,
WStb estimated that Germany and Italy required 9,400,000 tons of imports
to cover one year’s estimated
consumption during mobilization. Romania’s export balance would probably
shrink from 5,000,000 tons
in 1938 to 4,000,000 tons in 1939. Assuming that the Danube serviced
imports to Germany, while both
Germany and Italy would draw imports using railways, the existing
transportation network could deliver
2,200,000 tons to Germany and 1,000,000 to Italy, thus leaving 6,200,000
tons of consumption unfilled. It
was unlikely that the Axis could convince Romania to boost production by
6,000,000 tons in wartime, a
variety of measures would be necessary, the most important of which was
addressing the low throughput
of the main Romania port for shipping oil up the Danube, Giurgiu, which
could only handle 1,270,000
tons per year.158
The RWA concluded that “blockade-security” within the “Greater Economic
Area” was, even
assuming “great efforts” and significant contributions from Scandinavia,
conceivable “only to a limited
extent” unless Germany established “an economic union with Russia.” The
situation was particularly dire
with regard to iron ore, petroleum, phosphates, and copper, and the costs
of building up an adequate
stockpile of even one year’s consumption during mobilization would run to
approximately 747,000,000
RM. In the case of oil, at least another 8,000,000 tons divided between
Germany (4,500,000 tons), Italy

157

“Moglichkeiten einer Groβraumwehrwirtschaft unter deutscher Führung,”

August 1939, no author or date, T77/500 (Wi/I.44).
158
W Wi IV d, “Betr.: Transportmöglichkeiten für die Mineralölversorgung der
Achsenmächte im Kriege,” Vorg.:
Reisebericht Inspekteur W [illegible] III Mai/Juni 1939, 21 June 1939, T-
77/526 (Wi/I. 156). This report was itself
based on a much larger study concerning the potential contributions of
raw materials from expected European
neutral countries to the Axis. The author pointed out that Romania,
Hungary, Yugoslavia, and Estonia (shale) could
provide at best 6,145,000 tons of oil to Germany and Italy (since
Romania’s reliability “must in any case be looked
upon as assured”), against their mobilization import demand of 11,000,000
tons. Of the outstanding 5,000,000 tons,
the author had to concede that additional supplies “out of the neutral
European area must at this be considered as
impracticable [undurchführbar].” Besides precluding any “enlargement” of
oil deliveries from the Caucasus,
Turkey’s “expected attitude” vis-à-vis the Axis ruled out making use of
Mediterranean, over which 80% of
Romania’s exports normally travelled. OKW, W Stb W Wi VI, Nr. 5015.39 g.,
“Vortrag des Kapitän zur See Dose
gelgentlich der Wehrwirtschaftlichen Übungsreise nach Schwalbach am 20.
6. 1939 über ‘Möglichkeiten der
Versorgung Deutschlands/Italiens in einem Kreig mit den Westmächten aus
dem voraussichtlich neutralen
europäischen Raum,’” T-77/516 (Wi/I. 84).

399
(2,500,000 tons), and Spain (1,000,000) and costing roughly 385,000,000
RM would be required
(Germany already had a reserve of roughly 2,200,000 tons as of 01 April
1939). In order to keep costs
down, Germany would shift entirely to the production of expensive
aviation fuel (which would be
stockpiled), while continuing to import cheaper motor fuel, not to
mention diesel and fuel oil. If “proper
blockade-security” was what the Reich required, this was “only to be
accomplished through a close
economic association [Zusammenschluβ] with Russia.” Barring that, the
only suggestions the report could
offer for “improving the petroleum situation” was a “sharp throttling of
non-defense-related peacetime
consumption and a rapid boosting of supply, particularly upon the
Romanian basis.” But this was not a
feasible long-term solution: Germany needed to embrace the “construction
and maintenance of a
European Groβwirtschaftsraum, which secures in peace and war the
existence of its members.” “Rootand-branch [restlos] security” would
require more than just Scandinavia – it was “possible only with the
raw materials of Russia,” although the report hoped that this could be
accomplished through an “alliancepolicy” that “made possible a
sustainable relationship with Russia.”159

159

Although in the event that a “military altercation with Russia or Poland

cannot be avoided,” Germany might
make be able to scrounge together another 1,100,000 tons from either the
Polish or Ukrainian oilfields.
“Moglichkeiten einer Groβraumwehrwirtschaft unter deutscher Führung,”
August 1939, no author or date, T-77/500
(Wi/I.44). Emphasis in the original. The NARA finding aid indicates that
the memorandum was found within the
files of one of Krauch’s aides in the RWA, Dr. Gerhard Ritter, and that
the report was probably completed within
that agency. Eichholtz concurs with this judgment in his examination of
the memorandum, which is reprinted with
extensive commentary as Document 2 in: “Groβraumwirtschaft,” 86-160. See
also: Institut für Weltwirtschaft an der
Universität Kiel, “Die Versorgung Groβdeutschlands und Kontinentaleuropas
mit Mineralölerzeugnissen während
der gegenwärtigen kriegerischen Verwicklungen,” February 1940, T-84/72
(EAP 66-c-12/33).

400
An Appraisal of the Third Reich’s Prewar Petroleum Policy
A recent survey of European international history between 1933 and 1939
argues that oil was
Germany’s “Achilles’ Heel” – a popular leitmotiv within the
historiography of the Second World War.160
This was also the verdict of at least one contemporaneous assessment of
Germany’s petroleum position
published in the United States (“the tendo Achilles of Germany’s war
potential”), which concluded on the
basis of exaggerated estimates of German wartime consumption – 15,000,000
tons per annum – that the
Reich was incapable of meeting its wartime requirements without access to
the oilfields of Eastern
Europe, the Caucasus, and the Middle East.161 But this is a banal
judgment, for oil (or energy more
broadly) is the “Achilles’ Heel” of any modern society and war machine.
No industrialized country on
earth besides the United States or the Soviet Union could meet its
wartime requirements of oil from
domestic sources of production. For all others, “oil strategy thus
becomes a ‘system of substitutes,’”
including boosting domestic oil production, developing synthetic
alternatives, and accumulating
stockpiles.162 This was especially the case of European great powers, in
view of the Continent’s tiny oil
reserves.163 Even before the war, Europe’s import deficit was between
22,000,000 to 26,000,000 tons, not
far behind the figure for total Soviet oil production.164

160

Steiner, Triumph of the Dark, 674. See also: Lizzie Collingham, The Taste
of War: World War Two and the
Battle for Food (London: Allen Lane, 2011), 518, n. 96; and Mark Mazower,
Hitler’s Europe: How the Nazis Ruled
Europe (New York: Penguin, 2008), 290.
161
Fritz Sternberg, From Nazi Sources: Why Hitler Can’t Win (New York:
Stratford Press, 1939), 103-110
(quotation from pg. 109).
162
“Oil Strategy,” Militär-Wochenblatt (15 January 1937), NARA, Record Group
165: Records of the War
Department, Military Intelligence Division, “Regional File,” Box 1400;
Paul Ruprecht, “Ölbeschaffung und
Ölverbrauchspolitik und totaler Krieg,” Die deutsche Volkskraft: Beilage
zur “Deutschen Wehr,” Nr. 8, 7. Jahrgang
(05 August 1937); and Dr. Leonhardt, “Der kriegsentscheidende
Treibstoff,” Militär-Wochenblatt, 124. Jahrgang,
Nummer 26 (22 December 1939).
163
At the beginning of 1936, excluding Romania, Poland, and the Soviet
Union, the Continent’s oil reserves totaled
only 10,000,000 tons, against 24,400,000 tons of demand that year alone
among Europe’s great powers. Dr. Paul
Ruprecht, “Europa als Selbstversorger mit Erdöl,” Deutsche Wehr, Nr. 11,
43. Jahrgang (16 March 1939).
164
Germany and Romania accounted for almost 90% of the 11,625,000 tons
produced in Europe in 1938.
Statistisches Reichsamt, Abteilung VIII, “Rohstoffversorgung des
mitteleuropäisch-großdeutschen
Wirtschaftsraumes nach dem Kriege,” July 1940, T-84/70 (EAP 66-c-12/10);
Statistisches Reichsamt, Abteilung
VIII, “Rohstoffversorgung des europäischen Wirtschaftsraumes (ohne
UdSSR), Teil II: Gewerbliche Rohstoffe und
Genuβmittel 1938,” October 1940, T-84/69 (EAP 66-c-12/8a); Institut für
Konjukturforschung, “Rohstoffbilanz
Kontinentaleuropas unter Einschluss des Europäischen Russland und
Nordfrikas,” 1941, T-84/69 (EAP 66-c-12/4);
and Statistisches Reichsamt, Abteilung VIII, “Versorgung des europäischen
Wirtschaftsraumes (ohne UdSSR) in
wichtigen Nahrungsmitteln und Rohstoffen (Zahlenangaben) 1938,” January
1942, T-84/69 (EAP 66-c-12/11/9).

401
In that case, what makes National Socialist Germany so special? That, on
the eve of war, it needed to
import roughly half of its wartime requirement of 8,000,000 tons? Then
what are we to make of the
record of Britain and France? Both countries expended tremendous
resources during the 1920s and 1930s
in failed efforts to develop the Middle East as an alternative source of
supply from the Western
Hemisphere. Both countries, unlike Germany, had to import virtually 100%
of their oil requirements.
Unlike Germany, which could bully and cajole its major supplier (Romania)
because it lay within Berlin’s
sphere of influence after 1938, Britain and France had to place their
fate in the hands of either resentful
Middle Eastern clients such as Iraq and Iran, or a more powerful and
politically unreliable United States.
Furthermore, Germany’s total import requirements can be misleading unless
they are broken down by
types of petroleum products. Synthetic fuel did not make Germany
independent of oil imports, but it did
make the country virtually self-sufficient when it came to motor and
aviation fuel, which were the
primary fuels consumed by the main striking forces of the German armed
forces: the Army and the Air
Force. Germany did lack diesel and fuel oil, the primary fuels for the
Navy.165 But no one in Berlin
expected the German Navy to challenge the Royal Navy in a Trafalgar-style
battle for supremacy anytime
soon. Moreover, the most effective naval units in terms of their
operational success and the threat they
posed to the Allied war effort were the U-boats, whose fuel requirements
were manageable.
Naturally, factions within the Third Reich’s chaotic policymaking circle
competed over resources and
blamed everyone else for their failure to fulfill Hitler’s demand in
August 1936 that Germany be selfsufficient in petroleum in eighteen
months.166 There was nonetheless a genuine sense of accomplishment
by the start of the war. One even detects a cautious sense of optimism
that the country could collect
enough petroleum to fight a major war as long as it could retain access
to Romanian oil imports. The only

165

The inability of synthetic fuels to cover Germany’s requirements of both

“light” and “heavy” petroleum products
was accepted years before the war. “Produktion [der] synthetischen
Treibstoffes in Deutschland,” Wehrtechnische
Monatshefte, Nr. 2 (1936), T-77/425 (Wi/IF 5.3444).
166
Without disputing the “polycratic” nature of the Third Reich, as
Williamson Murray observes, “[although] there
might have been serious squabbles between Göring, Schacht, and Thomas
through the [prewar] period, it is clear
that they as well as their bureaucratic organizations worked
wholeheartedly toward the resurrection of German
military power.” Murray, Balance of Power, 25-27 (quotation from pg. 27).

402
reason why Germany could not expand its petroleum supply even more than
it did had less to with an
actual scarcity of petroleum than material constraints – namely steel,
labor, and hard currency.
In retrospect, one cannot fail to be impressed by the Third Reich’s
success in freeing itself from
overseas oil imports. That the Third Reich’s ability to wage war after
1939 depended on a series of
fortuitous developments (new discoveries in Austria and imports from the
Soviet Union) does not change
this.167 In 1938, the country imported 5,107,000 tons, more than half of
which came just from the United
States and Venezuela, against a total consumption of 7,117,000 tons.168
Once the war broke out, the Reich
transitioned quickly to relying entirely on its own production and
overland imports. It is also worthwhile
to recall one fundamental point: there was not enough crude oil in Europe
to fuel any major industrialized
nation’s war effort, hence the Continent’s large and increasing import
figure. In 1913, Britain, France,
Germany, and Italy imported around 4,493,000 tons of petroleum. By 1931,
in the depths of the
Depression, the figure was 16,814,000 tons.169 In one of the more
remarkable feats of engineering in the
modern era, Germany expanded its domestic supply virtually out of thin
air. Not a lot, but certainly
enough for it to exploit its relative military advantage in 1939-41.
It is also true that the results never lived up the optimistic
predictions of men such as Krauch.170 Even
under the best-case scenario, exemplified by the Krauch Plan of 1938,
Germany would produce only
11,000,000 tons of petroleum products by 1944 against an estimated demand
of 14,000,000 tons.171 To

167

Indeed, expanded imports from Romania and the Soviet Union comprised
roughly 16% of Germany’s
consumption in 1940. Karlsch and Stokes, Faktor Öl, 205 , 208.
168
OKW/OKH, “Mineralöl-Statistik,” no date, T-77/658 (Wi/VI.109)
169
G. Heberlein, “Deutscher Kraftstoff,” Deutsche Wehr, Nr. 6./7. (38.)
Jahrgang (07 February 1934).
170
Although, as of February 1944, the Germans still had every intention of
reaching Krauch’s production targets
(11,700,000 tons, of which 7,200,000 would be synthetic), albeit in 1945.
“Probleme der Mineralölversorgung unter
besonderer Berücksichtigung der Wehrmacht,” 14 February 1944, no author
(probably the Wehrwirtschaftsstab,
successor to WiRüAmt after 1942), T-77/90 (Wi/IF 5.399).
171
RWA, Abt. F 7/P 7, “Neuer Mineralölplan (Erläuterungen),” 12 July 1938,
T-77/423 (Wi/IF 5.3398). Total
German petroleum production in 1943 (the last full year of operations
before Allied bombers blasted the synthetic
fuel plants) was only 7,600,000 tons and lagged considerably behind
Krauch’s estimates from 1938/39. After adding
imports (2,200,000 tons, which was 600,000 tons less than the 1941
figure) and booty, Germany’s total petroleum
supply amounted to only 10,000,000 tons. Jonas Scherner, “Bericht zur
deutschen Wirtschaftslage 1943/44: Eine
Bilanz des Reichsministeriums für Rüstung und Kriegsproduktion über die
Entwicklung der deutschen
Kriegswirtschaft bis Sommer 1944,” Vierteljahrshefte für Zeitgeschichte
55: 3 (2007): 522. According to a more
detailed set of statistics, German output had increased from 5,641,230
tons to 7,442,455 in just two years (19411943). OKW/Fwi Amt/Abt. Min.
Öl/1c, Az. 66 b 3430, “Gesamt-Mineralölerzeugung 1940-1943,” Quelle:

403
illustrate how modest Krauch’s expectations were, consider that,
according the RWA’s calculations, the
Royal Navy alone would consume more fuel oil (12,000,000 tons) than
Germany would petroleum by the
end of the Krauch Plan.172 In 1943, the United States produced almost
228,000,000 tons worth of liquid
hydrocarbons, and its daily average that year (roughly 625,000 tons) was
two-thirds of the monthly
average projected by the RWA.173 Soviet production on the eve of the war
(31,000,000 tons per year)
would have been equivalent on a per capita basis with that of Germany by
the end of the Krauch Plan, but
that left aside the fact that the Soviet Union boasted of massive
reserves and was capable of boosting
output considerably with additional investment.174 Even Britain, which
lacked Germany’s tiny domestic
crude oil production, could easily satisfy its prewar estimates for
annual wartime consumption
(29,000,000 tons) from a variety of overseas sources stretching from the
Western Hemisphere to the
Middle East and the Dutch East Indies (the only constraints being
logistical, but even that problem was
not crippling as long as the United States was supportive).175
Krauch’s colleague, Thomas, complained incessantly during the war that
the regime had never taken
the expansion of Germany’s raw material production as seriously as it
should have, preferring instead to
placate the Führer by focusing on weapons production.176 The results were
nonetheless remarkable: In
1936, Germany produced only 1,554,000 tons of petroleum, and this figure
had increased by less than
50% two years later. After 1938, however, production rocketed upward,
from 2,281,000 tons to 7,600,000
Planungsamt Hpt. Abt. Statistik, October 1944, T-77/341 (Wi/IF 5.2164,
2687), Anlage 29i to: “Die Arbeiten des
WiRüAmtes.” Anlagen 2b-h provide a more thorough breakdown by source and
type of product between 1939 and
1943.
172
RWA, “Verzögerung im wehrwirtschaftlichen neuen Erzeugungsplan vom 12.
Juli 1938 durch verringerte
Stahlzuteilung,” 29 November 1938, NARA, RG 238, T-301/73 (NI-8838). In
fact, on the eve of hostilities, the
Royal Navy estimated its annual wartime requirements of fuel oil at
7,000,000 tons, which was roughly double
Germany’s domestic crude and synthetic production in 1939. J. Payton-
Smith, Oil: A Study of War-time Policy and
Administration (London: HMSO, 1971), 61.
173
Everette Lee DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum
Statistics (Dallas: DeGolyer and
MacNaughton, 2004), 20.
174
RfB, Die wichtigsten Lagerstätten der Erde, Heft 4: Erdöl in Rußland
(Berlin, 1941), LOC.
175
J.J. Llewellin (Chairman of the Oil Board, Committee of Imperial
Defence), “Oil Board: Thirteenth Annual
Report,” 24 January 1939, O.B. 294 (also C.I.D. Paper No. 1529-B), BNA,
CAB 50/7.
176
As Germany troops plunged headlong toward the Don River in July 1942,
Thomas warned Göring “that the day
will come, when responsibility for the inadequate expansion of petroleum
production will be sought. I have always
held to the position, which WiRüAmt has likewise demanded for years, that
the expansion of petroleum facilities
enjoy a higher level of priority than has hitherto been the case.” Chef
WiAmt, Aktennotiz, 06 July 1942, Imperial
War Museum (Duxford), Foreign Documents Collection (hereafter cited as:
IWM, FD) 4809/45.

404
tons by 1943, only slightly behind the RWA’s target figure (8,350,000
tons). It would therefore be
churlish to deny that the regime had, as one RWA retrospective analysis
of June 1940 claimed,
“transformed” Germany’s petroleum position by comparison to the
“seemingly hopeless situation of the
years prior to 1936.”177 By 1941, Germany produced approximately 75% of
its requirements, as opposed
to only 31% in 1936. Annual petroleum production had risen 342% between
1936 and 1942 (1,790,000
tons to 6,120,000 tons), and the production of aviation fuel by 579%
(76,000 tons to 1,200,000 tons),
during the same period.178 Germany’s achievements were qualitative as
well as quantitative, for the Reich
also achieved self-sufficiency in the production of high-octane aviation
fuel and specialized lubricants. 179
These were remarkable accomplishments considering that the synthetic fuel
industry had to compete
for resources with a host of other vital economic priorities, including
munitions production. In fact, except
for the first three quarters of 1939, Krauch never received the steel
allocation he needed in order “to
realize all of the technical possibilities at hand.”180 But even though
synthetic output stalled below the
targets set by Krauch, better than expected crude oil production – which
hit a peak of 1,989,000 tons in
Greater Germany in 1944 – captured supplies, booty extracted from the
occupied territories, new sources
such as Hungary, further reductions in the fuel allocation for occupation
and reserve troops, and existing
177

RWA, “Die deutsche Rohstoffversorgung durch den Vierjahresplan,” 20 June

1940, T-84/216 (EAP 66-c-1262/29).
178
There are a variety of primary sources that give good overviews of
Germany’s successes in boosting its
petroleum production after 1933. For a sampling, see: RWA, “Zuwachs an
Mineralöl-Kapazität rein inländischer
Erzeugung,” 09 January 1940, T-77/429 (Wi/IF 5.3558); RWA,
“Treibstoffversorgung,” 15 January 1940, no author
(handwritten notation reads: “Anlage zum Schreiben an Staatssekr. Körner
v. 16.1.40.”), T-84/216 (EAP 66-c-1262/29); RWA, “Die deutsche
Rohstoffversorgung durch den Vierjahresplan,” 20 June 1940, T-84/216 (EAP
66-c12-62/29); RWA, Minöl. P Dr. So/Gu, “Entwicklung der heimischen
Mineralöl-Produktion in den Jahren 19361940,” 15 October 1940, T-84/216
(EAP 66-c-12-62/29); “Vierjahresplan: Industrielle Rohstoffe: Stand vom
30. 1.
1941 (Unterlagen für den Vortrag Prof. Dr. C. Krauch vor den
Führungsstäben Wirtschaft am 30. 1. 1941),” BA-B,
R 3112/173; Dienststelle des Beauftragten für den Vierjahresplan,
“Ergebnisse der Vierjahresplan-Arbeit: Ein
Kurzbericht nach dem Stande vom Früjahr 1942,” BA-B, R 26 I/18; VJP,
“Chemischer Erzeugungsplan: Steigerung
der Erzeugung,” 10 June 1942, T-77/649 (Wi/VI. 34); Dr. R./G. (Gerhard
Ritter), “Mineralöl: Vortrag vor den
Mitgliedern der Parteikanzlei München am 21. 7. 1942,” BA-B, R 3112/175;
Aktenvermerk, 03 August 1944, IWM,
FD 4809/45; OKW, Feldwirtschaftsamt (Bearbeiter: Dr. W. Tomberg),
“Wehrwirtschaftliche Erkenntnisse von 5
Kriegsjahren,” Abgeschlossen: November 1944, T-77/429 (Wi/IF 5.3517); and
der Beauftragte für die Förderung
der Erdölgewinnung (Bentz) an das OKW (WiAmt M/3), DB-080/45 Btz/Schr.,
“Betr.: Entwicklung der deutschen
Erdölförderung,” 29 January 1945, IWM, FD 4809/45.
179
Carl Krauch, “Die Kriegsleistungen der chemischen Erzeugung und ihre
kommenden Aufgaben,” Vierjahresplan,
1942: I.
180
RWA, “Treibstoffversorgung,” 15 January 1940, no author (handwritten
notation reads: “Anlage zum Schreiben
an Staatssekr. Körner v. 16.1.40.”), T-84/216 (EAP 66-c-12-62/29).

405
reserves tided Germany over until the spring of 1944.181 Thereafter,
Allied bombers finally began
systematically targeting the Reich’s synthetic fuel industry and oil
production in Romania, reducing
hydrogenation output by over 90% and exports from Romania by two-thirds
in just three months.182
Although control of foreign sources of oil became a vital war aim after
1940, German policymakers
never wavered from their belief that the Third Reich’s only indispensable
source of petroleum was the
synthetic fuel industry.183 The second VJP began in September 1940 and
stressed the need for “the
systematic rationalization and mechanization of the entirety of German
economic life.”184 According to
the RWA, besides continuing to stockpile reserves sufficient to cover six
months of fuel consumption
(estimated at 4,900,000 tons), “The objective must be to produce as much
petroleum… from pure German
supplies, that is to say coal, German crude oil, oil shale and the like,
as the greater German military and
war economy continuously require in a war.” Germany’s synthetic fuel
plants would also be constructed
in such a fashion as to allow them to process either coal or crude oil as
a feedstock. Under existing
planning, Germany would seek to produce roughly 533,000 tons per month of
petroleum products per
month to maximize aviation fuel supplies, or 548,000 tons per month if
diesel output was emphasized.
Future mobilization demand would probably reach 845,000 tons per month,
and the OKW would make
the final determination as to whether this gap would closed by either
further expansion of synthetic fuel

181

The increase in crude oil production was primarily the result of Austria
(now Ostmark). Production within the
“Altreich” actually peaked in 1940, but the output of the Ostmark more
than compensated, increasing from 144,354
tons in 1939 to 1,103,526 tons in 1943. “Erdölgewinnung in Deutschland
von 1934 – 1943 t,” Quelle: Deutsches
Institut für Wirtschaftsforschung, October 1944, T-77/341 (Wi/IF 5.2164,
2687), Anlage 24 to: “Die Arbeiten des
WiRüAmtes.”
182
For a summary, see: Stokes, “Nazi Oil Industry,” 272-276. For more
detailed assessments of the Allied strategic
bombing campaign against the German petroleum industry, see: Assistant
Chief of Staff, A2, Headquarters United
States Air Forces in Europe, “The Contribution of Air Power to the Defeat
of Germany,” 07 August 1945 (esp.
Appendix E: “The Attack on Enemy Oil Production and Distribution”),
Library of Congress, Papers of Carl Spaatz,
Boxes 272-273; USSBS, Effects of Strategic Bombing on the German War
Economy (Washington, DC: U.S. GPO,
1945), 73-83; USSBS, German Oil Industry, Ministerial Report Team 78
(Washington, DC: U.S. GPO, 1945), 5168; USSBS, Oil Division, Final Report
(Washington, DC: U.S. GPO, 1945); and USSBS, Over-all Report
(European War) (Washington, DC: U.S. GPO, 1945), 39-45.
183
See especially: Dr. R./G., “Mineralöl: Vortrag vor den Mitgliedern der
Parteikanzlei München am 21. 7. 1942,”
BA-B, R 3112/175.
184
Staatssekretär Körner, “Der zweite Vierjahresplan,” Vierjahresplan, 1941:
I/III. Hitler formally renewed
Göring’s mandate in October 1940 “with the special assignment of adapting
it [the VJP] to the demands of war.”
“Decree on the Further Duties of the Plenipotentiary for the Four Year
Plan, 18 October 1940,” Translation of
Document NI-125, NMT, xii: 535.

406
capacity or imports.185 The major point of departure between the VJP of
1936 and that of 1940 was each
plan’s long-term objectives. The first VJP would only satisfy Germany’s
prewar military and civilian
consumption. The second VJP aimed at no less than meeting the petroleum
requirements for all of Axis
Europe “in the struggle against the Anglo-Saxon world and Soviet Russia
[…].”186
It could be argued that Germany did not have a “grand strategy” for oil
because there was really only
one path to choose: synthetic fuel and imports from Romania. After all,
if Germany was sure to lose
access to overseas oil under any plausible war scenario, it had no
options besides these two. Moreover,
there was no way for the Germans to exploit any possible gains during the
war due to a variety of
geographical, technical, economic, and raw materials obstacles, so why
bother developing a grand
strategy like the British and the Americans? If Germany won the war, it
could dictate whatever terms it
liked. Grand strategy is a luxury for great powers that have both the
means and the ambition, and the
Third Reich was at a clear disadvantage when it came to the former.
Germany’s petroleum supply
(including Romania) and consumption was trivial by comparison to Britain,
even though Germany’s total
GDP in 1938 (not including Austria) was 24% larger than that of the
United Kingdom ($351.4 billion vs.
$284.2 billion).187 By 1941, the Anglo-American coalition produced
twenty-two times more petroleum
than Axis Europe (78.9% vs. 3.5% of global production, or 295,000,000
tons vs. 10,400,000 tons). Even
occupying the Caucasus would only reduce the deficit to 5.4: 1.188 This
disparity did not prevent the
Germans from driving to the suburbs of Moscow.

185

RWA, “Gesichtspunkte zur Weiterführung der Massnahman des

Vierjahresplanes nach dem Kriege,” 05
September 1940, NARA, RG 238, T-301/73 (NI-8845). Emphasis in the
original. RWA also urged the creation of an
intellectual infrastructure within German universities and technical
institutes to continue the mission of the VJP once
the existing development program had been completed: “Gedanken über die
weitere Entwicklung der Arbeiten zur
Sicherung der deutschen Rohstoff-Versorgung nach Ende des
Vierjahresplanes,” 22 September 1940, no author (the
NARA finding aid indicates that the memorandum was found in the files of
Ritter of the RWA), T-77/634 (Wi/IV.
258).
186
Carl Krauch, “Die Kriegsleistungen der chemischen Erzeugung und ihre
kommenden Aufgaben,” Vierjahresplan,
1942: I
187
Mark Harrison, “The Economics of World War II: An Overview,” in: The
Economics of World War II: Six Great
Powers in International Comparison, ed. Mark Harrison (Cambridge:
Cambridge University Press, 1998), 3.
188
Statistisches Reichsamt, Abteilung VIII, “Produktionskapazitäten im
Angelsächsischen und im Europäischen
Wirtschaftsraum,” February 1942, T-84/46 (EAP 66-c-2-34/7).

407
Germany did not place all of its eggs into the synthetic basket – to
believe that it did would be to
confuse the propaganda of the VJP for reality. The Germans never aspired
to autarky, and the synthetic
program competed for resources just like every other sub-sector of the
economy. The policy that had
emerged by 1939 (synthetics, stockpiling, and overland imports) was
comprised of equal parts
technological fortitude and improvisation, with a healthy dollop of
optimism. But it was not the product
of any consistent “grand strategy.” Rather, Germany’s petroleum policy
evolved fitfully in response to
various economic, political, and technological challenges. Most
importantly, its aims were limited –
synthetic and domestic production was a means to an end: “freedom of
maneuver for the armed forces
until the expected conquest of the greater oil resources of the Caucasus
and the Near East.”189 This policy
initially exceeded expectations, such that Germany even ran a minor
surplus in 1940. German
policymakers had correctly diagnosed their relative weaknesses and
adopted policies that proved capable
of allowing their military to create facts on the ground conducive to
thinking in grand strategic terms. It
was at the moment of its greatest triumph, however, that the Third Reich
realized that its existing supplies
were woefully inadequate for purposes of a true world power. Europe was a
dead-end, as cursed by the
latest incarnation of the hydrocarbon revolution as it had been blessed
by the first. Germany would have
to look east if it was to find enough oil to win the battles yet to come.

189

Karlsch and Stokes, Faktor Öl, 243.

408
Map 7: Foreign Economic Administration, Enemy Oil Committee, “The Western
Axis Oil Position,” 1943
Source: National Archives and Records Administration (NARA), Record Group
59: General Records of
the Department of State (RG 59), Lot File 77D141, Records of the
Petroleum Division (PED), Box 27.
409
Chapter VI
Crisis and Opportunity: Germany, 1939-1941
Control of foreign oilfields was a major objective of German strategic
planning during the zenith of
the German war effort between the fall of France and the Stalingrad
debacle.1 This chapter will examine
how the seizure of Soviet and even Middle Eastern oil figured into the
thinking of German policymakers
until the failure of Operation Barbarossa. By relying excessively on the
findings of the United States
Bombing Survey, the existing English-language scholarship on oil and
German strategy has provided a
distorted picture of German of oil policy by focusing on Germany’s
synthetic fuel industry, which only
contributed 26.8% of Germany’s petroleum supply between 1939 and 1943,
compared to 32.6% from
imports, 16.1% from German crude oil production, and the remainder from
various alternative fuel
sources such as benzol.2 Readers of such works, therefore, learn nothing
of Germany’s establishment of
Kontinentale Öl A.G. (Konti), a joint-public/private and vertically
integrated major oil company in 1941
that would seize the oilfields of Continental Europe, the Caucasus, and
the Middle East.3
The only way to gain a nuanced appreciation of the scope of German oil
ambitions during the Second
World War is to consult the small, body of German-language secondary
sources on the subject.4 The preeminent German scholar on the subject
argues that the Third Reich planned to establish a “crude oil
empire” that extended beyond the Caucasus into the Middle East. Central
to his argument that Middle
Eastern oil represented a discrete objective of National Socialist
Germany is the fact that the Third Reich
planned a grand “Caucasus Pincer” following the defeat of the Soviet
Union, whereby German forces in
the Caucasus would overrun Iran and Iraq from the north in concert with
the Afrikakorps, which would

Unless otherwise indicated, all German-language sources are from the

National Archives and Records
Administration, Record Group 242: Foreign Records Seized (NARA, RG 242).
Since all documents included within
RG 242 are available only on microfilm, I have used the following
citation format: Microfilm Publication No./Reel
No. (Item No.).
2
Gottfried Plumpe, Die I.G. Farbenindustrie AG: Wirtschaft, Technik und
Politik (Berlin: Duncker & Humblot,
1990), 287-289.
3
Partial exceptions (based on a narrow documentary foundation) include:
Peter Hayes, Industry and Ideology: IG
Farben in the Nazi Era (Cambridge: Cambridge University Press, 1987),
255-257; and Richard Overy, Goering:
The Iron Man (London: Routledge & Kegan Paul, 1984), 119 and 132-133.
4
See the appendix to this study for additional discussion of secondary
sources.
410
strike against the Suez Canal, and German forces moving through Turkey
into the Near East.5 Another
historian refers to this conception of German grand strategy as the
“Weltblitzkrieg.” The first step was the
defeat of the Soviet Union, then a pincer-attack against the British
position in the Middle East combined
with a Japanese assault in SE Asia directed against both Britain
(Singapore and the Indian Ocean) and the
United States (the Philippines), and finally the closure of the Western
Mediterranean through the capture
of Gibraltar and occupation of French North Africa. The aim would be, as
Adolf Hitler informed Alfred
Jodl (Chief of Operations at the Armed Forces High Command – Chef des
Wehrmachtsführungsstabes,
Oberkommando der Wehrmacht, OKW) in December 1940, to “solve all
Continental European problems,
since from 1942 the United States would be in a position to intervene.”6
An examination of German economic and military records bears out the
contention of East German
historiography that the control of foreign oilfields was a central
element of the Third Reich’s war aims.
The Four-Year Plan (Vierjahresplan, VJP) of 1936 went beyond promoting
autarky within Germany: the
implicit aim was always to create the economic and military prerequisites
to establish a Germandominated “Greater Economic Area”
(Groβraumwirtschaft) by force.7 When Hitler spoke of “autarky,”
what he actually meant was economic self-sufficiency within “Europe” –
which included both the

Dietrich Eichholtz, Krieg um Öl: Ein Erdölimperium als deutsches

Kriegsziel, 1938-1943 (Leipzig: Leigziger
Universitätsverlag, 2006), 80-121. Hitler laid out such a strategy in his
Directive No. 32 of June 1941: The Fuehrer
and Supreme Commander of the Armed Forces, OKW/WFSt/Abt. L (I Op.) Nr.
44886/41 g.K. Chefs., “Directive
No. 32: Preparations for the Period after ‘Barbarossa,’” 11 June 1941,
reprinted in: U.S. Department of the Navy,
Office of Naval Intelligence, Fuehrer Directives and other Top-Level
Directives of the German Armed Forces,
1939-1941 (Washington, DC: 1948), 186-189. A revised version of the
directive, which elaborated upon the section
pertaining to the assault against Britain’s position in the Mediterranean
and Middle East, and released on 30 June
1940, made reference to “a concentric attack which is to be launched from
Libya through Egypt, from Bulgaria
through Turkey, and possibly from Transcaucasia through Iran.” The
revised directive of 30 June 1941 does not
differ from the earlier 11 June draft in any significant manner. The two
versions may be compared against one
another in: The Führer and Supreme Commander of the Wehrmacht,
OKW/WFSt/Abt. L (I Op.) No. 44886/41 g. K.
Chefsache, “Directive No. 32 Preparations for the Time after Barbarossa,”
11 June 1941, Document No. 617 in:
Auswärtiges Amt (AA), Documents on German Foreign Policy, 1918-1945,
Series D (Washington, DC: U.S. GPO,
1949-1983), xii: 1012-1016 – hereafter cited as: DGFP (D).
6
Andreas Hillgruber, “Der Faktor Amerika in Hitlers Strategie, 1938-1941,”
in: Nationalsozialistische
Aussenpolitik, ed. Wolfgang Michalka (Darmstadt: Wissenschaftliche
Buchgesellschaft, 1978), 513-515. See also:
Holger Herwig, “Prelude to Weltblitzkrieg: Germany’s Naval Policy toward
the United States of America, 19391941,” Journal of Modern History 43: 4
(1971): 662.
7
Richard Overy, “The Four Year Plan,” European Yearbook of Business
History (2000): 87-106 (esp. 93-95).

411
Continent and European Russia.8 In view of the Continent’s resource
poverty, Germany could not rest
easy even after the collapse of France in June 1940. European oil
production (even including European
Russia) was woefully inadequate. According to one 1943 book by an
influential German economic
analyst, total European production including the Soviet Union in 1938 was
only 36,800,000 tons against
65,200,000 tons of consumption (including Britain), which worked out to a
per capita consumption of 90
kg (excluding the Soviet Union) compared to 550 kg in Canada and 1,130 kg
in the United States.9
Hitler himself admitted to Fritz Todt (Albert Speer’s predecessor as
Armaments Minister) on the eve
of Operation Barbarossa: “The course of the war shows that we went too
far in our autarchical endeavors.
It is impossible, to try and manufacture everything we lack, by synthetic
procedures […]. One has to
choose another way. What one does not have, but needs, one must conquer.”
He added that the manpower
requirements of maintaining the synthetic fuel facilities represented a
tremendous drain on the German
war economy, and that taking the needed oil by force was, in the long
run, a cheaper alternative.
Ultimately, Hitler concluded, “[the] aim must also be to secure all
territories, which are of special interest
to us for the war economy, by conquering them.”10 This was not a simple
exercise in imperial
aggrandizement: according to Hitler’s Social Darwinist worldview
(Weltanschauung), a nation’s health
depended upon its supply of raw materials.11 “Despite all its efforts,”
he explained to Economics Minister
Walter Funk in October 1941, “the side that hasn’t got the natural riches
must end by going under.”

Norman Cameron and R.H. Stevens, trans., Hitler’s Table Talk: His Private
Conversations (New York: Enigma,
2000): No. 25 (25 September 1941) and No. 35 (13 October 1941).
9
Ferdinand Friedensburg, Die Rohstoffe und Energiequellen im neuen Europa
(Berlin: G. Stalling, 1943), 140-150.
Friedensburg made no reference to occupying the oilfields of either the
Caucasus or the Middle East in order to
redress Europe’s oil deficit. Rather, he urged that the substitution of
coal for oil whenever possible. Friedensburg
also advocated on behalf of more intensive development of Continental oil
reserves and synthetic production, but
counseled that at least partial dependence on overseas imports was
inevitable.
10
Chief of Agency for Armament Economy (General Georg Thomas),
“Memorandum,” 20 June 1941, Partial
Translation of Document 1456-PS, reprinted in: Office of United States
Chief of Counsel for Prosecution of Axis
Criminality, Nazi Conspiracy and Aggression (Washington, DC: U.S. GPO,
1946), iv: 21 – hereafter cited as: NCA.
For the original German document, see: International Military Tribunal,
Trial of the Major War Criminals
(Nuremberg, 1947-1949), xxvii: 220-221 – hereafter cited as: IMT.
11
Which probably explains his chagrin at having to cajole the Romanians for
oil: “These people for whom chance
has suddenly put a petroleum well under their feet… it’s contrary to the
whole natural order!” Table Talk: No. 161
(26 February 1942).

412
Human conflict was the inevitable byproduct of the scramble for finite
resources, which Hitler described
as being “in the natural order of things – for it makes for the survival
of the fittest.”12
In contrast to the rather programmatic assessment of National Socialist
petroleum strategy offered by
East German historians (who nonetheless pioneered the study of German oil
imperialism), this chapter
will argue that German plans to seize the oilfields of the Caucasus and
later of the Middle East were as
much a product of a wartime petroleum shortage as of any grand
strategy.13 Germany’s stunning military
successes during the first two years of the war were accompanied by a
worsening supply position that
began to manifest itself as early as the winter of 1939/40, when
inclement weather hampered imports
from Romania.14 The occupation of Western Europe only exacerbated the
problem: Germany’s existing
supply regime was barely adequate to satisfy its own needs. Satisfying
occupied Europe’s requirements
was out of the question. In that sense, Germany’s escalating oil crisis
after the summer of 1940 mirrored
the Third Reich’s wider strategic dilemma after Britain’s refusal to seek
terms in July 1940. Germany had
won a tremendous strategic victory, but victory remained out of reach.
The question therefore arose of where Germany could hope to satisfy its
immediate and long-term
requirements, since Romania (its most important supplier) was incapable
of doing anything more than
covering Germany’s existing deficit, much less that of Italy and France.
German analysts and
12

Table Talk: No. 35 (13 October 1941).

For a critique of Eichholtz, see my review of Deutsche Ölpolitik im
Zeitalter der Weltkriege (Leipzig: Leipziger
Universitätsverlag, 2011) in the Zeitschrift für Geschichtswissenschaft
59: 7 (2011): 680-681. For a more nuanced
analysis of German oil ambitions in the Middle East that conveys Berlin’s
ambivalence regarding the region and the
contradictory considerations that swayed in policy from one direction to
another (most notably, the need to placate
German’s Axis partner, Italy, which also had expansive claims in the
Middle East), see: Helmut Mejcher, Die Politik
und das Öl: II. Die Teilung der Welt, 1938-1950 (Stuttgart: Klett-Cotta,
1990), 29-30, 50-63.
14
For contemporaneous overviews, see: Wehrwirtschafts- und Rüstungsamt
(WiRüAmt), Stab Z/SR, “Die deutsche
Treibstoffversorgung im Kriege. Abgeschlossen um die Jahreswende 1941/42.
Versuch einer Darlegung der
Gesamtproblematik unserer Treibstoffversorgung im Kriege unter Verzicht
auf die Darstellung der Einzelheiten,” 16
February 1942, T-77/668 (Wi/VI. 216). Key WiRüAmt papers circulated to
higher levels concerning the supply and
transportation situation between 1940 and May 1941 are summarized in:
WiRüAmt/Stab I b 5, “Vortragsnotizen und
Exposés WiRüAmt an höhere Stellen über die Betriebstofflage,” [?] June
1941; and WiRüAmt/Stab I b 5,
“Schreiben WiRüAmt an andere Stellen zur Mineralöl-Transportlage,” 06
June 1941; both in: Imperial War
Museum (Duxford), Foreign Documents Collection (hereafter cited as: IWM,
FD) 4809/45. For a running
commentary on Germany’s petroleum position between September 1939 and
November 1940, see: Oberkommando
der Wehrmacht (OKW), WiRüAmt, Stab Ib 5, “Abschriften nur
Mineralölbetreffend aus Interne Monatsberichte zur
deutschen Rüstungswirtschaft (Auswertung der Kriegstagebücher WiRüAmt
Stab, W Rü and W Ro),” no date, T77/668 (Wi/VI. 216). For the period
between January 1941 and September 1942, see: “Auzug aus KTB
WiRüAmt/Stab (nur Mineralöl betreffend,” no date, T-77/668 (Wi/VI. 216).
13

413
policymakers such as Ernst Rudolf Fischer (head of the Petroleum Division
at the Ministry of Economics
– Reichswirtschaftsministerium, RWM), Alfred Bentz (Hermann Göring’s
Plenipotentiary for Crude Oil
Production), and Carl Krauch (Plenipotentiary for Special Matters
Pertaining to Synthetic Production),
who cumulatively shaped German oil policy between 1938 and 1942, all
recognized that the long-term
prospects for oil production in the Middle East were greater than
anywhere else in the world.15
Contemporary documents also highlight the fact that the Germans
considered the Caucasus and the
Middle East to be part of the same geological formation and geographic
area.16
Capturing and exploiting the oilfields of the Middle East was not a
simple matter. The logistical
obstacles for German military forces were immense, possibly
insurmountable without concurrent attacks
from Egypt, Turkey, and the Caucasus. Capturing the oilfields would only
lead to new problems.
Extracting, transporting, and refining Middle Eastern oil would require
massive expenditures of capital
and resources, not to mention long-term peace and security, during which
the local oil infrastructure could
be built (or, as the case may be, rebuilt).17 Germany’s resources would
be stretched to the limit simply
trying to restoring production in the Caucasus, and it made no sense to
fritter away resources in Iraq or
Iran, especially since doing so would not decisively alter the strategic
calculus in Germany’s favor by
knocking Britain out of the war. By contrast, the occupation of the
Caucasian oilfields, although also a
costly proposition, would demonstrably improve Germany’s strategic
outlook by both providing it with
15

For useful lists of the key personnel within the German Government,
private oil companies, and research institutes
responsible for shaping Germany’s oil policy during the first-half of the
Second World War, see: “Wichtige
Dienststellen der deutschen Mineralölwirtschaft,” no date or author, T-
77/86 (Wi/IF 5.384); Wi VI d, “Die
wichtigsten öffentl. Stellen, Firmen u. Persönlichkeiten der deutschen
Erdölwirtschaft,” 18 June 1941, T-77/1401
(Wi/II. 2-3); and “Reichswirtschaftsministerium, Abtl. II Min.Öl.
(Mineralölwirtschaft) Leiter: Dr. Ernst Rudolf
Fischer,” no date or author, T-77/1401 (Wi/II. 2-3).
16
As one important OKW report explained, the Caucasus “belong geologically
within the realm of the crude oil
deposits of the Near Orient.” OKW, Az. 31/34/42/43/45 WiRüAmt/Wi VI, Nr.
17109/40g, “Das Erdöl des Nahen
Orients und des Kaukasusgebietes,” 01 October 1940, T-77/646 (Wi/VI. 19).
17
Even superb works such as Milan Hauner’s mis-titled India in Axis
Strategy: Germany, Japan, and Indian
Nationalists in the Second World War (Stuttgart: Klett-Cotta, 1981), or
Alan Levine’s provocative synthesis, “Was
World War II a Near-run Thing?” Journal of Strategic Studies 8: 1 (1985):
57-59, overlook the many hurdles to
either a major German offensive in the Middle East or the effective
exploitation of the region’s oil. Both men appear
to take their cues from Field Marshal Erwin Rommel, who recognized the
strategic opportunities in the Middle East
but was oblivious of the logistical handicaps. B.H. Liddell Hart, ed.,
The Rommel Papers (New York: Harcourt
Bruce, 1953), 511-515. I am grateful to Scott Boorman for drawing my
attention to this source. For a necessary
corrective, see: Martin Van Creveld, Supplying War: Logistics from
Wallenstein to Patton (New York: Cambridge
University Press, 2004), 181-201.

414
an ample source of oil and eliminating one of its key rivals. With the
Soviet Union out of the way,
Germany would be free to overrun the lynchpin of Britain’s entire
empire.18 The loss of the Middle East
would effectively split the empire into two, leaving Allied forces west
of Suez unable to support those to
the east, and vice versa. Its successful completion would allow the
oilfields of the region – whose value
did not go unnoticed within German policymaking circles – to fall into
hands of the Axis like ripened
fruit. Planning for the development of such resources, and their future
division between Germany and its
allies would, however, have to wait at least until after the war against
the Soviet Union ended.

18

Both the Army High Command (Oberkommando des Heeres, OKH) and the OKW
completed operational studies
concerning the feasibility of an invasion of the Middle East following
the collapse of the Soviet Union. OKW and
OKH, Op.Abt. (II), “Studie über Operationsmöglichkeiten im Vorderen
Orient,” August 1941, T-78/647 (H 22/315);
and OKW and OKH, “Studie Kaukasus: Operation aus Nordkaukasien über den
Kaukasus und Nordwestiran zur
Inbesitznahme der Pässe Rewandus and Khanaqin an der iranisch-irakischen
Grenze,” no date, T-78/336 (H
22/364a); reprinted as Document No. 84 in: Helmuth Greiner and Percy
Ernst Schramm, ed., Kriegstagebuch des
Oberkommandos der Wehrmacht (Frankfurt am Main: Bernard & Graefe, 1961-
1965), i: 1038-1040 – hereafter cited
as: OKW, KTB. The chronology of the OKW’s war diary (KTB, i: 1233) dates
the report to 24 October 1941. The
memorandum of conversation from the General Staff meeting of 24 October
1941 to discuss the study is appended
to the original report (also reprinted as Document 105 in: OKW, KTB, i:
1072-1073). These plans were rendered
moot when Hitler called off the invasion of the Northern Caucasus in 1941
on 07 November 1941. Halder Diary: 07
November 1941. When citing from Halder’s diary, I have relied upon the
version reproduced as: Arnold Lissance,
ed., War Journal of Franz Halder (1950), retrieved from the Combined Arms
Research Library, Digital Library
(hereafter cited as: CARL). Following the war, Alfred Jodl, the chief of
operations at the OKW, confirmed to U.S.
military intelligence that “[it] was the intention of the Fuhrer [sic] to
break the Southern Russian front with the final
objective of denying the Caucasian oilfields to Russia. When these
operations had been successfully completed, it
was intended to advance towards Tiflis and subsequently join up with
Rommel.” Supreme Headquarters, Allied
Expeditionary Force, Office of the Assistant Chief of Staff, G-2
(Intelligence), “Interview between Brigadier Foord
and Colonel General Jodl,” no date, Library of Congress (LOC), Papers of
Carl Spaatz, Box 134.

415
Germany’s Petroleum Position during the First Year of the War, 1939-1940
On the eve of the war, the Defense-Economy Staff (Wehrwirtschaftsstab,
WStb) concluded,
“Germany finds itself still in a position of economic weakness,” in view
of the only partial success of the
VJP. Existing motor fuel stocks were sufficient for only four months of
consumption, and only 2.5
months in the case of diesel fuel. The European Axis powers had a deficit
of 4,000,000 tons of fuel
against an estimated demand of 10,000,000 tons, even assuming that they
extracted the maximum levels
of imports of Romania, Hungary, and Yugoslavia. Again, increasing the
amount of imports was difficult
in view of the transportation bottlenecks and Turkey’s attitude, since
Italy depended upon overseas
imports of Romanian fuel through the Straits.19
The WStb estimated a week into the Polish campaign that, over the first
year of hostilities, Germany
would have to import roughly 3,123,500 tons of fuel and lubricants to
cover the gap between supply and
demand once reserves had been drained.20 On the positive side of the
ledger, a major new supplier to
Germany became available after August 1939: the Soviet Union sent over
600,000 tons of oil to Germany
in 1940 under the terms of the first German-Soviet Commercial Agreement
of February 1940.21 As the
lead German negotiator (Karl Schnurre) explained, by February 1941,
Germany would receive 900,000
tons of petroleum valued at 115,000,000 RM (presumably including the
amount specified in the 1939
Non-Aggression Pact).22 Overall, if one included the figures covered
under the August 1939 credit
agreement (32,000 tons) and Germany’s share of Galician oil production
under the terms of the MolotovRibbentrop Pact (102,000 tons), the figure
increased to over 1,100,000 tons of petroleum. As of 01
19

“Stand der wehrwirtschaftlichen Lage Deutschlands,” no author or date

(handwritten notation indicates the minute
was presented by Thomas to generals Walter Brauchitsch and Wilhelm Keitel
– Oberbefehlshaber des Heeres and
Chef des OKW, respectively – on 09 August 1939), T-77/312 (Wi/IF 5.1788).
20
W Ro I Nr. 4596 g, 66 p 2010 Is, “Einfuhrbedarf Deutschland in den ersten
12 Mob-Monaten,” 09 September
1939, IWM, FD 4809/45.
21
OKW WiRüAmt/Ro, Az. 11 k 2209 V 1s [?], “Mineralöl-Einfuhr im 1. Und 2.
Kriegsjahr,” 22 December 1941,
IWM 4809/45. There is no space to summarize the complex negotiations
leading up to the signing of the GermanSoviet Economic Agreement of 11
February 1940. For the text of the agreement, see: Document No. 607 in:
DGFP
(D), viii: 762-769. The German-Soviet trade in petroleum is summarized,
with little analysis unfortunately, in:
Hartmut Schustereit, “Die Mineralöllieferungen der Sowjetunion an das
Deutsche Reich 1940/41,” Vierteljahrschrift
für Sozial- und Wirtschaftsgeschichte, 67: 3 (1980): 334-353.
22
Memorandum by the Chairman of the German Economic Delegation to the
Soviet Union, W 1027 g. Rs., RM 9 g.
Rs., “The German-Soviet Agreement Signed on February 11, 1940,” 26
February 1940, Document No. 636 in:
DGFP (D), viii: 814-817.

416
October 1940, of the 908,980 tons that the Soviets had contractually
agreed to deliver, only 531,500 tons
had arrived, with an additional 65,000 tons expected that month.23 In
January 1941, the two sides
concluded a new commercial agreement, under which the Soviets would
deliver almost 1,000,000 tons of
petroleum products to Germany between February 1941 and August 1942.24
Imports would be handled by
the Mineralöl-Einfuhr GmbH, a public-private venture that would import
and distribute imported Soviet
petroleum according to the guidance of the Office for Petroleum
(Reichstelle für Mineralöl), the agency
within the RWM responsible for administering internal German consumption
and distribution.25
Disputes over payment and counter deliveries resulted in numerous delays
and ensured that Soviet
exports never quite reached German expectations.26 The inability (or
unwillingness) of the Germans to
deliver the military hardware and raw materials (coal) they had promised
prompted the Soviets to cut off
exports of grain and oil in early-1940. Göring thereafter convened a
high-level meeting of the relevant
military, diplomatic, and economic officials where he reiterated that the
armed services should abandon
their “misgivings,” as “Russian raw materials are absolutely vital to us”
in the event of a “prolonged
war.” The Führer had made “an explicit decision” that “where reciprocal
deliveries to the Russians are
endangered, even German Wehrmacht deliveries must be held back so as to
ensure punctual delivery to

23

“Mineralölbezüge Deutschlands aus der Sowjetunion,” 03 October 1940,

author’s initials illegible (typewritten
notation indicates that it was presented to Carl Clodius, Deputy Chief of
the Commercial Policy Division of the AA
– Handelspolitische Abteilung, HaPol), Politisches Archiv des Auswärtigen
Amtes (PAAA), R 105990. See also:
(WiRüAmt, Ro) V b, “Aktenvermerk über eine Besprechung beim RWM am 22.
Dezember 1939,” 23 December
1939, T-77/671 (Wi/IV. 236).
24
OKW, WiRüAmt (Oberst Dr. Hedler), “Die Mineralöle und die Versorgungslage
im Kriege,” Abgeschlossen
31August 1941, T-77/438 (Wi/IF 5.2726). Ominiously, during an interagency
discussion of the treaty, Schnurre
stressed “that German exports must be guaranteed in the period up to
August 11, 1941, because up to that time the
Soviet side had committed itself to especially large deliveries, which in
part could not be matched until later by
German counterdeliveries.” Document nos. 637 and 640 in: DGFP (D), xi:
1066-1068 and 1070-1072; and “Record
of the Meeting of the Interministerial Committee of February 4, 1941,” zu
Ha. Pol. V a 357, Document No. 13 in:
DGFP (D), xii: 19-21.
25
Kapitän zur See Gottfried Griebel an den Herrn Chef des WiRüAmtes über
Chef Ro., W Ro, Az. 66 b 24 (Va), 05
January 1940, IWM, FD 4809/45.
26
The problems are summarized in: Militärgeschichtliches Forschungsamt
(MGFA), The Attack on the Soviet
Union, vol. 4 of Germany and the Second World War (New York: Oxford
University Press, 1998), 118-136. For
1940, the Ministry of Economics (Reichswirtschaftsministerium, RWM) had
planned on 60,800 tons of imports per
month, but they peaked at 56,286 tons in January and amounted to only
38,261 tons in June. Ro V, Az. 11 k 2209
(Vs), “Mineralöl-Einfuhr aus Ruβland 1941 nach den Planungen des RWM vom
4. 12. 1940,” 11 January 1941; and
OKW WiRüAmt/Ro, Az. 11 k 2209 V 1s [?], “Mineralöl-Einfuhr im 1. Und 2.
Kriegsjahr,” 22 December 1941,
IWM 4809/45.

417
the Russians.”27 Deliveries of Soviet grain and oil did not resume until
09 April 1940, after Göring “had
personally given satisfactory assurances” to Moscow’s representatives.28
Soviet deliveries spiked to the
point of overloading the German railway system soon after the collapse of
France and in the spring of
1941 after reports reached Moscow of a German military build-up along the
German-Soviet border. In
both cases, the Soviets had increased exports to soften their hard line
on political matters, such as the
annexation of the Baltic Republics and Bessarabia in June 1940 and during
Foreign Minister Vyacheslav
Molotov’s disastrous visit to Berlin in November 1940.29 Even assuming
the Allies did not interdict these
supplies by launching an aerial assault on the Caucasus from the Middle
East, imports of Soviet oil could
not fill the gap left by disappointing imports from Romania and higher
than expected consumption after
the Polish campaign.30
27

Memorandum by an Official of the Four Year Plan (Friedrich Gramsch,

Ministerialdirektor), V.P. 5697 g, W 1734
g., 01 April 1940, Document No. 32 in: DGFP (D), ix: 59-61.
28
Document nos. 51 and 70 in: DGFP (D), ix: 82-83, and 106. Commercial
relations between 1939 and 1941 are
summarized in Manfred Zeidler’s “German-Soviet Economic Relations during
the Hitler-Stalin Pact,” in: From
Peace to War: Germany, Soviet Russia and the World, 1939-1941, ed. Bernd,
Wegner (Providence: Berghahn
Books, 1997), 95-111. Zeidler concludes that the Germans received
extremely favorable terms under the 1941
commercial agreement, and that they came out ahead on both the 1940 and
1941 agreements to the tune of
146,000,000 RM (the German deficit vis-à-vis Soviet deliveries). The
overall financial balance was, however,
unfavorable to the Reich if one includes the 1935 and 1939 credit
agreements (a loss of 300,000,000 RM). Wolfgang
Birkenfeld argues that the Germans got the better of the agreement.
Although the Soviets received state-of-the-art
German hardware, it quickly became obsolete, and there was no time for
the Soviet armaments industry to make use
of the new technology, except in the case of machine tools. On the other
hand, the Germans used Soviet raw
materials deliveries to top-up their stockpiles, although Birkenfeld’s
claim that the German supply position was
never stronger than on the eve of Barbarossa is not true in the case of
petroleum. Birkenfeld, “Stalin als
Wirtschaftspartner Hitlers, 1939-1941,” Vierteljahrschrift für Sozial-
und Wirtschaftsgeschichte 53: 4 (1966): 477510. The Germans managed to
import 250,000,000 RM worth of goods from the Middle and Far East via the
TransSiberian Railway, including 15,000 tons of vital rubber prior to
Barbarossa. Schwendemann, “German-Soviet
Economic Relations,” 162. See also Hartmut Pogge von Strandmann’s
“Appeasement and Counter-Appeasement,
1939-1941,” in: Conflict, Catastrophe, and Continuity: Essays on Modern
German History, ed. Frank Biess, Mark
Roseman, and Hanna Schissler (New York: Berghahn Books, 2007), 157-176;
and Rainer Karlsch and Raymond
Stokes, Faktor Öl: Die Mineralölwirtschaft in Deutschland, 1859-1974
(München: C.H. Beck, 2003), 207-208. The
best treatment of Nazi-Soviet economic relations between 1939 and 1941
(with an invaluable statistical appendix) is:
Edward E. Ericson, Feeding the German Eagle: Soviet Economic Aid to Nazi
Germany, 1933-1941 (Westport:
Praeger, 1999).
29
Throughout the period of the Nazi-Soviet Pact, Stalin had labored under
the mistaken impression that he was
dealing directly with Hitler, and that his many concessions on economic
matters would demonstrate the Soviet
Union’s value to Germany. In fact, Hitler had no interest in the
relationship with the Soviet Union and had delegated
negotiations to the AA, which did not represent Hitler’s interests, per
se, but rather those of the bureaucracy in
Berlin, much of which valued the economic benefits of Nazi-Soviet
cooperation. Heinrich Schwendemann,
“German-Soviet Economic Relations at the Time of the Hitler-Stalin Pact,
1939-1941,” Cahiers du Monde russe 36:
1/2 (1995): 161-178.
30
WiRüAmt estimated the loss of Soviet oil imports as a result of an attack
on Baku (700,000 tons in 1940) would
result in a 44% reduction in Germany’s imports and the loss of 14% of its
total supply – “a loss [Ausfall] that is

418
In October 1939, the chief of the WStb, General Georg Thomas noted that
although Germany had
managed to acquire “a good crude oil territory” in Poland, the overall
situation remained dire, even if the
additional coal from Polish Silesia was exchanged for oil from elsewhere
in Europe or from the Soviet
Union. Although Germany signed a new economic agreement with Romania in
September 1939, oil
exports were limited to 1,500,000 tons due to a lack of transportation
capacity: “In the case of crude oil
transports, the shortage of railway freight cars and Danube barges
presents particular difficulties.”
Thomas concluded “that the possibilities for the supplying of Germany
with the most urgently required
goods from the European area are judged to be unfavorable,” while any
expansion of Soviet exports
would run into transportation bottlenecks that would not be resolved “for
a fairly long period of time.”31
Despite his optimism in April 1939, by October, the German economy again
proved incapable of
meeting Krauch’s steel requirements.32 Even before German forces fell
upon Western Europe in May
1940, the optimistic assumptions that had underpinned German petroleum
planning before September
1939 had come undone. During the first six months of the war, reserves of
motor and diesel fuel, and
navy fuel oil dropped by more than half, from 970,000 tons to 438,000
tons, although aviation fuel
reserves increased slightly from 442,000 to 480,000 tons.33
The Polish campaign did not pose extraordinary demands on German
petroleum reserves –
consumption was manageable and stocks replenished by higher domestic
production and imports. The

unbearable if the armed forces are expected to undertake major action.”

Ro V (Griebel), Az. 66 b 24 (Va),
“Vortragsnotiz über die Auswirkungen des Ausfalls des Bakuer-Erdölreviers
auf die deutsche
Mineralölversorgung,” 27 January 1940, T-77/128 (Wi/IF 5.549). For more
on Allied planning to bomb the
Caucasian oilfields in 1939-40, see: Ronald Cooke and Roy Nesbit, Target,
Hitler’s Oil: Allied Attacks on German
Oil Supplies, 1939-1945 (London: W. Kimber, 1985), 21-51; and Charles
Richardson, “French Plans for Allied
Attacks on the Caucasus Oil Fields, January-April, 1940,” French
Historical Studies 8: 1 (1973): 130-156.
31
“Inspekteurbesprechung am 12. 10. 39: Vortrag Chef W Wi,” T-77/312 (Wi/IF
5.1788). These difficulties, arising
from the collapse in imports as a result of the Allied blockade even
after the signing of the Non-Aggression Pact
with the Soviet Union, are summarized in: Williamson Murray, The Change
in the European Balance of Power,
1938-1939: The Path to Ruin (Princeton: Princeton University Press,
1984), 326-334.
32
By then, only 95,000 tons were left available after the RWM and military
had received their share. A further
10,000 tons would have to be subtracted to meet the requirements of the
German domestic crude oil industry. Dr.
R/Hoe., “Notiz über den Stand der Durchführung des wehrwirtschaftlichen
neuen Erzeugungsplan vom 12. July
1938 (Karinhallplan) im Mobfalle. Stand 1. Oktober 1939,” 02 Oktober
1939, no author (probably the Office for
Economic Development – Reichsamt für Wirtschaftsausbau, RWA), T-77/310
(Wi/IF 5.1773-4).
33
The supply position during the first year of hostilities is summarized
in: OKW, WiRüAmt/Ro, “Entwicklung der
Rohstofflage im 1. Kriegsjahr und ihr gegenwärtiger Stand,” 11 September
1940, T-77/123 (Wi/IF 5.533).

419
consumption of aviation fuel in September 1939 was a mere 54,000 tons,
against 276,000 tons of motor
fuel and 155,000 tons of diesel fuel. Germany began the war with
2,400,000 tons worth of reserves.34 As
of 01 October 1939, German petroleum stocks stood at 1,810,000 tons,
which worked out to 4.5 months
of aviation and motor fuel consumption, three months of diesel, and 6.5
months of fuel oil. On the basis
of these reserves, Germany could fight a war for twelve months by
importing an additional 3,123,500
tons, equal to about half of Romania’s production at the time.35
Interestingly, these rates of consumption were almost identical to
estimates by the main British
economic intelligence agency at the time, the Industrial Intelligence
Centre (IIC). Following the war,
British investigators came upon WStb’s estimates of Germany’s raw
materials position in October 1939
and found the similarities between the German and British assessments
“little short of staggering.” The
most important point of divergence was the size of German reserves. IIC
put forward a figure of
3,000,000 tons, but the rest of the British Government found this figure
implausible – surely no country
would go to war with such meager stocks – and they revised the estimates
upwards by 2,000,000 tons.
Consequently, all subsequent British economic intelligence estimates
overestimated German reserves by
this amount for the rest of the war. The former deputy head of the IIC
concluded in September 1945 that
there was “much deliberate bluff” behind the Germans’ decision for war,
and that their success during the
first year of the war created “a false sense of security” concerning
Germany’s petroleum supply.36
At the end of September 1939, Plenipotentiary for Automotive Affairs
(Kraftfahrwesen) Adolf von
Schell assured the Chief of the General Staff, General Franz Halder, that
the “fuel problem” had been
“solved,” while Thomas reported that Air Force consumption had only been
“equivalent to half a month’s
34

OKW, Feldwirtschaftsamt (Bearbeiter: Dr. W. Tomberg),

“Wehrwirtschaftliche Erkenntnisse von 5
Kriegsjahren,” Abgeschlossen: November 1944, T-77/429 (Wi/IF 5.3517).
35
W Ro I Nr. 4595 g, 66 p 2010 Is, “Einfuhrbedarf Deutschland in den ersten
12 Mob-Monaten,” 09 September
1939, T-77/341 (Wi/IF 5.2164, 2687), Anlage 46 to: OKW, Gen.z.bV.1., “Die
Arbeiten des WiRüAmtes an der
Mineralöl-Versorgung,” no date (handwritten notation reads: “vom Dezember
1944”), T-77/183 (Wi/IF 5.751) –
here after cited as “Die Arbeiten des WiRüAmtes.”
36
Martin Watson to Desmond Morton (Director of Industrial Intelligence
Center), 05 September 1945, British
National Archives (BNA), PREM 7/14. For more on Germany’s relatively weak
petroleum position at the start of
the war, see: Williamson Murray, “The Change in the European Balance of
Power, 1938-1939,” Ph.D. Dissertation,
Yale University (1975), 128-136; and Adam Tooze, The Wages of
Destruction: The Making and Breaking of the
Nazi Economy (New York: Viking, 2006), 412.

420
production.”37 Unfortunately for the Reich, this proved to be only a
temporary reprieve: between October
and December, reserves of motor fuel and diesel suffered a precipitous
decline (40% in the case of the
former – 454,000 to 280,000 tons – 50% in the case of the latter –
298,000 to 150,000 tons) for three
reasons. First, production of motor fuel had initially been curtailed by
30% in favor of aviation and diesel
fuel. This shortage could be rectified relatively easily by shifting the
emphasis back to motor fuel output,
since the reserves of aviation fuel were actually larger by the end of
1939 than they had been on 01
September (500,000 vs. 492,000 tons).38 The other two reasons were
somewhat more intractable: both
civilian and military consumption of gasoline and diesel even during the
lull in the fighting after the
Polish campaign was higher than expected; and imports bottomed out not
only because of the loss of
overseas imports but also because deliveries from Romania dropped due to
transportation difficulties,
particularly the freezing of the Danube and frost/snow on the railways.
On the eve of the German invasion
of Norway in April 1940, Defense-Economy and Armaments Office
(Wehrwirtschafts- und Rüstungsamt,
WiRüAmt, which succeeded the WStb in November 1939) forecasted that motor
fuel reserves would be
exhausted by the summer.39
According to the WiRüAmt’s calculations, the situation would “gradually”
improve starting in April
due to higher domestic production, the arrival of imports from the Soviet
Union, and the resumption of
37

Halder Diary: 28-29 September 1939.

Krauch shot down this idea the following month during a meeting of the
General Council of Four-Year Plan
(Vierjahresplan, VJP), pointing out that Germany could simply import the
required motor fuel from Romania and
the Soviet Union, neither of which could offer much in the way of
aviation fuel. Moreover, Krauch was convinced
that Germany’s “mineral oil supply was assured” through the addition of
imports from Romania and the Soviet
Union (to the tune of 2,500,000 tons for the year), although “[this]
presupposed the settling of the transportation
question.” “Meeting of 10 January 1940,” Partial Translation of Document
NI-7474, in: Nuernberg Military
Tribunal, Trials of the War Criminals (Washington, DC: U.S. GPO, 1953),
vii: 965-967 – hereafter cited as NMT.
Emphasis in the original. A detailed overview of Germany’s petroleum
position by the RWA later that month also
pointed out that Air Force consumption would increase dramatically by the
second half of 1940, which would leave
Germany able to produce only 58% of its requirements even assuming that
the production of aviation fuel received
maximum priority. If need be, the excess aviation fuel could simply be
used in lieu of motor fuel in vehicles,
whereas the opposite was impossible. “Treibstoffversorgung,” 15 January
1940, no author (handwritten notation
reads: “Anlage zum Schreiben an Staatssekr. Körner v. 16.1.40.”), T-
84/216 (EAP 66-c-12-62/29).
39
These factors are summarized in: OKW, WiRüAmt (Bearbeiter: Reg. Rat Dr.
Tomberg), “Abschrift nur Mineralöl
betreffend aus Die Probleme der deutschen Rüstungswirtschaft im Kriege,”
Abgeschlossen Ende September 1940,
T-77/668 (Wi/VI. 216). To give an indication of the how the winter
conditions impaired imports, consider that
Romanian deliveries of crude oil and refined petroleum products dropped
from 234,000 tons during the last quarter
of 1939 to 94,000 in the first quarter of 1940, before climbing to
183,000 tons by the second quarter. See also:
Murray, Balance of Power, 326-329.
38

421
full deliveries from Romania. WiRüAmt stressed, however, that the
“utilization of the possibilities for
imports” depended upon “the still existing difficulties in the provision
of the transportation means
necessary for that being remedied.” Until then, WiRüAmt could only
suggest “reorienting” production
from aviation to motor fuel, further “bothersome but not particularly
crippling” reductions in gasoline
consumption, having the Army and the civilian economy draw from the
relatively large reserves of the
Air Force and the Navy, and implement any and all measures to increase
imports from Romania.40
Basically, the German petroleum position before May 1940 depended on
Romania and the Soviet
Union fulfilling their assigned roles. This was as clear to the Germans
as it was to the Allies, who
estimated that Germany could not cover more than one-third of its
requirements (even including the
occupied Polish oilfields), but that “the pictures changes” if it could
make use of Romania’s entire
production (33,000,000 barrels) and an equivalent amount from the Soviet
Union.41 The situation was
somewhat more complicated if one took into account the entire European
Continent. The Institut für
Weltwirtschaft estimated that Germany’s wartime consumption was somewhere
between eight to

40

OKW, Wi Rü Amt/Ro Nr. 3040/39 gK I/V, Az 66 p 2010, “Überblick über die

Betriebsstoff-Versorgungslage,”
16 December 1939, T-77/341 (Wi/IF 5.2164, 2687), Anlage 47 to: “Die
Arbeiten des WiRüAmtes.” In view of the
“strongly variable” situation in terms of consumption and accumulation of
motor and aviation fuel, the OKW
demanded that the OKH and the Air Force High Command (Oberkommando der
Luftwaffe) provide daily supply
reports, while the Reichstelle für Mineralöl (responsible for the
allocation of petroleum to civilian consumer) do the
same in the case of imports, as well as monthly reports on the overall
supply situation. Keitel, Ro V, Az. 11 k 2209
(Vs), “Vortragsnotiz für Chef Wi Rü Amt betreffend kurzfristige Meldungen
über Veränderungen in der
Betriebsstoff-Versorgungslage,” 16 January 1940, T-77/341 (Wi/IF 5.2164,
2687), Anlage 48 to: “Die Arbeiten des
WiRüAmtes.”
41
Anlage I to: Chef der Sicherheitspolizei und des SD an das AA,
“Beurteilung der deutschen Öl-Versorgung in
England und in den neutralen Staaten,” 31 January 1940, Bundesarchiv,
Berlin-Lichterfelde (BA-B), R 901/116640.
German officials monitored Allied assessments of the German oil position
throughout the war. Most of these
assessments, although they tended to overstate the size of German
production and reserves, were nonetheless
broadly accurate in that they warned against “underestimating” Germany’s
productive capacity while pointing out
the Reich’s difficulties in satisfying both European consumption and the
requirements of the German armed forces
on the Eastern Front without the acquisition of the Caucasus and/or the
Middle East. For a sampling, see: OKW,
Amt Ausl/Abw, Abt. Ausland, “Schätzung über die deutsche Treibstofflage,”
20 February 1941, T-77/86 (Wi/IF
5.384); Anlage 1) zu “Bremen” nr. 1520/41 g vom 20. 1. 1942, “Betr.:
U.S.A. Meldung über die Ölversorgung der
Vereinigten Staaten und der Achsenmächte während des Krieges nach
amerikanischer Ansicht,” T-77/1375
(Wi/IVB. 21); and the Kontinentale Öl Aktiengesellschaft (Konti),
Mineralöl-Archiv, Übersetzung, “Europäischer
Krieg und russisches Öl: Zusammenfassung eines Aufsatzes ‘European War
and Russian Oil: the Oil Blockade, Its
Evaluation and Importance’ von Frederick Phillip Hellin in der ‘Petroleum
Times’ vom 27.6.42,” enclosed with:
Konti to General der Infanterie Thomas (WiRüAmt), [illegible] August
1942, T-77/551 (Wi/I. 315).

422
10,000,000 tons, with between five to 7,000,000 tons to be imported.42
There was no conceivable way of
filling this gap in the short term if Romanian and Soviet production had
to be shared with the rest of
Europe. Assuming the all of the latter two countries’ exports in 1938
(5,276,000 tons) went just to
Europe, there would still have been a shortfall of 9,205,000 tons (and
this was against peacetime
consumption figures).43 The Institut therefore argued that it was in
Germany’s “interest” that neutral
Europe, especially Italy, continued to draw, or even increase, its
imports from overseas, thus allowing for
the “re-orientation” of Romanian and Soviet exports entirely “to the
benefit of Germany,” at the expense
of the Allies. “The most important condition” to meeting the “6-8 million
tons,” which the Institut
determined was Germany’s indispensable import requirement, was “that
Romania and particularly the
Soviet Union raise their entire export of petroleum,” since any
significant increase in Soviet production
would basically render Romania an afterthought.44
The Reich’s relatively weak raw materials spurred Hitler to finish off
France as quickly as possible.45
As Göring informed Thomas in January 1940, Hitler was determined “to
bring about a decision to the war
in 1940.” Accordingly, the Reich would expend all available resources to
the upcoming offensive in the
West “without consideration” for Germany’s long-term raw materials
position.46 As German planning for
the assault on the Low Countries and France progressed, it appeared that
the Reich would be confronted

42

This figure was actually on the high side – in May 1940, WiRüAmt
estimated Germany’s entire mobilization
demand (including Denmark, Norway, and the former Czechoslovakia) at a
mere 8,000,000 tons. Ro V an Ro III,
Az. 11 k. 2209 (Vs), 15 May 1940, T-77/123 (Wi/IF 5.533).
43
This figure was significantly higher than the quantities provided under
Germany’s commercial agreements with
either country: 130,000 tons per month in the case of Romania – 30,000
tons of which went to the Protectorate of
Bohemia and Moravia (the former Czech portion of Czechoslovakia) – and
650,000 tons for the remainder of 1940
from the Soviet Union. It also exceeded the existing capacity of the
transportation network linking the Reich to
either Romania or the Soviet Union: 100,000 tons per month in the case of
the former, and 50,000 tons for the latter.
Ro V, Az. k 2209 (Vs), “Notiz für Besprechung in Karinhall am 15. Februar
1940,” 14 February 1940, T-77/123
(Wi/IF 5.533).
44
Institut für Weltwirtschaft an der Universität Kiel, “Die Versorgung
Groβdeutschlands und Kontinentaleuropas
mit Mineralölerzeugnissen während der gegenwärtigen kriegerischen
Verwicklungen,” February 1940, T-84/72
(EAP 66-c-12/33). See also: “Das Gewerbe im mitteleuropäischen
Wirtschaftsraum (Groβraum einschlieβlich
Belgien und den Niederlanden),” Bearbeitet im Institute für
Konjunkturforschung, June 1940, T-77/201 (Wi/IF
5.991).
45
Murray, Balance of Power, 332-333.
46
Chef Wi Rü Amt, Aktennotiz, “Betr.: Besprechung bei Generalfeldmarschall
Göring in Karinhall am 30. 1. 1940,”
30 January 1940, Hoover Institute, Records of the International Military
Tribunal at Nuremburg (hereafter cited as:
Hoover Institute, Nuremberg Records), Box 995 (PS-1456).

423
not by an overall shortage of petroleum, but rather, one limited to motor
fuel.47 In an estimate of
Germany’s requirements for the first nine months of 1940, the WiRüAmt
assumed a spike in Army
consumption for three months starting in March 1940 to 110,000 tons, Air
Force consumption peaking at
150,000 tons, naval consumption of fuel and diesel “gradually rising” to
95,000 tons and 26,000 tons,
respectively, and civilian consumption of 64,000 tons following “the
sharpest throttling of demand.”
WiRüAmt also presupposed “full operability” of all potential sources of
supplies, including imports. On
the basis of these calculations, WiRüAmt did not believe that there would
any problems with the supplies
of aviation fuel, or diesel and fuel oil for the Navy. On the other hand,
with “gasoline and diesel fuel [for
the Army], a temporarily higher consumption will lead to the supply
difficulties within weeks, even if the
estimated additions [production plus imports] arrive in their full
amount.” WiRüAmt therefore expressed
the most serious concerns about the consequences upon both any “possible”
military operations on-going
at the time and the civilian food supply.48
Although the OKW established an operational reserve on 08 March 1940, the
motor fuel situation did
not improve – as General Wilhelm Keitel (Chief of the OKW) informed
Göring six days later, it had
“worsened,” to the point “large operations of the Army must be considered
as endangered.” Following a
briefing from Thomas, Keitel warned Göring that, in spite of negligible
military requirements and “the
exhaustion of every possibility with regard to supplies or imports,”
motor fuel consumption continued to
outpace new supplies – the prime culprit being the “extraordinary weather
conditions” that were hindering
imports. Between 01 September 1939 and 01 March 1940, motor fuel reserves
fell from 324,000 tons to
108,000 tons, while diesel reserves dropped from 230,000 tons to 55,000
tons. If Germany undertook
major offensive operations, it could cover its motor fuel requirements
for a mere “4-6 weeks,” after which
47

Halder learned on 12 April 1940 that the existing fuel supply would
“[probably] be sufficient until fall,” although
the Army’s operational reserve would run out after three weeks, thereby
forcing it to “fall back on the central
reserve.” Halder Diary: 12 April 1940.
48
WiRüAmt urged the immediate creation of special, OKW operational reserves
of 50,000 tons of both diesel and
aviation fuel out existing naval and Wirtschaftsforschungsgesellschaft
(Wifo) stockpiles. WiRüAmt, Ro, Nr. 294/4
OgK I/V, Az. 66 p 2010, “Untersuchungen über die Entwicklung der
Betriebsstoffversorgungslage in der Zeit v. 1.
1. – 30. 9. 40,” 08 February 1940, T-77/341(Wi/IF 5.2164, 2687), Anlage
49 to: “Die Arbeiten des WiRüAmtes.”
Created in 1934, Wifo was responsible for the construction of underground
Army and Air Force petroleum storage
tanks.
424
it could provide supplies equal on average to only 30% of consumption.
Based on Thomas’
recommendations, Keitel offered a list of possible corrective measures,
including further withdrawals
from the Air Force and Navy reserves to boost the existing operational
reserve to 100,000 tons of aviation
fuel and 200,000 tons of diesel fuel. Keitel also suggested that Thomas
be given dictatorial authority over
the petroleum industry in Göring’s absence, including the right to make
the final determination on all
questions pertaining to the allocation of fuel.49 Göring obliged Keitel
ten days later, authorizing not only
the expansion of the operational reserves, but also ordering the
increased production of motor fuel at the
expense of aviation and diesel fuel. He also freed essential personnel
within the petroleum industry from
military service and instructed the Reichsarbeitsministerium to grant the
industry “preferential” treatment
concerning its labor needs. Finally, besides granting Thomas the
authority to make “recommendations
based on the existing operational situation,” Göring instructed Krauch,
Bentz, and Funk to come up with a
plan for assuring a “steady supply” for both the military and the
essential portions of the civilian
economy, “in particular the agricultural sector.”50
Germany’s first wartime oil crisis was the subject of one of the
irregular “Oil Conferences”
(Ölsitzungen) chaired by Göring on 27 March 1940 with all of the leading
civilian and military official
responsible for petroleum policy.51 Thomas began the conference by
explaining that the existing shortage
had arisen due to three factors: poor weather hampering imports from
Romania and the Soviet Union;
higher than expected consumption due to the weather-induced “aggravation
of the transportation

49

Der Chef des OKW an den Vorsitzenden des Ministerrates für die
Reichsverteidigung (Göring), Az. 66 b 2205,
Wi Rü Amt/Ro Nr. 1831/40g Vb, 14 March 1940, T-77/377 (Wi/IF 5.2694).
Thomas had briefed Keitel on the
serious depletion of Germany’s reserves over the winter of 1939/40 on 09
March 1940. Keitel had ordered that
WiRüAmt’s recommendations be forwarded to Göring. WiRüAmt,
Besprechungsnotiz, “Vortrag bei Gen. Oberst
Keitel,” 09 March 1940, IWM, FD 4809/45.
50
Der Vorsitzende des Ministerrates für die Reichsverteidigung (Göring) an
den Herrn Chef des OKW (Keitel), V.P.
5794/5 g., “Maβnahmen für die Verbesserung der Mineralölversorgung,” 24
March 1940, T-77/606 (Wi/IC 4.40).
51
Records of the Ölsitzungen between 1939 and 1942 (not all of which dealt
exclusively with petroleum policy) are
scattered between several archival collections. For a list of extant
sources, see: Eichholtz, Deutsche Ölpolilitk, 377,
n. 16; and Titus Kockel, “Eine Quelle zur Vor- und Gründungsgeschichte
der Kontinentale Öl AG aus dem Jahr
1940: E. R. Fischer (Reichswirtschaftsministerium, II Min. Öl), ‘Die
Versorgung Europas mit Mineraloel vor dem
Kriege, Ermittlung des Nachkriegsverbrauchs und Sicherung der
Belieferung, 1940,’ September 1940,” Jahrbuch
für Wirtschaftsgeschichte 2003/1: 181, n. 27. Protocols for two
conferences in July and November 1942 are
reprinted in: Dietrich Eichholtz, “Der Raubzug des faschistischen
deutschen Imperialismus zu den Erdölquellen des
Kaukasus, 1941-1943,” Jahrbuch für Geschichte 14 (1976): 462-477 and 483-
499.

425
position”; and “the planned rise in military consumption,” which now ran
to 230,000 tons of motor fuel
per month, as opposed to the usual 140-150,000 tons. After suggesting
that the Navy should be compelled
to share some its reserves as a “stopgap measure,” Fischer gave a
detailed presentation on the current state
of imports from Romania and the Soviet Union.52
The maximum throughput to Germany from Romania was only 130,000 tons per
month, which fell to
95,000 tons once one subtracted the requirements of the Protectorate of
Bohemia and Moravia (the Czech
portion of the former Czechoslovakia) and the Danubian tanker fleet.
Current imports, however, stood at
only 50,000 tons. Fischer expected to boost the capacity of the Danubian
tanker fleet (currently around
80,000 tons) by a further 7,000 tons starting 01 May 1940. It was
impossible at the moment, however, to
boost the railway carrying capacity (45,000 tons per month using 2,200
tanker cars) due to problems
within “Romania itself, where the loading of tank wagons often
experiences delays […].” Hopefully, the
situation would improve with delivery of an additional 4,000 wagons over
the course of 1940 and the
construction of pipelines connecting the Danube to the primary
consumers.53 As for the Soviet Union,
only 80,000 tons had been delivered during the first quarter of 1940, but
Fischer expected that by May,
exports would rise to 84,000 tons per month. Poor weather had also
delayed the expansion in crude oil
production to 200,000 tons from August 1940 to November. Finally,
hydrogenation plants were operating
at 113,000 tons per month, with a further 6,000 ton increase expected
“after August/September.”54
The Navy’s oil expert, Fritz Fetzer, claimed during the Oil Conference
that the Romanians were not
doing enough to procure the agreed upon amounts from the foreign oil
companies, such that rail cars were
returning to Germany empty. He also suggested that if Germany sold the
captured Polish weapons set
52

Ministerpräsident Generalfeldmarschall Göring, Beauftrager für den

Vierjahresplan (BVJP), gez.
Ministerialdirigent, VJP, V.P. 5909 g., “Sitzung betr.
Mineralölversorgung unter Vorsitz des Herrn
Generalfeldmarschall,” 27 March 1940, T-77/435 (Wi/IF 5.3654), Anlage 52
to: “Die Arbeiten des WiRüAmtes.”
53
The subject of disappointing deliveries from Romania had already come up
during a previous conference in
January 1940. The former German transportation chief in Romania during
the First World War suggested that the
lack of unified leadership over railways deliveries was holding back
exports. Wi VII, “Niederschrift: Sitzung in
Karinhall am 2. Januar 1940 unter Vorsitz von Generalfeldmarschall
Göring,” 29 January 1940, T-77/400 (Wi/IF
5.3063).
54
Production elsewhere in Axis Europe was trivial: 8,000 tons so far in the
General-Government, and 18,000 tons
from Italy, Denmark, and Sweden. Ministerpräsident Generalfeldmarschall
Göring, BVJP (gez. Ministerialdirigent,
VJP), V.P. 5909 g., “Sitzung betr. Mineralölversorgung unter Vorsitz des
Herrn Generalfeldmarschall,” 27 March
1940, T-77/435 (Wi/IF 5.3654), Anlage 52 to: “Die Arbeiten des
WiRüAmtes.”

426
aside for Romania to other nations for dollars, “more petroleum could be
bought in Rumania with these
dollars.”55 Carl Clodius, the Deputy Director of the Commercial Policy
Division of the German Foreign
Office (Handelspolitische Abteilung, Auswärtiges Amt – AA), Wilhelm
Fabricius (German Minister to
Romania), and Hermann Neubacher (Special Representative to Southeastern
Europe for Economic
Affairs) disputed Fetzer’s allegations. Clodius claimed that the primary
U.S. oil company (RomanoAmericana, a subsidiary of the Standard Oil
Company of New Jersey – Jersey) was “one of our principal
suppliers.”56 There was no point in trying to get oil from the British
and French companies while the
Danube was frozen since Germany already received more oil than it could
transport. Clodius and
Fabricius were confident that, now that the Danube was melting, the
Romanians would follow through
with their promise to “compel the British and French companies to supply
us, either directly or
indirectly.” Finally, Fetzer’s suggestion concerning purchases of oil in
dollars would be “very bad
business,” since oil prices had increased 150% since the war began, while
the dollar had appreciated by
65% against the Reichmark. Clodius also reminded the AA that arms sales
“are the most important factor
in our efforts to bring the Rumanians more and more into our camp,” and
Bucharest would not take
kindly to Berlin reneging on its previous commitments.57 Clodius felt no
reason to change his opinion
concerning Romania’s goodwill following meetings with leading Romanian
officials including Prime
Minister Gheorghe Tătărescu, who promised that “Rumania was holding at
our disposal 80,000 tons a
month of state-produced petroleum alone.”58 Manfred von Killinger, then
serving as a special emissary of
Foreign Minister Joachim von Ribbentrop, was more skeptical of Romanian
intentions. He was convinced
55

The Director of the Economic Policy Department to the Legation in

Rumania, No. 295, e.o. W 1627 g., 27 March
1940, Document No. 14 in: DGFP (D), ix: 30-31.
56
President Franklin D. Roosevelt personally inquired about Romana-
Americana exports to Germany during the
first months of the war. According to figures procured from the U.S.
Embassy in Bucharest, roughly one-quarter of
Romana’s exports of gasoline and kerosene went to Germany and the
Protectorate between January 1939 and
January 1940. F.D.R., “Memorandum for the Secretary of State [and]
Assistant Secretary Berle,” 27 January 1940;
Bucharest (Hibbard) to the Secretary of State, 08 February 1940; and A.A.
Berle, Jr., Memorandum for the
President, “Re Romanian deliveries of oil to Germany: Romano-Americana
Co.,” 09 February 1940; all in: Franklin
Delano Roosevelt Library, President’s Secretary’s File, Box 72.
57
The Legation in Rumania (signed by Clodius and Fabricius) to the Foreign
Ministry, No. 399, W 1670 g., 29
March 1940; and the Legation in Rumania (signed by Neubacher and
Fabricius) to the Foreign Ministry, No. 400, W
1671 g., 29 March 1940; document nos. 21 and 23 in: DGFP (D), ix: 41-43,
44.
58
The Legation in Rumania to the Foreign Ministry, No. 413, 30 March 1940;
and the Legation in Rumania to the
Foreign Ministry, No. 421, 01 April 1940; document nos. 27 and 33 in:
DGFP (D), ix: 49-53 and 61-62.

427
that what the Romanians most feared was a Soviet invasion, and they would
destroy the oilfields with
British assistance in such an event.59
Göring enthusiastically backed the suggestions made at the March
conference and, after securing the
Führer’s assent, reissued his letter of 24 March 1940 to the OKW the
following month as a formal
directive.60 Special notes went out to Thomas and Bentz requesting that
they “make appropriate
suggestions” in light of the 27 March 1940 conference.61 When Thomas
reported back in late April, he
was pleased to note that the overall military supply position had
improved in spite of the recent operations
against Denmark and Norway: Air Force consumption would rise, but “only
to approximately half of the
expected demand peak of 150,000 tons per month,” while naval consumption
would “decline
considerably” in view of their heavy losses in Norway (three cruisers and
ten destroyers).62
After consultation with Krauch and the RWM, Thomas suggested additional
increases in the
production of aviation fuel, since the industry had already achieved a
6,000 ton rise in motor fuel output
by reducing production of diesel. The import situation showed little
improvement, however, with
deliveries from both Romania and the Soviet Union “proving to be sluggish
and in no way corresponding
to the quantities” stipulated in Germany’s commercial treaties with both
countries. In April, they
delivered only 32,000 tons of motor fuel out of the expected 46,000 tons,
and 35,000 tons of diesel fuel

59

Minister Killinger to the Foreign Minister, RM 18 g. Rs., 14 April 1940,

Document No. 116 in: DGFP (D), ix:
165-166.
60
Der Vorsitzende des Ministerrates für die Reichsverteidigung (Göring) an
den Herrn Chef des OKW (Keitel), V.P.
5794/5 g., “Maβnahmen für die Verbesserung der Mineralölversorgung,” 02
April 1940, T-77/377 (Wi/IF 5.2694).
61
Ministerpräsident Generalfeldmarschall Göring, BVJP, an Herrn
Generalleutnant Thomas – oder Vertreter im
Amt – OKW (cc’d to Bentz), V.P. 5928, 03 April 1940, T-401/5 (RBF 96).
For Bentz’s response, see: der
Beauftragte des Ministerpräsidenten Generalfeldmarschall Göring für die
Förderung der Erdölgewinnung to
Generalleutnant Thomas (OKW, WiRüAmt), “Betr.: Sicherstellung der
Kraftstoffversorgung,” 13 April 1940, T401/5 (RBF 96). Bentz’s reply was
based on: Fachgruppe Erdölgewinnung der Wirtschaftsgruppe
Kraftstoffindustrie, Wietze Kr. Celle, Hu/P, “Aktennotiz über die zur
Zeit bestehenden und in Zukunft zu
erwartenden Schwierigkeiten in der Durchführung des Mob-Planes der
Erdölindustrie,” 07 April 1940, enclosed
with: Fachgruppe Erdölgewinnung der Wirtschaftsgruppe Kraftstoffindustrie
to Professor Dr. Bentz, Beauftragter
für die Förderung der Erdölgewinnung, Hu/P, 07 April 1940, T-401/5 (RBF
96).
62
In January 1940, the RWA had warned that Germany would need to import an
addition 1,900,000 tons of fuel oil
between January 1940 and 01 July 1941 in order to cover the Navy’s
requirements. “Treibstoffversorgung,” 15
January 1940, no author (handwritten notation reads: “Anlage zum
Schreiben an Staatssekr. Körner v. 16.1.40.”), T84/216 (EAP 66-c-12-
62/29).

428
instead of 53,000 tons.63 While the Soviets were “suspending” petroleum
exports due to disagreements
between the two governments over “counter deliveries” from Germany, in
Romania, it was the foreignowned oil refineries that were holding back
exports. High water levels were also impairing transit along
the Danube, but deliveries would climb to 107,000 tons per month by
May/June.64 This increase in
Romanian exports proved vital – not for Germany to wage its next military
campaign, but rather, to cope
with the unexpected demands of its greatest wartime victory.

63

The primary point of contention was the price charged for Soviet oil
exports: Berlin was offering a figure 20%
higher than the prevailing world price (the price charged at the Gulf of
Mexico) and willing to settle for roughly
80%, while Moscow was demanding more than double the Gulf price (138%).
In fact, the Soviets were simply
attempting to coerce the Germans into accepting a lower price for a
cruiser they promised to deliver under February
1940 commercial agreement, which would then be credited against the oil
deliveries. Documents No. 229 and 332
in: DGFP (D), ix: 317-318 and 454.
64
Der Chef des WiRüAmt, OKW (Thomas), an den Vorsitzenden des Ministerrates
für die Reichsverteidigung
(Göring), Az. 66 b 2205 Ro Nr. 2879/40g Vb, “Betr.: Massnahmen für die
Verbesserung der Mineralölversorgung,”
Bezug: V.P. 5794/40g vom 2. 4. 1940, 25 April 1940, T-77/606 (Wi/IC
4.40).

429
The Burden of Victory: The Origins of the Oil Crisis in Axis Europe,
1940-1941
The German campaign against France and the Low Countries in May-June 1940
ranks as one of the
most dazzling victories in military history. The degree to which luck had
anything to do with the final
outcome (a lot) does not detract from the overall magnitude of Germany’s
triumph, which was as decisive
(in terms of speed and overall shock effect) as any that has occurred in
modern history.65 Historians have
nonetheless come to see the events of the summer of 1940 as a different
sort of turning point – one that
demonstrated the limits of German power. If war is defined as a
clarifying act of violence designed to
compel an opponent into submission, then Germany was out of short-term
options by July 1940.
Although its land forces were undefeated, Germany lacked the air and
naval assets to do anything more
than harass Britain, which would only get stronger as a result of U.S.
assistance.
More troubling was the fact that the energy balance had also tipped
decisively against Germany.66
France had added nothing to the Allied oil supply beyond its 23.75% share
of the Iraq Petroleum
Company (IPC). Although Middle Eastern oil was no longer available to the
British Isles, Britain itself
could still fall back on alternative sources and suppliers in the Western
Hemisphere. Germany, on the
other hand, had acquired one ally (Italy) and a number of dependencies
(most of all France) that placed
additional strain on German resources without contributing anything
meaningful in terms of petroleum.67
Italy demanded a share of French oil reserves in the mainland and North
Africa, but this was impossible
since Germany had to keep the French munitions industry and Mediterranean
fleet supplied (presumably

65

Karl-Heinz Frieser, The Blitzkrieg Legend: The 1940 Campaign in the West
(Annapolis: Naval Institute Press,
2005); Williamson Murray, “May 1940: Contingency and Fragility of the
German RMA,” in: The Dynamics of
Military Revolution, 1300-2050, ed. Macgregor Knox and Williamson Murray
(Cambridge: Cambridge University
Press, 2001), 154-174; and Ernest May, Strange Victory: Hitler’s Conquest
of France (New York: Hill and Wang,
2000).
66
This is a point neglected in many secondary accounts. One exception is
Adam Tooze’s Wages of Destruction,
411-420, although even he claims that Germany’s “main worry” when it came
to oil at the end of 1940 “was the
problem of finding sufficient storage facilities” (pg. 385).
67
As Krauch explained during a presentation in January 1941, existing
production was sufficient to cover
Germany’s own requirements with only a 25% reduction in existing
reserves: “[A] worsening of the supply situation
enters however through [the] subsidy requirements [Zuschussbedarf] of the
occupied territories, particularly France
and… Italy,” leaving Germany with a 1,600,000 ton deficit for 1941 alone.
“Vierjahresplan: Industrielle Rohstoffe:
Stand vom 30. 1. 1941 (Unterlagen für den Vortrag Prof. Dr. C. Krauch vor
den Führungsstäben Wirtschaft am 30.
1. 1941),” BA-B, R 3112/173. Emphasis in the original.

430
because they hoped to use it one day against the Royal Navy).68 As a
result, the Italians warned that their
fuel reserves would be completely expended by May 1941, and the AA even
warned the OKW in
February 1941 that Italians might give up on the war unless Germany
rushed 214,000 tons of petroleum
products to them for the first six months of the year.69
Whether or not the Krauch Plan could be completed was now irrelevant –
Germany simply had to
acquire more oil in the east. The situation would not be serious for the
remainder of the year, except with
regard to diesel fuel.70 Thereafter, Germany’s position would become
difficult. As Thomas explained to
Göring in June 1940, now that Germany was responsible for supplying most
of Europe with oil, the
Reich’s long-term supply situation had deteriorated significantly. In
1938, Continental consumption
totaled 26,800,000 tons, against production of only 7,950,000 tons (not
including Germany’s synthetic
fuel output).71 Even after ruthlessly curbing consumption, Thomas
estimated that existing production,
inventories, and imports could keep Axis Europe (not including Italy)
fully supplied only until the end of
1940. The following year, assuming that Germany resumed offensive
actions, there would be a monthly
deficit of 118,000 tons (768,000 tons of demand against 650,000 tons of
supply) that could not be filled
without dipping into the Reich’s stockpiles. Germany could not afford to
deplete these reserves entirely,
which meant that it was “urgently necessary to accelerate” existing
construction projects and further
“throttle” consumption. The “improvement of the petroleum situation”
should, he argued, be “the most
important” task of Germany’s armament effort, specifically suggesting
that additional resources be

68

Chef WiRüAmt, “Aktennotiz über den Vortrag beim Reichsmarschall am

6.11.40. in Beauvais,” 08 November
1940, Nuremberg Records, Box 995 (PS-1456).
69
Aktennotiz, 06 January 1941, signature illegible (Thomas?); and Thomas,
Aktennotiz, 06 February 1941; both in:
Hoover Institute, Nuremburg Records, Box 995 (PS-1456).
70
Der Chef des OKW (i.A. Thomas) an den Herrn Reichsmarschall des
Groβdeutschen Reiches, Az. 11 k 2209,
WiRüAmt/Ro Nr. 1719/40 gK Vs, “Betriebstoffversorgungslage,” 29 August
1940, T-77/377 (Wi/IF 5.2694).
Thomas expected that Germany would enter 1941 with reserves of motor
fuel, aviation fuel, and fuel oil sufficient
for four to five months consumption.
71
Konti, Mineralöl-Archiv, “Förderung und Verbrauch von Erdöl in der Welt
sowie regionale Verteilung der
Welterdölausfur i.J. 1938 (Schaubild und Tabellen),” May 1942, T-84/51
(EAP 66-c-2-10/21).

431
devoted to expanding synthetic production and transportation capacity to
boost imports from Romania
and the Soviet Union.72
Thomas’ analysis presented the worst-case scenario, for it was possible
to read the supply and
demand figures differently. Captured stocks during the May-June 1940
campaigns probably exceeded
German consumption and fueled the Battle of Britain in the autumn.73
According to a WiRüAmt
assessment of the raw materials position after the first year of
fighting, Germany’s petroleum reserves had
actually increased over the previous twelve months, from 1,900,000 to
2,100,000 tons. If reserves
continued to accumulate through higher domestic production and imports,
Germany would soon “have
reserves by which we could live for five months without a single ton of
[additional] imports or supply
being necessary.” The only immediate cause of concern was the sharp drop
in diesel reserves, from
850,000 to 470,000 tons, since demand was expected to rise with the
increased construction of U-boats.74
This WiRüAmt paper also took a more sanguine view of Germany’s ability to
cover the requirements of
the occupied territories, whose demand was relatively small, with the
exception of France, which
“possesses reserves, which provide for a provisional supply until next
summer.” If one recalled that
Germany’s overall raw materials position, beyond petroleum, was actually
“propitious,” there was every
reason to conclude that Germany “could await further development calmly
and optimistically.”75
This was also the opinion of the economic staff of the Naval High Command
(Oberkommando der
Marine, OKM). In July 1940, German petroleum production was 31% greater
than in September 1939.

72

Chef, WiRüAmt, OKW, an den Vorsitsenden des Ministerrats [sic] für die
Reichsverteidigung, Aktz. 11 k 2209,
Wi Rü A/Ro 1330/40 gK Vs, “Betr.: Maβnahmen zur Sicherstellung der
Mineralölversorgung im Jahre 1941,” 28
June 1940, T-77/347 (Wi/IF 5.2233). According to the Anlage (Ro V, Aktz.
11 k 2209 (Vs), “Übersicht über die
voraussichtliche Mineralöl-Versorgungslage 1941,” 19 June 1940), the
largest shortages would be for diesel and
motor fuel (approximately 45,000 and 32,000 tons per month, respectively)
although there would be a modest
surplus of aviation fuel (12,000 tons).
73
Eichholtz, Krieg um Öl, 23-25.
74
Göring had consequently ordered in August that fuel production be shifted
to boosting diesel output. Overall,
however, he was “satisfied” with the fuel position. Chef Wi Rü Amt,
Aktennotiz, “Besprechung bei Reichsmarschall
Göring,” 29 August 1940, Hoover Institute, Nuremburg Records, Box 995
(PS-1456).
75
OKW, WiRüAmt/Ro, “Entwicklung der Rohstofflage im 1. Kriegsjahr und ihr
gegenwärtiger Stand,” 11
September 1940, T-77/123 (Wi/IF 5.533). See also: OKW, WiRüAmt
(Bearbeiter: Reg. Rat Dr. Tomberg),
“Abschrift nur Mineralöl betreffend aus Die Probleme der deutschen
Rüstungswirtschaft im Kriege,” Abgeschlossen
Ende September 1940, T-77/668 (Wi/VI. 216). Interestingly, Air Force
consumption had actually been one-third
lower than originally estimated by the Ministry of Aviation
(Reichsluftfahrtministerium).

432
Romania had, over the past year, delivered 746,000 tons (including
132,000 tons in July alone) and the
Soviet Union and Estonia another 565,000 tons. These supplies (which
would only increase over the year
until the winter), plus the nearly 800,000 tons captured during the
campaigns of 1940, meant that
Germany enjoyed a “not inconsiderable” surplus, “with the exception of
diesel fuel […].”76
In spite of these optimistic forecasts of Germany’s immediate prospects,
it seems difficult to dispute
the underlying validity of Thomas’ gloomy prognosis. Neutral consumption
in Europe in 1938 (excluding
Romania, the Soviet Union, and the Iberian Peninsula) was 9,649,000 tons,
which was 2,500,000 tons
greater than that of Greater Germany.77 Even if French consumption under
German occupation was cut to
the bone, it would still impose an additional drain of 100,000 tons per
month on German supplies in 1941,
rising to 149,000 tons the following year. This increase would be
eclipsed by that of the German armed
forces, whose consumption of aviation fuel, motor fuel, diesel, and fuel
oil would, according to a
WiRüAmt estimate from late November 1940 (not taking into account
Operation Barbarossa) rise from
305,000 tons per month in 1940 to 605,000 tons in 1942. Overall
consumption in Axis Europe would
therefore swell from 754,000 tons per month in 1940 to 1,250,000 tons in
1942.78
Rather than making progress toward energy independence, Germany still
relied “decisively upon
imports from Russia and Romania” – much to the chagrin of now-Reich
Marshal Göring. During one of
the periodic Ölsitzungen in October 1940, Göring emphasized that Germany
needed “to counterbalance
[ausgeleichen] this dependence upon imports through stockpiling as much
as possible.” He did not
specify the reasons why this should be the case, except to hint darkly
that precautions ought to be taken in

76

Amtsgruppe Wehrwirtschaft Kriegsmarine (Vizeadmiral Kurt von dem Borne),

M Wa Wi 21 220/40 geh.,
“Betrifft: Die allgemeine Rohstofflage (ohne Ernährung): Ausführungen
Chef M Wa Wi am 21. 9. 40 vor dem
Ob.d.M. [Oberbefehlshaber der Marine – Erich Raeder],” 23 September 1940,
T-1022/1772 (PG 32209). The
Germans lamented that considerable quantities of enemy fuel had been
destroyed over the course of the fighting. As
early as 22 May 1920, Halder received reports that “little” oil had been
captured in Belgium, and that “[tremendous]
stocks were deliberately spoiled” in Brussels and Antwerp. Halder Diary:
22 May 1940. Fischer of the RWM
complained during a press conference in November 1940 of the
misinformation concerning the amount of petroleum
captured in France. Against roughly 700,000 tons acquired (10% of German
consumption) roughly 1,000,000 tons
(one-fourth of German production) had been destroyed before capture. Wi
VIIIa2, Az. 1t16, “WirtschaftsPressekonferenz vom 12. 11. 1940,” 13
November 1940, T-77/220 (Wi/IF 5.1143).
77
OKW/OKH, “Mineralöl-Statistik,” no date, T-77/658 (Wi/VI.109).
78
Ro V, Az. 11k 2209 (Vs), “Mineralöl-Bedarf 1940, 1941 u. 1942,” 20
November 1940, T-77/704 (Wi/IE 4.40).

433
the event that “Russia should for some reason no longer serve as a
supplier of petroleum.”79 For the
moment, Germany needed to exercise greater responsibility for the
protection of oil production in
Romania by dispatching troops to prevent “sabotage and enemy actions.”80
Unexpectedly high petroleum consumption also sparked a nasty exchange
between the Army High
Command (Oberkommando des Heeres, OKH) and the OKW during the winter of
1940/41. After
castigating the Army for not providing accurate reports concerning its
consumption (which had been off
by as much as 100,000 tons of gasoline and diesel), the OKW requested
that the OKH voluntarily abide
by a monthly allocation 85,000 tons of gasoline and diesel (roughly twice
the March 1940 figure, since
the Army was in the process of expanding). The Supreme Commander of the
Army, Field Marshal Walter
von Brauchitsch, complained that this was unacceptable. For one thing,
OKW’s comparison between the
Army’s current consumption and that of March 1940 was fatuous. In March,
the Army had only ten
Panzer and seven mechanized divisions, whereas it was now in the process
of raising the number to
nineteen and thirteen, respectively. The Army was also preparing for
operations “in the East” and against
Gibraltar and the Balkans (“Felix” and “Marita”). Brauchitsch therefore
insisted that the allocation be
raised to 117,000 tons, even though this figure would not suffice to
cover the Army’s requirements during
operations “Felix” and “Marita,” on top of the buildup in the East. By
late December, much to the chagrin
79

The previous August, Göring had instructed Thomas to ensure that all
deliveries from the Soviet Union took place
as scheduled until the spring of the 1941. After then, “we would have no
further interest in a full satisfaction of
Russian wishes.” Chef Wi Rü Amt, “Aktennotiz betr. Besprechung bei
Reichsmarschall Göring am 14. 8. 1940,” 14
August 1940, Hoover Institute, Nuremburg Records, Box 995 (PS-1456).
80
V.P. 16596 g.Rs., “Vermerk: Besprechung unter Vorsitz des
Reichsmarschalls am 4. Oktober 1940 über die Lage
auf dem Mineralölgebiet,” BA-B, R 26 I/15. Only a fragment of the
protocol survived in the records of the
WiRüAmt. All other copies appear to have been lost after the Göring’s
office ordered their return in order to make
some revisions without apparently resending them. Der Reichsmarschall des
Groβdeutschen Reiches, BVJP, an
Herrn Professor Dr. Bentz, Reichstelle für Bodenforschung (RfB), et al.,
V.P. 16596/5., “Betrifft: Mineralölsitzung
vom 4. Oktober 1940,” 16 October 1940, T-401/5 (RBF 96); and der
Reichsmarschall des Groβdeutschen Reiches,
BVJP, V.P. 16596 g.Rs., 29 October 1940, T-77/594 (Wi/I. 273). Thanks to
Thomas’ memorandum of conversation,
we do know that much of the discussion focused on boosting imports from
Romania. Now that Operation Sealion
(the invasion of Great Britain) had been called off, 2,000 railways tank
wagons could be rerouted back to carrying
oil from Romania. Additionally, Göring ordered the construction of two
pipelines with a monthly throughput of
350,000 tons, “built largely with French materials.” Finally, Göring
instructed that future imports from the Soviet
Union should privilege deliveries of diesel fuel and lubricants, which
were in short supply in the Reich. Chef
WiRüAmt, “Ergebnis der Besprechung über Treibstoffragen bei
Reichsmarschall Göring am 4. Oktober 1940,” 05
October 1940; and Ro I, Aktennotiz, “Besprechung beim Reichsmarschall am
4.10.40,” 05 October 1940; both in:
T-77/606 (Wi/IC 4.40). Bentz also briefly described his contributions to
the conferences held on 06 September 1939
and 04 October 1940 in: Bentz, “Supplement to my questionnaire,” 11
February 1946, BNA, FO 1039/496.

434
of the OKH, the OKW put its foot down and imposed rationing on the armed
services on the grounds that,
if nothing was done to address the impending shortage of motor and diesel
fuels, the military would have
to dip into its strategic reserve (nicht einsetzbare Bestände) by the
spring of 1941.81
Another person who was concerned that Germany could no longer balance its
long-term supply with
demand was Krauch.82 Allied bombing was not yet a factor: the Allies had
begun targeting Germany’s
synthetic fuel plants in May 1940, but these attacks had only been a
nuisance. 83 As of January 1941, the
Allies had launched 120 bombing raids against synthetic fuel targets but
only destroyed 65,000 tons of
petroleum.84 In fact, until 1943, total German losses of petroleum from
Allied bombing equaled only ten
days of production.85 As Krauch explained to one of Göring’s deputies,
State Secretary Paul Körner, in
December 1940, “various changes have emerged, which have as a consequence
a significant aggravation
of the fuel supply,” including, of all things, an earthquake in Romania
in October. For 1940 as a whole,
German domestic production reached 3,586,000 tons, 42,000 tons less than
expected due in large part to
aerial attacks against synthetic fuel plants. Romanian imports were
51,000 tons lower than expected due
to aforementioned earthquake and various “political difficulties.” The
Soviets were also causing
headaches by calling off exports of gasoline in October, such that total
exports in 1940 fell below
expectation by 129,000 tons. Against such losses in supply, consumption
turned out to be higher than
previously thought – in the case of motor fuel for the military, 166,000
tons. Between June and

81

The exchange may be reviewed in T-77/341 (Wi/IF 5.2164, 2687), Anlagen

60, 62, 63a-c, and 64 to: “Die
Arbeiten des WiRüAmtes”; and OKW (Keitel) to the OKH, Oberkommando der
Marine (OKM), Reichsminister der
Luftfahrt and Oberbefehlshaber der Luftwaffe (Göring), Az. 66 b 2201,
WiRüAmt Ro Nr. 2497/40 gK Va., 23
December 1940, T-77/377 (Wi/IF 5.2694).
82
Although he publicly extolled the accomplishments of the VJP, Krauch
subtly conceded that the plan had not been
designed to cope with meeting Europe’s entire raw materials consumption,
and that the Reich’s supply position was
“tight” as a result of this additional burden. Carl Krauch, “Die
Kriegsleistungen der chemischen Erzeugung und ihre
kommenden Aufgaben,” Vierjahresplan, 1942: I
83
As of November 1940, WiRüAmt judged the Allied bombing attacks to be
“insignificant.” (OKW), WiRüAmt,
Stab Ib 5, “Abschriften nur Mineralölbetreffend aus Interne
Monatsberichte zur deutschen Rüstungswirtschaft
(Auswertung der Kriegstagebücher WiRüAmt Stab, W Rü and W Ro),” no date,
T-77/668 (Wi/VI. 216).
84
“Vierjahresplan: Industrielle Rohstoffe: Stand vom 30. 1. 1941
(Unterlagen für den Vortrag Prof. Dr. C. Krauch
vor den Führungsstäben Wirtschaft am 30. 1. 1941),” BA-B, R 3112/173.
85
A source of great happiness to Hans Kehrl (one of Albert Speer’s key
deputies after 1942), who “sighed with
relief” whenever he learned that Allied bombers were targeting Berlin
rather than the synthetic fuel plants.
Krisenmanager im Dritten Reich: 6 Jahre Frieden – 6 Jahre Krieg,
Erinnerungen (Düsseldorf: Droste Verlag,
1973), 366-367.

435
September, moreover, the military had also helped itself to an extra
78,000 tons of booty in France
without bothering to inform anyone. For the year as whole, Krauch had to
revise an earlier estimate of
German reserves from October 1940 downwards, from 2,428,000 to 2,057,000
tons (18%).86
Krauch estimated that German production in 1941 would increase to
approximately 4,470,000 tons,
but the import situation would be less promising. Imports from Romania
would be less than originally
planned: 2,872,000 tons vs. 3,200,000 tons – which assumed that the
country would raise production to
6,000,000 tons, 800,000 tons of which would go to Italy, leaving the
remainder for internal and
neighboring consumption. Meanwhile, imports from the Soviet Union would
likely remain at the 1940level, 740,000 tons, instead of the desired
835,000 tons, since however much it might desire higher
exports, Germany lacked the means to pay for them.87 Military and
civilian consumption would, one the
other hand, rise by 1,072,000 tons and 180,000 tons, respectively. The
former had nothing to do with any
expected offensive operations – they were the result of already planned
expansions of the Air Force and
Navy, as well as training to preserve the military’s operational
readiness. As the Office for Economic
Development (Reichsamt für Wirtschaftsausbau, RWA) explained, “[the]
elimination of the island of
England as an American aircraft carrier” was the “pre-requisite” for
guaranteeing Germany the raw
materials and munitions foundation for a drawn out war. For that reason,
the needs of the Air Force and
the Navy (U-boats) ought to take precedence over those of the Army.88 By
the beginning of 1942, Krauch

86

Krauch to Körner, Min. Öl. P Dr. Ad.M./Schw, “Treibstoffversorgung,” 14

December 1940, T-77/704 (Wi/IE
4.40).
87
There was also the fact that Soviet demand had outpaced new production
since the mid-1930s, such that Soviet
exports had shrunk from 6,000,000 tons in 1932 to only 1,930,000 tons in
1937. German analysts correctly judged
that this decline would be rectified once the Soviets made the necessary
capital investment to start up production in
the Volga-Urals. In the meantime, Baku would remain the “backbone” of the
Soviet oil industry. Dr. Paul Ruprecht,
“Die Ergänzung des kriegswichtigen bergbaulichen Rohstoffbesitzes
Deutschlands durch den russischen,” MilitärWochenblatt, 124. Jahrgang,
Nummer 20 (10 November 1939); Dr. Paul Ruprecht, “Die Ölfelder von Baku
in der
Erdölversorgung Russlands,” Militär-Wochenblatt, 124. Jahrgang, Nummer 47
(24 May 1940); and Dr. Paul
Ruprecht, “Erdölbedarf und Erdölverteilung,” Militär-Wochenblatt, 125.
Jahrgang, Nummer 40 (04 April 1941).
88
I Dr. R./vB., “Zur Entwicklung der Rohstofflage bei langer Kriegsdauer,”
28 January 1941, NARA, Record Group
238: National Archives Collection of World War II War Crimes Records,
National Archives Microfilm Publication
T-301, Reel 73, Document NI-8835 – hereafter cited as: NARA, RG 238, T-
301/Reel No. (Document No.).
Emphasis in the original.

436
expected that German reserves would stand at only 840,000 tons instead of
the 3,492,000 tons he
originally estimated.89
The situation would become truly critical in 1942. Krauch assumed that
German production would
rise by an additional 1,260,000 tons, and Romanian crude oil output by
1,500,000 tons (thereby leaving
3,350,000 tons for Germany, or 2,750,000 tons of fuel), while Soviet
imports would remain at the 1941levels and consumption within the
civilian economy and occupied territories only increase slightly.
Again, these additions would be eclipsed by military consumption, which
would increase by a further
1,500,000 tons. Assuming that the 350,000 tons currently set aside as a
special “transportation reserve”
for Romanian imports was added to the overall reserves, Germany would
have on hand on 01 January
1942 1,190,000 tons, plus 9,230,000 tons worth of new supplies
(production plus imports), or 10,420,000
tons in total. Against this, consumption would reach 9,920,000 tons,
leaving Germany with a miniscule
500,000 ton reserve by 01 January 1943. Krauch tried to make light of the
situation by noting Germany
could “at least” cover its requirements in 1942. Thereafter, all existing
possibilities of managing the
situation would be exhausted, leading Krauch to conclude: “A significant
easing of the fuel supply
situation would only arise if over the course of the war it became
possible to import petroleum from
Romania and Russia through the Mediterranean and most of all if oil from
Iraq from either Tripoli or
Haifa was available for supplying Europe.”90
Krauch’s estimates were useless in the event of an invasion of the Soviet
Union. Besides severing an
important source of supply, the military’s monthly “operational demand” –
estimated in February 1941 at
200,000 tons of motor fuel and 55,000 tons of diesel fuel for the Army,
and 150,000 tons of aviation fuel

89

Krauch to Körner, Min. Öl. P Dr. Ad.M./Schw, “Treibstoffversorgung,” 14

December 1940, T-77/704 (Wi/IE
4.40).
90
Krauch to Körner, Min. Öl. P Dr. Ad.M./Schw, “Treibstoffversorgung,” 14
December 1940, T-77/704 (Wi/IE
4.40). Emphasis added. I have been unable to locate a copy of the report
of 01 October 1940 to which Krauch
referred. Please note that although the December paper is almost
illegible, in view of its relevance to policymaking, I
have made every effort to utilize the most important portions. See also:
WiRüAmt, “Übersicht über die BetriebstoffVersorgungslage 1941,” 12
December 1940, T-77/704 (Wi/IE 4.40), which urged that the expansion of
petroleum
production should enjoy the same official “level of urgency”
(Dringlichkeitsstufe) as that of the production of tanks,
planes, and U-boats.

437
for the Air Force – would skyrocket.91 As early as January 1941, the OKW
feared that Germany would
begin Barbarossa with a deficit 150,000 tons per month – and even this
figure was based on the
assumption that the country had used up its “untouchable reserves” (nicht
einsetzbare Bestände) to cover
the shortfall between March and May 1941.92 Following a January
conference with Thomas, Halder noted
that the fuel supply position was “serious.” The situation had not
improved by March, with Soviet oil
exports “down to a dribble,” and even these meager supplies would be
unavailable after the start of
Barbarossa. Without them, “we shall be able to sustain a large-scale
offensive on existing stocks for a
period of 2 to 2½ months. After that we shall have to depend on our own
production and on Romania.”93
If the invasion began in June 1941, existing production, imports
(excluding the Soviet Union), and stocks
would no longer cover the military and civilian requirements of Axis
Europe for motor fuel and diesel by
the end of August. Therefore, Germany’s “aim must be the achievement of a
new, sufficient basis [of
supply] by no later than August through either military operations or
contractual agreements with a
partner willing to deliver.”94
Two weeks later, following discussions with the RWM and OKW, Krauch laid
out the situation for
Göring. Expected supplies over the course of 1941 (production plus
imports, including 580,000 tons from
the Soviet Union) would fall below expectations by 540,000 tons due to
disappointing production in
Romania and a shortage of skilled labor within Germany, which was holding
back the expansion of
synthetic production. OKW also revised their requirements upward by
530,000 tons. Once one included
the requirements of France and Italy, Germany would end 1941 with an
unfilled deficit of 1,180,000

91

Ro V (Griebel), 11 k 2209 (Vs), “Untersuchung der

Betriebsstoffversorgungslage, Januar – August 1941,” 08
February 1941; and Rohstoffabteilung, Az. 11 k 2209 (Vs), Vortragsnotiz
für Chef WiRüAmt, “Betr.: Übersicht
über die Betriebsstoffversorgungslage 1941,” 25 February 1941: both in:
T-77/704 (Wi/IE 4.40).
92
The situation was equally grim with regard to diesel fuel. L IV/Qu,
“Betr.: Treibstofflage im Fall Barbarossa,” 24
January 1941, IWM, FD 356/46.
93
Halder Diary: 28 January and 13-14 March 1941.
94
“Vermerk: Kraftstoffversorgungslage im Sommer 1941,” 13 March 1941, no
author (according to Wi/IF 5.2726,
the author was the Rohstoffabteilung of the WiRüAmt), enclosed with: Min.
Öl P Dr. Ad.M./Gr. (RWA?),
“Treibstoff-Versorgung: Kalenderjahr 1941,” 27 March 1941, T-77/704
(Wi/IE 4.40). This study made no specific
reference to Barbarossa, although it did mention that the “possibilities
for acquiring booty in the East like in the
West in 1940 cannot be likely be calculated” due to absence of any major
ports that could serve as conduits for
overseas exports.

438
tons.95 Krauch could offer no real suggestions for addressing this gap
other than boosting Soviet imports
to the maximum level previously achieved (80,000 tons in August 1940),
diverting drilling equipment
previously earmarked for delivery to the Soviet Union to Romania in order
to raise production beyond the
estimated 5,800,000 tons, and “rigorous execution” of orders to the
military to conserve fuel.96
On the basis of the aforementioned discussion, we might reasonably
surmise two things. One, by the
end of 1940, German planners understood that the country would sooner or
later face a “fuel crisis” due to
persistently higher consumption and the continuing inability to increase
supplies (particularly imports
from Romania) to the extent required.97 This crisis was the product both
systemic and contingent factors –
in the case of the former, that Germany’s obligations after June 1940
vastly exceeded the means available
in Continental Europe; as to the latter, once the buildup for Barbarossa
began, railways cars had to be
reallocated from importing petroleum to moving troops to their staging
grounds.98 Two, the German
95

Leaving aside an “unused minimum reserve” (nicht einsetzbare

Mindestbestände) of 760,000 tons.
Der Generalbevollmächtigte für Sonderfragen der chemischen Erzeugung
(Krauch) an den Herrn Reichsmarschall
des Groβdeutschen Reiches (Göring), I Dr.R./G., 2543/41 g.Rs.,
“Treibstoffversorgungslage für das Jahr 1941,” 28
March 1941, T-77/594 (Wi/I. 273). Naturally, the Reich was keen to
project the image of energy security to
outsiders. In April 1941, General Hermann von Hanneken (Plenipotentiary
for Iron and Steel Production in the VJP
and head of the RWM raw materials division) bragged to foreign newspaper
correspondents that, unlike the British
and French, who depended on overseas imports vulnerable to interdiction,
“our petroleum supply for the most part
rests upon a secure, domestic raw materials basis […].” He advised
Germany’s enemies not to hold their breath that
Germany would collapse anytime soon because of any raw materials
shortages – quite the contrary, the Reich had
enough to continue the war “until the final victory is achieved.”
“Deutschlands Rohstoffversorgung: Vortrag des
Generals von Hannken, Unterstaatsekretär im Reichswirtschaftsministerium,
vom 8. 4. 1941 vor den in Berlin
tätigen Auslandskorrespondenten,” BA-B, R 3101/3203.
97
Between August and December 1940, German military petroleum consumption
was higher than at any point prior
to the invasion of France, including during the Polish Campaign. This
trend continued into 1941: during the fiveplus months prior to
Barbarossa, consumption was higher every month except February than the
peak figure in 1940
(May, during the Battle of France). Overall consumption in 1941 was two-
thirds greater than that of 1940: 5,145,000
tons vs. 3,014,000 tons. V.P. 6719/5 gRs, “Treibstoffverbrauch seit
Kriegsbeginn in 1000 t,” 03 August 1944, IWM,
FD 4809/45.
98
By May 1941, OKW informed Halder that it could only send sixteen fuel
trains to the forces assembling in the
east, rather than the required 22, even though the local fuel depots were
only 20% full. Halder Diary: 19 May 1941.
For more on the the difficulties imposed by the preparations for
Barbarossa, see: Part IV, Section C, and Anlage 2
(Chef Wi Rü Amt (Thomas), “Die Gründe für die Treibstoffkrise zu Beginn
der Ostoperationen und die daraus zu
ziehenden Folgerungen,” 03 July 1941) of: OKW, WiRüAmt (Oberst Dr.
Hedler), “Die Mineralöle und die
Versorgungslage im Kriege,” Abgeschlossen 31August 1941, T-77/438 (Wi/IF
5.2726). An earlier draft of the
“Treibstoffkrise” paper (dated 30 June 1941), which has more to say about
WiRüAmt’s logistical planning for
Barbarossa, may be found in: T-77/704 (Wi/IE 4.40). Well after
Barbarossa, troop transports continued to receive
higher priority than those for petroleum, much to the consternation of
WiRüAmt. The situation was only resolved at
the end of July 1941, when, armed with authorization from both Göring and
the OKW, a WiRüAmt officer visited
Romania to sort things out. He succeeded in getting 498,000 tons per
month’s worth of transportation assets devoted
to hauling Romanian oil overland, either to Germany and Italy directly,
or by rail or pipeline to the Danube. Luckily,
there was no longer any shortage of Danubian tankers. Ro V (d), Az. 11 k
2426, “Aktennotiz über die Reise des
96

439
leadership reckoned on having enough petroleum to make it through the
year provided that non-military
consumption was further reduced, and, most of all, that Barbarossa ended
quickly.
The General Staff had drawn up its operational plans on the assumption
that the attacking forces
would receive 6,710 tons of motor fuel and diesel per day on from twenty-
two supply trains. WiRüAmt
pointed out in May that this was impossible – the Reich could only
provide sixteen trains per day, and
that only for the first six weeks. Thereafter, additional conservation
measures within the civilian economy
and the diversion of Air Force supplies to the Eastern Army (Ostheer)
would be required. There was also
the matter of where fuel oil for the Navy and Italy would be found. The
former would have to rely on its
relatively large reserves after the start of Barbarossa in order to cope
with the loss of 45,000 tons per
month of Soviet imports. The latter could only be supplied adequately
from Romania by sending supplies
through the Turkish Straits due to the lack of overland and Danubian
transportation capacity.99 A drawnout campaign would be catastrophic, for
Germany would start running a deficit of 10% as early as July
1941, while reserves would, as Thomas informed Halder nine days prior to
Barbarossa, “be exhausted in
[the] fall.” Halder scoffed at Thomas’ concerns: “Operational plans
cannot be tailored to suit economic
planners.”100 Among the many flaws of the Chief of the General Staff was
a contemptuous disregard for
logistical matters. In the absence of actual preparations, Halder could
only advise his subordinates to
“exhaust all means of improvisation.” One historian excoriates Halder’s
indifference: “Makeshift
solutions were to be a palliative against the truth that only 20 percent
of the Eastern Army could engage
in the envisaged rapid and far-reaching mobile warfare! The attempt to
solve provisioning problems – the
vast area, distant objectives, [and] no trains – by using lorries to send
supplies illustrates the arrogance of
the men who had conquered France.”101

Major Bahl nach Bukarest v. 28.6. – 24.7.41,” 31 July 1941, T-77/612

(Wi/IC 4.75). The letters of authorization
from Göring and the OKW are appended as Anlagen 1-2.
99
OKW, WiRüAmt/Ro, Az. 11k 2216 (Vb), “Untersuchung der
Betriebstoffversorgungslage,” 15 May 1941,
enclosed with: WiRuAmt (Thomas; gez. Griebel) an Herrn Oberst Jansen, Az.
11k 2216 Ro Nr. 1600/41gK (Vb), 16
May 1941, T-77/366 (Wi/IF 5.2528-34).
100
Halder Diary: 20 May and 13 June 1941.
101
Förster, “Hitler Turns East – German War Policy in 1940 and 1941,” in:
From Peace to War, ed. Wegner, 115133 (quotation from pg. 129).

440
In February 1941, Thomas warned Keitel and Jodl that, in the event of an
invasion of the Soviet
Union, aviation fuel reserves would only last until the autumn, while
motor and diesel fuel reserves would
dry up by “the middle of August.” Keitel reacted by ordering a savings
between March and July 1941 of
50,000 tons to 100,000 tons of motor fuel and 50,000 tons of diesel. He
informed Thomas that military
would have to find a way to deal with problem, since “the Führer would
not allow his plans to be
influenced by such economic difficulties.”102 The following month, Thomas
explained to both Keitel and
Göring that, with the exception of aviation fuel (where the supply
situation remained favorable) Germany
could probably scrape together its petroleum requirements during the
first three months of campaigning.
The situation would become either difficult (in the case of motor fuel)
or outright untenable (diesel) by
September, even assuming that military consumption dropped dramatically.
Thomas therefore suggested a
series of stringent conservation measures, including cutting the
allocation to the civilian economy starting
01 June 1941 by a further 10% and reducing Romania’s exports to third-
parties by 20,000 tons a month
(including the entirety of Turkey’s imports).103
Even then, both WiRüAmt and RWM estimated in May that Axis Europe would
be running a
monthly deficit of 400,000 tons by 01 October 1941 – roughly one-third of
expected demand. The only
way to “compensate” for this deficiency was “though the capture of a
major oil-producing area” by no
later than August in order to assure that deliveries would reach the
Reich by October. Unfortunately, even
the capture of new oilfields would not completely alleviate Germany’s
difficulties, for the Reich would
start the New Year without any appreciable reserves, while the winter
weather would adversely affect the
level of imports from the east.104 Krauch also agreed that Germany needed
the Caucasus. Two days after

102

Thomas, Aktennotiz, 08 February 1941, IWM, FD 4809/45.

Der Chef des WiRüAmtes an den Herrn Reichsmarschall des Groβdeutschen
Reiches, BVJP, [and] Chef des
OKW, Herrn Generalfeldmarschall Keitel, Az. 11 k 2209, Nr. 316 [?]/41 gK
[?], “Betr.: Betriebstoffversorgung im
Sommer 1941,” 27 March 1941, IWM, FD 356/46. Göring was not keen on using
aviation fuel for land warfare, but
he relented and gave Thomas the requisite authority to divert Air Force
supplies to the Army in the event of an
emergency. Chef WiRüAmt, “Vortrag beim Reichsmarschall am 26, 6. 1941,”
26 June 1941, IWM, FD 4809/45.
104
OKW, WiRüAmt/Ro, Az. 11k 2216 (Vb), “Untersuchung der
Betriebstoffversorgungslage,” 15 May 1941,
enclosed with: WiRuAmt (Thomas; gez. Griebel) an Herrn Oberst Jansen, Az.
11k 2216 Ro Nr. 1600/41gK (Vb), 16
May 1941, T-77/366 (Wi/IF 5.2528-34); and der Reichswirtschaftsminister
(i.V. Dr. Landfried) an den BVJP, Herrn
Reichsmarschall Göring zu Hd. Von Herrn Staatssekretär Körner o.V.i.A.,
II Min Öl 82/41 gRs, “Betr. Anforderung
103

441
the start of Barbarossa, he explained to the General Council of the VJP
that the Reich could probably
meet its demands by completely depleting its existing reserves.105 This
would not be possible in 1942:
even under the assumption that Germany’s total supply increased by the
projected 1,400,000 tons (both
domestic production and additional imports from Romania), the Reich would
still have a 600,000 ton gap
that could only be filled by imports from the Soviet Union.106 This left
aside the requirements of the socalled “Göring Plan” of 23 June 1941,
which would have quadrupled the strength of the Air Force over
the next two years to deal with Britain and the United States. This plan
naturally entailed a significant
increase in aviation fuel requirements, which would be satisfied by
refining 4,000,000 tons of crude oil
imported from the Soviet Union.107
By the autumn of 1940, it was clear to Berlin that Europe would face an
oil crisis once existing
reserves had been expended unless the Reich took corrective action or,
better yet, ended the war. The
latter option seemed within reach in 1940, but it posed a new set of
problems. Postwar Axis Europe
would also depend upon oil imports from overseas, but a return to the
prewar status quo was unacceptable
– Germany had not fought the war to return Europe to a state of
subservience to the major U.S. and
British oil companies. Even as German planners tried to resolve Axis
Europe’s immediate petroleum
shortage, they devoted some of their energies to the more ambitious
challenge of independently supplying
their postwar empire.

der Wehrmacht an Betriebstoffen und Entwicklung der Versorgungslage bis

Ende 1941,” 24 May 1941, T-77/704
(Wi/IE 4.40). The RWM note enclosed a statistical overview, but I have
been unable to locate it.
105
Compared to the year before, in 1941, Germany would have to reconcile
2,300,000 additional tons of
consumption with only 200,000 new tons of supplies. RWA, Dr. Ad. M./Gr.,
“Treibstoff-Versorgung 1940 und
1941: Stand 13. 6. 1941 (Bermerkung zu dem Schaubild für den Vortrag vom
24. 6. 1941),” 21 June 1941, T-84/217
(EAP 66-c-12-62/13).
106
Der Reichsmarschall des grossdeutschen Reiches, BVJP, V.P. 10103/1 g.Rs.,
“11. Sitzung des Generalrats vom
24. 6. 41 unter Vorsitz von Staatssekretär Körner,” no date, T-77/430
(Wi/IF 5.3593). Krauch also believed that the
existing transportation network could handle 400,000 tons of Soviet
imports a month, which “would place” the
supply position of the European Axis “upon an entirely new, sufficient
basis.” I Dr. R./G., “Bericht des Herrn
Professor Dr. C. Krauch über die Lage auf dem Arbeitsgebiet des GB-Chemie
in der Sitzung des Generalrates am
24. 6. 1941,” 25 June 1941, T-84/217 (EAP 66-c-12-62/13).
107
Eichholtz, Krieg um Öl, 90-91; and Karlsch and Stokes, Faktor Öl, 204.

442
Oil and Postwar Planning, 1940
The victory over France in May/June 1940, as unexpected as it was
decisive, prompted policymakers
across the Reich to speculate on the nature of postwar economic order
Germany would establish once it
had hammered out peace treaties with the Allies.108 The question of who
exactly would formulate postwar
economic policy set off a bitter bureaucratic feud between the AA and the
VJP, as both sides claimed
authority to determine Germany’s economic objectives in future peace
negotiations. Göring fired the first
shot on 20 June 1940 when he claimed responsibility for the “unified
direction of economic matters for
the peace negotiations” and designated Funk to handle the formation of
the “German-European economic
sphere.” Ribbentrop whined that the AA had traditionally been responsible
for foreign trade, and although
he accepted that the VJP was supreme in all internal economic matters, he
insisted that the AA handle all
matters pertaining to Reich’s foreign relations.109
Meanwhile, Clodius of the AA outlined a series of economic desiderata,
including full economic
integration with Holland, Belgium, Luxembourg, and Norway. Germany would
also have to reacquire its
colonial empire, in addition to the Belgian Congo, “largely to close the
gaps in its [Germany’s] supplies
of raw materials.” Interestingly, Clodius advised against the simple
expropriation of British and French
assets. Rather, “in contrast to the Treaty of Versailles,” Germany should
engineer “[the] sale of English
and French interests in third countries, which are of particular interest
to us,” making specific reference to
Anglo- and French-owned oil companies in Romania.110 Clodius then
collaborated on postwar economic

108

Mark Mazower, Hitler’s Europe: How the Nazis Ruled Europe (New York:
Penguin, 2008), 102-136.
Memorandum by the State Secretary, 22 June 1940, St.S. No. 475, 22 June
1940, Document No. 530 in: DGFP
(D), ix: 683-684; Ribbentrop to Neumann, No. 112, 26 June 1940, Document
No. 23; Göring to the AA, V.P.
10996/5 g, 02 July 1940, Document No. 82; Körner (State Secretary, VJP)
to the AA, V.P. 11088/1, 03 July 1940,
Document No. 103; Ribbentrop to Göring, Pol. XII 1790 g, 09 July 1940,
Document No. 142; all in: DGFP (D), x:
24, 93, 115, and 170-173. For Funk’s specific role in Germany’s campaign
of economic “spoliation,” see: Funk to
Hans Lammers (Chief of the Reich Chancellery), Rk. 11834 B., 30 July
1940, Document No. 261 in: DGFP (D), x:
369-370; and Funk’s testimony at Nuremberg on 05 May 1946, IMT, xiii:
129-130. Meanwhile, Ernst Bohle, the
head of the Auslandsorganisation, pledged the services of his agency to
the AA (where he also served as a State
Secretary) when it came to providing information that could assist in the
conduct of peace negotiations. Within the
section pertaining to “Claims for Damages,” Bohle made specific reference
to the “oil trusts, mining companies of
all kinds, [and] the Suez Canal Co. […].” Minute from the St. S. und Chef
A.O. presented to Emil von Rintelen
(Ministerialdirigent, Politische Abteilung), 12 July 1940, PAAA, R
106289.
110
Clodius, “Aspects of the Economic Organization of the Peace,” 30 May
1940, Document No. 354 in: DGFP (D),
ix: 476-482. During the summer of 1940, IG Farben collaborated with the
RWM in determining how the European
109

443
planning with Ambassador Karl Ritter (AA liaison to the OKW and
responsible for all matters pertaining
to economic warfare), and the two presented their findings to Ribbentrop
on 29 May 1940. Ritter’s vision
was similar to that of Clodius, if somewhat more expansive, for he
envisaged a continental economic and
possibly political union of 200,000,000 people and expanded colonial
empire in Africa that would also
include former French and British possessions. Both Ritter and Clodius
were most concerned with the
issue of postwar trade, since, as Ritter observed, the population of a
German-dominated Europe “have for
the most part a consumption and production capacity above average.”111
Control of Europe would be worthless without oil, however, and various
agencies began considering
how Germany might address this deficiency. Before the war, Continental
Europe had consumed
26,800,000 tons of petroleum products against a local production of
7,950,000 tons of oil (not including
German synthetic production).112 In the case of Romania, the Office for
Soil Exploration (Reichstelle für
Bodenforschung, RfB – after 1941, Reichsamt für Bodenforschung) estimated
that 60,000,000 tons worth
of reserves remained. Romania’s restrictive mining laws had limited
exploration and production, such that
output had fallen from a peak of 8,700,000 tons in 1936 to 6,240,000 tons
in 1939, and exports from
6,885,000 tons to only 3,848,000 tons during the same period. The major
player in Europe was the Soviet
Union, whose reserves could be as large as 1,000,000,000 tons. The
Soviets had recently begun
production in the Volga-Urals – the so-called “second Baku” – but 90% of
total production was still
concentrated in the Caucasus. The Soviets had shown considerable
ingenuity in raising production from a
post-Civil War trough of 3,138,000 tons in 1921 to over 29,000,000 tons
by 1939, in spite of the fact that
chemical industry would be reorganized under German leadership, with the
expressed aim of making the Third
Reich’s sphere of influence autarkic. IG Farben was also interested in
regulating future trade and economic
competition with other economic spheres (the United States, Japan, and
Italy). “New Order (Neuordnung),” no date
or author, enclosed with: Georg von Schnitzler (Managing Board, IG
Farben) and Kurt Krüger (Deputy Chief of the
Volkswirtschaftliche Abteilung, Vowi) to Ministerialdirigent Gustav
Schlotterer (RWM), 03 August 1940, Partial
Translation of Document NI-11252, NMT, vii: 1451-1463; and Col. B.B.
Bernstein, Director, Finance Division, U.S.
Group Control Council (Germany) to Lt. Gen. Lucius D. Clay (Deputy
Military Governor of Germany), “Report on
Investigation of I.G. Farbenindustrie,” 12 September 1945, NARA, Record
Group 466: Office of the High
Commissioner for Germany, Office of General Counsel, Decartelization
Division, Cartel Subject Files, 1947-55,
Box 26.
111
Memorandum by Ritter to Ribbentrop, 01 June 1940, Document No. 367 in:
DGFP (D), ix: 496-501. According
to fn.1 (pg. 496), no record of Clodius and Ritter’s oral presentation to
Ribbentrop survived.
112
Konti, Mineralöl-Archiv, “Förderung und Verbrauch von Erdöl in der Welt
sowie regionale Verteilung der
Welterdölausfur i.J. 1938 (Schaubild und Tabellen),” May 1942, T-84/51
(EAP 66-c-2-10/21).

444
they labored under shortages of equipment and experienced manpower.
Although rising Soviet
consumption had limited the exportable surplus to only 1,000,000 tons to
1,500,000 tons by the end of the
1930s, the RfB nevertheless felt confident “that Russian production will
rise further during the next few
years.”113
The most promising source of supply for Europe in the future was neither
Romania nor the Soviet
Union: according to the RfB, only South America and the Middle East
“enter into the equation” as
possible suppliers. The estimated reserves of the latter (960,000,000
tons) dwarfed those of the former
(500,000,000 tons).114 Production in the Middle East (16,700,000 tons in
1939) was also trivial by
comparison to the scale of the reserves. “When it comes to satisfaction
of demand of the oil-poor nations
of Europe and Africa, the deposits in the Near Orient, whose production
can moreover in future be
powerfully raised, will have for the long term a decisive importance.”115
113

RfB, Erdöl in Europa und im nahen Orient (Berlin, 1940), LOC. For more on
the Soviet Union, see: RfB, Die
wichtigsten Lagerstätten der Erde, Heft 4: Erdöl in Rußland (Berlin,
1941), LOC.
114
German geologists were skeptical of the prospects for significant oil
discoveries in Africa, either in Arab North
Africa or elsewhere on the continent. Concerning the former, although oil
had been discovered in Algeria and
Morocco, the level of discoveries “was in spite of all efforts only
limited.” Härle (?), A1 Mitt.15, “Nordafrika,” 27
November 1942 (handwritten notation indicates that the memorandum was for
Dr. Gerhard Ritter, one of Krauch
deputies at the RWA), T-84/51 (EAP 66-c-2-10/17). Even within Egypt,
where production had reached over
1,000,000 tons by 1939/40, more than half of output was consumed locally,
leaving little available for the
Afrikakorps if they succeeded in conquering the country, none of which
could be refined locally into high-octane
aviation fuel. Krauch to Staatsrat Scheiber (Reichsministerium für
Bewaffnung und Munition), “Erdöl in Ägypten,”
02 July 1942; and Härle (?) to Ritter, “Die Möglichkeiten der
Lebensmittel- und Rohstoffversorgung aus Ägypten,”
28 July 1942; both in: T-84/51 (EAP 66-c-2-10/17). As for the rest of
Africa, although there was some hope that
more extensive exploration efforts might yield major discoveries in the
future, the prognosis in the short to medium
term was grim. See: A. Mayer-Gürr (RfB, Abteilung Erdöl), “Bericht über
Die Ölanzeichen Afrikas mit Ausnahme
der bereits produzierenden Länder,” 15 January 1939, Bundesanstalt für
Geowissenschaften und Rohstoffe, 48971
(hereafter cited as: BGR #); A. Mayer-Gürr, “Afrika: Ölzeichen und
Aufschlussarbeiten,” July 1940, BGR 48973;
“Gibt es eine ‘hoffnunglose Ölarmut’ Afrikas?” Deutsche Wehr, Nr. 27/45.
Jahrgang (04 July 1941); and MayerGürr, “Die Erdölhöffigkeit Afrikas:
Sonderdruck aus Oel und Kohle 38, 73 (1942),” BGR 48972. Ironically, the
Axis Powers were already in possession of territories containing
quantities of oil beyond their wildest imagination in
Libya. Unfortunately for them, oil was not discovered until 1959. By
1969, Libya was producing over 3,000,000
barrels per day, compared to Germany’s peak daily synthetic production of
110,235 barrels in 1943. United States
Strategic Bombing Survey, Effects of Strategic Bombing on the German War
Economy (Washington, DC: U.S.
GPO, 1945), 75.
115
RfB, Erdöl in Europa und im nahen Orient (Berlin, 1940), LOC. Emphasis in
the original. For additional studies
examining production and foreign ownership of oil in the Middle East,
see: Institut für Weltwirtschaft an der
Universität Kiel, “Die Erdölwirtschaft des Vorderen Orients,” April 1940,
T-84/66 (EAP 66-c-8-38/3); and Institut
für Weltwirtschaft an der Universität Kiel, “Die Entwicklung der
Erdölwirtschaft in Nahen Osten seit Kriegsbeginn:
Als Nachtrag zu unserem Bericht über die Erdölwirtschaft des Vorderen
Orients von April 1940,” May 1944, T84/66 (EAP 66-c-8-38/5). Whereas in
the report of April 1940, British interests in the Near East “outweighed”
all
others, the situation had completely changed by May 1944: “The crude oil
industry of the Near Orient stands today
as a symbol of the advancing influence of the United States, which
believes that, in the Near Orient, it sees the crude

445
Many of these points were elaborated upon in a follow-up report produced
by the RfB in 1942 that
dealt exclusively with the Middle East. The RfB believed that, although
production in 1940 was limited to
15,700,000 tons, it could be more than doubled to 35,000,000 tons without
any expansion of the region’s
existing transportation infrastructure. Furthermore, current production
was limited to only six fields, but a
further nine could quickly go into production, thus boosting the region’s
annual output to 55,000,000
tons, against an internal consumption of only 2,500,000 tons. The bulk of
this increase would take place
in just five nations: Iran, Iraq, Bahrain, Saudi Arabia, and Kuwait. But
the RfB also warned that raising
Middle Eastern production was more complicated than just raising output
from existing fields. For one
thing, “[a] boosting of Near Eastern oil production is dependent upon the
possibilities for transportation.”
Besides the difficulty in bringing the oil to consumers in Europe via
pipelines and tankers, Middle Eastern
crude oil was “sour” (high in sulfur) and processing it would require
special measures during refining.116
Within the prevailing atmosphere of jubilation and reflection upon the
shape of the postwar world in
Berlin after the armistice with France, two of the Reich’s leading
petroleum experts – Bentz and Fischer –
took up the task of examining the long-term basis for Europe’s petroleum
supply following the successful
conclusion of the war. On 24 July 1940, Bentz completed a study
considering “The Safeguarding of

oil territory of the future, [and] whose development with great energy
stimulates the protection of its own [oil]
deposits […].”
116
The report’s introduction also paid homage to the role played by Germans
in the early history of oil development
in the Middle East, starting in 1892 when a German firm first drilled for
oil in the Sanjak of Alexandretta. The
Deutsche Bank’s involvement stretched back to 1904, while the German
military had tried again in 1916. Finally,
although the discovery of oil in Iran was strictly a British measure in a
commercial sense, Germans had participated
in both the initial exploration and production efforts. RfB, Die
wichtigsten Lagerstätten der Erde, Heft 21: Erdöl in
Vorderasien (Berlin, 1942). Gunther ascribed a sinister motive to the
publication of Die wichtigsten Lagerstätten
series, alleging that they constituted definitive proof of German
intentions to seize foreign oil reserves. Gunther
surmised that the RfB’s report on the Soviet Union “may be described as
economic intelligence and it aimed to
make essential technical data, from geology to production and reserves
available to the occupying forces.” A.E.
Gunther, “Oil Fields Investigation, Part V, Section 2: Russia (U.S.S.R.),
The Ukraine,” January 1947, BNA, WO
252/1451 (the last nine pages of which are actually a review of German
technical literature regarding the overseas
oil industry); and A.E. Gunther, “German War for Crude Oil,” (27 March
1948), 314-320. Such allegations are
without substance. The language within the reports is inoffensive, while
the conclusions were based on publicly
available data, especially trade publications. Most importantly, both
Erdöl in Europa and im nahen Orient and Erdöl
in Vorderasien were published as installments within an RfB series that
would run to at least 23 volumes covering
raw materials production across the entire world. Accordingly, in 1942,
the RfB also published Die wichtigsten
Lagerstätten der Erde, Heft 18: Erdöl in Südamerika (Berlin, 1942), T-
84/52 (EAP 66-c-2-34/1). Unless one
believes that the publication of this study is evidence of a German plot
to seize control of South America’s oil
reserves, there is no reason to think that there were any ulterior
motives behind the release of similar studies of the
Middle East, or for that matter, of the Soviet Union.

446
Europe’s Crude Oil Requirements.”117 Although Germany stood triumphant on
the Continent, it now had
to take responsibility for provisioning Axis Europe with petroleum
without recourse to imports from the
Western Hemisphere. Using the 1938 figures as a baseline, the Reich
needed to scrape together more than
9,500,000 tons to meet the Continent’s requirements in peacetime.118 He
noted that Germany had
produced 885,000 tons of crude oil in 1939, and that this figure could
rise to as much as 1,500,000 tons in
1940. Unfortunately, this rate of production was unsustainable, and Bentz
concluded that “one should not
count upon Germany being able to deliver a yearly figure of more than 1
million tons of crude oil.” Bentz
was also skeptical of the geological prospects in Romania, where
production in 1940 was already on pace
to drop by 2% from the 1939 figure. He was confident that Soviet
production would rise in spite of the
existing material and labor handicaps, thanks in large part to the
development of the “second Baku” west
of the Urals. Finally, Bentz surveyed developments in the Middle East. By
and large, the same situation
prevailed across the region: existing production, already considerable by
Europe’s meager standards, was
only a fraction of potential production due to inadequate transportation
capacity (pipelines) and a lack of
interest among the major oil companies in boosting output. Bentz made
special mention of Iraq, where the
output of the Kirkuk field (4,200,000 tons) per annum was considerably
below its “natural capacity” of
between 15,000,000 to 20,000,000 tons.119
As for reserves, Bentz ventured a guess of 10,000,000 tons in Germany,
between 5,000,000 to
10,000,000 tons in Estonia, Hungary, and Albania, 60,000,000 tons in
Romania, and 800,000,000 to
1,000,000,000 tons in the Soviet Union. Within the Middle East, reserves
fluctuated from a low of
10,000,000 tons in Egypt, to a high of 350,000,000 tons in Iraq just
within the Kirkuk field (and a further
200,000,000 tons elsewhere in the country). As for demand, Bentz stressed
“that the greatest consumers
117

Bentz , “Sicherstellung des europäischen Erdölbedarfs,” 24 July 1940, BGR

49459. The language of the report is,
in many instances, identical to that of the RfB’s Erdöl in Europa und im
nahen Orient, which suggests that Bentz
was the primary author of the latter report, as well.
118
Statistisches Reichsamt, Abteilung VIII, “Die Mangelstoffe des mittel-
europäisch-großdeutschen
Wirtschaftsraumes,” June 1940, T-84/70 (EAP 66-c-12/11). This figure more
than doubled if Britain’s requirements
were included: Statistisches Reichsamt, Abteilung VIII,
“Rohstoffversorgung des mitteleuropäisch-großdeutschen
Wirtschaftsraumes nach dem Kriege,” July 1940, T-84/70 (EAP 66-c-12/10);
and Statistisches Reichsamt, Abteilung
VIII, “Rohstoffversorgung des europäischen Wirtschaftsraumes (ohne
UdSSR), Teil II: Gewerbliche Rohstoffe und
Genuβmittel 1938,” October 1940, T-84/69 (EAP 66-c-12/8a).
119
Bentz , “Sicherstellung des europäischen Erdölbedarfs,” 24 July 1940, BGR
49459.

447
lie in Europe, [while] the countries with the greatest production and
with yet the greatest reserves [are]
however in the Near Orient.” Furthermore, unlike Europeans, Middle
Eastern consumers did not have
great demand for high-quality refined petroleum products. Excluding
England, Ireland, the Soviet Union,
and Turkey, Bentz estimated that demand in Europe exceeded the supply by
19,000,000 tons. The
situation was only slightly better if European supply and demand was
combined with that of the Middle
East: a demand of 30,600,000 tons against a total crude oil production of
24,800,000 tons. Bentz believed
that there were two ways to resolve this shortfall: The first was through
an expansion of synthetic fuel
production. The other was through a “significant boosting of crude oil
production, which would be easily
accomplished within the Near Orient,” as this was a “matter of
transportation and would require the
construction of some great oil pipelines.” In conclusion, Bentz warned
his readers that “[the] self-supply
of European area from European oilfields is entirely out of the
question,” and that it was an “absolutely
necessary” that Europe secure the crude oil reserves of the Middle East,
which was “the only territory in
close proximity to Europe within which major production increases are
possible.”120
Bentz was not a voice in the wilderness. An RWA study concerning the
viability of a “European
economic area” incorporating all European nations besides England,
Ireland, Russia, Finland, and the
Baltic Republics from June 1940 reached a similar conclusion. The RWA
sought to answer a number of
questions, including whether Europe could “supply itself with essential
raw materials,” and if the “Near
Eastern area” (encompassing Iraq, Iran, and the Persian Gulf), could
“contribute to the closing of gaps
(most decisively for petroleum).” The RWA concluded that German
“influence over the crude oil fields in
the Near Eastern area… must be secured,” since besides the Soviet Union,
the remainder of “European
and African economic area presents no possibility for supply.” The Middle
East, by contrast, produced
18,500,000 tons of oil per annum and could satisfy two-thirds of
Continental Europe’s petroleum
requirements.121

120

Bentz , “Sicherstellung des europäischen Erdölbedarfs,” 24 July 1940, BGR

49459; reprinted in: Eichholtz,
Deutsche Ölpolitik, 467-469. Emphasis in the original.
121
“Rohstoff Bilanz Europas ohne russichen Wirtschaftsraum und England:
Bedarf und Deckung an
wehrwirtschaftlich unentbehrlichen Rohstoffen (außer Textilien und
Leder),” 26 June 1940, no author, T-84/216

448
At the beginning of August 1940, Göring announced that “[one] goal of
German economic policy is
the increase of German influence in foreign enterprises.”122 At the very
least, the Reich would undo the
damages inflicted upon Germany and Austria under the treaties of
Versailles and St. Germain. Besides a
“lump sum payment” of 20,000,000,000 RM, the Reich reserved the right to
repossess German or
Austrian assets seized by the French after 1918. Among the spoils
available was the 23.75% stake held by
the Compagnie Française des Pétroles (CFP) in the IPC and the Steaua
Romana oil company, both of
which had been the property of the Deutsche Bank until their
expropriation during the First World War.123
The division of Allied raw materials was the subject of a conference at
the RfB on 14 August 1940
chaired by Wilhelm Keppler, who held a joint appointment as the President
of the RfB and State
Secretary in the AA. During his presentation on the international oil
industry, Bentz emphasized the
disparity between German consumption and production, noting that whereas
peacetime consumption had
been 7,000,000 tons, one could “reckon upon an extraordinary rise in view
of the progressive
motorization and the future excess demands for air travel and in
particular sea travel.” He argued that
Romania’s declining oil output ruled it out as “long-term” supplier,
which rendered it “imperative… at
the very least to secure a thorough influence over the oilfields of Iraq
(eventually in common with Italy).”
Furthermore, “penetration” of the Iranian oil industry would, Bentz
advised, be “desirable.” It was vital
that Germany coordinated with the governments of oil-producing nations to
prevent the transfer of oil
concessions held by enemy oil companies to those of neutral nations.
Bentz also indirectly argued that
Germany ought to take over Royal Dutch/Shell (Shell), since it already
occupied Holland, whose
nationals controlled 60% of the shares in the company. As Bentz noted,
Shell accounted for roughly
30,000,000 tons (over 10%) of the world’s annual production. Although
much of this was located in the
Western Hemisphere, roughly 2,750,000 tons lay within the grasp of the
Third Reich in Romania, Iraq,
(EAP 66-c-12-62/29). According the NARA finding aid for T-84, this report
came from a file belonging to Ritter of
the RWA, which was probably the originating agency as well.
122
Göring to the Reich Commissioners for the Netherlands (Arthur Seyss-
Inquart) and Norway (Josef Terboven),
and the Military Commander in Belgium (Alexander von Falkenhausen), V.P.
11964/5 g., 02 August 1940,
Document No. 278 in: DGFP (D), x: 401-403.
123
“Vorschläge für wirtschaftliche Bestimmungen im Friedensvertrag mit
Frankreich,” 25 June 1940, no author,
PAAA, R 106289.

449
and Egypt – a figure that would certainly rise in the case of Iraq. Shell
also owned a number of refineries,
a global marketing organization, and a large tanker fleet.124
Whereas Bentz outlined the extent of the challenge confronting Germany,
Fischer offered a possible
solution in September 1940. Fischer argued that the Reich should
establish a joint public-private oil
company that would take over the assets of at least the major British oil
companies in the Middle East.
Fischer surmised that, “[for] the period after the war,” one should
“count upon a significant rise in
demand, since the motorization of Germany would continue to stride
forward.” He calculated that
immediate postwar demand would be 50% higher than that of 1938 –
48,000,000 tons (including both
Africa and the Middle East but not Britain), of which Germany would
account for 50%.125 Postwar
Europe could either continue to import oil from the Americas or find
alternatives. In the case of the latter,
there were two options: crude oil and synthetic fuel production within
Greater Germany; or imports from
Southeastern Europe, the Soviet Union, Iraq, Egypt, Arabia, and Iran.
Germany was in a special position:
due to its considerable coal reserves, but it was the only nation capable
of pursuing synthetic fuel
production. Fischer estimated that, by 1943, total synthetic production
would reach 7,500,000 tons, on top

124

“Protokoll über die Sitzung in der ‘Reichsstelle für Bodenforschung,’ am

14. August 1940,” PAAA, R 106289.
The Reich’s primary corporate auditor, the Deutsche Revisions- und
Treuhand AG soon completed detailed studies
of the assets of both the French petroleum industry (including the
Compagnie Française des Pétroles and its holdings
in Iraq) and Royal Dutch/Shell (Shell), perhaps as a precursor to German
expropriation of French and Dutch oil
properties following a future peace treaty: “Bericht Nr. 7268/14329 der
Deutsche Revisions- und TreuhandAktiengesellschaft, Berlin, über die bei
der französischen Erdölwirtschaft vorgenommene Prüfung,” 1940; and
“Bericht der Deutsche Revisions- und Treuhand-Aktiengesellschaft,
Zweigniederlassung Den Haag, über die beim
Koninklijke/Shell-Konzern vorgenommene Prüfung,” 1941; both in: T-401/1
(RBF 2). See also: Wi VI d,
“Übersicht über die Beteiligung französichen Kapitals in der Wirtschaft
‘Iran’” and “Beteiligung im ‘Irak,’” 21
January 1940, T-77/1400 (Wi/IIA 5.3-4)
125
Much of the increase in consumption would be due to the construction of
large Autobahnen that would connect
the new empire – a task near and dear to the Führer. Table Talk: No. 2
(05-06 July 1941), No. 101 (09-10 January
1942), No. 161 (26 February 1942), and No. 201 (18 July 1942). Following
the victory over France, the
Organization Todt began the construction of roads linking the Reich to
France, Norway, and Poland, and after the
start of Barbarossa, planning started for a highway to Moscow. Jochen
Thies, “Hitler’s European Building
Programme,” Journal of Contemporary History 13: 3 (1978): 415-416. Thies’
offers an invaluable perspective on
the regime long-term ambitions, but his focus is rather narrow: he notes
that, in terms of building material, “Europe
alone, to judge only by the projects already in train, would have been
unable to supply what was needed,” which
meant that the Reich would have to expand its reach to fulfill its
architectural objectives (pg. 423). But this
judgment applies equally in the case of oil.

450
of an annual crude oil production of 2,000,000 tons, which would cover
roughly two-thirds of Germany’s
estimated requirements (14,000,000 tons).126
Southeastern Europe (including Romania) would probably be able to boost
production to 9,000,000
tons, provided that “the Romanian crude oil industry came under German
leadership.” As for the Soviet
Union, it was highly unlikely that any large exportable surplus would
exist within “the next few years,”
but there was every “possibility of producing a much larger quantity for
export through a corresponding
development of its crude oil industry.” As for the Middle East,
production there could easily be raised by
expanding the capacity of existing pipelines (Iraq), opening up new
territories for development (Iran), and
allowing production rise beyond the capacity of local refineries
(Arabia). Excluding the Soviet Union, the
aforementioned nations in Europe and the Middle East currently produced
23,000,000 tons of finished
products. Provided that “the transportation and the refining bottlenecks”
could be addressed, by 1945,
Fischer expected that production could be raised to 54,000,000 tons of
finished products against a demand
of 48,000,000 tons under the “best-case scenario.” The “most important
result of these considerations”
was that the Axis Powers could “in no event dispense with the oil
production of Iran and Arabia.”127
Fischer noted that the “concentration” of Anglo-Dutch-French interests
within the primary suppliers
of oil to postwar Europe presented, “on the one hand the possibility of
the acquisition of these companies
[the Anglo-Iranian Oil Company – AIOC – Shell, and the CFP], while
requiring on the other hand, that a
corresponding German organization either exist or be created.” The assets
of U.S. firms would not be
seized, since Fischer was confident that the Reich could reach an
accommodation with the Standard Oil
Company of California and the Texas Company, which controlled production
in Saudi Arabia and
Bahrain. AIOC and Shell would not be so lucky, as Fischer was certain
“that both of these leading groups
following the end of the war will carry on a hostile policy to handicap
the supplies of the Axis Powers.”128

126

E.R. Fischer (II Min. Öl), “Die Versorgung Europas mit Mineraloel vor dem
Kreige, Ermittlung des
Nachkriegsverbrauchs und Sicherung der Belieferung, 1940,” September
1940, BGR, No. 0049457.
127
E.R. Fischer (II Min. Öl), “Die Versorgung Europas mit Mineraloel vor dem
Kreige, Ermittlung des
Nachkriegsverbrauchs und Sicherung der Belieferung, 1940,” September
1940, BGR, No. 0049457.
128
E.R. Fischer (II Min. Öl), “Die Versorgung Europas mit Mineraloel vor dem
Kreige, Ermittlung des
Nachkriegsverbrauchs und Sicherung der Belieferung, 1940,” September
1940, BGR, No. 0049457.
451
As for the German oil company that would replace the Allies in the Middle
East, Fischer concluded
that a government-owned firm would be incapable of quickly taking over
the operations of the major oil
companies. German independent oil companies, on the other hand, lacked
the necessary capital and
skilled personnel. Only a public-private partnership of the sort that had
proven so successful at raising
domestic petroleum production before the war could “accomplish the
intentions of the state in a most
efficacious manner.”129
Although Hitler agreed that “[we] must at all costs advance into the
plains of Mesopotamia and take
the Mosul oil-fields from the British,” his objective was always limited
to undermining the Allied war
effort.130 As far as the Reich’s energy security was concerned, his gaze
remained fixed upon Romania and
the Caucasus, which (along with higher production in Greater Germany)
“would have saved us from all
anxiety for the future.”131 The memorandums composed by Bentz and Fischer
are nonetheless suggestive,
because they demonstrate that men at the highest levels of German
petroleum policy understood that the
Third Reich would eventually have to secure Middle Eastern oil industry
as a postwar source of supply
for Axis Europe.132 Whether their analyses drove policy or reflected it,
after the fall of France, the
acquisition of overseas oil assets held by British, French, and Dutch
nationals in countries such as Iraq
became at least a mid-level war aim of the Reich. Informed observers of
the international oil industry
certainly believed that Germany would seek the sort of terms that Fischer
was suggesting: “the
129

Since it was impossible to calculate the value of the assets being

disposed of by the German Government, Fischer
suggested German firms might purchase the rights to any oil extracted,
while the concessions themselves would
remain in the possession of the Reich. E.R. Fischer (II Min. Öl), “Die
Versorgung Europas mit Mineraloel vor dem
Kreige, Ermittlung des Nachkriegsverbrauchs und Sicherung der
Belieferung, 1940,” September 1940, BGR, No.
49457 (the document itself does not bear this title, but that is the one
used in the BGR finding aid); reprinted in
Kockel, “Eine Quelle,” 198-208, and Eichholtz, Deutsche Ölpolitik, 470-
473. Kockel’s article was the first study to
cite Fischer’s memorandum directly, although the British Technical Sub-
Committee on Axis Oil alluded to a report
on the “Petroleum Plan for Europe” produced by the VJP shortly after the
French signed the armistice at Compiègne
that appears to be either Fischer’s memorandum or a document closely
related to it. Chiefs of Staff Committee,
Technical Sub-Committee on Axis Oil, Oil as a Factor in the German War
Effort, 1933-1945, 08 March 1946, A.O.
(46) 1, BNA, CAB 121/418. Unfortunately, the report does not provide a
citation for this document.
130
Part of the reason was his mistaken belief that Haifa was Britain’s “sole
loading port for oil.” Table Talk: No. 280
(05 August 1942).
131
Although Hitler agreed that the government ought to take a more energetic
role in oil exploration, since private
companies could not always be trusted to sacrifice financial gains for
the national interest. Table Talk: No. 269 (26
July 1942).
132
The contents of both memoranda are summarized in: Dietrich Eichholtz,
Deutsche Politik und rumänisches Öl,
1938-1941 (Leipzig: Leipziger Universitätsverlag, 2005); and Eichholtz,
Krieg um Öl, 46-49.

452
confiscation of the British and French oil interests in Rumania and in
the Far and Near East and the
acquisition of the British and Norwegian tanker fleet was the least [of]
what had to be expected.”133
Bentz and Fischer were not the only people in the Third Reich who
believed that Middle Eastern oil
could free Axis Europe from the major U.S. and British oil companies. In
July 1941, the Minister for the
Occupied Eastern Territories, Alfred Rosenberg, argued that one of
Germany’s objectives in the Caucasus
must be to acquire a “landbridge” to the Near East, as “[only] this
connection to the sources of oil [in the
Middle East] can make Germany and all of Europe independent of any
maritime coalition for all time. ”134
The OKW was also impressed by the significance of Middle Eastern oil to
the Third Reich. In a study
from October 1940, the OKW assumed that, if Britain lost control of the
Eastern Mediterranean, its share
of Iraqi production through AIOC (800,000 tons) would go to Germany,
while the remaining 3,200,000
tons would be divided between Italy and France. (The prospects in Iran
were not good: “Since the British
Air Force in the Oriental and East African territories, as well as the
British naval support points in Egypt,
Malt, Cyprus, [and] Aden, depend overwhelmingly upon the supply of fuel
from Abadan, it is not to be
presumed that England will yield Abadan without a struggle.”) Middle
Eastern oil, which used to travel
across the Mediterranean and past Gibraltar, could be re-routed through
the Turkish Straits and up the
Danube, although this would entail a journey 700 km greater than the one
from Batum – the terminus for
the pipeline carrying oil from Baku to the Black Sea – to the mouth of
the Danube. The report also

133

Since Britain had not obliged Germany by accepting the hopelessness of

its position after June 1940, the émigré
petroleum economist Walter Levy argued that the Reich had set its sights
on the oil of the Caucasus before that of
the Middle East because the former was more likely to make a contribution
to the German war effort in the short
term. Not only was Caucasian production significantly higher than of the
Middle East (200,000,000 barrels per year
vs. 120,000,000 barrels), but it was also easier to transport it to
Germany across the Black Sea (especially since the
British would destroy the pipelines from Iraq to the Mediterranean), and
because Caucasian oil was easier to refine
into specialty products such as lubricating oils than oil from the Middle
East. Walter Levy, “Oil Drives Hitler’s
Army,” March 1942, American Heritage Center (University of Wyoming),
Papers of Walter Levy (hereafter cited as
Levy Papers), Box 1. For additional analyses by Levy of oil and German
strategy, see: Walter Levy, “Petroleum’s
Part in Axis Strategy,” World Petroleum 12: 7 (July 1941), 39-43, Levy
Papers, Box 1; and articles by Levy from
September 1941 and April 1942 published in Fortune and World Petroleum,
reprinted in: Walter Levy, Oil Strategy
and Politics, 1941-1981 (Boulder: Westview Press, 1982), 7-23, 36-43.
134
Germany would also take what it needed in the Caucasus: “Economically the
German Reich must take the entire
oil supply [of the Caucasus] in its hands,” while any arrangements
concerning the actual division of resources
between the Reich and its Caucasian clients “could be dealt with in the
future.” Rosenberg, “Über die Gestaltung
Kaukasiens,” 27 July 1941, NARA, RG 238, T-988: Prosecution Exhibits
Submitted to the International Military
Tribunal, Reel 2 (USSR-58 – quoted in: IMT, vii: 326). Emphasis in the
original.

453
observed that “[the] sources of crude oil in the Near Orient could
deliver a far higher yield” were it not for
the fact that the British and U.S. major oil companies were so worried
about overproduction and either
“limited or hindered exports to politically unsuitable countries […].”135
For the time being, Britain had the greatest stake in maintaining control
of the oil of the Middle East,
since British military forces in the region depended on it. In fact, the
Axis Powers were in certain respects
in a stronger position than the British. Whereas Britain relied upon the
refineries at Suez and Haifa to
refine Middle Eastern crude, the Axis were supplied from Europe and
boasted of sufficient domestic
refining capacity to handle large imports of crude oil from the Middle
East in the future. In the event of
Britain’s “expulsion” from the Middle East, the Axis would be in the
position to take over oil production
in Iraq and Egypt, which would “mean a strengthening of the crude oil
supply of Axis Powers by at least
5 million tons per year.” Iraq was of particular importance to Germany
because, unlike in Romania,
where the “crude oil fields demonstrate a descending tendency,” Iraq’s
oilfields “are capable of boosting
production considerably without noteworthy investments.”136
The OKW weighed a variety of options for gaining control of the IPC but
stressed that this was of
“secondary significance” to occupying Iraq itself and the “readiness” of
the Iraqi Government “to revise
the [oil] concession agreements according to the interests of the Axis
Powers.” Before then, any number
of headaches could emerge. For example, the British might try to steal a
march on the Axis by selling
AIOC’s shares in the IPC to their U.S. partners (the Near Eastern
Development Corporation – a jointventure between Jersey and the Standard
Oil Company of New York), which the Germans could not
touch since the United States was still a neutral power. The Iranian
Government might also complicate
matters by nationalizing their oil industry before the Axis arrived,
although this would still be preferable
to the entry of a third-player – the Soviet Union – into the equation.
The OKW warned, much as U.S. and

135

OKW, Az. 31/34/42/43/45 WiRüAmt/Wi VI, Nr. 17109/40g, “Das Erdöl des
Nahen Orients und des
Kaukasusgebietes,” 01 October 1940, T-77/646 (Wi/VI. 19).
136
OKW, Az. 31/34/42/43/45 WiRüAmt/Wi VI, Nr. 17109/40g, “Das Erdöl des
Nahen Orients und des
Kaukasusgebietes,” 01 October 1940, T-77/646 (Wi/VI. 19). The OKW/WiRüAmt
made no mention of the immense
resources that would be required to rebuild the IPC pipelines to the
Mediterranean in the event of their destruction, a
subject that will be discussed below.

454
British intelligence services did after 1945, that there was ample
“evidence” of the Soviets’ “lively
interest” in the Iranian oil industry. If the USSR “succeeded in laying
its hands upon the Southern Iranian
oilfields,” it would “gain an extraordinary augmentation of its economic
and military potential.”137
The German Minister to Iran prior to the Anglo-Soviet invasion, Erwin
Ettel, harped on the Soviet
threat in his dispatches. By the spring of 1940, he warned Berlin that
the Soviet Union was attempting to
take advantage of Britain’s weakness in Iran.138 Moscow was “fully aware”
of the strategic significance of
Iran’s oil reserves and the AIOC oil concession to Britain. Ettel
surmised that the Soviets had given up on
their long-standing ambition of acquiring free passage through the
Turkish Straits. Rather, “[a] glance at
the map shows the shortest route from the Soviet Union to the warm oceans
would be through Iran.”
Ettel’s primary concern was the future of the Iranian oil industry:
“Should Iran become part of the Soviet
Union, the latter would gain a predominant place in the sphere of
petroleum which would, in practice, be
tantamount to a position of monopoly.” Since both Germany and Italy had
“considerable interest in
Iranian oil,” Ettel advised that Soviet energies be channeled “in another
direction where there is less a
clash with the interests of the Reich,” such as India, which “would not
injure the common interests of
Germany, Italy, and Iran.”139 These attempts proved fruitless as the
Soviet Union remained committed to

137

OKW, Az. 31/34/42/43/45 WiRüAmt/Wi VI, Nr. 17109/40g, “Das Erdöl des
Nahen Orients und des
Kaukasusgebietes,” 01 October 1940, T-77/646 (Wi/VI. 19). For whatever
reason, this document has not been cited
anywhere in the secondary literature. It is difficult to assess how
widely it circulated, since only one copy appears to
have survived. According to a cover letter from the WiRüAmt to the
Prussian State Ministry, the attachment was the
last remaining copy within the possession of the WiRüAmt. Accordingly,
the WiRüAmt requested its “expedited
return” within a week. This suggests that the report enjoyed a wide
readership, including the leadership of the VJP,
which was housed in the Prussian State Ministry. WiRüAmt an das
Preussisches Staatsministerium, Az 31 3648/WiRüAmt/Wi VI (d), Nr.25
629/42g, “Betr.: Erdöl im Nahen Osten,” 16 April 1942, T-77/1401 (Wi/II.
2-3).
According to the OKW war diary, a Maj. Zinnemann gave a presentation on
Britain’s fuel supplies from the East on
16 October 1940 and delivered supporting materials to the Chief of the
Abteilung Landesverteidigung, Warlimont,
who was responsible for planning and reported directly to Jodl.
Zinnemann’s presentation was probably based upon
the aforementioned study, which had only been completed two weeks before.
Entry for 15-22 October 1940, OKW,
KTB, i: 122.
138
The two countries had concluded a new Treaty of Commerce and Navigation
in March 1940. German analysts
interpreted the treaty as an attempt by Moscow to wean Tehran away from
London in order to reduce the British
threat to the Caucasian oilfields, which Berlin had publicized after
capturing incriminating documents in Paris
following the fall of France. “Iran: Die Anglo Iranian Oil Company, ein
Pfeiler des britischen Einflusses im Orient,”
Vierjahresplan, 1940: XXII.
139
The Minister in Iran to the Foreign Ministry, No. B 938/40-E.G./Z., Pol.
VII 463, “Political Report,” 19 May
1940, Document No. 277 in: DGFP (D), ix: 379-383. Emphasis in the
original.

455
defending and even expanding its interests in Eastern Europe, which
threatened Germany’s most
important foreign source of oil during the war – Romania.

456
Romania Chooses Sides, 1939-1941
Although Germany began pulling Romania into its orbit in March 1939, the
results had not lived up
to the expectations.140 Romania was Germany’s indispensable source of oil
imports during the war.141
Ideally, even with its relatively small oil production, Romania could
meet Germany’s entire wartime
petroleum deficit – provided that the financial, political, geological,
and most importantly logistical
obstacles could be surmounted. As the WiRüAmt concluded at the end of
1939, Germany needed to
import at least 190,000 tons a month to meet its minimum military
requirements, and 430,000 tons in the
event of the “full application of all weapons.” The only possible
suppliers besides Romania were the
Soviet Union and Estonia. The latter could deliver a meager 10,000 tons
per month, while the former had
exported only 1,500,000 tons in 1938 and would have less available now
due to the war against Finland,
which began in November 1939. The 130,000 tons per month secured in the
September agreement with
Bucharest were impressive considering how much demand there was for
Romanian oil, but more needed
to be done, including expanding the German presence in Romania,
“[expelling] the English and French
influence within the Romanian crude oil economy,” developing alternative
sources of supply elsewhere in
Eastern Europe, seizing control of and expanding the existing
transportation network, and ensuring the
security of the Romanian oilfields.142
The possibility of Anglo-French sabotage could not be discounted due to
the presence of Allied
personnel in Romania until the summer of 1940. Göring was particularly
worried and complained during
a January 1940 conference that too much attention had been devoted during
the negotiations to the
“foreign exchange question” – much to the chagrin of the lead German
trade negotiator, Clodius, who
pointed out his efforts had resulted in 50,000,000 RM worth of savings
for the Reich.143 German
140

The following discussion is based on: Dietrich Eichholtz, Deutsche

Politik und rumänisches Öl, 1938-1941
(Leipzig: Leipziger Universitätsverlag, 2005), 17-68; Eichholtz, Krieg um
Öl, 26-39; and Maurice Pearton, Oil and
the Romanian State (Oxford: Clarendon Press, 1971), 226-263.
141
A fact Soviet prosecution harped upon during the first Nuremberg trial.
IMT, vii: 324-326.
142
Griebel, “Betr.: Rumänien. I) Bedeutung der Erdölzuführen aus Rumänien
für die deutsche Kriegsversorgung,”
29 December 1939, T-77/606 (Wi/IC 4.3a).
143
Göring had been prompted to raise the issue by the Air Force attaché in
Bucharest, Col. Alfred Gerstenberg. In a
note from December 1939, Gerstenberg had argued that too much faith had
been placed in the talents of German
engineers and chemists to replace Romanian oil with “substitute fuels
[produced] from the air and crap [Dreck].”

457
intelligence (the Abwehr) had, however, already implemented a “range of
countermeasures” that would
be in place later that month.144
The quickest way to resolve any concerns about Romanian oil production
would have been to occupy
the oilfields, but this was out of the question. Germany could only exert
so much pressure on Romania
without risking the destruction of the oilfields themselves. There was no
point in seizing the oilfields
unless the Reich had the means of maintaining existing rates of
production – 70,000 tons per month by
May 1940.145 Hitler himself understood the risks: he told Keitel in April
1940 that he was “striving with
all means to keep the Balkans quiet” and had warned off the OKH from
planning with the Hungarians to
occupy Romania. He would only consider “defensive action” in Balkans,
primarily to protect Romania
from the Soviet Union or the Allies.146
On the eve of the invasion of France and the Low Countries (“Case Yellow”
– Fall Gelb) in May
1940, Romania supplied 1,640,000 tons out of Germany’s requirements of
8,220,000 tons (20%). Even
then, German consumption exceeded supplies by 1,440,000 tons (17.5%),
which meant that Romania’s
contribution was not only irreplaceable but had to be increased. WiRüAmt
warned that an occupation of
Romania should only be considered if the Reich could maintain the
existing rate of production (70,000
tons) and redirect existing exports to countries beyond the European Axis
(1,491,000 tons) to Germany.
In such an eventuality, WiRüAmt believed that Germany would need to
occupy the oil-producing districts
of Prohova (the capital of which was Ploiești), Dâmbovița, and Buzău,
plus all of the territories north of

The agency that was responsible for oil policy (and who exactly was in
charge was “unclear”) should immediately
undertake “assessments” of whether Romanian oil could be replaced with
imports from the Soviet Union, and how
long it would take to repair any sabotage of the oilfields by the
Romanians (possibly aided by the British) in the
event of a Soviet attack. Minute enclosed with: Abwehrabteilung II an
Abw. III (wi 5) [and] Wi Rü Amt (W Wi),
Nr. 1233/[illegible] g Abw II/1 (08), “Betrifft: Rumänien,” 29 December
1939, T-77/600 (Wi/IC 4.77). Emphasis in
the original. Gerstenberg wrote this note in response to a report by one
Dr. Schober (a member of the German
legation in Bucharest), which I have been unable to locate, although
copies did go to Fischer, the OKW, and Bentz,
among others.
144
Wi VII, “Niederschrift: Sitzung in Karinhall am 2. Januar 1940 unter
Vorsitz von Generalfeldmarschall Göring,”
29 January 1940, T-77/400 (Wi/IF 5.3063).
145
Griebel, Ro V Az. 66 b 1210 (Va), “Rumänien,” 06 May 1940, T-77/606
(Wi/IC 4.3a-b).
146
Besprechungsnotiz, “Vortrag Amtschef bei Gen. Oberst Keitel,” 26 April
1940, Hoover Institute, Nuremburg
Records, Box 996 (PS-1456).

458
Danube (including Bucharest), in order to guarantee “the preservation and
improvement of petroleum
supplies from Romania.”147
Before the war, Germany achieved limited success in dealing with the
thorniest financial and political
issues, and its share of Romania oil exports almost doubled from 15.5% in
1937 to 28.9% two years
later.148 Once the war began, the total value of Romanian motor fuel and
lubricating oil exports exploded
from 65,646,000 RM in 1939 (31.3% of total trade with Germany) to
214,749,000 RM two years later
(62%).149 The Reich proved less successful at tackling the geological and
logistical problems. Before the
war, most of Romania’s exports had travelled overseas from Constanța:
5,597,000 tons out of 6,885,000
tons in 1936 and 3,315,000 tons out of 4,495,000 tons in 1938. The
outbreak of the war and the surrender
of France meant that exports, although devoted solely to the Axis, could
no longer travel overseas.
Exports from Constanța thereafter fell to only 1,393,000 tons in 1940 and
224,000 tons as traffic was
rerouted by rail or along the Danube.150 Germany (not to mention its
allies and occupied Europe) required
as much oil as Romania could produce, but the inadequacy of the existing
transportation network kept
deliveries to disappointing levels. Less than 20,000 tons was exported to
Germany in January and
February 1940, and the figure did not crack 100,000 tons until July.151
During a high-level interagency conference chaired by Göring at his
Karinhall estate in January 1940,
a representative of the RWM explained that the AA’s negotiations with the
Romanians had been too
successful – Germany was entitled to more oil (130,000 tons per month)
than it was able to transport
(only 30,000 tons due to the winter conditions). Rather than trying to
pry more oil from Romania,
Germany should concentrate on transporting its existing share, ensure
that the Romania complied with its
obligations, and frustrate any attempts at sabotage by the Allies. All
present agreed that this could be best

147

Griebel, Ro V Az. 66 b 1210 (Va), “Rümanien,” 06 May 1940, T-77/606

(Wi/IC 4.3a-b).
OKW/OKH, “Mineralöl-Statistik,” no date, T-77/658 (Wi/VI.109).
149
The value of crude oil and tar exports also trebled from 13,552,000 RM to
36,559,000 RM between 1939 and
1942 (from 6.5% of total trade with Germany to 8.5%). Vowi 4968, no date
or author, BA-B, R 8128/950.
150
HaPol IVb, 2548/42. “Die rumänische Mineralölwirtschaft,” no date or
author (1942), T-120/2618.
151
WiRüAmt/Ro V, Az. 11 k 2209 [illegible], “Deutsche Mineralöl-Einfuhr aus
Rumänien seit Kriegsbeginn,” 02
December 1940, IWM, FD 4809/45.
148
459
handled by sending a special representative to Romania to oversee
commercial and logistical affairs.152 At
the suggestion of Ribbentrop, the AA established the position of “Special
Representative for Economic
Questions” within its Romanian legation. Clodius of the AA would fill in
on an interim basis (and would
remain responsible for all economic negotiations with Bucharest) until
Neubacher, then-Mayor of Vienna,
could take up the position permanently.153
In May 1940, following a query from Wiehl, the AA’s transportation
division calculated the
transportation infrastructure between Romania and Germany was capable of
delivering the amounts to
which Germany was contractually entitled (130,000 tons) rather than the
existing monthly throughput of
75,000 tons by both rail and river. Reaching the former was impossible
unless more railway wagons were
made available. Luckily, the slack in deliveries from the Soviet Union
(which were considerably below
the 60,000 ton limit) meant that some wagons could be diverted to
Romania.154

152

Memorandum by the Director of the Economic Policy Department (Wiehl), 03

January 1940, Document No. 502
in: DGFP (D), viii: 598-603.
153
Foreign Minister Ribbentrop to Field Marshal Göring, 04 January 1940; and
the Foreign Minister to the Legation
in Rumania, W 144g., 13 January 1940; document nos. 508 and 533 in: DGFP
(D), viii: 615-617 and 661. In 1941,
Ribbentrop expanded Neubacher’s remit to cover the whole of Southeastern
Europe. The Foreign Ministry to the
Special Representative in Charge of Economic Questions, e.o. Ha. Pol. IVb
516, 17 January 1941, Document No.
729 in: DGFP (D), xi: 1223-1224. “On account of the cooperation with
Neubacher’s office within the area of fuel,”
Göring insisted on “unity” between the VJP, the RWM, and WiRüAmt on
petroleum policy regarding Romania.
Chef WiRüAmt, “Vortrag bei Reichsmarschall Göring am 19.3.41,” 20 March
1941, Nuremberg Records, Box 995
(PS-1456). The following year, Fischer loaned to Neubacher his personal
Reichsbeauftragter für Mineralöl (a retired
mining engineer by the name of Raab). Der Reichswirtschaftsminister (gez.
Fischer), an den Sonderbeauftragten für
Wirtschaftsfragen, Herrn Gesandten Dr. Neubacher, “Betrifft: Massnahmen
zur Steigerung der Erdölförderung in
Rumänien, Ungarn, Kroatien,” 21 January 1942, T-77/606 (Wi/IC 4.3a-b).
The Germans were partial to using
troubleshooters to deal with thorny bureaucratic problems. Only a few
months after Neubacher’s appointment,
Göring named General Adolf von Schell, already Plenipotentiary for
Automotive Affairs (Generalbevollmächtigter
für das Kraftfahrwesen) and an Under State Secretary the Reich Ministry
of Transportation
(Reichsverkehrsministerium), as the Plenipotentiary for Economic
Transports from the Eastern Area (Beauftragter
für die Wirtschaftstransporte aus dem Ostraum), “[to] ensure that all
imports, which are secured through trade policy
and firmly purchased, can be transported without delay or friction to
Germany as quickly as possible. This applies
first and foremost to petroleum imports, which are a matter of life and
death during wartime.” Ministerpräsident
Generalfeldmarschall Göring, BVJP, V.P. 9810/2/5, Abschrift W X II
4216/40, 12 June 1940, PAAA, 105988.
Schell had been one of the Reichswehr’s leading authorities on
motorization during the interwar period (as well as a
collaborator with and later rival of Heinz Guderian). He even spent a
year at Fort Benning, Georgia (1930-1931),
where he attended the Infantry School and studied motorization in the
United States. Heinz Guderian, Panzer
Leader (Cambridge, 2002), 316-317; and Jörg Muth, Command Culture:
Officer Education in the U.S. Army and the
German Armed Forces, 1901-1940, and the Consequences for World War II
(University of North Texas Press:
Denton, 2011), 142-145.
154
Martius (Director, Transportation Division, AA), Aufzeichnung, 15 May
1940, PAAA, R 105988.

460
Neubacher (a former IG Farben representative to Southeastern Europe with
impeccable ties to leading
figures in the Third Reich and extensive powers to improve the
transportation situation) reached a similar
conclusion a few days later following his own ground-level investigation.
Theoretically, the Danube
could handle as much as 874,000 tons between April and December 1940, but
“in practice” the actual
amount would be around 700,000 tons (an average of 58,000 tons per month,
with a high of 117,000 tons
between May and November). The available railway cars added an additional
25,000 tons per month, or
300,000 tons for the year, thus allowing Germany to import 1,000,000
tons.155 Thereafter, “[all] efforts
aiming to raise German crude oil deliveries from Romania must… begin with
the improvement of the
possibilities for transportation, that is to say providing additional
tanker tonnage and railway wagons.”
Besides the obvious “bottleneck” imposed by transportation capacity,
Germany’s ability to import
Romanian petroleum also depended upon the availability of refineries
owned by hostile oil companies,
which itself hinged upon Romania’s willingness to apply pressure on
Germany’s behalf.156 Neubacher
was convinced that Romania would play its assigned role so long as
Germany continued delivering
weapons in exchange for the oil. Price was not a concern for Germany
since Neubacher had secured
Romanian acquiescence to a fixed price well below the prevailing market
rate.157
Neubacher was referring here to the so-called “Oil Pact” he negotiated a
few days later, which
formalized the terms for the exchange of Polish arms for Romanian oil
first agreed to in March 1940.
Rather than purchase oil from Romania at inflated wartime prices, Germany
would exchange military

155

Roughly equivalent to the 130,000 tons per month to which Germany was
entitled (190,000 tons in the event of
any disruption caused by the Romanians).
156
With France reeling by mid-May 1940, Romanian officials went out of their
way to express their goodwill to
Germany, first and foremost King Carol II, who pledged to Fabricius “that
Rumania’s future depended solely on
Germany” and offered to resolve any outstanding concerns about oil
supplies. The Minister in Rumania to the
Foreign Ministry, No. 712, 16 May 1940, Document No. 252 in: DGFP (D),
ix: 349-350. Killinger agreed, pointing
out that France’s imminent collapsed proved to Carol “that there is no
purpose in his being aligned with the Allies.”
Germany was now the only power strong enough to defend Romania from the
Soviet Union and had every incentive
to do so due to its reliance on Romanian oil exports. Minister Killinger
to the Foreign Minister, 26 g. Rs., 29 May
1940, Document No. 346 in: DGFP (D), ix: 467-470.
157
“Wieviel Mineralöl kann Deutschland aus Rumänien monatlich beziehen?” 24
May 1940, enclosed with: Der
Sonderbeauftragte für Wirtschaftsfragen (Neubacher) an das AA, 18 May
1940 [sic], PAAA, R 105988.

461
hardware for the oil roughly on the basis of prewar prices.158 Under the
pact, Germany would pay 76.52
RM per ton of petroleum including shipping, which was more favorable than
the prewar rate that,
although about 7% lower, did not include freight charges.159
Neubacher’s efforts and improvements in the weather played a huge role in
the quintupling of exports
to Germany, from 21,000 tons in February to 105,000 tons by June.160 The
elimination of British and
French influence in Romania in 1940 following the collapse of France and
the abdication of King Carol
was a mixed blessing, however, thanks to Italy’s entry into the war. Not
only was Romania Italy’s only
major supplier, but exports would have to travel along the same
overloaded rail lines that handled
deliveries to Germany via Yugoslavia now that the Mediterranean was off-
limits, while the rail network
in Albania too primitive to handle the necessary volumes.161 Moving
Italy’s required 60,000 tons a month
would require the services of 4,000 wagons, plus the 5,000 already
earmarked for Germany, which
worked out to 300 wagons in transit each day. During an interagency
conference to discuss the issue, the
RWM suggested that the Italians be made aware “the capacity of the
Romanian railways has been utilized
for the purpose of shipments to Germany so relentlessly that the question
will become acute, whether, in
view of the possible appearance of additional strain through shipments of
crude oil to Italy, other German

158

Foreign Minister Ribbentrop to Field Marshal Göring, 16 March 1940,

Document No. 678 in: DGFP (D), viii:
925-926. With the support of the British Government, the major oil
companies in Romania had conspired to boost
prices in Romania after August 1939. By 1940, the prices for various
petroleum products had risen as follows:
Type of Product
Price Increase
Aviation Fuel
347%
Gasoline
256%
Diesel Fuel
258%
Source: Eichholtz, Rumänisches Öl, 33, n. 85.
159
The Special Representative for Economic Questions at the Legation in
Rumania to the Foreign Ministry, Tgb.
No. 156, I.C. 4 R, W 2891 g., “Signature of the Oil Pact,” 28 May 1940,
Document No. 338 in: DGFP (D), ix: 459460. See also: Eichholtz,
Rumänisches Öl, 38-40; and Tooze, Wages of Destruction, 381-382. In
October, Göring
ordered that the pact be “liquidated” and replaced by a clearing
agreement. Ro I, Aktennotiz, “Besprechung beim
Reichsmarschall am 4.10.40,” 05 October 1940, T-77/606 (Wi/IC 4.40).
160
Eichholtz, Rumänisches Öl, 34-38.
161
Production in Albania by 1940 was running at only 300,000 tons a year,
while local refinery capacity had been
increased to 400,000 tons. Dr. Paul Ruprecht, “Italien und das albanische
Erdöl,” Militär-Wochenblatt, 125.
Jahrgang, Nummer 33 (14 February 1941).

462
imports [from Romania] shall have to regress behind the war-essential
petroleum.”162 RWM advised that
the Italians ought to seize control of the Eastern Mediterranean “as
quickly as possible,” but the AA
replied that this was easier said than done and worried about the
political ramifications.163
On the other hand, with Romania firmly in the Axis camp, the Reich could
now re-establish the
commanding position with the Romanian oil industry it had enjoyed prior
to the First World War. The
defeat of France and the expulsion of Britain from the Continent opened
up the possibility of acquiring
outright or joint German-Romanian control of those companies with
majority French, Dutch, and Belgian
ownership, such as Astra Romana (a Shell subsidiary), Concordia, Steaua
Romana, and Colombia.164
During a conference at the RfB in August 1940, Keppler suggested that,
for the time being the Reich
would only acquire control of the five largest enemy-owned oil
companies.165 With both France and
Belgium under German occupation, the Reich expected to coerce the owners
of the oil companies to part
with their shares, and over the course of the summer, exports to Britain
and France ceased, while
Germany’s share increased to over 60%.166 After Romania consented to the
dispatch of a German military

162

Clodius met with the director of commercial affairs at the Italian

foreign ministry, Alberto Giannini, a few days
later. Giannini agreed that Italy’s requirements should not cause any
disruption of deliveries to Germany and
“recognized in principle that the Danube must be reserved primarily for
us as a transport route.” Memorandum by
the Deputy Director of the Economic Policy Department, 22 June 1940,
Document No. 531 in: DGFP (D), ix: 684.
163
Werner Trees, e.o. W III B 3445/40, “Aufzeichnung: über die
Ressortbesprechung bei Herrn Gesandten Martius
am 14. Juni 1940,” PAAA, R 105988. The Germans also began studying the
possibility of constructing a pipeline
with an annual capacity of around 1,500,000 tons – or 2,400,000 tons in
wartime – of finished petroleum products
from Ploiești to the primary loading ports along the Danube, Giurgiu and
Orşova. Beginning in March 1941, 340
tankers would be available, but conveying the petroleum would require
6,500 tank wagons (4,000 more than
currently in operation), and it was unlikely that the existing railway
network or the ports could handle the additional
traffic. Dr. Schober (?) to Gesandten Dr. Neubacher, “Aufzeichnung über
Besprechung in der Deutschen [sic]
Gesandtschaft, Bukarest, betreffend geplante Erdölleitung Ploeşti –
Donau,” 13 September 1940 (?), PAAA, R
105989.
164
Der Sonderbeauftragte für Wirtschaftsfragen (Neubacher) an das AA, Tgb.
Nr. 623/40, “Inhalt: Beteiligung an
rumänischen Erdölunternehmungen,” 19 September 1940, PAAA, R 105989. See
also: Eichholtz, Rumänisches Öl,
42-46. The Romanians were certainly keen on eliminating British, French,
and Dutch influence over the oil industry:
W.F., “Neuordnung der rumänischen Erdölwirtschaft,” Deutsche Wehr, Nr.
48, 45. Jahrgang (28 November 1941).
165
It would not, however, take over all companies owned by Allies due to
Germany’s lack of petroleum specialists.
“Protokoll über die Sitzung in der ‘Reichstelle für Bodenforschung’ am
14. August 1940,” PAAA, R 106289. U.S.
interests in Romania (Romano-Americana, a subsidiary of the Standard Oil
Company of New Jersey) would be
unaffected for the time being. Of course, if U.S. companies hoped to sell
their oil in Germany after the war, they
would need to show good faith by delivering what they could during the
war. Hopefully, the Reich could use the
Americans in such a fashion “to break the resistance, possibly inspired
by England, of Romanian officials.”
Gottfried Aschmann (The Hague) to the AA, “Der englische Petroleumkrieg,”
18 April 1940, BA-B, R 901/116641.
166
Clodius, “Aufzeichnung über die deutschen Wirtschaftsinteressen in
Rumänien,” 26 August 1940, PAAA, R
105989. Franco-German negotiations in 1940-1941 over the transfer of
French oil assets in Romania are

463
mission in July 1940, the Reich could finally oversee the “direct
protection” of the oilfields against Allied
attacks and sabotage.167
The Romanian State Secretary for Petroleum and Mining Affairs within the
Ministry of Economic
Affairs (Basil Dimitriuc) also assured Keppler and Bentz during a visit
to Berlin in October 1940 that
Romania would “during wartime place at Germany’s disposal all of the oil
it required.” Although it was
cordial, the meeting highlighted the contradictory aims of German and
Romanian policy. Dimitriuc
welcomed increased regulation of the major oil companies in Romania,
which he believed had
squandered the nation’s resources by depleting productive oilfields while
refusing to develop new ones.
But he was also determined to prevent “excessive production” in either
existing or new oilfields, which he
claimed was in the “interest” of both Germany and Romania. Keppler agreed
that the major oil companies
had a done a poor job of developing new oilfields, and he too wanted a
new exploration program “to
acquire clarity about the oil wealth of Romania.” On the other hand, he
complained that the Romanians
were doing their best to keep German firms away from “promising
territories” and reassured Dimitriuc
that Germany had every interest in maintaining Romania as a long-term
supplier of oil.168

summarized in: Eric Melby, Oil and the International System: The Case of
France, 1918-1969 (New York: Arno
Press, 1981), 177-182. Melby and Eichholtz contend that the Vichy regime
was willing to part with French oil
interests in Romania to protect its shares in the IPC. Eichholtz,
Rumänisches Öl, 49, n. 131. The regime even
mooted the possibility in July 1940 of helping the Axis overrun Iraq and
transferring the British and U.S. shares in
the IPC to Germany and Italy as compensation. Robert Paxton, Vichy
France: Old Guard and New Order, 19401944 (New York: Columbia University
Press), 59. See also: Eichholtz, Krieg um Öl, 24-25. The long-term status
of
Shell’s interests (Astra Romana) was unclear. The board of directors of
Royal Dutch (the Dutch portion of the Shell
Group) fled to the Dutch West Indies in 1940, but the Germans took
nominal control over the company’s remaining
assets in Holland on a trustee basis. They thereafter managed to get a
pro-German director (J.H.W. Rost) appointed
as the head of Astra Romana in July 1940, who subsequently established a
50-50 partnership between Astra and
Konti. Eichholtz, Rumänisches Öl, 45-46; Andreas Hillgruber, Hitler,
König Carol und Marschall Antonescu
(Wiesbaden: Franz Steiner Verlag, 1954), 157-158; and Stephen Howarth and
Joost Jonker, Powering the
Hydrocarbon Revolution, 1939-1973, vol. 2 of A History of Royal Dutch
Shell (Oxford: Oxford University Press,
2007), 29-34, 69.
167
Armed Forces High Command, WFSt/Abt. L., Nr. 33 298 g.K. Chefs. (I), 20
September 1940, reprinted in:
Fuehrer Directives, 1939-1941, 115-117. The OKW directed stressed that
German troops would only be called in to
assist the Romanians in “special cases.” See also: “Rumäniens Öl unter
deutschem Schutz,” Militär-Wochenblatt,
125. Jahrgang, Nummer 26 (27 December 1940).
168
“Aufzeichnung von Wilhelm Keppler, Staatssekretär im Auswäritgen Amt
z.b.V. und Leiter der Reichstelle für
Bodenforschung, 31. Oktober 1940,” reprinted in: Eichholtz, Deutsche
Ölpolitik, 358-359.

464
Germany’s new stake in the Romanian oil industry would be consolidated
within the nascent
Kontinentale Öl AG (see below).169 The company’s “task” in Romania would
be “to do everything in
view of the wartime requirements for an increase of Romanian oil
production” to halt the decline in
production and exploration since 1936.170 In February 1941, State
Secretary Erich Neumann of the VJP,
“in his capacity as Vice President of this company,” expressed his desire
to visit Bucharest to meet with
officials from those oil companies already or soon to be under German
management. Besides clarifying
their relationship to Konti, Neumann wished to discuss how they would
begin “the fastest possible
execution of rises in production, which are necessary to secure German
requirements.”171
In March 1941, Göring organized a conference with the dictator
(Conducător) of Romania, Ion
Antonescu, in Vienna. The ostensible purpose was to convince the
Romanians to raise production, but
Göring’s real aim (which he did not share with Antonescu) was to arrange
adequate supplies for the
upcoming invasion of the Soviet Union. The previous month, Thomas had
warned Göring that existing
fuel reserves would cover only two months of operational consumption.172
During his meeting with
Antonescu on 05 March 1941, Göring admitted that although Germany had
made great strides toward
meeting its military requirements of petroleum through domestic sources,
the synthetic plants were
extremely vulnerable.173 This meant that Germany was especially reliant
on its two largest suppliers of
oil, Romania and the Soviet Union. Göring told Antonescu that he was not
sure if the Soviet Union could
be counted upon as a reliable supplier.174 Germany had therefore poured
immense resources into

169

For a brief summary of the company’s operations in Romania in 1941, see:

Dienststelle des Beauftragten für den
Vierjahresplan, “Ergebnisse der Vierjahresplan-Arbeit: Ein Kurzbericht
nach dem Stande vom Früjahr 1942,” BAB, R 26 I/18.
170
Dr. vdW/Hof., “Memorandum über die Ergebnisse der Tätigkeit der
Kontinentöl in Rumänien,” 17 September
1943, T-401/2 (RBF 36).
171
Wiehl, Aufzeichnung, 26 February 1941, PAAA, R 105991.
172
“Aktennotiz über Vortrag beim Reichsmarschall am 26. 2. 1941,” 27
February 1941, signature illegible
(Thomas?) Hoover Institute, Nuremburg Records, Box 995 (PS-1456).
173
This was not just show for Antonescu. During his first postwar debriefing
by U.S. interrogators, Göring claimed
that the attacks against Germany’s synthetic fuel industry and the
transportation industry were the two most
effective elements of the Allied strategic bombing campaign.
Headquarters, Air P/W Interrogation Detachment,
Military Intelligence Service, A.P.W.I.D. (Ninth Air Force Adv) 65/1945,
“Enemy Intelligence Summaries:
Hermann Goering,” 01 June 1945, CARL.
174
Although Göring, perhaps not wishing to tip off the Romanians about
Barbarossa, “stressed explicitly that this
remark did not refer to the general relationship between Germany and
Russia – quite to the contrary, it applied only

465
developing its transportation links to with Romania, but all of this
would be naught if Romanian
production continued to decline.175 Although Romania had every right to
conserve its oil reserves in
peacetime, Göring beseeched Antonescu to open his country to German
technical experts, drilling
equipment, and financial resources.176 Germany had the means to
reorganize the Romanian oil industry
right away, and Göring believed “it was absurd to waste drilling
equipment on unproductive German
fields if the same equipment could drill [sic] three times as much in
Romania.” Antonescu promised “to
do everything in his power to increase the production and refining of
Rumanian production,” and he had
no love for the British or Americans, whose subsidiaries he believed had
wasted the country’s oil through
inefficient production practices (a perspective shared by Hitler).177
Nevertheless, he stressed that he was
not about to allow any other country to take over ownership of Romania’s
economic resources.178

to petroleum deliveries.” The Romanians only learned about the German

plans two weeks before Barbarossa when
Hitler confided to Antonescu that “Russia had gone over to the camp of
Germany’s enemies.” When asked by Hitler
if he wished to participate in the German invasion “from the very first
day,” Antonescu replied in the affirmative, as
there was no reason to expect the Soviets would show any “restraint”:
“The Russian would bomb the oil regions
even if Rumania should not participate at the start […].” Memorandum by
an Official of the Foreign Minister’s
Secretariat (Schmidt), “Record of the Conversation between the Führer and
General Antonescu at the Führerbau in
Munich on June 11, 1941 […],”13 June 1941, Document No. 614 in: DGFP (D),
xii: 996-1006.
175
During a preparatory meeting between Fischer and Clodius on 03 March
1941, the point was made that unless
Romanian production for the year increased to 6,000,000 tons, “for the
first time in many years the situation would
arise that the transportation capacity [would] exceed the rate of
production.” Göring would bring up the matter with
Antonescu and offer him the services of his finest geologist, Bentz.
HaPol IVb/224/41, Wiehl an die Adjutantur des
Herrn Reichsaussenministers, 03 March 1941, T-120/3671; reprinted in:
Eichholtz, Deutsche Ölpolitik, 359-361.
176
Eichholtz describes Göring lording over Antonescu “in the manner of
potentate over his vassals.” Eichholtz,
Rumänisches Öl, 60-61. The tenor of the meeting (according to the German
minutes) does not suggest this.
Moreover, by neglecting to consider the parlous state of Germany’s fuel
supply at the time within his overall thesis,
Eichholtz overestimates any leverage Göring might have had over
Antonescu.
177
Hitler commended the Romanians for breaking the power of the major oil
companies, which he believed had
been buying up oilfields “with the intention of restricting their
development to a degree compatible with their other
interests […].” Table Talk: No. 269 (26 July 1942).
178
Memorandum by an Official of the Foreign Minister’s Secretariat
(Schmidt), “Record of the Conversation
between Reichsmarschall Göring and General Antonescu in the Presence of
State Secretary Neumann, Minister
Neubacher, Professor Benz [sic], and Dr. Fischer, and of the Rumanian
State Secretary, Dimitriuc, in the Belvedere
Palace in Vienna, on March 5, 1941,” 08 March 1941, Document No. 126 in:
DGFP (D), xii: 221-227. Neumann
subsequently left for Bucharest, where, along with Neubacher, he met with
Antonescu and Maj. Gen.
Gheorghe Potopeanu, Romania’s Economics Minister, on 14 March 1941.
Neumann indicated that he was visiting
the country as a representative of Kontinentale Öl (actually, the
telegram says “Kommissionen Öl-AG,” but this is
clearly a mistake). He wanted to have a tour of the oil fields that would
fall under German jurisdiction but also
wished to discuss the results of the Vienna Conference, “in particular
the immediate utilization of German drilling
equipment.” Neubacher to the AA, Nr. 637 v.14.3., 14 March 1941, PAAA,
105991. Neubacher and Neumann met
with Mihai Antonescu the following day to inform him that Germany was
making available the additional drilling
equipment in order to make good on the production increases to which
Göring and Antonescu had agreed in Vienna.
When it came to reforming their oil industry, however, the Romanians
managed to get the matter referred to a joint
German-Romanian commission. Neubacher, Neumann, and Antonescu, “Notiz
über das Ergebnis der Besprechung

466
The Third Reich had other plans. Although a military occupation of the
Romanian oilfields was not in
the cards, Berlin was still determined to find some means of bringing the
European oil industry under de
facto German control. Only two weeks after Göring-Antonescu conference,
in fact, the Reich would put
the final touches to the instrument that would implement this process.

zwischen Minister Antonescu and Staatssekretär Neumann,” 15 March 1941,

enclosed with: Deutsche Gesandtschaft
(Bukarest), der Sonderbeauftragter für Wirtschaftsfragen (Neubacher), an
das AA, Tgb. Nr. 1559, WR 2, “Inhalt:
Besprechung zwischen Minister Antonescu und Staatssekretär Neumann,” 17
March 1941, T-120/3671; the former
is reprinted in: Eichholtz, Deutsche Ölpolitik, 361. The results of the
Vienna Conference came up briefly during
Thomas’ briefing of Göring on 19 March 1941: Chef WiRüAmt, “Vortrag bei
Reichsmarschall Göring am 19.3.41,”
20 March 1941, Nuremberg Records, Box 995 (PS-1456).

467
Germany’s Answer to Standard Oil: The Formation of the Kontinentale Öl
AG, 1940-1941
In the summer of 1940, officials within the Third Reich began considering
how Germany would
secure its long-term oil requirements from sources beyond Europe’s
borders. It was not enough simply to
occupy foreign oilfields. Capital, labor, and equipment were needed to
explore, produce, refine, transport,
and market any oil within the Reich’s expanded domain. Only a vertically
integrated oil company with
resources that rivaled those of the British and U.S. majors could hope to
satisfy all of Axis Europe’s
needs. Germany’s domestic oil industry was far too small to accomplish a
task of such magnitude. Not
only did it lack the necessary resources – financial, technical, or
personnel – but Germany neither
controlled any significant sources of oil, nor could it hope to acquire
any through normal commercial
practices. Private industry would, as Fischer noted in his paper of
September 1940, need the Reich to
provide it with those assets it could not acquire on its own. The
Kontinentale Öl AG was the product of
these circumstances.
It is impossible to date with any exactitude when Germany’s leadership
decided to establish a
foothold in the international oil industry.179 Part of the impetus for
the creation of the Konti appears to
have come from a note from Grand Admiral Erich Raeder, Supreme Commander
of the Navy, to Göring
in June 1940. As Raeder observed, “[following] the termination of the war
extensive oil interests around
the world previously under English and French ownership will fall to
Germany.” Raeder urged that
“[such] possibilities be seized as quickly as possible, not only to deal
with the rising demand of the
European Continent for crude oil,” but most importantly that of the Air
Force and the Navy.180 Raeder
urged Göring to use the existing preparations for peace negotiations “to
determine, which claims
Germany, in consultation with Italy, must put to England and France
within the realm of petroleum

179

The following discussion builds upon the path-breaking analysis of

Dietrich Eichholtz: Krieg um Öl, 45-53.
Raeder may have been prompted by an undated memorandum (most likely from
the spring of 1940) by the
commander of naval forces in the Baltic, Admiral Rolf Carls. He argued
that Germany ought to demand both the
“neutralization” of Suez Canal from a defeated Britain and France, as
well as the “[surrender] of all rights in the
Persian Gulf and the Persian-English [Anglo-Persian] oil facilities to
Germany.” “Memorandum von Admiral
Carls,” no date, Appendix B to: “Raumerweiterungs- und Stützpunktfragen,”
03 June 1940 – 04 August 1941,”
reprinted in: Michael Salewski, Die Deutsche Seekriegsleitung, 1935-1945
(Frankfurt am Main: Bernard & Graefe,
1970-1975), iii: 105-120.
180
468
supplies over the long-term around the world.” His demands included:
overseas territories, not simply for
the purposes of oil production but also to establishment of a military
infrastructure to protect Germany’s
access to foreign oil; and “direct interests” within the oil-producing
territories of the Near East, Arabia,
and North Africa. Finally, Raeder believed that Germany would also have
to take control of oil
companies, “which, up to now domiciled in enemy nations, are henceforth
to come under German
domination as a consequence of military operations.”181
Göring did not reply until 14 November 1940, and his response is
noteworthy because it contains the
first official reference to Konti.182 A week before, Göring had informed
Thomas “that he wanted to
establish a Central European fuel company.” Although the company would be
nominally private, in
reality, the Reich would exercise control. Its mission was “the
acquisition and utilization of all fuel
reserves within Central Europe,” and Göring requested that Thomas serve
on the supervisory board. The
two were also in agreement that Germany needed to start making
preparations to fight a “long war.”183 In
his letter to Raeder, Göring agreed that the “centralized direction” of
the supplying of the civilian
economy and the military during both peace- and wartime was “essential.”
On account of oil’s
“paramount significance for the entire economy and the conduct of war,”
Göring stated that he had taken
personal responsibility for policymaking in this regard. One of his most
important decisions was the
founding of the “Continentale Öl-Aktiengesellschaft,” which would
“improve the possibilities for
supplies from abroad and strengthen Germany’s position in the
international oil business… [by] taking
over those oil interests of the enemy powers and neutrals that fell to us
now and in the future.” Until the
company became operational, Göring had “specially commissioned” Fischer
with the task of handling all

181

Der Ob.d.M. (Raeder) an den BVJP, Herrn Generalfeldmarschall Göring,

z.Hd. Herrn Generalsekretär Körner, A
IV Nr. 167 gKdos., “Betr.: Ölversorgung,” 13 June 1941 (sic; 1940), T-
77/1399. For the correct date, see: OKM an
das AA, A IV Nr. 922 gen., “Betr.: Irak-Erdöl,” 26 April 1941, T-77/1399
(Wi/IIA 5.1-2).
182
Eichholtz’s earliest document is a minute (Vermerk) dated 22 November
1940 attached to an AA circular of 04
December 1940 (WI 2985) from Clodius (HaPol) to ten German diplomatic
missions. Both documents are
reproduced in: Eichholtz, Krieg um Öl, 51-52. The content of the minute
is virtually identical to Göring’s response
to Raeder.
183
Chef WiRüAmt, “Aktennotiz über den Vortrag beim Reichsmarschall am
6.11.40. in Beauvais,” 08 November
1940, Nuremberg Records, Box 995 (PS-1456).
469
matters relating to the “acquisition of oil data” and requested that
Raeder instruct his subordinates to
cooperate with Fischer.184
Although Göring had (possibly as a result of Fischer’s paper of September
1940) decided during the
autumn of 1940 to establish Konti, the Reich did not present any specific
plans regarding the ownership
structure and financing of the company until the beginning of 1941. On 21
January 1941, State Secretary
Neumann convened a meeting at the RWM with representatives of the
Deutsche Bank, the Dresdner
Bank, the Reichs-Kredit-Gesellschaft, and the Berliner Handels-
Gesellschaft, as well as various
government officials involved with the Reich’s financial policy. Those
attending the meeting already had
an inkling of its purpose. According to Hermann Abs of the Deutsche
Bank’s Managing Board, Neumann
informed those assembled “of the reasons why it seemed advisable to
establish” a holding company
(Aktiengesellschaft – AG) “that would comprise all foreign petroleum
interests which now came into the
German sphere of interests and explained the plan already known to us to
establish the Continental
Petroleum A.G.” Neumann indicated that Konti would be formed with an
initial capitalization of
50,000,000 RM, of which 30,000,000 RM would be provided by a special
holding corporation, Borussia
GmbH, owned entirely by the Reich.185
To allay any concerns about excessive government interference, “State
Secretary Neumann expressly
emphasized that the company should carry on its business and be managed
according to the principles of
purely private economy.” The remaining 20,000,000 RM would come from a
consortium of firms
involved in German natural and synthetic petroleum production, including
Gewerkschaft Elwerath,
Deutsche Erdöl (DEA), Wintershall, Preußische Bergwerks- und Hütten-
Aktiengesellschaft, IG Farben,
and Braunkohle-Benzin AG. Those parties that contributed to the original
50,000,000 RM capitalization
would receive a special class of “Name shares” that would allow them to
retain an absolute majority
within Konti even “if the entire capital was to be extended to several
hundred millions.” Specifically,

184

Der Reichsmarschall des Großdeutschen Reiches, BVJP, an den Ob.d.M.

(Raeder), V.P. 18[illegible]8/5, 14
November 1940, T-120/3671.
185
“File note by Herman J. ABS concerning a meeting at the Ministry of
Economics to the founding of the
Continentale Petroleum A.G.,” 23 January 1941, NARA, RG 238, T-301/89
(NI-10797).

470
bearers of “Name shares” would have fifty votes, whereas holders of
ordinary “Bearer shares” would only
enjoy a single vote per share.186 Those members of the consortium that
already possessed direct foreign
investments in the oil sector would be allowed to retain them, but
henceforth, all future purchases would
have to secure the approval of the other partners within Konti. So as to
avoid offending German domestic
producers, Konti was prohibited from producing oil within the Reich, but
it would “not bind itself to any
limitation of [its] activities in foreign countries.” Economics Minister
Funk would serve as the chairman
of Konti’s Supervisory Board (Aufsichtsrat), along with Neumann (his
deputy), Keppler, the four bankers
invited to the meeting, representatives from the aforementioned
industrial consortium, and members of
the Air Force High Command (Oberkommando der Luftwaffe) and the OKH.187
Actual management of
the company would be handled by the Managing Board (Vorstand), whose
membership would be
determined later, although Fischer would continue to oversee the
company’s affairs as he “enjoys the
confidence of the Reich Marshal to a very great extent.”188 Not for
nothing does the leading historian of
National Socialist oil imperialism describe Fischer as the “spiritus
rector of Konti.”189

186

As one U.S. investigator concluded after the war, “[If] the ‘Konti’
officials are trying to present the company as a
‘predominately’ private controlled corporation, because ‘Borussia’ owned
only RM 30.000.000. – out of a total
capitalization of RM 80.000.000. –, they are misrepresenting the case.”
Jules Wangler to Maj. Teisberg (Chief,
Property Section), 26 July 1946, NARA, Record Group 260: Records of U.S.
Occupation Headquarters, World War
II, Records of the Office of Military Government for Germany (OMGUS –
hereafter cited as: RG 260), Records of
the Property Division, Records of the Office Director, General Records,
Box 9. See also: Jules Wangler, Office of
the Military Government for Germany, Finance Division, “Research Report
Covering Documentary Material of
Kontinentale Oel A.G. Landshut A/ISAR Held under Control of Military
Government in Landshut,” 10 August
1946, enclosed with: Murphy to the Secretary of State, “Transmitting
Report on Investigation of Kontinentale Oel,
A.G., Berlin,” 29 August 1946, No. 6431, NARA, RG 59, FW 862.6363/8-2946.
187
The reference to the OKH may have been a mistake on Abs’ part when he
composed his memorandum of
conversation, since it was OKW that eventually secured representation on
Konti’s Supervisory Board, with Thomas
of the WiRüAmt holding the position (although one of his deputies,
Griebel, often attended on his behalf).
188
“File note by Herman J. ABS concerning a meeting at the Ministry of
Economics to the founding of the
Continentale Petroleum A.G.,” 23 January 1941, NARA, RG 238, T-301/89
(NI-10797). Many of the officials
responsible for petroleum policy in the Third Reich also held leading
roles within the company. Bentz, Funk,
Keppler, Krauch, and Thomas all served as members of Konti’s Supervisory
Board. (Thomas, who was sacked by
Speer in early-1943, was replaced by one of his former deputies, Griebel,
in September 1943: “Translation of a
memorandum found among the data held in custody of Mil. Govt. Landshut,
concerning the influence Walter
Dihlman had in ‘Konti’ affairs,” RG 260, Property Division, Box 9.)
Fischer of the RWM also held a joint
appointment to both the supervisory board (Aufsichtsrat) and the managing
board (Vorstand), of which the latter
actually handled the day-to-day operations of the company. The
distinction between the supervisory board and
managing board is a crucial one, in that under German corporate law, the
former only exercises an oversight
function and is not responsible for the management of a company.
Accordingly, the Nuremberg Military Tribunal
was forced to acquit Krauch, Bütefisch, and Keppler on the charge of
“spoliation” under Control Council Law No.
10. NMT, vii: 49, 283-284; viii: 923, 1152, 1154, 1162; xii: 264-266;
xiv: 694-695. Funk, during his interrogation by

471
As for the company’s future activities, these included purchasing control
of Belgian and Frenchowned companies operating in Romania (Concordia and
Colombia, respectively) and Jersey’s Hungarian
holdings (which was being negotiated by the IG Farben).190 These and
other endeavors would probably
require the infusion of an additional 70,000,000 RM, which would be
collected by the German banks that
would join Konti, since, as Hans Fischböck (State Secretary at the VJP
for price control and a member of
the Reichbank’s advisory council) explained, “it was impossible to raise
all of it by way of [public]
loans.” The banks would furnish the required sum by purchasing 30,000,000
RM worth of Class B
(“Bearer”) shares, which represented Konti’s initial public offering,
while offering Konti a two-year,
40,000,000 RM credit, which would be repaid with interest. Therefore,
Konti’s capitalization would
increase from 50,000,000 RM to 80,000,000 RM, although effective control
of the company remained in
the hands of the companies that had contributed the initial
capitalization.191

a Soviet prosecutor during the first Nuremberg Trial, had been the first
to claim that his membership on the
supervisory board “mainly had to do with the financing of that company
only.” IMT, xiii: 189.
189
Eichholtz, Krieg um Öl, 50.
190
Eichholtz, Rumänisches Öl, 42-46; and Eichholtz, Krieg um Öl, 31-34. The
Deutsche Bank, at Göring’s
prompting, had already worked out an agreement in December 1940 with the
Compagnie Financière Belge des
Pétroles, which owned Concordia, which was itself the product of a fusion
of several German-owned companies that
had been confiscated after 1918 and now accounted for roughly 11% of
Romanian production. The Deutsche Bank
secured the purchase of 1,865,112 shares in Concordia for the sum of
22,439,108 RM. In August 1941, the bank
arranged another stock purchase, this time with a French banking
consortium led by the Banque de Paris et des
Pays-Bas, for 650,000 shares of Colombia (out of the 760,000 existing
shares), which accounted for roughly 7% of
Romanian production. The Deutsche Bank also reserved the right to
purchase any outstanding shares until 30
November 1941. Deutsche Bank, Central Office: Ausland Dr. Fe/Gl. (Herman
Abs and Helmuth Pollems) to
Kontinentale Öl Aktiengesellschaft, 16 April 1941; and Deutsche Bank,
Central Office: Ausland, L./Kl., to
Kontinentale Öl A.G., 11 August 1941; both in: NARA, RG 260, Property
Division, Box 9; and Konti an den Leiter
der Deutschen Waffenstillstands-Delegation für Wirtschaft (Gesandten
Hemmen), Di/Wh, “Betrifft: Erwerb einer
Majoritätsbeteiligung an der ‘Colombia’ Sociéte Franco-Roumaine de
Pétrole, Bukarest,” 29 July 1941, enclosed
with: der Reichsmarschall des Groβdeutschen Reiches, BVJP, der Zweite
Staatssekretär (Neumann), an den an den
Leiter der Deutschen Waffenstillstands-Delegation für Wirtschaft, 29 July
1941, T-120/3671. For an accounting of
Konti’s assets in Romania on the eve of the latter’s surrender to the
Soviet Union in August 1944 (which the Soviets
expropriated after the Romanians nationalized all German-owned property),
see: Eugen Halder, “Kontinentale Oel
G.m.b.H. subsidiary, Bucharest,” 18 June 1946, NARA, RG 260, Property
Division, Box 9.
191
“File note by Herman J. ABS concerning a meeting at the Ministry of
Economics to the founding of the
Continentale Petroleum A.G.,” 23 January 1941, NARA, RG 238, T-301/89
(NI-10797). The Deutsche Bank
immediately staked a claim to “leadership” over the banking consortium
within Konti in view of “the position of the
Deutsche Bank in the crude oil sector […].” Aktenvermerk, 25 January
1941, no author (probably Abs), T-301/89
(NI-10800). For a short introduction on the role of the Deutsche and
Dresdner banks in the founding of Konti, the
purchase of shares held by French nationals in Romanian oil companies,
and the economic spoliation of the Soviet
Union, see: Christopher Simpson, ed., War Crimes of the Deutsche Bank and
the Dresdner Bank: Office of the
Military Government (U.S.) Reports (New York, 2002), 198-201 (Deutsche
Bank) and 287-291 (Dresdner Bank).

472
Having laid the groundwork in January, additional details concerning the
financing of Konti were
hammered out during a meeting on 18 March 1941.192 The participants
reaffirmed the plan set out by
Neumann in January, with the exception that the aforementioned four banks
would participate as a
syndicate. (Dresdner’s representative suggested that it and the Deutsche
Bank share management, since
each of them would each hold a 35% stake in the syndicate).193 Two days
later, Göring invited each of the
banks and companies involved to a meeting at the Preussenhaus on 27 March
1941 to commemorate the
official founding of Konti. Besides reiterating plans for Konti to take
over French and Belgian oil assets

192

For Göring’s invitation (signed by Neumann) to the conference of 18 March

1941 at the Preussenhaus, which
also references the earlier conference of 21 January 1941 (including
details concerning the banks’ role in provided
the aforementioned 70,000,000 RM worth of financing), see: “Letter of
Goering to Deutsche Bank (ABS), Dresdner
Bank (Goetz), Reichskreditgesellschaft (Rohdewald), and Berliner
Handelsgesellschaft (Weltzien), re: Financing of
the Kontinentale Oel AG,” 08 March 1941, NARA, RG 238, T-301/18 (NI-
2020).
193
The banks also pressured the Reich into accepting an initial 5% interest
rate on the 40,000,000 RM loan, which
would drop to 4.5% after Konti paid its first dividend. “Summary record
on a conference re: Financial of
Kontinentale Oel A.G.,” 18 March 1941, no author (most likely Karl
Rasche, a member of Dresdner’s Managing
Board who appears to have attended the meeting instead of the Chairman of
the bank’s Supervisory Board, Goetz,
who had originally been invited), NARA, RG 238, T-301/18 (NI-2016). For
some reason, this document states that
the date of the earlier conference was 22 January 1941, instead of 21
January. For an internal Deutsche Bank
memorandum concerning the meeting, see: Aktenvermerk, “Betr.:
Kontinentale Öl-Aktiengesellschaft,” no date or
author (handwritten notation reads: “Kontinentale Öl-AG Gründung RM
30.000.000. Aktien 1941”), BA-B, R
8119/1826. The day after the conference of 18 March 1941, Abs contacted
Dresdner to inform them that the
Deutsche Bank was willing to cede equal participation in the management
of the banking syndicate, so long as the
Deutsche Bank retained “standing control” (ständige Federführung) of the
syndicate’s affairs. “Record for the files
(unsigned) re: Agreement on the financing of the Kontinentale Oel A.G.,”
19 March 1941, NARA, RG 238, T301/18 (NI-2022). Ultimately, Deutsche and
Dresdner both accounted for 35% of the 30,000,000 RM worth of
shares purchased by the banking consortium, while the
Reichskreditgesellschaft and Berliner Handelsgesellschaft
settled for 15% each. See also: “Invitation to the floating of the
Kontinentale Oel A.G., addressed to ABS, Deutsche
Bank, Rasche, Dresdner Bank, Rohdewald, Reichskreditgesellschaft, and
Weltzien, Berliner Handelsgesellschaft;
also agreement between banks on the financing quota,” 24 March 1941, T-
310/18/NI-2017; and the Deutsche Bank
an den Herrn Reichsmarschall des Grossdeutschen Reiches, BVJP, “Ihr
Zeichen: V.P. 4278/5. Betr.: Finanzierung
der Kontinentalen Öl-Aktiengesellschaft,” 24 March 1941 (handwritten
notation reads: “Kontinentale Öl-AG
Gründung RM 30.000.000. Aktien 1941”), BA-B, R 8119/1826; “Blatt zum
Kreditprotokoll vom 16 Januar 1942 für
Kontinentale Öl Aktiengesellschaft, Berlin,” BA-B, R 8119/1826; and
“Statement covering credits extended to the
Kontinentale Oel A.G. by the Deutsche Bank” 23 February 1943, NARA, RG
238, T-301/89 (NI-10801). According
to the February 1943 statement, the Deutsche Bank also provided 100% of
the 2,000,000 RM credit extended to Ost
Öl GmbH, a wholly owned subsidiary of Konti that would operate in the
Caucasus following the German victory.
For a detailed study of the Dresdner Bank’s role in the early history of
Konti (based largely on internal bank
correspondence), see Harald Wixforth’s “Die Ausbeutung von Ressourcen im
Zeichen der Kriegswirtschaft: die
Kontinentale Öl AG,” in: Die Dresdner Bank in der Wirtschaft des Dritten
Reichs, ed. Johannes Bähr (Munich: R.
Oldenbourg, 2006), 360-370. The Deutsche Bank’s official history makes
only a brief mention of the bank’s
involvement with Konti: Lothar Gall, et al., The Deutsche Bank (London:
Weidenfeld & Nicolson, 1995), 327 and
336. See also: Paul H. Gantt, “Preliminary Memorandum Brief on The German
Oil Industry,” 03 October 1946, Paul
Hawkins Gantt Nuremberg Papers, Towson University Archive, Volume U,
Document 5.

473
in Romania, Göring’s letter also stipulated the exact breakdown of shares
within the industrial consortium
that would, along with Borussia, provide the initial 50,000,000 RM of
capitalization.194
The documents concerning the foundation of Konti make no mention of any
activities beyond
Continental Europe.195 Following the start of Operation Barbarossa,
German documents did, of course,
make reference to the company’s future operations in the Soviet Union.
According to a retrospective
analysis of the VJP between 1936 and 1942, Konti had been formed with
intention of acquiring control of
French and Belgian oil companies operating in Romania, such that the
company controlled 23% of that
194

Deutsche Erdöl (DEA), Elwerath, Wintershall, Preußische Bergwerks- und

Hütten-Aktiengesellschaft (Preussag),
and IG Farben each held 3,000,000 RM, Braunkohlen Benzin AG 2,000,000 RM,
and Preussag and another bank
holding 2,000,000 and 1,000,000 RM, respectively, on a trustee basis.
Reichsmarschall of Greater Germany,
Plenipotentiary for the Four Year Plan (Göring) to DEA (Attn: Direktor
Karl Schirner), Gewerkschaft Elwerath
(Attn: Direktor Hans Brochhaus), Wintershall A.G. (Attn: Generaldirektor
Rosterg), Preußische Bergwerks- und
Hütten-Aktiengesellschaft (Attn: Generaldirektor Wisselmann), Braunkohle
Benzin A.G. (Attn: Fritz Kranefuss),
and IG Farben (Attn: Direktor Buetefisch), V.P. 4373/5, 20 March 1941,
enclosed with: Reichsmarschall of Greater
Germany, Commissioner for the Four Year Plan, Second Secretary of State
(Neumann) to Rasche (Dresdner Bank),
V.P. 4373/5, 20 March 1941, attached to: “Letter of Staatsekretaer Neuman
[sic] to Dr. Rasche informing him about
the intentions of the founders of the Kontinentale Oel A.G., to appoint
him [a] member of the Aufsichtsrat in that
corporation, with enclosed invitation by Goering to the floating of the
Kontinentale Oel A.G.,” 20 March 1941,
NARA, RG 238, T-301/18 (NI-2018). Neumann’s covering letter to Rasche of
20 March 1941 also mentioned that
Keppler would serve alongside Neumann as the vice-chairman of Konti’s
Supervisory Board, with Funk continuing
to hold the chairmanship; and that Ministerialrat Fritz Fetzer (the oil
expert at the OKM and a member of the board
of directors of Eurotank, a major Hamburg refinery), Fischböck, Fischer,
Brochhaus, and Karl Blessing (a former
aide to Hjalmar Schacht at the RWM) would also serve on Konti’s
Supervisory Board. Bentz also received a copy of
Göring’s invitation of 20 March 1941 (BGR 86537), along with a cover
letter from Neumann identical to the one he
sent Rasche, which includes Anlagen such as a copy of the company’s
articles of incorporation, guidelines for
cooperation between Konti and those German oil companies that held stock
in it, the arrangements concerning
Konti’s financing by the banking consortium (undated, but according to
the copy summarized in NARA, RG 238, T301/18 (NI-2017), it was dated 24
March 1941), and bylaws for both the Managing Board and the Supervisory
Board not included within NARA, RG 238, T-301/18/ (NI-2018). Konti’s
partners commemorated the company’s
establishment during the meeting of 27 March 1941 by completing a report
listing the breakdown of shares, as well
as the memberships of both the Supervisory Board and the Managerial
Council (Verwaltungsrat – later replaced by
the Managing Board): Schirner, et al., “Foundation Report,” 27 March
1941, attached to: NARA, RG 238, T-301/18
(NI-2023). Those present at the meeting also nominated the Deutsche
Revisions- und Treuhand-Aktiengesellschaft
to serve as Konti’s auditor. A membership list for both the Supervisory
Board and the Managing Board is included
with the protocol of the proceedings for a general assembly of Konti’s
shareholders on 29 May 1942, which is
attached to: NARA, RG 238, T-301/18 (NI-2023). For an original exemplar
of the company’s articles of
incorporation, see: Satzung der Kontinentale Öl Aktiengesellschaft in
Berlin, 1941, BNA, FO 1039/496. This
document explicitly stated under Article II that the “[purpose] of the
undertaking is the acquisition of shares and
every other business activity within the domain of fuel, in particular
abroad.” The documents from January-March
1941 concerning the foundation of Konti played a prominent role in the
work of East German historians concerning
the collaboration between German industry and the Reich in planning for
the economic exploitation of the Soviet
Union. Four documents are reprinted with commentary in: Roswitha Czollek
and Dietrich Eichholtz, “Die deutschen
Monopole und der 22. Juni 1941: Dokumente zu Kriegszielen und
Kriegsplanung führender Konzerne beim Überfall
auf die Sowjetunion,” Zeitschrift für Geschichtswissenschaft, 15: 1
(1967): 64-76.
195
When questioned about his role activities with company during the first
Nuremberg Trial, Funk stressed that the
Konti was interested in oil development beyond just “the Occupied
Territories – this company was concerned with
oil industries all over Europe.” IMT, xiii: 188-189.

474
country’s oil production by the spring of 1942. More importantly, Konti
was responsible for promoting
more energetic exploitation of Romania’s oil reserves by overcoming “the
resistance of Romanian
government agencies,” which had thus far succeeded in stifling production
from the 1936 high of
8,700,000 tons to only 5,200,000 in 1941. As for the Soviet Union, Konti
served as an invaluable
substitute for the Reich by putting up its own capital (250,000,000 RM so
far, with “further hundreds of
millions” to follow) for the reconstruction of the Caucasian oil
industry.196
Foreign reporting on Konti claimed that its objectives included the
acquisition of oil reserves in the
Middle East, but it is difficult to find official corroboration of the
company’s intentions in the region.
Speculation over the company’s intentions was a source of great
embarrassment for the German Minister
in Tehran, Ettel, who was confronted by the Iranian Prime Minister (Ahmad
Matin-Daftari) in April 1941
with a report from Iran’s Ambassador to Turkey that included a report by
the Turkish wire service in
Berlin. According to that report, “In Berlin a company was founded for
the distribution of Romanian oil,
which after the war will have the task also of distributing oil from
Mosul and Iranian oil.” The Iranian
Prime Minister warned Ettel that such a report, if accurate, could harm
German-Iranian relations. Ettel
guessed that the Turkish wire service was referring to Konti based on the
circular he had received from
Clodius the previous December, and he requested that Berlin wire him
instructions.197 A week later,
Clodius informed Ettel that Konti’s primary task was to “represent German
petroleum interests overseas,”
and that allegations concerning its future activities in Romania, Iraq,
and Iran were “untrue.”198
The company was also ready in February 1942 to send engineers to Iraq if
the Afrikakorps broke
through the British defenses in North Africa.199 That same month, Fritz
Grobba, the former German
Minister to Iraq and AA Plenipotentiary for the Arab World, and Rashid
Ali, the exiled Prime Minister of

196

Dienststelle des Beauftragten für den Vierjahresplan, “Ergebnisse der

Vierjahresplan-Arbeit: Ein Kurzbericht
nach dem Stande vom Früjahr 1942,” BA-B, R 26 I/18.
197
Ettel (Tehran) to Berlin, Nr. 207, 07 April 1941, PAAA, R 106109. For
earlier AA circular regarding the
foundation of Konti, see: Clodius an die Deutsche Botschaft in Ankara, et
al., WI 2985, 04 December 1940;
reproduced in: Eichholtz, Krieg um Öl, 51.
198
Clodius to Tehran, Nr. 181, 15 April 1941, PAAA, R 106169.
199
Fritz Grobba, “Vordringen Deutschlands über den Kaukasus nach dem
arabischen Raum,” 05 February 1942,
PAAA, BA 61123.
475
Iraq who had fled to Europe after the Anglo-Iraqi War of May 1941, agreed
that the IPC’s concession
would be transferred to Konti if the Germany ever returned Rashid Ali to
power.200
There was significant interest in the company’s founding and operations
beyond Germany’s borders,
much of which was fueled by official announcements like the one provided
by the German Embassy in
Spain. According to a press release from April 1941, “[the] purpose of
the new company is to defend the
interests of the German petroleum industry, especially in foreign
countries.” Konti would soon “take its
place among the great world petroleum companies” and “be the means
through which a constant supply
of petroleum will be assured to the European Continent at all times.”
There had already been a “constant”
supply of oil to Europe before the war. The problem was that Europe had
depended upon foreign
companies to provide the imports and run many of the local oilfields.
Konti would rectify this situation by
“making Germany independent of the great Anglo-American Companies,” while
“the European supply of
petroleum will remain guaranteed under its control.” U.S. oil executives
were deeply troubled by the
emergence of a company that threatened not only their properties in
Romania and the Middle East, but
also their postwar access to the world’s most important market after the
United States.201
The German business press also covered Konti’s formation, and besides
providing detailed
information concerning the company’s formation and leadership, stressed
that its primary function was to
free Germany and Europe from having to buy oil from the U.S. and British
major companies. As the
Berliner Börsen-Zeitung explained, “Germany has initiated with the
current action an ordering and
securing of the markets, which should be of value to us as well as
Europe, in contrast the existing
situation, which is characterized by the predominant position of the
Anglo-American concerns.”
Although the VJP had done an admirable job of satisfying Germany’s
immediate, wartime needs, it had
not been designed to provide Europe with “imports for the coming
peacetime economy,” which required a
200

Der Bevollmächtigte des AA für die arabischen Länder (Grobba) to the Büro
des Herrn Reichsaußenministers, et
al., “Inh.: Abschluß eines Rahmenvertrages mit Raschid Ali el-Gailani,”
10 February 1942, T-120/773.
201
At least one of them took up the matter directly with the State
Department by forwarding a copy of the
aforementioned press release. “German Embassy Information Bulletin:
Petroleum Autarchy,” 30 April 1941,
enclosed with: Harold Sheets (Vice President, Standard Oil Company of New
York) to James Clement Dunn
(Adviser on Political Relations), 14 May 1941, NARA, Record Group 59:
General Records of the Department of
State (hereafter cited as: RG 59), 862/6363/209. Emphasis in the
original.

476
stronger presence for Germany on the international stage. “Although
Germany already stands at the door
– Romania, Iraq, Iran – the international companies were in the position
to create considerable difficulties
[…].” Germany now had the means of bypassing these obstacles and return
to the position it had enjoyed
prior to the Versailles Diktat, when it “had played a great role, above
all in Romania, whose oil industry
owed its development to German initiative.”202
Various news agencies beyond Germany also covered the company’s
activities, and their reports
formed the bedrock for Allied economic intelligence estimates regarding
Konti.203 Foreign officials were
also quick to grasp the significance of Konti’s founding.204 In early
April 1941, the U.S. Embassy in
Berlin transmitted a short report on Konti’s founding that summarized a
more detailed report completed
by the Vice-Consul. U.S. chargé d’affaires Leland Morris informed
Washington that while “Rumanian
and French interests form the present nucleus of the trust,” a
“[monopoly] in Rumania and ultimate
control in Iran and Iraq with the operation of a tanker fleet is
envisaged according to the press.”205
According to the U.S. Vice-Consul, much of the speculation concerning the
company’s long-term
ambitions came from the press: “To popularize German expansion into
foreign fields, the local press
comments that the corporation is only seeking to recover what the Reich
lost through the Versailles
Treaty, or to reacquire for the Reich an interest in certain fields where
German engineers have served as

202

For a sampling of opinion within the German business press, see: “Eine
deutsche Oel-Holding:
Gemeinschaftsgründung ‘Kontinentale Öl-AG,’” Berliner Börsen-Zeitung, Nr.
151 (30 March 1941); “Die
deutschen Erdölinteressen: Das Muster einer Gemeinschaftsgründung von
Staat und Wirtschaft,” WirtschaftsBeilage, 5. Beiblatt/Nr. 77 (30 March
1941); and “Kontinentale Oel-AG., Berlin: Eine ölindustrielle
Holdunggesellschaft für ausländische Petroleumbeteiligungen,” no date or
author (handwritten notation reads:
“Frankfürter Ztg 30.3.41”); all in: BGR 86537.
203
Much of the dossier on Konti compiled by the U.S. Enemy Oil Committee
within the Foreign Economic
Administration consisted of press articles from a variety of neutral
newspapers and trade publications. The dossier
also included short summaries of Intelligence Minutes compiled by the
British Ministry of Economic Warfare. One
such entry for 24 May 1943 recounted how the “president of Continentale
Oel A.G., Dr. W. Fischer [sic]” had told a
neutral colleague “that Germany could not win the war” and “was evidently
anxious to place on record that he was
‘different’ and thus endeavoring to put himself in a position that would
be of help to him in the difficult times
ahead.” The entire file is enclosed with: Charles Mayer to Brandon H.
Grove, 06 September 1944, RG 169, Box
2201.
204
One top U.S. official who knew precious little about the company was the
U.S. Petroleum Administrator for War,
Harold Ickes, who in late-1943 confessed in an off-the-record note to a
journalist to “[not] having heard of this
Continental Oil Company […].” Ickes to John P. Lewis (Managing Editor,
PM), 08 October 1943, LOC, Papers of
Harold Ickes, Box 221.
205
Morris to the Secretary of State, 02 April 1941, No. 1226, NARA, RG 59,
862.6363/205.

477
pioneers.” Germany had a long history when it came to oil production in
Romania, and German engineers
had been active in Mesopotamia during the First World War.206 Konti would
be in the position to exploit
“reserves in Irak [that] are capable of extraordinary expansion,” while
in Romania, it would “prevent the
ruthless exploitation by private companies and injury to German military
interests.”207
But such ambitions could only be realized if Germany won the war. The
U.S. Commercial Attaché in
Berlin laid out the uncertain prospects for Konti. Germany was unlikely
to pry its way into foreign
oilfields through commercial means, which entailed that “military
developments [must] prepare the way.”
The logistical problem was also daunting. Germany had no tanker fleet
worth speaking of, and even if it
did, they would be easy prey for enemy ships. Developing one would be
difficult, even in peacetime,
since Germany would be competing against established rivals that already
dominated the market.208
Unless Germany’s overall strategic position improved to the extent that
it could guarantee secure access
to overseas sources of oil, Konti would remain “little more than a
grandiose facade.”209 Or, as one
historian sarcastically remarks, “the greatest oil company in the world
without any oil […].”210
***
German planners had concluded on the eve of the invasion of Poland that
the Third Reich possessed
an adequate supply of petroleum to wage war. Although logistical
difficulties arising from the rerouting

206

Little is known of Germany’s attempt to produce oil in Mesopotamia during

the First World War, although the
so-called “Brennstoffkommando Arabien” formed for that purpose actually
found small quantities of oil using
“primitive methods.” For historical summaries, see: Kontinentale Öl
Aktiengesellschaft, Mineralöl-Archiv, “Wer
erschloß Mossul-Öl? (Aus den Akten des Brennstoffkommandos Arabien),” no
date (handwritten notation indicates
05 May 1941), T-580/907 (Box 8, Ordner 56); and “Der Deutsche Anteil an
der Erschließung des Iraköls,” no date
or author, enclosed with: Wi VI d, Aktennotiz, “Betr.: irakisches Erdöl,”
27 May 1941, T-77/1399 (Wi/IIA 5.1-2).
207
William L. Smyser, “Formation of German Oil Trust,” Completed: 02 April
1941, Mailed: 07 April 1941, No.
2389, NARA, RG 59, 862.6363/206.
208
Sam E. Woods, “Weekly Economic Background Report No. 40 (for week ending
April 5, 1941): State Control
Emphasized in Formation of New German Oil Corporation,” 07 April 1941,
Serial 244, enclosed with: Naval
Attaché (Berlin) to Director of Naval Intelligence, 15 April 1941, NARA,
Record Group 38: Chief of Naval
Operations, Intelligence Division, Confidential Reports of Naval
Attaches, Box 678.
209
William L. Smyser, “Formation of German Oil Trust,” Completed: 02 April
1941, Mailed: 07 April 1941, No.
2389, NARA, RG 59, 862.6363/206.
210
Karlsch and Stokes, Faktor Öl, 208-211 (quotation from pg. 211). Karlsch
is fairly contemptuous of the
company: whereas the major U.S. and British oil companies boasted of
legions of skilled personnel, Konti was
staffed by “bureaucrats and bankers with NSDAP [Nationalsozialistische
Deutsche Arbeiterpartei] memberships”
(pg. 211). One cannot challenge Karlsch’s assessment, since Konti’s
prospects depended upon the successful
conclusion of the war.

478
Romanian oil exports up the Danube led to shortages in the winter of
1939/40, Germany scraped by
thanks to its accumulated reserves and the military’s manageable
operational consumption during the
campaigns of 1939 and 1940. But in one of the war’s great ironies,
Germany’s greatest victory – the
defeat of France in June 1940 – left it strategically exposed. The Third
Reich’s prewar planning had been
focused on the manageable task of satisfying Germany’s relatively small
requirements of petroleum,
which were equivalent to those of just the Royal Navy. As analysts and
policymakers grappled with the
challenge of supplying the entire European Continent with oil – both
during and after the war – among
their more remarkable decisions was to establish the Kontinentale Öl AG
in March 1941.
The history of Konti deserves closer attention for two reasons. First, it
provides historians with a
window onto the Third Reich’s postwar economic vision. The economic
planners of the Third Reich
intended that Konti should reassert Germany’s rightful (and historic)
place within the international oil
industry as both a leading producer and supplier of oil to Europe. But
even more significantly, Konti
would also contribute to the grander project of liberating Europe from
the liberal economic order
dominated by Britain and the United States, albeit by mimicking the
methods of the very institutions it
was seeking to displace. In that sense, the story of Konti fits within
the wider history of German
expansionism before the 1945 – that is to say, an effort to escape
economic and strategic irrelevance visà-vis global great powers such as
Britain, Russia, and especially the United States by appropriating
British and U.S. models of imperial rule (British India), genocidal
settler colonialism (the American
West), and economic development through the violent acquisition of arable
land and raw materials.211

211

I am indebted to Adam Tooze’s Wages of Destruction, passim (esp. xxii-

xxv, 9-11, 166-167, 510-511, and 658),
for bringing the idea of National Socialist imperialism “as an
intelligible response to the tensions stirred up by the
uneven development of global capitalism” (pg. xxiv-xxv). See also:
Timothy Snyder, Bloodlands: Europe between
Hitler and Stalin (New York: Basic Books, 2010), 161. The influence of
U.S. landed expansion, colonialism, and
imperialism upon the National Socialist worldview (Weltanschauung) has
recently become a subject of considerable
interest among scholars. For a survey of the relevant English-language
literature, see: Carroll Kakel, The American
West and the Nazi East: A Comparative and Interpretive Perspective (New
York: Palgrave, 2011). Although Kakel
sees many similarities between the U.S. settler colonialism of the
nineteenth-century and the German bid for “living
space” (Lebensraum) after 1941, he overlooks the economic pressures
driving expansion. These co-existed
alongside the colonialist imperative and, in the case of Germany,
preceded the advent of the Third Reich, while they
persisted in the United States even after the “closing” of the frontier
in 1890. Hitler also made no secret of his
admiration for British rule in India, upon which he often expounded
during his wartime monologues. Table Talk:

479
No. 11 (27 July 1941) and No. 17 (08-11 August 1941). For an overview of
Hitler’s thinking about India, see:
Hauner, India in Axis Strategy, 26-34.

480
Map 8: U.S. Coordinator of Information, “Petroleum Production in Europe
and the Near East,” 23
February 1942
Source: Franklin Delano Roosevelt Library, Harry L. Hopkins Papers, Box
154.
481
Map 9: German Foreign Office (Auswärtiges Amt), “The Crude Oil of the
Near East,” 07 March 1941
Source: Politisches Archiv des Auswärtigen Amtes, BA 61123.
482
Map 10: Reich Office for Economic Development (Reichsamt für
Wirtschaftsausbau), “Crude Oil [in] the
Caucasus and Near Orient,” 22 January 1942
Source: Archiv der Bundesanstalt für Geowissenschaften und Rohstoffe, No.
65936.
483
Chapter VII
Oil and Operation Barbarossa: Germany, 1941
Any examination of oil and German strategy after 1940 that does not give
predominance to the Soviet
Union would be misleading.1 Germany had been scheming to gain control of
the Caucasus and its oil
since the First World War and briefly succeeded in gaining a quarter of
Baku’s production in August
1918 as a result of one of the Russian-German treaties supplementing the
Treaty of Brest-Litovsk.2 In
concert with their Ottoman allies, German troops poured into the Caucasus
from the Ukraine and
occupied Georgia. They even took possession of “valuable crude oil
reserves” but the lack of tankers in
the Black Sea prevented its shipment to Germany before the end of the
war.3
Germany’s attentions returned to Caucasus in 1940 following the defeat of
France. There was some
opposition by the spring of 1941 to Adolf Hitler’s decision to launch
Barbarossa. A clique within the
German Foreign Office (Auswärtiges Amt, AA) including Orientalists such
as Fritz Grobba (the former
Minister to Iraq) had in concert with representatives of the Deutsche
Bank been pushing for an antiBritish strategy centered on the Arab Middle
East since 1939, particularly after the pro-Axis coup of April
1941 in Iraq.4 Raeder had been trying to convince the Führer to
concentrate upon the defeat of Britain by

The best focused study is Joel Hayward’s “Hitler’s Quest for Oil: The
Impact of Economic Considerations on
Military Strategy,” Journal of Strategic Studies 18: 4 (1995): 94-135.
See also: Rainer Karlsch and Raymond
Stokes, Faktor Öl: Die Mineralölwirtschaft in Deutschland, 1859-1974
(München: C.H. Beck, 2003), 213-217.
Unless otherwise indicated, all German-language sources are from the
National Archives and Records
Administration, Record Group 242: Foreign Records Seized (NARA, RG 242).
Since all documents included within
RG 242 are available only on microfilm, I have used the following
citation format: Microfilm Publication No./Reel
No. (Item No.).
2
Fritz Fischer, Germany’s Aims in the First World War (New York: W.W.
Norton, 1967), 550-557. For the text of
the treaty in question, see: U.S. Senate, Bolshevist Movement in Russia:
Letter from the Secretary of State
Transmitting to the Senate Committee on Foreign Relations a Memorandum on
Certain Aspects of the Bolshevist
Movement in Russia, 66th Congress, 2nd Session, Document No. 172
(Washington, DC: GOP, 1920), 49-52.
3
Hauptmann Walter Suβdorf, “Das Feldkraftfahrwesen,” in: Der groβe Krieg,
1914-1918, ed. M. Schwarte
(Leipzig: Johann Ambrosius Barth, 1921), viii: 381.
4
Due to space constraints, it was impossible to include an extended
discussion of Grobba’s activities and the Third
Reich’s Middle Eastern policy during the war. Existing studies such as
Lukasz Hirszowicz’s Third Reich and the
Arab East (London: Routledge, 1966), although good on Germany’s attempts
to harness Arab nationalist sentiment,
have little to add in terms of its oil ambitions in the Middle East. This
is unfortunate considering the close
collaboration between Grobba, the German Foreign Office (Auswärtiges Amt,
AA), and the Deutsche Bank to
reclaim Germany’s “lost rights” to Iraq’s oil after the First World War.
See, instead: Dietrich Eichholtz, Krieg um
Öl: Ein Erdölimperium als deutsches Kriegsziel, 1938-1943 (Leipzig:
Leigziger Universitätsverlag, 2006), 62-80.

484
focusing on the Eastern Mediterranean since the fall of France.5 In
November 1940, he conveyed to Hitler
the Navy’s “conviction that the commencement of an offensive against
Alexandria/Suez” that would
eventually extend to the “African and Near Eastern area [was] of war-
decisive significance.” Exerting
control over the “the African region” was the only way for Germany to
compensate for the economic
advantage enjoyed by the Britain through its partnership with the United
States. The Navy’s planning
arm, the Naval Warfare Command (Seekriegsleitung, SKL) was convinced that
the “securing [of a]
greater Europe/Africa under German leadership” would enhance Germany’s
economic position by
offering “possession of [a] decisive basis for raw materials and
foodstuffs,” including oil.6
SKL reiterated these points seven months later, in the wake of German
occupation of the Balkans and
Crete, pointing out that “sea and air superiority in the Aegean” not only
safeguarded Italy, France, and
Spain’s lifelines to imports from the Black Sea, but also “brings in
future significant relief for our own
supply of grain and oil through sea transport over Italy.” Germany should
also not pass up the opportunity
to strike at Britain in the Middle East. The British recognized the
“grave danger” confronting them and
placed their “hopes upon the punctual insertion of U.S. support […].” In
spite of Raeder’s pleading,
however, the Navy could do little except implore Hitler not to allow
Operation Barbarossa “to lead to any
giving up, decrease or retardation of military operations in the Eastern
Mediterranean.”7 The OKM’s
5

Eichholtz, Krieg um Öl, 60-61. Holger Herwig emphasizes the Navy’s

interest in North Africa and the Atlantic
Islands (which were directed primarily at the United States) but only
briefly mentions operations in the Middle East
to dislodge Britain. Herwig, “Prelude to Weltblitzkrieg: Germany’s Naval
Policy toward the United States of
America, 1939-1941,” Journal of Modern History 43: 4 (1971): 655-659
6
“Beurteilung Mittelmeer,” no date or author, Anlage 3 to: Oberkommando
der Marine (OKM), I op 2486/40,
“Besprechung des Ob.d.M. [Oberbefehlshaber der Marine – Erich Raeder]
beim Führer am 14.11.40. 13. Uhr.,” T1022/1727 (PG 32184). Emphasis in
the original.
7
Among the various suggestions put forward by the Seekriegsleitung (SKL)
was the seizure of Alexandria and
Suez, but the SKL’s ambitions went much farther: “The SKL is as before of
the resolute conviction that the
domination of the Eastern Mediterranean and thorough elimination of each
expression of British political and
military power in this area” should not stop until Germany had extended
its reach “over the entire Near East and
beyond that toward India […].” Captain Heinz Aßmann (1b/1.SKL),
“Betrachtung über die strategische Lage im
östlichen Mittelmeer nach Balkanfeldzug und Kretabesetzung und die
weitere Kampfführung,” no date, Anlage 5 to:
B.Nr.1/Skl.885/41, Op Chefs., “Vortrag Ob.d.M. beim Führer am 6. 6. 1941
auf dem Berghof,” T-1022/3407 (PG
32185). All of these points were reiterated using the strongest possible
language in the SKL’s “Denkschrift zum
gegenwärtigen Stand der Seekriegsführung gegen England (‘Juli-
Denkschrift’),” July 1941, reprinted in: Michael
Salewski, Die Deutsche Seekriegsleitung, 1935-1945 (Frankfurt am Main:
Bernard & Graefe, 1970-1975), iii: 189214. The author (Aßmann) warned
that Germany could not afford to comfort itself in thinking that either
defeat of
the Soviet Union or the loss of the Middle East would compel Britain to
seek terms. Britain, and its U.S. ally, could
only be beaten into submission by a German victory in the Battle of the
Atlantic – the “pivotal event in the greatest

485
criticism of Barbarossa was politically irrelevant, and after 22 June
1941, the Navy could only hope that
the invasion of the Soviet Union would yield the expected strategic
benefits when Germany finally turned
west to deal with Britain and the United States.8
Other notables at the fringes of power, such Finance Minister Johann
Ludwig von Krosigk, registered
their concerns through third-parties such as Hermann Göring. In April
1941, Krosigk pointed out that
Germany was unlikely to wrest any immediate economic gains from the
occupied territories – certainly
less than they were already receiving under the supplemental economic
agreements to the MolotovRibbentrop Pact – Krosigk implored Göring to
move against “the most sensitive position of the English
world empire,” the Suez Canal, rather than undertaking a course that
would bolster Anglo-American
determination to fight one by “[bringing] Russia on to the side of our
opponents.”9 Germany would be
better served by building upon its existing successes in the west by
moving “with all available forces”
against the Suez Canal, “which would give us the dominant position for
Africa and the Near East.”
economic war of all times.” Germany would also have to secure its control
over French Northwest Africa (to prevent
its use as an Anglo-American launching pad for attacks on Europe) and
“incorporate the Iberian Peninsula –
including Gibraltar – in its own sphere of influence.” Raeder’s
opposition to Barbarossa – which was based entirely
on strategic rather than moral considerations – is outlined in the
following historical study: “Memorandum for
Admiral Assmann for His Own Use, Signed ‘Raeder,’ 10 January 1944,”
Translation of Document C-66, reprinted
in: Office of United States Chief of Counsel for Prosecution of Axis
Criminality, Nazi Conspiracy and Aggression
(Washington, DC: U.S. GPO, 1946), vi: 887-892 (hereafter cited as: NCA);
for the original German document, see:
International Military Tribunal, Trial of the Major War Criminals
(Nuremberg, 1947-1949), xxxiv: 276-282 –
hereafter cited as: IMT. See also: “A File on Russo-German Relations
Found in the Files of the High Command of
the Navy,” no date, Translation of Document C-170, NCA, vi: 977-1002 (for
the original German document, see:
IMT, 674-718).
8
As Aßmann explained in his “Juli-Denkschrift,” “[the] center of gravity
of action of the German armed forces lies
at the moment in the East, with the building of a secure eastern-flank
for the Reich and the securing of the foodstuffs
and oil supplies necessary for a war of a long duration.” Unfortunately,
the temporary concentration of Germany’s
military and industrial energies in the East would give Britain
“breathing space” to prepare the “healthiest starting
basis for the decisive struggle against Germany still to come.”
“Denkschrift zum gegenwärtigen Stand der
Seekriegsführung gegen England (‘Juli-Denkschrift’),” July 1941,
reprinted in: Salewski, Seekriegsleitung, iii: 189214. Hopefully, the
impending victory against the Soviet Union, and the acquisition of its
oil in particular, would
immeasurably strengthen the German economy by making it “blockade-proof.”
This was the “fundamental
prerequisite for a successful final struggle against Britain” (and,
implicitly, the United States). Aßmann,
“Lagebetrachtung der Seekriegsleitung zur weiteren Kampfführung gegen
England (Stand 20. 10. 1941),” 20
October 1941, reprinted in: Salewski, Seekriegsleitung, iii: 215-233.
9
Prominent diplomats offered a similar critique. In a memorandum prepared
for Ribbentrop (who himself was
distinctly unenthusiastic about Barbarossa and wished to present his
objections to Hitler), Weizsäcker prophesied in
April 1941 that “I believe we would be victors over Russia only in a
military sense, but would, on the other hand
lose in an economic sense.” The Soviets would probably continue to wage
war from Siberia, while the British would
receive a “moral lift.” Memorandum by the State Secretary, Document No.
419 in: AA, Documents on German
Foreign Policy, 1918-1945, Series D (Washington, DC: U.S. GPO, 1949-
1983), xii: 661-662 – hereafter cited as:
DGFP (D).

486
Besides bolstering Italy and compelling Turkey to join the Axis, “the oil
of Mosul would come in rich
quantities” to Germany.10
Hitler’s flirtation with a “peripheral strategy” in the Mediterranean was
never an “alternative” to the
invasion of the Soviet Union in either 1941 or 1942.11 Any interest
Hitler may have expressed in striking
at targets in either the Western (Gibraltar and the Azores) or Eastern
Mediterranean (Suez) was transitory.
Although Germany had dispatched France at only negligible cost, it lacked
the means to grapple with
Britain directly due to the weakness of both the German Navy and Air
Force – the former being
completely out-classed by the Royal Navy, the latter lacking the long
range fighters and strategic bombers
necessary for a waging a sustained campaign for aerial supremacy over the
whole of Great Britain, much
of which lay beyond the existing operational range of the Air Force,
particularly its escort fighters.12
Following the fall of France, Hitler had briefly considered reorganizing
Germany’s armaments production
around the needs of the Air Force and the Navy in a campaign against
Britain. This entailed a significant
reduction in the front-line strength of the Army to only 120 divisions
(although the number of armored
divisions would be doubled to twenty). Hitler backed off in August and
decided that the military needed
10

Krosigk to Göring, 19 April 1941, enclosed with: Krosigk to Göring, 20

April 1941, Bundesarchiv, BerlinLichterfelde (BA-B), R 2/24243. It seems
doubtful that Göring took any of Krosigk’s strategic suggestions
seriously, if only because the latter had also opposed the invasion of
France. Krosigk to Göring, 06 November 1939,
BA-B, R 2/24243.
11
See: Milan Hauner, India in Axis Strategy: Germany, Japan, and Indian
Nationalists in the Second World War
(Stuttgart: Klett-Cotta, 1981), 173-193 and 259-274; Andreas Hillgruber,
Hitlers Strategie: Politik und
Kriegsführung, 1940-1941 (Frankfurt am Main: Bernard & Graefe Verlag für
Wehrwesen, 1965), passim; Alan
Levine, “Was World War II a Near-run Thing?” Journal of Strategic Studies
8: 1 (1985): 51-59;
Militärgeschichtliches Forschungsamt (MGFA), The Mediterranean, South-
east Europe, and North Africa, 19391941, vol. 3 of Germany and the Second
World War (New York: Oxford University Press, 1995), 180-301, 557-640;
Gerhard Schreiber, “The Mediterranean in Hitler’s Strategy in 1940:
‘Programme’ and Military Planning,” in:
German Military in the Age of Total War, ed. Wilhelm Deist (Leamington
Spa: Berg Publishers, 1985), 240-281;
Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi
Economy (New York: Viking,
2006), 395-512; and MGFA, The Global War: Widening of the Conflict into a
World War and the Shift of the
Initiative, 1941-1943, vol. 6 of Germany and the Second World War (New
York: Oxford University Press, 2001),
110-144 and 843-1215. Levine explicitly contends that Germany could have
never won the war under any
circumstances after 1939. Having ruled out a successful invasion of Great
Britain (geography) or the Soviet Union
(geography and ideology), and dismissed the significance of German
efforts either in the Battle of the Atlantic or the
Mediterranean, Levine concludes (compellingly in my opinion) that “the
only victories Germany might reasonably
have hoped to achieve would not have affected the outcome of the war”
(pg. 59). The other authors tend to hedge
their bets, with the balance of opinion resting on the idea that
Germany’s last remaining hope of staving off defeat
was Operation Barbarossa. I find this unpersuasive: even if Germany had
triumphed in the East, it would have taken
years to create the material preconditions for a cross-Channel invasion.
In the meantime, the United States would
have fully mobilized and developed the atomic bomb.
12
Williamson Murray, The Luftwaffe: Strategy for Defeat (Washington:
Brassey’s, 1996), 39-56.

487
“to prepare for every potential arising political situation,” including
the impossibility of defeating Britain
in 1940, the intervention of the United States in 1941, and a “change” in
relations with the Soviet Union.13
If an invasion was out of the question, Germany need some other means of
compelling Britain to
recognize the futility of further resistance and sue for peace, thereby
allowing Germany to escape the trap
of a “two-front” war when it finally turned against the Soviet Union.
Jodl (Chief of Operations at the
Armed Forces High Command – Wehrmachtsführungsstab, Oberkommando der
Wehrmacht, OKW) first
broached to Hitler the idea of a “peripheral strategy” in the summer of
1940 as a means of “breaking
England’s will to resist.”14 The most effective means of forcing Britain
to sue for peace would, of course,
be an invasion, but if that was impossible, Jodl suggested “the extension
of the war to the periphery.”
Such a strategy entailed the support of possible allies who “are
interested in the breakup of the English
world empire and hope for a fruitful inheritance [ergiebige Erbschaft],”
such as Italy, Spain, the Soviet
Union, and Japan.15
Prospects for achieving a decisive victory in the Mediterranean appeared
fleeting in view of the
weakness or vacillation of Germany’s existing (Italy) and potential
(Spain and Vichy) allies. Moreover,
German successes in this theater were unlikely either to break British
resistance or afford the Axis any
meaningful short-term economic gains (including oil). A drawn-out
campaign in the Mediterranean would
also contribute nothing toward the fulfillment of Hitler’s “Programme,”
with its emphasis on the
acquisition of “living space” in the east. Hitler was also unenthusiastic
about forcing the matter with

13

“Aktennotiz über die Entwicklung der Rüstungslage im Sommer 1940,” no

date or author (circa August 1940;
probably Thomas), Hoover Institute, Records of the International Military
Tribunal at Nuremburg (hereafter cited
as: Hoover Institute, Nuremberg Records), Box 995 (PS-1456).
14
A good summary of German planning directed against Britain through the
Middle East between June 1941 and
Barbarossa may be found in: Walter Warlimont, Inside Hitler’s
Headquarters, 1939-1945, (New York: F.A.
Praeger, 1964), 104-134. Warlimont is a problematic source in view of his
unabashed desire to redeem the honor of
the German Army, but he has much to offer when it comes to purely
operational and planning matters, even if
economic factors such as oil almost never make an appearance in his
memoirs.
15
Jodl, “Die Weiterführung des Krieges gegen England,” 30 June 1941,
Document 1776-PS, IMT, xxviii: 301-303.

488
Britain, and he worried that the collapse of the British Empire would
benefit the United States and Japan
rather than Germany.16
Although he did not commit himself to Operation Barbarossa until December
1940 when he issued
his Directive No. 21, Hitler was already thinking about eliminating the
Soviet Union as an indirect means
of convincing London to come to terms as early as July 1940: “With Russia
smashed, Britain’s last hope
would be shattered,” Halder recorded Hitler stating on 31 July, when the
decision to begin planning for
Barbarossa was announced. Liquidating the Soviet Union would also weaken
Britain’s other key ally, the
United States. The Soviet Union was the “Far Eastern sword of Britain and
the United States pointed at
Japan.” If Germany eliminated the threat to Japan’s rear, Hitler reckoned
that Tokyo would be able to
concentrate its energy against the Western powers, thereby splitting
their forces between two theaters.17
Hitler reiterated many of these points during a conference with
Ribbentrop on 09 January 1941: “What
keeps Britain standing is hope upon the USA and Russia […]. England hopes
however to carry on until it
has brought together a great continental block against Germany.” Once the
British realized that their last
hope in Europe was gone, they would see the light, if only because if
“they lost [the war], they would no
longer have the moral strength to hold their Empire together.”18
Moreover, only the occupation of the Soviet Union could provide Germany
with the economic and
physical security it needed to wage the drawn-out conflict Hitler
expected between a German-dominated
Europe and the United States. As Hitler explained to Ribbentrop in
January 1941, Barbarossa would have
the following objectives: first, “the destruction of the Russian Army”;
second, “the seizure of the most
16

Besides Lothar Gruchmann, “Die ‘Verpassten strategischen Chancen’ der

Achsenmächte im Mittelmeerraum
1940/41,” Vierteljahrshefte für Zeitgeschichte 18: 4 (1970): 456-475, see
the appendix to this study for additional
discussion of secondary sources.
17
Halder Diary: 13, 22, and 31 July 1940. Emphasis in the original.
According to Halder, besides “inciting Russia
against us,” Hitler was concerned that Britain might strike at one of
Germany’s most vulnerable points by attacking
its synthetic fuel plants (22 July 1941). When citing from Halder’s
diary, I have relied upon the version reproduced
as: Arnold Lissance, ed., War Journal of Franz Halder (1950), retrieved
from the Combined Arms Research
Library, Digital Library (hereafter cited as: CARL).
18
Armed Forces High Command (Oberkommando der Wehrmacht, OKW) War Diary
Entry for 09 January 1941,
reprinted in: Helmuth Greiner and Percy Ernst Schramm, ed.,
Kriegstagebuch des Oberkommandos der Wehrmacht
(Frankfurt am Main: Bernard & Graefe, 1961-1965), i: 253-259 – hereafter
cited as: OKW, KTB. As Jürgen Förster
puts it, “The decision to embark on Operation ‘Barbarossa’ was taken not
on account of London’s uncompromising
attitude, but in spite of it.” Förster, “Hitler Turns East – German War
Policy in 1940 and 1941,” in: From Peace to
War, ed. Wegner, 115-133 (quotation from pg. 122).

489
important industrial territories and the destruction of the remainder,
most of all the area around
Yekaterinburg”; and third, the occupation of Baku.19 Once it controlled
the “immeasurable riches” of the
Soviet Union, Hitler believed Germany would have everything it needed “to
wage war in future against
continents. […] If this operation can be pulled off, Europe will hold its
breath.”20 Following the start of
Barbarossa, Hitler remarked to Arthur Seyss-Inquart (the Reich Commissar
of Holland) that it was “an
absurdity that a great empire should have existed in the East of the
European Continent with almost
inexhaustible mineral resources and raw materials… whereas in the
thickly-settled central and western
European countries there existed a scarcity of raw materials” that had
heretofore been surmounted only by
the possession of overseas colonies.21 Germany could short-circuit this
historical trend by forcibly
integrating its developed economy with the vast natural resources of
Eurasia, “so that in the future the
western European industrial areas and eastern European agricultural and
raw materials areas could
complement one another in a healthy manner.” If it freed itself from
having to import rubber and oil from
overseas, there was no need for Axis Europe to re-join the global economy
or compete for colonies and
markets after the war.22 Besides being a source of raw materials and
labor, the Soviet Union would also
serve as a captive market for German exports, which would no longer have
to compete against foreign
rivals by lowering prices to the detriment of German workers.23
If victory in the East finally convinced Britain to abandon its struggle,
or discouraged the United
States from more active participation in the war (since the elimination
of the Soviet Union would
19

Hitler had mentioned a “Limited drive on Baku oilfields” to Halder on 31

July 1940, but Hauner points out that
“[when] exactly the Caucasus was included in Hitler’s war plans is not
easy to determine.” Hauner, India in Axis
Strategy, 182, n. 42.
20
Entry for 09 January 1941, OKW, KTB, i: 258.
21
This was a familiar refrain in German analyses of the global distribution
of oil reserves. Dr. Paul Ruprecht,
“Erdölbedarf und Erdölverteilung,” Militär-Wochenblatt, 125. Jahrgang,
Nummer 40 (04 April 1941).
22
The Representative of the Foreign Ministry with the Reich Commissar for
the Occupied Netherlands to the
Foreign Ministry (Otto Bene), Pol. II 2762, 02 October 1941, Document No.
377 in: DGFP (D), xiii: 606-608. Hitler
stressed the idea of Barbarossa as a Pan-European crusade to harness the
economic resources of the east in the
service of a reorganized and unified Europe under German leadership
during several of his meetings with various
foreign ministers who assembled in Berlin on the occasion of the renewal
of the Anti-Comintern Pact. See document
nos. 507-511, and 519 in: DGFP (D), xiii: 849-867 and 891-894. This theme
also came up frequently during his
wartime monologues. Norman Cameron and R.H. Stevens, trans., Hitler’s
Table Talk: His Private Conversations
(New York: Enigma, 2000): No. 18 (19-20 August 1941).
23
Unlike U.S. and British laborers, who struggled under the constraints
imposed by the liberal trading order and the
Gold Standard. Table Talk: No. 25 (25 September 1941) and No. 35 (13
October 1941).

490
strengthen Japan), then so much the better – but it was not the
determining factor. Hitler had been
committed to attacking the Soviet Union even when he still believed, in
the summer of 1940, that Britain
might seek terms and showed little desire to break up the British Empire
for the benefit of Japan and the
United States. The Führer recognized that any strategy that deferred the
settling of accounts in the east
worked to the advantage of the Reich’s enemies. Germany’s military
strength would be sapped by
indecisive military engagements, while the German economy would struggle
to support resource-poor
Europe. Meanwhile, Germany’s foes would gain either a respite (Britain)
or the opportunity to further
develop their military infrastructure (the United States and the Soviet
Union). Although there is not a
shred of evidence that the Soviet Union was planning a pre-emptive war
against Germany – or that Hitler
believed that one was imminent – the scale of Soviet demands in Eastern
Europe was a source of concern
in Berlin because their fulfillment would enhance Moscow’s economic
leverage over the Reich.24
German analyses of the Soviet oil industry on the eve of the Second World
War or during its early
years emphasized the immensity of the Soviet reserves. In 1941, the
Office for Soil Exploration
(Reichstelle für Bodenforschung, RfB – after 1941, Reichsamt für
Bodenforschung) estimated Soviet
reserves at over 8,600,000,000 tons, of which 882,400,000 tons were
classified as proven or probable.25
Although the Soviet oil industry had recovered from the depredations of
the Civil War, actual production
by the end of the Second Five-Year Plan (1933 to 1937) lagged well behind
expectations: 28,396,000 tons

24

The argument of H.W. Koch’s “Hitler’s ‘Programme’ and the Genesis of

Operation ‘Barbarossa’,” Historical
Journal 26: 4 (1983): 891-920, is based on a caricature of the thesis put
forward by Andreas Hillgruber in Hitlers
Strategie. But the former is still valuable by illustrating how the
irreconcilability of Soviet and German ambitions in
Eastern Europe by the time of Soviet Foreign Minister Vyacheslav
Molotov’s visit to Berlin in November 1940
pushed Hitler toward a confrontation that even Koch concedes was premised
on the notion of fulfilling Germany’s
“Manifest Destiny” through a “process of territorial expansion analogous
to that experienced by the U.S.A. and
Russia in the preceding century” (pg. 920).
25
Reichstelle für Bodenforschung (RfB), Die wichtigsten Lagerstätten der
Erde, Heft 4: Erdöl in Rußland (Berlin,
1941), Library of Congress (LOC). Production in 1938 was over 30,000,000
tons, 90% of which was concentrated
within the Caucasus, along with over 80% of the country’s refining
capacity and about 65% of its proven or
probable reserves. For more detailed information regarding oil and gas
production, refining, and transportation in the
Caucasus, see: Vowi 4615, “Erdöl und Erdgas im Kaukasus,” 29 April 1942,
T-84/117 (EAP 66-c-12-44/100). For
more specific data compiled by the RfB on the oil industry in the
Caucasus (circa 1941-1942), including Georgia
and Dagestan, see: “Erdöl,” no author or date, Bundesanstalt für
Geowissenschaften und Rohstoffe, 63070 (hereafter
cited as: BGR #).

491
instead of 47,000,000 tons.26 As a result, Soviet output could not keep
up with rising internal consumption
due to the mechanization of agriculture, rearmament, and
industrialization, which quadrupled from
6,700,000 tons in 1928 to 25,000,000 tons in 1939. The narrowing gap
between production and
consumption led to a collapse in exports from 6,600,000 tons in 1932 to
only 931,000 tons in 1939 (3% of
production that year). Whereas domestic consumption had equaled 54% of
total production in 1928, by
1939, production covered only 76% of consumption. Although this should
have left an exportable surplus
of 7,800,000 tons, waste and inefficiency had reduced the amount
available for export to only 1,200,000
tons.27 The decline in exports also encouraged the Soviets to reduce
investment in their oil export
infrastructure, obviously a matter of concern to Berlin if not Moscow.28
Not for nothing did one National
Socialist periodical refer to the oil industry as the “problem child of
the Russian economy.”29
Before the invasion of the Soviet Union, there was a great deal of
speculation within Germany as to
whether the amount of oil available for export could be increased through
higher production.30 Although
Alfred Bentz (Director of the Crude Oil Division, RfB) and Ernst Rudolf
Fischer (Petroleum Division,
Ministry of Economics – Reichswirtschaftsministerium, RWM) had argued in
the summer of 1940 that
the Reich could not expect Soviet exports alone to satisfy European
demand, there was consensus among
German analysts that exports to Germany at least could be raised. Experts
also surmised that actual oil
reserves might be significantly larger than existing estimates due to the
sheer size of the Soviet Union:
26

“Erdöl als Wirtschafts- und Wehrfaktor der Sowjetunion,” Militär-

Wochenblatt, 119. Jahrgang, Nummer 20 (25
November 1934).
27
A.M. Stahmer (RfB, Abt. Erdöl), “Bericht über die Erdöl-Industrie Sowjet
Russlands,” 26 April 1941 (with
“Geological Observations” by A. Mayer-Gürr), BGR 48745. For more detailed
statistics prewar Soviet oil
production, consumption, and exports, as well as the amounts sent to each
of the major recipients of Soviet exports,
see: “Wandlung in der Erdölausfuhr der UdSSR,” Material: Ostwirtschaft,
Heft 5/6, 1937, no date, T-77/425 (Wi/IF
5.3444); and OKW/Oberkommando des Heeres (OKH), “Mineralöl-Statistik,” no
date, T-77/658 (Wi/VI.109).
28
E. Sch., “Öl in der Sowjetunion,” Vierjahresplan, 1942: IX.
29
“Die Erdölbasis der Sowjetunion,” Vierjahresplan, 1937: VI.
30
Germany became the primary recipient of Soviet oil exports following the
signing of the German-Soviet
Commercial Agreement of February 1940. According to one important WiRüAmt
study of the Soviet economy,
German imports of all manner of Soviet petroleum products in 1940 had
totaled almost 686,833 tons (worth roughly
71,600,000 RM). OKW, WiRüAmt, Wi (VI), Nr. 2758/41 g Ax 3i/34/35, “Die
Wehrwirtschaft der Union der
Sozialistischen Sowjet-Republiken (UdSSR),” March 1941, LOC. For
additional WiRüAmt economic analyses
(useful for data, but of little policy content), see also: OKW, WiRüAmt,
Az. 3i./34/25 (Wi VIa), Nr. 4720/42, “Die
Wehrwirtschaft des kaukasischen Raumes,” April 1942, LOC; and OKW,
WiRüAmt, Chef Wehrwirtschaft Ausland,
Az 3i/34, Nr. 26007/43 g, “Die Wehrwirtschaft der UdSSR,
Rohstoffwirtschaft, Erdöl: Die außerkaukasischen
Erdölgebiete und Raffinerien,” 01 March 1941, T-77/1085 (Wi/ID. 257).

492
21,500,000 square km, of which “until today only a minimal portion” had
according to the RfB been
“geologically and geo-physically explored exhaustively.” But the largest
short-term gains would come
through greater efficiency and better management. According to the Office
for Defense-Economy
Planning (Reichsamt für wehrwirtschaftliche Planung), “With regard to
crude oil a significant rise of the
amount available for export can be accomplished by means of an
intensification of crude oil extraction
and first and foremost by decreasing the high losses in extraction,
refining, transportation and demand.”31
The RfB concurred: “The raising of production is not a problem of
discovering new crude oil fields, but
rather ultimately a question of organization, of industrial
infrastructure and of transportation.”32
Agencies such as the RfB did not neglect the Soviets’ development of the
so-called “Second Baku” in
the Volga-Urals region, or Emba (Kazakhstan). Although proven reserves in
those two regions were
rather small (only 77,000,000 tons) the possible reserves (3,876,000,000
tons) dwarfed even those of
Baku. Production in both areas had risen sharply at the end of the 1930s,
and under the Third Five Year
Plan, their combined production was supposed to exceed 9,000,000 tons by
1942. All told, the areas
beyond the Caucasus would have a planned production of 12,800,000 tons in
1942, or roughly 26.6% of
the total estimated production of 48,400,000 tons. One RfB analysis from
1942 poured cold water on the
idea that the areas beyond the Caucasus could supply the Soviet Union in
the event that the Caucasus fell
to Germany, noting that production in 1941 had only been 4,400,000 tons
instead of the estimated
5,700,000 tons. The RfB doubted that the Soviets, for all of their
“ruthlessness” when it came to
mobilizing labor, could achieve the goals set out for the Third Five Year
Plan, reckoning that the only
meaningful short-term increases would come in Emba and Sakhalin, but
these would hardly compensate
for the “stagnation of production in the ‘Second Baku’ […].”33Another
report by the Wirtschaftsstab Ost
31

Ironically, the study included the assumption that the Soviets’ might
expand their exports when they “felt free
from the continual cumbersome nightmare [lastenden Alpdruck] since 1917
of a ‘unification of the capitalist states’
for the purpose of an intervention against the ‘only socialist state in
the world.” Reichsamt für wehrwirtschaftliche
Planung, “Der Wirtschaftspotential der UdSSR, I: Urproduktion,” January
1940, LOC.
32
RfB, Erdöl in Rußland. See also: A. Mayer-Gürr and A.M. Stahmer, Abt.
Erdol, RfB, “Das Erdöl Russlands,” no
date (circa 1940/41), BGR 2026385, which appears to have provided the
factual basis for the Erdöl in Ruβland
pamphlet.
33
Alfred M. Stahmer, RfB, Abteilung Erdöl, “Russland ohne das kaukasische
Erdöl,” no date, T-84/119 (EAP 66-c12-44/241); according to the copy of
the report in the BGR – No. 65842 – the report is dated August 1942. See
also:

493
on the eve of the 1942 offensive concurred: an advance to the Volga and
the capture of the Caucasus
would have “grave and decisive” consequences for the Soviet effort. Even
if the Soviets managed to
import oil from Iran and Iraq across the Caspian, the “raw materials
potential” of the Soviet Union by the
start of the 1943 campaigning season would be insufficient to support
“energetic military operations,”
since the supposed extent of “the development of the Urals- and Far
Eastern-industry” had been
“deceptive and incomplete.”34 Other RfB analyses were critical of the
systemic waste of oil (“indirect
consumption”) which meant that even though there was a gap of 7,800,000
tons between production and
consumption, only 1,200,000 tons was available for export.35
Many of these studies, written before Barbarossa, were premised on the
idea of continued GermanSoviet trade.36 Therefore, they did not make the
obvious point: if Germany invaded the Soviet Union and

Arnold Bonwetsch, “Die Erdölindustrie im ‘Zweiten Baku,’” Ost-Express,

Sonderbericht No. 26 (367), 18
November 1941, BGR 65936.
34
Wirtschaftsstab Ost, Führungsgruppe der Chefgruppe W, “Das Rohstoff-
Potential der Rest-Sowjetunion,” no date
(circa late-1941, early-1942), T-77/1203 (Wi/ID.1375).
35
A.M. Stahmer (RfB, Abt. Erdöl), “Bericht über die Erdöl-Industrie Sowjet
Russlands,” 26 April 1941 (with
“Geological Observations” by A. Mayer-Gürr), BGR 48745.
36
For a sampling of economic analyses prior to Barbarossa, see: Vowi 3582,
“Die Rohstoffgrundlage der
Sowjetunion,” 10 August 1939, T-84/117 (EAP 66-c-12/44/87); Dr. F/F.
(Volkswirtschaftliche Abteilung, Vowi),
“Der deutsche Rohstoffbezug aus der UdSSR und Südosteuropa,” 04 September
1939, BA-B, R 8128/579; Dr.
Erwin Haudan (Wehrpolitisches Institut der Universität Berlin),
“Treibstoffversorgung Deutschlands aus Rußland,”
23 September 1939, enclosed with: Wehrpolitisches Institut an den Chef
der 3. Abteilung des Generalstabes des
Heeres (Fremde Heere Ost), 23 September 1939, T-78/491 (H3/851) (“[In] my
judgment, for the first year of
deliveries [and] under the most favorable circumstances, a total volume
of 1.5 to 2.0 million tons of fuel [experts]
can be adopted.”); Institut für Weltwirtschaft, “Das russische
Wirtschaftpotential und die Möglichkeit einer
Intensivierung der russischen Handelsbeziehungen,” September 1939, T-
84/118 (EAP-66-c-12-44/177) (“Without a
doubt a rise in production seems possible and thereby a rise in exports
of crude oil, because Germany’s demand for
imports is meager in relation to Russian production and the total Russian
exports. […] Crude oil exports from the
existing assets of the Russian economy are the easiest and the fastest
[that] can be placed at Germany’s disposal.”);
Ferdinand Friedensburg, “Bodenschätze und Bergbau der Sowjet-Union,”
Sonderabdruck aus… Jahrgang 1940 der
Berg- und Hüttenmännischen Zeitschrift “Glückrauf,” BGR 63042; and “Die
Sowjetunion als deutscher
Erdöllieferant,” no date or author (circa January 1939 to June 1941;
probably the Ministry of Economics –
Reichswirtschaftsministerium, RWM), BA-B, R 3101/15337. At some point
during the second half of 1941, the
WiRüAmt also completed an immense, 155-page survey of every aspect of the
Soviet oil industry, based largely on
date published in the primary German trade journal for the petroleum
industry, Oel und Kohle: OKW, WiRüAmt,
Ro, “UdSSR[:] Mineralölunterlagen,” no date, T-77/1084 (Wi/ID. 255). The
various economic intelligence estimates
for Soviet production between 1938 and 1943 (including official Soviet
claims) are contrasted in: Imperial War
Museum (Duxford), Foreign Documents Collection (hereafter cited as: IWM,
FD) 4479/45. For whatever reason, the
Germans continued producing studies of the Caucasian oilfields as late as
1944: Dr. J. Witt (Kontinentaleuropäische
Forschung, Reichsministerium für die besetzten Ostgebiete), “Die
Bodenschätze Kaukasiens und ihre europäische
Bedeutung,” 1944, T-84/51 (EAP 66-c-2-10/19). The author of this study
clearly had an eye to the future: “Europe’s
natural sources of supply lie to its East.” Hopefully, after the return
“of political and economic relations to normal
conditions,” the “almost inexhaustible sources” of oil in the Caucasus
could be harnessed to the “peaceful work of
European reconstruction.” Such a study is only of value when it comes to
ascertaining the accuracy of German

494
exterminated or enslaved its population, it would not have to worry about
allocating much oil to the
Soviet economy. The Third Reich intended the keep the population of
Western and Central Europe alive
not just because of National Socialist racial ideology: Germany also
needed to harness the economic and
military power of Europe. Berlin had no such incentives when it came to
the Slavic (and Jewish)
populations of Eastern Europe and the Soviet Union.
Following the war, when asked to describe “to what extent German military
strategy had been
influenced by economic considerations,” Albert Speer claimed “that in the
case of the attack on Russia
the need for oil certainly was a prime motive.” He also recounted that,
following the start of Barbarossa,
Göring instructed him and Carl Krauch to prepare Germany’s synthetic fuel
plants to refine Soviet crude
oil.37 But Operation Barbarossa was more than just an exercise in
economic plunder. Nor was the invasion
just a ploy to protect the Romanian oilfields – although that was a
consideration as early as July 1940,
Hitler appears to have used it as an ex post facto rationalization, and
even then only in the event that the
Soviets launched an offensive to pre-empt Barbarossa.38 Rather, Germany’s
oil crisis following the
victory over France, and its lack of strategic alternatives in other
theaters, precipitated both the timing and
the direction of the assault against the Soviet Union.39
Oil and the control of Soviet raw materials competed for attention within
Germany policymaking
circles alongside a host of military, diplomatic, and ideological factors
including the extermination of
“Judeo-Bolshevism” or the acquisition of “living-space.” Not to be
underestimated was the belief that, by

estimates of Soviet oil reserves and production. As this report, along

with Gunther’s analyses, make clear, much of
the data the Germans relied upon (such as the proceedings of the
International Geological Congress of 1937 in
Moscow) was out-of-date. A.E. Gunther, “Oil Fields Investigation, Part V,
Section 1: Russia (U.S.S.R.), The
Caucasus Expedition, 1942-1943,” March 1946, British National Archives
(BNA), WO 252/1151; and A.E.
Gunther, “Oil Fields Investigation, Part V, Section 2: Russia (U.S.S.R.),
The Ukraine,” January 1947, BNA, WO
252/1451.
37
C.S. Snodgrass (Director of Foreign Refining Division, Petroleum
Administration for War) to Ralph Davies
(Deputy Petroleum Administrator for War), “German War Oil,” 16 July 1945,
NARA, Record Group 253: Records
of the Petroleum Administration for War, Entry 10, Box 665. See also:
United States Strategic Bombing Survey,
German Oil Industry, Ministerial Report Team 78 (Washington, DC: U.S.
GPO, 1945), 76.
38
Halder Diary: 22 July 1940. For Hitler’s perspective, see: Table Talk:
No. 223 (20 May 1942).
39
Eichholtz claims that fuel shortages prior to Barbarossa only emerged as
a result of German operations against
Yugoslavia and Greece in April/May 1941. As we have seen, officials such
as Thomas were worried well before
then. Lack of attention to Germany’s deteriorating fuel situation well
before Barbarossa is one of the shortcomings
of Eichholtz’s otherwise invaluable work, particularly in Krieg um Öl,
40-46, 80-100.

495
destroying the Soviet war machine and occupying its most economically
productive areas, “Russia will be
eliminated as an ally of any consequence for England,” even as “German
war potential will be
tremendously increased” while freeing Berlin from any concern about its
flank as it devoted its full
attention to the defeat of Britain.40 Even if oil was not the pre-eminent
factor behind the invasion of the
Soviet Union, it certainly predetermined the geographical extent of
Barbarossa. In February 1941, as
preparations for the assault on the Soviet Union began in earnest
following the promulgation of Hitler’s
Directive No. 21, the Defense-Economy and Armaments Office
(Wehrwirtschafts- und Rüstungsamt,
WiRüAmt) produced the first of two important studies concerning the
German acquisition of Soviet raw
materials.41
The first paper considered the state of the Soviet war economy in the
wake of a possible German
advance to a line stretching from the Crimea along the Dnieper to
Smolensk and Leningrad. WiRüAmt
considered such vast territorial losses to be “in general without [any]
decisive significance for Russia’s
supplies” of raw materials, particularly in the case of crude oil, the
total supply of which would drop by a
mere 1%. If Germany pushed on to a line stretching from Baku to
Stalingrad, Saratov, Gorki, and
Archangel, the Soviet economy would find itself in a precarious state,
having lost 90% of its existing oil
production. WiRüAmt therefore advised that the capture of the territory
south of the mouth of the Don
and Volga rivers to be of “particular importance.” On the other hand, if
Germany occupied just European
Russia, but not the Caucasus, it would find itself with a tremendous oil
deficit on its hands, as the regions
now under its control had previously accounted for only 1% of Soviet oil
production and depended upon
imports from elsewhere in the Soviet Union. The Soviet agricultural
sector, which accounted for 60% of
Soviet consumption before the war, would pose a particularly large
burden.42

40

Circular of the Foreign Minister, RAM 365/R, 27 August 27 (actually

August 26) 1941, Document No. 244 in:
DGFP (D), xiii: 389-390.
41
Preparations for economic exploitation of the Soviet Union began in
November 1940 and are described in:
MGFA, The Attack on the Soviet Union, vol. 4 of Germany and the Second
World War (New York: Oxford
University Press, 1998), 118-224. Such a topic is beyond the scope of
this chapter, which will focus only on oil
policy. See also: Eichholtz, Krieg um Öl, 40-46, 84-90.
42
OKW, WiRüAmt/Wi, B.Nr. 337/41 gK, Vortragsnotiz, 07 February 1941, T-
77/1066 (Wi/ID. 73).

496
A few days later, Georg Thomas completed his evaluation of “The Economic
Effects of an Operation
in the East.” Although Thomas had once been skeptical of an invasion of
the Soviet Union, he had
quickly changed his tune once he learned of Hitler’s determination.
Thomas reiterated all of the points of
the earlier study concerning the economic rationale for occupying the
Caucasus. He also pointed out that
Germany would no longer be able to full satisfy its full military
requirements by the late summer, early
autumn of 1941, without “recourse to Russian stocks or Russian
production. In case this is not possible,
consumption would have to sink to [a level compatible with] German
domestic production and Romanian
imports.” Even assuming a successful conclusion to the war, and a return
to normal levels of fuel
consumption by the military (which, in the case of the Air Force and Navy
at least, could be satisfied
though German and Romanian production), there was still the matter of
supplying the occupied eastern
territories, for which the Soviet oilfields would be “essential.” For
that reason, Thomas concluded that the
Caucasus had “to be factored into the operation. The Caucasian fuel-
territory is indispensable for the
utilization of the occupied territories.”43 Göring agreed with Thomas’
evaluation of the need to occupy
both the Ukraine and the Caucasus, but he was more sanguine about
Germany’s chances of capturing the
oilfields intact. Echoing the Führer’s sentiments, Göring reassured
Thomas that the “Bolshevik state”
would collapse too quickly to engage in any effective sabotage.44

43

Thomas, WiRüAmt, “Die wehrwirtschaftlichen Auswirkungen einer Operation

im Osten,” 13 February 1941, T77/1060 (Wi/ID. 39); reprinted in: Georg
Thomas’ Geschichte der deutschen Wehr- und Rüstungswirtschaft,
19181943/1945 (Boppard am Rhein: Boldt, 1966), 514-532. Emphasis in the
original. Lizzie Collingham is correct in
observing that Thomas was determined to use Caucasian oil production to
supply the Soviet agricultural sector
during the German occupation, but she misunderstands the broader context
by claiming that German planners
considered the Reich’s overall petroleum position to be of secondary
importance on the eve of Barbarossa. Lizzie
Collingham, The Taste of War: World War Two and the Battle for Food
(London: Allen Lane, 2011), 38.
44
“Aktennotiz über Vortrag beim Reichsmarschall am 26. 2. 1941,” 27
February 1941, signature illegible
(Thomas?), Hoover Institute, Nuremburg Records, Box 995 (PS-1456). Thomas
continued to make the case for the
German occupation of the Caucasus in a memorandum of 22 October 1941 to
Halder, but now the emphasis was on
identifying vulnerabilities that could be exploited to speed up the
collapse of Soviet resistance. Thomas advised that,
in the event that German forces advanced to the point where the oilfields
of Baku and the West Urals lay within
range of the Air Force, “Russia runs the risk” that its supply of crude
oil, “the last essential raw material still
available in sufficient quantities, will be limited.” Thomas did not
believe, however, that this would bring about the
collapse of Soviet resistance, which was rather “to be expected following
the loss of the industrial areas of the
Urals.” Thomas, WiRüAmt, Abt. Wi, Nr. 3208/41 gk, “Voraussichtliche
Entwicklung der wehrwirtschaftlichen Lage
Russlands mit Fortschreiten der Operationen nach Osten,” 01 October 1941,
enclosed with: der Chef des WiRüAmt
im OKW (Thomas) an das Chef des Generalstabs des Heeres, Herrn
Generaloberst Halder, Nr. 3409/41 g.K., 22
October 1941, T-77/1066 (Wi/ID. 73).

497
Oil and the Economic Spoliation of the Soviet Union, 1941
Planning for the capture of the Caucasian oilfields also began well
before the start of Operation
Barbarossa.45 One OKW study from 05 May 1941 noted that existing Axis
monthly consumption
including the occupied territories was 1,150,000 tons per month against a
total production (including
including imports from all nations other than the Soviet Union) of only
850,000 tons. At this rate, stocks
would be expended by August, and the resulting deficit of 300,000 tons
per month “could, if Iraq stays
out of consideration, be covered only from Russia.” After considering
Caucasian oil’s significance to
Soviet agriculture, the problem of transporting it (which entailed
transportation through the Dardanelles
and the Aegean), and the risk of Soviet or British sabotage, the OKW
concluded that “[the] necessity of
taking the Caucasian crude oil district, at the very least the area
around Maikop (7% of total Soviet
production) and Grozny (9%) and the transportation route for the oil, at
the earliest possible time is
irrefutable.”46 Once Barbarossa began, however, the WiRüAmt realized
that, as important the oilfields
might be to Germany, there was little chance of preventing their
destruction, particularly those of Baku in
view of the distances entailed. Accordingly, WiRüAmt now argued that, at
least in the short term, it
would be more worthwhile for the German Army to focus on the capture of
the North Caucasian oilfields

45

For a summary of the role of oil in the planning and conduct of Operation
Barbarossa, besides Eichholtz, see:
Titus Kockel, “Geologie und Krieg: Die Erdölpolitik des Reichsamt für
Bodenforschung und seiner Vorläufer 19331945,” Magisterarbeit (Technische
Universität Berlin, Fachbereich 1, 1995), 43-53. I am grateful to
Dietrich
Eichholtz for providing me with a copy of this work.
46
“Unterlagen für die Prüfung eines Vorgehens gegen das kaukasische
Ölgebiet,” no date or author, Anlage to:
OKW, Nr.44564/41 g.K. Chefs. WFSt/Abt. L (I Op.), “Betr.: Das kaukasische
Ölgebiet,” 04 May 1941, T-77/1066
(Wi/ID. 73). See also WiRüAmt’s comments on the original study by the
Armed Forces Operations Staff
(Wehrmachtsführungsstab, WFSt): WiRüAmt an WFSt/L, Nr. 50/41
Chefs./g.Kdos. Wi Ia H, “Betr.: OKW
44564/41 g.Kdos./Chefs. WFSt/L (I Op.) v. 5.4.41[,] ‘Das kaukasische
Ölgebiet,’” 19 May 1941, T-77/1066 (Wi/ID.
73). To frustrate the destruction of the oilfields, the WFSt raised the
possibility of a pre-emptive sea or air landing
by German troops, but judged this to be unfeasible. It also broached the
idea of supporting the creation of an
autonomous Caucasian nation, “which naturally would be interested in
intact oil districts […].” To that end, the
Abwehr suggested to the WiRüAmt in July that it should begin recruiting
Caucasian émigrés from Romania,
Bulgaria, and Turkey to form a counter-revolutionary cadre that would
infiltrate the remaining Soviet personnel still
working in the fields under German supervision. The Abwehr expected that
such a plan would incur opposition from
the AA and trusted that it would enjoy the support of the WiRüAmt. Wi VI,
Gr. Nr. 2/41 g.Kdos. Wi VI,
Vortragsnotiz, “Betr.: Sicherung des Erdölgebietes Baku,” 09 July 1941,
T-77/1066 (Wi/ID. 73).

498
and refineries, since the latter, which boasted of an annual throughput
of 19,100,000 tons, were easier to
destroy and harder to reconstruct than the oilfields themselves.47
Under Göring’s leadership, prior to Barbarossa, the Third Reich prepared
detailed plans for the
ruthless economic exploitation of the Soviet Union, especially its
petroleum and agricultural sectors.48
Göring had not been terribly engaged with economic policy since the
outbreak of the war, but he took a
special interest in the economic planning for Barbarossa, particularly
when it came to the seizure of oil.49
The despoliation of the Soviet Union would be managed by the Economic
Command Staff
(Wirtschaftsführungstab Ost, WFO), which was directly subordinate to
Göring and would be run by State
Secretary Körner of the Four-Year Plan (Vierjahresplan, VJP), although
Thomas would be responsible for
all “military matters.” After delegating the responsibility for creating
the administrative structure to
Thomas in February 1941, Göring established the WFO (unofficially in
March; officially in May 1941) to
provide unified leadership regarding economic and political management of
the occupied territories.50
In his “Green Map” (Grüne Mappe) instructions of June 1941, Göring made
reference to Hitler’s
instructions concerning the “the immediate and highest possible
utilization of the occupied territories for
the benefit of Germany,” which was “to be carried through first and
foremost within the areas of the
47

Chef Wi (Thomas), Vortragsnotiz, “Betr.: Inbesitznahme der kaukasischen

Erdölgebiete,” 16 July 1941, T77/1066 (Wi/ID. 73). According to the OKW’s
KTB, i: 1220, the Operationsabteilung completed its “first
Denkschrift for an offensive against the Caucasus” on 24 July 1941, but I
have been unable to locate a copy of this
paper.
48
The Soviet prosecution at Nuremberg provided a decent historical summary
of German planning for the
despoliation of the Soviet Union while making its case concerning German
crimes against humanity between 08 and
13 February 1946: IMT, vii: 158-345. For more measured surveys, see: Alex
Kay, Exploitation, Resettlement, Mass
Murder: Political and Economic Planning for German Occupation Policy in
the Soviet Union, 1940-1941 (New
York: Berghahn, 2006), passim (esp. 26-46); Mark Mazower, Hitler’s
Europe: How the Nazis Ruled Europe (New
York: Penguin, 2008), 137-178; and Norman Rich, Hitler’s War Aims: The
Establishment of the New Order (New
York: W.W. Norton & Company, 1974), 326-393 (esp. 336-343 for economic
planning).
49
Hans Kehrl, Krisenmanager im Dritten Reich: 6 Jahre Frieden – 6 Jahre
Krieg, Erinnerungen (Düsseldorf:
Droste Verlag, 1973), 223.
50
Memorandum, “Conference at Office Chief, General of the Infantry Thomas
on February 28, 1941, Re:
Oldenburg,” 01 March 1941, Document 1317-PS, NCA, iii: 911-913 (for the
original German document, see: IMT,
xxvii: 169-171); Chef WiRüAmt, “Vortrag bei Reichsmarschall Göring am
19.3.41,” 20 March 1941, Nuremberg
Records, Box 995 (PS-1456); and der Reichsmarschall des grossdeutschen
Reiches, Beaftragter für den
Vierjahresplan (BVJP), V.P. 10103/1 g.Rs., “11. Sitzung des Generalrats
vom 24. 6. 41 unter Vorsitz von
Staatssekretär Körner,” no date, T-77/430 (Wi/IF 5.3593). Following their
meeting of 26 June 1941, Thomas
proudly recalled Göring’s observation that the “success of the Eastern
campaign” would have been “impossible
without the organization of the WiRüAmt,” which had not only provided him
with accurate economic intelligence
but had also undertaken “the especially valuable groundwork” for the
creation of the “Economic Organization East.”
Chef WiRüAmt, “Vortrag beim Reichsmarschall am 26, 6. 1941,” 26 June
1941, IWM, FD 4809/45.

499
agricultural and the crude oil economy. The primary economic aim of the
action is to win as much as
much foodstuffs and petroleum for Germany as is possible.” The objectives
of the WFO would be
implemented by the Economic Staff, East (Wirtschaftsstab Ost, WSO –
codenamed “Oldenburg” prior to
the invasion), with Thomas serving as the link between the two. Since
petroleum occupied the “heavy
weight” position of importance ahead of all other industrial raw
materials, Göring decreed that
maintaining the supply and transportation of oil from the Soviet Union
was to take “precedence in all
circumstances” besides restoring agricultural production. He stressed
that furnishing the Soviet
agricultural sector with sufficient tractor fuel presented a “special
task,” since food production depended
upon it. This had nothing to do with supplying the captured population
with food – they would be starved
and replaced with German settlers in any event. Rather, the regime did
not want to risk the loyalty of
German civilian population by imposing additional rationing, which
policymakers believed had
contributed to the breakdown of the war effort in 1918.51 To that end,
supplying fuel to the Soviet
agricultural sector in the occupied territories “took precedence over
exports to Germany.” Göring also
declared that the Kontinentale Öl AG (Konti) would take a leading role
“[with] regard to the execution of
all measures to be undertaken within the realm of petroleum, in
particular in the Caucasus.”52
Göring reiterated these points in a decree of 27 July 1941 establishing
the primacy of Konti when it
came to the execution of the Reich’s oil strategy in the Soviet Union.
After referring to Hitler’s decree
(Erlaβ) of 29 June 1941 authorizing him to use any means necessary to
exploit Soviet economic
resources, Göring stressed that, at least initially, German efforts would
be concentrated upon “bringing
into order again” only those industries that “are of decisive important
to the German war economy. These
51

Collingham Taste of War, 32-38. Minister for the Occupied Eastern

Territories Alfred Rosenberg also pointed to
the indispensability of Caucasian oil to the “material output, and indeed
the existence of the other mainly
agricultural areas of the USSR” due to mechanization. “[Any]
strangulation of the oil supply,” he observed, “tends
to famine.” Unsigned Memorandum in Rosenberg’s Files, “The USSR,” 02
April 1941, Document 1017-PS, NCA,
iii: 674-681; for the original German document, see: IMT, xxvi: 547-554.
52
Der Reichsmarschall des Großdeutschen Reiches, “Richtlinien für die
Führung der Wirtschaft (Grüne Mappe),
Teil I: Aufgaben und Organisation der Wirtschaft,” June 1941, Document
1743-PS, IMT, xxviii: 3-15. Emphasis in
the original. For the creation of the Wirtschaftsführungstab Ost and
Wirtschaftsstab Ost (WFO and WSO), see:
“Conference with the Branches of the Armed Forces at 1000 hours on 29 th
April 1941,” Translation of Document
1157-PS, NCA, iii: 811-816 (for the original German document, see: IMT,
xxvii: 32-38); and der Reichsmarschall
des Großdeutschen Reiches, “Richtlinien für die Führung der Wirtschaft
(Grüne Mappe), Teil I (2. Auflage):
Aufgaben und Organisation der Wirtschaft,” July 1941, Document 472-EC,
IMT, xxxvi: 542-545.

500
centers of gravity are grains, oilseeds [vegetable oil], crude oil and
light metals.” With regard to
petroleum, Göring declared that “[the] the Russian crude oil economy must
on account of its overarching
significance for the German military and economy stay permanently in
German hands. I have therefore
delegated Kontinentale Öl A.G. to take over all petroleum sources that
fall into German hands.”53 Hitler
had assigned the “civilian administration” of the occupied territories to
Alfred Rosenberg (Minister for
the Occupied Eastern Territories), but in practice, this was a
meaningless task as Rosenberg would only
take up his responsibilities following the end of military operations.
Moreover, his authority did not
extend to economic affairs, where the VJP (Göring) took precedence.54
Konti was one for four different “monopoly companies” accredited by
Göring’s decree of 07 July
1941, the other three being the Zentralhandelsgesellschaft Ost für
landwirtschaftlichen Absatz und Bedarf
(responsible for supplying the agricultural sector); “Ostland” Berg- und
Hüttenwerk Gesellschaft
(mining); and Ostfaser GmbH (textiles, paper, and pulp).55 On 22 July
1941, the RWM provided Konti
with instructions elaborating upon the company’s responsibilities and
powers, as well as those of the
“Petroleum Commandos” (Mineralölkommandos) operating in support of the
WSO. Konti would “carry
out the industrial economic measures to be taken in the field of mineral
oil. The exclusive right of mining,
processing and trading in mineral oil products has been transferred to
it,” along with the authority to
53

Der Reichsmarschall des Großdeutschen Reiches, BVJP, V.P. 12028, 27 July

1941, BA-B, R 26 I/13. Emphasis in
the original. For Hitler’s proclamation regarding economic exploitation
of the , see: “Erlaß des Führers über die
Wirtschaft in den neu besetzen Ostgebieten,” 29 June 1941, reprinted as
Document 93 in: Martin Moll, ed., FührerErlasse, 1939-1945 (Stuttgart: F.
Steiner, 1997), 179-180.
54
“Erlaβ des Führers über die Verwaltung der neubesetzten Ostgebiete vom
17. Juli 1941,” Document No. 74:
OKW, KTB, i: 1027-1028. Although Rosenberg did not object to Göring’s
mission “to secure Germany’s
nourishment and war economy,” he believed that this could be accomplished
by “a shrewd policy” that cultivated
the Soviet Union’s various disgruntled minorities as client states. “Rede
des Reichsleiters A. Rosenberg vor den
engsten Beteiligten am Ostproblem am 20. Juni 1941,” Document 1058-PS,
IMT, xxvi: 610-627. Hitler’s statements
during a conference with Göring, Rosenberg, and Keitel on 16 July 1941
left no doubt that the Führer was
indifferent to the wishes of the national minorities of the Soviet Union.
Germany’s overriding “principles” in the
east would be the creation of physical security by eliminating the
possibility of any military challenger ever
emerging from the lands west of the Urals and “[creating] a Garden of
Eden in the newly occupied eastern
Territories; they are vitally important to us; as compared with them
colonies play only an entirely subordinate part.”
The Caucasus and the Volga region would be incorporated into the Reich
and a “military colony” established around
Baku. “Memorandum for the Record,” 17 July 1941, Translation of Document
L-221, NCA, vii: 1086-1093; for the
original German document, see: IMT, xxxviii: 86-94. German plans for the
Caucasus are summarized in: Rich,
Hitler’s War Aims, 388-392.
55
Geo. W. Hirschfeld an die Industrie- und Handelskammer, Bremen, 11
October 1941, BA-B, R 8119/1825. Hans
Kehrl (the Chairman of the Managing Board of Ostfaser) recalled that the
inspiration for the creation of Ostfaser
came from his friend, Ernst Rudolf Fischer, who informed him of Konti’s
formation. Kehrl, Krisenmanager, 227.

501
expropriate any physical infrastructure formerly serving the Soviet oil
industry. The “Petroleum
Commandos” were responsible for securing and restoring production in
recently captured Soviet oilfields,
initially in the Baltic Republics (Estonian shale) and Galicia, but
hopefully later in the Caucasus as well.56
Once they had been secured, the oilfields would pass into the hands of
Konti and its subsidiaries (the most
important being Ost Öl, which would operate in the Caucasus). One
historian appropriately describes
these “Petroleum Commandos” as “the stormtroopers of Continental Oil in
the truest sense of the word.”57
As Göring explained during an interdepartmental conference in November
1941 concerning economic
policy in the east, the occupied territories “will be economically
exploited from colonial viewpoints and
by colonial methods.” All Soviet agricultural and economic assets
captured by German forces would
immediately become the property of the Reich except oil installations,
which would be administered by
Konti. Remarkably, although the company was acting on behalf of the
Reich, it would operate
autonomously, without “any real exertion of influence” by the Reich’s
civilian administrators.58 Later that
month, Günther Schlicht of Deutsche Erdöl AG (the largest independent
German oil company) was
commissioned to serve as the “Chief Representative”
(Generalbevollmächtigter) of Konti and its
Caucasian subsidiary (Ost Öl) in the occupied territories.59 Hermann
Neubacher, the former “Special
Representative for Economic Questions” in Romania, who had handled the
negotiations with Bucharest

56

The RWM decided that, in the interest of “simplicity,” whenever possible

the staff of each Mineralölkommando
would be identical to that of the local Konti subsidiary. At the very
least, the commander of each Kommando would
also be a Konti official, who could rely on two separate staffs: the
Mineralölkommando staff for government and
military matters, and Konti personnel for technical and commercial
matters. Reich Minister for Economics to
Kontinentale Oel, II Min. Oil 18893/41, “Ref.: Russian Mineral Oil
Economy,” 22 July 1941, NARA, Record Group
238: National Archives Collection of World War II War Crimes Records,
National Archives Microfilm Publication
T-301, Reel 18, Document NI-2021 – hereafter cited as: NARA, RG 238, T-
301/Reel No. (Document No.); for the
original German document, see: BA-B, R 3010/32413. See also: Roswitha
Czollek, “Zum Raub estnischer
Ölschiefervorkommen für die deutsche Kriegswirtschaft: 1941 bis 1944,”
Jahrbuch für Wirtschaftsgeschichte
1969/2, 107-115.
57
Karlsch and Stokes, Faktor Öl, 214-215.
58
The Reichs Marshal of the Greater German Reich, Commissioner for the Four
Year Plan, Economic Management
Staff, East, to the Chef des OKW (Keitel), et al., Four Year Plan 19203/6
g., 20 November 1941, NARA, RG 238,
T-301/5 (NI-440). Emphasis in the original.
59
“Vollmachterteilung für Herrn Bergassessor a.D. Schlicht,” 26 November
1941, BA-B, R 176/1. For the
company’s official financial statement regarding its first year of
operations on the occasion of its first regular
stockholders’ meeting (Hauptversammlung), see: Kontinentale Öl
Aktiengesellschaft, Berlin, “Jahresabschluß für
das Geschäftsjahr 1941,” 29 May 1942, BA-B, R 8119/1825.

502
concerning the German-Romanian oil trade since 1940, would at the
Führer’s personal insistence oversee
the regime’s economic interests in the Caucasus.60
The failure of Operation Barbarossa during the winter of 1941/42 did not
interfere with Konti’s
preparations. The second meeting of Konti’s Supervisory Board on 13
January 1942 was devoted to the
company’s current and future business in the Soviet Union. Karl Blessing
of the Managing Board noted
that, “[in] preparation of the operations in the Caucasus,” Konti had
established Ost Öl with an initial
capitalization of 100,000 RM.61 Another subsidiary, Kontinentale
Transport Gesellschaft, had been
formed with an initial capitalization of 3,500,000 RM to satisfy the
transportation requirements of Konti’s
various subsidiaries by purchasing, leasing or constructing tankers, oil
loading and offloading facilities,
and pipelines – both in the Black Sea region and in the Mediterranean,
which meant that Konti would
have to stay “in constant touch with the Navy.” Fischer gave a
presentation on future German
management of the Soviet oil industry. He noted that, although Konti was
not the only officially
sanctioned monopoly operating within the occupied territories, its
position was unique. Whereas the other
monopoly companies existed only on a temporary basis and would be
dissolved at war’s end, Konti
would continue to operate “on its own account and at its own risk; the
company pays rent for this to the
German Reich until such time as it will acquire these installations by
purchase.”62 With regard to the
Caucasus, Fischer fretted about the current shortage of oil equipment due
to German industry’s focus on
munitions production: “Only if this situation can be remedied completely
is there any guaranty,” Fischer

60

Chef WiRüAmt, “Ergebnis der Vorträge beim Reichsmarschall und bei

Feldmarschall Keitel am 17. 7. 1941,” 18
July 1941, Hoover Institute, Nuremburg Records, Box 996 (PS-1456); and
Karlsch and Stokes, Faktor Öl, 215.
61
Ost Öl’s capitalization was later raised to 4,000,000 RM: Kontinentale Öl
Aktiengesellschaft an die Herrn
Mitglieder des Aufsichtsrat der Kontinentale Öl Aktiengesellschaft,
“Betrifft: Berichterstattung an den
Aufsichtsrat,” 03 February 1943 (for the period between 01 October to 31
December 1942), T-401/2 (RBF 35).
Blessing became President of the Bundesbank between 1958 and 1969.
62
Within reason, of course: Konti received compensation from the military
for all equipment dispatched and then
lost during the invasion of the Caucasus, “so that the company accrued no
financial damages.” “Interner Bericht an
den Aufsichtsrat über den Jahresabscluss der Kontinentale Öl
Aktiengesellschaft,” no date (circa 1943), T-401/2
(RBF 35).

503
warned, that “the capacity of the plants [oilfields] can be fully used
and most of all a continuous flow of
production can be guaranteed […].”63
During the invasion of the Caucasus in the summer of 1942, the company
would be assisted by the
Technical Petroleum Brigade (Technische Brigade Mineralöl, TBM – also
known as the Mineralölbrigade
Kaukasus). Göring ordered the TBM to take all “necessary measures for the
safe [treuhänderisch]
appropriation and operation of these territories and businesses on behalf
and for the account of
Kontinentale Öl, that is to say to carry out in particular the
extraction, production, refining, transportation
and marketing of finished petroleum products for the account of
Kontinentale Öl as long as this company
is not in the position to take over leadership of the business itself or
through one of its sistercompanies.”64 Konti also enjoyed a close working
relationship with the WiRüAmt, which was responsible
(through the WSO) for overseeing the operations of the TBM. The fact that
Konti personnel basically
staffed the TBM also contributed to the spirit of cooperation.65

63

“Minutes of the 2nd meeting of the Aufsichtsrat of the Kontinentale Oel

Aktiengesellschaft on Tuesday, 13
January 1942, in the Preussenhaus, Berlin,” NARA, RG 238, T-301/83 (NI-
10162). Much of the initial planning for
the occupation of the Caucasus, especially the purchase of drilling
equipment, is summarized in: Gunther, “Oil
Fields Investigation, Part V, Section 1: Russia (U.S.S.R.), The Caucasus
Expedition, 1942-1943,” March 1946,
BNA, WO 252/1151; and Kockel, “Geologie und Krieg,” 54-64.
64
Der Reichsmarschall des Großdeutschen Reiches, BVJP, an das OKW, Chef des
Wehwirtschaftsamtes, Herrn
General Thomas, V.P. 12618/5 g, “Betr.: Mineralölwirtschaft in den
besetzten russischen Gebieten,” 16 July 1942,
T-77/1058 (Wi/ID. 29). Emphasis in the original.
65
For a complete set of the instructions given to the TBM based on Göring’s
earlier Erlaβ, see: Der Chef des OKW
an Technische Brigade Mineralöl, Az. 1 d 10 Wi Amt – Z 1/II, Nr. 5160/42
geh., “Betr.: Mineralölwirtschaft in den
besetzten sowjetischen Gebieten,” 28 July 1942, T-77/1058 (Wi/ID. 29).
For material regarding Konti’s cooperation
with the TBM to procure and deliver oil drilling equipment to the
Caucasus in the autumn of 1942 in order to restore
production over the course of 1943, see the following record of a meeting
between Konti’s Managing Board, Alfred
Bentz, and two TBM officials (including Günther Schlicht, who had been
seconded to the TBM from Ost Öl) on 12
September 1942: Di/Gi., “Stand der Materialbeschaffung für den Einsatz im
Kaukasus,” 17 September 1942,
enclosed with: Dihlmann (Konti) to Thomas (Wehrwirtschaftsamt), “Betr.
Kaukasus,” 17 September 1942, T-77/551
(Wi/I. 315). For Konti’s internal and public financial statements
regarding its operations during the autumn of 1942
and the winter of 1942/43 (during the invasion of the Caucasus), see:
“Interner Bericht an den Aufsichtsrat über den
Jahresabschluss der Kontinentale Öl Aktiengesellschaft,” no date, T-401/2
(RBF 35); Kontinentale Öl
Aktiengesellschaft an die Herrn Mitglieder des Aufsichtsrat der
Kontinentale Öl Aktiengesellschaft, “Betrifft:
Berichterstattung an den Aufsichtsrat,” 06 November 1942 (for the period
between 01 July and 30 September 1942),
T-77/1223 (Wi/IA 3.7); Kontinentale Öl Aktiengesellschaft an die Herrn
Mitglieder des Aufsichtsrat der
Kontinentale Öl Aktiengesellschaft, “Betrifft: Berichterstattung an den
Aufsichtsrat,” 03 February 1943 (for the
period between 01 October to 31 December 1942), T-401/2 (RBF 35); and
Kontinentale Öl Aktiengesellschaft,
“Bericht des Vorstandes und Aufsichtsrates und Jahresabschluß für das
Geschäftsjahr 1942: 2. Ordentliche
Hauptversammlung, Dienstag, den 21. September 1943,” T-401/2 (RBF 35). As
the report of the Supervisory
Board’s meeting of 30 June 1943 laconically observed: “The contraction of
the front in the southern portion of the
Eastern Front has brought about some changes in the activities of our
company. A range of already assigned tasks

504
Strangely, the Reich did not conclude a concession agreement with Konti
until July 1942. Konti
would enjoy “the exclusive right to the prospecting, production, refining
and marketing of crude oil,
natural gas and all other bituminoid materials as well as their
derivatives” throughout all of the occupied
territories of the Soviet Union in exchange for a quarterly royalty
equivalent to 7.5% of its oil and gas
production (although production from “newly opened fields” was exempt
from any royalties owed to the
Reich). In his covering letter, Göring stressed that the “petroleum
industry in the concession area is to be
directed in the interests of the Reich,” and that Konti should “keep the
long-term duration of this
concession agreement secret for the time-being under all circumstances
[…].”66 By the summer of 1942,
however, the course of the war had already turned against Germany, and
the Reich’s hopes for Konti in
the Soviet Union would soon be dashed at Stalingrad.

was cancelled; further, under official instruction, materials and

equipment from our inventory were given to other
consumers [Bedarfsträger] in the interests of an increase in petroleum
production from oil-bearing territories lying
within the German sphere of influence […].” Kontinentale Öl
Aktiengesellschaft an die Herrn Mitglieder des
Aufsichtsrat der Kontinentale Öl Aktiengesellschaft, “Betr:
Berichterstattung an den Aufsichtsrat,” 30 June 1943
(for the period between 01 January 1943 and 31 March 1943), T-401/2 (RBF
35).
66
Enclosed with: Der Reichsmarschall des Großdeutschen Reiches, BVJP, an
den Vorstand der Kontinentalen Öl
A.G., zu. Hd. von Herrn Direktor Blessing, V.P. 12301/5 g.Rs., “Betrifft:
Einsatz im Osten,” 10 July 1942, BA-B, R
176/111. Eichholtz claims that Göring issued a decree in September 1941
assigning concession rights in the Soviet
Union to Konti, but the language he quotes is identical to the contract
cited above, which Eichholtz does not cite.
Eichholtz, Krieg um Öl, 53.

505
The Oil Crisis Reaches the Front, July-September, 1941
Germany’s oil position was poor even before Barbarossa due to a variety
of unexpected difficulties,
including problems in Romania and unexpectedly high consumption by the
German military due to
unforeseen military campaigns such as the invasion of the Balkans in
April-May 1941.67 Germany itself
could not make up the deficit, which threatened to reach crisis
proportions by the autumn of 1941, even
though it had been waging only limited campaign following the surrender
of France. According to a
presentation Thomas gave to Keitel on 08 February 1941, existing supplies
of petroleum products would
no longer be “sufficient” by the “middle of August” or the autumn at the
latest: “from there on the
covering of demand is possible only through our own production and
imports.”68 The following month,
General Eduard Wagner, the Army Quartermaster General, gave an equally
gloomy prognosis to Halder,
informing him that, once Germany lost its imports from the Soviet Union,
existing stocks were only
sufficient for two months of “large-scale offensive” consumption.69
In the midst of the German high tide in July 1941, WiRüAmt reminded the
OKW that Germany
would run out of “appreciable quantities of freely available motor fuel
reserves” by the end of
September.70 The remaining reserves (Umlaufsmengen), equivalent to one
month’s consumption, were
already in circulation and could not be diverted to the front since they
were essential for supply purposes,
such as transporting fuel from production facilities to distribution and
refining installations. Nor were any
reserves to be found within Axis Europe, including Romania. Short-term
prospects for addressing this
shortfall were non-existent. Demand within Axis Europe during the “winter
half year” (October 1941 to
67

For an excellent summary of the “fuel crisis” confronting Germany on the

eve of Barbarossa, see Part IV, Section
C, and Anlage 2 (Chef Wi Rü Amt (Thomas), “Die Gründe für die
Treibstoffkrise zu Beginn der Ostoperationen und
die daraus zu ziehenden Folgerungen,” 03 July 1941) of: OKW, WiRüAmt
(Oberst Dr. Hedler), “Die Mineralöle
und die Versorgungslage im Kriege,” Abgeschlossen 31August 1941, T-77/438
(Wi/IF 5.2726).
68
Entry for 11 February 1941, OKW, KTB, i: 316-317.
69
Halder Diary: 13 March 1941. The situation was even worse with regard to
Italy, whose reserves would “touch
bottom” by the June 1941 without an immediate transfer of 260,000 tons –
60,000 tons of which “have yet to be
found.” Halder Diary: 27 May 1941.
70
Fuel consumption, Halder sheepishly noted at the beginning of July 1941,
had been “quite a lot more than
expected”: 11,500 cubic meters (cbm) per day instead of the estimated
9,000 cbm. (One cbm of oil equals roughly
6.3 barrels of oil.) Only a week into Barbarossa, the Eastern Army
(Ostheer) was already depending on captured
Soviet stocks for one-third of its consumption. Halder Diary: 01 July
1941. Luckily, in a conspicuous example of
foresight, the Army had taken precautions to set up mobile facilities to
raise the octane-rating of captured Soviet fuel
supplies with benzol in order to render them usable in German engines.
Halder Diary: 20 May 1941.

506
April 1942) would be 1,007,000 tons per month (or 6,042,000 tons in
total), but Germany would need
1,170,000 tons (7,000,000 tons) if it wanted to restart stockpiling in
preparation for future offensive
operations.71 Total production within Germany and Romania was a mere
770,000 tons, leaving a sixmonth shortfall of 1,440,000 tons. Breaking
down the figures by specific petroleum products, Germany
could barely cover its minimum requirements of motor and aviation fuel
for the next six months
(1,404,000 tons and 726,000 tons), but diesel and fuel oil production
lagged well behind (68% and 61%
of consumption, respectively, or 1,428,000 tons per month).72
WiRüAmt believed that Germany’s only hope of redressing the deficit was
imports from the Soviet
Union, to the tune of 400,000 tons per month for six months (2,400,000
tons) to cover the existing
shortfall (1,400,000 tons) and accumulate new stockpiles (1,000,000
tons), not including 100,000 tons of
crude oil per month to carry out the planned expansion of aviation fuel
production. The transportation
requirements were also enormous, for if Germany wanted to avoid having
deliveries from Romania being
paralyzed by the freezing of the Danube, twenty trains would be required
each day to move the required
240,000 tons per month. Even this assumed, moreover, that 80,000 tons per
month could be transported
through the Mediterranean. As for deliveries from the Soviet Union, they
depended on whether sufficient
numbers of French, Italian, and Soviet tankers, plus Soviet railway
wagons, could be mustered.73

71

WiRüAmt Ro/V, Az. 11 k 2209 (s) I., “Laufender Bedarf an Treibstoffen

(ohne sonstige Mineralöle) Winter
1941/42 ohne Russland,” no date, Anlage 1 to: WiRüAmt/Ro, Az. 11 k 2209
(Vs), “Beurteilung der TreibstoffHeizölversorgungslage für das
Winterhalbjahr 1941/1942,” 07 July 1941, T-77/500 (Wi/I. 36). This figure
did not
include the 45,000 tons of gasoline and diesel consumed by the armed
forces in the Soviet Union, who would have
to live off the land, although it did include 10,000 tons of Air Force
consumption that had to be supplied from
Germany since it could not make use of the inferior quality aviation fuel
used by the Red Air Force.
72
WiRüAmt/Ro, Az. 11 k 2209 (Vs), “Deutsche und rumänische Treibstoff-
Erzeugung im Winterhalbjahr 1941/42,”
no date, Anlage 2 to: WiRüAmt/Ro, Az. 11 k 2209 (Vs), “Beurteilung der
Treibstoff-Heizölversorgungslage für das
Winterhalbjahr 1941/1942,” 07 July 1941, T-77/500 (Wi/I. 36).
73
WiRüAmt/Ro, Az. 11 k 2209 (Vs), “Beurteilung der Treibstoff-
Heizölversorgungslage für das Winterhalbjahr
1941/1942,” 07 July 1941, T-77/500 (Wi/I. 36). WiRüAmt revised the
figures used in this study a month later.
Although it did not alter its outlook for German production, WiRüAmt cut
the expected monthly production of
motor fuel and fuel oil in Romania by 33,000 and 23,000 tons,
respectively. This reduced the expected six month
production figure by almost by almost 400,000 tons (from 4,602,000 tons
to 4,206,000 tons), although estimated
demand did not change (6,042,000 tons, or 6,372,000 tons including the
requirements of German troops in the
Soviet Union). WiRüAmt/Ro, Az. 11k 2209 (Vs), “Deutsche und rumänische
Treibstoff-Erzeugung im
Winterhalbjahr 1941/42,” 05 August 1941, T-77/704 (Wi/IE 4.40).

507
Both Göring and the OKW leadership concurred with WiRüAmt’s assessment.
During a conference
on 17 July, Göring asked Thomas to undertake a “quick assessment” of
Germany’s ability to raise imports
from Romania and ship oil from the Caucasus via pipeline.74 Although the
OKW was insisting by the end
of July that “the seizure of the Caucasian oil reserves is… of decisive
importance to the conduct of future
military operation and an important objective of the operations in the
Russian area,” it grudgingly
admitted that Soviet sabotage would likely hinder “the desired relaxation
of the fuel situation” for a
significant period of time. This meant that “considerable savings” would
have to be extracted from the
civilian economy and the occupied territories (“ruthless cutbacks”), over
and above those from all
German troops not deployed in the Soviet Union.75
By August, the situation had become so serious that even Halder had to
take notice after learning that
Germany would be running a deficit of 120,000 tons per month starting on
01 October 1941.76 A week
later, representatives of the WiRüAmt (Thomas), AA (Wiehl), RWM
(Fischer), and the VJP, on the basis
of figures tabulated jointly by the OKW and RWM, agreed on a two-pronged
strategy to deal with the
crisis. First, production in Germany, Romania, and Hungary would be
“immediately pushed upward to
the highest degree that was technically feasible.” The key element was
getting the Romanians to go along
74

Chef WiRüAmt, “Ergebnis der Vorträge beim Reichsmarschall und bei

Feldmarschall Keitel am 17. 7. 1941,” 18
July 1941, Hoover Institute, Nuremburg Records, Box 996 (PS-1456).
75
Der Chef des OKW (Keitel), WFSt/Abt. L (IV/Qu), Nr. ?/41 g.Kdos.,
“Mineralölversorgung im Winterhalbjahr
1941/42,” 30 July 1941, T-77/429 (Wi/IF 5.3563). Emphasis in the
original. Such analyses left out consideration of
the long-term challenges confronting Germany, namely the massive
projected increase in requirements over the
course of 1942 due to the expansion of the Air Force and Navy, as well as
“the necessity to provision the occupied
territories to an ever increasing extent from the spring of 1941 […].”
Whereas the deficit between supply and
demand in 1941 was estimated to be 1,300,000 tons, it would rise to
3,500,000 tons the following year (11,500,000
tons, including imports from the Soviet Union, vs. 15,000,000 tons). Even
if consumption in 1943 remained
unchanged while production expanded according to plan, Germany would
still have a 1,700,000 ton shortfall. The
only way to fill this deficit was through the immediate construction of
“at least” three major synthetic plants with a
yearly output of 480,000 tons to 600,000 tons, although this would
require at least 1,000,000 tons of steel to be
distributed in monthly allocations of 42,000 tons for two whole years.
“Mineralölerzeugung,” no date or author
(probably WiRüAmt; circa summer of 1941), T-77/704 (Wi/IE 4.40). The
sheer barbarity by which the “ruthless
cutbacks” would be squeezed from the Soviet population is detailed in:
Timothy Snyder, Bloodlands: Europe
between Hitler and Stalin (New York: Basic Books, 2010), 155-186.
76
Even if Germany managed to close the gap by cutbacks everywhere but the
Eastern Front, Halder complained that
“the Armed Forces are in no position to embark on any large-scale
operation.” Halder Diary: 07 August 1941.
During preparations for Operation Typhoon against Moscow, OKW informed
the Army that it could only provide
between twenty-two and twenty-seven fuel trains per day during September
instead of the required twenty-seven;
twenty-two in October; and just three in November, even though the
requirements would rise to twenty-nine trains
per day following the start of the offensive. Halder Diary: 11 September
1941.

508
with this. To that end, while Konti started the “necessary preparations”
for expanded production, the AA
would undertake negotiations with Bucharest to ensure its compliance.77
Second, since it was impossible
to reduce either the military’s operational requirements or consumption
by the German agricultural sector,
those in attendance agreed that all military forces stationed within
Germany or on garrison duty would
suffer a 20% reduction in their fuel allocation, while the RWM “once
again” imposed “curtailments”
upon both the civilian economy and the transportation sectors, “even
though these are already
undersupplied.” But this was the end of the line when it came to
reductions of non-essential consumption:
all existing possibilities, at least within Germany, had been “fully
exhausted,” and “[additional] cuts from
the economy would weaken the defense-economic potential of the Reich to a
considerable extent.”78
WiRüAmt described the necessary measures in more detail two weeks, by
which time it had also
concluded that “for the time being [Germany] cannot reckon on petroleum
imports from the Caucasus,”
even though consumption during the last quarter of 1941 would exceed
expectations. WiRüAmt regretted
that military requirements could only be satisfied “somewhat”
(einigermaβen) even though military
consumption during Barbarossa in July had been lower than originally
estimated.79 Of particular interest
was the observation that, even with the envisaged savings, securing
“large quantities [of fuel] for Army
operations starting at the beginning of 1942 is not possible any longer…
without Russian imports.”80
Whereas WiRüAmt’s July 1941 assessments were predicated on the idea that
major combat operations
would end by September 1941, it was now clear that a “considerable
operational demand” would persist
77

In December 1941, Neubacher, already seconded to the AA to handle German

petroleum policy in Southeastern
Europe, received a new appointment from Göring to promote “the greatest
possible increases of crude oil
production” within Romania, Hungary, and Croatia. Der Reichsmarschall des
Groβdeutschen Reiches, BVJP, to
Herrn Gesandten Neubacher, V.P. 20882/5., 16 December 1941, T-77/606
(Wi/IC 4.3a-b).
78
Der Reichsmarschall des Groβdeutschen Reiches, BVJP (signed: Löbbecke,
persönl. Referent to Staatssekretär
Erich Neumann) an das OKW, z.Hd. des Chefs des WiRüAmts, Herrn Gen.d.Inf.
Thomas, V.P. 13698/5 g.Rs.,
Vermerk, “Betr.: Treibstofflage. Besprechung bei St.S. Neumann am 14. 8.
1941,” 19 August 1941, T-77/594 (Wi/I.
273).
79
And it would continue to decline – precipitously: whereas the operational
demand for troops in the Soviet Union
was 216,000 tons of gasoline and diesel in August, it would shrink to
only 45,000 tons by December, plus 17,000
tons for so-called “Schnelle Divisionen” starting in October. Meanwhile,
the allocation for all three services
stationed in Germany or on occupation duty had been reduced from 89,900
tons in July to 41,500 tons by
September. Ro V (Griebel), Az. 11 k 2209 (Vs), Vortragsnotiz für Chef
WiRüAmt, 14 August 1941, T-77/704
(Wi/IE 4.40).
80
WiRüAmt, Az. 11 k 2209 (Ro Vs), Nr. 2873/41gK, “Betr.:
Mineralölversorgungslage in Europa bis zum Früjahr
1942,” 26 August 1941, T-77/704 (Wi/IE 4.40). Emphasis in the original.

509
at least until the end of the year. Since all avenues for expanding
production had been “exhausted,”
current operational requirements could only be satisfied by “reconciling
consumption to the [existing]
possibilities for supply through cutbacks.” Without drastic reductions
(21% of motor fuel, 16% of diesel,
and 23% of fuel oil consumption for all sectors besides units engaged in
combat in the Soviet Union and
North Africa), Germany ran the risk of incurring a deficit of 1,272,000
tons of motor fuel, diesel, and fuel
oil by year’s end. Such cutbacks, WiRüAmt warned, “are so substantial
that negative political, military,
and economic repercussions are to be expected.” Even if Germany made it
through 1941, no additional
reserves of motor fuel would be available for divisions being circulated
back to Germany, or for new
Panzer and mechanized formations then in the process of formation.
Equipping these troops was essential
if Germany was to undertake extensive offensive operations in 1942, such
as the planned assault against
Gibraltar. In fact, consumption during the first quarter of 1942 would be
greater than that of the previous
quarter, “in spite of the end of operational consumption in the East.”
Rectifying the 1942 deficit (127,000
tons during the first quarter alone, not including anything carried over
from 1941) was only conceivable
“if at the very least the crude oil territory of Maikop can already be
exploited.”81
At the end of August 1941, WiRüAmt drafted a number of estimates for
supply and demand for the
second half of 1941. In the case of Romania, WiRüAmt hoped it would
produce 80,000 tons of crude oil
beyond the expected figure of 3,030,000 tons, which would be refined into
2,703,000 tons of petroleum
products. Meanwhile, German petroleum production would rise from 343,000
tons in July to 376,000 tons
by December, or a six-month total of 2,180,000 tons. Even assuming
implementation of the suggested
reductions in civil and military consumption, demand over the same period
would still reach at least
3,680,000 tons, and perhaps as high as 3,940,000 tons. Considering that
Romanian production had to be

81

WiRüAmt (Thomas), Az. 11 k 2209 (Ro Vs), Nr. 2873/41gK,

“Mineralölversorgungslage Europas im 2. Halbjahr
und 1. Vierteljahr 1942,” 26 August 1941, T-77/704 (Wi/IE 4.40). Emphasis
in the original. This conclusion was
reiterated in a follow up study in October using the latest figures.
WiRüAmt, Az. 11 k 2209 Ro Vs, “Stand der
Mineralölversorgung im 4. Vierteljahr 1941 ausgehend von der Lage am 1.
10. 1941,” 07 October 1941, T-77/704
(Wi/IE 4.40).

510
shared with Italy and the rest of Europe, it is clear that German and
Romanian production were falling
considerably short of the requirements.82
In view of the seriousness of the situation, Keitel ordered that all
measures be taken to reduce the
expected shortfall during the first quarter of 1942. When WiRüAmt pointed
out that this would result in
“grave effects” across Axis Europe, Keitel responded “that all of these
downsides would have to put up
with in order to secure the supplies necessary for [military] operations
under all circumstances.”83 Göring
gave his approval two days later, although he still placed his hopes on
capturing Maikop, which Hitler
had identified as the next objective of the German offensive, not to
mention the only major Soviet oilfield
the Germans could conceivably bring into operation in the short term
(being relatively close to both
Rostov and the Black Sea). Göring figured it would take six months to
repair the damage in Maikop, after
which the new oil production could “bring the fuel situation again into
equilibrium.”84 Until then,
however, higher production within the Reich and Romania was vital to
maintaining the operational
effectiveness of the German armed forces. This hope turned out to be
misplaced in the case of the latter.

82

WiRüAmt, Az. 11 k 2209 (Ro Vs), “Rumänische Mineralöversorgung vom 1.7. –

31.12.41,” 27 August 1941;
WiRüAmt, “Deutsche Erzeugung vom 1.7. – 31.12.41,” 27 August 1941; and
WiRüAmt, “Deutscher Bedarf vom
1.7. – 31.12.41,” 30 August 1941; all in: T-77/704 (Wi/IE 4.40).
83
Keitel also shot down proposals for Göring to receive the authority for
administering the entire European
petroleum industry, reckoning that it was not “in the military’s
interests” if the various agencies of the Four-Year
Plan (Vierjahresplan, VJP) took over petroleum allocation in wartime. Ro,
“Aktenvermerk über Vortrag beim Chef
OKW im Führerhauptquartier am 30.8.41,” 02 September 1941, IWM, FD
4809/45.
84
Chef WiRüAmt, “Aktennotiz über Vortrag beim Reichsmarschall am 4.9.41 im
Reichsjägerheim Rominten,” 05
September 1941, IWM, FD 4809/45.

511
Failure in Romania, 1941
Besides the failure to reach the Caucasus, Romania was the greatest
disappointment for German
petroleum policy in 1941.85 Even before Barbarossa, Thomas believed that
the entire Axis war effort
depended upon expanding Romanian exports.86 The Germans had managed to
boost their imports
between September 1940 and August 1941 by almost one 1,000,000 tons from
the previous twelve
months, even as Romanian production continued its inexorable decline,
from 6,600,000 tons in 1938 to
only 5,300,000 tons in 1943.87 The failure of Barbarossa had one
unintended consequence: it allowed the
Germans to divert drilling equipment they planned to use in the Caucasus
to Romania, instead, and
thereby fulfill the program established at the Vienna Conference. This
infusion managed to halt
temporarily the decline in Romanian output, which actually increased
slightly between July and
December 1941.88 But the additional production was nowhere near what
Germany required.89
More than one historian argues that Romania made every effort to meet the
Reich’s oil demands after
the start of Barbarossa. Deliveries between July and December 1941
averaged 267,000 tons per month
and reached 500,000 tons in October (largely by emptying existing
reserves).90 Exports to Germany in
1941 were double those of the previous year: 3,055,310, tons vs.
1,390,467 tons – 576,169 tons in August

85

For a critical assessment of German efforts, see: A.E. Gunther, “The

German War for Crude Oil in Europe, 19341945,” Petroleum Times (17
January 1948), 65-68 and 84.
86
Der Chef des WiRüAmt an den Chef des Transportwesens, Herrn
Generalleutnant (Rudolf) Gercke, 11608/41g,
21 May 1941, T-77/377 (Wi/IF 5.2694).
87
OKW WiRüAmt/Ro, Az. 11 k 2209 V 1s [?], “Mineralöl-Einfuhr im 1. Und 2.
Kriegsjahr,” 22 December 1941,
IWM 4809/45. For a comparision of Romanian production vs. exports to
Germany in 1940-1941, see: der
Reichsmarshall des Groβdeutschen Reiches, BVJP, V.P. 18756/2/5/6 (?),
Vermerk, “Vergleich zwischen der
rumänischen Rohölproduktion und den deutschen Mineralölbezügen aus
Rumänien für Januar bis Oktober 1940
und 1941,” 30 November 1941, T-77/594 (Wi/I. 273).
88
Whereas the Romanians had previously complained that they could not
fulfill German expectations because of the
lack of equipment, German officials were now concerned that the Romanians
would block full implementation of
the German drilling program in 1942 through the restrictive mining law of
1937, which Bucharest had yet to revise
in spite of Berlin’s entreaties. “Aufzeichnung für Herrn
Ministerialdirektor Wiehl betreffend rumänische
Erdölproduktion,” 17 February 1942, author’s initial illegible (Bentz?),
T-120/2618.
89
RWM was apparently counting on monthly exports to Greater Germany
(including Slovakia) reaching 288,000
tons by May 1940 and staying there for the entire year: Ro V, Az. 11 k
2209 (Vs), “Voraussichtliche MineralölEinfuhr aus Rumänien im Jahre 1941
nach den Planungen des RWM vom 10. Januar 1941,” 11 January 1941, IWM,
FD 4809/45.
90
Dietrich Eichholtz, Deutsche Politik und rumänisches Öl, 1938-1941
(Leipzig: Leipziger Universitätsverlag,
2005), 58-59.

512
1941 alone.91 Overall, Romania sent somewhere between 55% and 70% of its
wartime production to the
Axis Powers.92 And yet, the oil crisis of late-1941 was in no small part
attributable to the Romanians’
failing to deliver the required amounts of irreplaceable fuel oil, in
part because they had not bothered to
restrict their domestic consumption of this product.93
By November 1941, for example, the Germans were only receiving 41,000
tons out of 92,000 tons of
fuel oil they expected. The Romanians had also rebuffed German efforts to
raise the domestic price of oil
in order to spur greater production and exploration, such that oil
production was lagging by as much as
60,000 tons per month, “because the crude oil industry lacks the
incentive to boost supplies.” As far
WiRüAmt was concerned, the fault lay entirely with Romanian officials,
who either “deliberately” or
through “negligence” were “unable or unwilling to elicit the utmost from
the petroleum industry for our
benefit.” Germany had virtually no leverage over Romania, however, which
meant that all the Reich
could do besides exhorting Romanian dictator Ion Antonescu to appoint an
“Oil Dictator” (backed by
German advisers) was “to increase German deliveries of goods” as payment,
“even at the cost of
considerable German sacrifice.”94 On the other hand, civilian experts
such as Fischer pointed to the fact
that the planned expansion of production was being starved of resources
in order to implement the Krauch
Plan, which he believed was “for the current war not of such direct and
decisive significance as the
accelerated execution of the expanding drilling program in Romania.”95
That same month, Bentz

91

Of course, this would have been impossible without additional investment

to expand the capacity of the
transportation network: the number of tankers plying the Danube increased
from 138 in September 1939 to 505 by
December 1941, while 23,000 railway cars were in service during the
winter of 1941/42, compared to 1,800 in
1939/40. AA, HaPol IVb, 2548/42., “Die rumänische Mineralölwirtschaft,”
no date or author (1942), T-120/2618.
92
Karlsch and Stokes, Faktor Öl, 206-207.
93
Zu HaPol IV b 1302/42, “Aufzeichnung über die deutsche-rumänischen
Wirtschafts- und Finanzierungsfragen,”
17 February 1942, T-120/2618. Total petroleum consumption in 1941 was
more than 200,000 tons higher than in
1938: 1,986,000 tons vs. 1,776,000 tons. 134,000 tons of this increase
was for fuel oil. HaPol IVb, 2548/42. “Die
rumänische Mineralölwirtschaft,” no date or author (1942), T-120/2618.
94
OKW, Az. 66 b 1210, WiRüAmt – Ro Va, “Vermerk über notwendige Massnahmen
zur Steigerung der
Mineralölbezüge aus Rumänien,” 03 November 1941, T-77/606 (Wi/IC 4.3a-b).
95
Spalke, “Grundsätzliche Stellungnahme zur Mineralöllage in Rumänien,” no
date, enclosed with: der Chef der
deutschen Wehrwirtschaftsmission in Rumänien (Spalke) an das OKW,
WiRüAmt, zu Händen des Herrn General
d.Inf. Thomas, Br. Tgb. Nr. 2327/41 g, “Betr. Mineralöllage in Rumänien,”
09 October 1941, T-77/606 (Wi/IC 4.3ab). The Raw Material Division of the
WiRüAmt agreed with Fischer and Spalke that efforts in Romania were
suffering due to “competition with a great number of proposed plans,
whose authors consider them just as important,
if not more.” It nonetheless disagreed with Spalke’s suggestion that the
OKW take over the production and

513
conceded that the targets for Romanian oil production had not been met,
nor would they for the
foreseeable future. He estimated output at 5,200,000 tons for 1941, while
the Romanians were claiming
that production during the first six months had been only 2,418,447 tons.
On the plus side, expected
German production in 1942 would probably rise to above 5,000,000 tons
according to Bentz’s new
estimate of German crude oil production, which was 9,000 tons per month
higher than originally planned
by the Office for Economic Development (Reichsamt für
Wirtschaftsausbau).96
Ribbentrop, Göring, and Hitler all brought up the necessity of Romania
increasing its oil production
during three separate meetings with Deputy Prime Minister Mihai Antonescu
(no relation to the
Conducător) in November 1941. Ribbentrop and Göring both expressed hope
that Germany would
occupy at least the North Caucasus before the end of the campaigning, but
the latter reckoned that it
would take at least a year to restart production. Until then, Germany
needed Romania to step up, even at
the risk of exhausting its oilfields. Göring foreswore any German designs
over the Romanian oil industry
and promised Antonescu that Romania “would be compensated by…
participation in Russian and Iranian
petroleum interests.”97 Upon hearing of these entreaties, Ion Antonescu
replied in December that Romania
could, after the most stringent rationing, only make available an
additional 25,000 tons of fuel oil. If,
however, Germany could provide 60,000 tons of coal and material to pump
natural gas to Bucharest,
Antonescu believed that another 45,000 tons of fuel could be scrounged.
Although he conceded that
Romanian production had dropped by more than 3,000,000 tons per year
between 1936 and 1941, he had
distribution of Romanian oil, pointing out that neither did the military
have the competence to handle such a task,
nor would the Romanians look kindly upon such a measure.
Rohstoffabteiilung an den Chef des WiRüAmtes, Herrn
General der Infanterie Thomas, “Betr.: Mineralöllage in Rumänien,” 27
October 1941, T-77/606 (Wi/IC 4.3a-b).
96
Ro Vf, Az. 66 b 3430, Aktenvermerk, “betr. Mineralölerzeugung,” 18
November 1941; and der Beauftragt [sic]
für den Vierjahresplan, der Generalbevollmächtigte für Sonderfragen der
chemischen Erzeugung, Tgb.-Nr. 8342/41
g.Rs. (Ro-Nr. [?]/41gK), “Treibstoff-Produktionsplan 1942: Stand 28.
November 1941,” 02 December 1941; both
in: T-77/385 (Wi/IF 5.2816).
97
During all of these meetings, Antonescu stressed that Romania was already
doing everything possible to increase
oil production and pointed out that Germany and Italy were currently
receiving two-thirds of Romania’s production
(3,300,000 tons out of 5,500,000), with 1,500,000 tons being delivered
just over the past four months. Nonetheless,
Antonescu was unhappy about the state of affairs with Hungary, which he
claimed was persecuting the Romanian
minority in Northern Transylvania, which had been ceded to Hungary under
the Second Vienna Award. Although
Antonescu did not explicitly link higher oil production to resolving
Romania’s tensions with Hungary, the fact that
Antonescu brought up the matter during all three meetings is suggestive
that Romanians were using their oil as
diplomatic leverage. See document nos. 505, 513, and 519 in: DGFP (D),
xiii: 844-848 (quotation from pg. 845),
870-876, and 891-894.

514
nonetheless made every effort to live up to his promises at the Vienna
Conference, as evidenced by the
fact that daily production had recently increased by 2,500 tons. Finally,
even if Romania’s total
production had declined, Germany and Italy’s share of Romanian exports
had more than trebled, from
25% in 1936 to 83% in 1941.98 (Antonescu’s figures for 1936 were accurate
– 1,725,000 tons out of
6,885,000 tons of exports – but those for 1941 were actually an
understatement: Germany and Italy’s
share of Romania’s exports in 1941 was 90%: 3,660,000 tons out of
4,048,000 tons.99)
Although no one in Berlin was happy about the situation, the leadership
of the Third Reich,
particularly Göring, shrank from taking the hard line against Romania
advocated by his civil and military
advisers, such as Neumann and Thomas, who believed that Antonescu was
either misinformed or being
“deceived systematically by his own people.” Göring, on the other hand,
considered the Conducător to be
“the only one in Romania who still defends the German line,” and the
Reich therefore needed to treat him
delicately.100 As always, the specter of 1916 hung over any discussion
about how to handle the
Romanians – Germany could not do without Romanian exports, which ruled
out the application of “the

98

Marshal Antonescu to Adolf Hitler, 05 December 1941, Document No. 549 in:
DGFP (D), xiii: 963-964. Neither
the WiRüAmt nor the RWM put much stock in the Romanians’ protestations of
good faith. The following February,
in preparation for a meeting between Hitler and Antonescu on 11 February
1942, the RWM provided a set of talking
points for the Führer concerning Germany’s expectations of Romania in
regard to oil. The paper stressed that, rather
than reducing their consumption as promised, the Romanians had actually
increased it. The most important
concession to wring from Romania was a promise that it would no longer
export to third-parties without the prior
approval of the Reich. “Entwurf einer Notiz für den Führer anlässlich des
Besuchs von Marschall Antonescu,” no
date or author, enclosed with: Der Reichswirtschaftsminister (signature
illegible) an das OKW, WiRüAmt, z.Hd.v.
Herrn Major von Versen o.V.i.A., II Min.Öl. 787/42 g, “Betrifft: Besuch
von Marschall Antonescu,” 03 February
1942; and Besprechungsnotiz für den Herrn Chef OKW, “Betr.:
Besprechungspunkte ‘Mineralöl’ für die Begegnung
des Führers mit Marschall Antonescu,” 04 February 1942; both in: T-77/606
(Wi/IC 4.3a-b). In expectation of
taking the Caucasus during the upcoming campaign, OKW was keen on getting
the Romanians on board with plans
to rebuild the destroyed oil loading facilities at the port of Odessa,
which was then occupied by Romanian troops.
Besprechungsnotiz für den Herrn Chef OKW, “Betr.: Besprechungspunkte
‘Mineralöl-Umschlagseinrichtungen
Odessa’ für die Begegnung des Führers mit Marschall Antonescu,” 07
February 1942, T-77/606 (Wi/IC 4.3a-b).
99
Dr. F/F., Vowi 3386, “Das rumänische Erdöl,” 11 April 1939, T-77/611
(Wi/IC 4.16); HaPol IVb, 2548/42. “Die
rumänische Mineralölwirtschaft,” no date or author (1942), T-120/2618;
and Kontinentale Öl Aktiengesellschaft
(Konti), Mineralöl-Archiv, Do/Re., “Zahlen zur Mineralöl-Wirtschaft
Rumäniens i.J. 1941,” 16 September 1942,
enclosed with: Konti to Herrn Professor Dr. A. Bentz (RfB), 29 September
1942, T-401/5 (RBF 142). Complete
figures for Romanian production, exports to Germany, and Romania’s
percentage-share of German oil imports
between 1938 and 1944 may be found in: Eichholtz, Rumänisches Öl, 67.
100
Antonescu had apparently been complaining that the Germans had not been
delivering sufficient quantities of
coal or drilling equipment. Chef WiRüAmt, “Aktennotiz über Vortrag bei
Reichsmarschall Göring im Sonderzug am
7. März 1942,” 09 March 1942, IWM, FD 1434/46.

515
extreme measures” the Reich had “so frequently adopted elsewhere, often
with far less provocation.”101
The most the Germans were prepared to do was to request that the Romanian
Government take action to
reduce Romanian consumption of key products such as fuel oil, which was
19,000 tons higher in
February 1942 than in February 1939 without any discernible reason.102
Bentz also urged the AA to speed
up the process of acquiring ownership of the two major French-owned
companies operating in Romania,
Colombia and Concordia, so that the Reich could make the personnel
changes necessary to increase
production.103 Although the Germans managed to secure a new mining law in
1942, the Romanians
remained recalcitrant.104 Although Germany (and Italy) poured resources
into Romania throughout 1942
and 1943, all they managed to accomplish was to hold production steady.
Meanwhile Germany’s share of
Romanian production never reached the heights of 1941 (53%).105 In
combination with the synthetic fuel
industry, Romanian oil would at least preserve Germany’s ability to wage
a defensive war until 1944. But
the dream of victory had already faded almost three years before with the
failure of Operation Barbarossa.

101

Rich, Hitler’s War Aims, 255-256.

Deutsche Gesandtschaft (Bukarest) an den Herrn Königlich Rumänischen
Ministerpräsidenten (Antonescu),
“Note,” 27 February 1942, T-120/2618. See also: RWM an den
Bevollmächtigten für Erdölangelegenheiten im
Südosten, Herrn Gesandten Dr. Neubacher, II Min. Öl 6899/42, no date,
enclosed with: der
Reichswirtschaftsminister (i.A. gez. Rosencrantz) an das AA, z.Hd.v.
Herrn Dr. Wapenhentsch, II Min. Öl 6899/42,
10 March 1942, T-120/2618.
103
BVJP, der Beauftragte für die Förderung der Erdölgewinnung (Bentz) an das
AA, 02 July 1942, NARA, RG 238,
T-301/18 (NI-1934).
104
Maurice Pearton, Oil and the Romanian State (Oxford: Clarendon Press,
1971), 226-244.
105
Eichholtz, Rumänisches Öl, 63-64, and 67; and Pearton, Oil, 259-263.
102

516
Oil and the Turning Point of the Second World War, December 1941
Through the most stringent curtailment of consumption, Germany managed to
get enough fuel to its
offensive spearheads in the Soviet Union.106 Reserves of motor fuel and
diesel had withered to their
minimum allowable level. Allocations to the civilian economy of motor
fuel and diesel in December 1941
were less than one-quarter and 42%, respectively, of those of September
1939. On the other hand,
between June and December 1941, total deliveries to the Eastern Front
exceeded consumption to the
extent that the Army technically had a surplus of 173,000 tons by the end
of the year.107 The defeat of
Operation Typhoon at the outskirts of Moscow exacerbated the existing
shortage of petroleum further
because it left Germany on the hook for meeting the requirements of both
Axis Europe and the occupied
portions of the Soviet Union, which were just as oil-poor as Continental
Europe. There was also the
matter of the German forces still locked in combat on the Eastern Front –
they would require at least
100,000 tons to 120,000 tons per month for defensive purposes, but the
most WiRüAmt could initially
allocate was 48,000 tons. Once the existing surplus accumulated in 1941
was used up in March 1942, the
Eastern Army’s ability even to conduct “defensive military operations
would be endangered.” The
“grotesque” refusal of the military and civilian leadership to grasp that
Barbarossa had used up any
remaining operational fuel reserves and acknowledge that none were
available for the anticipated spring
offensives was the source of considerable consternation at WiRüAmt, which
fumed that precious
production was still being claimed for useless projects such as expansion
of the Autobahnen.108

106

Average monthly consumption by the armed forces in 1941 totaled 102,000

tons of aviation fuel, 135,000 tons of
motor fuel, 68,000 tons of diesel, 183,000 tons of fuel oil (including
the requirements of the Italian Navy), and
10,500 tons of lubricants. WiRüAmt, Az. 66 b 1210 Ro V 1a, Nr. 4604/42g,
“Anlage zum Beitrag zum Schrb. Des
Herrn Chef OKW an Marschall Antonescu,” 29 April 1942, T-77/606 (Wi/IC
4.3a-b). The actual battlefield logistics
of Barbarossa are described in: Martin Van Creveld, Supplying War:
Logistics from Wallenstein to Patton (New
York: Cambridge University Press, 2004), 142-180.
107
The General Staff, on the other hand, reported that reserves amounted to
less than 100,000 tons, leading
WiRüAmt to surmise that “the consumption of the troops must therefore be
higher” than the Army was admitting.
108
“Whence the additional, considerable fuel demand for the planned
offensive operations in the spring or summer
1942 shall be found, nobody knows at the moment.” WiRüAmt, Stab Z/SR,
“Die deutsche Treibstoffversorgung im
Kriege. Abgeschlossen um die Jahreswende 1941/42. Versuch einer Darlegung
der Gesamtproblematik unserer
Treibstoffversorgung im Kriege unter Verzicht auf die Darstellung der
Einzelheiten,” 16 February 1942, T-77/668
(Wi/VI. 216). Emphasis in the original. The Reich did not begin
curtailing its gargantuan postwar building program
until the military crisis of 1942 forced the regime “to return at least
to that minimum of rationality in economic

517
Germany needed the Caucasus now more than ever, but as 1942 dawned German
troops would no
longer enjoy “the same operational freedom” as before, since Barbarossa
had drained the military’s
operational reserve.109 A new offensive along the entire breadth of the
Eastern Front was out of the
question in 1942, since “[the] shortage of kinds of petroleum is so great
that the operational freedom of all
three branches of the military” was now “impaired.”110 Axis Europe would
labor through 1942 under the
600,000 ton shortfall first identified in the spring of 1941, while the
completion of new synthetic fuel
facilities would provide only a “slight improvement,” rather than a
“decisive change.”111 The great hope
in 1939, Romania, was still indispensable, but it was now becoming clear
that Romania would never live
up to expectations.112 Thanks to the massive application of German
resources and technical expertise,
most notably by Konti, the Germans managed to halt temporarily the
decline in Romanian production,
which actually increased by 3% in 1942 from the previous year’s
figure.113
But what good were a few thousand extra tons of petroleum when the Reich
was responsible for all of
Europe? As WiRüAmt recognized, “Germany’s petroleum supply cannot be
considered secure until the
territory of Maikop is in German hands and can be made usable.”114
Getting there would require still more
petroleum, but not nearly as much was available the year before. Thomas
informed Halder in November
affairs which it had temporarily abandoned.” Jochen Thies, “Hitler’s
European Building Programme,” Journal of
Contemporary History 13: 3 (1978): 421-422.
109
OKW, Az. 11 k 2209 (Vs), WiRüAmt/Ro Nr. 3515/41gK, “Entwicklung der
Mineralölversorgungslage bis
Fruhjahr 1942 nach dem Stand vom 1. 11. 1941,” 03 November 1941; and OKW,
WiRüAmt (Thomas), Az. 11 k
2209 Ro V 1[?], Nr. 4071/41gK, “Gegenüberstellung des monatlichen
Verbrauchs an Betriebstoffen im Jahre 1941
und der voraussichtlich im den einzelnen Vierteljahren und im ganzen Jahr
1942 zur Verfügung stehenden
monatlichen Durchschnittsmengen,” 12 January 1942; both in: T-77/704
(Wi/IE 4.40).
110
Aktenvermerk, “Treibstoff- und Heizöl-Versorgungslage,” no date or author
(circa January 1942), T-77/704
(Wi/IE 4.40); and WFSt, “Wehrkraft 1942,” 06 June 1942, quoted in: OKW,
KTB, ii: 170-173 (quotation from pg.
172 of the latter source).
111
WiRüAmt (Griebel), Az. 11 k 2209 Ro Vs, “Voraussichtliche
Mineralöversorgungslage Europas (ohne Spanien
und Portugal) im 1. Vierteljahr 1942,” 24 October 1941, T-77/704 (Wi/IE
4.40); WFSt, “Wehrkraft 1942,” 06 June
1942, quoted in: OKW, KTB, ii: 170-173 (quotation from pg. 172 of the
latter source).
112
Keitel nonetheless had to send a groveling letter (drafted by WiRüAmt) to
Antonescu in May 1942 practically
begging that 320,000 tons of petroleum products be set aside for the
armed forces during the upcoming “Case Blue”
(Fall Blau – the invasion of the Caucasus). WiRüAmt (Griebel) an Herrn
Chef OKW, Az. 66 b 1210 (Ro V/1a), Nr.
4604/42g, 27 April 1942; WiRüAmt, Az. 66 b 1210 Ro V/1a, Nr. 4604/42g,
“Beitrag zum Schreiben des Herrn Chef
OKW an Marschall Antonescu,” 27 April 1942; and Keitel to Antonescu, 06
May 1942; all in: T-77/606 (Wi/IC
4.3a-b).
113
Dr. vdW/Hof., “Memorandum über die Ergebnisse der Tätigkeit der
Kontinentöl in Rumänien,” 17 September
1943, T-401/2 (RBF 36).
114
Rohstoffabteiilung an den Chef des WiRüAmtes, Herrn General der
Infanterie Thomas, “Betr.: Mineralöllage in
Rumänien,” 27 October 1941, T-77/606 (Wi/IC 4.3a-b).

518
1941 that the military’s monthly fuel quota for the first quarter of 1942
would be reduced to 75,000 tons
from the 95,000 it would receive in December. “This is for us,” Halder
moaned, “the end of operational
freedom.”115 The following spring, Göring had to rebuke the General
Staff, reminding them that “he could
not give more than he had […].” If Germany was to regain the strategic
initiative, the military would have
to “adjust” its operational requirements to the prevailing supply
situation.116 It would yet again have to do
more with less.117
Germany would return to the offensive in 1942, but even as the Third
Reich ratcheted up the level of
violence directed against Jews and other undesirables, it fought for more
modest strategic objectives. The
Third Reich had risked two-front war in June 1941 because the civilian
and military leadership was
convinced that Germany could annihilate the Soviet Union within only a
few weeks. Such a victory
would have radically altered the strategic calculus in Germany’s favor
and allowed it to reorient its war
effort to waging an aerial and naval campaign against the Anglo-Saxon
powers. Even before the failure of
Operation Barbarossa, the resilience of the Soviet regime in the face of
the disastrous military defeats of
June-October 1941 shattered the German war plan, which had been
predicated upon the assumption that a
decisive operational victory would induce a strategic (political)
victory. If the Soviet regime failed to
concede, Germany had no means of compelling its surrender, just denuding
its war-making capacity
(hence the decision to cut off Soviet access to the Caucasian oilfields).
Hitler grasped the strategic reality

115

Halder Diary: 19 November 1941.

Chef WiRüAmt, “Aktennotiz über Vortrag bei Reichsmarschall Göring im
Sonderzug am 7. März 1942,” 09
March 1942, IWM, FD 1434/46. See also: der Chef des WiRüAmtes im OKW
(Thomas) to Herrn Chef OKW
(Keitel), Nr. 650/42gK, “Betr.: Betriebstoffversorgung im Sommer 1942,”
16 March 1942, T-77/704 (Wi/IE 4.40).
117
Hence Göring’s Erlaβ of January 1942, bolstered by Hitler’s personal
approval, decreeing that the “raising of
petroleum production” within the German sphere of influence would “have
precedence over all other undertakings
[Vorhaben].” Der Vorsitzende des Ministerrats [sic] für die
Reichsverteidigung und BVJP, V.P. 306/42 g., 07
January 1942; and der Führer und Oberste Befehlshaber der Wehrmacht, Nr.
1/42 g/K. OKW/WFSt/Org.-WiRüAmt,
“Betr.: Rüstung 1942,” 10 January 1942; both in: T-77/1057 (Wi/ID. 26).
Hitler’s instructions are reprinted in:
Office of Naval Intelligence, Fuehrer Directives and other Top-Level
Directives of the German Armed Forces,
1942-1945 (Washington, DC: 1948), 1-4. Krauch outlined the material and
labor requirements to fulfilling Göring’s
directive, as well as completing the task of the second Four-Year Plan
(“to supply Europe and not just Germany”),
in: BVJP, der Generalbevollmächtigte für Sonderfragen der chemischen
Erzeugung, “Auszug aus dem Vortrag Dr.
Ritter vor dem Chef OKW – WiRüAmt und den Rüstungsinspekteuren am 21.
January 1942 in Berlin ‘Über die
Arbeiten des Generalbevollmächtigten für Sonderfragen der chemischen
Erzeugung,’” 21 January 1942, T-77/649
(Wi/VI. 34). Emphasis in the original. See also: Carl Krauch, “Die
Kriegsleistungen der chemischen Erzeugung und
ihre kommenden Aufgaben,” Vierjahresplan, 1942: I.
116

519
as early as the beginning of 1942: not that defeat was inevitable, but
rather that Germany lacked the
means of achieving victory. By the time German troops entered Caucasus in
the summer of 1942, the
grand strategy that determined their movements was essentially defensive
in character. The acquisition of
oil was now truly the centerpiece of the German war effort, but the
illusions of 1940/41 had vanished. As
Hitler explained to Raeder in August 1942, the Reich was no longer
fighting for victory, but rather to win
space and resources sufficient to keep the Soviet Union at bay and fight
a protracted war against Britain
and the United States until the Anglo-Saxons were “ready to make
peace.”118 Oil would no longer be the
instrument by which Germany reversed the judgment of history, just the
means of forestalling it.
***
The decision to attack the Soviet Union in June 1941 stemmed from three
factors. The first was
National Socialist ideology, specifically Hitler's obsession with the
extermination of “Judeo-Bolshevism”
and the more widespread desire in the Third Reich to acquire “living
space” (Lebensraum) to redress
Germany’s economic disadvantages vis-à-vis the other great powers. The
second factor was the strategic
position within which Germany found itself following its unexpectedly
rapid victory over France.
Although Germany stood unchallenged on the Continent, Britain had vowed
to continue the fight, which
put Hitler in an awkward position, since the Reich presently lacked the
aerial and naval means to coerce
Britain militarily. Pouring resources into the Mediterranean and Middle
East, although it offered the
prospect of cheap victories, was a dead end. Even the more thoughtful
strategists within the German
leadership could not explain how Axis victories in peripheral theaters
would compel Britain to submit.
But the lack of military options in the west did not pose an insuperable
problem Hitler, who never had
any firm idea about how he would end the war he had unleashed. If
anything, he expected (indeed, hoped)
that the generational struggle for world dominion with the United States
and Britain would extend

118

The preceding discussion was based on: Hillgruber, Hitlers Strategie,

549-556; MGFA, Germany and the Second
World War, vi: 1206-1215; and Bernd Wegner, “The Road to Defeat: The
German Campaigns in Russia, 19411943,” Journal of Strategic Studies 13: 1
(1990): 114-121. The relevant portions of Hitler’s 26 August 1942
conversation with Reader are reprinted in: OKW, KTB, ii: 8. The record of
the conservation included with Hitler’s
Table Talk is rather different from Raeder’s recollection, but Hitler did
stress that he had to go on the offensive in
1942 to “gain the initiative” and forestall “the danger of being
annihilated.” Table Talk: No. 300 (26 August 1942).

520
indefinitely since conflict was the only way to preserve the martial
spirit of the German race. Irrespective
of Britain’s posture, then, Germany would eventually have to wage "long
war" of some sort. Such a
conflict could only be sustained from a resource base far in excess of
what was available in either
Germany or even Axis Europe – which left only the Soviet Union. Whether
or not victory over the Soviet
Union compelled Britain to yield was irrelevant, for Germany needed the
economic resources of the
Soviet Union in any event.
The final factor animating German grand strategy, and one that has so far
escaped the attention of
many historians, is the oil crisis that overcame Axis Europe following
the defeat of France. The list of
economic resources in short supply was long, but the deficit was most
acute in the case of oil, as prewar
Europe had produced no more than 40% of its own petroleum requirements
internally. Without the oil of
either the Middle East or the Soviet Union – ideally both – Germany would
be unable to mobilize the
resources of Europe against the Anglo-American coalition assembling
against it.
If it came to a choice between whether to attack the Soviet Union or the
Middle East, the decision
was an easy one to make. Leaving aside the thorny matter of dividing the
spoils between Germany’s
current and prospective allies (Italy, Vichy France, and Spain), an
assault against the Middle East would
neither compel Britain to seek terms nor guarantee Germany the economic
resources it needed to wage a
war of indefinite duration in the west – particularly oil in view of the
logistical difficulties entailed by its
transport to Europe. A war against the Soviet Union, by contrast, would
fulfill both Germany’s immediate
strategic requirements and many of the long-term objectives of National
Socialist ideology. Besides
eliminating Britain’s only possible ally of consequence in Eurasia, the
conquest of European Russia and
the Caucasus would provide Germany with a plethora of resources
unavailable in or inaccessible from the
Middle East, including oil, coal, minerals, arable land, and slave labor.
Once these resources had been tied
to Europe’s mighty industrial centers, the Third Reich could look forward
to the air and naval struggle
against the Anglo-American coalition with every expectation of success.

521
Conclusion
Oil and the Illusion of Grand Strategy
The primary aim of this work has been to establish that any effort to
understand contemporary great
power conflict is bound to be incomplete or even misleading if it does
not reference oil’s significance.
The gradual displacement of coal by oil as the industrial world’s
greatest source of energy after 1900 was
the most important development in global energy consumption patterns of
the twentieth century. This
shift also influenced the course of international relations after the
First World War and helped to upend
the global balance of power that had predominated since the end of the
nineteenth century, particularly by
undermining the autonomy of Great Britain and Germany on the
international stage throughout the
twentieth century.
The findings presented here should temper the historical rehabilitation
of Britain’s post-WWI military
and economic capacity as well as the strategic viability of the empire on
the eve of the Second World
War. After 1912, Britain began restructuring its armed forces around the
consumption of petroleum. This
development turned out to have major consequences for Britain’s national
and economic security.
Although its empire swelled to its greatest territorial extent following
the Allies’ victory in the First
World War, Britain’s imperial pretensions after 1918 were hollow without
adequate supplies of oil, access
to which could no longer be guaranteed by the Royal Navy due to the
unfavorable location of Britain’s oil
assets in the Middle East. It does not seem unfair to contend that
Britain descended to the rank of secondtier power and ward of the United
States well before 1940 due to its lack of energy security.1 Britain’s
relative decline vis-à-vis the other great powers did not simply
correlate to the rise of oil – but this study
does suggest a casual relationship between the two phenomena. After 1918,
Britain still had an
armaments industry capable of producing first-rate weapons systems and
platforms, as well as a
shipbuilding industry that churned out not only naval vessels but also
invaluable merchant ships,
including tankers. When bolstered by the resources of the empire, Britain
was certainly more deserving of
1

David Snyder makes this point with regard to Britain only in passing, but
he cannot really prove his case since his
study ends in 1922: “Petroleum and Power: Naval Fuel Technology and the
Anglo-American Struggle for Core
Hegemony, 1889-1922” (Ph.D. Dissertation, Texas A&M, 2001), 255-274.

522
the title of “great power” than Germany.2 Indeed, during the Second World
War, it produced more
combat aircraft, artillery, mortars, and machine pistols than the Third
Reich, and even more tanks than the
birthplace of Blitzkrieg between 1940 and 1942.3 Unlike during the Age of
Coal, however, Britain no
longer independently possessed the means to fuel all of them.
Contemporaries understood that one of the foundations of British power in
the nineteenth century was
Britain’s almost “unlimited supply of marine coal” and stranglehold over
the international distribution of
naval coal through its network of overseas bases. Moreover, Britain had
managed to acquire this position
at only moderate cost during the relatively peaceful nineteenth century.4
Britain entered the oil age,
however, saddled with an energy production and distribution
infrastructure at home and abroad that was
becoming increasingly “obsolete.”5
Some overseas bases, such as Aden, that guarded access to foreign oil or
were used as staging or
refurbishment points for the Royal Navy in case it deployed beyond Home
waters would retain their
value.6 On the other hand, thanks to the declining demand for coal at
sea, many of the existing coaling
stations would either have to be discarded or refurbished as oil storage
facilities at great cost. In 1914,
coal accounted for 96.6% of the fuel consumed by the world’s ships:
43,859,381 tons of coal compared to
2

David Edgerton’s Britain’s War Machine: Weapons, Resources, and Experts

in the Second World War (New York:
Oxford University Press, 2011), passim (esp. 11-85).
3
Mark Harrison, “The Economics of World War II: An Overview,” in: The
Economics of World War II: Six Great
Powers in International Comparison, ed. Mark Harrison (Cambridge:
Cambridge University Press, 1998), 15-16.
4
Lt. Cmdr. G.J.A. Miles (Royal Naval Staff College), “The Supply of Oil
Fuel for Fleets and Squadrons Abroad in
the Future,” 14 April 1920, British National Archives (BNA), ADM 203/48.
5
Orest Babij, “The Royal Navy and Inter-War Plans for War against Japan:
The Problem of Oil Supply,” in:
Merchant Marine in International Affairs, 1850-1950, ed. Greg Kennedy
(London: Frank Cass, 2000), 88.
6
Andrew Lambert places special emphasis on those bases that included dry
dock facilities: Malta, Gibraltar, and
Bermuda (which were owned and operated by the British Government); and
Sydney, Auckland, Halifax, Esquimalt,
Hong Kong, Cape Town, and Bombay (ownership and costs split between
London and the local governments). “The
Royal Navy and the Defence of Empire, 1856-1918,” in: Imperial Defence:
The Old World Order 1856-1956, ed.
Greg Kennedy (London: Routledge, 2008), 127. Geoffrey Kemp and John
Maurer – building upon Halford
Mackinder’s theoretical work, also make a compelling case that British
naval supremacy in the nineteenth century
rested upon the twin foundations of coal and underwater cable, which were
undermined by the development of
railways in continental powers such as Russia, wireless (which undercut
Britain’s stranglehold over transoceanic
communications), and oil: “In this new age based on oil and radio waves,
Britain’s competitive advantage over her
rivals in the ability to project military power diminished by degrees and
has never been recovered.” Kemp and
Maurer, “The Logistics of Pax Britannica: Lessons for America,” in:
Projection of Power: Perspectives,
Perceptions, and Problems, ed. Uri Ra’anan, Robert Pfaltzgraff, and
Geoffrey Kemp (Hamden: Archon Books,
1982), 28-49. For a concise introduction to Mackinder’s thinking, see:
Geoffey Sloan, “Sir Halford J. Mackinder:
The Heartland Theory Then and Now,” Journal of Strategic Studies 22: 2-3
(1999): 15-38.

523
1,544,496 tons of oil. By 1922, however, coal’s share had dropped to
73.9% – 45,338,327 tons (the
postwar peak) – whereas oil’s share had risen eight-fold and consumption
now stood at 16,004,625 tons.
By 1932, demand was almost evenly balanced: 38,194,758 tons of coal vs.
30,173,383 tons of oil.7 British
policymakers had realized as early as 1920 that the conversion of the
world’s merchant ships from
burning coal to oil would have a “serious effect” on British trade, since
coal was Britain’s single largest
export by volume. Nor could Britain use its existing coal bunkering
network to control naval refueling,
“and unless therefore we take early steps to convert our coaling stations
to oil stations we shall risk
losing, to some extent, the means of bunker control of neutrals which was
so valuable in the recent war
when coal was in general use.”8
Years later, the U.S. Military Attaché in London wondered at the “solid
unwillingness” of the British
Government and public to face “the fact that the traditional source of
motive power, coal [,] has largely
been displaced,” thus rendering political discussions about the
“depressed” coal industry entirely
superfluous.9 But refurbishing or liquidating such obsolescent assets was
not a simple matter in view of
the human costs, as anyone familiar with the concept of path dependence
will recognize. Just the physical
infrastructure alone, including coal mines at home or coaling stations
abroad, represented sunk costs that
Britain could not easily liquidate since the fate of coal industry was as
much a political and economic
quandary as a strategic dilemma.
The rise of oil undermined the very basis of the Pax Britannica, which
one historian describes as
resting upon “trade, colonies, and the navy.”10 Colonies – in particular
overseas bases – no longer enjoyed
the same strategic or economic significance. In terms of trade and
finance, the substitution of oil for coal
7

R.W. Ferrier, The Developing Years, 1901-1932, vol. 1 of The History of

the British Petroleum Company
(Cambridge: Cambridge University Press, 1982), 674.
8
W.H.L. (Walter Long, First Lord of the Admiralty) and H.G. (Hamar
Greenwood, Secretary of Overseas Trade),
“Oil Fuel Reserve for British Oil-Burning Merchant Ships: Memorandum
Prepared by the Admiralty and the
Petroleum Executive for the Cabinet,” 05 February 1920, C.P. 601, BNA,
CAB 24/98.
9
Lt. Col. Raymond E. Lee (Military Attaché), “Oil and Its Effect on
British Warmaking Capacity,” 11 December
1935, Report No. 37765, National Archives and Records Administration
(NARA), Record Group 59: General
Records of the Department of State, 841.6363/413.
10
It is unfortunate that Kennedy does not reference oil or its strategic
and economic consequences even once in his
The Rise and Fall of British Naval Mastery (London: A. Lane, 1976). Doing
so would have bolstered his thesis that
there was a causal relationship between the waxing and waning of
Britain’s naval strength and its relative economic
position.

524
began to deprive British firms of earnings from the sale of coal either
at British-owned coaling stations or
when British merchant ships carried it as ballast during their voyages
from Britain to overseas markets.11
Imports of oil also strained Britain’s balance of payments. Britain had
been running a trade deficit since
the 1880s following the economic rise of the United States and Germany,
and it only balanced its current
account through exports to captive markets in Asia such as India and
earnings from invisible income.12
The sudden need to import oil (by 1933, 13% of the Britain’s daily
imports consisted of oil) added yet
another burden on a country that already depended on overseas trade for
its national survival while
degrading Britain’s ability to pay for these new imports by depressing
demand for coal.13 Finally, on the
strategic level, Britain’s ability to employ economic warfare was
degraded: its coaling stations no longer
determined the movements of foreign navies because oil-fueled ships
needed to be refueled less
frequently than their coal-burning predecessors and could be resupplied
at sea from tankers.
After 1918, Britain had two options. It could subordinate itself to the
United States to secure reliable
oil supplies in wartime. This was hardly advisable if, as policymakers in
both London and Washington
feared, U.S. oil reserves declined or domestic consumption increased to
the point where there was no
exportable surplus left. There was also the matter of Britain’s
outstanding war debt and shortage of
foreign exchange. The second option was to undertake costly efforts at
exploring and producing oil in
territories that were strategically vulnerable, politically unstable, and
taxed Britain’s already overextended military forces – not just in the
Middle East, but also in Burma and the East Indies. This was
quite a reversal of fortune from London’s perspective. One political
scientist describes Britain as the
“Saudi Arabia of coal” during the nineteenth century not just because of
the extent, but also the quality, of
its reserves (Welsh coal being ideally suited for naval boilers). This
is, if anything, an understatement: by

11

According to one 1921 article, coal accounted for 90% of the tonnage of
all of Britain’s exports. Quoted in: John
Maurer, “Fuel and the Battle Fleet: Coal, Oil, and American Naval
Strategy, 1898-1925,” Naval War College
Review 34: 6 (1981): 62.
12
Kenneth Pomeranz, Great Divergence: China, Europe, and the Making of the
Modern World Economy
(Princeton: Princeton University Press, 2000), 283-284.
13
“Ölstrategie,” Militär-Wochenblatt, 121. Jahrgang, Nummer 27 (15 January
1937).

525
virtue of its stranglehold over the international coal trade, Britain
exercised the power of life or death over
the world’s other navies, including the U.S. Navy.14
Although blessed with natural resources, one thing that the United States
did lack was coal reserves
on its West Coast suitable for use in naval boilers, which meant that
naval operations in the Pacific
depended upon shipments of coal from the Atlantic Coast by U.S. Navy
colliers around the Cape Horn
(the Panama Canal not being completed until 1914), refueling at British
coaling stations, and resupply at
sea from British colliers. Even with British assistance, on the eve of
the First World War, the U.S. Navy
was still incapable of supporting a coal-fueled fleet in the Pacific.
After the First World War, oil did more
than just solidify the supremacy of the U.S. Navy by ending its
dependence upon Britain’s coal-supply
network. The existence of plentiful, high-quality oil supplies in
California also radically upset the balance
of power in the Pacific in favor of the United States, at the expense of
both Britain and Japan. As one
historian concludes, “Oil would be the foundation of American overseas
expansion much as coal served
to underpin British imperial policy.”15
Britain did derive some advantages from oil. The major British oil
companies, Royal Dutch/Shell and
Anglo-Persian/Anglo-Iranian, earned valuable foreign exchange and
improved Britain’s balance of
payments by reducing its imports of oil denominated in dollars. Moreover,
successive British
governments sought to use oil to offset the costs of their expanded,
post-WWI empire in the Middle East.
That such schemes were failures is less important than the fact that they
were needed in the first place –
they demonstrate that London recognized that it had to formulate a new
grand strategy to take into
account its unfavorable economic and strategic position in a world
denominated by access to oil.
The argument here is not that Britain made the wrong choice in 1912 when
the Royal Navy shifted to
oil. Considering Britain’s political, economic, and strategic position in
the world by the twenty-first
century as a “winner” of the world wars relative to that of “losers” such
as Germany and Japan, we need
to ask ourselves whether terms such as “victory” or “defeat” mislead as
much they explain. For Britain, in

14
15

Ian Lesser, Resources and Strategy (Basingstoke: Macmillan, 1989), 25.

Maurer, “Battle Fleet,” 60-74 (quotation from pg. 73).

526
one vital regard, winning or losing either of the world wars turned out
to be irrelevant over the long run,
as neither the victories of 1918 nor 1945 did anything to forestall the
disintegration of the British Empire.
Britain’s days as a world power were already numbered in 1912 whether it
switched to oil or stuck with
coal. Neither option was especially palatable, and both of them would
have sooner or later resulted in the
erosion of British strength. Although it had some control over the
timing, London could not indefinitely
delay the conversion of the Royal Navy from burning coal to oil due to
advances in naval technology, for
a coal-burning fleet would have been at a major tactical disadvantage
against oil-fueled rivals. Likewise,
achieving energy security by embracing rather than fighting its
dependence upon the United States made
sense in view of Britain’s overall relative decline, and it was certainly
more advisable than placing
Britain’s energy security in the hands of resentful clients such as
Persia or Iraq. But the end result was the
same: the end of Britain’s reign as an independent great power.
Germany was hardly in a better position, even if its synthetic petroleum
and domestic oil industries
provided it with a margin of security unavailable to its rival across the
English Channel. Unlike Britain, it
could not even consider relying on overseas imports during wartime.
Germany’s remarkable military
successes between 1939 and 1941 also ended up exacerbating its economic
weaknesses by forcing it to
supply Axis Europe with raw materials that had previously come from
overseas.16 Germany could and did
manage to scrape by thanks to oil imports from Romania and synthetic
fuel, but neither option was ideal.
German analysts had deluded themselves into thinking that Romania could
be a reliable wartime supplier
in spite of ample evidence that oil production there had peaked in 1936.
The Third Reich proved
incapable of arresting this downward trend, not the least because Romania
had no interest in turning over
its oil industry to a new set of foreign owners or losing the diplomatic
and economic leverage that came
from being the only oil-producer of consequence in Europe. Coercion was
out of the question – the last
time Germany occupied Romania in 1916, an Anglo-French demolition team
sabotaged the oilfields so
thoroughly that the Central Powers were unable to restore prewar rates of
production before the war

16

A point that stressed in: Adam Tooze, The Wages of Destruction: The
Making and Breaking of the Nazi Economy
(New York: Viking, 2007), 411-420.

527
ended. After 1939, the Third Reich had no option except to expend
inordinate amounts of resources to
secure and transport relatively small quantities of oil.
Likewise, reliance upon synthetic fuel was a dangerous gambit that
imposed tremendous burdens
upon Germany’s economy without guaranteeing its long-term energy
security. Germany invested billions
of Reichmarks, millions of tons of coal and steel, and the labor of tens
of thousands of skilled and slave
laborers to construct its synthetic fuel industry. Even at peak
production, however, the synthetic fuel
plants could cover barely half of Germany’s petroleum requirements, which
were already tiny compared
to those of the other Western industrialized nations. The vast synthetic
production facilities, which often
produced a variety of synthetic products besides petroleum, including
rubber or chemicals such as
ammonia and methanol, were also vulnerable to bombing. Production could
even be disrupted indirectly
by attacks on the railway lines and distribution hubs that supplied these
facilities with the coal and steel
they needed to function, and which carried their output to consumers
across Axis Europe.17
During and after the war (usually on the basis of the findings of the
United States Strategic Bombing
Survey), many analysts argued that Germany developed Blitzkrieg as a
means of overcoming its resource
and manpower deficiencies.18 The concept actually has two meanings, one
at the level of tactics and
operations, the other for strategy and economics. In the case of the
former, we are speaking of the
revolutionary application of tanks supported by mechanized infantry and
close air-support that interwar
theorists (in Germany and elsewhere) designed to overcome the stalemate
of the First World War, and
which supposedly brought France to its knees in six weeks. In the case of
the latter definition, we are
17

For additional information concerning the extent of prewar capital,

material, and labor investment in the German
oil industry (both natural and synthetic), as well as detailed
information concerning production, imports, and
consumption, see: Chiefs of Staff Committee, Technical Sub-Committee on
Axis Oil, Oil as a Factor in the German
War Effort, 1933-1945, 08 March 1946, A.O. (46) 1, BNA, CAB 121/418;
Office of the U.S. High Commissioner
for Germany, Economics Division, Decartelization Branch, “The German Oil
Industry,” 04 December 1946, NARA,
Record Group 466: Office of the High Commissioner for Germany, Office of
General Counsel, Decartelization
Division, Cartel Subject Files, 1947-55, Box 47; United States Strategic
Bombing Survey (USSBS), The German
Oil Industry: Ministerial Report, Team 78 (Washington, DC: U.S. GPO,
1945), 22-24; and USSBS, Oil Division:
Final Report (Washington, DC: U.S. GPO, 1945), 14-16.
18
Although the term was, in fact, coined by the German military before the
war, it into entered the popular
imagination thanks to Western propagandists trying to excuse the
incompetence of the British and French high
commands during the invasion of France and the Low Countries by
exaggerating the prowess of the German armed
forces. Karl-Heinz Frieser, The Blitzkrieg Legend: The 1940 Campaign in
the West (Annapolis: Naval Institute
Press, 2005), 4-11.

528
referring to the idea Germany deliberately contrived to fight a series of
short wars in 1939 until it
achieved the mastery of Europe because it lacked the economic resources
to fight a single, long war on
multiple fronts.19 Germany’s economic resources would also be only
partially mobilized to ease the
burden on the German civilian population, so as to ensure their loyalty
and avoid a repeat of 1918. Each
military campaign from the invasion of Poland to Operation Barbarossa was
designed to be selfsupporting and timed in such a way as to allow Germany
to gather its economic resources before
launching itself at its next opponent. The so-called
“Blitzkriegswirtschaft” finally gave way to a “total
war” only after the failure of Barbarossa and Albert Speer’s appointment
as Armaments Minister.20
If there was one “fundamental lesson” that “the military and economic
geniuses of the Reich” had
learned from the last world war, according to one astute U.S. analyst, it
was “that under no circumstances
should Germany be forced into a long war.”21 He estimated that Germany’s
petroleum requirements
during its victorious campaigns between September 1939 and June 1941
totaled around 13,500,000
barrels, which worked out to less than one-quarter of its prewar
consumption – three or four days of U.S.
production. The aforementioned analyst even surmised that Germany “came
out ahead of the game,”
since he estimated that it managed to capture about 20,000,000 barrels in
France and the Low Countries.22
19

The idea that Germany was pursuing a Blitzkrieg strategy due to its lack
of oil first appeared in the writings of the
petroleum economist (and future U.S. intelligence analyst) Walter Levy in
1940/41: “When it was realized that the
material requirements would be so enormous… it becomes clear to the
strategist that fighting on such a scale would
only be possible in intervals and would always have to be interrupted by
breathing spaces, during which stocks for
short [and] heavy campaigns could be accumulated. The decision must thus
be obtained in short and heavy battles
[…].” Walter Levy, “Oil and War,” 09 May (or 05 September) 1941, NARA,
Record Group 169: Records of the
Foreign Economic Administration, Entry 360, Box 2191.
20
The classic formulations of this argument may be found in: Nicholas
Kaldor, “The German War Economy,”
Review of Economic Studies 13: 1 (1945-1946): 33-52; Burton Klein,
Germany’s Economic Preparations for War
(Cambridge: Harvard University Press, 1959); and Alan Milward, German
Economy at War (London: Athlone
Press, 1965). See also: W.G. Jensen, “The Importance of Energy in the
First and Second World Wars,” Historical
Journal 11: 3 (1968): 545-554; and Lesser, Resources and Strategy, 70-72.
21
Walter Levy, “The Paradox of Oil and War,” Fortune (September 1941),
69ff, American Heritage Center
(University of Wyoming), Papers of Walter Levy (hereafter cited as: Levy
Papers), Box 1; reprinted in: Walter
Levy, Oil Strategy and Politics, 1941-1981 (Boulder: Westview Press,
1982), 9.
22
Levy, “Paradox of Oil and War,” 14-15; Levy, “Oil in this War’s
Strategy,” no date (circa late-1940, early-1941);
Levy, “Petroleum’s Part in Axis Strategy,” World Petroleum 12: 7 (July
1941), 39-43; and Levy, “Oil Drives
Hitler’s Army,” article manuscript dated March 1942; the latter three in:
Levy Papers, Box 1. The 20,000,000 barrel
figure turned out to be exaggerated. The British Government estimated
that the Germans captured 550,000 tons of
oil in Norway, Denmark, Holland, and Belgium (3,850,000 barrels). A.G.
(Arthur Greenwood), “The Economic
Consequences of a Complete or Partial Collapse of French Resistance:
Memorandum by the Minister without
Portfolio,” 17 June 1940, W.P. (G) (40) 155, BNA, CAB 67/7/5. The
Germans, however, acquired only 800,000

529
Neither definition of Blitzkrieg is entirely accurate. The Germans rarely
used the term, but analogous
concepts such as Bewegungskrieg (war of movement) had a long pedigree in
Prussia-Germany that dates
back at least to Frederick the Great. The Prussian Army had a tradition
of making do with less. By virtue
of its exposed position in the center of Europe, small population prior
to unification and industrialization,
flat terrain, and lack of natural resources, Prussia, which did not even
have contiguous borders until after
the acquisitions from the Wars of Unification, had to a make a virtue out
of necessity. Prussia’s strategic
predicament could be turned into an advantage, at least in the short run,
if its army made effective use of
interior lines of communication to strike at its more numerous and
better-equipped enemies quickly
before they had a chance to coalesce. The emergence of the oil-fueled
triad of combined arms (tanks,
mechanized infantry, and airplanes), like railroads and telegraphs before
them, allowed practitioners of
the German “way of war” to fight more effectively the kinds of short,
sharp battles of encirclement and/or
annihilation Prussia-Germany needed to win if it was to deny its enemies
the time to make good on their
numerical, economic, and materiel superiority. German officers served an
institution that even before
1918 already valued the key tenets of Blitzkrieg/Bewegungskrieg: speed,
surprise, tactical flexibility,
mobility, and most importantly, aggression. The dreaded alternative was a
static “positional warfare”
(Stellungskrieg) that would gradually erode Germany’s tactical and
operational advantage until it was at

tons of “booty” (Beute) from Norway, Holland, Belgium, and France, not
including supplies captured by the
German armed forces in the field. The breakdown was: 363,000 tons of
gasoline; 65,000 tons of diesel fuel; 222,000
tons of aviation fuel; and 150,000 tons of fuel oil. OKW,
Wehrwirtschafts- und Rüstungsamt (WiRüAmt), Stab
Z/SR, “Die deutsche Treibstoffversorgung im Kriege. Abgeschlossen um die
Jahreswende 1941/42. Versuch einer
Darlegung der Gesamtproblematik unserer Treibstoffversorgung im Kriege
unter Verzicht auf die Darstellung der
Einzelheiten,” 16 February 1942, T-77/668 (Wi/VI. 216). Before the war,
it was an article of faith that France had
pursued a conscientious policy of accumulating large war reserves, since
it lacked either the extensive overseas oil
concessions of Britain or sufficient coal to synthesize into petroleum
like Germany. G.F., “Treibstoffe auf Vorrat,”
Vierjahresplan, 1937: VII; and “Aufgaben und Methoden der
Treibstoffpolitik,” Vierjahresplan, 1939: IV. The
Italians were astonished by the dearth of French reserves in the summer
of 1940, having believed that the French
Navy possessed “underground lakes” of petroleum in Tunisia and huge
reserves in Toulon. In reality, France had
been dependent upon shipments from Iraq, where the British and U.S.
partners in the Iraq Petroleum Company
determined production according to their commercial requirements, while
the major oil companies had thwarted the
accumulation of anything larger than a three-month national reserve
within France during the 1920s. Gregory
Nowell, Mercantile States and the World Oil Cartel, 1900-1939 (Ithaca:
Cornell University Press, 1994), 252-262
and 275-276.

530
the mercy of the enemy’s numerical and materiel superiority.23 What
passed for grand strategy within the
German military leadership before the Third Reich was fighting total wars
for limited aims: the maximum
application of military force against an enemy to convince them as
quickly as possible to seek a
negotiated peace rather than resort to extraordinary measures such as a
“people’s war.”24
Even amid the carnage of the First World War, “the German army had been
the most flexible and
innovative of the armies that had engaged in the 1914-1918 war.” The
necessity of rebuilding the military
from scratch after Versailles without being burdened by obsolete arms
encouraged German planners to
“concentrate upon a weapon’s future possibilities rather than its
immediate capabilities.” Similarly,
Germany’s indefensible borders and tiny conventional forces forced its
military to embrace a flexible
doctrine of mobile defense and counterattack.25 German generals also
needed little prompting to embrace
the technical developments of the First World War, many of which
complemented the existing mindset of
Germany’s military leadership: “[The] internal combustion engine was not
altering the parameters of
strategy but restoring them. Prospects for decisive victory, as opposed
to bean-counting attrition, seemed
to be reemerging.”26

23

Robert Citino, German Way of War: From the Thirty Years’ War to the Third
Reich (Lawrence: University Press
of Kansas, 2005). The political and social consequences of the failure of
Bewegungskrieg were also troubling. In
such an event, Germany’s only hope would be the adoption of the levée en
masse. This would have undermined the
leadership pretensions of Germany’s aristocratic officer-class, which as
a whole remained hostile to the idea of
privileging merit over social status until Second World War. Ironically,
the regime that finally institutionalized the
kinds of military reforms articulated by Prussian liberals during the
Napoleonic Wars such as Gerhard von
Scharnhorst that rewarded “outstanding bravery and presence of mind” or
“Selbständigkeit” (self-reliance) was the
Third Reich. MacGregor Knox, Common Destiny: Dictatorship, Foreign
Policy, and War in Fascist Italy and Nazi
Germany (Cambridge: Cambridge University Press, 2000), 186-226. See also:
David Schoenbaum, Hitler’s Social
Revolution: Class and Status in Nazi Germany (Garden City: Doubleday,
1966), 234-274.
24
Dennis Showalter, “German Grand Strategy: A Contradiction in Terms?”
Militärgeschichtliche Mitteilungen 58
(1990): 65-102; and Dennis Showalter, “Total War for Limited Objectives:
An Interpretation of German Grand
Strategy,” in: Grand Strategies in War and Peace, ed. Paul Kennedy (New
Haven: Yale University Press, 1991),
105-123.
25
Williamson Murray, “Germany Army Doctrine, 1918-1939, and the Post-1945
Theory of ‘Blitzkrieg Strategy,” in:
German Nationalism and the European Response, 1890-1945, ed. Carole Fink,
Isabel Hull, and Williamson Murray
(Norman: University of Oklahoma Press, 1985), 71-79. Of course, the
German military’s tactical and operational
virtuosity was balanced by a staggering incompetence in matters such as
intelligence gathering and assessment,
logistics, industrial mobilization, and overall strategy – all areas in
which “they were quite literally at sea.”
Williamson Murray, The Change in the European Balance of Power, 1938-
1939: The Path to Ruin (Princeton:
Princeton University Press, 1984), 360-361; Williamson Murray, German
Military Effectiveness, 1-38; and
Williamson Murray, “Net Assessment in Nazi Germany,” in: Calculations:
Net Assessment and the Coming of
World War II, ed. Alan Millet and Williamson Murray (New York: Free
Press, 1992), 60-96.
26
Showalter, “Total War for Limited Objectives,” 120.

531
The downside of this mentality – an almost fanatical focus on tactical
and operational skill – was that
Germany’s military leadership abrogated any responsibility to think
critically about Germany’s grand
strategy, or even its military strategy for that matter, which it
frequently confused with operations. Rather
than weighing means and ends, the military stuck to its area of
expertise, perhaps as a means of
preserving its political independence, since military interference within
traditionally civilian areas of
policymaking would have risked reciprocal meddling in military affairs by
politicians. In exchange for
not commenting on matters of grand strategy in peacetime, German officers
expected that political and
economic considerations would be subordinated to “military necessity” in
wartime. The ramifications
would be sorted out by the civilian leadership after the military had
achieved a decisive military victory.27
At the strategic level, it is not really possible to plan for a short
war, otherwise every nation would.
As for economics, historians have undermined the idea of a
“Blitzkriegswirtschaft” before Speer’s
appointment as Armaments Minister by demonstrating that the Third Reich
was largely mobilized from
the start of the war, and that the “Speer miracle” of 1942-45 was the
product of investments made
beforehand.28 The apparent effortlessness by which Germany secured its
unbroken string of military
victories between 1939 and 1941 has misled many then and since into
thinking that they were the product
of design rather than contingency.29 The fact that the National Socialist
regime had devoted vast resources
to the development of synthetic substitutes for many raw materials and
stockpiles of critical war materiel

27

Besides the aforementioned works by Williamson Murray, see also: Isabel

Hull, Absolute Destruction: Military
Culture and the Practices of War in Imperial Germany (Ithaca: Cornell
University Press, 2005); and Jehuda
Wallach, The Dogma of the Battle of Annihilation: The Theories of
Clausewitz and Schlieffen and their Impact on
the German Conduct of the Two World Wars (Westport: Greenwood Press,
1986). For an excellent sampling of
some of the recent scholarship concerning German military strategy during
the Second World War, see the
contributions by Martin van Creveld, Karl-Heinz Frieser, and Williamson
Murray in Part III of: Die Wehrmacht:
Mythos und Realität, ed. Rolf-Dieter Müller and Hans-Erich Volkmann
(München: Oldenbourg, 1999).
28
Adam Tooze “No Room for Miracles: German Industrial Output in World War
II Reassessed,” Geschichte und
Gesellschaft 31 (2005): 439-464; and Tooze, Wages of Destruction, 552-
589.
29
The idea that Hitler intended to use the German military as an instrument
for waging Blitzkriege against France
and then the Soviet Union in order to establish a German-dominated
“Greater Economic Area”
(Großraumwirtschaft) in Western Eurasia before the British and the
Americans could bring their superior economic
strength to bear against the Axis – the so-called “Stufenplan” (step-by-
step) – is one of the more contentious
elements of Andreas Hillgruber’s remarkable analysis of Hitler’s grand
strategy: Hitlers Strategie: Politik und
Kriegsführung, 1940-1941 (Frankfurt am Main: Bernard & Graefe Verlag für
Wehrwesen, 1965). Although Hitler
and the German Army thought Germany could wage such a campaign against
the Soviet Union in 1941, there is no
evidence that either intended to wage a “Blitzkrieg” against France in
1940.

532
before 1939 proves that the Third Reich was preparing to fight a war of
greater duration and intensity than
allowable under a “Blitzkrieg” strategy.30
The timing and conduct of “Case Yellow” (Fall Gelb) – the invasion of
France and the Low
Countries, and the prototypical Blitzkrieg campaign – in May 1940 was
accidental: Hitler had no
intention of biding his time after the subjugation of Poland and tried
browbeating the German Army into
launching an offensive against France as quickly as possible. Only a
combination of bad weather,
opposition by the military (which wanted time to rest and refit while
absorbing the lessons of the Polish
campaign), and the compromising of the German war plan in January 1940
(after a plane carrying it
accidentally landed in Holland) convinced Hitler to postpone the
offensive.
Moreover, the extent of Germany’s success against France in 1940 has
obscured the fact that the
Germans had been extraordinarily lucky and never expected such a swift
and decisive victory.31 The
original 1939 war plan was basically a repeat of the failed Schlieffen
Plan and had much more modest
aims: the acquisition of ports and airbases along the English Channel,
from where Germany would mount
an aerial and naval campaign against Great Britain.32 The magnitude of
the victory in June 1940 was
exhilarating to the civilian and military leadership contributed to their
excessive optimism by the eve of
Operation Barbarossa, which comes as close as any campaign fought by
Germany during the Second
World War to being a “Blitzkrieg” operation, since German planners
expected from the start to win it
within six to eight weeks.33

30

A concise refutation of the Blitzkrieg-as-strategy thesis on military

grounds may also be found in: Murray,
German Military Effectiveness, 217-228.
31
Besides Frieser, a good demolition of the operational myth of Blitzkrieg
during the 1940 campaign against France
and the Low Countries may be found in Robert Doughty’s “Myth of the
Blitzkrieg,” in: Challenging the United
States Symmetrically and Asymmetrically, ed. Lloyd Matthews (Carlisle
Barracks: U.S. Army War College, 1998),
57-79; and Williamson Murray’s “May 1940: Contingency and Fragility of
the German RMA,” in: The Dynamics of
Military Revolution, 1300-2050, ed. Macgregor Knox and Williamson Murray
(Cambridge: Cambridge University
Press, 2001), 154-174.
32
Murray, Balance of Power, 334-340.
33
The key work on the subject of Blitzkrieg is Frieser, Blitzkrieg Legend,
passim (esp. 320-353). Frieser offers the
provocative thesis that “the German conception of Blitzkrieg was equally
revolutionary and reactionary,” in that it
represented the harnessing of “the most modern methods” of tactics with
an “anachronistic view of war” when it
came to strategy: “In the age of industry, in which two world wars were
decided in terms of strategy, and indeed on
the assembly lines of factories, Hitler and his generals hoped to be able
to decide the war through purely military

533
At the same time, this work should not be construed as a wholesale
assault on the “Blitzkrieg” thesis.
The leadership of the Third Reich (down the line from Hitler to military
and civilian experts such as
Georg Thomas, Ernst Rudolf Fischer, and Alfred Bentz) understood that
autarky was not economically
viable even if it was scientifically feasible due to the capital, labor,
and material demands. German
petroleum policy, like the rearmament effort as a whole, was explicitly
designed to derive maximum
value from Germany’s short-term advantages (its scientific skill at
producing synthetic fuel) in order to
accrue long-term strategic dividends through conquest.
Germany’s prospects in 1939 nonetheless appeared inauspicious. In spite
of massive investments of
scarce raw materials, labor, and capital that could have been devoted to
other sectors of the economy, the
German synthetic fuel industry could not satisfy Germany’s petroleum
consumption. Even allowing for
the fact that Germany’s per capita income in 1939 was only two-thirds
that of Britain and less than half
that of the United States, per capita consumption of petroleum in Germany
lagged even farther behind the
other industrialized nations of the Euro-American world.34 At the start
of the Third Reich, annual per
capita oil consumption was only forty liters, against eighty-five liters
in France, 144 in Britain, and 609
liters in the United States.35 As late as 1938, Germany ranked 27th in
the world in terms of per capita oil
consumption at 0.67 barrels – one-thirteenth that of the United States.36
But to condemn German planners for failing to achieve autarky would be
unreasonable, since that
would imply that such grandiose objectives were feasible in the first
place. It cannot be stressed enough
that the German leadership never sought autarky but rather autarchy: the
ability to take by force what
Germany could not produce for itself. While it fell short of providing
Germany with energy independence
by 1939, synthetic fuel did facilitate rearmament by limiting oil
imports, which conserved foreign
means upon the battlefield.” Karl-Heinz Frieser, “Die deutsche
Blitzkriege: Operativer Triumph – strategische
Tragödie,” in: Die Wehrmacht, ed. Müller and Volkmann, 182-196.
34
Richard Overy, “Mobilization for Total War in Germany, 1939-1941,”
English Historical Review 103: 408
(1988): 619.
35
Dietrich Eichholtz, Deutsche Politik und rumänisches Öl, 1938-1941: Eine
Studie über Erdölimperialismus
(Leipzig: Leipziger Universitätsverlag, 2005), 8.
36
USSBS, German Oil Industry, 7. Germany’s production that year was only
one-fifteenth that of the United States:
7,500,000 tons vs. 164,000,000 tons USSBS, Overall Report (European War),
(Washington, DC: U.S. GPO, 1945),
39.

534
exchange for the purchase of those commodities that could not be produced
at home. Synthetic fuel
production also promoted horizontal integration across German industry by
stimulating demand for
German steel and coal even before rearmament began, while complementing
the production of other
essential synthetic products such as ammonia, methanol, and later rubber.
Horizontal and vertical integration throughout the German war economy,
which linked the synthetic
fuel and chemical industries, steel, ore, and coal producers, finance,
and domestic oil producers and
refiners, turned out to be a source of both immense strength and
weakness. By harnessing Germany’s
limited means to its unparalleled strengths in scientific research and
development, the Third Reich
managed to punch above its weight as a resource-starved continental
power. This process of economic
integration and centralization also established connections across
various industrial sectors that, in the
event of a German victory in the Second World War, would have allowed the
country to exercise a
dominant position over the provision of energy within Western Eurasia
particularly through IG Farben’s
control of hydrogenation and the emergence of the Kontinentale Öl AG. The
drawbacks only became
evident in the summer and autumn of 1944, when Allies bombing induced a
systemic failure across the
German economy by striking at certain vulnerable production and
transportation nodes. For example,
besides disrupting fuel production, attacks against hydrogenation
facilities also reduced the output of
synthetic nitrates, creating a ripple effect throughout the German war
economy by impairing the
production of both munitions and fertilizers.
Control of the oilfields of the Caucasus and the Middle East between 1940
and 1942 also constituted
vital elements of the Third Reich’s plan to create an economically and
racially self-contained Greater
German empire that would wage a decades-long struggle against the United
States and the British Empire
for world domination after the subjugation of the Soviet Union. Although
France and the Low Countries
had been neutralized at minimal cost, Germany had only won an incomplete
victory. The Third Reich still
lacked the means to bring the war in the west to close, either through
diplomacy or force, since neither the
German Air Force nor the Navy possessed the means to subdue Britain.
Paradoxically, Germany’s final
defeat was sealed within weeks of its greatest operational and strategic
victory – a fact that did not go
535
unnoticed even at that time. As a young Walter Levy, later of the pre-
eminent petroleum economists of
the twentieth century, observed in 1941: “[…] Germany’s hopes that a
decisive victory in the West would
mean the end of the war have been crudely shattered in June, 1940, and
the Reich is now responsible for
the oil supplies of practically the whole European Continent.”37 Within
the course of just a six-week
campaign, Germany had come down with a terminal case of “imperial
overstretch.”
Although gravely weakened following Dunkirk, Britain would draw strength
from its empire and the
United States while Germany looked on helplessly. Germany could strike at
Britain along the periphery,
but any successes in the Mediterranean or the Middle East would not force
Britain to seek terms, while
frittering away German resources and most importantly time to no good
end. Most troubling from the
perspective of the Third Reich, the United States would continue to aid
Britain, and both it and the Soviet
Union would continue to expand their militaries and war industries. Hence
Hitler’s decision in December
1940 to strike at the Soviet Union, which was motivated in no small part
by the need to expand
Germany’s oil supply now that it had to meet both its own needs and those
of occupied Europe, which
had previously depended on overseas imports that were no longer
forthcoming.
Geography’s curse upon Germany was two-fold: not only had it deprived the
Third Reich of adequate
supplies of numerous natural resources by stranding it in the midst of
resource-poor Europe, but the
physical geography of Western Eurasia also worked to its strategic
disadvantage. Every military triumph
only weakened Germany by extending its lines of supply, increasing the
number of dependents claiming a
share of Axis Europe’s paltry economic reserves, and swelling the ranks
of the Allies – all without
reducing the materiel gap vis-à-vis the Allies. Even if Germany had
managed to seize two economic
assets that could have altered the strategic calculus in its favor – the
oilfields of the Caucasus and the
Middle East – the geographical obstacles and extraordinary material
requirements ruled out their effective
exploitation in wartime. Meanwhile, geography – from the English Channel
to the vast expanses of the
Soviet Union – afforded the European Allies’ varying degrees of physical
security that checked

37

Levy, “Oil and War,” 09 May (or 05 September) 1941, RG 169, Entry 360,
Box 2191; and Walter Levy, “Oil
Drives Hitler’s Army,” March 1942, Levy Papers, Box 1.

536
Germany’s relative operational superiority. Even worse, the most
important military and economic
partner within the Grand Alliance – the United States – lay entirely
beyond the reach of the Third Reich.
Ultimately, the rise of oil narrowed rather than broadened the range of
alternatives available to either
Britain or Germany. Both sides had profited immensely during the period
of industrialization in the
nineteenth century from the fact that they could fall back on large
domestic reserves of coal to power their
burgeoning industries. This favorable situation did not last once the
world entered the Age of Oil. The
facts of oil geography are stubborn ones and proved especially nettlesome
for the European powers.
Neither the British nor the Germans could dismiss oil’s significance, but
the only options available to
them in the absence of vast domestic oil reserves besides overseas
imports – synthetic production,
stockpiling, and intimidation of suppliers – were undesirable for various
reasons.38 Both sides had the raw
materials necessary to establish a synthetic fuel industry, but the costs
were too high in Britain’s case
because of path dependency – in this instance, the vast infrastructure
established at home and abroad to
exploit oil produced in exotic locales such as Mexico, Venezuela, the
Middle East, and the East Indies.
Assuming that the technical hurdles to synthetic production on an
industrial scale had been surmounted,
Britain could not afford to maintain its extensive overseas commitments
to secure access to foreign
sources of oil while subsidizing the development of a domestic synthetic
fuel industry. Moreover, only
Britain and Germany had the luxury of even considering such a ruinously
expensive program, as no other
European nation had the requisite supplies of coal, steel, capital,
technical expertise, and labor.
Stockpiling was a stopgap measure that was unlikely to accomplish
anything other than delaying
defeat in the event that all other supplies were cut off. Finally,
intimidation of suppliers yielded meager
results: it was hard to hold an oil-producing nation hostage if pulling
the trigger ensured that neither side
had any oil. Accordingly, Germany had to cajole Romania into being a
reliable oil supplier without daring
to threaten military action since it could not afford a repeat of what
happened during the First World War.
The same situation applied in the case of the Soviet Union in 1942, where
German “Petroleum
Commandos” proved incapable of producing more than a trickle of oil
during their brief occupation of
38

David Deese, “Oil, War, and Grand Strategy,” Orbis 25: 3 (1981): 551.

537
Maikop between October 1942 and January 1943.39 Although firm statistics
are hard to come by, it seems
likely that the Germans extracted less oil by force from the occupied
eastern territories between 1941 and
1944 than they received through trade during the two years of the Nazi-
Soviet alliance.
The history of oil provides additional proof that the Second World War
was fundamentally a contest
of and for resources (economic, natural, financial, and technological),
wherein traditional military factors
such as strategy, operations, and tactics played a supporting rather than
decisive role.40 By 1942 the
United States, Soviet Union, and Britain boasted of a combined GDP (in
1990 dollars) that was double
that of Greater Germany, Japan, and Italy ($1,906,000,000,000 vs.
$903,000,000,000), while the 1938
GDP of pro-Allied neutrals was 1.7 times greater than pro-Axis ones
($259,400,000,000 vs.
$151,000,000,000). Neither the Allied advantage in manpower in 1942 (1.5
times on the Eastern Front
and 1.1 times on the Western and Pacific fronts) nor 1938 per capita GDP
($4,184 vs. $3,598 when
considering only the major powers) was decisive. The real disparity was
in terms of materiel output:
between 1942 and 1944, the United States, Britain, and Soviet Union
produced three times as many rifles,
machine guns, artillery pieces, and combat aircraft as did the Axis, and
five times as many tanks and
naval vessels. The U.S. contribution was spread equally except for its
overwhelming contribution to naval
production, while the Soviet Union concentrated more on small arms and
tanks, and Britain on artillery.41
Even assuming that Germany could have made more effective use of the
economic assets of Axis
Europe, there existed an insuperable gulf between Germany’s capacity to
produce more weapons (which
it started to do after 1942) and its ability to utilize them effectively
due to the shortage of petroleum.
Notwithstanding the recent assertion of one historian who claims that
“[by] the summer of 1942 the
resources of the area under the military control of the Axis Powers were
in no way substantially inferior

39

Roughly 1,000 tons of oil between December 1942 and January 1943 at the
cost of approximately 10,000 tons
worth of equipment that had to be abandoned when Army Group A withdrew
from the Caucasus following the
debacle at Stalingrad. Albert Gunther, “Oil Fields Investigation, Part V,
Section 1: Russia (U.S.S.R.), The Caucasus
Expedition, 1942-1943,” March 1946, BNA, WO 252/1151
40
It appears that historians are gradually coming to recognize the
centrality of resources in the Second World War.
In spite of its numerous factual errors, Lizzie Collingham’s The Taste of
War: World War Two and the Battle for
Food (London: Allen Lane, 2011) is an invaluable and overdue
contribution.
41
Harrison, “Economics of World War II,” 1-42.

538
to those controlled by the Allies,” Germany never commanded more than a
fraction of the petroleum at
the disposal of the Allies.42 In 1943, Germany’s total supply – domestic
crude and synthetic oil
production, plus imports from Romania and elsewhere in Europe – peaked at
roughly 80,000,000 barrels
(11,300,000 tons).43 By contrast, U.S. oil production that year reached
4,250,000 barrels per day, or
1,505,613,000 barrels over the entire year – more than 133 times the
German figure.44 Since supplies of
oil were abundant, the only meaningful obstacles to the Allies’
exploitation of their energy superiority
were logistical.
The Allies could translate their economic superiority into military
strength precisely because they
never lacked the petroleum products essential for modern warfare.
Economic superiority, once redirected
to the production of war materiel, gave the Allies the quantitative edge
necessary to blunt the tactical and
operational superiority of the Axis during the crucial “hinge years” of
the war (1941-1943), when they
first blocked Germany’s desperate attempts to win the war in the Soviet
Union and North Africa, before
turning the tables once their own commanders and troops had acquired the
skills necessary to compete
against their more experienced adversaries. The example of oil therefore
bolsters one historian’s
observation that “[the] Allies won the Second World War because they
turned their economic strength
into effective fighting power.”45 Oil was an essential ingredient to this
formula because it gave the Allies
the means to “bridge” the gap between their economic strength and their
fighting power.46
Germany, on the other hand, gambled that it could leverage its brief
window of opportunity in terms
of superior fighting ability and head start at rearmament into decisive
victories first against its neighbors
(Poland and France) and later the Soviet Union before its economically
superior foes could mobilize their
economic might. Fighting power is, however, a wasting asset – it degrades
even during victories due to

42

Gerhard Weinberg, “Some Myths of World War II,” Journal of Military

History 75: 3 (2011): 702. Although
Weinberg does concede that “[the] wider issue of resources also needs a
more careful look.”
43
USSBS, Effects of Strategic Bombing on the German War Economy
(Washington, DC: U.S. GPO, 1945), 75.
44
Everette Lee DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum
Statistics (Dallas: DeGolyer and
MacNaughton, 2004), 5.
45
Richard Overy, Why the Allies Won (New York: W.W. Norton, 1995), 325.
46
Rear Admiral Henry E. Eccles, Logistics in the National Defense
(Harrisburg: The Stackpole Company, 1959),
41, 46-47, and 52-56. I am grateful to Scott Boorman for drawing my
attention to this source.

539
casualties and the expenditure of resources on the one hand, and by
giving opponents the opportunity to
practice their craft on the other. Once this qualitative edge had eroded,
the Axis were in dire straits
because both Germany and Japan lacked the economic means to confront
their opponents on anything
approaching equal terms. And even if the weapons had existed, there was
no petroleum to fuel them –
much less prepare soldiers to use them properly, as evidenced by the fate
of the raw German pilots thrust
into aerial combat over the Reich in 1944 without adequate training due
to a lack of fuel.47
The simple fact of the Allies’ industrial and raw materials superiority
does not mean that the outcome
of the Second World War was a foregone conclusion, only that the result
is inexplicable without taking
their economic advantages into consideration. One should be wary of
falling into the trap of economic
and geographical determinism by ascribing the outcome of the war
exclusively to the Allies’ access to
greater quantities of vital raw materials and human resources without
taking into account more intangible
factors such as superior management, political will, flexibility, and
even creativity.48 But leaving aside the
question of whether the Allies’ made better use of their economic and
human resources than the Axis, this
study has revealed the extent to which the exploitation of such assets
depended upon certain structural
factors such as the availability of oil that were beyond the control of
policymakers on either side.
Under most circumstances, the absolute (as opposed to relative) decline
of any great power is the
product of decisions by individual leaders or policymaking elites that
contribute to “imperial overstretch”
or worse.49 But Britain and Germany did not choose to decline because of
their shortage of oil – geology,
geography, and technological change had all conspired to put them in that
position. Recognizing the
gravity of their predicaments, both countries spent a generation trying
to escape the handicaps imposed
upon them by the unequal distribution of world oil reserves. The allure
of energy independence exerted a
47

USSBS, The Defeat of the German Air Force (Washington, DC: U.S. GPO,
1945).
See again: Overy, Why the Allies Won; and Paul Kennedy “History from the
Middle: The Case of the Second
World War,” Journal of Military History 74: 1 (2010): 35-51. Kennedy
seems to have come full circle: his earlier
works stressed the primacy of economic factors with little reference to
individuals. See especially: Paul Kennedy,
The Rise and Fall of the Great Powers: Economic Change and Military
Conflict from 1500 to 2000 (New York:
Random House, 1987).
49
Kennedy, Rise and Fall, xv-xvi. Although the phrase “imperial
overstretch” is associated with Kennedy’s Rise
and Fall, it was in fact Correlli Barnett who first used the term
(“strategic over-extension”) within the context of
British grand strategy in The Collapse of British Power (London: Eyre
Methuen, 1972).
48

540
tremendous pull on policymakers in both countries, forcing them to expand
their ambitions and
commitments well beyond their means, whether in the Middle East for
Britain or in the Soviet Union in
the case of Germany. In that sense, the quest for oil exerted an
ambiguous influence over grand strategy.
Sometimes it complemented existing ambitions, such as Britain’s wish to
preserve access to India through
the Middle East, or Hitler’s determination to exterminate “Judeo-
Bolshevism.” At other points, it
spawned policies that ran contrary to the status quo, such as the
purchase of shares in the Anglo-Persian
Oil Company by a Liberal Government, or the acquisition of foreign oil
reserves by the United States to
compensate for the failure of conservation at home.50
A consideration of oil as both the means and object of grand strategy
ultimately has great analytical
value because it shed light on one of the key factors that determined the
outcome of the great power
rivalries that convulsed the world during the first half of the twentieth
century. Among the most important
results by 1945 were the crippling of the European great powers and the
rise of the superpowers on the
peripheries of the industrialized core. By integrating the history of oil
and energy security into the
international history of the twentieth century, we can better appreciate
why the international system
evolved from a state of multipolarity into one of U.S.-Soviet bipolarity
and later outright U.S. hegemony.
Britain and Germany’s failure to win energy independence from rival great
powers paved the way for the
United States to assert global predominance earlier and to a greater
extent than would have been
conceivable at the start of the Second World War, before the devastation
of Europe, the Soviet Union,
China, and Japan. The accelerating mechanization of society and warfare
after the First World War
ensured that only nations with unfettered access to oil could hope to
impose their will upon the rest of the
world with any expectation of success. Once we grasp this fact, the
outcome of the great power
competition between 1918 and 1945, although not inevitable, was certainly
unsurprising.

50

David Painter, Oil and the American Century: The Political Economy of
U.S. Foreign Oil Policy, 1941-1954
(Baltimore: Johns Hopkins University Press, 1986).

541
Appendix
Bibliographical Essay
Only a handful of studies have examined the relationship between oil and
grand strategy in the
twentieth century. The most notable is Daniel Yergin’s The Prize, whose
chapters on the world wars,
unlike the rest of the book, move beyond the operations of the oil
industry to assess oil’s impact on the
evolving global balance of power.1 The Prize comes as close as any other
secondary source to being
indispensable to this study. I have therefore refrained from including
references this work in my footnotes
only because such citations would be superfluous. Nevertheless, there are
some limitations with The
Prize, the most important being that it is only as strong as its
secondary sources. For example, Yergin’s
chapters on the world wars are based on a limited number of English-
language secondary sources. In the
case of Germany, because his most important sources were the reports of
the U.S. Strategic Bombing
Survey, Yergin lavished attention on the synthetic fuel program, while
neglecting German oil imperialism
in the Caucuses and the Middle East. David Painter’s article on “Oil and
the American Century”
succinctly covers the important developments of the 20th century, but it
is focused on the post-1945
period.2 Not to be forgotten is the Federal Trade Commission’s pioneering
exposé on the operations of the
“International Petroleum Cartel” which is still an essential reference
work on the global operations of the
oil industry during the first half of the twentieth century.3
Beyond Yergin and Painter, the best overviews have been produced by
political scientists: David
Deese’s “Oil, War, and Grand Strategy”4; and Ian Lesser’s Resources and
Strategy.5 Both authors make
important theoretical observations, but their analysis is based on
outdated, English-language secondary
sources. Lesser’s work is also limited by the fact that he considered
strategy only under the narrow terms
1

Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New
York: Simon & Schuster,
1991).
2
David Painter, “Oil and the American Century,” Journal of American
History 99: 1 (2012): 24-39. See also: David
Painter, “Oil,” in: vol. 3 of Encyclopedia of American Foreign Relations,
ed. Alexander DeConde, Richard Dean
Burns, and Fredrik Logevall (New York: Scribner, 2002), 1-20.
3
U.S. Senate, Select Committee on Small Business, International Petroleum
Cartel (Reprint), 94th Congress, 1st
Session (Washington, DC: U.S. GPO, 1975).
4
David Deese, “Oil, War, and Grand Strategy,” Orbis 25: 3 (1981): 525-555.
5
Ian Lesser, Resources and Strategy (Basingstoke: Macmillan, 1989). See
also his Oil, the Persian Gulf, and Grand
Strategy (Santa Monica: Rand Corporation, 1991).
542
established by Basil Liddell Hart: “the art of distributing and applying
military means to fulfill the ends of
policy.” By his own admission, Lesser did “not systematically explore”
matters pertaining to foreign
relations or political economy “except as they bear directly on questions
of strategy.”6 W.G. Jensen’s
“The Importance of Energy in the First and Second World Wars” is dated,
but it deals with both oil and
coal and is still useful.7 My understanding of how vast economic
disparities between the belligerents
contributed to the outcome of the Second World War has been aided
immeasurably by the work of Mark
Harrison8 and Richard Overy,9 and I was pleasantly surprised by the
continuing relevance of Alan
Levine’s “Was World War II a Near-run Thing?”10
This study is fairly critical of British policymaking and doubtless bears
the imprint of “declinist”
works such as Corelli Barnett’s polemical The Collapse of British
Power,11 and Paul Kennedy’s The Rise
and Fall of British Naval Mastery12 and The Rise and Fall of the Great
Powers.13 But I believe that the
works of David Edgerton are indispensable to avoid falling prey to any
easy assumptions about British
decline since the late-nineteenth century.14 Williamson Murray’s skill at
blending comparative military,
diplomatic, and economic history, particularly in The Change in the
European Balance of Power, is a
model for my own scholarship.15
There are a number of studies of various aspects of pre-WWI and interwar
British oil policy. The best
one is still Geoffrey Jones’ State and the Emergence of the British Oil
Industry.16 But also of some value

Resources and Strategy, 4. Emphasis in the original.

W.G. Jensen, “The Importance of Energy in the First and Second World
Wars,” Historical Journal 11: 3 (1968):
538-554.
8
Mark Harrison, ed., The Economics of World War II: Six Great Powers in
International Comparison (Cambridge:
Cambridge University Press, 1998).
9
Richard Overy, Why the Allies Won (New York: W.W. Norton, 1995).
10
Alan Levine, “Was World War II a Near-run Thing?” Journal of Strategic
Studies 8:1 (1985): 38-63.
11
Correlli Barnett, The Collapse of British Power (London: Eyre Methuen,
1972).
12
Paul Kennedy, The Rise and Fall of British Naval Mastery (London: A.
Lane, 1976).
13
Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and
Military Conflict from 1500 to
2000 (New York: Random House, 1987).
14
David Edgerton, Warfare State: Britain, 1920-1970 (Cambridge: Cambridge
University Press, 2006); and David
Edgerton, Britain’s War Machine: Weapons, Resources, and Experts in the
Second World War (New York: Oxford
University Press, 2011).
15
Williamson Murray, The Change in the European Balance of Power, 1938-
1939, The Path to Ruin (Princeton:
Princeton University Press, 1984).
16
Geoffrey Jones, The State and the Emergence of the British Oil Industry
(London: Macmillan, 1981).
7

543
still are: Marian Kent’s Oil and Empire17 and Moguls and Mandarins18;
B.S. McBeth’s British Oil
Policy19; Helmut Mejcher’s “Die britische Erdölpolitik im Nahen Osten,
1914-1956,”20 Imperial Quest for
Oil,21 and The Struggle for a New Middle East in the 20th Century22; and
D.J. Payton-Smith’s contribution
to the British Government’s Official History of the Second World War.23
Only McBeth’s book provides a
complete survey of the entire interwar period. Although he is strong on
Venezuela, McBeth’s treatment of
“Britain’s efforts to achieve oil independence” from the United States is
misplaced at times. His cursory
treatment of the 1930s and British grand strategy results in an
incomplete appraisal of the reasons why
British policy failed. Charles More offers a well-written, albeit
eclectic history of the British oil industry
in the twentieth century in Black Gold, but since he relies largely on
secondary works and the official
histories of British Petroleum and Royal Dutch/Shell, the sections
covering the period before 1945 do not
make any original contributions. That the book’s subchapters are
organized thematically also obscures the
relationship between developments in the oil industry and official
British policy.24
The operations of the Anglo-Persian Oil Company (later Anglo-Iranian –
APOC/AIOC) are detailed
in R.W. Ferrier and J.H. Bamberg’s contributions to The History of the
British Petroleum Company.25
Ferrier’s work is overly sympathetic to APOC in terms of the company’s
relationship to Persia, and it
should be balanced against the more critical conclusions of Mostafa Elm
in Oil, Power, and Principle.26
We are still waiting for a history of Anglo-Iranian relations that
provides adequate attention to both sides
as well as third parties such as Russia and Germany. In the meantime, the
relevant chapters of the
17

Marian Kent, Oil and Empire: British Policy and Mesopotamian Oil, 1900-
1920 (London: Macmillan, 1976).
Marian Kent, Moguls and Mandarins: Oil, Imperialism and the Middle East
in British Foreign Policy, 1900-1940
(London: Frank Cass, 1993).
19
B.S. McBeth, British Oil Policy, 1919-1939 (London: Frank Cass, 1985).
20
Helmut Mejcher, “Die britische Erdölpolitik im Nahen Osten, 1914-1956,”
Vierteljahrschrift für Sozial- und
Wirtschaftsgeschichte 59: 3 (1972): 350-377.
21
Helmut Mejcher, Imperial Quest for Oil: Iraq, 1910-1928 (London: Ithaca
Press, 1976).
22
Helmut Mejcher, Struggle for a New Middle East in the 20th Century:
Studies in Imperial Design and National
Politics (Piscataway: Transaction Publishers, 2007).
23
D.J. Payton-Smith, Oil: A Study of War-time Policy and Administration
(London: HMSO, 1971).
24
Charles More, Black Gold: Britain and Oil in the Twentieth Century
(London: Continuum, 2009).
25
R.W. Ferrier, The Developing Years, 1901-1932, vol. 1 of The History of
the British Petroleum Company
(Cambridge: Cambridge University Press, 1982); and J.H. Bamberg, The
Anglo-Iranian Years, 1928-1954, vol. 2 of
The History of the British Petroleum Company (Cambridge: Cambridge
University Press, 1994).
26
Mostafa Elm, Oil, Power, and Principle: Iran’s Oil Nationalization and
Its Aftermath (Syracuse: Syracuse
University Press, 1992).
18

544
Cambridge History of Iran will have to suffice.27 The history of the
Burmah Oil Company (a key
shareholder in APOC/AIOC) is handled in: T.A.B. Corley, A History of the
Burmah Oil Company.28
Despite its coffee-table format and excessive graphics, the relevant
portions of the recent three-volume
history of Royal Dutch/Shell are invaluable in view of how difficult it
is for historians to gain access to
the company’s archive.29
The key work on the Royal Navy’s shift to oil and London’s purchase of a
controlling-interest in
APOC is still Marian Jack’s “The Purchase of the British Government’s
Shares in the British Petroleum
Company, 1912-1914.”30 Elizabeth Monroe has a chapter on the Middle East
and British oil policy until
the Suez Crisis, but it is dated, tends to be overly credulous of British
policy, and has many important
gaps.31 Likewise, Benjamin Shwadran’s The Middle East, Oil and the Great
Powers summarizes the key
issues but is now out of date.32 The recent literature on British
imperial history, although of great value in
terms of its scope and conceptual insights, has little to offer insofar
as oil and grand strategy is
concerned.33 The key secondary sources on Anglo-American competition over
Iraqi oil after 1918 are:

27

Peter Avery, Gavin Hambly, and Charles Melville, ed., From Nadir Shah to
the Islamic Republic, vol. 7 of The
Cambridge History of Iran (Cambridge: Cambridge University Press, 2008).
28
T.A.B. Corley, A History of the Burmah Oil Company, 1886-1924 (New York:
Heinemann, 1983).
29
Joost Jonker and Jan Luiten van Zanden, From Challenger to Joint Industry
Leader, 1890-1939, vol. 1 of A
History of Royal Dutch Shell (Oxford: Oxford University Press, 2007); and
Stephen Howarth and Joost Jonker,
Powering the Hydrocarbon Revolution, 1939-1973, vol. 2 of A History of
Royal Dutch Shell (Oxford: Oxford
University Press, 2007).
30
Marian Jack, “The Purchase of the British Government’s Shares in the
British Petroleum Company, 1912-1914,”
Past & Present 39 (1968): 139-168.
31
Elizabeth Monroe, Britain’s Moment in the Middle East, 1914-1971
(Baltimore: Johns Hopkins University Press,
1981).
32
Benjamin Shwadran, The Middle East, Oil and the Great Powers (New York:
Council for Middle Eastern Affairs
Press, 1959).
33
See especially: P.J. Cain and A.G. Hopkins, British Imperialism:
Innovation and Expansion, 1688-1914 (London:
Longman, 1993); P.J. Cain and A.G. Hopkins, British Imperialism: Crisis
and Deconstruction, 1914-1990
(London: Longman, 1993); and John Darwin, The Empire Project: The Rise
and Fall of the British World-System,
1830-1970 (Cambridge: Cambridge University Press, 2009).

545
Michael Hogan, “Informal Entente”34; William Stivers, “International
Politics and Iraqi Oil, 1918-1928”35
and Supremacy and Oil36; and Fiona Venn, “‘A Futile Paper Chase.’”37
The English-language literature on German petroleum policy is
surprisingly small considering the
volume of works on the Third Reich. The best overall history remains
Raymond Stokes’ “The Oil
Industry in Nazi Germany, 1936-1945.”38 Anthony Krammer’s “Fueling the
Third Reich” lacks the
breadth of Stokes’ article.39 The best work on the German crude oil
industry is still A.E. Gunther’s
articles on the “The German War for Crude Oil in Europe” in the Petroleum
Times.40 Anthony Stranges’
work is solid on the technical aspects of German synthetic fuel
production.41 Thomas Parke Hughes’
“Technological Momentum in History”42 is still a joy to read, even if it
has been supplanted by Peter
Hayes’ Industry and Ideology.43 Gottfried Plumpe’s I.G. Farbenindustrie
should be used with caution in
view of the criticism it has drawn.44 Thomas Hager provides an accessible
if somewhat melodramatic
introduction to the history of the Haber-Bosch process and the twisted
path to hydrogenation,45 but more
sophisticated readers are advised also to consult Ray Stokes’
contribution to the official history of

34

Michael Hogan, “Informal Entente: Public Policy and Private Management in

Anglo-American Petroleum
Affairs,” Business History Review 48: 2 (1974): 187-205.
35
William Stivers, “International Politics and Iraqi Oil, 1918-1928: A
Study in Anglo-American Diplomacy,”
Business History Review 55: 4 (1981): 517-540.
36
William Stivers, Supremacy and Oil: Iraq, Turkey, and the Anglo-American
World Order, 1918-1930 (Ithaca:
Cornell University Press, 1982).
37
Fiona Venn, “‘A Futile Paper Chase’: Anglo-American Relations and Middle
East Oil, 1918-1934,” Diplomacy &
Statecraft 1 (1990): 165-184.
38
Raymond Stokes, “The Oil Industry in Nazi Germany, 1936-1945,” Business
History Review 59: 2 (1985): 254277.
39
Anthony Krammer, “Fueling the Third Reich,” Technology and Culture 19: 3
(1978): 394-422.
40
A.E. Gunther, “The German War for Crude Oil in Europe, 1934-1945,”
Petroleum Times (08 November 1947 –
08 May 1948).
41
Anthony Stranges, “Germany’s Synthetic Fuel Industry, 1927-1945,” in: The
German Chemical Industry in the
Twentieth Century, ed. John Lesch (Dordrecht: Kluwer Academic Publishers,
2000), 147-216.
42
Thomas Parke Hughes, “Technological Momentum in History: Hydrogenation in
Germany, 1898-1933,” Past and
Present 44: 1 (1969): 106-132.
43
Peter Hayes, Industry and Ideology: IG Farben in the Nazi Era (Cambridge:
Cambridge University Press, 1987).
44
Gottfried Plumpe, Die I.G. Farbenindustrie AG: Wirtschaft, Technik und
Politik (Berlin: Duncker & Humblot,
1990). Dietrich Eichholtz derides Plumpe’s work as an exercise in
“intensive whitewashing.” Dietrich Eichholtz,
“Öl, Krieg, Politik: Deutscher Ölimperialismus, 1933-1942/43,”
Zeitschrift für Geschichtswissenschaft 51: 6 (2006):
502, n. 32. For a more measured critique, see Peter Hayes’ review of I.G.
Farbenindustrie in Economic History
Review 65: 4 (1991): 1020-1023, and Plumpe’s reply in Geschichte und
Gesellschaft 18: 4 (1992): 526-532.
45
Thomas Hager, The Alchemy of Air: A Jewish Genius, a Doomed Tycoon, and
the Scientific Discovery that Fed
the World but Fueled the Rise of Hitler (New York: Harmony Books, 2008).

546
Badische Anilin- und Soda-Fabrik.46 Hans-Erich Volkmann’s contribution on
Germany’s prewar
economic preparations for war in the introductory volume of the
Militärgeschichtliche Forschungsamt’s
(MGFA) Germany and the Second World War is disappointing.47 My
understanding of German economic
history and National Socialist grand strategy has been profoundly shaped
by Adam Tooze’s Wages of
Destruction.48
The German-language literature is superior to what is available in
English. For many years, the key
source was Wolfgang Birkenfeld’s Der synthetische Treibstoff.49 Of
limited use is Georg Thomas’
Geschichte der deutschen Wehr- und Rüstungswirtschaft.50 Dieter Petzina’s
Autarkiepolitik im Dritten
Reich is by now obsolete.51 Today, any examination of the Third Reich’s
petroleum policy must begin
with: Dietrich Eichholtz, Deutsche Ölpolitik im Zeitalter der
Weltkriege52; and the relevant portions of his
Geschichte der deutschen Kriegswirtschaft.53 Deutsche Ölpolitik is itself
a compilation of several short
studies Eichholtz wrote between 2005 and 2010, the most important of
which is Krieg um Öl,54 but whose
major shortcoming is that it omits discussion of developments before
1938.55 See also Hanns-Heinz

46

Werner Abelshauser, et al., German Industry and Global Enterprise: BASF:

The History of a Company
(Cambridge: Cambridge University Press, 2004), 206-361.
47
Militärgeschichtliches Forschungsamt (MGFA), The Build-up of German
Aggression, vol. 1 of Germany and the
Second World War (New York: Oxford University Press, 1990), 157-372.
48
Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi
Economy (New York: Viking,
2007).
49
Wolfgang Birkenfeld, Der synthetische Treibstoff, 1933-1945 (Göttingen:
Musterschmidt-Verlag, 1964).
50
Georg Thomas, Geschichte der deutschen Wehr- und Rüstungswirtschaft,
1918-1943/45 (Boppard am Rhein:
Boldt, 1966).
51
Dieter Petzina, Autarkiepolitik im Dritten Reich: Der
nationalsozialistische Vierjahresplan (Stuttgart: Deutsche
Verlagsanstalt, 1968).
52
Dietrich Eichholtz, Deutsche Ölpolitik im Zeitalter der Weltkriege
(Leipzig: Leipziger Universitätsverlag, 2010).
53
Dietrich Eichholtz, Geschichte der deutschen Kriegswirtschaft (München:
KG Saur, 1999).
54
Dietrich Eichholtz, Deutsche Politik und rumänisches Öl, 1938–1941: Eine
Studie über Erdölimperialismus
(Leipzig: Leipziger Universitätsverlag, 2005); Dietrich Eichholtz, Krieg
um Öl: Ein Erdölimperium als deutsches
Kriegsziel 1938–1943 (Leipzig: Leipziger Universitätsverlag, 2006);
Dietrich Eichholtz, Die Bagdadbahn,
Mesopotamien und die deutsche Ölpolitik bis 1918: Aufhaltsamer Übergang
ins Erdölzeitalter (Leipzig: Leipziger
Universitätsverlag, 2007); Dietrich Eichholtz and Titus Kockel, Von Krieg
zu Krieg: Zwei Studien zur deutschen
Erdölpolitik in der Zwischenkriegszeit (Leipzig: Leipziger
Universitätsverlag, 2008); and Dietrich Eichholtz Ende
mit Schrecken: Deutsche Ölpolitik und Ölwirtschaft nach Stalingrad
(Leipzig: Leipziger Universitätsverlag, 2010).
Eichholtz’s “Öl, Krieg, Politik,” 493-510, is a useful summary of Krieg
um Öl.
55
For a necessary corrective, consult Helmut Mejcher’s work on German
attempts to acquire control of the British
Oil Development Company’s concession in western Iraq between 1932 and
1936 in: Die Politik und das Öl im
Nahen Osten: I. Der Kampf der Mächte und Konzerne vor dem Zweiten
Weltkrieg (Stuttgart: Klett-Cotta, 1980).

547
Kasper’s dissertation, “Die Erdölgewinnung Deutschlands in der Zeit von
1933-1945,”56 portions of
which were reprinted as: “Die Mineralölpolitik des deutschen Faschismus
und der Erdölbergbau in
Deutschland 1933 bis 1945.”57
Eichholtz and Kasper’s studies are products of East German historiography
and should be read in
conjunction with less polemical works such as Hayes’ Industry and
Ideology. Rainer Karlsch and
Raymond Stokes have produced the best general history of the German oil
industry.58 Also of value is
Titus Kockel’s revisionist Deutsche Ölpolitik,59 which is summarized in a
short work he co-authored with
Dietrich Eichholtz, Von Krieg zu Krieg. The major problem with Kockel’s
work is that he considers
petroleum policy in the broadest sense, such that it is difficult to
distinguish between what was
strategically significant (synthetic fuels or relations with Romania) and
what was not (private interest in
oil concessions in Ecuador).
Eichholtz’s Deutsche Ölpolitik is obligatory reading for any student of
German oil imperialism during
the Second World War. His earlier “Der Raubzug des faschistischen
deutschen Imperialismus zu den
Erdölquellen des Kaukasus” is still useful regarding the invasion of the
Soviet Union and the Caucasian
campaign of 1942.60 Hanns-Heinz Kasper’s “Das Erdöl in den Raubplänen des
Deutschen Faschismus in
Vorbereitung und bei der Durchführung des Zweiten Weltkrieges” covers
much of the same ground.61
Eichholtz’s deterministic presentation of German oil ambitions in the
Middle East should be tempered by
a perusal of the second volume of Helmut Mejcher’s Die Politik und das
Öl, which stresses “the
improvisational character of German Middle Eastern policy during the
National Socialist era.”62 Titus

56

Hanns-Heinz Kasper, “Die Erdölgewinnung Deutschlands in der Zeit von

1933-1945 (Ph.D. Dissertation,
Technische Universität, Dresden, 1974).
57
Hanns-Heinz Kasper, “Die Mineralölpolitik des deutschen Faschismus und
der Erdölbergbau in Deutschland 1933
bis 1945,”Beiträge zur Geschichte der Produktivkräfte 10 (1976): 15-65.
58
Rainer Karlsch and Raymond Stokes, Faktor Öl: Die Mineralölwirtschaft in
Deutschland, 1859-1974 (München:
C.H. Beck, 2003).
59
Titus Kockel, Deutsche Ölpolitik, 1928-1938 (Berlin: Akademie Verlag,
2005).
60
Dietrich Eichholtz, “Der Raubzug des faschistischen deutschen
Imperialismus zu den Erdölquellen des Kaukasus,
1941-1943,” Jahrbuch für Geschichte 14 (1976): 445-502.
61
Hanns-Heinz Kasper, “Das Erdöl in den Raubplänen des Deutschen Faschismus
in Vorbereitung und bei der
Durchführung des Zweiten Weltkrieges,” Jahrbuch für Wirtschaftsgeschichte
3 (1976): 55-77.
62
Helmut Mejcher, Die Politik und das Öl, Band II: Die Teilung der Welt
(Stuttgart: Klett-Cotta, 1990) – quotation
from pg. 50.

548
Kockel offers many vital insights regarding long-term German planning in
1940 and the origins of
Kontinentale Öl (Konti) in “Eine Quelle zur Vor- und Gründungsgeschichte
der Kontinentale Öl AG aus
dem Jahr 1940.”63 The MGFA’s magisterial Germany and the Second World War
provides the essential
historical context and an introduction to the most important primary
sources.64 The contributions of
Gerhard Schreiber on Hitler’s decision to forego “peripheral strategy” in
the Mediterranean aimed at
Britain in 194165; Rolf-Dieter Müller on the economic exploitation of the
Soviet Union during Operation
Barbarossa66; and Bernd Wegner on German grand strategy in 1942 were
especially enlightening.67
With the exception of Peter Hayes’ Industry and Ideology,68 most English-
language sources only
mention Konti in passing, even though the company figured prominently in
both A.E. Gunther’s
important survey of the German oil industry in the Third Reich and Franz
Neumann’s Behemoth.69
Neumann characterized Konti “as the model of a new ruling class” in
Germany combining the party,
military, bureaucracy, and private enterprise (pg. 396), while Gunther
was particularly critical of the

63

Titus Kockel, “Eine Quelle zur Vor- und Gründungsgeschichte der

Kontinentale Öl AG aus dem Jahr 1940: E. R.
Fischer (Reichswirtschaftsministerium, II Min. Öl), ‘Die Versorgung
Europas mit Mineraloel vor dem Kriege,
Ermittlung des Nachkriegsverbrauchs und Sicherung der Belieferung, 1940,’
September 1940,” Jahrbuch für
Wirtschaftsgeschichte 2003/1: 175-208.
64
MGFA, Germany and the Second World War (New York: Oxford University
Press, 1990-2008).
65
MGFA, The Mediterranean, South-east Europe, and North Africa, 1939-1941,
vol. 3 of Germany and the Second
World War (New York: Oxford University Press, 1995), 180-301 and 557-640.
For a précis of his main argument,
see: Gerhard Schreiber, “The Mediterranean in Hitler’s Strategy in 1940:
‘Programme’ and Military Planning,” in:
German Military in the Age of Total War, ed. Wilhelm Deist (Leamington
Spa: Berg Publishers, 1985), 240-281.
66
MGFA, The Attack on the Soviet Union, vol. 4 of Germany and the Second
World War (New York: Oxford
University Press, 1998), 118-224 and 1081-1188. Rolf-Dieter Müller’s,
“Der Wettlauf um das Erdöl: Zur
wirtschaftlichen Bedeutung der Kaukasusregion für die deutsche
Kriegsführung,” in: Mitteilungen der
Gemeinsamen Kommission für die Erforschung der jüngeren Geschichte der
deutsch-russischen Beziehungen:
Volume II, ed. Horst Möller and Aleksandr Tschubarjan (Munich: R.
Oldenbourg, 2005), 35-44, is based on
secondary sources, especially the MFGA volumes.
67
MGFA, The Global War: Widening of the Conflict into a World War and the
Shift of the Initiative, 1941-1943,
vol. 6 of Germany and the Second World War (New York: Oxford University
Press, 2001), 110-144 and 843-1215.
Abridged versions of Wegner’s work may be found in: Bernd Wegner, “The
Road to Defeat: The German
Campaigns in Russia, 1941-43,” Journal of Strategic Studies 13: 1 (1990):
105-127; and Bernd Wegner, “Facing the
Global War: Germany’s Strategic Dilemma after the Failure of
‘Blitzkrieg,’” in: From Peace to War: Germany,
Soviet Russia and the World, 1939-1941, ed. Bernd Wegner (Providence:
Berghahn Books, 1997), 611-627.
68
Hayes, Industry and Ideology, 255-257. See also: Richard Overy, Goering:
The Iron Man (London: Routledge &
Kegan Paul, 1984), 119 and 132-133.
69
Franz Neumann, Behemoth: The Structure and Practice of National
Socialism, 1933-1944 (New York: Octagon
Books, 1963).

549
company, condemning it as a “regression in social economy” and a specimen
of “the industrial feudalism
of the XVIIth Century.”70
Hitler’s decision-making in 1940/41 is summarized in: Jürgen Förster,
“Hitler’s Decision in Favour of
War against the Soviet Union”71 and “Hitler Turns East – German War
Policy in 1940 and 1941.”72 Barry
Leach’s German Strategy against Russia, based on Alan Milward’s
conception of a “Blitzkrieg”
economy,73 is out of date but still has much to commend it, particularly
its consideration of the role of oil
in German strategy and operations.74 The best recent synthesis of the
Soviet-German War is Stephen
Fritz’s Ostkrieg, which acknowledges oil’s relationship to German
strategy but not in a systematic
fashion.75 Ian Kershaw’s Fateful Choices discusses the various
permutations of the “peripheral strategy”
championed by the German armed forces and the Foreign Office as an
alternative to Operation
Barbarossa before explaining why Hitler rejected them, although like
Milan Hauner, he underestimates
the obstacles Germany had to surmount before it could hope to exploit the
oil reserves of the Middle
East.76 The scope of Hauner’s comparative study is truly daunting – his
book has set a standard for
empirical research that I cannot hope to surpass.
The most important historian of National Socialist grand strategy is
Andreas Hillgruber. Although he
overuses the economic conception of “Blitzkrieg,” Hillgruber’s Hitlers
Strategieremains the finest study
of German grand strategy during the first half of the war.77 Hillgruber,
Tooze, and Wegner provide the
intellectual foundations for my understanding of German grand strategy
between 1939 and 1942. Earlier
works by Hugh Trevor-Roper78 and Eberhard Jäckel79 present a
deterministic picture of National Socialist

70

Gunther, “German War for Crude Oil,” Petroleum Times (08 May 1948), 472.
MGFA, Germany and the Second World War, iv: 13-51.
72
In: From Peace to War, ed. Wegner, 115-133.
73
Alan Milward, Germany Economy at War (London: Athlone Press, 1965).
74
Barry Leach, German Strategy against Russia, 1939-1941 (Oxford: Oxford
University Press, 1973).
75
Stephen Fritz, Ostkrieg: Hitler’s War of Extermination in the East
(Lexington, University Press of Kentucky,
2011).
76
Ian Kershaw, Fateful Choices: Ten Decisions that Changed the World, 1940-
1941 (New York: Penguin, 2007);
and Milan Hauner, India in Axis Strategy: Germany, Japan, and Indian
Nationalists in the Second World War
(Stuttgart: Klett-Cotta, 1981).
77
Andreas Hillgruber, Hitlers Strategie: Politik und Kriegsführung, 1940-
1941 (Frankfurt am Main: Bernard &
Graefe Verlag für Wehrwesen, 1965).
78
Hugh Trevor-Roper, “Hitlers Kriegsziele,” Vierteljahrshefte für
Zeitgeschichte 3: 2 (1960): 121-133.
71

550
policy that fails to account for the role of contingency, which sometimes
compelled Hitler to alter the
timing (though not the substance) of his various political, diplomatic,
and military gambits. A good
introduction to some of Hillgruber’s work in English may be found in his
essay on “England’s Place in
Hitler’s Plans for World Dominion.”80 It is impossible to gain a full
appreciation of Hillgruber’s thinking
without also consulting his “Faktor Amerika” essay in: Wolfgang Michalka,
ed. Nationalsozialistische
Aussenpolitik.81 Hillgruber’s most important essays were published
together as Deutsche Groβmacht- und
Weltpolitik.82 One invaluable essay is, however, found in a separate
collection.83 Chapters twelve to
fifteen of Adam Tooze’s Wages of Destruction, covering the period between
the defeat of France and the
failure of Barbarossa, are invaluable for their blending of grand
strategy and political economy. 84 Milan
Hauner offers a good if outdated summary of the various strains of
thinking concerning Hitler’s long-term
objectives in his “Did Hitler Want a World Dominion?”85
Wherever possible, I used the translations of documents entered into
evidence during the Nuremburg
trials86 or reprinted in documentary collections such as Documents on
German Foreign Policy rather than
the originals themselves.87 The following are the most important U.S. or
British government reports on
the German oil industry (arranged alphabetically by originating agency):
A.E. Gunther (British Military
Government, Celle), “British Oil Fields Investigation, Part IV, Section
1: The War Structure of the

79

Eberhard Jäckel, Hitler’s Weltanschauung: A Blueprint for Power

(Middletown: Wesleyan University Press, 1992).
Andreas Hillgruber, “England’s Place in Hitler’s Plans for World
Dominion.”Journal of Contemporary History 9:
1 (1974): 5-22.
81
Wolfgang Michalka, ed., Nationalsozialistische Aussenpolitik (Darmstadt:
Wissenschaftliche Buchgesellschaft,
1978), 493-525.
82
Andreas Hillgruber, Deutsche Groβmacht- und Weltpolitik im 19. und 20.
Jahrhundert (Düsseldorf: Droste,
1977), especially chapters 11-12 and 14-15.
83
Andreas Hillgruber, “Die weltpolitischen Entscheidungen vom 22. Juni 1941
bis 11. Dezember 1941,” in:
Nationalsozialistische Diktatur, 1933-1945: Eine Bilanz, ed. Karl
Dietrich Bracher, Manfred Funke, and Hans-Adolf
Jacobsen (Düsseldorf: Droste, 1983), 440-464.
84
Especially pgs. 396-512.
85
Milan Hauner, “Did Hitler Want a World Dominion?” Journal of Contemporary
History 13: 1 (1978): 15-32.
86
Office of United States Chief of Counsel for Prosecution of Axis
Criminality, Nazi Conspiracy and Aggression
(Washington, DC: U.S. GPO, 1946); and Nuernberg Military Tribunal, Trials
of the War Criminals (Washington,
DC: U.S. GPO, 1953).
87
Auswärtiges Amt, Documents on German Foreign Policy, 1918-1945
(Washington, DC: U.S. GPO, 1949-1983).
Hitler’s war directives were reprinted in: U.S. Department of the Navy,
Office of Naval Intelligence, Fuehrer
Directives and other Top-Level Directives of the German Armed Forces
(Washington, DC: U.S. GPO, 1948).
80

551
German Crude Oil Industry, 1934-1945,” May 1946,88 and “Oil Fields
Investigation, Part V, Section 1:
The Caucasus Expedition,” March 194689; Foreign Economic Administration
(FEA), “Study of the
Interagency Drafting Committee on the Treatment of the German Petroleum
Industry from the Standpoint
of International Security,” Technical Industrial Disarmament Committee,
Project 6, 15 October 194590;
Foreign Office and Ministry of Economic Warfare, Economic Advisory
Branch, “The German Oil
Industry,” October 194491; Ministry of Fuel and Power, Report on the
Petroleum and Synthetic Oil
Industry of Germany92; United States Strategic Bombing Survey (USSBS),
The Effects of Strategic
Bombing on the German War Economy,93 The German Oil Industry, Ministerial
Report Team 78,94 and
Oil Division, Final Report.95 The finest piece of analysis produced by
the Allies is: Chiefs of Staff
Committee, Technical Sub-Committee on Axis Oil, Oil as a Factor in the
German War Effort, 19331945.96 Although this report is rarely cited, U.S.
intelligence analysts were so impressed with it that the
Executive Secretary to the Enemy Oil Committee of the FEA admitted to a
British Embassy official “that
from a statistical and historical standpoint this report will be both
accurate and comprehensive, so that a
parallel report by the Enemy Oil Committee would be superfluous and
hardly to be recommended.”97
Statistics on global, regional, and U.S. oil production before 1945 are
drawn from: Everette Lee
DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum Statistics.98
Statistics on British oil
88

British National Archives (BNA), WO 252/1448.

BNA, WO 252/1151.
90
National Archives and Records Administration, Record Group 59: General
Records of the Department of State
(hereafter cited as: NARA, RG 59), 862.6363/7-2946
91
NARA, RG 59, Records of the Petroleum Division, Lot File No. 77D141, Box
30
92
Ministry of Fuel and Power, Report on the Petroleum and Synthetic Oil
Industry of Germany (London: HMSO,
1947).
93
United States Strategic Bombing Survey (USSBS), Effects of Strategic
Bombing on the German War Economy
(Washington, DC: U.S. GPO, 1945).
94
USSBS, German Oil Industry, Ministerial Report Team 78 (Washington, DC:
U.S. GPO, 1945).
95
USSBS, Oil Division, Final Report (Washington, DC: U.S. GPO, 1945).
96
Chiefs of Staff Committee, Technical Sub-Committee on Axis Oil, Oil as a
Factor in the German War Effort,
1933-1945, 08 March 1946, A.O. (46) 1, BNA, CAB 121/418.
97
Brandon Grove to Sidney Kilbey, 21 July 1945, enclosed with: Kilbey to
Charles Rayner, “Post-Mortem on
German Oil,” 16 July 1945, NARA, Record Group 169: Records of the Foreign
Economic Administration, Entry
361, Box 2202, which also includes a copy of the questionnaire (Oil
Section, German Economic Department,
Foreign Office, “The Factor of Oil in Germany’s Defeat: Outline
Questionnaire for German Strategists & Planners,”
19 June 1945) used during postwar interrogations of German officials.
98
Everette Lee DeGolyer and Lewis MacNaughton, Twentieth Century Petroleum
Statistics (Dallas: DeGolyer and
MacNaughton, 2004).
89

552
supplies are drawn largely from the records of the Oil Board of the
Committee of Imperial Defence,
particularly the thirteen annual reports published between 1926 and
1939.99 The lack of any central
agency coordinating German petroleum policy means that there is no
single, authoritative statistical
source for the Third Reich’s petroleum supplies. A detailed statistical
appendix based primarily on the
USSBS reports may be found in: Birkenfeld, Der synthetische
Treibstoff.100 I have also drawn upon
figures provided by the Office for Defense-Economy Planning (Reichsamt
für wehrwirtschaftliche
Planung – renamed the Reich Statistical Office, Statistisches Reichsamt,
in 1940), Konti, the Reich Office
for Soil Exploration (Reichsamt für Bodenforschung), and various private
research institutes and firms
such as IG Farben and its economic intelligence division (the
Volkswirtschaftliche Abteilung). A number
of German military sources were also of considerable use.101

99

BNA, CAB 50/3 to 50/8.

Pgs. 217-236.
101
Most sources originating from private firms or civilian governmental
agencies may be found in: NARA, Record
Group 242: Foreign Records Seized (hereafter cited as: RG 242), Microfilm
Publication T-84 (Miscellaneous
German Records Collection), reels 29-148 and 193-228. Military sources
are scattered throughout: NARA, RG 242,
Microfilm Publication T-77 (Records of the Headquarters, German Armed
Forces High Command).
100

553
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558
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