By John M. Blair
In this excerpt, John Blair shows how the US and UK companies held down production in their Iraq concessions, in order to maximize their worldwide profits. In spite of protests from the Iraq government, and opposition from their French partner, the Anglo-American companies maintained this policy until nationalization in 1972. In the last part of this excerpt, we see the active role of the US State Department in defending the oil companies' interests.
Although its original concession of March 14, 1925 covered all of Iraq, the Iraq Petroleum Co., under the ownership of BP (23.75%), Shell (23.75%), CFP (23.75%), Exxon (11.85%), Mobil (11.85%), and Gulbenkian (5.0%), limited its production to fields constituting only one-half of 1 percent of the country's total area. During the Great Depression, the world was awash with oil and greater output from Iraq would simply have driven the price down to even lower levels. Delaying tactics were employed not only in actual drilling and development, but also in conducting negotiations on such matters as pipeline rights-of-way. While such tactics ensured the limitation of supply, they were not without their dangers. If the Iraqi government learned that IPC was neither actively seeking new fields not exploiting proved and productive areas, it might withdraw or narrow IPC's concession, or worse, award it to some independent willing and anxious to maximize production.
Suppression of Discoveries
From almost the beginning of its operations IPC not only suppressed production in Iraq (as well as in nearby lands) but went to considerable lengths to conceal that fact from the Iraqi government.
Of the many concession areas exclusively preempted by IPC, none was rapidly developed. IPC had held the area east of the Tigris River in the Mosul and Baghdad vilayets since1931, and by 1950 the only developed field was Kirkuk. Qatar is another illustration of "sitting on" a concession. Fearful that the area would fall to outside interests, Anglo-Iranian in 1932 obtained a two-year exclusive license for a geological examination of this peninsula. These exploration rights were expanded into a concession in 1935, and in 1936 were given to IPC under the terms of the Red Line Agreement. BP and Shell, however, were not anxious to develop more production in the Persian Gulf because of the effect this would have upon production in Iran. Although Mobil wanted more crude from the Persian Gulf, drilling did not start until three years and five months after the signing of the geological survey. A productive well was completed in 1939, and a few others were drilled after the war began; but in 1941, an official (Mr. Sellers) wrote: "â€¦.. as there is excess of petroleum products available from AIOC and Cal-Tex in Persian Gulf, it is obvious productive wells in Qatar will not be expedited at present time." Commercial production in substantial quantities did not begin until 1950- eighteen years after the first exploration of the area.
An interesting case of "technical compliance" is provided by IPC's actions concerning a concession in Syria. In 1933, IPC had obtained drilling permits in Syria, and two years later suggested that the Syrian government grant it a blanket concession over a large part of Syria, similar to the Iraq concession. Negotiations were opened for this purpose, but in view of the time which the negotiations would take, the IPC groups "agreed that the Company should drill shallow holes which would constitute technical compliance with Company's obligations, the Syrian government should be informed of the Company's intentions to do so." Negotiations dragged on and the British High Commissioner of Syria suspended the acceptance of any further drilling permits. But IPC was prepared to receive this blow with equanimity; the general manager wrote: "â€¦..we have been steadily complying with the letter of the Mining Law by drilling shallow holes on locations where there was no danger of striking oilâ€¦â€¦." However, when IPC encountered difficulty in getting the Syrian Parliament to ratify the c