The British Ambassador (Geddes) to the Secretary of State
My Dear Mr. Secretary: I know how great is the importance which you attach to the existence of cordiality and understanding between the peoples of the United States of America and the British Empire. I therefore without hesitation venture to approach you on a matter which appears to me to be of importance in connection with the feelings of friendship existing between our respective countries.
It is I believe common knowledge that on numerous occasions articles and paragraphs have appeared in American newspapers and magazines indicating that the British Government was making determined efforts to secure for the British people control over an unduly large share of the world’s oil resources. Somewhat similar statements have been made in the Congress of the United States and assertions have not been lacking that the British Government was attempting to secure, or had already secured, a dominating position in the petroleum industry. Facts and figures adequate to support such assertions have never to my knowledge been included in the articles and speeches which contained them. After the most careful enquiries I have failed to find either in the official information at the disposal of the British Government or in unofficial information gathered from all available sources any solid foundation for the statements and assertions to which I have referred.
Realizing the risk of friction which might attend serious misapprehension on the important subject of the relations of Governments to the petroleum industry, I have followed the example of my predecessors and have attempted whenever opportunity offered to dispel misapprehension regarding the position and interests of the British Government and to assure your predecessors and the Department of State that the allegations to which I have referred are devoid of foundation in fact.[Page 72]
This subject does not lose importance with the lapse of time and I am led to address you upon it now by an indication that many misapprehensions as to the facts still persist in the mind of a member of the American Government, in spite of the fact that so recently as the 13th of January of this year I formally informed the Acting Secretary of State of the United States of the British Government’s position with regard to these matters.1 I understand fully the practical difficulty of maintaining the continuity of Government knowledge at a time of change of Government personnel and this letter is written, therefore, in no spirit of criticism but from a desire to dispel misunderstanding.
I desire to direct your attention to the report appearing in the Congressional Record of April 12th, Vol. 61, No. 2., pages 81 to 90,1a of the debate which took place in the United States Senate on the 12th instant, regarding the ratification of the Treaty of April 6th, 1914, with the Republic of Colombia.2 Incorporated with the speech made on that occasion by the Senator from Massachusetts (Mr. Lodge) is the text of a letter addressed to him on March 21st, 1921, by the Secretary of the Interior, dealing largely with the petroleum question. That letter contains several statements based on misinformation and I feel it my duty to bring them to your notice with the request that you may be good enough to place the Secretary of the Interior in possession of the true facts.
After having stressed the seriousness of the oil question from the American point of view, Mr. Fall’s letter contains the following paragraphs:–
“Other nations are aware of the seriousness of the situation and Great Britain learned at least one lesson from the recent war. That is to say, that the nation which controlled the oil industry controlled commerce by sea, in view of the fact that no coal burner can compete with an oil-burning ship.
“Realizing this, Great Britain, the nation, has within the last two years particularly followed a policy which she had adopted in many of her provinces many years ago; that is, of excluding Americans from or placing heavy burdens upon such Americans or other foreigners in any British oil field.”
This statement appears to me to be misleading.
In the United Kingdom itself there is no restriction whatever on the exploitation of possible oil-bearing lands by foreigners or foreign companies. A regulation (No. 30 BB) which had been introduced during the war, under the Defence of the Realm Act, restricting the participation of foreigners in British oil undertakings [Page 73] was aimed at preventing the indirect exercise of enemy influence. It has long since been withdrawn—a fact of which the Department of State was duly apprized.
In Canada the annual production is only about 34,000 tons, which meets but a small proportion of the Dominion’s needs. The regulations, generally speaking, require simply that operating companies shall be registered or licensed in Canada, and have their principal place of business within the British Empire. It is, perhaps, worthy of note that the most active company in Canada, both in regard to imports and prospecting work, is Imperial Oil Limited, a subsidiary of the Standard Oil Company of New Jersey.
Since 1883, prospecting or mining leases in India have been granted only to British Companies, but the production of petroleum in that country is only about 1,200,000 tons per annum, a quantity which falls short of the country’s requirements.
In Trinidad there is no nationality restriction in the case of private lands. The lessees of Crown lands, however, must be British subjects or British controlled companies. Exception has, however, been made in the case of a particular American Company which has been permitted to lease certain Crown lands in that Colony. Similar regulations apply [in British Guiana, British Honduras, Nigeria, Kenya Colony and Brunei. On the other hand, there are no nationality restrictions whatever]3 in Jamaica, Barbadoes, Sarawak, Somaliland, British Honduras,4 British North Borneo and Egypt, in all of which countries prospecting operations have been, or are being, carried on. These are the main facts with regard to the regulations governing the exploitation of oil lands in British territory and they appear to me entirely to disprove the assertion that the British Government have deliberately adopted a policy “of excluding Americans from or placing heavy burdens upon such Americans or other foreigners in any British oil field”.
Even in the case of India, where certain restrictive regulations exist, it will be observed that those regulations have been in effect for nearly 40 years. When they were introduced, the oil situation was very different from that now prevailing and the problem was not so much to find new sources of oil as to secure markets for that already produced. There was real danger that oil-lands might be taken up by large foreign oil companies and kept unworked so that prices might be maintained.[Page 74]
The next two paragraphs of the Secretary of the Interior’s letter are quoted as follows:—
“Within the last two years however, taught by the lessons of the war, Great Britain has deliberately pursued a policy of obtaining governmental control of all the great oil companies in which British subjects had been interested, and, going beyond this has secured practical, if not sole, control of the great ‘Royal Dutch-Shell’ and other foreign companies, particularly through what is known as the ‘Royal Dutch-Shell Group’ combine, which was effected in January 1907.
Of course, it is impossible to give exact figures, but our government, through at least two of its departments, has information satisfactory beyond question that the British Government actually controls the ‘Royal Dutch–Shell’ combine, sixty per cent of the stock of which is owned by the ‘Royal Dutch’ and forty per cent of whose stock was owned by the Shell Transport & Trading Company, Ltd.”
The meaning which I understand these paragraphs to convey is that the British Government has a direct controlling financial interest in the Royal Dutch Shell group of companies. If there were any doubt as to this being the correct interpretation to place on the Secretary’s words it is dispelled by the following dialogue which took place between the Senator from Massachusetts and the Senator from Indiana in the course of the debate:—
“Mr. Watson of Indiana: ‘The Senator says that England controls the Royal Dutch Shell group. Does he mean by that the Government of England or citizens of England?’
Mr. Lodge: ‘The Government’.
Mr. Watson of Indiana: ‘The Government itself?’
Mr. Lodge: ‘The Government has sixty per cent of the stock of the Royal Dutch and forty per cent of the Shell, I think. It may be the reverse, but it controls both. Of course, the Royal Shell is an English corporation. In the Royal Dutch the Government has the absolute control of sixty per cent; at least, that is the report in response to the enquiry of our Government.”
It is difficult to understand how, in the face of repeated denials by the British Government and by the companies concerned, as well as in the face of formal statements made by me to the Secretary of State of the United States, these errors come to be perpetuated and I would ask you to inform the Secretary of the Interior and any others who may be seeking the truth in this matter, that the British Government have no financial interest whatever, directly or indirectly, in the Royal Dutch–Shell group. The controlling interest in this group is Dutch and not British.
I now pass to what I regard as the most serious point raised at this time and I quote the following passages from the printed copy of Mr. Fall’s letter to Senator Lodge:— [Page 75]
“In the lower right-hand portion of this diagram you will find the interlocking British National companies which control British petroleum holdings in the Republic of Mexico.
The Mexican Eagle Oil Company (Limited), known to us as the ‘Aguila’ Company, is the principal “Cowdray” company in Mexico.
Allow me to call your attention here to a most significant matter which has recently occurred, i.e.:
The British Government and the French Government have each repeatedly protested to the Mexican Government, from time to time, along exactly similar lines to the protests made by this Government concerning the confiscatory decrees of the Mexican Government under the Constitution of 1917, proclaimed by Carranza, and being followed by Obregon.
These protests yet stand as the official last word of Great Britain and France, as exactly similar protests yet stand as our last word to that country.
The Mexican Eagle Company (“Aguila”) has been a member of the American Association of Oil Companies and has for years cooperated with this Association in making protests against confiscatory decrees in Mexico, both from the British Government and the American Government.
Recently, within the last three months, the “Aguila” Company finally notified the American Association that it proposed to pursue its own lines and make its own terms with the Mexican Government, accepting the Mexican Government’s demands with reference to oil drilling permits, etc.
This came as a shock out of a clear sky, and I am informed that after certain protests made by the Association and by the American Companies, the Mexican Eagle (“Aguila”) Company has not, in fact, obtained titles under this confiscatory decree, upon properties belonging to others, but yet has not countermanded instructions to its agents in Mexico to obtain such titles from time to time.
Nevertheless the British protest still stands and Great Britain is ostensibly acting with the United States officially, in identical official protests against the constitution of 1917 and decrees under it.
The British “Aguila” Oil Company owned, as a matter of fact, by Great Britain herself is, however, yielding to such decrees and obtaining advantage of American companies, who are faithfully abiding by the advice and instructions of the American Government in the matter.
British oil interests are giving every assurance to Obregon and Mexican officials, of their support and friendly cooperation, seeking advantage against or over American companies, while the British Government, owning this oil company is ostensibly standing by the United States Government in its action.
I bring these matters to your attention, and am furnishing you with the diagram referred to, for the reason that it is high time that Americans should understand the situation and as patriotic Americans deal with it.”
I cannot for a moment suppose that a member of the Administration can have wished to convey to a Senator of the United States the impression that the British Government have been pursuing a [Page 76] double policy with regard to the situation in Mexico, officially associating themselves, on the one hand, with the Government of the United States in protests against certain legislation in Mexico while, on the other hand, they were seeking through the medium of an industrial concern, which the Secretary of the Interior in his letter incorrectly refers to them as “owning”, to take undue advantage of the situation and, by accepting the validity of the legislation in question, to secure concessions on lands already owned or operated by American companies. Mr. Fall is in error in believing that the British Government have any financial interest whatever in the Mexican Eagle Company. The British Government have no such interest. They exercise no control of any kind over the actions or policies of the Mexican Eagle Company and, whatever course may have been taken by that Company in connection with the Mexican law or with any other matter has been taken on the sole responsibility of that Company without any approval, express or implied, from the British Government. It is within the knowledge of your Department, for I had myself the honour of informing the Acting Secretary of State, that a considerable proportion of the stock of the Mexican Eagle Company formerly owned by Lord Cowdray, a private British subject, was transferred some time since to Dutch interests. Moreover, it is reported that a fair proportion of the stock of the company is owned in the United States, so that it is even doubtful now whether private British citizens collectively own a majority interest in the Company.
You will agree with me, I feel sure, that misapprehensions and allegations of this nature regarding the position and policies of His Britannic Majesty’s Government in relation to the petroleum industry render international understanding less easy and must tend, I believe, to affect the judgment of American legislators in framing appropriate laws for the protection of American interests against imaginary activities of the British Government. Certainly they do grave damage to the friendly relations between our two countries and I should regard myself as negligent in the performance of my duty if I were to permit them to pass in silence when I find them printed in the official record of the proceedings of Congress over the name of a responsible member of the American Cabinet. It is, nevertheless, in the friendliest spirit that I bring them to your notice, confident in the belief that the Secretary of the Interior will welcome an official denial of alleged facts and circumstances which must have caused him much patriotic anxiety and that he will naturally desire to take the earliest opportunity to correct in the mind of Congress and of the people the unwarranted suspicions to which, I greatly fear, his letter must have already given birth.
Believe me [etc.]
- No record of this communication in Department files.↩
- Vol. 61, pt. 1, pp. 157–168.↩
- Foreign Relations, 1914, p. 163.↩
- Section in brackets, added in accordance with note of July 27 from the British Embassy (file no. 841.6363/170).↩
- By note of Aug. 8 the British Embassy informed the Department that the second mention of “British Honduras” was due to a typist’s error and requested its deletion (file no. 841.6363/171).↩