The Prize Chapter 8: The Fateful Plunge
Consider the following questions:
- Was Shell really a menace?
- Was Greenway ethical?
- What were the strategic dimensions of government ownership of Anglo-Persian?
Admiral John Fisher and the Royal Navy
Admiral John Fisher helped modernize the Royal Navy. He saw Germany as a major threat primarily because it was a major industrial powerhouse as well as a growing military power. His first test of the use of fuel oil in a Royal Navy ship, the HMS Hannibal in 1903 turned out to be disastrous and dealt a bitter defeat to Fisher and Samuel's vision to convert naval ships from coal to oil. A faulty burner caused the entire ship to be engulfed in a black smoke on suddenly switching from coal to oil. Just after the disappointment, Fisher met D'Arcy while at a spa in Marienbad, Bohemia; and D'Arcy saw the potential market (Royal Navy) for his Persian oil. In 1904, John Fisher, as the First Sea Lord of the Royal Navy, proclaimed "Wake up England!" in an effort to draw attention to responding to the German naval challenge by modernizing the Royal Navy through converting its fleet from coal to oil. The use of oil provided several advantages: ships could be at sea longer, move more quickly than a coal powered ship, required fewer personnel to operate the ship, and had better maneuverability.
The "Guns vs. Butter" debate
The naval race between Britain and Germany occurred against a backdrop of social and labor unrest, domestic conflicts of financial and budgetary constraints, and the "guns (navalists) vs. butter (economists)" bitter debate. The navalists supported "big Navy" policy and expanded expenditure while the economists favored more money for social and welfare programs and maintaining the peace.
Initially, Winston Churchill did not see Germany as a threat and supported the economists' viewpoint and rather favored an Anglo-German naval agreement. However, he changed his mind instantaneously when in July 1911 the German gunboat, the Panther, sailed into the Moroccan port of Agadir. He saw German expansionism thereafter and concluded Germany meant to make war. On becoming First Lord, Churchill invited Fisher, who had retired, to become his unofficial adviser. The two men had met earlier through the Navy and become good friends. Fisher pushed Churchill to convert the fleet to oil power and pointed out that oil was more efficient and cheaper.
The conversion from coal to oil by the Royal Navy
Fisher arranged for Marcus Samuel and Churchill to meet to make a case for oil. Churchill did not find Samuel very convincing and decided to conduct a study to determine the advantages of a naval fleet powered via oil versus coal including pricing, availability and security of supply. The study clearly demonstrated that oil allowed faster ships, greater rapidity in getting up to speed and allowed advantages in operation and manning of the fleet, provided greater radius of action, and could be refilled at sea. Oil also greatly reduced the stress, time, exhaustion, manpower, and discomfort that went with coaling. Thus, bottom-line, oil provided more gun-power and speed for less size and cost.
Eventually, the three naval conversion programs of 1912, 1913, and 1914 created a great addition of power and cost with five oil powered battleships and other vessels. There was now a major issue of finding oil, obtaining enough of it, and securing the supply (politically and militarily). The major questions concerning oil, once the decision to convert from coal to oil was made, were: where was the oil to be obtained from, and could enough supply be secured (militarily and politically)? In Churchill's opinion, Britain needed to be the master of the high seas to keep it alive and that "Mastery itself was the prize of the venture."
The entire British naval fleet was eventually converted to oil. This process turned out to be expensive but vital to British naval dominance. Also, Britain needed to decide which company would supply the oil and thereby reap the profits: Royal Dutch/Shell Group or Anglo-Persian Oil Co? Charles Greenway was truly the man behind the scenes for Anglo-Persian's operations. To win the Admiralty over in giving Anglo-Persian the contract, he engaged in the "Shell Menace" and stressed Samuel's "Jewishness" and Deterding's "Dutchness". His ploy to make Shell appear unreliable was argued in the British House of Commons by Winston Churchill, civilian head of the Royal Navy and Member of Parliament, and was well received by the British parliament.
British Government as 51% Owner of Anglo-Persian, a private company
Greenway wanted direct British government capital involvement in Anglo-Persian as he was afraid that without it Anglo-Persian would end up being acquired by Shell. He was determined to keep Anglo-Persian an absolutely "all British Company." Although the Admiralty was not initially interested in a special relationship with Anglo-Persian, after a report of Admiral Slade's Commission to Persia, an agreement was signed between Anglo-Persian and the British government on May 20, 1914. An oil bill introduced in parliament by Churchill on June 14, 1914 called for the investment of $2.2 million pounds of the British government in Anglo-Persian. The bill passed by 254 to 18 votes in favor. The agreement and passage of the oil bill constituted a 51% ownership of a private company by the British government. In addition two government board members with veto power were placed on the company's board and the Admiralty was assured of fuel oil for 20 years, as well as rebates from the company's profits for the Royal Navy. The deal provided the British government with a large and assured supply of oil while providing Anglo-Persian with the much needed capital and secure market. Churchill, in the spring of 1914, also began negotiating with Shell on a fuel oil contract with the Navy. The interplay between strategic, national, & commercial interests in the political theatre was demonstrated by the British agreement with Anglo-Persian. Oil had, for the first time, clearly become a strategic commodity and an instrument of national policy.
Events leading to World War I
Eleven days after Churchill's bill, on June 28th 1914, Archduke Franz Ferdinand of Austria was assassinated at Sarajevo. Russia mobilized its forces on July 30th and on August 1st, 1914, Germany declared war on Russia. Churchill flashed the order to the entire British fleet to "Commence hostilities against Germany" starting the 1st World War!