A brief thread on the History of Oil & the Great Game

However if you will allow me

I will not start w/ John Rockefeller&Standard Oil in 1870s or even Persia in 1900s

I will start in Middle&the collapse of USSR

Ch1: Putin never forgets

@dugalira @andymukherjee70 @ananthng

In 1985, a Young KGB Officer in East Germany saw his beloved USSR collapse

He saw what many did not

Communism didn't end USSR. Saudi Arabia did

The KGB Officer never forgot

Because Putin, neither Forgets nor Forgives

and one day his time would come

However

To see the events in perspective, we need to chart 2 separate stories

The rise of Middle Eastern Oil and the Rise of Putin

and its current cataclysmic intersection

PART 1: of this thread is the Rise of Middle Eastern Oil

Middle Eastern Oil can be directly traced to the playboy William D'archy and him "wildcatting on a colossal scale in a distant unsettled land" in Persia in 1901

He failed commercially and was bailed out by Anglo Persian (Todays BP) and the British Govt

In 1908, BP made the first major discovery in the appropriately named "Maidai-i-Naftan", The Plain of Oil

Did this lead to a sudden interest in Middle East oil?

No

Persia / Mesopotamia - Iran / Iraq, wasn't the the Arabian Pensinsula

BP (Anglo-Persian) for one, was convinced there was NO oil in Arabia

In 1926 it said Arabia was "Devoid of all oil prospects"
In fact, Albania was the next hot destination

Most American companies thought the same, with the exception of Gulf Oil and Standard Oil California

They teamed of with Colonel Homes(know as Äbu Naft"- the father of oil) to prospect in Bahrain

Gulf Oil and SoCal would later merge to become part of the modern day Chevron

Oil was discovered Bahrain and then Kuwait, there was stiff competition for the right to discover in Saudi Arabia

The British (Anglo-Persian ie: BP) was kept out by Ibn Saud's chief British oil confidant

Jack Philby

He hated his country & he would transfer his hate to his son

His son, Kim Philby, would go on become the most famous double agent of all time

The person who nearly destroyed the British secret service, MI5 and who was immortalised by Le Carre in Tinker Tailor Soldier Spy

Largely due to the efforts of the British hating, Jack Philby, Standard Oil California (Chevron) won the first concession

They along with the modern day Exxon, Texaco and Mobil would form Arabian America Oil company or ARAMCO, the main company prospecting Oil in Saudi Arabia

Ibn Saud was always troubled by next door Iran

Shia Vs Sunni
Arab Vs Persian
The enmity was not young

With the ARAMCO deal, Saud bound his country defence with American economic interests

The die was cast. Saudi Oil would from now on also become American Oil

To go back a bit...

All these American MNCs can be linked to the birth of Oil

Original Commercial Oil is American & it was discovered in Pennsylvania around 1870

John Rockefeller created Standard Oil, which became the largest player by far, a behemoth, bordering on a monopoly

In fact it became so large, that US Anti Trust broke the company into many pieces in the landmark 1911 Supreme Court Vs Standard New Jersey case

This ruling &the associated Sherman Anti-Trust law are the most important landmarks in global Anti-Trust/Monopoly breaking regulations

For a long time US was the dominant producer of oil in the world

Its only real competition was Russia and its Central asian provinces around Baku

In fact the Pioneer of the Russian oil industry was Ludwig Nobel, the brother of Alfred Noble (Noble Prize founder)

Then came the
Dutch east Indies (and the birth of Royal Dutch)
Venezuela
Mexico
and of course the Middle East.

US Share dropped from a nearly 80% to about 25% and in 1960s for the first time became a importer

But we are digressing...

and to get back on track, we need to get back to middle East and the birth of Opec

Oil as a cartel is NOT an Opec invention

In fact the notion OPEC++ has its origins in an 50,000 acres Scottish Castle Estate, called the Archancarry

In 1928 on banks of the river Arkiag, the top producers had tried to frame rules for the cartelisation of Oil

As today, the only country missing was Russia &the only market excluded was America due to fears of Anti-trust actions

Do note, in 1928, Oil production was controlled not by countries but by companies

That would change with the formation of Opec and the effective nationalisation of the global oil industry

Started in 1960,OPEC was the brainchild of Venezuelan Oil Minister,Juan Pablo Perez Alonzo

Alonzo, studied medicine John Hopkins &was a visionary

A leftist he insisted that nations regain sovereign control of oil. However he also saw the wisdom of collaborating with foreign companies

He was also one of the earliest to talk about "resource curse"

OPEC got off to a slow start

In 1960, Oil production was controlled by Oil MNCs

Countries did not have the right to turn off the taps (with minor exceptions like Mexico)

The just shared in the profits by turning it on

However the wave of nationalism sparked by mainly by Colonel Gamal Abdel Nasser ascendance to power in Egypt, changed all that

Nationalism was the clarion call and one by one, production shifted to the nation state

It was all building up for that one spark

and the spark was the Yom Kippur war in 1973

On the holiest Jewish day of Yom Kippur, Egyptian and Syrian jets surprised the Israelis

The resultant war, nearly destroyed the Israeli state

Israel clawed back at end, but the damage had been done

And on 16 October, egged on by Anwar Sadat, The Saudi King finally came around and Opec announced that Oil price would be hiked by 70%!

In addition the Saudis stopped all supply of oil to the United States.

The 4 decade old petroleum order was finally dead

This is END of Part 1

PART 2 Tomorrow