18/04/2022

What Was the Red Line Agreement of 1928

The San Remo oil deal excluded U.S. oil companies from participation in the TPC. This fact provoked strong protests from U.S. oil companies, which feared that Europeans would deny them access to foreign oil wells and dump cheap Middle Eastern oil into the global market, and from the U.S. State Department, which opposed all attempts by foreign governments and companies to discriminate against U.S. companies in their search for new markets and business opportunities. To prevent Europeans from treating U.S. oil companies unfairly, the U.S. Congress passed the Mineral Leasing Act in February 1920, which denied drilling rights on public lands in the United States to any foreign company whose parent government discriminated against U.S.

companies. However, neither the British nor the American government wanted to jeopardize their relations on this issue. In 1928, the TPC was reorganized to include the Near East Development Corporation, an American oil syndicate that included Jersey Standard, Socony, Gulf Oil, the Pan-American Petroleum and Transport Company, and Atlantic Refining (later Arco). Jersey Standard and Socony then took full control of the NEDC after buying their partners in the 1930s. It was said that at a meeting in 1928, Calouste Gulbenkian, an Armenian businessman and philanthropist, drew a red line on a map of the Middle East that delineated the boundaries of the area where the self-denial clause would come into effect. [4] Gulbenkian said that it was the border of the Ottoman Empire that he knew in 1914. He should know, he added, because he was born in him and lived in him. The other partners looked at it carefully and did not contradict it. They were already expecting such a limit. (According to some reports, the “red line” was not drawn by Gulbenkian, but by a French representative.) With the exception of Gulbenkian, the partners were today`s supermajors. Inside the “red line” is the entire former Ottoman territory in the Middle East, including the Arabian Peninsula (plus Turkey), but excluding Kuwait.

Kuwait was excluded because it was intended to be a reserve for the British. The red line, as well as the agreement as it stands, has shaped the structure of foreign ownership and the pace of oil development in the Middle East. For example, Gulf Oil (now owned by Chevron), an initial party to the IPC agreement (it later resigned), became an active competitor for a stake in the Kuwait concession, in part because its participation in IPC prevented it from seeking promising concessions elsewhere in the Gulf region. Gulf`s success in conquering a stockpile thwarted expectations that the Anglo-Persians (APOC) would be able to monopolize Kuwait, then a British protectorate. The red line prevented APOC and its U.S. partners in IPC, mainly New Jersey`s Standard Oil (now Exxon) and New York`s Standard Oil (now Mobil), from seeking concessions in Saudi Arabia. The rich fields of eastern Saudi Arabia were discovered by Casoc, a subsidiary of Standard Oil in California (now Chevron). Texaco bought half of Casoc in 1936.

Neither was a red line company. “After the formation of the IPC, [Calouste] Gulbenkian insisted that the consortium participants sign what became known as the Red Line Agreement (Yergin 1991:203-6). The red line was drawn on a map to define the areas that were once under the sovereignty of the Ottoman Empire, and the agreement stipulated that the participants of the IPC consortium undertook to participate in the exploitation of the oil to be discovered in the red line exclusively through consortia of the same composition as the IPC. Thus, if one of the members of the IPC consortium discovered oil or obtained a concession elsewhere in the red line, he would have to offer that asset to the remaining members in the same “geometry” as in the CPI. [3] At the San Remo Conference in 1919, the German share of TPC was transferred to the France. The Americans, also victorious in the war, demanded a share of their booty and accepted 20% in 1922 (later increased to 23.7%). However, this did not put an end to the disputes that hindered the reorganization of the company. Gülbenkian insisted that the “self-denial clause” be maintained in any new agreement. The Frenchman supported Gülbenkian with a share of 23.7%; The other participants did not.

The 1928 Group Agreement (better known as the “Red Line Agreement”) was an agreement between several American, British, and French oil companies on oil resources in regions that once included the Ottoman Empire in the Middle East. The origins of the Red Line Agreement date back to the founding of the Turkish Petroleum Company (TPC) in 1912. Map with the extension of the Red Line Agreement, 1928. In 1928, shareholders agreed to explore and develop the oil fields of the Middle East. Gulbenkian said he drew a red line on a map along the borders of the former Ottoman Empire to mark the company`s area of operation. It was found that one shareholder could not act in this area without the consent of others. This so-called “self-denial clause” dates back to the early 1900s, when European banks and oil companies sought to counter Standard Oil`s commercial penetration by creating protective cartels. For Gulbenkian and the French, it guaranteed a share of Middle Eastern oil, but for American oil companies, it turned out to be a straitjacket. There have been few companies in the world that have been able to exploit Iraq`s oil resources, and even if they had existed, it is unlikely that they would have been in direct competition with each other. .

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