Oil in the Great War

This memo dealt with the ‘Effect of War on Our Gold Reserves.’ Blackett writes,

It is of course impossible clearly to forecast what would be the effect of a general European war in which most of the Continental countries as well as Great Britain were engaged, leaving only New York (assuming the neutrality of the United States) among the big money markets of the world available from which gold could be attracted to the seats of war.

Equally astonishing, in light of Britain’s decision to go to war that fateful August 4, was a letter from Sir George Paish to Lloyd George dated 2 A.M., Saturday morning, August 1, 1914:

Dear Mr. Chancellor, The credit system upon which the business of this country is formed, has completely broken down, and it is of supreme importance that steps should be taken to repair the mischief without delay; otherwise, we cannot hope to finance a great war if, at its very commencement, our greatest houses are forced into bankruptcy.2

Specie payments (gold and silver bullion) were promptly suspended by the Bank of England, along with the Bank Act of 1844. This decision placed large sums of gold into the hands of the Bank of England, in order that Britain’s government could fi nance food and war matériel purchases for the newly declared war against Germany. Instead of gold, British citizens were given Bank of England notes as legal tender for the duration of the emergency. By August 4, the British fi nancial establishment was ready for war.

But, as we shall soon see, the secret weapon was to emerge later: the special relationship of His Majesty’s Treasury with the New York banking syndicate of Morgan.

OIL IN THE GREAT WAR

Between 1914 when fi ghting began and 1918 when it ended, petroleum had emerged as the recognized key to success of a revolution in military strategy. In the age of air warfare, mobile tank warfare and swifter naval warfare, abundant and secure supplies of the new fuel were becoming increasingly essential.

Under the foreign policy guidance of Sir Edward Grey, Britain, in the months leading up to August 1914, precipitated what was to become the bloodiest, most destructive war in modern history. According to offi cial statistics, deaths due to the war, directly or indirectly, numbered between 16,000,000 and 20,000,000, with the great majority, 10,000,000 or more, being civilian deaths. The British Empire itself incurred more than 500,000 dead and total casualties of almost 2,500,000 in the four-year-long world ‘war to end all wars.’

Rarely discussed, however, is the fact that the strategic geopolitical objectives of Britain, well before 1914, included not merely the crushing of its greatest industrial rival, Germany, but, through the conquest of war, the securing of unchallenged British control over the precious resource which, by 1919, had proved itself as the strategic raw material of future economic development—petroleum. This was part of the Great Game—the creation of a new global British Empire, whose hegemony would be unchallenged for the rest of the century, a British-led New World Order.

A study of the major theatres of the 1914–18 war reveals the extent to which securing petroleum supplies was already at the center of military planning. Oil had opened the door for a terrifying new mobility in modern warfare during the course of the war. The German campaign in Romania, under Field Marshal von Mackensen, had the priority of reorganizing into a single combine, Steaua Romana, the previously English, Dutch, French and Romanian oil-refi ning, production and pipeline capacities. Romania during the course of the war was the only secure German petroleum supply for her entire air force, tank forces, and U-boat fl eet. The British campaign in the Dardanelles, the disastrous defeat at Gallipoli, was undertaken to secure the oil supplies of the Russian Baku for the Anglo-French war effort. The Ottoman sultan had embargoed the shipping out of Russian oil via the Dardanelles.

By 1918, the rich Russian oil fi elds of Baku on the Caspian Sea were the object of intense military and political effort on the part of Germany, and also of Britain, which pre-emptively occupied them for a critical period of weeks in August 1918, denying the German General Staff vital oil supplies. Denial of Baku was a decisive last blow against Germany, which sued for peace some weeks later, only months after it had seemed that Germany had defeated the Allied forces. Oil had proved to be at the center of geopolitics.

By the end of the First World War, no major power was unaware of the vital strategic importance of the new fuel, petroleum, for future

military and economic security. At the end of the war, fully 40 per cent of the British naval fl eet was oil fi red. In 1914, at the onset of the war, the French army had a mere 110 trucks, 60 tractors and 132 airplanes. By 1918, four years later, this had increased to 70,000 trucks and 12,000 airplanes, while the British, and in the fi nal months the Americans, put 105,000 trucks and over 4,000 airplanes into combat service. The fi nal British–French–American offensives of the war on the Western Front consumed a staggering 12,000 barrels of oil per day.

By December 1917, French supplies of oil had become so low that General Foch pressed President Clemenceau to send an urgent appeal to President Woodrow Wilson. ‘A failure in the supply of petrol would cause the immediate paralysis of our armies, and might compel us to a peace unfavorable to the Allies,’ Clemenceau wrote to Wilson.

The safety of the Allies is in the balance. If the Allies do not wish to lose the war, then, at the moment of the great German offensive, they must not let France lack the petrol which is as necessary as blood in the battles of tomorrow.

Rockefeller’s Standard Oil group answered Clemenceau’s appeal, giving Marshall Foch’s forces vital petrol. Lacking a sufficient Romanian oil supply, as well as access to Baku, German forces were unable to successfully mount a fi nal offensive in 1918 (despite the Russian–German Brest–Litovsk agreement to cease hostilities) as the trucks necessary to bring suffi cient reserves were unable to secure petrol.

Britain’s foreign minister, Lord Curzon, commented, quite accurately:

The Allies were carried to victory on a fl ood of oil … With the commencement of the war, oil and its products began to rank as among the principal agents by which they [the Allied forces] would conduct, and by which they could win it. Without oil, how could they have procured the mobility of the fl eet, the transport of their troops, or the manufacture of several explosives?

The occasion was a November 21, 1918, victory dinner, ten days after the Armistice which ended the war. France’s Senator Henry Berenger, director of the wartime Comité Général du Petrole, added that oil was the ‘blood of victory. Germany had boasted too much of its