The Anglo-American Red Line

Under the Dawes Plan, Germany paid reparations for fi ve years, until 1929. At the end of 1929, she owed more than at the beginning. It was a scheme of organized looting by the international banking community dominated by London and New York. Guarantees were made for reparations payments of special funds in Germany. An agent-general for reparations, S. Parker Gilbert, a J.P. Morgan partner and protégé of Owen D. Young, was installed in Berlin to collect the repayments for the Anglo-American banks. With their risk thus all but nil, the London and New York banks began a vastly profi table lending to Germany, money which was recycled back to the banks of New York and London in the form of reparations with commission and interest. It was a vast international credit pyramid at the top of which sat London and ultimately, the New York banks.

Between 1924 and 1931 Germany paid 10.5 billion marks in reparations, but borrowed 18.6 billion marks from abroad. German recovery after 1923, under the guiding hand of Montagu Norman and his Reichsbank colleague, Hjalmar Schacht, was all controlled by the borrowings from the Anglo-Americans. There were no more fears of any Rapallo initiatives upsetting the Anglo-American order—that is, until the pyramid collapsed in 1929, when the credit fl owing from the New York and London banks into Germany to roll over the debt suddenly stopped.9

THE ANGLO-AMERICAN RED LINE

By then, the Anglo-American power struggle for primacy in world fi nance and economic affairs had been resolved. The oil wars, which had shaken the world for more than a decade, were fi nally resolved in a ‘ceasefi re,’ which resulted in the creation of an enormously powerful Anglo-American oil cartel, later dubbed the ‘Seven Sisters.’ The peace agreement was formalized in 1927, at Achnacarry, the Scottish castle of Shell’s Sir Henri Deterding. John Cadman, representing the British government’s Anglo-Persian Oil Co. (British Petroleum), and Walter Teagle, president of Rockefeller’s Standard Oil of New Jersey (Exxon), gathered under the cover of a grouse shoot to conclude the most powerful economic cartel in modern history. The Seven Sisters were effectively one.

Their secret pact was formalized as the ‘As Is’ agreement of 1928, or the Achnacarry agreement. British and American oil majors agreed to accept the existing market divisions and shares, to set a secret world cartel price, and to end the destructive competition and price

wars of the previous decade. The respective governments merely ratifi ed this private accord the same year in what became the Red Line agreement. Since this time, with minor interruption, the AngloAmerican grip over the world’s oil reserves has been hegemonic. Threats to break that grip have been met with ruthless responses, as we shall later see.

Britain and a weakened France agreed in 1927 to let the Americans into the Middle East and revised the secret wartime accords to refl ect this. A Red Line was drawn from the Dardanelles down through Palestine, to Yemen and up through the Persian Gulf; it encompassed Turkey, Syria, Lebanon, Saudi Arabia, Jordan, Iraq and Kuwait. Inside the line, the oil interests of the three countries worked out ironclad divisions of territory which have largely held to this day. Inside Iraq, Anglo-Persian, the Royal Dutch Shell group, and the French Compagnie Française des Pétroles, which had been ‘given’ the old Deutsche Bank share of the Turkish Petroleum Gesellschaft from 1914, along with the Rockefeller group, gained ‘concessions’ from Iraq for exclusive exploitation for 75 years of Iraq’s oil. Kuwait was given to Anglo-Persian and the American Mellon family’s Gulf Oil.10

By 1932, all seven major companies in the Anglo-American sphere—Esso (Standard of N.J.), Mobil (Standard of N.Y.), Gulf Oil, Texaco, Standard of California (Chevron), as well as Royal Dutch Shell and Anglo-Persian Oil Co. (British Petroleum)—were part of the Achnacarry cartel.

The cartel then devised a strategy to deal with companies not in the cartel, so called ‘outsiders.’ According to the terms of their cartel agreement:

It is recognized that it is desirable to convert uncontrolled outlets into the controlled class; in view of this, the purchase by the ‘as is’ members [i.e. Achnacarry cartel companies] of going distributing concerns outside ‘as is’ is to be recommended as tending to improve the stability of the markets.

The cartel was also prepared to deal with outsiders less compliant, as soon became clear.11

The sinews of the Anglo-American ‘special relationship’ had been defi nitively formed around the control of oil. The way was now clear for major new initiatives.