British Petroleum And The Redline Agreement

by Jill & Cathy on September 12, 2021

The Red Line Agreement was an agreement signed on 31 July 1928 by partners in the Iraq Petroleum Company (IPC). [1] The agreement was signed between Anglo-Persian Company (later renamed British Petroleum), Royal Dutch/Shell, Compagnie Française des Pétroles (later renamed Total), Near East Development Corporation (later renamed ExxonMobil) and Calouste Gulbenkian (an Armenian businessman). The aim of the agreement was to formalise the structure of the IPC company and to commit all its partners to a “self-denial clause” that prohibited each of its shareholders from independently seeking oil interests in the former Ottoman territory. It marked the creation of an oil monopoly or a cartel of enormous influence that extended over a vast territory. The cartel was slightly preceded by three decades by the birth of another cartel, the Organization of the Petroleum Exporting Countries (OPEC), created in 1960. [2] Edwin Black spoke of the 1928 agreement, signed by a consortium of oil companies that concluded a Western-controlled oil cartel in the. Years later, Walter C. Teagle of Standard Oil of New Jersey said the deal was “one hell of a bad deed.” [5] It was, however, used to define the scope of TPC`s successor, the Iraq Petroleum Company (IPC). Writer Stephen Hemsley Longrigg, an IPC alumnus, said that “the Red Line agreement, repeatedly seen as a sad case of illegal cartel or an enlightened example of international cooperation and equitable sharing, was to hold the field for twenty years and largely determined the pattern and pace of oil development over much of the Middle East.” [6] With the exception of Saudi Arabia and Bahrain, where ARAMCO and BAPCO prevailed, IPC monopolized oil exploration within the Red Line during this period. The American oil companies Standard Oil of New Jersey and Socony-Vacuum were partners of IPC and were therefore bound by the Red Line Agreement. When offered a partnership with ARAMCO to exploit Saudi Arabia`s oil resources, their IPC partners refused to release them from the deal. After the Americans claimed that World War II had ended the Red Line agreement, lengthy legal proceedings followed with Gulbenkian.

[7] Eventually, the case was closed out of court and the U.S. partners were allowed to join ARAMCO. [8] After this date, the Red Line agreement became a legacy document, as IPC continued to exploit existing concessions on its terms, but shareholder companies were allowed independently of each other to apply for new oil concessions throughout the Middle East. [9] “After the creation of IPC[Calouste] Gulbenkian insisted that 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 participants in the IPC consortium committed to participate in the exploitation of oil that was to be discovered within the red line exclusively by consortia of the same composition as the IPC. Thus, if one of the members of the IPC consortium discovers an oil activity or obtains a concession elsewhere in the red line, it should offer this asset to the remaining members according to the same “geometry” as in the CPI. “[3] Edwin Black spoke of the 1928 agreement signed by a consortium of oil companies that created a Western-controlled oil cartel in the Middle East, which he argues is at the root of decades of struggle for power and energy supply.

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