BP Has Dealt With Government Takeover Before...In Iran





Edwin Black is the New York Times bestselling and award-winning author of IBM and the Holocaust. This article is based on research from Banking on Baghdad: Inside Iraq's 7,000-Year History of War, Profit, and Conflict (Dialog Press). This article originally appeared on his website The Cutting Edge News.

America’s unrelenting addiction to oil has compelled it to recklessly drill off its most pristine shores without an emergency plan.  Now, the country’s territorial integrity is increasingly threatened while the Obama administration is essentially powerless to control the outcome and prioritize the response.  This country’s government—state, local and federal—fights its own community fires, responds to its own natural disasters, and maintains its coastal defenses against all comers.

However, although oil spills incrementally equaling the Exxon Valdez spill occur annually—and have for decades—our nation has never developed its own response capability.  By necessity, the legacy of neglect to this addictive oil supply means consigning those governmental responsibilities in the Gulf to a foreign company—BP.

Hence, the panoply of stoppage efforts are under the control of BP, the video feeds are under the control of BP, the dispersants deployed are under the control of BP, the clean-up efforts are under the control of BP, the estimates, progress, operational facts and figures are under the control of BP, and the communities are at the mercy of BP.

What BP does and does not do is dramatically changing the Gulf region’s way of life, its economic vitality, our nation’s food supply, and our coastal waters from Louisiana to New England.  In essence, America has abdicated dominion of its own petroliferous shorelines for oil.  What can be done now by the Obama administration?

First, the Obama administration should take charge of the American BP division and other companies at fault.  The solicitor general should obtain a temporary restraining order obligating BP to stop the leak within 24 hours; and if that cannot be done, appoint a court-supervised “master” to take control of the video feeds, the plugging efforts, the clean-up, the dispersants and everything else involved in this massive Gulf spill.  Evidence must be preserved.  Permission for everything must be granted by the master.  Grand juries must be convened.  If a company owed the IRS $10,000 in taxes, that agency could take over the company until the problem was remedied.  According to legal experts consulted, a temporary restraining order might not be necessary.  The necessary authority might already exist within the alphabet soup of regulatory agencies that purportedly oversee the drilling, from the EPA to OSHA to the Coast Guard.  Yes, this means stationing a government person in every decision-making office.  If BP challenges the matter in court, it could take as long as Exxon’s decades-long legal battle over its spill in Prince William Sound.

Second, the government, which is responsible to the citizens and not a foreign company responsible to its shareholders, must make orderly decisions, deploying BP’s resources and any other oil industry technology.  Then the buck will really stop somewhere in Washington.

BP has a century of experience with government takeovers.  It exists as a result of government takeovers.  It has thrived as the beneficiary of a sequence of international government takeovers.  Born as an arm of British oil imperialism in the Middle East, the company was originally known as Anglo-Persian Oil Company in the first decade of the twentieth century.  Its job was to secure on behalf of the British Empire the Iranian oil needed to transition off coal and join the early twentieth century’s naval arms race which exploded into World War I.  Anglo-Persian received the protection, sponsorship and financial assistance of the British government.

Indeed, Anglo-Persian Oil was an unofficial arm of the government.  London coveted oil lands in Ottoman Mesopotamia (Iraq), which were controlled by Turkish Petroleum Company and the Deutsche Bank.  To secure those oil rights in the Middle East, the British government systematically extorted and pressured the companies and its executives into transferring those oil rights to British and Anglo-Persian control.  When World War I broke out in 1914, the British government unilaterally seized control of a small German lantern oil company called British Petroleum and merged it with Anglo-Persian and Turkish Petroleum to create a new combined entity.  Parliament passed legislation to invest the equivalent of millions of dollars in the company and obtain a passive fifty percent ownership stake that could be exercised in the event of a national emergency.  Winston Churchill masterminded that government takeover.  Thus, World War I was the first oil war in the Middle East.

In 1920, the League of Nations, under the control of France and Great Britain, converted British Petroleum’s corporate contractual oil rights into international law and treaty.  This is how the West got into Iraq, and indeed how Iraq was invented out of three separate provinces and an oil-rich piece of Turkey.  In 1927, those same corporate oil interests, operating through nominees and subsidiaries, secured a vast monopoly over virtually the entire Middle East.  That monopoly was achieved through the secret 1928 Red Line Agreement.  Yes, the map had a red line around it identifying the vast monopolistic realm.  Puppet kings and princes and a few protectorates along the way were installed to ensure that oil flow.  The corporate names of the company changed from political regime to political regime, from Anglo-Persian to Anglo-Iranian and a few permutations in between.

In 1951, things turned bad for the Anglo-Iranian Oil Company.  Strongman Muhammad Mossadegh headed the Teheran government and never stopped making demands on Anglo-Iranian for more transparency, better royalties and more realistic government control.  Mossadegh was partially deaf and, therefore spoke to company officials at a six-inch distance.  The discourse was made all the more uncomfortable, it was said, because he gave off “a slight reek of opium.”  Eventually, Mossadegh became uninterested in any elaborate explanations of international law, commercial custom, or contractual rights and obligations.  He just wanted to know how soon officials could vacate his country.  Frantic, the company begged for the chance to arbitrate and promised a £10 million advance and £3 million per month payment even as arbitration progressed.  The more Anglo-Iranian offered in hopes of delaying the inevitable, the more Mossadegh was convinced the intensely valuable concession must be nationalized.

On June 10, 1951, Iranian officials arrived in force at the company’s facility in Khurramshahr near the strategic Shatt al-Arab for an official takeover ceremony.  The event was immense.  They slaughtered a sheep, the Iranian flag was hoisted up the flagpole atop the building, and then the Navy played the national anthem.  A thousand company employees stood closely packed on every surface high and low, straining to hear the historic proclamation:  the newly established state-run National Iranian Oil Company had now seized the facilities.  Anglo-Iranian’s general manager, Eric Drake, suddenly found a soldier sporting a bayonet-fixed rifle in his office.  Policemen guarded all the doors.  Drake was informed that he was now an employee of National Iranian Oil Company.  The new supervisors demanded he turn over organizational charts and all recent financial statements.  Drake refused without written authorization from London.

Days later, back in Teheran, celebratory mobs stormed the Anglo-Iranian office, pulled down its illuminated sign, and marched through the streets, carrying it above their heads as an exalted trophy.  A few days after that, Drake, who had refused to comply with Iranian orders, was accused of industrial sabotage.  He fled to Basra in Iraq before he could be arrested.

Teheran laughed at efforts by Anglo-Iranian to submit the matter to the International Court of Justice at The Hague.  Iranian officials declined to answer a summons, refused to recognize the concession clause calling for such adjudication, and rejected the court’s supposed jurisdiction, since the takeover of Anglo-Iranian was an exercise of national sovereignty.  Shortly thereafter, all British personnel were evicted from their corporate premises.  The families were evacuated from Abadan, where the “atmosphere had become one of siege.”  Everything was taken over by the state:  refineries, pipelines, ships, repair shops, the company printing press, office furniture, paper, and pencils.  With the whole world watching, Arab and European alike, the Anglo-Iranian Oil Company, the company that had invented commercial Mideast oil a half-century before as Anglo-Persian, was expelled from where it began it all.

Two years later, in mid-August 1953, Mossadegh was overthrown in Operation Ajax, a joint CIA-MI6 engineered coup.  The Shah of Iran assumed the reins of leadership.  By that time, Anglo-Iranian’s position as an international oil conglomerate tethered to an oil supply it did not control became more and more untenable.  In December 1954, two workmen in coveralls at Anglo-Iranian’s curved and stately Britannic House headquarters at Finsbury Circus in London climbed up the two steps at the entrance.  They carefully removed the large brass plaque next to the door that read ANGLO-IRANIAN OIL COMPANY LIMITED.  In its place, they installed a new plaque. It read:  THE BRITISH PETROLEUM COMPANY LIMITED.  Through patient negotiation with the Shah, a fifty-fifty arrangement was finalized. The company was again permitted access to its oil.  Compensation for its nationalized assets was set at £25 million payable in ten installments plus several hundred million dollars in oil and other emoluments.  A British Petroleum tanker resumed oil shipments out of Abadan on October 29, 1957.

A generation ago, the British government divested its stake in British Petroleum; and in the late 1990s, the company merged with Amoco under the new moniker “BP.”

But its new name did not erase a century of government entanglements and military aggression.  Nor did it change the century-long culture in which the company ultimately felt it could rise above local responsibility to achieve its global, multinational and corporate objectives.  Over the decades, that conduct has been evident in Iraq, Iran, elsewhere throughout the Middle East, and indeed, throughout the developing world. Now recklessness is seen off America’s coast.

No one is suggesting an angry mob, an expropriation of the company or the slaughter of a sheep.  But if the American government does step in, it will business as usual for BP. From Istanbul to London, Baghdad to Teheran, they have been there and done that.

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Lawrence Brooks Hughes - 6/9/2010

BP was transformed when it acquired both AMOCO, the former Standard Oil of Indiana, and ARCO, the original Atlantic Refining plus Richfield from California. Atlantic was one of the oldest parts of the Standard Oil Trust, containing Rockefeller's holdings around Philadelphia, and it dates from the mid-19th century. Standard of Indiana was (and remains) an even greater part of the former Rockefeller empire, and very much American. When one considers the vast size of the assets of both Amoco and Arco, which are something of a backbone of this country, the word "British" in the name "British Petroleum" is quite misleading.