This site requires Javascript to be turned on. Please enable Javascript and reload the page.

Urban Sights: Urban History and Visual Culture

Oil and the Political Landscape

IPC discovered oil at Baba Gurgur, Iraq’s first productive well, in 1927. Thereafter, the company changed its name to the Iraq Petroleum Company (IPC) and was constituted by six shareholders. Interests were split equally in shares of 23.5% among the Anglo-Persian Oil Company (later Anglo-Iranian), Shell, Compagnie Française des Pétroles, and the consortium of American oil companies called the Near East Development Corporation. The remaining 5% was given to the Armenian businessman Calouste Gulbenkian. The companies established the so-called “Red Line Agreement,” an informal decision to favor cooperation in territories of the former Ottoman Empire. In short, IPC dominated production inside the red line for twenty years while the arrangement remained in effect.

By the time the League of Nations recognized Iraq’s independence in 1932, a single company had established control over all of the country’s known and potential oil reserves. This meant that IPC could control production of Iraqi oil for foreign markets according to the interest of its shareholders and without regard for the expectations of the Iraqi government. IPC shareholders with ongoing major crude production elsewhere – including Anglo-Persian and Shell – remained reluctant to initiate extraction in Iraq for fear of creating a market surplus and forcing prices to plummet and thus IPC restricted its exploration to just one half of one percent of land in the country. In other words, the Iraqi government had sold control of its oil to a company that had no intention of developing its potential in the near future.

As mentioned above, the Atlantic Charter and the Anglo-American agenda espousing self-determination in former colonies was decreed in 1941. Accordingly, imperial discourses of conquest were reproduced as promises of progress for the territories under British control in the Middle East and elsewhere. By this time Anglo-Persian had established Abadan as the site of the world’s largest and most productive oil refinery. Poor labor conditions and meager profits inspired broad support among Iranians for nationalization of the oil company, and in 1951 the Majlis (Parliament) voted in favor of this move. Mohammed Mossadegh was elected Prime Minister and championed a movement to nationalize Iran’s oil facilities, resulting in the British company’s pull out from Abadan and the British state’s call for international boycott of Iranian oil.

This page has paths:

Contents of this path:

This page is referenced by:

Origins of Iraqi Oil Oil extraction for lamps from hand-dug pits had been a practice of local residents in the Ottoman province of Mosul since the middle of the 19th century. By 1899 a British geological survey confirmed high potential for rich petroleum deposits to be accessible and abundant in the area. Originally, Deutsche Bank purchased concessions to develop oil and a railway in Mosul and Baghdad provinces from the Ottoman government; however, the Bank failed to move forward with the project. Timothy Mitchell argues this was no accident as the German investors actually intended to block development of the region’s “inexhaustible supply” of oil for fear that it would flood the European market.
In 1914, after years of competition between British and German interests, a new deal was struck between the Ottoman government and a consortium of British financiers for future discovery and development of oil in Mosul and Baghdad provinces. The British group partnered with Deutsche Bank alongside Compagnie Française des Pétroles (CFP) and Royal Dutch Shell Oil Company to form a new consortium: the Turkish Petroleum Company (TPC).

The Anglo-Persian (later Anglo-Iranian) Oil Company acquired majority shares of the TPC by 1914 and was thereafter the largest single company shareholder. In fact, the British government was Anglo-Persian’s majority stakeholder and maintained chief control and interest in the company. At this point, the two major oil companies positioned to explore and exploit oil from the regions of Persia and Mesopotamia (Anglo-Persian and TPC respectively) were effectively direct extensions of the British government. Mitchell illuminates the symbiotic relationship between the companies and the imperial state in this regard:

Petroleum companies were never strong enough to monopolise the flow or stoppage of oil by themselves. They needed outside help, both military and financial. To draw on the resources of well-armed states and government treasuries, Western oil companies began to describe their control of overseas oil as an ‘imperial’ interest of the state, or in later language as a ‘strategic’ interest, and thus somehow beneficial to the public well-being.

In order to warrant its hegemony over oil resources after the collapse of the Ottoman Empire Britain was pressed to maintain control over the territories that it had claimed during the San Remo conference in 1920. Namely, this included the former Ottoman provinces of Mosul, Baghdad and Basra that comprised the British mandate. This arrangement empowered TPC, and thus the British government, with an easy avenue to govern the development and exploitation of Iraq’s northern oil fields near Kirkuk. In 1921, British authorities installed the Hashemite monarch as Iraq’s formal ruler and within five years on the Turkish Petroleum Company obtained concessions for exploration within Iraq’s national borders.

Next - Oil and the Political Landscape

Previous - Oil Films in Context