Prelude to Saudi Arabia-Socal Concession, Caltex and Aramco - 1892-1933
Edited and condensed from Google search, Wikipedia, Stegner Discovery: Search for Arabian Oil and Gurtz Prelude to Discovery
No event in history is without antecedents—antecedents that reach back indefinitely into the past. In all recorded history there is no such thing as a true beginning. If we wished to trace the development of Middle Eastern oil, we could find the fact of oil's existence and the human knowledge of its uses far back in the twilight where history and legend blur. Bitumen from oil seeps waterproofed the ware of potters in Ur of the Chaldees. Noah smeared his ark, within and without, with the same pitch. But this story does not pretend to deal with the development of Middle Eastern oil. It pretends only to be a part of the human record of some of the men who lived some of the actions—the story of the pioneers of one company in one country for a limited number of years. And so it is necessary to go back to Lloyd Hamilton only far enough to understand the circumstances that sent him to Jeddah, and to touch for a moment on the difficult and awkward situation into which he stepped.
The difficulties were religious and political as well as commercial, for Hamilton was not merely Industrial Civilization meeting an ancient culture of patriarchal shepherds and oasis townsmen. He was also the Outsider aspiring to do business with the most fundamentalist sect of Islam. Further, he was American Business trying to get a solid foothold in a country which the United States had officially recognized only two years before, and in an area into which American enterprise had thus far never penetrated.
As time would show, he was more—he was the spokesman of a kind of foreign development prepared to operate strictly as a business, and that in itself was revolutionary. Political domination, restrictive treaties, government partnerships, "designated instruments" were not hiding behind him. Absent was the imperial conviction that commerce was possible in undeveloped countries only when tied to colonial administration. The United States Government was so far from being involved in Hamilton's business that it didn't even have a representative in Saudi Arabia. American missionaries had been so little concerned—and so little able—to make converts to Christianity that their efforts had been confined to the periphery of the peninsula— Kuwait, Aden and Muscat. According to a traditional formula, the flag followed the missionaries and trade followed the flag. Here, trade came first, and came alone.
For generations the British Empire had maintained political and commercial primacy in both the Red Sea and the Persian Gulf. All around the Arabian Peninsula's southern and eastern shores, from which once the dhows of pirates had burst forth to raid ships plowing the lanes of empire, the British Navy had established dominance and British political agents had enforced treaties. There had been no other way of maintaining order and keeping the trade routes open. The treaties left the little sheikhdoms around the coast (none of which was ever consolidated into Ibn Saud's kingdom) technically independent in domestic matters, but delegated management of their international relations to Great Britain. The sheikhs of Kuwait, Bahrain and Qatar, and the lesser sheikhs and chiefs of the Trucial Coast refrained from piracy as requested, drew their annual bounty money, and did pretty much what the British political agents told them to do.
The paper signed by Zaid ibn Khalifa, chief of Abu Dhabi, in 1892, was a representative treaty: he bound himself, his heirs and his successors never to enter into any agreement or correspondence with any foreign power other than Britain; never to permit, without specific British consent, the residence in his territory of any foreign representative or agent other than British; and never to sell, cede, mortgage, or otherwise grant rights to any of his territory without the British blessing. That pretty effectively shut the door in the faces of foreigners snooping for commercial advantages in the British-protected domain of Abu Dhabi.
It is impossible to say exactly when the search for oil in Arabia began. But if one date had to be chosen, it might well be January 15, 1902, the day that 'Abd al-'Aziz ibn 'Abd al-Rahman Al Sa'ud recaptured Riyadh and began the march to Arabian statehood. Without the stability King 'Abd al-'Aziz assured by consolidating nine-tenths of the Arabian Peninsula into a single polity, a search for oil would likely not have begun under auspicious circumstances, nor would it have yielded the prosperity that characterizes Saudi Arabia today. Yet it was hardly the consolidation of the kingdom alone that was responsible. Three other world-shaping events—the discovery of oil elsewhere in the Middle East, the First World War, and the Great Depression—each also drove and shaped Arabia's search for oil.
The discovery of oil in the Middle East occurred some six years after 'Abd al-'Aziz's victory at Riyadh when, on May 25, 1908, a self-made British millionaire named William Knox D'Arcy struck oil at Masjid-i-Sulaiman, the site of a natural oil seep in the Zagros Mountains of western Persia.
It had long been thought that oil would be found in this region. Ancient oil seeps had been discovered at several sites, including Masjid-i-Sulaiman itself. (See Aramco World, July/August 1994.) But getting it out was another matter. When D'Arcy signed a concession agreement with Shah Muzzafar al-Din Kadjar in 1901, he had been advised that the search might cost some £10,000.
1902 Muzaffar Shah, William D'Arcy Concession 1909 Mashadid Sulaiman Iran Oil find 1909 George Reynolds left
By the time Masjid-i-Sulaiman came in, D'Arcy and his partner, Burmah Oil, had spent hundreds of thousands of pounds sterling, and they realized that millions more would be required to develop the roads, refineries and ports necessary to bring the oil to market. To generate these vast new funds, in 1909 D'Arcy and Burmah Oil offered to the public shares in the newly formed Anglo-Persian Oil Company. But by the end of 1912, the company's capital was exhausted and no bank was willing to back the fledgling enterprise any further. Anglo-Persian then turned to the British Admiralty, which had just converted its ships from coal-fired to oil-fired engines. As war jitters reverberated throughout Europe, Britain was eager to secure a reliable source of fuel oil, and that, it turned out, was Anglo-Persian.
On June 17, 1914 First Lord of the Admiralty Winston Churchill presented a bill to Parliament authorizing the Admiralty to purchase 51 percent of Anglo-Persian's stock for £2.2 million. In a surprising victory, the bill passed 254 to 18. It was an astoundingly astute move. Just 11 days later, Archduke Franz Ferdinand of Austria was assassinated at Sarajevo, and Europe devolved into the chaos that became World War I. By the time of the armistice four years later, there was no doubt of the role that oil had played. Before the advent of the internal combustion engine, troops had to be mustered at a railhead or port and marched to battle, with equipment, guns and supplies on horse-drawn wagons. Horses were costly: They ate 10 times as much as a man. When oil arrived, however, transport vehicles were limited only by the terrain, and airplanes, it was soon discovered, could surmount even that obstacle.
Lawrence of Arabia and Saudi Arabia Campaign During Worl War I
The decisive difference between the allied forces of England, France and the United States and those of Germany, Austria-Hungary and Ottoman Turkey was thus not so much tactics or even leadership but oil supply. In addition to Anglo-Persian—which by 1916 was supplying one-fifth of the British Navy's needs—the Allies had at their disposal the giant networks of Royal Dutch/Shell and Standard Oil of New Jersey. The Germans were less fortunate. When the Allies destroyed the oil facilities in Romania in November 1916, and then prevented Russia's Baku fields from falling into German hands in August 1918, the war was unsustainable.
Saudi Arabia Oil Fields Persian Gulf to Caspian Sea Oil Corridor Oil (green) and Gas (red) fields of Persian Gulf
The lesson was clear: No longer could a nation be secure without a steady supply of oil. And, as a huge new discovery in 1927 at Baba Gurgur in Iraq demonstrated, nowhere was that oil more apt to be found than in the Middle East. But barely had British, French, Dutch and Americans formed the Turkish Oil Company, largely operating in Iraq, when the 1929 stock market crash undermined the world economy.
Ibn Sa'ud had proved too big for British policy to control through the 1892 agreement. After his Ikhwan armies chased Sharif Hussain of the Hijaz clear off the peninsula and into exile on Cyprus, he held a position of unassailable strength, and gained full British recognition of his sovereignty by the Treaty of Jeddah in 1927. With respect to oil and Mr. Hamilton's mission, this was to be an important exception.
Long before Ibn Sa'ud solidified his control over Arabia, British power sat solidly in what were then the two important oil nations of the Middle East: Iran and Iraq. The Anglo-Persian Oil Company at Abadan was not merely under contract to supply fuel to the Royal Navy; it was more than half owned by His Majesty's Government, and had been ever since 1914. There was thus more than the usual cooperation between British business and British foreign policy: the two were virtually identical, and Anglo-Persian operated not simply as a "designated instrument" but as an owned and operated, overt instrument of British policy.
1900 Arabia Mandates 1922 Ibn Saud in Desert 1928 Red Line Agreement of IPC Companies
A collection of companies owned the Iraq Petroleum Company in 1933. The Near East Development Corporation, originally owned by five American companies, three of which sold out in the early 30's, held 23.75 per cent of the IPC stock. British-Dutch and British interests, including Anglo-Persian, held twice as much. British influence was enhanced by the fact that the company operated under the eye and protection and with the active cooperation of the High Commissioner and his representatives in Baghdad, Mosul and Basra. The owner companies of IPC, in 1928, had bound themselves, by the so-called "Red Line Agreement", not to explore or develop independently any region which lay inside the boundaries of the old Ottoman Empire. Outside competitors un-welcome to the IPC and Anglo-Persian group were excluded by England's treaties with the sheikhs, and by her political domination throughout much of the area. Only Saudi Arabia, in fact, lay outside the sphere of effective British control.
There was a third oil area, not merely potential but already producing, where American enterprise had won a concession from the British. This was the island of Bahrain, 12 miles off the Arabian mainland in the Persian Gulf. Though the Sheikh of Bahrain, like the coastal sheikhs, was tied by treaties with Britain, a combination of circumstances and the energy of a few men had allowed him to make commercial agreements with an American company. The story of the opening of Bahrain is so necessary a preliminary to the negotiations for which Hamilton came to Jeddah that we must go back 11 years before Hamilton's arrival, to the year 1922. We can confine our attention to a ruddy, genial, hearty, energetic, undiscourageable New Zealand adventurer named Major Frank Holmes. Holmes was one of those who, as Bernard de Voto once said, awake alertly in the night, hear history's clock strike at a critical time—but count the strokes wrong. He was on the trail of a big idea very early, but as it happened, arrived just a little too early and in not quite the right way.
Frank Holmes (1874–1947), known affectionately by Arabs as "Abu Naft" (the Father of Oil), was a British-New Zealander mining engineer, geologist and oil concession hunter. Following distinguished service in World War I, he was granted the title of honorary Major and was thereafter known as Major Frank Holmes. He was born in 1874 at a remote work camp in New Zealand where his father was building a bridge. He attended Otago Boys' High School, Dunedin in 1888-89. At the age of 17, he was apprenticed to his uncle who was the general manager of a gold mine in South Africa. For two decades in gold and tin as mining engineer, he worked in Australia, China, Russia, Malaya, Mexico, Uruguay, Nigeria.
During World War I, he was a quartermaster in the British Army. In his efforts to source food and supplies for the British Army in Mesopotamia, Holmes travelled widely through the Middle East and may have heard rumors of a possible oil seepage on the eastern seaboard of the Arabian peninsula. This, together with a close study of Admiralty maps of the area, triggered an abiding interest in oil in the region. By 1918, he was writing to his wife that "I personally believe that there will be developed an immense oil field running from Kuwait right down the coast of eastern Arabia".
During World War I, after active service which included the Gallipoli campaign, Holmes had worked for a time in the Admiralty, where access to petroleum maps left him thoughtful. At the beginning of the 1920's he showed up in Bahrain to work on the water system, and he was such an agreeable fellow, so uniformly good-natured and so full of bustle and steam, that he made many friends among both British and Arabs. When a group of London financiers formed the Eastern and General Syndicate to promote profitable enterprises in the Persian Gulf area, Holmes was their natural choice as Bahrain agent. The Eastern and General Syndicate was interested in oil, but it was not an oil company. It proposed either to act as negotiator for oil companies which wanted concessions but lacked contacts for making them, or to obtain the concessions first and then sell them to companies which would explore and develop them.
Obviously the Anglo-Persian and Iraq Petroleum people were going to keep their eye on Holmes' activities. Obviously, too, the best chance for Eastern and General would lie at some place outside British political influence— Saudi Arabia, for instance. A land almost cut off from modern history, nearly untraveled by Europeans, it had been in times past a by-word for the fabulous. As a nation, it was bounded on the east by Bahrain's pearls, on the west by King Solomon's mines, on the south by frankincense and myrrh. Oil under it? Why not?
Holmes almost made the dream come true. In the boiling heart of the Arabian summer of 1922 he rode across deserts only a handful of Europeans had ever seen, and talked with Ibn Sa'ud in his fortress capital of Riyadh. With Ibn Saud’s permission, he carried out a survey over four weeks in the desert and returned to Hofuf with earth samples which he claimed bore traces of oil. In order to allay the suspicions of British officials, Holmes claimed that he was looking for a rare butterfly, the Black Admiral of Qatif, although this deception appears not to have been effective Again in November he intercepted the King (then called the Sultan of Najd and Its Dependencies) at Hofuf, in the al-Hasa oasis. He followed him to al-'Uqair, where the King was holding a conference with Sir Percy Cox, the British High Commissioner in Iraq. Sir Percy, with the interests of Anglo-Persian in mind, turned an understandably cool eye upon Holmes' efforts and advised the King that concessions for the exploration of al-Hasa were premature at that time. Premature or not, Holmes pursued the King back to Hofuf and in the teeth of Sir Percy's plainly-indicated objections obtained a concession to explore for oil over 60,000 square miles of al-Hasa, Arabia's eastern province.
But then, disappointment. The task of trying to find and develop oil fields in a country which lacked most of the elements necessary to support such an industry—good roads and communications, skilled labor, transport, supply centers—and which few foreigners entered except during the pilgrimage season, did not appeal to any of the oil companies, European and American, to which the Syndicate offered its concession. After several years, during which some Belgian geologists tried without success to discover what was under al-Hasa's dunes and gravel plains, the Syndicate defaulted on its annual rental payment and let the concession lapse. It thereby gave up one of the greatest oil reserves in the entire world—it had heard the clock strike, but counted the strokes wrong. But there was after all no way for the concessionaires to know what they were relinquishing. Moreover, by the time they let al-Hasa go, they had a more promising prospect going on Bahrain.
The Bahrain concession was granted to Holmes by the Sheikh of Bahrain, with British approval, in 1925, and was renewed in 1927, the year in which the Iraq Petroleum Company brought in the big Kirkuk field. At the end of November, 1927, the Syndicate sold an option on the Bahrain concession to Eastern Gulf Oil, and Gulf sent out a geologist, Ralph Rhoades, to explore and map the island. Rhoades found on Bahrain a perfect structure, a textbook dome, but he had no way of knowing, without drilling, whether there was oil in it. And Eastern Gulf, having bought something it liked the look of, now found itself unable to go ahead. It was reminded that it was a subsidiary of Gulf Oil, and that Gulf was a part of the Near East Development Corporation which was in turn a part owner of the Iraq Petroleum Company and a signatory to the recent Red Line Agreement. Eastern Gulf then offered its Bahrain option to the IPC, which decided against it because its geologists reported the Oligocene-Miocene formations, oil-producing in Iran and Iraq, to be missing from Bahrain. So Eastern Gulf sold its option to Standard of California, a complete newcomer in the Middle East.
Socal too had its difficulties, this time with the British Colonial Office and the political agent on Bahrain. Nearly two years of negotiations and compromises were needed to produce an agreement. It stipulated that the company developing Bahrain must be a British company, registered in Canada, and must establish an office in Great Britain, in the charge of a British subject, for maintaining communications with His Majesty's Government; one director must be a British subject, persona grata to the British Government; as many of the company's employees as was consistent with efficient operation must be British or Bahrainis; and the company must maintain on Bahrain Island a "Chief Local Representative" whose appointment must be approved UK and who must, in all his dealings with the Sheikh of Bahrain, work through the British political agent.
Thus, with one hand tied behind it in political restrictions and red tape, the first wholly-American-owned oil company came into the Middle East. The Eastern and General Syndicate signed a final agreement with the Sheikh of Bahrain on June 12, 1930, and on August 1 it formally assigned the concession to Socal's new Canadian subsidiary, Bahrain Petroleum Company, or Bapco, whose first Chief Representative was Major Frank Holmes.
When 'Abd al-'Aziz took control of the Hijaz in 1926, he was delighted to find that the taxes paid by pilgrims to visit the holy cities were enough to administer not only the Hijaz, but the rest of his domain besides. By 1931, however, the number of pilgrims had fallen from an annual average of more than 100,000 to fewer than 40,000. Foreign debt repayments and administrative salaries began to fall badly into arrears. With this in mind, 'Abd al-'Aziz began to reconsider an idea he had explored 10 years earlier when he first met the enterprising New Zealander named Frank Holmes.
The King recalled that in 1925 Holmes signed a concession with the island state of Bahrain. But Holmes believed that oil could be found in even greater quantities a short distance away on the Arabian mainland, along the Arabian Gulf coast. After meeting with 'Abd al-'Aziz in al-Hasa in 1922, Holmes returned the following year to al-'Uqayr, where he once again saw the ruler. In May 1923 King 'Abd al-'Aziz signed an agreement with Holmes which entitled the Eastern and General Syndicate to find a company to search for oil in eastern Saudi Arabia. But there was trouble from the beginning. It began when Eastern and General invited a Swiss geologist to survey al-Hasa Thereupon, London banks refused to lend Eastern and General the money needed to renew the lease for a third year.
Unable to generate interest from Anglo-Persian, which then had more oil flowing than it knew what to do with, Holmes headed for New York, where he looked up Gulf Oil, one of the few US companies committed to developing foreign oil at that time. In November 1927 Gulf took over all rights to the Eastern and General concessions, which included Bahrain, al-Hasa and Kuwait. In 1928, however, Gulf joined the Turkish Petroleum Company, then jointly owned by US, British, French and Dutch interests, and thereby became a party to the so-called Red Line Agreement, which effectively blocked Gulf from undertaking exploration anywhere in the region, except Kuwait, without the backing of all the partners of Turkish Petroleum. With the oil market glutted and little geological confidence that there would be oil in Arabia at all, that backing was not forthcoming. Within the year, the concession lapsed. In 1931, Standard Oil of California (SOCAL)—which was not a partner in Turkish Petroleum and therefore free to act within the former Ottoman Empire—agreed to take over the Bahrain portion of the concession from Gulf. On May 31, 1932 SOCAL's newly formed Bahrain Petroleum Company struck oil there, and SOCAL's eyes turned toward al-Hasa.
In his book, Arabian Oil Ventures, Harry St. John ('Abd Allah) Philby, who was 'Abd al-'Aziz's confidant on Western affairs, tells how, in response to 'Abd al-'Aziz's concerns about his Depression-wracked financial situation, Philby remarked that the king and his government seemed "like folk asleep on buried treasure." When 'Abd al-'Aziz replied that he might consider granting a new concession, Philby suggested that he talk to Charles Crane, an American plumbing tycoon and philanthropist who was then sponsoring development projects in neighboring Yemen. As Crane happened to be in Cairo, it was easy enough to invite him for a visit. On February 25, 1931 'Abd al-'Aziz greeted him in Jeddah with a banquet, and presented him with a bundle of carpets and swords as well as two Arabian horses. In return, Crane offered to send, at his own expense, one of his mining engineers, Karl Twitchell, then working in Yemen, to search for artesian wells for the king. It took Twitchell some time to make the 1500-mi journey north, complete the surveys— which encompassed much of the Peninsula—and prepare a report. The news, he noted, was mixed: There was no water, but there might be oil.
1931Charles Crane Philanthropist ME Friend 1931Karl Twitchell 1933 Twitchell Saud 1930's Ibn Saud group
Twitchell noted the similarity between the geology of eastern Arabia and that of Bahrain. Should SOCAL find oil in Bahrain, he reasoned, the likelihood was great that oil would be found in al-Hasa, too, and possibly in much greater quantities, owing to al-Hasa's greater area. When Bahrain 1 came in, it confirmed Twitchell's expectations—and those of 'Abd al-'Aziz. The king quickly dispatched Twitchell to the United States to find an oil company willing to invest in a search for oil in eastern Arabia. Within weeks, Twitchell was referred to SOCAL in San Francisco, the same company that had been hoping to approach the king ever since it had begun its exploration in Bahrain.
With both SOCAL and 'Abd al-'Aziz now pursuing the same objective, events began to move quickly. Following a flurry of letters between Riyadh and San Francisco, Twitchell returned to Jeddah in February 1933 accompanied by Lloyd Hamilton, a lawyer representing SOCAL, who had been instructed to sign a concession agreement if the two parties could agree on terms.
The home office of Socal at 225 Bush Street, San Francisco, was separated from Bahrain Island by half the globe, and in 1930 by an almost complete lack of dependable information, as well as by a certain reluctance on the part of more conservative members of the Board of Directors. The search for new foreign reserves, necessarily both speculative and expensive, was no new experience for Socal. It had spent millions of dollars, without success, on exploration and drilling in Mexico, Venezuela, Colombia, Ecuador, Argentina, the Philippines and Alaska. But by the time the Bahrain agreement was concluded, the world was deep in the Great Depression. Oil was in over-supply, and the price had dropped to a dime a barrel in Texas. As a result, only a few men in the company were advocating the Middle East venture. These were mostly from the Producing Department: producing men always have felt that the time to look for oil is when there is already plenty of it. That is when concessions and leases are easiest and least expensive to get, and that is when you must find oil if you want to have your share for the future.
One of the most persistent, enthusiastic, and effective of the directors was Maurice Lombardi. He was supported by William H. Berg, another director, who later became president of the company; by Reginald Stoner, manager of the Producing Department, and by the two chief geologists, Clark Gester and "Doc" Nomland. And Lombardi had an able and industrious aide in Francis B. Loomis, once Under-Secretary of State for Theodore Roosevelt and now a consultant on foreign affairs for Socal.
These men were all enthusiastic about Rhoades' Bahrain report; they had all recommended the purchase of Gulf's option. But Lombardi was not content to wait while long-drawn-out negotiations were carried through. He had Loomis do some cabling for permission, and on May 14, Fred A. Davies, a geologist, and William F. Taylor, general superintendent of the foreign division, stepped ashore on Bahrain from a British-Indian boat and were welcomed by Major Holmes.
It took them no long time to determine that Bahrain should be drilled, though Davies warned that it could not be considered a first-class wildcat prospect. Davies "spotted" the well, choosing a site that the drillers later swore was the one place on the whole island that never had a breeze, and then he and Taylor turned their eyes across the gumdrop-green water to the pale shore of Arabia, where the light at sunrise and sunset picked out a cluster of hills. It was Davies' conclusion that anyone who developed Bahrain ought to try to get a look at al-Hasa as well, thus corroborating hunches that Lombardi, Loomis, and Nomland had had without ever seeing the country at all.
But Holmes, it turned out, could not or would not get them over there or arrange an audience with Ibn Sa'ud. He had many excuses, he stalled, he warned them about being seen talking to Anglo-Persian people, for fear Ibn Sa'ud should get suspicious of political motives and refuse to deal for concessions. Cables went back and forth, to and from London and San Francisco, and Davies waited, and waited some more, on through the time of shamals and into the time of the soaking hot winds from the southeast. The little lost island adrift in the steamy Gulf began to be a prison; across the channel the tantalizing Arabian shore swam in and out of haze and fog and heat waves.
By the end of June, Taylor had gone home, and Davies, never quite sure that he wouldn't be called back to inspect Arabia, left Bahrain and went on up to Baghdad. Still no word from Holmes, who was supposed to be busy arranging permissions. Davies poked on into northern Iraq, telling no one where he was going or what he was doing, which was inspecting geological sections in order to have a better notion of what might lie under the crust of Bahrain and Arabia. An amiable and distinguished-looking tourist, he took a look at a good part of Iraq before a horse persuaded him to go home. The horse was skittish, the stirrups were short, and Davies had very long legs. He was humped up in the saddle like a folded katydid, and every time he bounced, the prospector's pick in his belt pecked the horse on the haunch. Eventually the horse bolted, piling Davies onto some rocks. Davies broke a blood vessel above his right hip. His car and driver got him back to Mosul, where he lay in the hospital for a month.
Still no word from Holmes. Davies hired another car and took an inspection trip into Iran and returned. Still no word. On September 17, after four strenuous months in the area, Davies sailed for home without ever having had that look at Arabia which had been one of his principal reasons for coming. But the little he had seen, and the inferences he had been able to draw, had made it certain that if and when opportunity presented itself, Socal would be at least as interested in Arabia as in Bahrain. Also, Davies need not have lamented his lost chances in al-Hasa. As it turned out, he would spend a good part of his life there.
On August 7, 1930, a week after the Bahrain concession was formally assigned to Socal by the Eastern and General Syndicate, a quite different but likewise important event took place on the other side of Arabia: Harry St. John B. Philby embraced Islam. Philby, late of the British Colonial Office, once of the Indian Civil Service, once a colleague of Sir Percy Cox in India and Mesopotamia, one of the great explorers of the Arabian Peninsula and a great Arabist, was now selling Ford cars in Jeddah. He had been a friend and on occasion an advisor of Ibn Sa'ud since they first met in Riyadh in 1917, when Philby crossed over from al-'Uqair to persuade Ibn Sa'ud to keep the peace with Sharif Hussain, Britain's ally, and harry the Rashidis, allies of the Turks and Ibn Saud's mortal enemies.
Philby had broken with the Colonial Office and had been allowed to resign for his outspokenness in criticizing certain British policies. He had lived in Jeddah since 1925. Since 1929, when the first Model A Fords gave his business a smart fillip, his home had been the Bait Baghdadi, a huge, century-old pile built on land reclaimed from the sea and once the residence of the Turkish Wali of the Hijaz. In it, though by no means wealthy, Philby lived the life of an influential sheikh, intimate with the great of the kingdom.
When he finally made the decision to accept Islam he telephoned some of his friends and then drove to Hadda, where he was met by the Deputy Foreign Minister, Fuad Hamza, and by the Minister of Finance, Sheikh Abdullah Sulaiman. They helped him perform the proper ablutions and purifications and drove him to Mecca, where he went through the rituals of the Lesser Pilgrimage under the tutelage of Sheikh Abdullah's secretary. The next day they all drove to Taif, in the hills, to receive King Ibn Saud's congratulations.
Philby's embracing of Islam would seem important only to himself. But the conversion was important to others as well, and to the development of Middle Eastern oil. It brought Philby even closer to Ibn Sa'ud than he had been, and confirmed him as a confidential and trusted adviser on matters of international relations and international trade. And Philby was not only strongly sympathetic to Arabs and their country and their way of life; he was also outspokenly critical of British colonial policy.
It was sometime after Philby's conversion, during one of their intimate talks, that the King expressed his concern about the poverty of his Kingdom, then almost entirely dependent for cash on the fees charged pilgrims. Philby told him Arabia was like a man sleeping on top of buried treasure why didn't he take steps to develop the country's mineral resources? The King retorted that for a million pounds he would give mineral or oil concessions to anyone—had already, with disappointing results, given a concession to Holmes.
If the King had only known it, Fred Davies had recently gone back to the States after a frustrating four months of trying to make contact and talk about precisely these same mineral possibilities. But out of Philby's talk with Ibn Sa'ud came at least one definite result: Philby reminded the King that Charles R. Crane, a member of the American plumbing-manufacturing family and a philanthropist extraordinary, had landed briefly at Jeddah a few years before. Ibn Sa'ud had not given him an audience. Yet somebody like Crane, philanthropical and American rather than political and British, might hold the key to Arabia's future.
The King agreed, Philby communicated, and in 1931 came Charles Crane, eager to help in any way he could. An ardent friend of the entire Middle East ever since, in 1919, he had helped write for Woodrow Wilson an ill-fated and disregarded report recommending the self-determination of people in the area, Crane had already, in 1926, loaned the services of Karl Twitchell, a mining engineer, to the Imam of Yemen. He would be happy to make the same loan to Ibn Sa'ud, to have Twitchell prospect for water, oil, and minerals, and make a report that could be used as a basis for later development.
Thus came Twitchell, a Vermont Yankee with an Irish-born wife, and he prospected up into the northern Hijaz, and into the mountains northeastward which some thought the Land of Midian and the place of King Solomon's mines. He also went clear across the mountains, across the Tuwaiq escarpment and the Dahana sands, and on to the sabkhahs and dunes of the Persian Gulf coast, so that he was the first American engineer to visit the shore which Fred Davies had eyed wistfully from across the channel in the summer of 1930.
It was not the fault of Socal officials, especially Loomis and Lombardi, that Twitchell was the first to examine al-Hasa. Communication (or the failure to establish it) was such that Socal for some time had no notion of Twitchell's activity, and they had no real assurance that Holmes had told Ibn Sa'ud of their own eagerness to set up talks. While they groped blindly for contacts in the forbidden kingdom, Karl Twitchell went up and down Arabia sniffing for oil seeps and quartz outcrops, and a wildcat crew spudded in the first well, Jabel Dukhan # 1, on Bahrain on October 16, 1931.
Twitchell's reports in 1932, after he had visited the well being drilled on Bahrain, so encouraged Ibn Sa'ud about oil and gold prospects that he commissioned Twitchell to communicate to oil or mining companies in the United States, Arabia's willingness to discuss concessions. In March, 1932, Lombardi wrote Holmes reminding him that it was a long time, and he hadn't yet made his promised visit to the King. On April 2, Ed Skinner, manager of Bapco on Bahrain, wired Taylor that Holmes expected to see the King in Jeddah at the end of that month, and that a new element had came in by reason of Gulf Oil's interest in an Arabian concession. Apprehensive about being frozen out, Socal immediately sent Loomis and Lloyd Hamilton to London to see what could be done from there, and arranged for a geologist, Robert P. Miller, to go on to Bahrain to watch the first well, and to select a second well location.
For a year and a half they had jockeyed and corresponded and guessed in the dark. Then on June 1, 1932, Jabel Dukhan No. 1 came in with a heavy flow of oil from the Cretaceous, thus confounding the geologists of Anglo-Persian, who did not think oil would be found in formations older than the Asmari limestone. Holmes, who had made excuses for not going to Jeddah in April, said in June that he was prevented by the King's grief over the death of his favorite wife. Tied to the Syndicate by the Bahrain deal, but growing more and more restless with the delays, Socal explored other possibilities. Philby told Loomis about Twitchell's reports, and for the first time Socal learned the King himself had been trying to make contacts.
By August 26, the delays had begun to seem so meaningless and fantastic that Loomis gave the Syndicate an ultimatum: if nothing were done by November 1, Socal would consider itself free to try independent negotiations with Ibn Sa'ud. The next week, Loomis cabled Philby, who had returned to Jeddah, to see if he would be available as a contact man. It seemed that the only way to make sure some competitor did not slip into Arabia ahead of them was to give Ibn Sa'ud a direct word about Socal's interest. Loomis would be cabling Philby for a long time, for Philby and his wife were driving to Jeddah by way of Belgium, Holland, Germany, Austria, Hungary, the Balkans, and Istanbul, and thence going by ship to Alexandria, Suez to catch the khedivial mail boat home. They were many weeks on the road, while uncertainty mounted in London and elsewhere.
By the time Philby got back to Jeddah and cabled his willingness to serve and Ibn Saud's willingness to negotiate, Loomis had met Twitchell in Washington and signed him too as a contact man. So in the end, Socal wound up with both Twitchell and Philby as advisers, though the agreement with Philby was not completed until after Hamilton reached Jeddah. With the way finally cleared for discussion, the Hamiltons and Twitchells left London for Marseilles and a January 28 sailing on the Henderson Line ship Burmah. Shortly afterward, Lombardi also left London, on his way via Istanbul and Basra to Bahrain. He not only wanted to look into the new oil field there, where the second well was now being drilled, but he wanted to be reasonably close to back up Hamilton in the negotiations.
Thus it was—after years of guessing, negotiation, and just plain luck—that Lloyd Hamilton sailed into Jeddah harbor that February day in 1933 to begin the long months of negotiations that would one day send Arabian oil out to the Western world and bring the Western world to Saudi Arabia.
Jeddah 1930's 1933 Lloyd Hamilton 1933 Karl Twitchell 1930's Jeddah Port
The Jeddah that T. E. Lawrence knew, "a dead city, so clean underfoot, and so quiet," its narrow streets overhung by houses "like crazy Elizabethan half-timber work ...gone gimcrack to an incredible degree," has been transformed in the past 35 years into a modern city of many times its pre-World-War I size, so changed from the old that a returning pilgrim would hardly recognize it as the same place. But in 1933 Jeddah still presented to the sea its ancient, unreal facade. Tightly concentrated, surprisingly tall, it sprang up on the barren shore, squared by the wall that Steve Bechtel's bulldozers would one day push down. Its four- or five-story buildings with their cutout arches of windows and their ranks of ornate balconies might have been made of sticks and pasteboard; or it might have been a child's city of blocks knocked out of plumb. It looked, said one traveler, like a city that had slept on its feet for ages but had been prevented from lying down to sleep properly.
In the old town, in those days, the walls leaned together over alleys barely wide enough for two donkeys to pass; the warped, carved, weathered balconies all but touched. Minarets tilted dizzily and the whole town sagged and slouched on foundations gradually sinking into the unconsolidated coral sand. In its crooked enduring way it looked as ancient as Genesis, and some thought it was. Around Jeddah the shore could only be Arabia—pale, seared, discharged of color, treeless, spotted with sparse shrubs. The land flows down from the distorted rim of mountains to the mirage-like margins of the Red Sea, where beaches grade imperceptibly into coral bottoms and barely covered reefs and the gradually deepening waters mottled in scallops and bays of tan, near-white, emerald, finally blue. Jeddah has been the official harbor of Mecca since the year 648, and this vision of a tall wobbly city on a naked shore before papier-mâché hills has been the first sight of the Holy Land for millions of the devout making the hajj to the birthplace of the Prophet 40 miles to the east.
It looked no different to the pilgrims who approached its shallow and difficult harbor in the Khedivial steamer Talodi on February 15, 1933. But these were pilgrims of an unprecedented kind. None of the faithful in all the thirteen hundred years of the pilgrimage, and no invader in the city's total history, had brought such a potential for change. Not even Aelius Gallus, during his invasion of Yemen in 24 B. C, had touched it, really. Rome reeled back from the inhospitable Arabian Peninsula and left Jeddah on its timeless shore. The Portuguese who attacked the city in 1541, and the British who shelled it in 1858, had knocked down a few buildings, but changed nothing.
And even 'Abd al-'Aziz ibn 'Abd al-Rahman Al Faisal Al Sa'ud, commonly known to the West as Ibn Sa'ud, completing his conquest of the Hijaz in December, 1925, had intended to make few changes except in the ruling family. He was concerned to establish order, reassure the leaders of Muslim countries worried about the safety of the pilgrimage, and win recognition from foreign powers. Jeddah's tiny foreign colony was allowed to go on in its old way, the only enclave of non-Muslims in all the lands that Ibn Sa'ud now controlled and that in 1932 would be named Saudi Arabia. It had adjusted itself to Arabian ways and to the prohibitions of the Wahhabi government; and where it could not comfortably adjust, it somehow managed to achieve certain Western pleasures, keeping its cameras out of sight, playing its hidden radios and phonographs softly and in secret, smoking only in the legations, getting a drink as it could. The Committee for the Commendation of Virtue and the Condemnation of Vice, though zealous to clean up corruption, granted in Jeddah a sort of diplomatic immunity: the need for foreign recognition was more potent than the patriotism of Ibn Saud's Ikhwan armies. In return for the consideration shown it, the foreign colony was discreet; no one of the group there, which was dominated by British and Dutch, wanted to overturn any applecarts. Foreign-colony Jeddah seemed as little interested in innovations as Arabia.
But now change entered in a suit of wrinkled whites and a sun helmet—change in the person of a smooth-faced American businessman of forty named Lloyd N. Hamilton. Accompanied by his wife and by Twitchell and wife acting as his advisers and assistants, Mr. Hamilton was to bring the nervous needs of the 20th century into contact with the undeveloped possibilities of a land older than Abraham. Into a country whose energy had been supplied for millennia by donkeys and camels he came to discuss the more explosive energy of oil.
Lloyd Hamilton was a lawyer and land-lease expert of the Standard Oil Company of California, known in cablese and abbreviated business talk as "Socal". His wife Airy was along for the ride. The other couple, Karl and Nona Twitchell, were two of few Americans who in 1933 knew anything whatever about the Arabian Peninsula. Standing on the Talodt's pitching deck, all a little queasy from the stiff shamal they had bucked on the way across from Port Sudan, and sick of the steamer after 16 rough hours, they watched the city spring up before them as the harbor opened. They passed the half-sunken hulk of the ship Asia tilted on her reef, they began to be surrounded by the slant sails of dhows. Ahead of them the dark keyhole arches of the quarantine dock emptied robed figures onto the quay. Launches started out toward them. The four went below to get their bags ready. They were, without knowing it, social and economic revolution arriving innocently and by invitation with unforeseeable implications.
However, Philby, aware that the king might achieve better terms if there were two bidders instead of one, had written to his friends at Anglo-Persian. Although the amply supplied British were not much interested in more oil from the Middle East, they were adamant about not letting anyone else into the region in which they enjoyed hegemony. The news of SOCAL's Bahrain strike had them worried. Through the Iraq Petroleum Company (IPC), which had grown out of the Turkish Petroleum Company, they sent a representative, Stephen Longrigg, to enter the bidding. Since IPC was acting defensively, and had no intention of developing any oil resources that might prove to exist in Saudi Arabia, Longrigg was instructed to offer only a tiny fraction of what the Saudis were asking. When Longrigg explained his situation to Philby, he received little sympathy. "You might as well pack up," said Philby. "The Americans are far and away higher than that." Longrigg took the next plane back to Basra.
In 1933 Holmes also finally travelled to Jeddah, where negotiations for an oil concession were going between Ibn Saud, SOCAL and IPC for a new concession for al-Hasa province. When Ibn Saud’s adviser, the former British colonial officer Harry St. John Philby, got wind of his arrival he attempted to deter Holmes from joining the negotiations by informing him that he was persona non grata in Jeddah and was remembered for the failure to exploit the first al-Hasa concession. There was also the matter of £6,000 rent owed to Ibn Saud. Holmes appeared undaunted. “Holmes does not seem to share the otherwise universally held belief that Ibn Saud regards him unfavorably,” wrote the IPC representative Longrigg. In fact, Holmes probably had no intention of joining in but simply wanted to exclude the Neutral Zone between Saudi Arabia and Kuwait from the negotiations. After three days, during which time he met with Saudi finance minister Abdullah Suleiman, Holmes left Jeddah and took no part in the al-Hasa negotiations. The concession for al-Hasa (excluding the Neutral Zone) went to SOCAL.
SOCAL, for its part, was not prepared to pay the fees demanded by Saudi Minister of Finance 'Abd Allah al-Sulayman. From the start, he had asked £100,000 as an immediate loan, and had made rental and royalty payments secondary. Saudi Arabia had bills it needed to pay immediately, he explained. Furthermore, maintained al-Sulayman, the concession was well worth this amount of money, and likely a great deal more. After all, excellent terms had been offered for concessions in Iran and Iraq, where the geology was similar.
To the businessmen at SOCAL, al-Hasa was a pure calculated risk. It took three and a half months of wrangling before SOCAL came up with its final offer: An initial loan of £35,000 in gold and a second loan of £20,000 after 18 months, and a rental of £5,000 per year for the concession area, beginning in the second year. Then, if oil should be discovered in commercial quantities, SOCAL would provide a £50,000 loan in gold and a second loan of £50,000 a year later.
On May 8, 1933 al-Sulayman asked the king for his decision. 'Abd al-'Aziz's answer was simple and direct. "Put your trust in God and sign," said the king. On May 29, 1933 'Abd Allah al-Sulayman and Lloyd Hamilton signed the agreement. Under it, SOCAL received exploration rights to some 930,000 square kilometers (360,000 sq mi) of land for 60 years. Four months later, SOCAL geologists Robert P. "Bert" Miller and Schuyler B. "Krug" Henry landed at the Arabian Gulf port of Jubail. The search for oil in Saudi Arabia had begun. The company formed an operating company, the California Arabian Standard Oil Company (CASOC), joined forces with the Texas Oil Company and struck commercial oil at Dahman in March 1938. CASOC went on to become Aramco in 1944.
1933 Ibn Saud Jack Philby Abdul Finance Minister, Lloyd Hamilton
Saudi Arabia Hasa Discovery Search for Arabian Oil Saudi Arabia 1937
1900 Arabia Mandates 1933 Ibn Saud 1931 Karl Twitchell 1931 Fred Davies 1937 Tom Barger