A history of romanian oil vol. II

soon…

FORWARD

¹

It is unnecessary to argue, here and now, what petroleum represented and represents, for the evolution of the World at the beginnings of our century and millenium. I have no doubt that the present History will convince the reader that petroleum – or so-called „the black gold" or „the King" of contemporary economy – had become a veritable nervum rerum for the development of modern civilization on the whole. Recently, Professor Aymeric Chauprade, a well-known French geopolitician, pointing out the place and the role of petroleum in contemporary world, surprised in this kind the key-elements of the oil question in this moment:

«En 1917, en faisant sortir les soldats des tranchées, le pétrole renversa le cours de la guerre. En 1945, la mobilité tactique rendue possible par le contrôle des resources pétrolières se révélait déterminante dans les victoires américaine et russe contre l´Allemagne. En 1995, lorsque Belgrade cédait à Washington, l´armée serbe, étouffée par un blocus continental et maritime, avait épuisé son carburant. L´oublierait-on aujourd´hui? En temps de guerre, l´accès à l´or noir reste un facteur clé de la victoire…» (cf. Aymeric Chauprade, Etats-Unis, Russie, Chine – Guerre pour le pétrole!, in „L´Histoire", Paris, 279/2003, p. 56; Etienne Dalemont, Le pétrole, Paris, PUF, 1971, passim).

A History of Romanian Petroleum retraces, on the basis of a vast bibliography and of important documents discovered throughout the years in Romanian and foreign archives (the U.S.A, Great Britain, the Russian Federation, France and Germany), the beginnings, the development and the full affirmation of an industry that, for decades, played a very important role in determining the destiny of modern Romania – the oil industry; it also analizes the oil policy of the cabinets in Bucharest for a period of almost one hundred years (1857-1947) and, last but not least, if not in particular, it follows the evolution of the question of Romanian liquid fuel in an international context.

Prefacing this History, I consider it a pleasant duty to express my deepest appreciation and all gratitude to the people and the institutions that supported and encouraged my studies:

― Professor Aurel Loghin, the scientific coordinator of my doctorate thesis (1971);

― Academicians Mihnea Gheorghiu, Mihai Drăgănescu, former president of the Romanian Academy, Cristofor I. Simionescu, former president of the Iași Branch of the Romanian Academy;

― My colleagues at The Center of European History and Civilization of the Iași Branch of the Romanian Academy, particularly Stela Cheptea;

― Economist Adriana Frangu, chief financial officer of S.C. Oil Terminal S.A. Constanța;

― The management department of the prestigious publishing house Editura Enciclopedică in Bucharest and its director – who has always been my colleague and true friend, Marcel D. Popa;

― Mariana Vlad, the director of „Mica Valahie" Publishing House in Bucharest;

― The management departments of a number of great libraries and archives in Romania and abroad – Library of the Romanian Academy in Bucharest; National Library of Romania in Bucharest; Library „M. Eminescu of the „Al. I. Cuza University in Iași; The National Archives of Romania in Bucharest; National Library of the Russian Federation and The Special Archives in Moscow; Library of Congress and The U.S. National Archives in Washington, D.C; Library of Stanford University and Hoover Institution on War, Revolution, and Peace/Hoover Institution Archives in Palo Alto, California; F.D. Roosevelt Library in Hyde Park, New York; Public Record Office and British Library/British Museum in London; The University Libraries in Freiburg im Breisgau and Stuttgart, Germany;

― Romanian Academy and the IREX Foundation in Princeton, New Jersey, U.S.A.

I would like to mention that some of the History’s chapters, now revized and developped, have been previously fructified in the monograph România și trusturile petroliere internaționale până la 1929 (Romania and the International Oil Trusts until 1929) (Iași, Editura Junimea, 1981), distinguished with the Romanian Academy Award, and in O istorie a petrolului românesc (Bucharest, Editura Enciclopedică, 1998).

With the hope that the supreme judge of a book, the Reader, will find many interesting pages in this volume, worthy of profound meditation and filled with lessons to be learned, I take the liberty of expressing in anticipation my sincere gratitude to all those who will take the time and will be willing to study the present History of Romanian Oil.

May it be a success!

Gh. Buzatu

BUCHAREST, OCTOBER 2004

¹ See A History of Romanian Oil, I, Bucharest, „Mica Valahie Publishing House, 2004, p. 7-8.

LIST OF ABREVIATIONS

Archives and Libraries

Arh. M.A.E. – Arhiva Ministerului Afacerilor Externe al României, București

(The Archives of the Ministry of Foreign Affairs of Romania, Bucharest)

A.N.R. – Arhivele Naționale ale României, București

(The National Archives of Romania, Bucharest)

B.N.R. – Biblioteca Națională a României, București

(National Library of Romania, Bucharest)

Hoover Archives – Hoover Institution on War, Revolution, and Peace, Stanford University, Palo Alto, California, U.S.A.

Library of Congress – The United States of America, Library of Congress, Washington, D.C.

P.R.O., F.O. – Great Britain, Public Record Office, the fond of the Foreign Office, London-Kew

U.S.A., N.A.W. – The United States of America, National Archives, Washington, D.C.

Osobîi Arhiv – Rossiiskaia Federațiia, Ossobîi Arhiv, Moskva

ȚGASA – Țentralnîi Gossudarstvennîi Arhiv Sovetskii Armii, Moskva

Collections of documents and publications

A.D.A.P., series …, volume …, - Akten zur deutchen auswärtigen Politik 1918-1945

(The official collection of German diplomatic documents, 1918-1945)

DBFP, series …, volume … - Documents of British Foreign Policy. 1919-1939

(The official collection of British diplomatic documents)

DDF, series …, volume … - Documents Diplomatiques Français. 1933-1939

(The official collection of French diplomatic documents, 1933-1939)

DDI, series …, volume … - I Documenti Diplomatici Italiani

(The official collection of Italian diplomatic documents, series VIII and IX – 1935-1939 and 1939-1943)

DGFP, series …, volume … - Documents on German Foreign Policy. 1918-1945

(The official collection of German diplomatic documents, 1918-1945, published partially in English)

FRUS, year …, volume … - Foreign Relations of the United States. Diplomatic Papers

(The official collection of U.S. diplomatic documents, after 1932) (see also Papers…)

M.P.R. – Monitorul Petrolului Român / Moniteur du Pétrole Roumain, Bucharest, 1900-1946 (Gazette of Romanian Petrolium)

Papers …, year …, volume … - Papers Relating to the Foreign Relations of the United States

(The official collection of U.S. diplomatic documents, for the years 1869-1932 ) (see also FRUS).

IX

THE GREAT ECONOMIC CRISIS AND THE PETROLEUM QUESTION (1929-1937)

A. International evolutions

The international history of petroleum registers important facts and phenomena after the period between the years 1928 and 1829,² carefully recorded by specialists.³ The period was dominated by the great oil discoveries in the Middle East, among which the most important one was the eruption in Iraq (Kirkuk, October 15, 1927),⁴ of the same significance for the evolution of the international „black gold" industry as the discoveries previously made at Tampico (Mexico, 1907)⁵ and Maracaibo (Venezuela, 1922).⁶ This fact stimulated, undoubtedly, the great companies to close the famous agreements from 1928 to which we have referred before. One of the agreements (the Red Line Agreement) was signed on July 31, 1928 and it established an immense area delimited by a red line that included Turkey, Syria, Jordan, Iraq, Saudi Arabia, and the region of the Persian Gulf (excepting Kuwait) for the exploitation of which the trusts reached an agreement within Turkish Petroleum Company⁷ (which in 1929 became Iraq Petroleum Company Ltd.), where „equal rights" (to be read as shares) were held by Anglo-Persian Oil Company Ltd. (beginning with 1935, Anglo-Iranian Oil Company Ltd.), Royal Dutch-Shell, Compagnie Française des Pétroles and Near East Développment Corporation⁸ - 23.75% each and Gulbenkian with 5%.⁹ Turkish Petroleum Company later closed several exploitation agreements with Persia (beginning with 1935, Iran), the most important one dating from April 29, 1933.¹⁰ Also in 1928, in September, Sir Henry Deterding, from Royal Dutch-Shell, had the initiative of a meeting, at one of his castles in Scotland (Achnacarry), with John Cadman and Walter Teagle, representing the interests of Anglo-Persian Oil Co. Ltd. and, respectively, Exxon (Standard Oil Co. of New Jersey). The agreement they closed, named As Is and remained, in most part, secret until 1952,¹¹ laid the foundations of a veritable international cartel of petroleum which was guided by seven principles (the delimitation of the markets, the respecting of certain limits in raising the production and in establishing the prices, the supplying of the nearest markets, the establishing of the basic price according to the level reached in the Gulf of Mexico, the exclusion of the U.S. internal market, etc.).¹² Until the outbreak of the Second World War, the Achnacarry agreement was completed in 1930, 1932, and 1934¹³ by other three agreements,¹⁴ of which the most important one was the memorandum from January 20, 1920, which concerned Romania as well.¹⁵ Several large North-American companies subscribed later to the document signed by the uncrowned kings of petroleum from 1928 (Deterding, Cadman, and Teagle), thus laying the foundations of the most powerful and long lived cartel of „black gold", which still dominates the international market. The seven sisters, as the trusts participating in the cartel were named,¹⁶ were and have remained the following:

- Royal Dutch-Shell

- Exxon (Standard Oil of New Jersey)

- Anglo-Persian Company (later Anglo-Iranian Oil, then British Petroleum)

- Standard Oil of California (Socal)

- Gulf

- Texaco

- Socony (later Mobil Oil) (Standard Oil of New York)¹⁷

The implication of the great powers in supporting the interests of the international oil companies was incontestable in the period under discussion as well.¹⁸ In order to obtain markets or to defend the already conquered „redoubts", the trusts solicited and obtained the support of the interested states, and – as we have shown – this fact was primarily obvious in the area of raw materials, especially of petroleum.¹⁹ The famous historians Pierre Renouvin and Jean-Baptiste Duroselle exemplified with actions taken by Standard Oil Co. and Royal Dutch-Shell, the intervention of the states being explainable in a period when the „black gold became „essential for the land, sea, and air transport and had a major role in the use of armed forces.²⁰ Considering that a „war of petroleum" did not occur, the respective authors did mention, however, that the petroleum in the Near and Middle East, in Russia and Latin America had become an „element of serious agitation in the political relations among states, their diplomacy being dominated by the military and strategic motives: „… The states wish to be able to possess, in case of war, the raw materials indispensable for the metallurgical and chemical industries, as well as the fuel necessary for transportation.²¹ The controversy rose in intensity in the years 1935-1939.²² During the 1929-1933 crisis, the area of maximum dispute among the large companies and the great powers was still represented by the former territories of the Ottoman Empire,²³ where the mandates were divided between Great Britain and France, and where the United States, as we have shown, were admitted by „mutual agreement, being represented by their „national trusts.²⁴ The manifestations of the economic crisis determined the small and medium states to adopt precautionary measures, qualified as „nationalistic by the great powers,²⁵ which insisted on an „open door regime.²⁶ During the years that preceded the outbreak of the Second World War, the role of the economic factors (including petroleum) in determining the evolution of the international relations became major,²⁷ especially since the dispute among the states increased at the same time with the appearance and the affirmation of certain „models" and tendencies that were not urging to collaboration in general (the economic concentration and rationalization, the economic nationalisms against the efforts of economic globalization, the modification of certain economic structures and financial difficulties, the social evolutions, etc.).²⁸ And the fact that, of the totalitarian powers, with the exception of the USSR, which held second place in the international oil production, Germany and Italy lacked raw material resources in general and especially oil resources aggravated the situation even more. At the other end of the world, in the Far East, Japan, about to form an Axis with Berlin and Rome, suffered from the same shortcomings. All this brought forward, more than the system of the Paris-Versailles peace treaties, the world order itself. Soviet Russia, although from a doctrinarian view point it was at the opposite end, counted among the contesters. As in 1937-1938 it became obvious that for the „solving" of the situation the path of a new world war could no longer be excluded, the question of petroleum was among the priorities of international politics. This became obvious especially after, in the actions that prefaced the 1939-1945 world war (Italy’s campaign in Abyssinia in 1935-1936²⁹ or the conflict in Spain from 1936-1939³⁰) the role of petroleum for the modern armies became essential. As it was pointed out at the time, the triumph of Benito Mussolini in Abyssinia was primarily a „victory of petroleum.³¹ For everyone, both for the „satisfied and for the „soliciting" states, petroleum became, just as a few decades earlier, the universal panacea on which both survival as well as the condition of the future war depended,³² and the cause no less. Jean-Jacques Berreby, whom we have mentioned so many times, observed with good reason: „More than the First World War, the war from 1939-1945 depended on petroleum, whose importance was essential (author’s bold)."³³

Certainly, Romania, with its important oil resources, could not avoid the facts and phenomena caused by the manifestations of the general economic crisis and by its consequences,³⁴ nor from the future evolutions.³⁵

B. Petroleum – a topical question

It is extremely significant that, in the period 1929-1937, as well as in the first years after the 1914-1918 war,³⁶ the question of petroleum reentered in the attention of international public opinion, not to mention the economic, financial, and political circles all over the world, always interested, naturally, in this respect. In our opinion, this fact can be explained first of all through the complications caused by the great overproduction crisis from 1929-1933, and secondly by the increased role of petroleum in international economy, not to mention within the war preparations intensified after 1933, with Hitler’s coming to power in Germany. There is no need to go into details, but the complete bibliography illustrates to what extent petroleum returned to the attention of numerous historians, economists, politicians, military people, and journalists from that period. Generally, they would point out the major interest for petroleum, its increased role in society and in the international conflicts. A reflex of this situation was the International Congress of Petroleum, which took place in Paris between June 14 and 19, 1937. The manifestation brought together, it is true, scientists and engineers of the time, but its significance could not be overlooked, a fact which the prestigious gazette Monitorul Petrolului Român / Moniteur du Pétrole Roumain, which had been published for over 30 years, recorded it in a special issue dedicated to the Congress.³⁷ In Considerațiuni în preajma Congresului Mondial de Petrol, Valer Pop, the Minister of Industry and Commerce, pointed out Romania’s „great interest for the planned manifestation,³⁸ arguing: „… International assemblies are a good opportunity for learning, through documented reports, about the progresses obtained by some and to establish the shortcomings of others, with the constant preoccupation to raise the technical level of the exploitations. Romania possesses important subsoil resources among which petroleum has a very important place. The importance of this mining resource results not only from the volume of invested capital and the great number of personnel for whom it ensures a satisfying living, but it is due mostly to the contribution that it brings to the national economy by supplying quality liquid fuel, by being a rich source of income for the State and a primary factor in the foreign trade of the country.³⁹

The author also pointed out the desire for equal treatment – by the Romanian state – of the foreign capital with the Romanian one. It was time to take into consideration strictly the financial, technical, and production capacity of the interested companies, and for the foreign capital to preserve its „entire freedom of movement and intensification, because: „The national capital or the foreign capital is welcome and finds the possibility of a profitable utilization in the exploitation of our oil resources.⁴⁰

Various interventions, included in the above mentioned issue, insisted on the major role of petroleum in modern economy. According to Grigore Trancu-Iași, former Minister of Labor, „black gold had incontestably become the „vim of war and peace, having a considerable role in the evolution of international trade in general and of Romanian trade in particular.⁴¹ In his turn, the journalist B. Brănișteanu evoked the international rivalry for petroleum from the last two-three decades, especially in Iran, the Caucasus, etc. with the specification that – having in view precisely the political and military significance of petroleum – international politics came to be dominated by the principle „chercez le pétrole.⁴² The one who treated the issue most systematically and concisely was Ernest Ene, former general secretary at the Ministry of Industry and Commerce. Showing that „petroleum – as well as the land, the waters, and the forests – is a national asset, an essential element of the material life of the nation, the author, motivating the necessity of a state policy that would guide the production and the use of the product for the national prosperity and security, presented the „reference points" necessary to Romania, as well as to any other country that produced and exploited oil. Ene’s reference points were the following: 1. the development of the largest production possible; 2. the ensuring under optimum conditions of the internal consumption; 3. the most intense participation possible of the national capital in exploitation, processing, and selling; 4. the ensuring of future reserves; 5. the preservation in the country of the largest quota possible of the equivalent value of the export of oil products; the use of export with a view to an advantageous foreign commercial policy; 7. the attraction of serious foreign capital; 8. the granting of the facilities necessary to the foreign participants in the capital or in the managing of the oil exploitations.⁴³

A direct reflex of the extensive debate that took place in the country regarding the petroleum question is the rich literature published in the period 1929-1937. Famous personalities intervened in the discussions, prestigious writers asserted their opinions. As we have pointed out, the question of petroleum as part of the ensuring of the state’s general economic development preoccupied all the political parties,⁴⁴ and especially the National Liberal Party,⁴⁵ the People’s Party,⁴⁶ the National Peasant Party,⁴⁷ and the Nationalist-Democrat Party of the historian Nicolae Iorga.⁴⁸ We have shown that the orientation of the program elaborated by the Liberals was in the spirit of „economic nationalism",⁴⁹ a context that called for the 1924 mining law, which, despite all its deficiencies – article 33 hindered the influx of foreign capital,⁵⁰ had an essential role in the unification of the mining regime in Romania.⁵¹ In contrast, the economic program of the People’s Party, in the spirit of Neo-Liberalism, proved to be more generous and more flexible than that of the National Liberal Party,⁵² although, among the predominant directions, those of the National Peasant Party, which insisted on attracting foreign capital in the development of the natural resources, were the dominant ones at that moment.⁵³ At a general level, however, there was a lack of a „continuity of political views and a total absence of a unitary program of economic and financial reconstruction that all the parties could adopt and all the politicians could comply with.⁵⁴ Transferred to the political battlefield, the economic issues suffered, especially since the program of the predecessors was almost obligatorily „sabotaged by the successors.⁵⁵ Numerous specialists insisted for a national policy of petroleum, among whom: Eugen Severin,⁵⁶ G.H. Damaschin,⁵⁷ L. Mrazec,⁵⁸ C. Osiceanu,⁵⁹ A.L. Dinopol,⁶⁰ Gh.N. Leon,⁶¹ G. Macovei,⁶² Ion G. Rarinescu,⁶³ I.P. Gigurtu,⁶⁴ Pascal Toncescu,⁶⁵ G. Gane,⁶⁶ Neculai Macarovici,⁶⁷ Andrei Drăgulănescu⁶⁸, Aristide Blank,⁶⁹ Grigore Trancu-Iași and George Stroe,⁷⁰ Florin Dumitrescu,⁷¹ the prestigious director of Monitorul Petrolului Românesc – Mihail Pizanty,⁷² Valeriu Patriciu,⁷³ Vasile Iscu,⁷⁴ C.D. Bușilă,⁷⁵ George Ștefan Serdaru,⁷⁶ Ion Basgan,⁷⁷ etc. As we can see, despite the differences manifested,⁷⁸ for political, exclusively economic and financial,⁷⁹ or doctrinarian⁸⁰ reasons, the question of petroleum remained in the general sphere of interest, categorical opinions being expressed in favor of the intervention of the Romanian state, although the limits recommended were of different – the superior interest of political and economic independence, of military defense, or strictly economic, financial, technical reasons, etc. Despite all that, the debate had a positive effect, influencing Romania’s general policy. We consider that this fact was illustrated in the new mining law published in Monitorul Oficial on March 24, 1937, to which we will dedicate a separate subchapter. It was the difficulty of the matter, we believe, that necessitated a thorough study, so that the draft bill was under the attention of the Parliament for almost one year (February 1936 – March 1937),⁸¹ and the law, adopted not without the expected and inevitable difficulties,⁸² responded, at least in matters of petroleum, to the principles of Romania’s policy, containing new and extensive dispositions regarding the exploration and granting of the state’s petroliferous territories, the oil consolidations, the observing of the „gained rights, the commercialization of the products, etc.⁸³ Despite all the objections,⁸⁴ the legislator imposed the prevalence of the superior interests of the Romanian state with regard to the production and the capitalization of the „black gold resources, as well as in ensuring the preservation of the petroleum patrimony.⁸⁵ Under the same circumstances, the National Bank of Romania entrusted a committee, in the autumn of 1937, with the study of raw materials. The Sixth Committee was in charge of petroleum, dyes, rubber, plastic masses, and natural resins, and the resulting materials, in the form of reports, were printed.⁸⁶ Certainly, the most thorough, most comprehensive, and most important report was the one dedicated to petroleum, dated June 1938⁸⁷ and prepared by several acknowledged specialists.⁸⁸ Since the significance of the publication of the report is so great, both from an editorial point of view as well as from the standpoint of its influence on the decision factors in Bucharest, we will give the proper attention to Contribuțiuni la problema materiilor prime în România.⁸⁹

Concretely, the report about the situation of petroleum, published in 1939 and finished in 1938, reflected the evolutions of the years 1929-1937. Benefiting from a rich specialized literature and from the main economic-financial publications in the world,⁹⁰ mentioned in the report,⁹¹ the authors, without going into details, pointed out the role and place of petroleum in modern society. We will extract from the report the following considerations worthy of interest even today: „Petroleum became over night the most coveted fuel by all the nations. Not only because the known reserves are much smaller than the coal reserves, not only because its derivates (gasoline and Diesel oil) can be used in explosion engines that have a much higher thermal efficiency than the steam engine, not only because it represents the raw material for an entire series of other precious derivates, but especially because it is an easily transported fuel. All the oil products flow, can be transported in tanks, and can be pushed through pipe lines for great distances. Besides, the oil products can be easily preserved and take little space. With the increase of the oil production, coal gradually lost its importance, and the coal mines decreased their output […] Today, the vim of movement and of energy, both in time of peace but especially in time of war, is petroleum in its various forms. Land, water, and air transportation are impossible without gasoline and Diesel oil. The armies have been motorized, the tanks and airplanes have increased in number, and ammunition is made in factories that use petroleum. Also, the other products necessary to war: the steel, metals, clothing, weapons, and food, all are tied to liquid fuel, called with good reason „black gold. In 1914 only 25% of the war vessels and ships used black oil, while the rest used coal. In 1934 the proportion reached 46%; today it is higher, because all the vessels built in the meantime burn black oil, Diesel oil, or gasoline. The number of the automobiles in the world increased in the same period from 2 to 26 million. Today, over 45 million vehicles circulate in the world. The number of airplanes increased with the same speed.⁹² The importance of petroleum in modern economy led, at the confluence of the nineteenth and the twentieth centuries to a fierce battle among the great powers and the trusts for the monopoly of the oil fields, a battle that in 1938 was „not over yet, it continues before our eyes."⁹³ It was difficult to make prognostications, because: „We can say that the U.S. one it [the battle] as far as the present exploitation, because it owns today 75% of the oil fields under exploitation and is producing 61% of the total international production. On the other hand, Great Britain owns the richest and most expansive territorial oil reserves."⁹⁴

The Sixth Committee of the National Bank of Romania investigated in 1937-1938 the issue of the capitalization of Romanian petroleum from three points of view, mentioned in the report: 1) the reserves of gaseous and liquid hydrocarbons of Romania and the issues tied to these reserves; 2) the industrial capitalization of the gaseous and liquid hydrocarbons in Romania; 3) the synthetic gasoline obtained through the liquefaction of coals.⁹⁵ Naturally, all the aspects were analyzed systematically and in direct relation with the „ample issue of the capitalization of the gaseous and liquid hydrocarbons in Romania."⁹⁶

Thus, as far as Romania’s reserves of hydrocarbons, the report, insisting first of all on the gaseous ones (pp. 12-17), identifies the regions in Transylvania that were under exploitation (Sărmăsel, Copșa Mică, Saros, Bazna, Nadeș), under exploration (Boian-Cetatea de Baltă, Zaul, Șincai, Bunești-Crit, Daia) or not (Noul Săsesc. Cristur, Teleac, etc.),⁹⁷ establishing the probable productive surface (374.5 square kilometers) and the level of the positive and probable reserves (575 billion cubic meters).⁹⁸ Transylvania’s reserve could have been bigger, to which were added those in the rest of the country, in the areas where the gasses were associated with petroleum (approximately 14 billion cubic meters),⁹⁹ as well as the presumed ones.¹⁰⁰ As far as exploitation, a rational system functioned only in Transylvania, and by no means in Wallachia, where the annual losses registered approximately 1.3 billion cubic meters. The issues regarding the prospecting and the explorations were in direct connection with those regarding crude oil.¹⁰¹

The subchapter in the report dedicated to liquid hydrocarbons was, certainly, not only extensive, but also more significant from our standpoint.¹⁰² According to information gathered from the Geologic Institute of Romania, the positive and probable oil fields were „billeted" mostly in the counties of Prahova, Dâmbovița, Buzău, and Bacău (4 957 hectares), the reserves being evaluated to 1 308 400 wagon loads.¹⁰³ If the oil derricks that were in production in 1938 (2 501) continued to be exploited in the same rhythm, the estimated total production between 1938 and 1942 would have been 1 763 300 wagons, with a decrease from year to year:

¹⁰⁴*

From the exploitation of the new oil derricks, for the same period, the following extracted quantities were estimated:

¹⁰⁵*

For the year 1942, there resulted a total production of 353 wagon loads, an inevitable decrease – with a margin of error of 10-20% plus or minus – unless new exploitable regions were discovered.¹⁰⁶ For the year 1938 however, taking into account other positive oil fields and probably profitably exploitable (approximately 2 967 hectares and 938 700 wagon loads of crude oil), the report established the exploitable crude oil reserves to 2 702 000 wagon loads.¹⁰⁷ Taking into consideration the pessimistic predictions for the next five years,¹⁰⁸ the report established a firm plan of prospecting¹⁰⁹ and explorations,¹¹⁰ as it was only this way that the country could be ensured „the petroleum it needs for a few decades from now on."¹¹¹

As we have mentioned, a second subchapter of the report examined the matter from the standpoint of the industrial capitalization of the gaseous and liquid hydrocarbons.¹¹² It was considered that the issue was of „great" importance for Romania,¹¹³ given the well known existing situation:

„… If we examine the industrial realizations in Romania in the petroleum area, we notice that they were resumed to an anarchic exploitation of the resources and, at the same time, to an extremely reduced industrialization of crude oil. At the beginning of the year 1938, the refining industry in Romania was in the same situation that the refining industry of in America was ten years ago. Only little progress has been made in the industrialization of the natural gases from the oil exploitations. This industrialization is limited only to the separation of the complex of heavier hydrocarbons […]. The industrialization of crude oil is in the same situation. The petroleum factories that have modern equipment still use cracking gases as fuel, a precious material from which the most various products can be manufactured, from synthetic gasoline to alcohols and resin […] Only 25% of the black oil obtained is subjected to cracking operations or made into asphalt, paraffin, or oils, and the rest of the black oil is sold as fuel or exported in order to be industrialized in an economical manner in other countries…"¹¹⁴

The established deficiencies imposed, in this area as well, a plan for the capitalization of the gaseous hydrocarbons, based on the examples of Germany and the United States,¹¹⁵ as well as of the liquid hydrocarbons.¹¹⁶ It was an opportunity, for the authors of the report, to examine the situation of the refining industry of Romania. Once more, it was found that, as far as the primary distillation, the processing capacity of the refineries (11 520 000 tons in 1937) clearly exceeded the processed quantities (6 656 564 tons in the same year). The main production came from the large refineries (6 459 549 tons), as did the largest quantities obtained through cracking (1.3 million tons), or of oils, paraffin, and asphalts,¹¹⁷ namely: Astra Română, Steaua Română – Câmpina, Steaua Română – Moinești, Concordia, Romanian-American, Orion, Unirea, Colombia, Creditul Minier, Xenia, Prahova and Dacia.¹¹⁸ Of the crude oil processed by refineries in 1937 resulted:

¹¹⁹*

The report had in view the nature of the capital in the oil industry. According to the data of the committee, the predominance of foreign capital was undeniable, either with regard to the value of the investments (1937):

Either with regard to the value of the production (1937):

¹²⁰*

In conformity with their findings, the committee drew up a rigorous plan for the industrialization of the gasses and of crude oil, recommending, concurrently, efforts for the production of synthetic rubber, ethylic alcohol, special solvents, synthetic oils, pharmaceutical products, insecticides for agriculture or, based on the model of the United States, Germany, Italy, and Great Britain,¹²¹ for the obtaining of fuels through the hydrogenation of coals.¹²² They did not overlook the stimulation of the refineries with Romanian capital, pointing out that it was, „besides an economic necessity, also a necessity from the standpoint of national defense."¹²³

A third subchapter of the report dealt with the issue of the superior capitalization of the raw materials through the preparation of gasoline and synthetic oils especially by liquefying coals.¹²⁴ Starting from Essad Bey’s¹²⁵ statement, who said that „the invisible history of the days we are living is being written with petroleum,"¹²⁶ the authors of the report plead for the necessity of producing synthetic gasoline,¹²⁷ with references to the efforts of Germany, Great Britain, and the United States in that direction. Among their arguments, two had undisputable priority: „the concern for the exhaustion of the reserves and the fear of isolation in case of war of the nations that lacked petroleum."¹²⁸ They quoted as source of information World Petroleum of New York, which indicated the fact that, in comparison to 1928 (the level of the international production – 181 440 000 tons), in 1937 the oil production had reached 279 337 000 tons, and therefore the increased had been over 97 million tons = 54%.¹²⁹ In the same period, remarkable increases were registered in the consumption of: gasoline (by 63.3%), Diesel oil and black oil (by 53.9%), kerosene (by 41.3%), and mineral oils (by 22.7%),¹³⁰ and at the same time certain states manifested the tendency to absorb their own production: the United States in a proportion of 89.7%, Russia – 79.1%, Poland – 75.4%, etc.¹³¹ On the other hand, some countries were producing primarily for export: Venezuela, the third international producer at that time, with 95.7%,¹³² Columbia with 91.2%, Iran (including Bahrein) with 80.9%, Iraq with 87.1%, Romania with 73.6%.¹³³ It was not surprising, under such circumstances, that the petroleum war continued, especially among the great powers, neither the fact that the governments (USA, Great Britain, etc.) supported the actions of the disputing trusts.¹³⁴ Also, a reflex of the situation presented above led the states „poor" in petroleum, as was Germany, to be preoccupied with obtaining synthetic products; I.G. Farbenindustrie, the most powerful chemical concern in the world, for example, under the protection and with the assistance of Berlin, in the dispute with the British and Dutch companies, had managed to obtain the patents of Friedrich Bergius for the liquefaction of coal or had developed the new procedures Fischer-Tropsch, Pott, Boche, etc. Consequently, it was estimated that Germany was in the stage of covering its gasoline consumption integrally (approximately 2 million tons/year).¹³⁵ The situation was encouraging for Romania, especially since the hydrogenation of coal would put an end to enormous losses of caloric units: only 15% of the caloric power of coal was used by burning it, while through its liquefaction – 85%. The „overwhelming importance of the ability to produce synthetic gasoline was therefore self-evident.¹³⁶ The examples of other countries (in order, Germany, Great Britain, France, USA, Italy, Japan, the big oil trusts)¹³⁷ needed to constitute an impulse for Romania, the richest European country, after Russia, in petroleum resources and the sixth international producer of the years 1937-1938. In Romania, the issue had reached „a point of inflexibility and, besides, concern needed to be shown for the ensuring of energy resources for the future.¹³⁸ The prospects were not too bright, especially in the light of the statistics of the last years which indicated, in general, the stagnation of the production and of the export in the period between 1924 and 1936,¹³⁹ and in 1937 even a regression:¹⁴⁰

¹⁴¹*

But, in relation to the tendencies of the last years, for 1940 the export necessities were estimated to approximately 11-11.5 million tons, and the internal consumption to 2.5 million tons, which implied a total production of at least 13.5 million tons, a level impossible to reach considering the 1937 production (6.6 million tons). For the increase of the production of oil and its derivates, the following were necessary:

- the facilitation and encouragement of the explorations and the discovering of new oil fields;

- the amelioration of the productivity of the functioning refining and cracking plants;

- the polymerization of the well and natural gases.¹⁴²

Finally, returning to the chapter in the report especially dedicated to the manufacture of synthetic gasoline and oils, we mention the fundamental conclusion of the specialists: they needed to find „the method to increase, on the one hand, the oil production through heroic means and, at the same time, to create liquid fuels for the internal consumption, using for this purpose the very large reserves of coals that we have."¹⁴³

The general conclusions¹⁴⁴ of the report examined the issue of the superior capitalization of Romanian petroleum in relation to the situation de facto of the industry and to the imperatives of the time, drawing the attention of the decision factors towards three directions of approach¹⁴⁵ and recommending 28 concrete measures regarding the exploration, prospecting, and exploitation of „black gold", the industrial capitalization of gaseous and liquid hydrocarbons, the manufacture in the country of synthetic gasoline through the liquefaction of coals.¹⁴⁶ Some of the main measures proposed were the establishing of a „state organism meant to supervise, study, and guide the exploitation of the oil fields,"¹⁴⁷ the modernization of the refining industry, with the encouragement „within certain limits" of the Romanian companies,¹⁴⁸ the generalization of the use of gases as fuels.¹⁴⁹

The following events justified in excess the realism of the recommendations of the report from 1938, without being able, unfortunately, to invalidate the formulated prognoses. That was the reason we insisted on this document.

It is worth mentioning that, approximately at the same time with the Sixth Committee of the National Bank of Romania, there functioned a team of specialists under the leadership of D. Gusti which prepared the ample and solid Enciclopedia României in four volumes. Among the collaborators, I.G. Rarincescu recorded in the subchapter Politica petrolului elements that needed to be at the basis of the „new policy of the Romanian state in the area of „black gold. Thus, the Romanian state had the „right and the obligation":

1) To impose on the oil companies, on the basis of official regulations and prescriptions and under the guarantee of the application of very severe penalties, to organize and rationalize the exploitations of the oil fields in relation to the corresponding technical progresses in accordance with the newest methods of exploitation.

2) To impose on the oil companies an increased percentage restriction (for instance, 20% per year) of the quantities of gases that were burned or dispersed in the air, in relation to the quantity of the previous year.

3) To evaluate, with the slightest approximation possible, based on previous prospecting and exploitations, as well as on the data resulted from the existing exploitations, the positive and the probable reserve of crude oil of Romania, determining, depending on the resources, the level of the annual production that would be exhausted in at least 10-15 years.

4) To be preoccupied with the performing of the prospecting and explorations necessary for the discovery of new oil fields.

5) To provide all the possible facilities for the execution of sounding, as well as for the transportation and distribution of gases.

6) To impose on refineries to modernize their equipment, with the purpose to adapt to the latest progresses in the area of refining.

7) To provide all the facilities for the encouragement of the use of natural generators of energy.¹⁵⁰

As we can see, the recommendations coincided almost with those in the report Considerațiuni la problema materiilor prime în România, and the imperative was the same: „The state – concluded I.G. Rarincescu – needed to carry on (author’s bold) an energy policy, unitary and in conformity with the superior interests of the country."¹⁵¹

C. The oil crisis and the oil industry

More often than not it was asserted that the great economic crisis of overproduction from 1929-1933 began unexpectedly, at the New York City stock market, on October 29, 1929, when over 16 million shares were sold, rendering inefficient the intervention of the large groups (Morgan, etc.) to stop the collapse which took place in the previous „stormy" week.¹⁵² It all took place after a period of spectacular boom of the American economy and finance, a fact that also occurred after 1926 in Europe.¹⁵³ In reality, however, the signs of the crisis were obvious before October 1929 in several countries on the old continent, including Romania. In general, in all the states with a developed agricultural production the difficulties persisted during the entire decade following the world war of 1914-1918, and, in the Romanian industry, the debut of the crisis,¹⁵⁴ in 1926, affected first of all, in the authorized opinion of C. Osiceanu, even petroleum.¹⁵⁵ At a general level, the apogee of the economic crisis was reached in 1932, when over 30 million unemployed people were registered.¹⁵⁶ In Romania, with the exception of petroleum, the indexes in the other industrial branches decreased, the production of the processing industry on the whole diminished from 100% in 1928 to 53.4% in 1932, and its value decreased by 48.8%.¹⁵⁷ In agriculture, although the cereal production increased, the general price index collapsed in 1933 with 44.9% in comparison with 1929.¹⁵⁸Between 1929 and 1933, 10 650 industrial and commercial bankruptcies¹⁵⁹ were registered, as well as bankruptcies of certain financial institutions, as The General Bank of Wallachia, The Bercovitz Bank and The Marmorosch Bank, Blank et Co. (in total, 1048 banks in 1929, 749 in 1934).¹⁶⁰ Romania’s external public debt amounted to 127 billion lei on January 1, 1933,¹⁶¹ which led to serious difficulties in ensuring the external payments, reason for which foreign inspectors headed by Charles Rist came to Bucharest, and between 1932 and 1933 the so called „Geneva plan" was negotiated and signed, establishing the postponement of a payment of the public debt annuity in exchange for the admittance of direct foreign control of Romania’s finance.¹⁶² The reestablishing of the economic situation of the country was done gradually during the years 1934-1937,¹⁶³ and in the year 1938 it reached the highest level of capitalist production.¹⁶⁴ During this interval, characteristic mutations occurred in the Romania’s agrarian-industrial national economy,¹⁶⁵ in 1935 the industry ensuring – according to M. Manoilescu – already 70% of the country’s necessities. Therefore, we can no longer refer to Romania as an „eminently agricultural" state.¹⁶⁶ Politically, the period of the economic crisis was administered mostly by the National Peasant cabinets, but also by the National Democrat and by the Liberal ones (N. Iorga, respectively I.G. Duca), and the reestablishment coincided with the government of Gh. Tătărescu, the Premier belonging less to the Liberal finance and more to the oligarchic group in full affirmation in the heavy, metallurgical, and weapon industry under the personal protection of King Carol II.¹⁶⁷

It was considered that, in the period of the economic crisis, the increase of the „black gold production we referred to became „threatening.¹⁶⁸ The culminating point of the oil industry crisis¹⁶⁹ was reached at the confluence of the years 1930-1931, when the price collapse occurred.¹⁷⁰ After the 1927 price record,¹⁷¹ in December 1930 the oil products reached the lowest level after 1922.¹⁷² Another difficult moment supervened in the summer of 1934.¹⁷³ In the interview given to Monitorul Petrolului Român on February 15, 1931, Sir Henry Deterding, admitting that the situation in Romania was a „segment of the crisis of the international oil market" and illustrating the case of the company Astra Română, considered that „the Romanian oil industry is practically facing ruination."¹⁷⁴ The crude oil production, however, experienced in the period under discussion,¹⁷⁵ with the exception of one single year (1935),¹⁷⁶ an ascending curve:¹⁷⁷

¹⁷⁸*, ¹⁷⁹**, ¹⁸⁰***

The increase of the oil production, with a maximum reached in 1936, caused the reaction of the specialists and the state authorities, for whom the specter of the approaching exhaustion of the positive available resources appeared.¹⁸¹ The famous economist Gh.N. Leon wrote: „The oil economic policy carried on so far had in view only a continuous production increase, without any consideration regarding the creation of new reserves for the future needs of the national economy and of the state. The saddest fact is that the production increase was not done in economic conditions."¹⁸² At a certain point, Victor Slăvescu considered the problem of ensuring future reserves to be „a serious present condition" (author’s bold).¹⁸³

It is interesting to point out that, in the same period, after the international production increased incessantly until 1929, it decreased for a while, but it was reestablished immediately after overcoming the crisis of 1934-1935:¹⁸⁴

¹⁸⁵*, ¹⁸⁶**

The same descending and then ascending tendency was registered in the international consumption of oil products:¹⁸⁷

Certainly, all the data must be confronted with the main sources used and quoted by us.¹⁸⁸

The production increase was realized despite the general collapse of the prices.¹⁸⁹ For all that, the internal consumption of oil products increased (from 1.2 million tons in 1930 to 1.4 million tons in 1935),¹⁹⁰ and the state made important profits (from 1.7 billion lei in 1931 to 2.3 billion lei in 1934).¹⁹¹ However, Virgil Madgearu¹⁹² included Romania among the backward states from the standpoint of internal consumption.¹⁹³ Concomitantly, the export of oil products registered a considerable leap (it practically doubled), although its value decreased,¹⁹⁴ as it was only natural in a period of crisis:¹⁹⁵

¹⁹⁶*, ¹⁹⁷**, ¹⁹⁸***

On the basis of its reserves, Romania occupied in 1936 the third place in the world (with 11.6% of the total) in the international oil trade.¹⁹⁹ The main products solicited for export were gasoline (31.4% of the total in 1935) and black oil (23.7% of the total, in the same year).²⁰⁰ The big companies Astra Română and Romanian-American had at their disposal, for the external distribution, the branches of the trusts Royal Dutch-Shell and respectively Standard Oil Co.,²⁰¹ and Steaua Română had its own branches.²⁰² For the internal consumption there functioned the company Distribuția, which had as subsidiaries Astra Română, Romanian-American, or Steaua Română, and, from 1934, Concordia (the Petrofina group).²⁰³

In the same period, as a result of the manifested tendencies (the disagreement between the exported quantities and the prices), the state’s revenues (export taxes, price, transportation, communal taxes, etc.) did not register spectacular leaps:²⁰⁴

The majority of the specialists considered that „rather big taxes saddle the export,"²⁰⁵ but the taxation system was considered „exaggerated" for the entire oil industry.²⁰⁶

The total effective value of the oil exports, under the circumstances of the international economic depression, oscillated from one year to another, but at no moment was it – as a result of the collapse of the prices – at the level of the year 1929. In 1937, Șerban Gheorghiu, the director of the statistic section of foreign trade within the Ministry of Finance, calculated the differences (namely the losses) between the real value at the level of the year 1929 and the effective one registered in the export of oil derivates:²⁰⁷

It was considered, rightfully so, that it was a disaster of prices obtained at export, the situation being all the more serious as the realities of the years of the economic crises from 1929-1933 were being related to the average lei prices from 1913.²⁰⁸

As far as the destination of the main exported quantities,²⁰⁹ important changes supervened during the respective period, illustrated first of all by the fact that, in 1936, Germany became the main importer,²¹⁰ surpassing Great Britain and France,²¹¹ as well as Italy:²¹²

²¹³*, ²¹⁴**

We have already mention that in the years 1935-1936 Romania was among the main producers of crude oil derivates in the world, more precisely after USA, USSR, Venezuela, but before Iran, the Dutch Indies, Mexico, or Iraq.²¹⁵ From a standpoint of its export availabilities, Romania occupied, after Venezuela, the second place in the world with 73.6% of the production, and only with 26.4% for the internal consumption.²¹⁶ In the international trade of oil products in 1936, Romania was situated immediately after Venezuela and Iran.²¹⁷ In order to avoid unwanted exaggerations, we must mention that, despite what we have established, at any moment of its modern and contemporary evolution Romania has not been anything more than an important oil producer and trader,²¹⁸ but in no case of international level.²¹⁹

As we shall see further, in the following years, which coincided mainly with the period of the Second World War, the dispute of the European powers (we have mentioned Great Britain, France,²²⁰ Germany, and Italy) for the advantages of the Romanian market of oil products accentuated,²²¹ momentarily giving advantage to Germany, which in 1940-1944 became the main ally of Bucharest. After 1944-1945, USSR, which did not count in the pre-war period, by virtue of the fact that it occupied Romania for a number of years, disposed of its economic resources, including, or especially, its oil resources.²²²

An issue that preoccupied the specialists, confronted with a production decrease after 1936, was the ensuring of a superior processing of the crude oil derivates.²²³ They pointed out not only the insufficiency of the quantities used for cracking,²²⁴ but also the fact that they were becoming obsolete. The modernization of the refineries would have determined a double capitalization of the derivates,²²⁵ while, for the moment, Romania was not producing oils and octane gasoline, which were important.²²⁶

No less urgent were considered the issues of the personnel used in the industry of „black gold"²²⁷ or of the transportation of the oil products, which was done in all the areas (through pipelines, on railways and roads) in precarious conditions that entailed important losses; Romania did not yet have a pipeline for the transportation of gasoline to connect the Ploiești region to Constanța.²²⁸

From a financial point of view, in the year 1936²²⁹ the total value of the capital invested in the oil industry of Romania was estimated to 10.8 billion lei, which represented ¼ of the sum of 41.8 billion lei placed in the entire industry.²³⁰ In comparison to the previous years, we notice important diminutions, as a result of several registered bankruptcies.²³¹ According to Victor Slăvesu, who in 1937 was the president of the „General Union of the Industrialists in Romania" and director of Creditul Industrial, out of the 10.8 billion lei placed in 114 oil companies, the overwhelming majority of the deposited capital (92%) had been realized in production or refining companies, and the rest (8%) in commercialization, transportation, etc.²³² An issue that was under the attention of the contemporaries was the nature of the capital. Consequently, different numbers were reported,²³³ generally close.²³⁴ We shall take into consideration the figures communicated for the years 1930 and 1931²³⁵ by Monitorul Petrolului Român²³⁶ and, respectively, by sources of the National Liberal Party:²³⁷

²³⁸*, ²³⁹**, ²⁴⁰***, ²⁴¹****

Reexamining the situation in 1937-1938,²⁴² the Sixth Petroleum Committee within the National Bank of Romania synthesized the data, presenting a different situation, which we have already commented:²⁴³

For the year 1931, Monitorul Petrolului Român communicated the