Britain’s Legacy in the Middle East: Iraq’s Oil

Lord Curzon famously observed that the Allied Powers of World War I had “floated to victory upon a wave of oil.” As far as the British Empire was concerned, the only problem was that the oil had come from the United States. For imperial strategists like Lord Curzon and Winston Churchill, the discovery of oil within the British Empire was a key aim.

It was in this spirit of trying to maintain the prestige and power of the British Empire that the British anxiously sought control over Iraq’s oil. This, however, led to Britain coming into direct conflict with the interests of the United States.

The Iraq Petroleum Company (IPC) was the vehicle through which Iraqi oil would be exploited. The Americans successfully acquired 25% of the company, with the Anglo-Persian Oil Company (the forerunner of BP) controlling another 25%. Calouste Gulbenkian, the so-called Mr. Five-Percent, earned his sobriquet from the stake he retained in the company.

Britain’s relationship with Iraq always revolved around the issue of oil. The initial Sykes-Picot agreement of 1916 had given Mosul, the northern province of Iraq, to France. This concession was reversed by Prime Minister David Lloyd George in 1918, however, as it was suspected that that Mosul contained valuable oil fields. (The French were allowed a participation of roughly a quarter in the IPC.)

Iraqi oil politics in the 1920s often saw Britain pitted against the interests of the United States. Even though the Americans at the time produced nearly 70% of the world’s oil, they were particularly keen to get more deeply involved in Iraqi oil.

As Walter Teagle, the president of the Standard Oil Company of New Jersey, said in an address to the American Petroleum Institute: “Our British friends… have argued that if the United States is now supplying 70% of the world’s production, we should be content with things as they are. This is an entirely fallacious view.”

Was it reasonable, Teagle asked, “to ask Americans to rush heedlessly on to the quick exhaustion of their own supply and then retire from the oil business?” The American petroleum industry could not “accept such a conclusion.” American oil interests now would be compelled to look to the “development of petroleum outside the United States.”

Even though oil was the dominant consideration, this did not prevent colorful characters like Gertrude Bell, an Oxford graduate, archaeologist and adventurer, from getting involved in colonial administration. Other British dignitaries on the Iraqi scene included Percy Cox — a military man of whom it was said “he could keep silence in a dozen languages” — and Lawrence of Arabia himself.

Indeed, it was T.E. Lawrence’s friend from the days of World War I, Faisal I, who was installed as Iraq’s first king in 1921. Faisal was a Hashemite, descended from the Prophet Mohammad himself. The Hashemites were notoriously pro-British in their attitudes and style. and it was no surprise when Faisal sent his son, Ghazi, to Harrow School in the 1920s. To James Morris (later Jan Morris, after having gender reassignment surgery), the historian the Iraqi monarchy had been a “parasitical fake.”

The obvious pro-British tendency of the Iraqi monarchy was a contributing factor in its brutal extinction in the Iraqi revolution of 1958. The perception was that while the royal family, their cronies and Western businessmen were growing rich, the vast bulk of the Iraqi people saw no improvement in their living standards. This had, of course, always been the standard anticolonial complaint. The violent revolution of 1958 was in many ways simply an anticolonial uprising.

As a consequence of the monarchy’s demise, Iraq ended up with a nationalist government, most powerfully epitomized by Saddam Hussein. Saddam became vice president of Iraq in 1968, and by the early 1970s was the most dynamic figure on the Iraqi scene. He nationalized the IPC in 1972 and, as a consequence of Iraq’s oil revenues flowing directly into the Iraqi Treasury, saw a huge windfall when oil prices quadrupled in 1973.

A torrent of wealth flowed into the country, as Iraq’s oil revenues increased from $500 million in 1972 to over $26 billion in 1980, an increase of nearly 50 times in nominal terms. It was this dramatic increase in revenue which allowed Saddam to expand the country’s military forces and, especially after he assumed full control as the new president in 1979, to pose a serious threat to regional stability.

Editor’s note: This article is an excerpt from Ghosts of Empire: Britain’s Legacies in the Modern World by Kwasi Kwarteng (PublicAffairs). Published with permission of the author. Copyright © 2012 by Kwasi Kwarteng.