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Searching for oil in Roubaix

Joost Jonker and Jan Luiten van Zanden find a rich seam in the archives of de
Rothschild frères for the history of Royal Dutch Shell and the global oil industry

Baku with a forest of oil


derricks in the distance,
taken from the brochure
Kraftübertragungsanlage der
Apscheroner Elektricitäts-
Gesellschaft Baku (c.1903).
De Rothschild frères was
the biggest shareholder in
this electricity generating
company in Baku; Henri de
Rothschild (1872–1947)
was another big investor.
Archives nationales du
monde du travail,
132 aq 301. When we embarked on the Shell History Project in 2002, we envisaged with some delight the
exotic locations we would have to visit for the first volume alone: Indonesia, of course, Singa-
pore, Egypt, Romania, Russia, Mexico, Venezuela, Los Angeles, San Francisco, St Louis … .₁
Little did we know that we would do some of our most fruitful archival work exploring the
archives of the Paris firm of de Rothschild frères deposited at the Archives nationales du
monde du travail (formerly the Centre des archives du monde du travail) in the northern French
town of Roubaix, a former milltown struggling to recover from industrial decline. These
records provide a unique and very rich data source. The Paris firm filed the continuous flow of
information which it received from its correspondents by country, economic sector, and some-
times even by company, allowing business historians an insider’s view on developments in their
research area. Some files are more informative than others, of course, and fortunately for us
those concerning Royal Dutch Shell proved particularly rich due to the long and close associa-
tion between de Rothschild frères and the oil company. The material even enabled us to get a
close look at key parts of Royal Dutch Shell about which few other records have survived.
The association between Rothschilds and Royal Dutch Shell began when, during the second
half of the 1880s, the Paris firm’s London agent, Fred Lane of the shipping brokers Lane &
Macandrew, approached M. Samuel & Co. He proposed that the firm should embark on the
Asian trade in lamp oil drawing kerosene supplies from a company owned by the Paris
Rothschilds, the Caspian and Black Sea Oil Company, usually referred to by its Russian acronym
of Bnito. This business was to be firmly established in a fiercely competitive market by trans-
porting the kerosene in bulk, using specially built tankers designed to meet the stringent safety
requirements of the Suez canal. In December 1891 Samuel & Co. became Bnito’s exclusive
agent for bulk sales east of Suez and the first cargo arrived in Singapore the following August.
The syndicate which Samuel & Co. formed for running the kerosene trade was incorporated as
The ‘Shell’ Transport & Trading Company in 1897, its managers Samuel & Co. retaining a
majority share in the company.
Lane also linked de Rothschild frères with Royal Dutch. Set up in 1890, this company pro-
duced its first oil on the Indonesian island of Sumatra in 1892, a few months before Samuel &
Co.’s cargo of kerosene arrived at Singapore. Royal Dutch rapidly developed into a major player
in the Asian market, driven by the energetic Henri Deterding, appointed marketing director in
1896 and general managing director five years later. Deterding had two ambitions: to turn Royal
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Dutch into a global rival of Rockefeller’s until then all-powerful Standard Oil, and to maximise Baku oil well pictured in
Kraftübertragungsanlage der
market power by persuading oil companies to collaborate rather than compete. Lane was so
Apscheroner Elektricitäts-
impressed by Deterding’s vision and determination that he helped him materially by doing all Gesellschaft Baku.
he could to align Shell Transport and Bnito with his long-term strategy.
The crucial importance of the archive of de Rothschild frères at Roubaix for Royal Dutch
Shell’s history derives from Lane’s pivotal position in London. Lane kept the two managers of
Rothschild’s oil business, Maurice Baer and Jules Aron, fully up-to-date with regular and
detailed reports about the industry’s deals, talks, projects, prices, and prospects. This volumi-
nous correspondence proved a mine of first-hand information, all the more important since
Royal Dutch Shell’s archive for this period showed large gaps, notably on the London side.
Hardly any records of Samuel & Co. have survived. For Shell Transport accounts, board min-
utes, and supporting documents are available, but no general correspondence or records of dis-
cussions. The large volume of Deterding correspondence in the
Royal Dutch archives offers only part of the story, and neither
The Hague nor London have preserved comprehensive records
of the Asiatic Petroleum Company, the joint venture of Shell
Transport, Royal Dutch, and Bnito. Consequently, the Roubaix
archive proved of great value since it enabled us to piece together
the events leading up to the merger of Royal Dutch and Shell
Transport in 1907 and also the management and performance of
Asiatic, the central and by far the most profitable part of the busi-
ness. As it turned out, Rothschilds had a decisive influence in
shaping Royal Dutch Shell, more so than anyone had previously
imagined.
The opening moves in the formation of the Royal
Dutch/Shell Group took place in the autumn of 1901 when
Lane, in his capacity as Shell Transport director, and Deterding
began drafting plans for a marketing joint venture between the
main European oil companies active in Asia, in addition to Royal
Dutch and Shell Transport, Bnito and the various Dutch compa-
nies producing oil in Indonesia. Having secured an agreement
between Royal Dutch and Shell Transport in May 1902, the two
men had little difficulty in persuading Rothschilds to join the pro-
jected alliance on an equal basis. Bnito was considerably bigger
than either Royal Dutch or Shell Transport, but rather less prof-
itable and heavily reliant on Asian export revenues. In September
1902 the joint-venture started trading as the Asiatic Petroleum
Company.
Set up for a duration of twenty-one years, Asiatic was to all
intents and purposes a merger of the participants’ most impor-
tant business. Under Deterding’s energetic leadership the com-
pany performed spectacularly well despite constant and furious
rows about the interpretation of the terms agreed between the
shareholders. Fortunately for us the Roubaix files yielded not only
the Asiatic accounts, no longer available in the Royal Dutch Shell
archives, but also gloriously detailed descriptions of the board-
room battles, in which Rothschilds usually sided with Royal
Dutch against Shell Transport. There was little love lost between
the Paris house and Samuel & Co. The latter blamed the under-
performance of Shell Transport on the sharp fluctuations in
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Postcard depicting a
Rothschild oil well in Baku,
n.d.

Bnito’s kerosene supply which rose and fell with the vagaries of the Russian oil industry. For
their part, Rothschilds nursed suspicions about the probity of the brothers Marcus and Sam
Samuel who ran Samuel & Co. and Shell Transport. In addition, Lane despaired of the Samuels’
mismanagement at Shell Transport, which led to his angry resignation from the board in
December 1902. Impetuous expansion and imprudent financial policies rendered Shell
Transport’s position increasingly precarious, despite large dividends from Asiatic. By 1905 the
company was virtually bankrupt, forcing Samuel & Co. to seek a merger with Royal Dutch.
To his frustration, Lane found himself casting around for information during the 1906
merger talks between Royal Dutch and Shell Transport. Though meeting frequently in the exec-
utive committee of Asiatic, Deterding and Marcus Samuel kept Lane at arm’s length because
they wished to exclude Bnito. In the original plan Royal Dutch and Shell Transport were to
become holding companies by transferring their assets to a single, integrated operating com-
pany. This plan foundered, however, on the twenty-one year term set by the Asiatic agreement
with the intention, according to Lane, of leading to a merger between the three main sharehold-
ers. Deterding and Samuel then considered alternatives such as buying the Rothschilds’ share in
Asiatic or taking over Bnito, before giving up such ideas because neither Royal Dutch nor Shell
Transport had the money for them. In the end they settled for a very complicated structure,
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forming what became known as the Royal Dutch/Shell Group, in which the two holdings
owned three operating companies: Bataafsche Petroleum Maatschappij for exploration, pro-
duction and manufacturing, Asiatic for marketing, and Anglo-Saxon Petroleum Company for
storage and transport. Royal Dutch and Shell Transport owned the Group in the famous 60–40
proportion, but Rothschilds continued to hold 33 per cent of Asiatic shares. From an equal
partner in a tripartite agreement, Rothschilds had become a minority party entirely dependent
on the good will of the majority, all the more important since successive amendments and read-
justments had made Asiatic’s accounting so fearfully complicated that even Lane admitted to no
longer fully understanding them.
The differences between the partners in Asiatic widened when, following its formation in
1907, the Group embarked on a tremendous expansion into all major oil producing areas then
known: Romania, Russia, Egypt, the United States, Mexico, and Venezuela. The Group’s expan-
sion in Russia was partly effected by the acquisition, in 1912, of Rothschilds’ oil interests in
Baku. From being a fellow oil producer, the Paris firm had now become a mere shareholder,
rendering Lane’s supervisory task all the more difficult. His close relationship with Deterding
and his active role on the Royal Dutch board ensured that Rothschilds and Royal Dutch/Shell
remained on very good terms. At the same time his letters to Paris yield matchless insights con-
cerning Royal Dutch/Shell and Deterding. In October 1913, for instance, Lane commented on:
the peculiar character of Mr Deterding. His mind is so active, so suspicious and so ready
to take offence, that it is always advisable if possible to keep him outside the sphere of
action until the last moment, and persuade him to leave himself into the hands of some-
one in whom he has the utmost confidence and knows his weaknesses, and is able to lead
him on sound and equitable lines and prevent his bursting away in some petulant mood
and out of pique adopting a regrettable course.²
However, the First World War drove a deep wedge between the Group and Rothschilds by over-
turning the conditions underlying the successive agreements between them. At the same time
Royal Dutch/Shell’s operations in the Western hemisphere rapidly outpaced those in the Asian
market, undermining Asiatic’s original conception and purpose. Lane put up a courageous bat-
tle to defend Rothschilds’ interests, accepting the fairness of adjusting conditions while fight-
ing to obtain the best terms, but as the war progressed selling out became an increasingly
attractive option. The two sides reached agreement in January 1918, five years before the Asiatic
agreement was due to expire.
By selling its share in Asiatic – the purchase price paid for in Royal Dutch shares – de
Rothschild frères’ relationship with Royal Dutch/Shell entered a new phase: first Bnito had
actied as a supplier to Shell Transport, then came the partnership in Asiatic, this in turn became
a minority position following the Royal Dutch and Shell merger, and now the sale of Asiatic
meant that at a stroke Rothschilds became Royal Dutch’s single biggest shareholder. With the
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end of his active involvement with Asiatic, Lane’s correspondence in the Roubaix files
inevitably loses some of its importance for Royal Dutch/Shell history although Rothschilds
remained a highly esteemed business partner, treated to singular privileges such as confidential
updates on the Group’s trading and likely profits, and attendance at board meetings by repre-
sentatives visiting London.
At the same time, the mutual ties perceptibly slackened. In 1921 Deterding’s somewhat rude
insistence on support from Rothschilds in a tax dispute with the Dutch government raised eye-
brows in Paris. Subsequently the correspondence declined in frequency and assumed a more
factual tone. Lane’s death in 1926 marked a further stage in the gradual distancing between
Rothschilds and Royal Dutch/Shell. By 1933 little remained of the formerly close relations.
That year Deterding picked a sorry quarrel with Rothschilds when the firm declined to support
one of his hobby horses, the fight against Communism and the Soviet Union. Though not
overtly anti-Semitic, Deterding’s letters in the matter show the insidious effects of the Nazi
propaganda absorbed during his sojourns in Germany following his purchase of a
Mecklenburg hunting estate. The fact that his colleagues on the Royal Dutch board failed to
stop his disastrous action underlines just how far the Group and Rothschilds had drifted apart.

Joost Jonker is Lecturer and Research Fellow in Economic History at Utrecht University, with financial
history and business history as special interests. Jan Luiten van Zanden is Professor of Economic History at
Utrecht University and Senior Researcher at the International Institute for Social History (Amsterdam).
He has published widely on the economic history of Western Europe and Indonesia from the Middle Ages to
the present. The authors collaborated with Stephen Howarth and Keetie Sluyterman on the four-volume A
History of Royal Dutch Shell (Oxford: Oxford University Press; Amsterdam:Boom Publishers, 2007).

notes
1 Joost Jonker and Jan Luiten van Zanden, A History 2 Archives nationales du monde du travail (Roubaix),
of Royal Dutch Shell. Voume. 1: From Challenger to Joint 132 aq 199, correspondence 1913, Lane to Baron
Industry Leader, 1890‒1939 (Oxford: Oxford University Edouard de Rothschild, 21 October 1913.
Press; Amsterdam: Boom Publishers, 2007).

The Baku oil terminal


and oil derricks (above)
pictured in Kraftüber-
tragungsanlage der Apscheroner
Elektricitäts-Gesellschaft Baku.

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