HOW BRITISH ( REALLY ) IS BP ? / THE NEW YORK TIMES OP EDITORIAL ( RECOMMENDED READING )

June 16, 2010

How British (Really) Is BP?

By KARL E. MEYER and SHAREEN BLAIR BRYSAC

Just how British is BP?

So touchy is 10 Downing Street about this question that Prime Minister David Cameron took time during a 30-minute call to firmly remind President Obama that BP is a global corporation, and that it long ago ceased calling itself “British Petroleum.”

Well, yes. This may be literally true, but to millions of non-Britons around the world, it may seem a distinction without a difference. Not only is BP based in London, but for a century its chief executives have all been British. Certainly to anyone knowledgeable about its past operations in the Middle East, Central Asia, Africa and the Americas, BP is as British as warm beer.

Nor is there anything new about complaints that BP is secretive in its operations and given to doubletalk in responding to valid criticisms in host countries. This is certainly not the whole story, but these very British negatives are deeply embedded in its corporate DNA.

Here is a brief history:

Three outsize Britons presided over BP’s birth in 1909: an entrepreneurial buccaneer named William Knox D’Arcy, a young member of Parliament named Winston Churchill, and the Royal Navy’s leading “oil maniac,” Admiral Sir John Fisher.

“If a single man be permitted to hold the title,” according to BP’s authorized history, “D’Arcy must go down to posterity as the father of the entire oil industry in the Middle East.” It’s true. Having amassed a fortune in Australia’s gold rush, D’Arcy in 1901 gambled on reports that oil abounded in southwest Persia.

For £20,000 in cash, plus shares of equal worth, £650 in annual rent, bribes to notables and 16 percent of net profits, D’Arcy’s envoys wrested from the Shah of Persia a contract valid for 60 years and covering 480,000 square miles (nearly twice the size of Texas).

During six fruitless years of exploration, D’Arcy and his Anglo-Persian Oil Company (A.P.O.C.) were kept on life support by Admiral Fisher — in his determined drive to upgrade the Royal Navy from coal to oil — and by Churchill as First Lord of the Admiralty.

Finally in 1908, just as D’Arcy was about to abandon his search for oil, a gusher erupted at Majid-i-Suleiman, a plateau in the Zagros Mountains. The oil field was immediately encircled by India’s Bengal Lancers, as if it were British territory, and an ecstatic Lieutenant A.T. Wilson wired this coded message to his superiors: “See Psalm 104 verse 15 third sentence” (“That he may bring oil out of the earth to make him a cheerful countenance”).

This was the first commercially significant discovery of oil in the Middle East. Acting for both country and company, Wilson helped strike a deal with local tribes that enabled A.P.O.C. to construct a pipeline (the first in the region) linking the oil field to refineries at Abadan, 138 miles away. Thus the company was integrally wedded to Britain’s grand imperial strategy, as evident in Wilson’s later service as wartime proconsul in newborn Iraq, and then as A.P.O.C.’s managing director.

So critical was Persian oil to British security that, at Churchill’s urging, Parliament in 1914 approved acquiring 51 percent of A.P.O.C.’s shares. Months later, when Ottoman Turkey entered World War I on Germany’s side, Anglo-Indian forces entered the Gulf with urgent orders to protect the company’s tankers, pipelines, refineries and oilfields.

At war’s end, Lord Curzon, speaking as foreign secretary, maintained that the Allies sailed to victory “on a sea of oil.” He pressed in 1920 for a revision of the still-extant D’Arcy concession to ensure that all future victories would be fueled by Persian oil. With minor modifications, Curzon prevailed — in part because a British treasury official served as Persia’s chief negotiator.

For three decades, oil poisoned relations between Britain and Iran (as Persia officially became in an effort to reinvent itself). Iranians complained that the Anglo-Iranian Oil Company (as the company also became known) concealed its pricing policies, withheld royalties through bookkeeping tricks, resisted training Iranians for managerial posts, and proved indifferent to environmental concerns (even today, oil keeps leaking into Shatt-al Arab, the estuarial waters dividing Iran and Iraq).

“The management of Anglo-Persian could endlessly repeat that the company operated as a commercial entity, independent of government,” writes the energy historian Daniel Yergin in “The Prize,” “but no Persian would ever believe such an assertion.”

Eventually, after fruitless years of argument, the Iranian parliament voted in 1951 to nationalize the oil company.

In British eyes, the villain responsible was Prime Minister Mohammad Mossadeq, who dared insist that once American oil companies increased their royalties to host countries, A.I.O.C. should follow suit.

Within days after Iran acted, Britain closed down the Abadan refinery, froze Iranian assets, imposed economic sanctions and tried to coax the United States into deposing the perceived despoiler of Britain’s single largest overseas asset. But President Harry Truman was sympathetic to the now wildly popular Mossadeq (who became Time magazine’s man of the year) and rebuffed British overtures.

The oil company had somehow become a symbol of British greatness, a reminder of times past, even when the supposedly anti-imperial Labour Party led by Clement Attlee was in power.

A widespread view was articulated by a senior spokesman at the Ministry of Fuel and Power: “It was British enterprise, skill and effort which discovered oil under the soil of Persia, which got the oil out, which has built the refinery, which has developed markets for Persian oil in 30 or 40 countries, with wharves, storage tanks, pumps, roads and rail tanks and other distribution facilities. None of these things would or could have been done by the Persian government or the Persian people.”

A year later, Churchill returned to Downing Street, and Dwight Eisenhower assumed office in Washington. The incoming British Conservatives approached the incoming American Republicans with Operation Boot, a covert scheme to unseat Mossadeq. This time, the wheels meshed: In August 1953, the CIA’s Kermit Roosevelt (a grandson of Theodore) arrived in Tehran with bushels of cash and within days brought about a regime change. As a reward, American oil companies were for the first time permitted to seek concessions under a deal negotiated by Herbert Hoover Jr. (a son of the president).

In 1954, A.I.O.C. was formally reborn as British Petroleum, its global reach soon extending from the North Sea to Alaska. As part of Margaret Thatcher’s privatization program, the British government sold all its B.P. shares; in 1998 the company merged with Amoco (formerly Standard Oil of Indiana), officially cropped its name to BP and became the world’s biggest corporation.

But how British is BP? When it comes to oil spills, evidently, not at all. Its corporate culture remains roughly as transparent as the Gulf’s chocolate waters. As The New York Times’s David Carr reported on June 14, when reporters in New Orleans sought answers to routine questions, they were given a BP memorandum saying that the company “was prevented from answering individual questions by disclosure rules governing trade in its stock.” Britannia still rules these waves.

Karl E. Meyer and Shareen Blair Brysac are co-authors most recently of “Kingmakers: The Invention of the Modern Middle East.”