At first almost unnoticed after 1850, then with significant intensity after the onset of the Great Depression of 1873 in Britain, the sun began to set on the British Empire. By the end of the 19th Century, though the City of London remained undisputed financier of the world, British industrial excellence was in terminal decline. The decline paralleled an equally dramatic rise of a new industrial Great Power on the European stage, the German Reich. Germany soon passed England in output of steel, in quality of machine tools, chemicals and electrical goods. Beginning the 1880’s a group of leading German industrialists and bankers around Deutsche Bank’s Georg von Siemens, recognized the urgent need for some form of colonial sources of raw materials as well as industrial export outlet. With Africa and Asia long since claimed by the other Great Powers, above all Great Britain, German policy set out to develop a special economic sphere in the imperial provinces of the debt-ridden Ottoman Empire. The policy was termed “penetration pacifique” an economic dependency which would be sealed with German military advisors and equipment. Initially, the policy was not greeted with joy in Paris, St. Petersburg or London, but it was tolerated. Deutsche Bank even sought, unsuccessfully, to enlist City of London financial backing for the keystone of the Ottoman expansion policy—the Berlin-to-Baghdad railway project, a project of enormous scale and complexity that would link the interior of Anatolia and Mesopotamia (today Iraq) to Germany. What Berlin and Deutsche Bank did not say was that they had secured subsurface mineral rights, including for oil along the path of the railway, and that their geologists had discovered petroleum in Mosul, Kirkuk and Basra.
The conversion of the British Navy under Churchill to oil from coal meant a high risk strategy as England had abundant coal but no then-known oil. It secured a major concession from the Shah of Persia in the early 1900’s. The Baghdad rail link was increasingly seen in London as a threat to precisely this oil security. The British response to the growing German disruption of the European balance of power after the 1890’s was to carefully craft a series of public and secret alliances with France and with Russia—former rivals—to encircle Germany. As well, she deployed a series of less public intrigues to disrupt the Balkans and encourage a revolt against the Ottoman Sultan via the Young Turks that severely weakened the prospects for the German Drang nach Osten. The dynamic of the rise of German assertiveness, including in addition to the Baghdad rail, the decision in 1900 to build a modern navy over two decades that could rival England’s, set the stage for the outbreak of a war in August 1914 whose real significance was a colossal and tragic struggle for who would succeed the ebbing power of the British Empire. The resolution of that epic struggle was to take a second world war and another quarter century before the victor was undeniably established. The role of oil in the events leading to war in 1914 is too little appreciated.
