The Silk Roads: A New History of the World

by Frankopan, Peter

  The broader results in Iraq were a disaster. A new feudalism took root as local magnates were handed large tracts of former Ottoman state land in return for their support for the British mandate – curtailing social mobility, widening inequality and fanning dissatisfaction as rural communities lost their land rights and their means of living. In Kut province in eastern Iraq, two families were able, over the course of three decades, to acquire more than half a million acres between them.45 The scenario was much the same in Persia, where the wealth generated by oil revenues was concentrated in the hands of the Shah and those around him. In this sense, it was precisely the knowledge that the British government was the majority shareholder of Anglo-Persian – which by the 1920s was responsible for nearly half the country’s revenues – that prompted increasingly determined anti-British sentiments and a rising tide of nationalism.

  This was also a sign of the times, as reactions against colonialism were gaining an almost unstoppable momentum across the empire. In 1929 in India, the Lahore session of the Indian National Congress set out a ‘Declaration of Independence’ (Purna Swaraj). ‘The British Government in India has not only deprived the Indian people of their freedom but has based itself on the exploitation of the masses,’ it stated. India has been ruined, and ‘must forthwith sever the British connection and attain . . . complete independence’. The time had come for civil disobedience.46

  It was all but inevitable that this cocktail of disenchantment, disgust and disenfranchisement would catch on elsewhere. But the growing frustration in the Middle East also stemmed in part from the realisation that the benefits promised by the oil finds had proved so elusive. The western oil corporations that controlled the concessions were dextrous and highly creative when it came to making royalty payments. Just as in the modern world, a web of subsidiary companies was set up with the aim of using inter-company loans to create losses that could be used to reduce or even eliminate altogether the apparent trading profits of the operating companies – and therefore manipulate downwards the royalties due under the concession agreement. This was grist to the mill. Angry reports ran in the newspapers that spoke of ‘foreigners [being allowed] to drain the country of her oil resources and deliberately reducing the revenue of Persia by granting illegal and unnecessary exemption from customs duty’. At least things were not as bad in Persia as they were in neighbouring Iraq, which was a colony in all but name.47

  To try to head off the rising tide of local anger, the directors of Anglo-Persian went on a charm offensive: they promised a host of new benefits, ranging from educational opportunities to helping upgrade the railways, to considering making royalty payments more generous. It was plain wrong, high-ranking Persians complained, that the Persian government held no shares in the business. ‘The Persians’, one observer recorded, ‘felt that an industry had been developed on their soil in which they had no real share’; they insisted that this was not a question of money, since ‘no financial reward would dispel this feeling’ of alienation.48 Anglo-Persian’s chairman, the urbane Sir John Cadman, urged calm, suggesting to his opposite number at the negotiating table that it was in no one’s interests for the press to create the ‘erroneous and painful impression’ that the business was not a fair and equitable one.49 This was all very well, he was told; what was in everyone’s interests was that there should be a partnership. As it stood, it was little more than outright exploitation.50

  Drawn-out discussions about if and how to renegotiate the Knox D’Arcy concession came to nothing. Eventually, the Persians snapped. Even before 1929, the discovery of oil in Mexico and Venezuela (the work in the latter led by George Reynolds, who had struck the all-important well at Masjed Soleymān) led to a major correction downwards in oil prices. After Wall Street had crashed, prompting a dramatic fall-off in demand, the Persians took matters into their own hands. Finally, in November 1932, following a sharp decline of royalty payments and continuing financial chicanery whereby detailed figures were deliberately withheld from Teheran, the Shah declared that the Knox D’Arcy concession was cancelled with immediate effect.

  This was disgraceful, complained British diplomats. ‘If we do not make ourselves felt at the outset,’ advised one senior official, ‘we shall have far worse trouble with the Persians later.’51 The declaration was a ‘flagrant’ offence, said another.52 In the eyes of the British, the contract agreed three decades earlier should stand, no matter what. It was true that considerable financial risks had been taken to open up the oil business in the first place, and that it had required hefty investment to create an infrastructure that enabled resources to be exploited. Nevertheless, the riches that were unlocked as a result were huge. The clamour to share these more evenly was simply ignored; in the manner of the great banking scandals of the early twenty-first century, Anglo-Persian and the interests that sat behind it were too big to fail.

  In this case, however, the process of equalising the situation and putting things right was a quick one – largely because Persia had the potent negotiating tool of being able to harass, prevent and hinder production to force a renegotiation. In the spring of 1933, a new deal was hammered out. The Persian delegation met with oil executives at the Beau Rivage hotel in Geneva and explained that they were familiar with the terms of a recent agreement about oil in Iraq, demanding that these at least be matched. The initial proposal – which included Anglo-Persian ceding 25 per cent of the shares, a guaranteed annual income, profit share and board representation – was dismissed by Sir John Cadman as preposterous and impossible.53

  Although the discussions that followed were perfectly cordial, it soon became clear that efforts to avoid a major renegotiation would fail. By April 1933, a new deal had been struck. More attention would be paid to the ‘Persianisation’ of the oil business – that is, hiring and training more locals to be involved in the business at all levels, from management down to more lowly positions. The region covered by concession was dramatically reduced to a quarter of its original size, albeit the sweetest bite of the cherry; a fixed royalty fee was agreed that removed the screen of currency and oil-price fluctuations; a minimum annual payment was guaranteed, regardless of production levels or market prices achieved; the Persian government would also share in the wider benefits of Anglo-Persian, receiving a share of the profits that the company made in its other jurisdictions. Cadman did not comment when the Persian negotiators told him he should see the new agreement as a ‘personal triumph for [himself] and his colleagues’. His notes disclose his reaction: ‘I felt that we had been pretty well plucked.’54

  The Persians, and others who were watching, saw a different moral in the story. The lesson was that, for all the bluster, the west’s bargaining position was a weak one. Those with the resources could ultimately force the hand of those who held the concession, and make them come to the table. The west could complain as bitterly as it liked, but it turned out that possession truly was nine-tenths of the law.

  This became one of the key themes of the second half of the twentieth century. New connections were rising that straddled the spine of Asia. A web was being spun not of towns and oases but of pipelines that linked oilwells to the Persian Gulf and, by the 1930s, to the Mediterranean. Resources and wealth were pumped along these lines to ports like Haifa and Ābādān – a site that became home to what was for more than fifty years the world’s biggest refinery.

  Control of this network was everything, as the British recognised even before the First World War broke out. To the optimist, things still looked rosy. After all, despite the renegotiation of concessions in 1933, strong links had been built up with this part of the world, and there was still much to be gained from co-operating with those whose resources were of such enormous importance; and Britain, surely, was in a better position than anyone else.

  The reality, however, was that the tide had already turned. The power and influence of the west was in decline – and seemed certain to diminish further. There was a price to pay for constant interference in l
ocal affairs; there was a price to pay for remodelling the gardens of the embassy; and there was a price to pay for never quite playing with a straight bat. That price was reservation, misgivings and mistrust.

  The two very different outlooks were perfectly captured at a dinner in Baghdad in 1920, just as the shape of the new Near and Middle East was becoming clear. One of those attending was the dynamic and fiercely intelligent Gertrude Bell, who had been recruited at an early stage in the First World War to work for British intelligence, and was an astute observer of Arab politics. Rest assured, she told Jafar al-Askarī, soon to be appointed Prime Minister of the new country of Iraq, that ‘complete independence is what we [the British] ultimately wish to give’. ‘My lady,’ he replied, ‘complete independence is never given – always taken.’55 The challenge for countries like Iraq and Persia was to free themselves of outside interference, and to be able to decide their own futures. The challenge for Britain was how to prevent them from doing so. It was a conflict waiting to happen. First, though, there was another disaster that was about to take place, again driven by control of resources. This time it was not oil but wheat that lay at the heart of impending catastrophe.

  19

  The Wheat Road

  The British magazine Homes & Gardens has long prided itself on being at the cutting edge of interior design. ‘Mixing beautiful features with gorgeous real-life homes and gardens, expert advice and practical information’, the magazine declares in its recent marketing strapline, is ‘the ultimate source of decorating inspiration’. Its November 1938 issue gushed with praise about a mountain bolt-hole rich in Alpine chic. ‘The colour scheme throughout this bright, airy chalet is light jade green,’ wrote the correspondent, enlivened by the passion for cut flowers displayed by the owner – who as it happened was also the property’s ‘decorator, designer and furnisher, as well as architect’. His watercolour sketches hung in the guest bedrooms, alongside old engravings. A ‘droll raconteur’, the owner loved being surrounded by a range of ‘brilliant foreigners, especially painters, musicians and singers’, and would often bring in ‘local talent’ to play pieces by Mozart or Brahms for after-dinner entertainment. The article’s author was very impressed by Adolf Hitler.1

  Nine months later, on 21 August 1939, an eagerly awaited call came through to the telephone exchange which Homes & Gardens reported was next to his modern office and which allowed ‘the Führer’ to be in contact with ‘his friends or Ministers’. During supper, a message was passed to Hitler. According to one who was present, ‘he scanned it, stared into space for a moment, flushed deeply, then banged on the table so hard that the glasses rattled’. He turned to his guests and said excitedly, ‘I have them! I have them!’2 He sat down to eat, no doubt faced with the usual ‘imposing array of vegetarian dishes, savoury and rich, pleasing to the eye as well as to the palate’, admired by the Homes & Garden journalist a year earlier, and prepared by Hitler’s personal chef, Arthur Kannenberg – who often came out of the kitchen in the evenings to play his accordion.3

  After the meal, Hitler called his dinner guests together, and told them that the paper he was holding contained the text of a reply that he had been waiting for from Moscow. Stalin, the undisputed master of the Soviet Union, had agreed to sign a treaty of non-aggression with Germany. ‘I hope’, the teletype read, ‘that [this] will bring about a decided turn for the better in relations between our two countries.’4 Two nights later, after the news had been announced, Hitler and his entourage stood on the terrace, looking into the valley below. ‘The final act of Götterdämmerung could not have been more effectively staged,’ noted the leading Nazi, Albert Speer.5

  Ironically, the extraordinary agreement was prompted by British and French foreign policy. Both countries had been trying desperately to find ways to contain the German Chancellor after becoming alarmed by his high-stakes political poker in the 1930s – with little success. So little, in fact, that Mussolini confided in his Foreign Minister Count Ciano that Britain’s politicians and diplomats were not made of the same stuff as ‘the Francis Drakes’ and the other ‘magnificent adventurers who created the empire’; in fact, they are ‘the tired sons of a long line of rich men, and they will lose their empire’.6

  Following Germany’s occupation of Czechoslovakia, a tougher line was taken. In the afternoon of 31 March 1939, the Prime Minister Neville Chamberlain rose in the House of Commons. ‘In the event of any action which clearly threatened Polish independence,’ he said solemnly, ‘His Majesty’s Government would feel themselves bound at once to lend the Polish Government all support in their power. They have given the Polish Government an assurance to this effect. I may add that the French Government have authorised me to make it plain that they stand in the same position in this matter as do His Majesty’s Government.’7

  Rather than guaranteeing Poland’s security, this sealed its fate. Although the Prime Minister told the House of Commons that the Foreign Secretary had met with the Soviet ambassador, Ivan Maiskii, the same morning in an attempt to smooth things over, the assurances offered to Poland set in motion a chain of events that led straight to the wheatfields of Ukraine and southern Russia. The struggle was to spell death for millions.8

  The aim had been to lock Germany into stalemate, using the threat of war to deter any move against its neighbour to the east. In fact, as Hitler quickly understood, he had been dealt an ace – albeit one that required astonishing gall to play: here was a chance to make a deal with the Communist Soviet Union. Although the USSR was a bitter rival to Nazi Germany in many respects, suddenly there was common ground where the interference of Britain and others had provided an opening. Stalin too realised how the cards fell. He had also been given an opportunity – one that he likewise required astonishing gall to take advantage of: reaching terms with Hitler.

  The idea of an alliance between the two states seemed beyond the realms of plausibility or reality. Since Hitler had been voted to power in 1933, relations between Germany and the USSR had deteriorated sharply, with vitriolic media campaigns in both countries portraying the other as demonic, ruthless and dangerous. Trade had all but collapsed: while nearly 50 per cent of all imports to the Soviet Union had come from Germany in 1932, six years later the figure had fallen to below 5 per cent.9 But with the guarantees extended to Poland, the two countries finally had something in common: a wish to destroy the state that was sandwiched between them.10

  In the spring of 1939, there was a flurry of diplomatic activity. The Soviet chargé d’affaires in Berlin and the leading German expert on eastern Europe met to set out grounds for improving relations, and to look for areas of possible co-operation, including the resumption of trade. These talks accelerated quickly, taken forward in Moscow by discussions between the German ambassador and Vyacheslav Molotov, the new Commissar of Foreign Affairs, whose predecessor, Maxim Litvinov, had been dismissed because of his Jewish background – an obstacle when dealing with the anti-Semitic German regime. Litvinov, ‘the eminent Jew’, wrote Winston Churchill, ‘the target of German antagonism, was flung aside like a broken tool . . . bundled off the world stage to obscurity, a pittance and police supervision’.11

  By the summer, things had moved forward to the point that Joachim von Ribbentrop, the German Foreign Minister, was able to send messages to Moscow that explained that just because National Socialism and Communism were very different, there was ‘no reason for enmity between our two countries’. If there was an appetite to discuss matters, he suggested, then further rapprochement was possible. At the heart of the matter was Poland: could a deal be done in which Poland would be dismembered and divided up between them?12

  The question was taken up by Stalin personally. Poland had been a bête noire since the Revolution. For one thing, the peace agreements at Versailles had awarded the Poles a swathe of territory that had been Russian before 1914; for another, Poland had taken military action that had threatened the very success of the Bolshevik seizure of power in the years after 1917. Fear
of Polish spies was a regular and common feature in the Soviet purges of the 1930s that saw millions arrested and many hundreds of thousands executed. Barely two years before negotiating with Germany, Stalin had personally signed orders demanding the ‘liquidation of the network of spies of the Polish Military Organisation’, which led to tens of thousands more being arrested, of whom more than four-fifths were then shot.13 His response to the German question about co-operation, not least over Poland, was positive and encouraging.

  It was followed up immediately. Two days after Stalin’s reply, two Focke-Wulf Condor planes touched down in Moscow to be met by a Soviet guard of honour and two sets of flags fluttering in the wind. Half bore the image of the hammer and sickle, the tools of the urban proletariat and the peasantry, unmistakable symbol of Communism; the others were flags of the Third Reich, designed by Hitler himself – as he explained in Mein Kampf: ‘In red, we can see the social idea of the [National Socialist] movement, in white the nationalist idea, and in the swastika the mission of the struggle for the triumph of the Aryan man.’14 In one of the most extraordinary and unexpected sights of the twentieth century, the flags representing Communism and Fascism flew side by side as the Germans disembarked from the planes. The delegation was headed by Ribbentrop, the German Foreign Minister, described by one former teacher as ‘the most stupid in the class, full of vanity and very pushy’ and now trusted to broker an agreement between bitter rivals.15

  After being driven to the Kremlin to meet with Stalin and Molotov, Ribbentrop expressed his hope for good relations. ‘Germany asks for nothing from Russia – only peace and trade,’ he said. Stalin gave a typically direct reply. ‘For many years now, we have been pouring buckets of shit over each other’s heads, and our propaganda boys could not do enough in that direction. Now all of a sudden, are we to make our peoples believe all is forgotten and forgiven? Things do not work so fast.’16