Bahrain & Big Oil's Pre-1962 Special Interests

Harvey O’Connor’s 1962 Monthly Review Press book, World Crisis in Oil, contained the following reference to Bahrain and the transnational oil companies’ special economic interests in Bahrain, prior to 1962:

“In the split-up of the Standard Oil Trust in 1911, the California company inherited the Pacific Coast properties…British fumbling and the energetic intervention of the State Department transformed the California company into one of the partners in the world cartel. It began on the island of Bahrain, lying off the Arabian coast but long claimed by Iran. In 1925 a British group obtained a concession from the ruler which was transferred to an American group two years later. In 1928 Standard of California [now known as Chevron Texaco] appeared as the owner of the concession, to the consternation of the Colonial Office which could only regard this as a form of poaching on Imperial preserves, for the Sheikh’s foreign relations were shepherded from London. At this point the State Department stepped in, and the Colonial Office was obliged by 1930 to concede Standard’s position in Bahrain. While Bahrain’s oil reserves are not considerable, their advantageous location next to deep water eliminated the need for costly inland exploration and pipe lines…

“…In 1880 the [Bahrain] Ruler had declared his dependence on Britain, the better among other things to shield him from the Persians [Iranians] who claimed the island as their own…

“…The Bahrain Petroleum Company (Bapco), a Canadian subsidiary of Standard of California, took over in 1929. It was stipulated that all contacts with the Sheikh must be made through the local Political Agent, that at least one director must be British and persona grata to the Colonial Office, that the chief local representative must be approved by it, and as many employees as possible be British or Bahraini. A concession was signed with the Sheikh, and amended in 1940 to include the entire island and its offshore. In 1932 oil was discovered.

“Bahrain, while not important in itself as an oil producer, with an output of around 15 million barrels a year , proved to be the key to Arabia and its hidden wealth. Standard of California looked across the narrow strait and proceeded to obtain its golden concession from Ibn Saud, by then ruler of Saudi Arabia…

“Bahrain Petroleum Company became a unit in 1936 of the California Texas Oil Corporation (Caltex) when Texaco became a partner with Standard of California in its Bahrain-Arabian enterprises. Minor though Bahrain might be in the Caltex scheme of things, the royalties were soothing to the hitherto impecunious Sheikh. At first he got 14 cents a barrel, later 29 cents, and then in 1952 the 50-50 pattern. From a mere $8,800 in 1933, royalties mounted to $3.3 million in 1950 and to $13 million in 1959…

“Because Bahrain, under the protection of British guns, afforded a safer haven for such a venture, a refinery was built with a capacity of 155,000 b/d to which Arabian oil was piped under the Gulf as the island’s own production was small…

“The company employed Bahrainis as far as possible, but with the development of other oil areas in the Gulf, the trained Bahrainis tended to succumb to the lure of higher wages elsewhere, while their places were taken by Indians, Pakistanis, and Iranians. As in Kuwait, the Sheikh divided his income into three parts, one for himself and his family, one for the sheikhdom, and the rest for investment in London. In a small territory with a population somewhat over 100,000 [prior to 1960], the oil revenues devoted to social needs produced a town with amenities—schools, hospitals, electricity—which have resulted in Manama becoming a kind of resort frequented by foreigners from Arabia and Qatar…

“Bapco was a minor pearl in the crown of Standard of California and Texaco. Capitalized in 1929 at $100,000, by 1947 its earned surplus totaled $55 million. The gladsome profits were made possible by production costs of 25 cents for oil selling then at $1.05-1.15 a barrel. As Bapco was registered as a Canadian company, it paid no income taxes to the Untied States; Caltex as a Bahamian company was likewise exempt.

“The rise of nationalistic pan-Arab feeling has been particularly noteworthy in Bahrain…In 1954 a general strike demanded some measure of political liberty and curbing of the Sheikh’s powers with improvements in public health and education. The 1956 strike was highlighted by demands for the dismissal of the Sheikh’s British adviser, Sir Charles Dalrymple Belgrave, who had imposed censorship on the three Bahrain newspapers. The British reacted swiftly to protect their navel and air bases on Bahrain, by exiling the nationalist leader. He had demanded the enactment of a civil and criminal code (hitherto non-existent), elections and a legislative council, better use of oil royalties, and an end to immigration to leave more jobs for Bahrainis in their own country. Many work in Arabia, Kuwait, and Qatar.

“…The Suez affair in November sparked demonstrations in Bahrain that resulted in the jailing of the nationalist leaders late in the year…

“Although the first of the Arabian oil to be found, Bahrain’s will also be the first exhausted. The 300-million-barrel reserve is expected to last no more than 20 years, barring unexpected discoveries. After that, most of the $15-million annual oil revenues will cease and the Sheikh may have to enact an income tax and cut expenditures. He has stashed away some $20 million in London, yielding some $650,000 a year, so he will not be destitute.

“A sandspit named HMS Jufair is the headquarters of the British Persian Gulf Command…The U.S. Middle East Squadron also has office space on `HMS Jufair’…”