Winter - 2013 Lakatos1

Published on March 13th, 2013

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Competition for Romanian Oil in the Interwar period

 

By Artur Lakatos

Following World War I and the great Unification, Romania experienced a serious increase in size and power. During the interwar period, Romania was an important exporter of raw materials, first of all grains, corn, oil and timber. When it came to oil exports it was second, only behind the USSR in Europe, and sixth in the world. 

During World War I, the oil field installations were destroyed by sabotage, and were partially rebuilt by Germany between 1916 and 1918. Their rehabilitation continued after the war and was finished around 1924.

Oil deposits on the territory of Romania were documented in the Antiquity and in the Middle Ages, but lacked major importance. I 1857 the first refineries were founded, though these could better be described as workshops rather than refineries in today’s meaning of the word.

 

The level of Romanian oil production and its efficiency is illustrated in the following tables and statistics. It is based on the insights of the academic Gheorghe Buzatu.

Romanian oil production, expressed in tons.

Evolution of exports, in the same period.

 

 

 

 

 

 

 

 

 

 

 

 

 

Between 1918 and 1924, 101 new companies were registered in Romania, most of them with Romanian capital, whose activity was the extraction, transformation or distribution of crude oil and/or its derivatives. Some of them – like the Creditul Minier, Industria Romana de Petrol (known as IRDP), and Pacura Romaneasc were quite important, while other ones were small enterprises. In 1920 when the Romanian state, through its Liberal government, offered state monopoly-like concession to the IRDP, diplomats of England, the USA, France and the Netherlands exercised serious pressure, even threatening with retrieval of international loan for rebuilding the country from London’s financial markets. The government had to give up the idea.

Workers on a Romanian oil field, 1923.

Among foreign investments, the English was the most important one, and replaced in a successful way former German and Austro-Hungarian interests. The most important company was the British-Dutch Royal Dutch-Shell, through its affiliated branch-company, the Astra Romana. In 1920 other English companies penetrated the Romanian market, like the Anglo-Persian oil Co Ltd., through the Steaua Romana (having previously German capital), the Sospiro Oilfields, and the Phoenix Oil and Transport Co. Ltd.

As a result of peace treaties, French capital received equal share with British one from former interests of German and Austro-Hungarian firms. Just as British investors cooperated with Dutch ones, the French cooperated with Belgians. The most important representative of French-Dutch capital was the cartel-like company Omnium International des Petroles, with its headquarter in Paris. Among its stockholders were firms like  the Banque de Paris at des Pays Bas, Banque Mirabaud at Co., Louis Hirsch et Co., Petroles des Roumanie-Anvers, etc. its main branch company in Romania was the Colombia, founded in 1920. Other companies with French or Belgian interests were the Petrol Block, Aquila Franco-Romana and Compagnie Financiere Belge des Petroles.

Drilling towers of European companies.

American capital missed the opportunity of redistributing “war prey” (investments of Central Powers) between British, French and Romanian capitals. Instead, the Standard Oil invested in the  already existing Romano-Americana company, in which it was the only shareholder. The Romano-Americana quickly became the second major oil producer company after the Astra Romana. US diplomats in general were very active in promoting economic interests from American investors.

Italian capital entered Romania during the mid-twenties, through the AGIP, whose base was in the Prahova valley. Interestingly, unlike England and France, who used refineries on Romanian soil where oil products were transported through pipelines till the port of Constanta, Italians preferred in the mid-thirties to use the AGIP refinery inFiume. In 1934, Italian authorities asked AGIP to base its supply for the largest part on Romanian oil (around two thirds) leaving the other to short term contracts basically with the Soviet Union.  With all this, 1934, exploitation in the Prahova valley declined, and Italy never regained its position, facing a far stronger competitor in Nazi Germany. The AGIP often collaborated with American-owned companies, for example, rotary drilling technology was adopted with the help of American engineers.

German direct investments, compared to other ones, were insignificant both under the Weimar Republic and the Nazi Third Reich. On the other hand, Germany in the thirties quickly became the most important partner of Romania when it came to oil import. This is illustrated by the following table (its data reflects realities from 1936):

Oil-importer country Tons imported
Germany 1,072,402
France 866,322
Great Britain 846,276
Italy 653,222

Cartoon of the Daily Mirror showing King Carol’s dangerous situation between Hitler and Stalin.

In 1938 Germany became Romania´s most important trading partner: 48,5 percent of Romanian imports came from Germany, and 35,9 percent was the share in destination of exports toward Germany. In 1939, the “German-Romanian Treaty for the Development of Economic Relations between the Two Countries” was signed, which granted, for ten years, German primacy in Romanian bilateral trade. The treaty provided German priority in Romanian exports for agricultural, timber and oil products. In exchange Germany granted technical know-how and war equipment. Change could be made through direct exchange, products for products, no use of currency needing to be involved.

The treaty strengthened German economic power considerably and contributed on proving an enhanced economic capability of its war efforts. During World war II, Nazi Germany penetrated the Romanian economy even more, subordinating it to its war objectives. But that is the subject of another article.

 

Further reading:

Buzatu, Gheorghe, România și trusturile petroliere internaționale până la 1929, Iași, Editura Junimea, 1981

Buzatu, Gheorghe, O istorie a petrolului românesc, București, Editura Enciclopedică, 1998; ediția a II-a, Iași, Demiurg, 2009

Calcan, Gheorghe, “Aspects of Technical Progresses in Romanian Petroleum Industry in the Interwar Period: Drilling” ,Annual of the University of Mining and Geology “St. Ivan Rilski”, Vol. 50, Part I, Geology and Geophysics, 2007 pp 183-186

Pozzi, Daniele, «AGIP in Romania: the Prahova’s Venture(1926–1943)” ,  Buletinul Universitatii Petrol-Gaze din Ploiesti, Seria Stiinte e Socio-Umane si Juridice, Vol LX. No 1/2008, p 29-36

Stanciu, Laura, “ Free-Standing Companies in the Oil Sector in Romaniaand Polandbefore 1948: Typologies and Competencies”, Business History,  Vol. 42. No 4/2000, pp 27-66

 

Sources for pictures:

Petroblog. Romanian Petroleum History. http://furcuta.blogspot.no/2011/05/interwar-oil-industry.html

The political caricature is representing a cartoon of the Daily Mirror from 1940

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One Response to Competition for Romanian Oil in the Interwar period

  1. Dimples82 says:

    Sir,
    Your article about Competition for Romanian Oil in the Interwar period, can you please advise which British and British partnered companies interests were nationalised on July 24, 1940 ?
    Best regards,

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