Newsletter Ten: The Actual Cause for World War I and a Century of War

This issue of my periodic newsletter I would like to devote to a selection from my best-selling book, A Century of War: Anglo-American Oil Politics. The book describes the emergence of oil as the strategic commodity for world economic power and its role in leading not only to the First World War in August 1914, but also most subsequent wars down to the present. I have selected a section describing the long-ignored role of Germany’s mammoth Berlin-to-Baghdad railway project to decisions in London to redraw the map of Europe by encircling the German Reich with secret alliances first with France and then Russia to oppose Germany.  If you like the book, it would mean a lot to me if you leave a review on Amazon. This helps me continue to create great content for you. 

A Century of War: Anglo-American Oil Politics Copyright F. William Engdahl

CHAPTER TWO--
The Lines are Drawn:
Germany and the Geopolitics of the Great War

Germany’s Wirtschaftswunder

[dropcap]G[/dropcap]rowing divergence after 1873 between the depressed economy of the British Empire, and the emerging industrial economies of Continental Europe, above all the German Reich, created the background to the outbreak in 1914 of the Great World War. The role of petroleum in this conflict already had become central, though few outside a tiny elite of London and New York bankers and financiers realized fully how central until years after. Towards the final decade of the 19th century, British banking and political elites had begun to express first signs of alarm over two specific aspects of the impressive industrial development in Germany. The first was emergence of an independent, modern German merchant and military naval fleet. Since 1815 and the Vienna Congress, the English Navy had been unchallenged lord of the seas. The second strategic alarm was sounded over an ambitious German project to construct a railway linking Berlin with, ultimately, Baghdad, then part of the Ottoman Empire.

In both areas, naval challenge and building a rail infrastructure linking Berlin to the Persian Gulf, oil figured as a decisive, if still hidden, motive force for both the British and the German side. We will see why these two developments were regarded as virtual casus belli by the Anglo-Saxon establishment at the turn of the century. By the 1890s, British industry had been surpassed in both rates and quality of technological development by an astonishing emergence of  industrial and agricultural development within Germany.

By the 1870s, decades of piecemeal German adoption of the economic reforms of Friedrich List, in creation of a national modern rail transport infrastructure and tariff protection for emerging domestic industries, began to bring notable results, more so in the context of the political unity of the German Reich after 1871. Until approximately the 1850s, imitation of the apparently successful British economic model was the dominant policy followed in Germany, and the free trade economics of such British economists as Adam Smith or David Ricardo, were regarded as holy gospel in German universities.

But increasingly, after England went into prolonged depression in the 1870 s, which hit Germany and Austria as well, Germany began to realize the serious flaws in continuing faithfully to follow the British model. As Germany turned increasingly to a form of national economic strategy, and away from British free trade adherence, in building a national industry and agriculture production, the results were remarkable. As one indication of this shift away from the English model, from 1850 to the eve of the First World War in 1913, German total domestic output increased five-fold. Per capita output increased in the same period by 250%. The population began to experience a steady increase in its living standard, as real industrial wages doubled between 1871 and 1913.

But the heart of the German industrial revolution was the explosive expansion of technological, industrial, and agricultural development within Germany. With the United States concentrated largely on its internal expansion after its Civil War, the industrial emergence of Germany was seen increasingly as the largest threat to Britain s global hegemony during the last decade of the century.

By rail from Berlin to Baghdad

Sultan Mehmed V  greeting the German Kaiser in 1898.

[dropcap]I[/dropcap]n 1889, a group of German industrialists and bankers, led by Deutsche Bank, secured a concession from the Ottoman government to build a railway through Anatolia from the capital, Constantinople. This accord was expanded ten years later, in 1899, when the Ottoman government gave the German group approval for the next stage of what became known as the Berlin-Baghdad Railway project. The second agreement was one consequence of the 1898 visit to Constantinople by German Kaiser Wilhelm II. German- Turkish relations had become of high importance over those ten years. Germany had decided to build a strong economic alliance with Turkey beginning in the 1890s, as a way to develop potentially vast new markets to the East for export of German industrial goods. The Berlin-Baghdad Railway project was to be the centerpiece of a brilliant and quite workable economic strategy. Potential supplies of oil lurked in the background and Britain stood opposed. The seeds of animosities tragically being acted out in the Middle East in the 1990 s trace directly back to this period.

For more than two decades, the question of construction of a modern railway linking Continental Europe with Baghdad was at the center of German-English relations as a point of friction. By the estimation of Deutsche Bank director, Karl Helfferich, the person responsible at the time for the Baghdad rail project negotiations, no other issue led to greater tensions between London and Berlin in the decade and half before 1914 with the possible exception of the issue of Germany's growing naval fleet.

In 1888, under the leadership of Deutsche Bank, a consortium secured a concession for construction and maintenance of a railway connecting Haidar- Pascha outside Constantinople, with Angora. The company was named the Anatolian Railway Company, and included Austrian and Italian shareholders as well as a small English shareholding. Work on the railway proceeded so well that the section was completed ahead of schedule and construction was further extended south to Konia.

By 1896 a rail line was open which could go from Berlin to Konia deep in the Turkish interior of the Anatolian highlands, a stretch of some 1,000 kilometers of new rail in a space of less than 8 years in an economically desolate area. It was a true engineering and construction accomplishment.

The ancient rich valley of the Tigris and Euphrates rivers was coming into sight of modern transportation infrastructure. Hitherto, the only rail infrastructure built in the Middle east had been British or French, all of it extremely short stretches in Syria or elsewhere to link key port cities, but never to open up large expanses of the interior to modern industrialization.

The railway gave Constantinople and the Ottoman Empire vital modern economic linkage for the first time with its entire asiatic interior.

The rail link, once extended to Baghdad and a short distance further to Kuwait, would provide the cheapest and fastest link between Europe and the entire Indian subcontinent, a world rail link of the first order. From the English side, this was exactly the point. "If Berlin- Baghdad were achieved, a huge block of territory producing every kind of economic wealth, and unassailable by sea-power would be united under German authority," warned R.G.D. Laffan, at that time a senior British military adviser attached to the Serbian Army, "Russia would be cut off by this barrier from her western friends, Great Britain and France. Laffan added. "German and Turkish armies would be within easy striking distance of our Egyptian interests, and from the Persian Gulf, our Indian Empire would be threatened. The port of Alexandretta and the control of the Dardanelles would soon give Germany enormous naval power in the Mediterranean." Laffan hinted at the British strategy to sabotage the Berlin- Baghdad link. "A glance at the map of the world will show how the chain of States stretched from Berlin to Baghdad. The German Empire, the Austro-Hungarian Empire, Bulgaria, Turkey. One little strip of territory alone blocked the way and prevented the two ends of the chain from being linked together. That little strip was Serbia. Serbia stood small but defiant between Germany and the great ports of Constantinople and Salonika, holding the Gate of the East...Serbia was really the first line of defense of our eastern possessions. If she were crushed or enticed into the Berlin-Baghdad system, then our vast but slightly defended empire would soon have felt the shock of Germany s eastward thrust. --(emphasis added)."

In 1912, Deutsche Bank, in the course of its financing of Baghdad rail connection, negotiated a concession from the Ottoman Emperor giving the Baghdad Rail Co. full right-of-way rights to all oil and minerals on a parallel 20 kilometers on either side of the rail line. The line had reached as far as Mosul in what today is Iraq. By 1912, German industry and government realized that oil was the fuel of its economic future, not only for land transport but for naval vessels. At that time, Germany was itself in the lock-grip of the large American Rockefeller Standard Oil Company trust. Standard Oil's Deutsche Petroleums Verkaufgesellschaft controlled 91% of all German oil sales. Deutsche Bank held a minority 9% share of Deutsche Petroleums Verkaufgesellschaft, hardly a decisive interest. Germany in 1912 had no independent, secure supply of oil. But geologists had discovered oil in that part of Mesopotamia today called Iraq, between Mosul and Baghdad. The projected line of the last part of the Berlin-Baghdad rail link would go right through the area believed to hold large oil reserves. Efforts to pass legislation in the Berlin Reichstag in 1912-13 to establish a German state-owned company to develop and run the new found oil resources, independent of the American Rockefeller combine, were stalled and delayed until the outbreak of World War in August 1914 pushed it from the agenda. The Deutsche Bank plan was to have the Baghdad rail link transport Mesopotamian oil over land, free from possible naval blockade by the British and thereby, make Germany independent in its petroleum requirements.