The Blue-Chip Game

(See Cover)

In the subterranean world of petroleum, it is the international oilmen who play the blue-chip game. The players must back their gambling spirit with refineries, tankers, filling stations -- and millions in hard cash. In this blue-chip game, the jackpot is the Middle East, Iraq, Iran, Saudi Arabia and the string of tiny sheikdoms in the rolling sand dunes around the Persian Gulf -- Bahrein, Kuwait and Qatar (pronounced gutter).

Under these scorching deserts lies an ocean of oil, the fabulous wealth of the Arabian Nights. The ocean contains a minimum of 26 billion barrels (1 1/4 times the proved reserves of the U.S.), a maximum of 150 billion barrels. How much is this worth? In cash, enough to make a hundred Rockefellers; as a military asset, as nations count, it is beyond price.

This jackpot has not lacked for players.

The Nazis tried to sweep the tables in World War II by Rommel's drive into Egypt. The Russians placed a tentative bet only a year ago, lost out with their fiasco in Azerbaijan, Iran. Now Russia has raised the ante by threatening Greece and Turkey. Last week, President Truman dealt in the U.S. -- in a diplomatic way --by asking for a $400,000,000 loan to Greece and Turkey, accompanied by mili tary advisers and weapons (see NATIONAL AFFAIRS). The loud talk was all of Greece and Turkey, but the whispers be hind the talk were of the ocean of oil to the south.

New Deck. As the U.S. prepared to make its historic move, a potent group of U.S. oil companies also came to a historic decision. With the tacit approval of the U.S. and British Governments, the companies concluded a series of deals -- biggest ever made in the blue-chip game -- to develop and put to full use this ocean of oil.

Standard Oil Co. (N.J.), world's biggest oil company, was the natural leader of the group; as Standard's internationally minded president, Eugene Holman, was the one who had a big hand in drafting the breath-taking plans. Jersey Standard and its partners were going to spend upwards of $300,000,000 in the stormy Middle East to bring out the oil.

As free-enterprising businessmen, their hardheaded purpose was to make money. But as internationalists, they were well aware of the political implications. By making the oil available to all the world (Russia would be able to buy as cheaply as anyone else), they would do their part to clear the political air. By bringing the tangible benefits of free enterprise to the desert lands, where starvation and disease are as ever-present as heat, they would make friends and influence people where the U.S. sorely needed friends. As the London Economist summed up: "They should be offered the resources of Western technique in making their deserts once more blossom like the rose. Western democracy claims that it stands for a synthesis of enterprise, forethought and trusteeship. It will never have a better chance to prove its case."

High Hand. Up till now, the British have held the high hand in the jackpot 'game. The principal players are a complex mixture of governments and private companies :

P: The oil concessions in Iran are owned by the Anglo-Iranian Oil Co., in which Winston Churchill, then First Lord of the Admiralty, bought control for the British Government in 1914.

P: In Iraq, the concessions are held by the Iraq Petroleum Co., which is owned by Anglo-Iranian Oil (23 3/4%); the British-controlled Royal Dutch-Shell (23 3/4%); Jersey Standard and Socony-Vacuum, through their jointly owned Near East Development Corp. (23 3/4%); the French Government through its Compagnie Franc,aise des Petroles (23 3/4%). The only individual is a mysterious Armenian financier, Calouste S. Gulbenkian, whose 5% gives him a distant claim to the title of the "world's richest man."

P: In Arabia, the concessions were wangled from wily old Ibn Saud by Arabian American Oil Co. (Aramco), jointly owned by Standard Oil Co. of California and the Texas Co.

Jersey Standard has long wanted to get into Arabia. But it was virtually barred by the famed and cartel-like Red Line Agreement* which it was forced to sign to get a share in Iraq Petroleum.

Under this cozy agreement no member of Iraq Petroleum could develop fields in the Red Line area unless he put the oil into a common pot. Last week, fed up with this, Jersey Standard formally announced what it had only hinted at before.

It said the agreement was dead. Then Jersey Standard and its, partner in Middle Eastern ventures, Socony, dealt themselves a new hand.

New Deal. In the new hand Holman held, the aces were Socony's Board Chairman Harold Sheets; Henry DeWard Collier, the shrewd, benign-looking board chairman of Aramco, boss of Standard of California; William Starling Sullivan Rodgers, director of Aramco and board chairman of the Texas Co.;Aramco's globe-trotting Vice President James Terry Duce. Their companies produce 22% of the worlds oil. They reached an agreement which, in effect, put Jersey Standard and Socony in Arabia.

In broad outline, the deal called for Aramco to borrow $227,500,000 from a group of banks to spend on the venture. (Jersey Standard and Socony will guarantee $102,000,000 of the loans, all three companies will share the rest.) Aramco will build a 1,000-mile pipeline from the blistering oil-rich city of Dammam to the Mediterranean: it will construct a deep-water port at Dammam, build a short railroad, install additional refinery equipment and connecting pipelines. All this, it expects, will step up production in Arabia from the current 200,000 barrels a day to 500,000, replenishing the depleted treasury of Ibn Saud by 23-c- for every barrel.

Win the Pot? But with its new hand, Jersey Standard got a joker. The French have not taken kindly to Jersey Standard's view that the Red Line Agreement is defunct, are now suing-in London to try to keep it in force. As bait to the French to settle out of court, Jersey Standard and Socony have offered to sink upwards of $20,000,000 in Iraq's Kirkuk fields to quadruple production, help build two--and possibly three--more pipelines from Kirkuk to the Mediterranean.

To mollify Anglo-Iranian, concerned about selling its own production in Iran, Jersey Standard planned to buy substantial quantities of oil over the next 20 years. To transport it, Anglo-Iranian will build a pipeline from Abadan on the Persian Gulf to the Mediterranean--with Standard footing about $30,000,000 of the bill.

Play at Home. These deals and counterdeals will radically change the flow of oil around the world. The Western Hemisphere now supplies almost 80% of the world's oil (see chart). As production increases in the Middle East, its oil will supply all Europe and the Far East. The flow of oil across the Atlantic will stop; the Western Hemisphere will keep its oil to use at home.

Shortsighted U.S. oilmen loudly complained that this would cut down their markets. Venezuela, which produces about 84% of South American oil, worried that Standard planned to use the Middle East as a club to keep the leftish Venezuelan government from piling on any more taxes. Actually, world oil consumption is increasing so fast that the world needs all the oil it can get. Most important, the U.S. used its oil so lavishly during World War II that it has to find new foreign sources to stop the current drain on its own.

Unless it does get those sources, the U.S. will probably not have enough oil to fuel another global war. The U.S. cannot afford to become a "have not" in oil, any more than Standard can. And in the Middle East, where the U.S. has taken a strong hand, U.S. oil companies now have a strong leader. Jersey Standard is the kingpin. By its bold enterprise it has won the lion's share of the world markets in which the oil must be sold.

Work Abroad. The pattern of internationalism, by which Standard has prospered, was first established by John D. Rockefeller when he went into China with oil for its lamps (and also sold the lamps to burn the oil). Ever since, that pattern has been followed by Jersey Standard's hardheaded, world-minded presidents. As a matter of course, it was thus up to President Gene Holman to lay down the outlines of Standard's Middle Eastern campaign.

At 51, Gene Holman is a tall (6 ft.), broad-shouldered 185-pounder with green eyes and the ruddy face of an oilfield roughneck. His offhand, informal manner and slow Texas drawl disconcert those accustomed to more stuffing in bigwigs. One visitor snorted, only half facetiously: "You should be pompous and have a double-breasted fawn-colored vest with a big gold watch chain stretched across a protruding paunch, some handlebar moustaches and a Standard Oil bearing."

An easy talker, Holman can crisply sum up why he is a free-trader. To him, the risks of trading in a world full of civil wars and uneasy rulers are the normal risks of the oil business. He says: "I sweated over Arabia. The Middle East is a pretty big gamble, but the political trouble there is a normal business risk. Last year we spent $350,000,000 in foreign countries--a substantial amount of that in those politically and economically unstable countries. The point is, we believe in international trade. We don't believe in the sort of nationalism that tries to grow bananas at the North Pole."

Rock Bottom. Holman comes by his internationalism naturally. As a geologist, the first ever to head Standard, Gene Holman takes a global view, compounded of a mixture of business and science. It isn't enough, he believes, to devise new technologies. Technology raises politico-sociological problems which must also be solved. Gene Holman spends his days trying to solve the politico-sociological problems which Standard's new oil technologies have brought to backward lands.

But he is no round-the-clock worker.

Usually he arrives at his office on the 29th floor of Rockefeller Center's RCA Building at 9 a.m. He dislikes paper shuffling so much that his broad, flat-topped desk is almost always clean of everything except a big blotter. At 5 p.m. he usually leaves for home--and he tries not to take any work with him. On the way, he drops in at the University Club for a swim. He feels that a little exercise every day is the reason why he has not missed a day's work in 30 years.

His 15-room Fifth Avenue apartment has an international look about it, with paintings from Hungary, France and Germany, chairs and sofa from Lima, rugs from Egypt, ornate gold-leaf mirrors from Mexico. On weekends, he and his wife, Edith, whom he married while she was a physical-education teacher in Shreveport, La., and their two children, Catherine, 17, and Eugene Jr., 14, go to their 18-acre farm near Greenwich, Conn. There Gene Holman putters around in his garden, trapshoots from his terrace, or has whiskey &water in his trophy house under the stuffed heads of the game that he has shot. He cares so little for night life that he hasn't been in a Manhattan nightclub for two years, says: "I'm the kind of fellow who needs eight hours sleep a night."

"Shot" & "Ma." Gene Holman was pretty well bound to be an oilman. He was born in Texas, raised in the first excitement of its oil boom. His father, James R.

("Dad") Holman, was a Texas ranch hand who had a local reputation as a "hoss traduh." He settled down with his family in Monahans, whose 35 weather-beaten houses marked only a wider place in the road. While Dad Holman kept a livery stable and feed store, his wife ran a boardinghouse grandiloquently called the "Holman Hotel." Young Gene helped around the hotel and attended the one-room country school.

His playmates called him "Shot," in honor of the time he had once misspelled the word in school. Later, he worked as a call-boy on the nearby Texas & Pacific Railway, and punched cows in the summer to earn his way through Simmons College (now Hardin-Simmons University). He played basketball, and ran so many campus organizations that he picked up another nickname, "Ma." Prankish, he liked to set all the alarm clocks in the student dormitory in which he lived for 4 a.m., roll 16-lb. shots down the halls and stairs in the dead of night. The college yearbook, which Gene edited, said of him: "Quiet and un assuming but a living example of influence."

A good student, he showed particular talent for geology, the "new science" which the oil business was just getting interested in. Gene also got interested. He spent a year after graduation studying geology at the University of Texas and then a hitch as a corporal in the U.S. Signal Corps in World War I. He caught the eye of Wallace Pratt, then Standard's top geologist, who hired Gene to work fin its subsidiary, Humble Oil Co. There Holman again impressed the right person--William Stamps Parish, Humble's president. In a short time he was made boss of Humble's Shreveport office. When Holman asked for "instructions," Parish waved a hand and said: "Just run things."

Drill the Wells. He did. He "ran things" so well that Parish made him Humble's chief geologist in 1926, with a free hand to "buy anything you want." It was the chance of a lifetime--if Gene knew his geology well enough to lease the right land. He did--and from this land came oil that helped make Humble the biggest single producer of crude oil in the U.S.

To his knack of smelling out the oil beneath the cracks and domes of the earth, he added the know-how to get it out, rose in Standard like oil in a new field. In 1944, Gene Holman moved into the presidency, now gets $100,000 a year. He took his promotion calmly. On the day he was made president, Mrs. Holman got the news from the excited wife of another Standard official. When Mrs. Holman called Gene, he drawled: "Oh, yes, I meant to tell you about it when I got home."

Sell the Oil. Most of Standard's 112,000 employees have come to regard him as the boss. But Jersey Standard is too big to be a one-man show. No one man could oversee everything. Jersey Standard, which operates in 115 countries, has 245 subsidiaries with their 41 refineries, including the world's second largest at Aruba, 11,000 miles of pipelines and the largest U.S. fleet of private tankers.

Standard, top holding company for this oil empire, produced some 14% of the world's oil last year, grossed some $1,500,000,000 and netted some $180,000,000.

The job of running the empire belongs to Holman, plus the eleven-man board of directors, most of whom came up as Holman did, stratum by stratum. The board chairman is Frank W. Abrams, 57, who started in Standard as a draftsman, came up the refining side. The executive committee of the board meets every day with Holman. It is the gusher which produces the policy on Standard's worldwide problems. It is Holman who refines the policy and distributes it. Actually, most of the day-by-day problems are sensibly solved by subsidiaries on the scene. This is partly due to the Standard dictum: first get efficient and then get big. And it is partly due to the trust-busting days of 1911, when John D. Rockefeller's Jersey Standard octopus had its tentacles cut up into 34 pieces. Though most of the pieces have grown bigger than the old trust, none has garnered a big enough share of the U.S. oil business to raise the scare of monopoly. And now that the Rockefellers have sold out the bulk of their holdings, no individual stock interest is greater than 4%. But Jersey Standard, allergic to the word "octopus," thinks that the more autonomy the subsidiaries have, the less it will hear the word mentioned.

Something for Free. Standard is equally sensitive to the cry of "dollar imperialism." In foreign countries, Standard's subsidiaries work ceaselessly to become a part of the country. They keep their U.S. employees at a minimum, train natives or send them to the U.S. for schooling. Actually, Standard has probably done the best job of any U.S. company in selling free enterprise along with its oil. Nor has it been discouraged by its setbacks. The war cost it an estimated $135,000,000 in damaged properties; the expropriations by Mexico cost it more than $22 million.

And in the Balkans, the oil from Standard's subsidiaries goes to Russia.

In spite of such setbacks, Standard has been able to convince a good part of the world that its brand of free enterprise brings tangible results. That, rather than oil production, is Standard's No. 1 problem in the Middle East. Standard has been a good salesman of U.S. free enterprise in Venezuela. This year, thanks to record spending of $115,000,000 by Standard's Creole Petroleum in new developments, Venezuelans will pocket more wages than ever. And though the leftists still grumble of imperialism, they grudgingly admire Standard's super-efficient operation, its gleaming laboratories, the work camps, schools and hospitals (250,000 patients were treated in them last year). Typical improvement: illiteracy among Creole's 15,000 workers is only 12% compared to about 50% for the whole of Venezuela. Standard puts back into the country much of the profits it takes out. Its uplift is mixed with the dollars & cents knowledge that raising the standard of living of its employees makes better workers out of them.

House of the Lion. In Arabia, the job of raising the wretchedly low standard of living is an Atlantean one. But a start has already been made by Aramco in showing the tangible benefits of free enterprise. At Dhahran and Bahrein, Aramco has erected neat little villages of air-conditioned houses for its U.S. employees, and has also built houses for its Arabian workers.

Many of the workers are also getting their first sight of modern schools and hospitals (non-employees are also treated) and their first taste of many foods. At Al Kharj, surface wells have actually made 3,000 desert acres bloom like the rose in the first of Ibn Saud's irrigation projects, supervised by Aramco. The job of keeping the sheiks placated is not so difficult; their royalties do that. But Aramco, Standard and all the companies in the East know that their fate depends to a great extent on their popularity with the masses. In the complexity of politics, where a speech in London causes a pipeline to be blown up at Haifa, the companies know that they must stand on their own reputations. The best foreign policy is one made on the scene.

Americans call the corner of Arabia they are developing "the land of Wajid Mafi" (the land of plenty of nothing). Almost everything needed for development must be brought in. But the Arabians, whose eyes bulge at the oil companies' riches and who call on the companies for everything from autos to Coca-Cola, refer to Aramco in the words of an old proverb: "In the house of the lion there is always plenty of meat." The job of Standard and its companions in the Middle Eastern adventure will be to see that in the land of nothing there is meat for all.

*So called because members of I.P.C. simply drew a red line around a map taking in most of the old Ottoman Empire. *Jersey and Socony claim that the Red Line Agreement was abrogated when France's Vichy government became an "enemy."

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