Oil Exploration, Diplomacy, and Security in the Early Cold War

The Enemy Underground

Roberto Cantoni

• Publisher: Routledge
• Year: 2017
• Topic: History
• eBook ISBN:
  9781315531519
• Subtopic: 20th Century History
• Index: History

The importance of oil for national military-industrial complexes appeared more clearly than ever in the Cold War. This volume argues that the confidential acquisition of geoscientific knowledge was paramount for states, not only to provide for their own energy needs, but also to buttress national economic and geostrategic interests and protect energy security.

By investigating the postwar rebuilding and expansion of French and Italian oil industries from the second half of the 1940s to the early 1960s, this book shows how successive administrations in those countries devised strategies of oil exploration and transport, aiming at achieving a higher degree of energy autonomy and setting up powerful oil agencies that could implement those strategies. However, both within and outside their national territories, these two European countries had to confront the new Cold War balances and the interests of the two superpowers.

1 The Allied Shadow

International Pressures and the Italian Oil Industry

The Italian Government’s right to enter directly into the oil business of course is recognized, but you should point out the disadvantages of that course particularly in the situation that will prevail in Italy after the war.

—Joseph Grew to Alexander Kirk, 22 March 1945¹

I believe we have every right to attempt openly to influence legislation where American interests are at stake […].

—John Jones to Elbridge Durbrow, 16 September 1954²

In tatters. No other expression could better define the state of Italian industry by the end of the war. The oil sector was no exception. British and American properties confiscated by the Fascist regime and handed over to the Italian public oil agency, the General Italian Oil Company (Azienda generale italiana petroli, AGIP), had been damaged to varying degrees or completely destroyed, as had most of AGIP’s plants. The majority of reservoirs were out of use, as were most fuel pumps. The vessels constituting the small tanker fleet had been lost or confiscated. Railroad tankers and exploration materials in the center and south of the country were lost, as the Allies had occupied these areas. AGIP’s assets in Romania and Italy’s African colonies had been requisitioned by the Nazis during the war, or by the Allies afterwards.³ On top of all this, the company’s exploration personnel had been halved, drilling equipment had been abandoned in Greece, Hungary, and Croatia—where spot exploration had been carried out during wartime—and only in northern Italy could geological, geophysical, and drilling operations be carried out.⁴

Commenting on Italy’s postwar situation to the State Department in 1945, Alcide De Gasperi, the Italian Foreign Minister, and at a later stage Alberto Tarchiani, the Italian Ambassador in Washington, wrote in dramatic tones: “We have millions of people without shelter and clothing; entire towns destroyed; the greater part of our industries paralyzed by the lack of raw materials and fuel; the transportation system completely disorganized.”⁵

By February 1945, over half the peninsula was under Allied control. The rest of the country was under Nazi occupation and the authority of the newly established Italian Social Republic (Repubblica Sociale Italiana), a puppet state led by former Italian Prime Minister, Benito Mussolini. With the aim of reconquering the remaining parts of the country, the Allied command devised a long-term strategy for oil matters. The instructions given by US Acting Secretary of State, Joseph Grew, to the US Ambassador in Rome, Alexander Kirk, and quoted at the beginning of this chapter, referred to aspects of a more extended plan, intended both to establish a US-like economic system in Italy dedicated to the free market economy, and to take control of potential resources hidden in the subsurface, in the name of Western security. Such a strategy would allow British and American oil companies to re-establish their dominant position in the Italian oil market, as had been the case until the advent of Fascism.

In this chapter I demonstrate that, while claiming to be assisting Italy on the path to recovery, Allied officials were effectively establishing a scheme to gain control of the Italian oil market. I will show that geoscientific intelligence played a key role in the struggle for control of oil, and that major players in this game of knowledge production sought to appropriate, distribute, conceal, and manage this information according to conflicting agendas, causing tensions of different degrees between Italian and Anglo-American agencies and officers. I then discuss the role of AGIP technicians and executives—especially that of the company’s Vice-President, Enrico Mattei (Figure 1.1)—and Italian policymakers in responding to the Allied plan by challenging US influence, promoting a change of technopolitical regime in the administration of the oil business, and empowering the exploration sector with a greater degree of autonomy. In developing my argument, I emphasize the importance of gaining access to restricted geoscientific information, as well as securing land concessions to prospect.

Figure 1.1 Enrico Mattei (1906–1962).

Source: Courtesy of ENI’s Historical Archive, Pomezia.

Italian Oil Interests and Exploration Before and During the War

With the Allied occupation of southern and central Italy, industrial plants that had belonged to AGIP came under Anglo-American control. This was more a restitution than a requisition, as a number of these facilities had belonged to British and American concerns before being nationalized by the Fascist state. Early postwar management of requisitioned plants was carried out by a new structure, established by Allied Command in the spring of 1944: the Italian Petroleum Committee (Comitato Italiano Petroli, CIP). The Committee was administered by representatives of the newly constituted Italian Southern Kingdom, of the Allied occupying government, and of oil companies. These included Italian bodies such as AGIP, the National Agency for Fuel Hydrogenation (Azienda nazionale idrogenazione combustibili, ANIC)—a subsidiary of the private chemical company, Montecatini—and the Petrolea company run by the car manufacturer, FIAT. Also included, however, were the international oil majors active in Italy: in order of importance, American Standard Oil of New Jersey (SONJ), Anglo-Dutch Royal Dutch Shell, and American Standard Oil of New York-Vacuum Oil (SOCONY).

The CIP was initially to supply oil for Allied civil and military operations. The Committee’s headquarters took over AGIP’s offices and staff in Rome, since AGIP’s headquarters had been temporarily moved to Milan.⁶ Throughout its existence, the Committee was to be dominated by officials of the Allied governments and the two largest global oil companies, with AGIP enjoying very little decision-making power. The CIP soon extended its activities beyond its original functions, to the point of exerting almost absolute control over oil and gas distribution in the country until 1948.⁷

An intended effect of these circumstances was to prevent AGIP from autonomously planning the recovery of Italy’s oil production, especially since the agency’s wartime initiatives had striven to limit the influence of the oil majors. Allied dominance over the CIP was intended to ensure that this would not happen again. Indeed, although Allied plans indicated that the CIP would treat all the companies operating in Italy equally, the Committee actually laid the groundwork—as affirmed by US State Secretary, James Byrnes, to Kirk in August 1945—for “a fair share of the total business” to be reserved for American interests. The Committee would be dissolved when Anglo-American domination of the Italian market was restored, thus taking the national oil market back to the situation that had existed prior to Fascism.⁸

Before the constitution of AGIP, foreign oil companies had ruled the Italian oil market. Founded in 1926 by a consortium largely controlled by public administrators, AGIP was established to minimize the influence of British and American oil firms, in order to avoid threats to national oil security—embargoes or boycotts—in the event of war. At the time of AGIP’s foundation, most crude oil imported by Italy came from the Italian-American Oil Company (Società italo-americana pel petrolio, SIAP), a SONJ affiliate, and from the Nafta Public Limited Company (Società anonima Nafta), a Shell affiliate. The former owned numerous oil and lubricant companies, as well as refineries and a solid distribution network, while the latter controlled a refinery, oil, and lubricant factories. SOCONY also owned a refinery, and operated in lubricant transportation and sale.⁹

Among these large companies only SONJ was involved in oil exploration in Italy, through another affiliate, the Italian Petroleum Company (Società petrolifera d’Italia, SPI), active in the Po Valley in northern Italy (Figure 1.2). The creation of AGIP as a consequence of the Fascist regime’s autarchic policies, intended to ensure Italy’s economic self-sufficiency, challenged foreign interests, and resulted in a system of regulations for protecting national enterprises. However, in terms of exploration results, these policies did not live up to expectations.¹⁰

Exploration methods based on physical measurement of the earth’s properties had been introduced in the very first years of AGIP’s existence. Gravimetry—the measurement of anomalies in the terrestrial gravitational field with respect to an area’s average—had first been employed, with encouraging results, in the Po Valley. But the scarcity of resources available to the Italian company, and the difficulties in finding adequately trained staff, had limited its operations considerably. Gravimetry, as business historian Daniele Pozzi has noted, soon revealed its inadequacy for a thorough exploration of the Po Valley. The reservoirs that would later turn out to be the most favorable were invisible to this technique, which was unable to differentiate them from the surrounding geological layers.¹¹

Figure 1.2 The Po Valley (shadowed).

Source: Wikimedia Commons.

The introduction at AGIP of German instruments for seismic prospecting, a technique for estimating the properties of the earth’s subsurface from reflected and refracted seismic waves, together with AGIP’s manufacture of its own equipment based on German models, prompted the company to focus on seismology.¹² Initially experimented during World War I by the French, British and Germans to locate enemy artillery, seismology expanded over the following decade into seismic exploration for hydrocarbons. Blasts produced by dynamite charges buried in the ground emitted seismic waves that interacted with geological layers. Reflected or refracted waves were then recorded by seismographs, arranged in log charts and interpreted, thus giving information on the underlying geological structures.

However, while the Germans were still experimenting with this new procedure in the mid-1930s, the American geophysical industry appeared to be at a more mature stage of development. In 1936, AGIP geophysicist Tiziano Rocco had already urged his company to acquire US technology, and in the same year the Italian-American geophysicist and conservative political activist, Henry Salvatori, founder and president of the US-based Western Geophysical Company (WGC), visited AGIP’s headquarters. In 1938, during an AGIP mission to the US, Rocco and his fellow geologist, Tiziano Vercelli, managed to acquire seismic reflection instrumentation created by WGC, as well as to hire one of WGC’s crews. The crew was sent to Italy in mid-1940.¹³

Once in Italy, WGC carried out an exploration survey in the area of Lodi, near Milan, and began outlining some promising geological structures in the summer of 1940. However, the team had to abandon Italy in October, as war broke out, leaving AGIP all its seismic equipment. Thanks to the training received by WGC technicians during the survey, AGIP geophysicists were able to use their ‘tacit knowledge’ and equipment in an intense wartime exploration program. As a result, by the end of hostilities, Italian technicians were aware of the potential of the Po Valley for oil and gas, and their prolonged activity there in comparison with WGC enabled them to collect more detailed information than that possessed by American geophysicists.¹⁴ Yet these key gas fields were yet to be revealed.

In 1944, AGIP made a further gas discovery in the Po Valley at Caviaga, but the gas field was not put into operation to avoid the Nazis taking control of it. Marcello Colitti, a former executive of the National Hydrocarbon Authority (Ente nazionale idocarburi, ENI)—successor to AGIP—has argued that data on the Caviaga gas field were probably disseminated widely. It is likely that besides WGC, SPI—whose director had been in close contact with an AGIP executive—as well as military intelligence, Italian partisan fighters, and Allied officials, had informed the Allied commission in Italy and the American intelligence center—the Swiss-based Office of Strategic Services—about the findings.¹⁵

In the 1930s and early 1940s, AGIP had then extended its activities to the refining and hydrocarbon transportation sectors, through the acquisition of a refinery near Venice, the foundation of ANIC, with Montecatini, to obtain oil substitutes by hydrogenating coal—consistent with Fascist autarchy plans—and the subsequent construction of two refineries for ANIC’s use. In order to manage the construction of an Italian gas pipeline network, a dedicated company, the National Company for Methane pipelines (Società nazionale metanodotti, SNAM), had also been established. From this picture, we can see that, although the power of Italian industry in the country’s oil sector was not comparable to its Anglo-American counterpart, it had been steadily, albeit slowly, increasing.¹⁶

AGIP pursued a fairly lively policy of exploration during it...

Table of contents

• Cover Page
• Half Title
• Title Page
• Contents
• List of Figures
• Acknowledgments
• List of Acronyms and Archive Codes
• Introduction
• 1 The Allied Shadow: International Pressures and the Italian Oil Industry
• 2 From Iraq to Africa: The Quest for French Energy
• 3 Oil Diplomacy in Wartime Algeria
• 4 The Midstream Shift
• 5 Transnational Counterattack Against Soviet Oil Plans
• Conclusion
• Bibliography
• Index