excerpted from the book
A Century of War
Anglo-American Oil Politics and
the New World Order
by William Engdahl
Pluto Press, 2004, paperback (original
War in Iraq was about the very basis of America's 'national security,'
of future American power. America's role as the sole hegemon was
the unspoken reason for the war, and for this reason neither of
the major presidential candidates offered an alternative to American
military occupation of the vast oilfields of Mesopotamia.
[After WWII] the combined power of its military dominance and
monetary dominance allowed the United States the enviable luxury
of printing endless paper certificates, its dollars, and giving
them to the rest of the world in exchange for well-engineered
cars, machinery, textiles and every imaginable product. It was
the greatest confidence game the world had ever seen. Americans
bought the imports with more dollar debt, creating an edifice
of dollar debt on which the entire world was dependent. This special
hegemony also allowed the United States to become the world's
largest debtor, to run endless trade imbalances, to inflate its
currency beyond imagination, to create a buildup of private and
public debt unprecedented in world history. So long as other nations
depended on American markets for their trade, and on American
military protection for their national security, the game appeared
endless. Japan's role as 'lender of last resort' to the U.S. was
supplemented at the turn of the century by China. Hundreds of
billions of dollars in Japanese, Chinese and other foreign purchases
of U.S. Treasury debt, U.S. real estate debt, and other assets,
propped up the American economy long after it made any economic
The power of the dollar and the power of the U.S. military had
been uniquely intertwined with one commodity, the basis of the
world economic growth engine, since before the First World War.
That commodity was petroleum.
In 1912, the United States produced more than 63 per cent of the
Why would Britain risk a world war in order to stop the development'
of Germany's industrial economy in 1914? The ultimate reason she
declared war in August 1914 lay fundamentally "in the old
tradition of British policy, through which England grew to great
power status, and through which she sought to remain a great power",
stated German banker Karl Helfferich in 1918. "England's
policy was always constructed against the politically and economically
strongest Continental power," he stressed.
Ever since Germany became the politically
and economically strongest Continental power, did England feel
threatened from Germany more than from any other land in its global
economic position and its naval supremacy. Since that point, the
English-German differences were unbridgeable, and susceptible
to no agreement in any one single question.
Many in the British establishment had determined well before
1914 that war was the only course suitable to bring the European
situation under control. British interests dictated, according
to her balance-of-power logic, a shift from the traditional 'pro-Ottoman
and anti-Russian' alliance strategy of the nineteenth century,
to a pro-Russian and anti-German alliance strategy.
On November 2, 1917, in the darkest days of the Great War, with
Russia's war effort on behalf of the Anglo-French alliance collapsing
under economic chaos and the Bolshevik seizure of power, and with
the might of America not yet fully engaged in Europe as a combatant
on the side of Britain, Britain's foreign secretary, Arthur Balfour,
sent the following letter to Walter Lord Rothschild, representative
of the English Federation of Zionists:
Dear Lord Rothschild, I have much pleasure
in conveying to you, on behalf of His Majesty's Government, the
following declaration of sympathy with Jewish Zionist aspirations
which has been submitted to, and approved by, the Cabinet:
'His Majesty's Government view with favour
the establishment in Palestine of a national home for the Jewish
people, and will use their best endeavours for the achievement
of this object, it being clearly understood that nothing shall
be done which may prejudice the civil and religious rights of
existing non-Jewish communities in Palestine, or the rights and
political status enjoyed by Jews in any other country.' I should
be grateful if you would bring this declaration to the knowledge
of the Zionist Federation. Yours sincerely, Arthur James Balfour.
The letter formed the basis on which a
post-1919 British League of Nations mandate over Palestine was
established under whose guiding hand territorial changes of global
consequence were to be wrought. The almost casual reference to
'existing non-Jewish communities in Palestine' by Balfour and
the cabinet was a reference to the more than 85 per cent of the
population &ho)were Palestinian Arabs; in 1917, less than
1 per cent of the inhabitants of Palestine were Jewish.
It is notable that the letter was an exchange
between two close friends. Both Balfour and Lord Rothschild were
members of an emerging imperialist faction in Britain, which sought
to create an enduring global empire, one based on more sophisticated
methods of social control.
Also notable is the fact that Lord Rothschild
spoke, not as head of any international organization of Jewry,
but rather as a member of the English Federation of Zionists,
whose president at the time was Chaim Weizmann. Rothschild money
had essentially created that organization, and had subsidized
the emigration to Palestine of hundreds of Jews, fleeing Poland
and Russia since 1900, through the Jewish Colonisation Association
of which Lord Rothschild was president for life. Britain was generous
in offering lands far away from her shores, while in the same
period she was far from open-armed in welcoming persecuted Jewish
refugees to her own shores.
But more relevant than the evident hypocrisy
in the Balfour-Rothschild exchange was the British Great Game,
which lay behind the Balfour note. It is not insignificant that
the geographical location for the new British-sponsored Jewish
homeland lay in one of the most strategic areas along the main
artery of the enlarged post-1914 British Empire, in a sensitive
position along the route to India as well as in relation to the
newly won Arab petroleum lands of Ottoman Turkey. The settlement
of a Jewish minority under British protectorate in Palestine,
argued Balfour and others in London, would give London strategic
possibilities of enormous importance. It was, to say the least,
a cynical ploy on the part of Balfour and his circle.
Beginning approximately in the early 1890s, a group of British
elites, primarily from the privileged colleges of Oxford and Cambridge,
formed what was to become the most influential policy network
in Britain over the next half century and more. The group denied
its existence as a formal group, but its footprints can be found
around the establishment of a new journal of empire, the Round
Table, founded in 1910.
The group argued that a more subtle and
efficient system of global empire was required to extend the effective
hegemony of Anglo-Saxon culture over the next century.
... In place of the costly military occupation
of the colonies of the British Empire, they argued for a more
repressive tolerance, calling for the creation of a British 'Commonwealth
of Nations.' Members nations were to be given the illusion of
independence, enabling Britain to reduce the high costs of far-flung
armies of occupation from India to Egypt, and now across Africa
and the Middle East as well. The term 'informal empire' was sometimes
used to describe the shift.
This emerging faction was grouped around
the influential London Times, and included such voices as Foreign
Secretary Albert Lord Grey, historian and member of British secret
intelligence Arnold Toynbee, as well as H.G. Wells, Alfred Lord
Milner of the South Africa project, and the proponent of a new
field termed geopolitics, HJ,. Mackinder of the London School
of Economics. Its principal think tank, which was formed in the
corridors of Versailles in 1919, became the Royal Institute for
International Affairs (Chatham House).
The idea of a Jewish-dominated Palestine,
beholden to England for its tenuous survival, surrounded by a
balkanized of squabbling Arab states, formed part of this group's
[British Round Table Group] concept of a new British Empire.
The Round Table group's grand design was to link England's vast
colonial possessions, from the gold and diamond mines of Cecil
Rhodes and Rothschild's Consolidated Gold Fields in South Africa,
north to Egypt and the vital shipping route through the Suez Canal,
and on through Mesopotamia, Kuwait and Persia into India in the
The British conquest of the German colony
of Tanganyika (German East Africa) in central Africa in 1916,
was not a decisive battle in a war to bring Germany to the peace
table, but rather the completion of a vital link in this chain
of British imperial control, from the Cape of Good Hope to Cairo.
The great power able to control this vast
reach would control the world's most valuable strategic raw materials,
from gold, basis of the international gold standard for world
trade, to petroleum, in 1919 emerging as the energy source of
the modern industrial era.
This remains a geopolitical reality every
bit as much during the early years of the twenty-first century
as it was in 1919. With such control, every nation on earth would
fall under the scepter of the Britannic Empire. Until his death
in 1902, Cecil Rhodes was the prime financial backer of this elite
new 'informal empire' group.
The Boer War (1899-1902) was a project
of the group, financed and personally instigated by Rhodes in
order to secure firm British control of the vast mineral wealth
of the Transvaal, at that time in control of the Boer minority,
who were of Dutch origin. The war itself, in which Winston Churchill
rose to public notice, was precipitated by Rhodes and Alfred Miler,
and others of their circle, in order to bring what was believed
to be the world's richest gold-producing region firmly under British
The Transvaal was the site of the world's
largest gold discovery since the 1848 California Gold Rush, and
its capture was essential to the continued role of London as the
capital of the world's financial system and of its gold standard.
Lord Miler, Jan Smuts and Rhodes were all part of the new empire
faction which, as part of the Great Game, defeated the independent
Boers and created a Union of South Africa.
By 1920, Britain had succeeded in establishing
firm control over all of southern Africa, including the former
German South West Africa, as well as the vast newly discovered
petroleum wealth of the former Ottoman Empire, by means of her
military presence, conflicting promises and the establishment
of a British protectorate over Palestine as a new Jewish homeland.
Britain emerged from the deliberations of the 1919 Versailles
conference in most apparent respects the dominant superpower in
the world. One small detail, pushed to the background during the
actual conduct of war between 1914 and 1918, however, was that
,is victory was secured on borrowed money.
American savings amounting to billions
of dollars, organized by the Wall Street house of J.P. Morgan
& Co., were a decisive component of the British victory. At
the time of the Versailles peace conference in 1919, Britain owed
the United States the staggering sum of $4.7 billion in war debts,
while its own domestic economy was in a deep postwar depression,
its industry in shambles, and domestic price inflation 300 per
cent higher after the four years of war. The British national
debt had increased more than ninefold, some 924 per cent between
1913 and the end of the war in 1918, to the then-enormous sum
of £7.4 billion.
If Britain emerged as the territorial
victor of Versailles, the United States, or at least certain powerful
international banking and industrial interests, emerged in the
early 1920s with the clear idea that they, and no longer Britain,
were now the most powerful world economic power.
By January 1915, four months into the Great War [WWI], the British
government had named a private New York banking house, J.P. Morgan
& Co., to be its sole purchasing agent for all war supplies
from the United States. Morgan was designated Britain's exclusive
financial agent for all British war lending from private U.S.
banks as well. In a short time, Britain in turn became the guarantor
for all such war purchases and loans by the French, Italians and
Russians in the war against the German-Austrian Continental powers.
It was a giant credit pyramid on top of which sat the influential
American house of Morgan. Never had a single banking house gambled
on such high and risky global stakes.
The British Empire and Britain herself
were virtually bankrupt at the outbreak of war in 1914 ... But
British financial officials were confident of the backing of the
United States and the Anglophile circles of New York banking.
The role of Morgan and the New York financial
community was of supreme importance to the war [WWI] efforts of
the Entente powers. Under an exclusive arrangement, purchase of
all American munitions and war materials, as well as necessary
grains and food supplies for Britain, France and the other Allied
powers in Europe, was funneled through the house of Morgan. Morgan
also utilized its London affiliate, Morgan Grenfell & Co.,
whose senior partner, E.G. Grenfell, was a director of the Bank
of England, and an intimate friend of Chancellor of the Exchequer
Lloyd George. Morgan's Paris office, Morgan Harjes & Co.,
completed the essential Entente circle. Such power in the hands
of a single investment house, given the scale of the British war
requirements, was without precedent.
Morgan, with its franchise as sole purchasing
agent for the entire Entente group, became virtual arbiter over
the future of the U.S. industrial and agricultural export economy.
Morgan decided who would, or would not, be favored with very sizeable
and highly profitable export orders for the European war effort
Firms such as DuPont Chemicals grew into
multinational giants as a result of their privileged ties to Morgan.
Remington and Winchester arms companies were also favored Morgan
'friends.' Major grain trading companies grew up in the Midwest
as well, to feed Morgan's European clients. The relations were
incestuous, as most of the Morgan loans raised privately for the
British and French were raised through the corporate resources
of DuPont and friends, in return for a guarantee of the huge European
The position of this private banking house
was all the more remarkable since Woodrow Wilson's White House
at this time was professing strict neutrality. But that neutrality
became a thinly veiled fraud, as billions of dollars of vital
war supplies and credits flowed to the British side over the next
years. As purchasing agent alone, Morgan took a 2 per cent commission
on the net price of all goods shipped. The business grew so large
that Morgan took in E.R. Stettinius, later to become Secretary
of State, as a senior Morgan partner to handle war purchases for
what was becoming a colossal operation.
All of this activity was in strict violation
of international law regarding a neutral, which forbade allowing
belligerents to build supply bases in neutral countries. Morgan
himself was later charged in a U.S. Senate inquiry with having
made excess profits, and with having directed purchases to firms
in which Morgan partners had an interest. By 1917, the British
War Office had placed purchase orders totaling more than $20,000,000,000
through the house of Morgan. This is not to mention the direct
loans raised by Britain, France and others through Morgan and
his New York financial syndicate.
In 1915, U.S. Treasury Secretary McAdoo
convinced a nervous President Wilson that such private American
loans were necessary in order to 'maintain American exports.'
The flows continued. By 1915, American exports to Britain had
increased 68 per cent from the level of 1913. By the eve of the
American entry into the war in 1917 on the side of Britain, the
Entente powers had raised some $1,250,000,000 through the private
efforts of Morgan, Citibank, and the other major New York investment
houses, a staggering sum in that day. Morgan's relation to the
financial powers of the newly created New York Federal Reserve
Bank, under the control of former J.P. Morgan banker Governor
Benjamin Strong, was essential to the success of the private financial
mobilization. Even so, the risky enterprise several times threatened
to break down.
The threat in January 1917 of British
and French collapse, after Russia fell back in exhaustion from
the war effort, provided more than enough incentive for Morgan
and his New York financial syndicate to mobilize their combined
propaganda and other resources. They did this with the careful
assistance of the highest levels of British secret intelligence
and friendly American press outlets, when it became clear that
nothing else but American entry into the war would turn the looming
disaster in Europe facing J.P. Morgan and Morgan's European clients.
They organized that America would enter the European war on the
'right' side-in support of British interests. Morgan & Co.,
and Britain as well, faced complete financial ruin by early 1917
if they did not succeed.
Fortunately for Morgan and for London,
German General Erich Ludendorff provided the basis for the Anglo-Morgan
interests to avert financial ruin. In February 1917, Germany declared
unrestricted submarine warfare, in an attempt to cut off the supply
of American oil to the Allies, among other things. The sinking
of American tankers was the excuse needed for the Morgan-controlled
press to demand an end to American neutrality.
Once the Congress of the United States
declared war against Germany, on April 2, 1917, the New York financial
community, with the backing of the New York Federal Reserve's
Governor Strong, launched the most ambitious financial operation
Had Woodrow Wilson not been persuaded
to sign the Federal Reserve Act into law on December 23, 1913,
it is questionable whether the United States would ever have committed
the resources it did to a war in Europe. Without the new law,
it is also doubtful whether Britain would have launched her bold
designs against the rival empires of the Continent in August 1914.
The house of Morgan and the powerful international financial interests
of the City of London played the critical role in shaping a U.S.
Federal Reserve System in the months just before outbreak of the
In stark contrast to the German experience,
with the Reichstag severely restricting financial speculation
in the 1890s, the group of interests which shaped the Federal
Reserve Act in 1913 were dominated by the elite circles of the
house of Morgan, for the benefit of New York's emerging role as
an international capital center. New York bankers were beginning
to adopt the style of British imperial finance.
In August 1917, the Federal Reserve mobilized
sales of Liberty Loans and bonds, to finance U.S. government war
costs. Bonds of the U.S. Treasury sold to private investors in
this great 'patriotic' mobilization were sold through Morgan and
the other leading New York investment houses. The total of these
Liberty Loans and bonds had reached the breathtaking sum of more
by June 30, 1919. Never before in history had such sums been mobilized
in so short a time. Morgan's commission on this business was handsome
By 1920, Morgan partner Thomas W. Lamont
noted with obvious satisfaction that, as a result of the four
years of war and global devastation, 'the national debts of the
world have increased by $210,000,000,000 or about 475 per cent
in the last six years, and as a natural consequence, the variety
of government bonds and the number of investors in them have been
greatly multiplied.' Lamont added, 'These results have made themselves
manifest in all the investment markets of the world; but nowhere,
perhaps, in greater measure than in the United States.
Once the house of Morgan and the allied
New York investment community had tasted playing the role of the
world's leading financial power, they seemed willing to do anything
to keep their grip on that power.
Morgan's men, including Thomas Lamont,
as well as fellow Wall Street crony Bernard Baruch, sat at the
table during the closed-door Versailles sessions which drew up
the 'bill' for the Great War. They jointly established a special
Commission for Reparations, to be permanently established in order
to devise the precise amount and means for Germany to repay its
war damages to the Entente powers.
And, being good conservative bankers,
Morgan and friends could not let the war loans of the Allied powers
simply be forgotten in the euphoria of peace, despite the assumptions
of A.J. Balfour and others in the British government that such
magnanimity would follow. Morgan & Co. had quietly shifted
their private British government loans over to the general debt
of the U.S. Treasury as soon as the United States officially entered
the war, in effect making the British debts the burden of the
American taxpayers after the war. Despite this, Morgan interests
made sure they had a major stake in the postwar Versailles reparations
financing. As the U.S. war debt grew beyond anything known before
in her history, the distinction between Morgan's interests and
that of the government became blurred. The U.S. government increasingly
made itself simply a useful instrument for the extension of the
new power of New York's international bankers.
During the course of the Versailles talks, a new institution of
Anglo-American coordination in strategic affairs was formed. Lionel
Curtis, a longtime member of the secretive Round Table or 'new
empire' circle of Balfour, Milner and others, proposed organizing
a Royal Institute of International Affairs. The proposal was made
on May 30, 1919) in the midst of the Versailles deliberations,
at a private gathering at the Hotel Majestic. Philip Kerr (Lord
Lothian), Lord Robert Cecil and other members of the Round Table
circle attended that formative meeting. The first nominal mission
of the new institute would be to write the 'official' history
of the Versailles peace conference. The Royal Institute received
an initial endowment of £2,000 from Thomas Lamont of J.P.
Morgan. Historian Arnold J. Toynbee was the institute's first
paid staff member.
The same circle at Versailles also decided
to establish an American branch of the London Institute, to be
named the New York Council on Foreign Relations, so as to obscure
its close British ties. The New York Council was initially composed
almost entirely of the Morgan men, financed by Morgan money. It
was hoped that this tie would serve to weld American interests
into harmony with England's after Versailles. This was not to
occur for some years, however.
It took the entirety of the 1920s, in often bitter, almost military,
conflicts over war-debt repayment terms, rubber agreements, naval
accords, the parity of a new gold standard and most significantly,
control of untapped oil regions of the world, before the Anglo-American
condominium emerged in its present form, and before the policy
harmony between the circles of Morgan's Council on Foreign Relations
and London's Royal Institute could take hold. In 1922, a Wall
Street lawyer John Foster Dulles, a key participant at the Versailles
talks, who had authored the Treaty's Article 231, the infamous
German 'war guilt' clause, wrote in the Council on Foreign Affairs
magazine Foreign Affairs about the thinking of Morgan and his
fellow New York bankers. It was quite simple; he stated: "There
cannot be a war without losses. The resulting losses are measured
by debts. The debt assumes varying forms - internal, reparations,
Inter-allied, etc. - and is generally represented by bonds or
Dulles calculated that Britain and the
other Allied powers owed the United States $12,500,000,000 at
5 per cent interest. Britain, France, and the other Entente countries,
in turn, were owed by Germany, according to the Versailles demands,
the sum of $33,000,000,000. The figures were beyond the scale
of imagination at that time.
The American Congress refused to sign the Versailles Treaty and
the included League of Nations apparatus to enforce it, but Morgan
and the New York Federal Reserve axis proceeded to dominate the
financial destiny of Europe in the postwar period. The combined
burden of the Versailles German reparations debt, as well as the
inter-Allied debts of the respective 'victors'-the war debts of
France, Italy and Belgium to Britain, and in turn, of Britain
to the United States-overwhelmed world finance and monetary policy
from 1919 through to the October 1929 Wall Street crash. The entire
pyramid of post-Versailles international finance was propped up
on the edifice of the punitive war-debt structure. Morgan and
the newly powerful New York banks refused to compromise on the
The scale of the combined war debt burden
of Europe was so large that its annual debt service demands on
the world financial system were greater than the entire annual
foreign trade of the United States during the 1920s. New York's
international banking community redirected world capital flows
to the service of this staggering debt burden. The debt servicing
was carried out at the expense of the desperately needed investment
in rebuilding and modernizing the war-torn economies of Europe.
J.P. Morgan & Co. enjoyed the competitive
advantages provided by a devastated European economy, in which
New York credit could dictate the terms. Profits from the new
European lending were far greater than gains from investment in
the postwar U.S. economic expansion. New York financial interests
centered around Morgan and the New York Federal Reserve under
Morgan's Benjamin Strong deliberately kept U.S. interest rates
low. As a consequence, American loans flooded postwar Europe and
the rest of the world where capital earned a higher risk premium
than at home, while London and a new Bank of England governor,
Montagu Norman, looked on nervously at the American financial
incursion into their traditional markets.
The ink on the Versailles treaty had barely dried when the powerful
American oil interests of the Rockefeller Standard Oil companies
realized they had been skillfully cut out of the spoils of war
by their British alliance partners. The newly carved Middle East
boundaries, as well as the markets of postwar Europe, were dominated
by British government interests through Britain's covert ownership
of Royal Dutch Shell and the Anglo-Persian Oil Company.
... the Anglo-American power struggle for primacy in world finance
and economic affairs had been resolved. The oil wars, which had
shaken the world for more than a decade, were finally resolved
in a 'ceasefire,' which resulted in the creation of an enormously
powerful Anglo-American oil cartel, later dubbed the 'Seven Sisters.'
The peace agreement was formalized in 1927, at Achnacarry, the
Scottish castle of Shell's Sir Henri Deterding. John Cadman, representing
the British government's Anglo-Persian Oil Co. (British Petroleum),
and Walter Teagle, president of Rockefeller's Standard Oil of
New Jersey (Exxon), gathered under the cover of a grouse shoot
to conclude the most powerful economic cartel in modern history.
The Seven Sisters were effectively one.
Their secret pact was formalized as the
'As Is' agreement of 1928, or the Achnacarry agreement. British
and American oil majors agreed to accept the existing market divisions
and shares, to set a secret world cartel price, and to end the
destructive competition and price wars of the previous decade.
The respective governments merely ratified this private accord
the same year in what became the Red Line agreement. Since this
time, with minor interruption, the Anglo-American grip over the
world's oil reserves has been hegemonic.
... By 1932, all seven major companies
in the Anglo-American sphere - Esso (Standard of N.J.), Mobil
(Standard of N.Y.), Gulf Oil, Texaco, Standard of California (Chevron),
as well as Royal Dutch Shell and Anglo-Persian Oil Co. (British
Petroleum) - were part of the Achnacarry cartel.
The unstable international monetary order imposed after Versailles
by London and New York bankers on a defeated central Europe came
to an abrupt, if predictable, end in 1929. Montagu Norman, then
the world's most influential central banker as governor of the
Bank of England, precipitated the crash of the Wall Street stock
market in October 1929. Norman had asked the governor of the New
York Federal Reserve Bank, George Harrison, to raise U.S. interest
rate levels. Harrison complied, and the most dramatic financial
and economic collapse in U.S. history ensued in the following
J.P. Morgan bankers had already proved to themselves the usefulness
of radical top-dawn political solutions to ensure repayment of
bank loans, when they gave foreign credit to the fascist regime
of Italian strongman Benito Mussolini. In November 1925, Italian
Finance Minister Volpi di Misurata announced that the Mussolini
government had reached an agreement on repaying the Versailles
war debts of Italy to Britain and the United States. One week
later, J.P. Morgan & Co., financial agents of the Mussolini
government in the United States, announced a crucial $100 million
loan to Italy to 'stabilize the lira.'
In reality, Morgan had decided to stabilize
Mussolini's fascist regime. On the urging of J.P. Morgan &
Co. and Montagu Norman, governor of the Bank of England, Volpi
di Misurata established in 1926 a single Italian central bank,
the Bank of Italy, to control national monetary policy and further
ensure repayment of foreign debts. Mussolini had shown himself
to be the ideal strongman to discipline Italian labor unions,
drive down wages and enforce sufficient austerity to guarantee
foreign bank lending, or so thought Morgan's people in New York.
The man who controlled U.S. monetary policy
at the time, former Morgan banker Benjamin Strong, an intimate
personal friend and collaborator of Britain's Montagu Norman,
met with Volpi and the Bank of Italy governor, Bonaldo Stringher,
to confirm the final details of the Italian 'stabilization' program.
From Poland to Romania during the 1920s, the same combination
of powerful persons - J.P. Morgan & Co., Montagu Norman and
the New York Federal Reserve - organized effective economic control
over most countries of Continental Europe, under the pretext of
the establishment of 'creditworthy' national policies - an informal
precursor of the role of the International monetary Fund in the
A Century of War