Definitions

laid it line

Red Line Agreement

The Red Line Agreement is the name given to an agreement signed by partners in the Turkish Petroleum Company (TPC) on July 31, 1928. The aim of the agreement was to formalize the corporate structure of TPC and bind all partners to a self-denial clause that prohibited any of its shareholders from independently seeking oil interests in the ex-Ottoman territory. It marked the creation of an oil monopoly, or cartel, of immense influence, spanning a vast territory. The cartel preceded easily by three decades the birth of another cartel, OPEC, which was formed in 1960.

It is said that Calouste Gulbenkian took out a large map, laid it on the table and drew with a thick red pencil an outline demarking the boundaries of the area where the self-denial clause would be in effect. He said that was the boundary of the Ottoman Empire he knew in 1914. He should know, he added, because he was born in it and lived in it. The other partners looked on attentively and did not object. They had already anticipated such a boundary. (According to some accounts, the “red line” was drawn not by Gulbenkian but by the French.) Excepting Gulbenkian, the partners were the supermajors of today. Within the “red line” was included the entire ex-Ottoman territory in the Middle East, including the Arabian Peninsula (plus Turkey) but excluding Kuwait. Kuwait was excluded, as it was meant to be a preserve for the British.

Years later, Walter C. Teagle of Standard Oil of New Jersey remarked that the agreement was “a damn bad move.”

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