16 Jun The Genesis of Royal Dutch Shell – Part 1 of 2
Baku
In the 1880s the Rothschilds and Nobels were losing their battle with John D Rockefeller for the kerosene market in Europe. Their unlikely saviour was a Jewish merchant from the East End of London. Marcus Samuel transformed the petroleum industry, persuaded the Royal Navy to convert from coal to fuel oil in time for WW1 and, with Henri Deterding, founded Royal Dutch Shell in 1908.
Our story begins in 1873 when Robert Nobel made the 3,000 km journey south from Saint Petersburg to Baku on the western shore of the Caspian Sea. His brother, Ludvig, had given him 25,000 roubles (US$350,000 today) to buy Russian Walnut to make stocks for the rifles he was manufacturing for the Imperial Russian Army. The last stage of the journey was by steamer from Astrakhan on the Caspian’s north shore. As they cruised across its tranquil waters, Robert was befriended by the Dutch captain who regaled him with stories of the oil boom engulfing their destination.
Marco Polo had arrived in Baku on his way to China 600 years earlier. He observed oil being collected from seeps and noted that apart from providing excellent illumination it was efficacious in the treatment of skin diseases, particularly mange on camels. As we will see later, the story of oil is very much that of its transportation, and Marco Polo reported that up to 200 camel bales of oil were shipped from Baku daily. These bales were made from the skins of Caspian seals and carried approximately 2½ barrels each.
As the industry developed, producers started digging storage pits, some up to 25 m deep, which they lined with timber. But the real transformation occurred in the early 1870s with the introduction of wooden derricks from Titusville, Pennsylvania and Czar Alexander II’s sale by auction of oil leases over 3,348 acres of crown land. This precipitated the construction of around 20 oil refineries in the struggle to quench Russia’s thirst for kerosene, fast outstripping that for vodka.
It just so happened that Robert Nobel’s new best friend, the Dutch captain, owned one of these refineries, and even before the flares illuminating the night sky over Baku heralded journey’s end, Robert had bought it with his brother’s 25,000 roubles. Normally a story of this nature would end badly, but Robert was an experienced chemist and within three years had modernised the refinery and was successfully marketing his kerosene as far north as Saint Petersburg, where it was considered superior to the product imported from America.
Transportation was tiresome. The kerosene was shipped in wooden barrels (each approximately 160 litres) from Baku across the Caspian to Astrakhan. From there they went up the Volga on barges to various railheads, such as Volgograd and Nizhny Novgorod, for local and onward distribution. But the Nobels were nothing if not inventive. Ludvig moved to Baku when he realised his brother was on to something and by 1878 had designed the Zoroaster, the world’s first tanker ship. It was 180′ long by 35′ wide and carried 240 tonnes of oil in bulk tanks incorporated into the hull. It was constructed in a Swedish yard and her maiden voyage took her through the Baltic, down the Volga and into the Caspian.
By 1879, when the brothers incorporated Branobel, they had eight tankers modelled on the Zoroaster and had exhausted the Russian market. Meanwhile Baku was awash with oil stored in any hollow that would hold it. Finding markets outside Russia was imperative. The Volga/Baltic route was unwieldy, expensive and icebound for three months of the year. The answer was a 500 km railroad to T’bilisi, which already had a rail connection to Batumi on the Black Sea. In 1879 a franchise to build the new section was issued to BNITO, a company owned by two other Baku oil entrepreneurs, AA Bunge and SS Palashkovsky. The Transcaucasus railroad was completed four years later but not before its owners had been forced to borrow heavily from the Paris Rothschilds. Its completion unleashed an oil boom on the Black Sea. Storage tanks and refineries covered the Batumi foreshore, and in 1885 Branobel’s 1,700-tonne tanker ship, Sviet, caused a minor sensation when she unloaded the first shipment of Russian kerosene in London. The euphoria was short lived, however. Ludwig and Robert had stirred a hornet’s nest, and the hornet was John D Rockefeller.
John D Rockefeller
Rockefeller was born in New York in 1839. He trained as an accountant and in 1857 moved to Cleveland, Ohio, where he founded a general trading company, Clark and Rockefeller, in partnership with Englishman Maurice Clark. Wasn’t it fortunate Cleveland was barely a stone’s throw from Titusville, Pennsylvania, where Edwin L Drake made America’s first oil discovery two years later? By 1862, with much of the oil from Titusville passing through Cleveland, it was difficult for a trader not to take an interest. As it happened, a flour miller from Titusville was a Clark and Rockefeller customer and had an oil well on the side. Rockefeller decided to pay a visit. The miller agreed to provide as much oil as he wanted, and Rockefeller accepted his invitation to inspect the well. They went as far as they could on horseback but had to walk the last half mile. This included negotiating a gang plank across a bog full of oil sludge. It was icy and Rockefeller slipped and fell in up to the waist. A new suit later, he was in the oil business.
It was a roller coaster ride. Production in the Titusville oilfields grew from 2,000 barrels in 1859, to four million, ten years later. During that time the price oscillated between $16 and 50c a barrel. This was anathema to Rockefeller. He methodically studied the oilfields as only an accountant can and concluded the industry was far too fragmented and needed consolidation. He set about buying every refinery he could and, as he expanded, negotiated mates’ rates with railroad operators. By 1866, aged 27, he was widely recognised as a major player. Cornelius Vanderbilt, who had sold all his ships just before the Civil War and successfully invested everything to become the #1 rail baron and world’s richest man, invited Rockefeller to New York for a chat. In the event, he agreed to cart Rockefeller’s oil at a 30% discount. The Standard Oil Company was incorporated in 1870 and by the end of the 1880s was refining 80% of the world’s oil. Rockefeller owned 27% and was richer than Cornelius Vanderbilt.
The arrival of the Sviet in London was a slap in the face to Standard Oil. Although the company had not been responsible for the first cargo of kerosene from New York in 1861, it had established a monopoly soon afterwards. So, it did what it always did when competition raised its ugly head. It slashed prices locally and raised them in other markets to compensate. The Nobels had their Russian market, so survived, but Batumi was devastated and traffic on the Transcaucasus railway ground to a halt. Bunge and Palashkovsky could no longer service their debt, so BNITO, including the railway, its production assets and refineries, was taken over by the Rothschilds. They had deep pockets, so were able to hold on and sell some of their kerosene in Russia, and in an uneasy truce with Rockefeller managed to sell some in London. But by 1890 the surpluses in Baku demanded a new market. The Rothschilds’ agent in London, Shady Lane, knew a trader in the East End with close ties to the Orient. Enter Marcus Samuel, our hero.
Marcus Samuel
Marcus Samuel was born in Houndsditch in the shadow of the Tower of London in 1853. His father, Marcus Snr, a Jewish trader, was known as a shell merchant since one of his most successful business lines was supplying seaside holiday towns with seashell-decorated curios. He sold seashells on the seashore. But that was just the start of it. He had well-established contacts with Scottish trading houses in the Far East, and other interests included importing spices, tea and silk, and exporting manufactured goods and machinery. So, his children were educated well. Marcus Jnr finished his schooling in Brussels and Paris and at 16 joined M Samuel & Co as a ledger clerk. He applied himself diligently and when his father died in 1870, he, together with his younger brother Samuel, inherited the company as a well-established concern.
Three years later, aged 20, Marcus embarked on a tour of the Far East that saw him mature from boy to man and from ledger clerk to businessman with the nose for a deal. From London he travelled east via the Suez Canal, opened just four years earlier. From Colombo through all stops east to Yokohama, he personalised relationships with his father’s agents and evolved a deep understanding of the endless opportunities for two-way trade between England and the Orient. After all, the Orient was in favour, Van Gogh, Renoir Gauguin. So, it was not by accident that M Samuel & Co flourished. In 1880 Sam opened an office in Yokohama. In the late 1880s the brothers arranged the first offshore loan for the Japanese Government. Gilbert & Sullivan brought the Orient to the West End when The Mikado opened in 1885 and went on for a record 670 performances.
So, by the time Shady Lane called on Marcus to discuss selling kerosene in the Far East, Marcus was more interested in enjoying the fruits of his success than risking it all in an arm wrestle with the Standard Oil gorilla. But Shady Lane didn’t become Shady Lane by taking no for an answer. He persuaded Marcus to at least take a look. Together they took a ferry to Paris and then, you guessed it, the Orient Express east. What a trip – Stuttgart, Munich, Salzburg, Vienna, Bratislava, Budapest and finally Constanta, 2,200 km in three days. From Constanta it was another three days by steamer to Batumi. Once there, Marcus was hooked. The wheeler-dealer realised it was the opportunity of a lifetime. But it would not be the quick in and out he was used to. He knew better than anybody the enormity of the Far Eastern market, but he also knew Standard Oil was already well and truly established there. More importantly, he knew he could not compete with Standard Oil by shipping from Batumi via Gibraltar and the Cape.
So, there was much to consider as he and Shady returned to London in time for Christmas. There wasn’t a boy who grew up in Houndsditch who didn’t know ships, and Marcus had been involved in shipping all his life. He soon realised his only hope was to ship from Batumi in bulk via the Suez, but bulk carriers such as Ludvig Nobel’s Sviet were considered floating bombs and banned from the Suez. He would have to design a radically new tanker ship acceptable to the Canal Authority if the venture were to succeed.
But first he had to sell the idea to Sam and his agents in the Far East who would be funding the shipments. In January 1891, having sold the idea to an apprehensive younger brother, Marcus embarked on a reprise of his 1873 Far East tour. It’s worth noting the timeline here because I wouldn’t be telling this story if the venture had failed, and in many ways its eventual success was largely due to the blitzkrieg-like speed with which Marcus Samuel developed and executed his plan.
He spent the first six months of 1891 selling and developing his ideas with his trusted agents in the Far East. This included identifying potential bulk storage sites from which kerosene could be unloaded from tanker ships via pipeline. He had determined he must supply the entire Far East to pre-empt Standard’s tried and true tactic of undercutting local competition and making up the losses by increasing charges in areas where there was none. By the time Marcus left Kobe for London in June 1891, he and his “Tanker Syndicate” had firm plans for terminals in Bangkok, Calcutta, Madras and Singapore, and outline plans for Burma, Java and Japan.
The Suez Canal
Back in London, the first priority was to reach agreement with the Rothschilds for the transportation and marketing of all BNITO’s kerosene east of the Suez. An exclusive nine-year contract was in place by the end of July. This included discounts for lifting in bulk. Marcus now had the tiger by the tail. He had his kerosene but no pathway to his market. Once again, Shady Lane, by profession a shipping agent, came up with a solution. He introduced Marcus to James Fortescue Flannery. Flannery had made a name designing cargo steamers. He was briefed to design a tanker ship to a standard the Suez Canal Authority could not reasonably refuse. By summer’s end, Flannery had developed a design that was to be the template for tanker design for the next 70 years. Named Murex after a predatory sea snail, it boasted the following groundbreaking features.
- A 349′-long × 43′-wide hull with nine transverse bulkheads and a segmented double bottom, facilitating integrity and ballast control in the event of grounding
- 4,000 tons of kerosene in ten tanks set amidships between the transverse bulkheads, each with its own summer tank
- A tank steam cleaning system for return cargos
- Coal-fired triple expansion steam engines
- Two pumps set amidships capable of unloading in 12 hours
- A fan-driven ventilation system designed to evacuate all gasses from the hull once every 20 minutes
- Steam heating and electric lighting in manned areas, avoiding naked flames
- Lloyd’s 1A.100 safety rating
Lloyd’s 1A.100 was the gold standard rating and critical to achieving clearance for the Suez Canal. The stories relating to the award of the rating are myriad; however, it did not pass notice that William Gray, the owner of William Gray & Co of West Hartlepool, the shipbuilder appointed to build the Murex, was on the Lloyd’s of London executive management committee. But it was not all plain sailing. The oil business feeds on rumours and loves spreading them, and before long Standard Oil had guessed there was a plan to ship oil through the Suez Canal. They engaged prominent solicitors to mount a counterattack by scaremongering in the press and lobbying the Salisbury Government, claiming the plan would endanger the canal, ergo British business interests.
In September 1891, as William Gray & Co laid the keel for the Murex, the Standard Oil campaign was gaining momentum. It became nasty and anti-Semitic. It was time for the Rothschilds to join the battle, but first a potted history of the Suez Canal: In December 1858 Ferdinand de Lesseps raised £8 million to build it via a public share offer. Palmerston’s British Government was cool on the project. Perhaps because it was a French idea but more likely because it would compromise British trading interests along the West African coast. Private shareholders, mainly French with encouragement from Alphonse and Edmond Rothschild, took up 56% of the IPO, with the remainder unsubscribed. Realising its importance to Egypt and to ensure the project went ahead, the Egyptian Viceroy, Mohammed Said Pasha, took up the remaining 44%. The canal was opened in November 1869 but not before the cost had doubled. This posed a financial strain on Egypt, and in 1875 the Viceroy’s successor, Ismail, was forced to put the Egyptian stake on the market.
Even though the canal’s initial receipts had not been as robust as predicted, its economic and strategic value, particularly to Britain with its Empire, was now beyond question. Disraeli, prime minister of the day, was desperate to buy the stake but didn’t have the readies. Realising he had to act quickly, he approached his old mate, Lionel Rothschild, for a loan. It was done overnight on a handshake. Disraeli snatched a 44% stake in the canal for £4 million. Lionel was Alphonse’s and Edmond’s English cousin. So, the Rothschilds had influence where the Suez Canal was involved. By the time Marcus Samuel’s wife, Fanny, launched the Murex in May 1892, the Suez Canal Authority had cleared tanker ships rated Lloyd’s 1A.100 to navigate the canal. There was only one, and on 23 August 1892, loaded with 4,000 tonnes of Rothschilds’ kerosene, the Murex did it. Samuel had conceived and executed his incredibly audacious coup in 21 months.
[Continue reading Part 2 ]
Caz C MacClancy
Posted at 16:42h, 16 JuneFascinating .. I look forward to the next chapter 🤩
Roz W
Posted at 18:07h, 16 JuneWhat a wonderful raconteur of this history which elaborates on how strong international connections have been long before current day!
Luke Harris
Posted at 07:41h, 17 JuneHad read the Rockefeller side of this episode, very interesting to see how Standard was successfully outflanked.
Andrew Maconie
Posted at 07:59h, 17 JuneNice one Wilson AMAZON 2026?
David Wilson
Posted at 16:18h, 17 JuneMore than a few people have been in touch to say that Sir Henri Deterding developed open sympathies for Adolf Hitler and the Nazi regime during the 1930s. His connection to Hitler was ideological and financial, though not formal or institutional.
He was deeply hostile to communism, especially after the Bolshevik Revolution, which had expropriated Shell’s assets in Russia. This led him to see Hitler’s staunch anti-communism as not only admirable but essential for European stability.
Around 1936, Deterding reportedly offered substantial donations to the Nazi regime, including shipments of oil and foodstuffs. This support, while not officially sanctioned by Shell, raised concerns among Allied observers about his personal political leanings. His donations were widely interpreted as an endorsement of Nazi ambitions, particularly as Germany began to rearm in defiance of the Versailles Treaty.
While there’s no public record of a formal meeting between Deterding and Hitler, Deterding is known to have expressed admiration for the Führer’s leadership and policies, especially those aimed at restoring German strength and eliminating Bolshevism.
Deterding resigned from Royal Dutch Shell in 1937 and moved to Germany, where he lived on a large estate in Mecklenburg. His association with Hitler was never formalized through party membership or direct political office although the alignment of his ideology and resources with Nazi goals—especially in the late 1930s—suggests a concerning degree of support.
He died there in 1939, shortly before the outbreak of World War II. His funeral was held in Germany and attended by Nazi officials. The service featured Nazi flags and ceremonial honours, suggesting that the regime regarded him as a supporter or fellow traveller however his death just months before the war spared him from any public reckoning or prosecution for aiding the regime.
Malcolm McColm
Posted at 17:47h, 17 JuneA fascinating history well told, David.
Bring on Part 2.
Alexander Stuart
Posted at 22:27h, 17 JuneIt is a truism that there are good guys and bad guys in every nation on Planet Earth – just as there are in every
Business Venture! If Sir Henri Deterding had Nazi sympathies (which sounds probable) , he would have been one of
many similarily minded business titans at that time.
Moving rapidly forward, I’d like to be a fly on the wall at a Dinner attended by John D Rockefeller, Marcus Samuel,
Andrew Carnegie, Elon Musk and Steve Jobs – hosted of course by Donald Trump. There we have a host of Imperial
sized egos, dubious political ethics and above all, a will to win at all costs.