the greatest negotiator in history -- 10/8/19

Today's selection -- from The Prize by Daniel Yergin. Calouste Gulbenkian was the greatest negotiator in history, known for his "granite obduracy," and it made him one of the world's wealthiest men.

In 1912, he was the force behind the creation of the Turkish Petroleum Company (TPC)—a consortium of the largest European oil companies aimed at cooperatively procuring oil exploration and development rights in the Ottoman territory of Mesopotamia, and reserved a significant portion for himself.

During the dismantling of the Ottoman Empire after the war, heated and prolonged negotiations ensued regarding which companies could invest in the Turkish Petroleum Company. The TPC was granted exclusive oil exploration rights to Mesopotamia in 1925. The discovery of a large oil reserve at Baba Gurgur provided the impetus to conclude negotiations and in July 1928 an agreement, called the "Red Line Agreement", was signed which determined which oil companies could invest in TPC and reserved 5% of the shares for Gulbenkian. The name of the company was changed to the Iraq Petroleum Company in 1929. He became known as 'Mr. 5 Percent.' As oil became critical resource for war and commerce, he became incredibly wealthy:

"Gulbenkian, as usual, was another matter [in the negotiations]. Installed in a first-floor suite in Lisbon's venerable Hotel Aviz, Gulbenkian kept to his flint-nosed habits. Be­cause it was cheaper, he no longer maintained a car and chauffeur, but hired a driver to take him into the country for his daily walk, carefully checking the odometer on the car to make sure he was not being charged for someone else's trips. 'Gulbenkian may be regarded as a man of his word once this has been given,' observed a British official. 'The difficulty lies in obtaining it. The ability to compromise is not one of his attributes.' The official could not help adding that 'Gulbenkian's idea of his own financial integrity takes on a peculiar form when it comes to taxation, the avoidance of which constitutes one of his major activities.' He escaped income taxes in France and Portugal by maintaining an appointment with the Iranian legation. In order to avoid property tax on his man­sion in Paris, he turned a small part of it into a picture gallery. And when he sold the Ritz Hotel in Paris, he insisted on terms that provided that a suite be perma­nently reserved for him, so that he could always claim that he was 'in transit' while in Paris -- thus further avoiding French taxation.

"Gulbenkian brought this same infuriating attention to detail, along with his reluctance to compromise and his intense powers of concentration, to the strug­gle over the Red Line Agreement. Though the French had dropped their suit, Gulbenkian was willing to wash every last piece of dirty linen in public if neces­sary. He filed suit in a British court. [Corporate participants] Jersey and Socony responded with counter­suits.

"The case received wide publicity, which helped Gulbenkian in his counter­attack against Jersey and Socony. After all, it was not he, but the American com­panies that had to worry about the Justice Department and public opinion. Still, there was a side effect of the notoriety that he very definitely found distasteful. Owing to his short stature, he had ordered a special platform built in the restau­rant of the Hotel Aviz, so that he could eat his lunch and survey the scene at the same time. As the publicity from the case increased, 'Mr. Gulbenkian at the Hotel Aviz' became one of the tourist 'musts' of Lisbon, along with the bull­fights. He objected, but there was nothing much he could do about it.

"For well over a year, negotiators shuttled back and forth from New York to London to Lisbon, looking for a compromise. Now the next generation of oil men and lawyers had the opportunity to learn how exasperating it was to deal with Calouste Gulbenkian. 'It was my father's practice never to press any claim to a breakdown,' said his son Nubar, 'but, very able negotiator that he was, to make his demands step by step, so that having obtained satisfaction on one point he would raise another and yet another, thus achieving all he wanted or, at least, much more of what he wanted than he would have obtained if he had started by putting forward all his demands at once.'

Calouste Sarkis Gulbenkian,
23 March 1869

"Negotiations were made even more difficult by Gulbenkian's habitual suspicion, which had deepened into an obsession. Gulbenkian did not attend the various meetings himself. He had four different representatives at the sessions, each of whom had to report to him separately in writing, without collaborating -- indeed, without even talking to the others. That way, in addition to analyzing his opponents, he could double check and second guess each of his own negotiators.

"But what, in essence, did Gulbenkian want? Some suspected that he actually aimed to get a share of Aramco. That was out of the question. lbn Saud would never allow it. To a director of Socony, Gulbenkian offered a simple ex­planation of his objective. He could not respect himself unless he 'drove as good a bargain as possible.' In other words, he wanted as much as he could get. To an­other American, not an oil man at all, but one who shared his love of art, Gul­benkian could explain still more. He had made so much money that more money, in itself, did not count for very much. He thought of himself in the same terms he had used to Walter Teagle two decades before -- as an architect, even as an artist, creating beautiful structures, balancing interests, harmonizing eco­nomic forces. That was what gave him his joy, he said. The artworks he had col­lected over his lifetime had come to compose the greatest collection ever assembled by a single person in modern times. He called them his 'children,' and seemed to care more for them than for his actual son. But his masterpiece, the greatest achievement of his life, was the Iraq Petroleum Company. To him, it was as architecturally designed, as faultlessly composed, as Raphael's The School of Athens. And if he was Raphael, Gulbenkian made clear, he regarded the executives of Jersey and Socony in much the same company as Giroloma Genga, a third-rate, mediocre, obscure imitator of the masters of the Renais­sance.

"Under the pressure of the unpleasant arguments soon to begin in a London courtroom, an agreement with Gulbenkian at last seemed to take shape; and the whole 'caravan,' as it was called, of oil men and their lawyers migrated to Lis­bon. Finally, at the beginning of November 1948, on the Sunday before the Monday on which the court arguments were to begin, the new agreement was completed. Nubar, the dutiful and gracious son, had booked a private room in the Hotel Aviz where the signing was to take place, at 7:00 p.m., to be followed by a celebratory dinner.

"At five minutes to seven, Gulbenkian announced that he had found one more point that had not been covered in the new agreements. Consternation gripped the room. Telegrams were sent back to directors in London, and replies were awaited. A stunned and depressing silence descended on the Hotel Aviz. Yet the food had been ordered, it would soon be cold, and there was no point in not eat­ing, at least so far as Nubar Gulbenkian could see. He summoned the 'caravan' to the table. The dinner that ensued was very somber and funereal; only one bot­tle of champagne was drunk among twelve people. There was nothing to cele­brate.

"Around midnight, the telegrams came back from London. Gulbenkian's final demand was acceded to. The agreements were retyped, Gulbenkian signed them at one-thirty in the morning, and they were sent by chartered plane to Lon­don. The appropriate officials were informed that the court proceedings sched­uled for later that day in London should be called off, and the exhausted group in Lisbon finally adjourned to an all-night cafe to celebrate over sandwiches and cheap wine.

"Thus was negotiated the Group Agreement of November 1948, which re­constituted the Iraq Petroleum Company. What Gulbenkian got, in addition to higher overall production and other advantages, was an extra allocation of oil. Mr. Five Percent was no more; he was now something greater.

"The agreements themselves were 'monuments of complexity.' An Anglo-Iranian executive (and later a chairman of the company) declared, 'We have now succeeded in making the Agreement completely unintelligible to anybody.' But there was an advan­tage to such complexity, for, as one of Gulbenkian's lawyers put it, 'No one will ever be able to litigate about these documents because no one will be able to un­derstand them.'"


 | www.delanceyplace.com

author:

Daniel Yergin

title:

The Prize: The Epic Quest for Oil, Money & Power

publisher:

Free Press

date:

1991, 1992, 2009 by Daniel Yergin

pages:

398-401
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