Saturday, October 17, 2020

"The Greatest Negotiator In History"

From the tiny treasure that is Delancey Place, October 2019:

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 Be­cause it was cheaper, he no longer maintained a car and chauffeur, but hired a driver to take him into the country for his daily walk, carefully checking the odometer on the car to make sure he was not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....MORE (the nub of the matter)