International Business and the Cold War
Rising demand for oil in Western Europe prompted major oil companies to study the construction of an integrated Trans-European crude oil pipeline in 1956. Although technically and economically feasible, an integrated pipeline system was never constructed. This chapter questions why the plan failed and evaluates the main causes for its failure. The explanation focusses on the efforts of the pipeline consortium to devise a legal and organisational structure that would protect the pipeline from political risks deriving from the Cold War geopolitics of oil. Emboldened post-colonial regimes in the Middle East challenged the majors’ control over oil production and exports. Simultaneously, the majors saw their European markets threatened by growing Soviet oil exports, aggressive competition from Italy’s ENI and potential French state interference seeking to push Algerian oil onto the market. The major oil companies Royal Dutch Shell, Standard Oil of New Jersey and British Petroleum envisioned the Trans-European pipeline as a barrier to entry and to establish a European pipeline oligopoly that would harness their control over West European markets. Facing uncertainty over pipeline regulation in France and other West European countries, the consortium pursued a legal and organisational strategy that would protect the pipeline against state interference and secure the ultimate objective of controlling Europe’s pipeline infrastructure.