Chapter Three—
Revolution and Oil

The Mexican Revolution abounded with rumors of conspiracies. How could it have been otherwise? The mercurial politics of revolution dictated that domestic politicians had to choose sides. The wrong choice often meant exclusion and exile, loss of property, or death. Foreign businessmen also felt pressure to be swept into the rumor mongering, to prevent a competitor from gaining advantage with the political regime of the moment. Often, the deeds of foreign businessmen did not substantiate the charges and rumors, as few actually felt they could really influence a revolution that appeared to them to be a strictly Mexican affair. Inasmuch as revolutionary factions were struggling over who would deal with foreign interests, the foreigners themselves had to deal with the truly byzantine power struggles.^[1] Therefore, many Mexican power contenders easily believed in the machinations of the powerful, distant forces of Wall Street and The City. How else can the success of unworthy enemies be explained?

The problem for the foreigners was that they became coconspirators in the game of innuendo and unsubstantiated allegation. After all, the mere change of government signaled an enormous adjustment in the political involvement of foreign interests. Old power brokers became excluded from influence, while new aspirants took command of the perquisites of office. The changeover at the top invalidated the oilman's connections to the Científicos. Now maderistas, huertistas, convencionalistas, and carrancistas replaced each other in bewilderingly quick succession. The foreign businessmen themselves succumbed to the rumor

mongering. Hoping to gain some business advantage for themselves, either the foreign oilmen were quick to anticipate a competitor's political maneuver or they propagated rumors to prevent a rival's maneuver. In essence, the foreign business community was divided against itself, company against company, and Americans against the British.

The continuation of the Mexican Revolution more than inconvenienced the foreigners. The longer the struggle continued and the more actively the Mexican peasants and laborers became involved, the greater the economic destruction and the disruption of business-as-usual. While licenses for pipelines and refineries languished at the top, the oil companies became susceptible to paying double taxation, forced loans, and bribes to competing revolutionary factions. No capitalistic organization, least of all these penny-pinching oil competitors, desired to dole out that kind of money to every passing army general and bandit straggler. But the oil companies did just that. Moreover, the competition for military superiority made its way from the central plateau down into the hot-lands. The longer the revolutionary violence lasted — roughly from the Orozco rebellion against Diaz in January 1911 to the successful rebellion of General Obregón against President Carranza in May 1920 — the more inviting the oil industry became to the competing factions. It was the only sector of the economy that boomed during this period. Therefore, the oil industry was seen increasingly as a revenue source for penurious revolutionary governments and their political opponents.

Ultimately, the revolution enhanced economic nationalism in Mexico. Revolution created in the state a severe need for monies with which to reestablish control over the social furies unleashed by revolution. The state sought the essential revenues from the prosperous foreign interests. When those foreigners resisted, the politicians would accuse them of complicity in creating the conditions of revolution in the first place. All in all, control and ability to tax meant about the same thing to revolutionary politicians. Other Latin American countries, in time, would achieve economic nationalism without revolution. But always, a domestic environment of political and social stress underlay the creation of economic nationalism.^[2] In Mexico, that stress became dramatically extreme.

Their inevitable political involvement in the Revolution itself — either through rumor of their own making or through coercion by contending factions — rendered the foreign companies susceptible to heightened exactions by successive governments and rival factions. No one was immune from the political struggle. Therefore, even as the in-

dustry itself grew according to the market dictates of the great Mexican oil boom, the revolutionary process and the oilmen's complicity in it were subjecting the industry to political intervention. The fact is, state control and regulation increased; Mexican politicians willed it; the Revolution sanctioned it; and the foreign oilmen, despite their accumulated wealth, were too divided to stop it. Economic nationalism in Mexico had a social base, and that is why the social revolution of 1910 to 1920 also produced an economic nationalism bent on reducing the power of the foreign oil companies.

The Smaller the Better

The rumors began to surface as soon as the initial rebellion of the Mexican Revolution succeeded in sending President Díaz into exile and placing the green, white, and red sash of executive office across the torso of Francisco I. Madero. Reports appeared in London newspapers that Waters-Pierce had financed the rebellion in order to obtain important oil concessions from the victorious Madero. Mexican newspapers recounted the rumors. Along the northern border, conversations among Americans and Mexicans turned to the conspiracy of Standard Oil to provide Madero with a one-million-dollar loan. Again, important oil concessions from the Madero regime were to be the pay-off. Nearly everyone recounted stories to each other of the support of Lord Cowdray for the Diaz regime and how Doheny and Standard Oil desired and worked for the overthrow of the Anglophile porfiristas.^[3]

Perhaps historians will never be able to document who started which rumor, but little evidence exists that any company willingly gave money to any Mexican faction. Even the circumstantial evidence is very spurious. By the same token, there is no doubt that the oilmen themselves engaged in the rumor mongering because they half-believed the political malevolence of their rivals. As they had been involved in the politics of the Porfirian regime, so the oilmen became involved in the machinations of the Madero regime too. Perhaps a distinction should be made between involvement and intervention. To be involved in Mexican affairs, all the oilmen had to do was be present and be a source of income for Mexican politicians and revenues for the state. They had to depend to a degree on political support for obtaining licenses and economic privileges. Thus, the rumors were testimony to the involvement of the foreign oil companies in domestic Mexican

politics during the Revolution. To intervene in politics, however, the oilmen had to voluntarily direct their resources to influencing the outcome of disputes between Mexican politicians. Involvement was vastly more common among oilmen than intervention.

The rumor that the Standard Oil Company of New Jersey had financially supported the successful Madero rebellion would not die. As the story went, American oilmen resented the Diaz government for having supported the British oil interests of El Aguila. Everyone had heard some version of C. R. Troxel's alleged negotiations for Standard Oil (see chapter 1). Both Mexicans and Americans continued to repeat these rumors. They did so in newspapers and political proclamations and under oath in U.S. Senate hearings. Therefore, a Mexican attorney who once served some foreign oilmen could calmly testify to Standard Oil's financing of John Kenneth Turner's book Barbarous Mexico, which had vilified the Diaz regime for an otherwise adoring American public.^[4] An American agriculturalist in Mexico claimed that "a brother of my cashier" had seen a check from the Madero government made out to Waters-Pierce. The check had overpaid for a government purchase of kerosene in order to repay Pierce for his loan to the Madero rebellion. When erstwhile ally Gen. Pascual Orozco broke with the Madero government and condemned Don Francisco for having accepted "FOURTEEN MILLION dollars from Wall Street millionaires," Orozco pointed to the Waters-Pierce Oil Company, which had hoped to widen its petroleum sales to the Mexican National Railways. A second rumor immediately arose: Lord Cowdray was financing the Orozco revolt because Madero had revoked El Aguila's Díaz-era concessions. In fact, the concessions had not been revoked.^[5]

Lord Cowdray was convinced that Henry Clay Pierce was behind many of the malicious stories. When El Diario broke the news in 1912 that Standard Oil, "that great oil octopus," was about to purchase El Aguila, Cowdray suspected that the news items were the work of Pierce. "He employed Press men, unscrupulous but able, to attack us, day by day, in the American and Mexican Press," Cowdray wrote confidentially. "[Pierce] issued a pamphlet which was sold on the London bookstalls. He accused us of having bribed and corrupted the Díaz Government and of doing the same to each of the revolutionists that for the moment, were in disfavour. I was shadowed when in America."^[6]

One who did know rather more about the connections — or lack thereof — between Madero and the foreign interests was Madero's American consultant. Shelburne Hopkins was a confidant of the Ma-

deros, acting as their counsel on retainer for American affairs. He had even been in a position to know a bit about Waters-Pierce. The company employed Hopkins in 1912 to "get evidence" against the Standard Oil Company in Mexico. Hopkins claimed that Madero had received no money at all, whether from Standard Oil or Waters-Pierce. Although the American oil importer wanted to "make it hot" for El Aguila, Waters-Pierce obtained no advantages at all from the Madero rebellion. Hopkins claimed that much of Pierce's animosity derived not from the oil business but from the Porfirian consolidation of the railways. As principal stockholder of the Central Railways, he had approved of Limantour's railroad stock purchases and consolidation of the Mexican National Railways. What Pierce distrusted was those Mexican notables — Creel, Landa y Escandón, Pablo Macedo, Luis Elguera, and even Porfirio Díaz, Jr. — who subsequently joined Limantour's new board of directors of the National Railways. They were all Pearson men. Therefore, Pierce approved of Madero's removal of these porfiristas from the directorate of the National Railways although, said Hopkins, Madero had not consulted Pierce about these replacements.^[7] If Don Porfirio's economy had been politicized, so was Don Francisco's.

In 1913 and 1919, the United States convened public hearings into allegations of American interference in the affairs of Mexico, as well as to propose U.S. policy alternatives toward the Revolution. Senator Albert B. Fall had interviewed witnesses in El Paso and Los Angeles. He found that, although rumors abounded as to the American oil interests' financing of the Madero rebellion, "very few persons had any definite knowledge upon the subject." He concluded that the Maderos had supported themselves substantially from family funds. Other revolutionists "largely supported themselves by killing and rustling cattle and sheep, by looting stores, and by securing forced contributions." The American oil interests, therefore, "should be exculpated of the charge that they incited or promoted the revolution against the Díaz Government," Fall wrote in 1913.^[8] Fall's judgment may be trusted. His closest ties to American oilmen were not to Standard Oil or Pierce. They were to Doheny and Harry Sinclair, neither of whom were involved in the controversy. Nevertheless, few Mexicans and Americans along the border paid much attention to the conclusions of Senate hearings. The rumors persisted and were believed.

While Madero was in power, from 1911 to 1913, the actual relations between the oil company representatives and the government continued to be formally correct. Foreigners still needed political insiders in

order to accomplish official business, as in the old regime. Only one oilman's archive, that of Lord Cowdray, is extant to provide a glimpse of the important art of business diplomacy. The Pearson interests had the most arduous task with the Maderos. They had to quietly shed the image of having been cozy with the discredited Porfirians. It was not easy. Nasty little reminders always cropped up in newspapers in Mexico and the United States, thanks, said Cowdray, to his rival Henry Clay Pierce. The Pearson group also sensed the urgency of a rapprochement with the Maderos when Manuel Calero, described as Doheny's representative in Mexico City, joined the government as minister of development. Fortunately, J. B. Body knew Ernesto Madero, the uncle of the incoming president. But Ernesto admitted hostility toward the Pearsons, accusing them of attempting to influence American policy in favor of Díaz during the revolt.^[9]

Nonetheless, Francisco I. Madero and Lord Cowdray met in August 1911. Responding to Cowdray's primary concern, Madero said that he intended to respect all Díaz-era contracts and concessions. He also assured Cowdray that he had never had any ties to Standard Oil; all the money for the rebellion had been raised by Mexican donors. Madero's own father had raised $350,000, using his properties as collateral. Cowdray informed Madero that he believed Pierce to be behind the scurrilous press attacks. Cowdray said he had never meddled in Mexican politics. It appeared a frank meeting, based upon the notes of Body. Cowdray informed the future Mexican president that he needed funds to expand El Aguila's markets, perhaps combining with a larger oil company. Madero replied that he would "look with suspicion" on the sale of El Aguila to Standard Oil, and Cowdray quickly added that he was considering The Texas Company or Gulf.^[10] Perhaps the Madero government would not be so bad for the Pearson oil interests, after all.

At any rate, the early political breakdown of the Madero regime did not permit the Pearson group to develop a lasting, profitable relationship. El Aguila's pipeline permits for Bustos-Tancochín were held up in the secretariat of development by the influence of the Doheny interests, Body thought. Rising political tension may have been more at fault. When the battle between Madero's federal army and Orozco broke out at Torreón, Body wrote that it was becoming "most difficult to transact any business in the Government Departments, and I fear we shall be at a stand still until things change."^[11]

Still, Cowdray found himself working on behalf of the Madero government in March 1912. While in the United States, Cowdray spoke to

the brother of President William Howard Taft about the need to prevent the sale of arms across the border to Orozco's rebel forces. Eventually, the executives had to devise a code so that they could discuss the political turmoil in Mexico so that, if compromised, its correspondence "might [not] be viewed unfavourably by other parties."^[12] Despite the cordial relations, the British managers were ever suspicious that the Americans might have more influence with Madero.

Body in Mexico City thought that the Doheny representatives had obtained major political advantages with the Madero government. Near panic derived from two Porfirians still on El Aguila's staff, Enrique Creel and attorney Riba. "We must prepare action to counteract," Body cabled to Cowdray. Cowdray agreed.^[13] None of the documents reveal what issue concerned the Pearson group, whether pipeline rights-of-way or fuel oil sales. The crisis passed quickly — or at least was overwhelmed by Madero's mounting political problems. When he had to make a cabinet change in November 1912, Madero's foreign affairs secretary asked Lord Cowdray to wire a note of his "satisfaction" with the new appointees. The Pearson representatives were willing to comply, although privately they said they would have preferred it if the brief rebellion of Félix Díaz, nephew of Don Porfirio, had been successful.^[14]

As the fortunes of the regime sank, the Maderos turned to the foreign interests for money. Ernesto Madero devised a scheme to buy the opposition newspapers in Mexico City and asked J. B. Body to contribute $ 100,000 toward this end. Cowdray was put out. He felt obliged to contribute something so that Madero would not consider a refusal to be an "unfriendly act." "[W]e ought to subscribe whether we like it or not," he wrote Body, "of course, the smaller the better."^[15] The fall of Madero and his assassination within a month relieved the Pearsons of this obligation. Yet, they had succeeded in gaining a degree of cooperation from the Madero government despite the persistent rumors.

Rumors and Wise Precautions

Much of the animus that developed between the various revolutionary governments and the oil industry was a matter of both principles and finances. It was a fight between advocates of alien concepts of free enterprise and state control. Foreign oilmen subscribed to Adam Smith's ideas that the pursuit of private interest will contribute

to the general wealth. For example, Doheny never felt any embarrassment about how rich he had become on Mexican oil. He did not exploit anyone, he said. He paid "honest prices" for his land, and the Mexican landowners who leased to him were the envy of their neighbors. Doheny's attorneys, he said, were constantly decrying the high prices that he paid for his leases.^[16] The revolutionary state, on the other hand, wished to control and direct national life in a way that would avoid the causes of revolutionary outbreaks. For the twentieth-century state to do this — as for the colonial royal government to have done it — revenues were required. In the colonial period, the silver mines provided the resources. In the twentieth century, the oil and other advanced industries provided those revenues. The difference was that the industry of early twentieth-century Mexico was owned by foreign capital.

The Madero regime, pressed for funds, began to look to the oil industry soon after coming to power. The Díaz-era budget surpluses dwindled — but did not yet disappear — as Madero attempted to satisfy old Porfirian families and new political players. The federal army and the rurales, for instance, augmented the numbers deliberately shrunk by Porfirio Diaz. Some old insurrectos like Emilio Madero, Pascual Orozco, and Pancho Villa were brothers in arms with Generals Reyes, Blanquet, and Huerta. The army payroll nearly doubled. Military expenditures mounted when the zapatistas continued their rebellion, and Orozco and others followed suit. How to raise money? Congressman José María Lozano introduced a bill to tax all oil lands, because their export of petroleum was contractually tax-free for fifty years. Lozano said he wanted to free Mexico from the clutches of Standard Oil, which was attempting to take over El Aguila. To Lozano, taxation was an instrument of control.^[17] In Veracruz, the state legislature considered a proposal to impose a state tax of fourteen centavos per ton on crude oil. Both El Aguila and Huasteca sent their Mexican attorneys to confer with the state governor, who anyway was unwilling to press forward until President Madero and Minister of Development Calera approved. They did not. They were preparing their own federal tax increases. Meanwhile, the representatives of twenty oil companies organized a coordinated protest against the state deputies.^[18] Oil company protests were often couched in predictions that any increased taxation would undercut economic growth and the country's tax base. "It is possible that this [tax increase] might cause the cancellation of otherwise profitable contracts and thus greatly reduce the amount which the Government desires to realize," Harold Walker of Huasteca warned.^[19] In the

end, the oilmen settled for a compromise, getting the state government to reduce its tax demands. Yet, taxes did rise from their previous level.

What oilmen feared most was any break with an 1887 Mexican law which stated that petroleum was subject only to the stamp tax. But by this time, the break had already been made. The Porfirian regime had imposed bar taxes at Tampico, the proceeds of which ostensibly financed the dredging of the harbor. The oil companies agreed to pay the modest tax just to avoid higher taxes. The tax exemption of Huasteca as a pioneer company also expired in 1911. Thereafter, it could no longer import new equipment duty free.^[20] Then, late in 1912, Madero proposed to increase the bar tax to thirty centavos per ton. Once again, the oilmen pooled their resources, protested in unison, sent their attorneys to speak with congressmen, and wrote pamphlets about how Mexican oil would be priced out of international markets. Again, the big companies effected a compromise, agreeing to pay one-third of the increased tax. Representatives of the smaller companies were disgusted. William Buckley later pointed to these Díaz- and Madero-era compromises as the beginning of "the troubles of the oil companies."^[21] Ever cognizant of its need for government goodwill, El Aguila always seemed to be in the vanguard of compromise. Ernesto Madero later praised the company for not meddling in Mexican politics.^[22] Yet Buckley was essentially correct. The Mexican state had begun imposing some new rules on the oil industry even as it began to boom. The process would intensify.

The Madero revolution and its political problems also began to erode the sense of security that the oil operations had enjoyed during the Díaz era. When Orozco revolted in March 1912, the "rumors" of impending trouble motivated the sometimes isolated oil managers to arm themselves. At the Minatitlán refinery, A. E. Chambers requested that he be permitted, as a "wise precaution," to import 20 rifles and organize a force of volunteers. Foreign diplomats soon entered into the action. The British minister at Mexico City acquired 160 rifles from the Mexican government for distribution to the British "defence committee" in the capital. It was reported also that the U.S. ambassador had 1,500 rifles imported for the protection of his countrymen.^[23] In Tampico, the Waters-Pierce refinery obtained rifles and ammunition, as did El Aguila, which imported 90 carbines and 9,000 cartridges. The Americans working for J. A. Sharp of the Petroleum Iron Works Company, constructing tank farms at Topila, requested 20 guns and 400 cartridges. The arming of frightened foreign oilmen was done

with the consent of government authorities. The governor of Tamaulipas and the local military commander assisted in arming the foreign community at Tampico.^[24] This arming of foreigners was a waste. No foreigners in the oil patches were any match for even the smallest military patrols. Various revolutionary factions would soon disarm the foreigners, who were also relieved of much else.

If foreign businessmen were inextricably involved in domestic politics, then their greatest need was for stability. Only in an atmosphere of political calm could the oilman establish the long-term relationships with insiders so essential to obtaining construction permits, oil concessions, tax exemptions, and domestic sales. The extent of state control of industry in the second decade of the twentieth century was just this modest. As yet, the Mexican state did not regulate drilling, production, oil exports, or domestic prices. It had not yet gained control of oil property. Therefore, the oil business proceeded in full boom, despite the political tribulations of the Mexican Revolution. Still, the political disruption did affect the oilmen. This was true for two reasons. During the revolution, fiscal deficits grew, motivating each succeeding government to seek new taxes on the booming oil companies. Also, competing politicians became increasingly inclined to blame the foreign interests for their own political problems — and for the nation's, as well.

Therefore, the fall of the Madero government, although first welcomed by foreigners already weary of political turmoil, proved to be the beginning of their considerable vexations in Mexico. When Madero fell from power, the oilmen scrambled to establish friendly relations with the new regime, whichever it was to be. J. B. Body of the Pearson group rushed immediately to see Gen. Félix Díaz, nephew of the former president. Body and Lord Cowdray were thinking that Díaz would be the next president. (Privately, they preferred Díaz to General Huerta.) Cautiously, Body refrained from making "real propaganda" with any faction, except to cultivate them all. Then news broke like a thunderclap that Madero and his vice-president, Pino Suárez, had been assassinated by their jailers. Body was horrified.^[25]

Nevertheless, the new provisional government headed by Gen. Victoriano Huerta had to be cultivated. Body paid courtesy calls on all of the new ministers. The new cabinet already understood how the game worked. The minister of justice asked Body for information regarding Huasteca. Then the foreign minister requested that Lord Cowdray use his influence to obtain British recognition of the Huerta government. On both requests, Body said he would try. Body subsequently called

on the British ambassador, whom he convinced that British recognition of Huerta would be appropriate if only to counteract the American ambassador's enthusiasm for Huerta. Huerta even asked Lord Cowdray to use his influence with the British government to retain the British ambassador, Sir Francis Stronge, whom Huerta liked. Stronge was replaced anyway.^[26] Other foreigners also interceded with their home governments for recognition of the Huerta government, but the Americans did not have any success with President Wilson.^[27] Still, they discovered that this inexpensive aid was a way of ingratiating themselves with the new regime.

Men in and out of government continued to court favor with the oilmen, and vice versa. How could oilmen not do otherwise when today's outcast might well become tomorrow's minister? On learning of Félix Díaz's arrival in London, Lord Cowdray sent a motorcar for his use and invited his old friend's nephew to dinner. Meanwhile, the surviving Maderos were also treated with respect. From his exile in San Sebastian, Spain, Ernesto asked Lord Cowdray to intercede with the Foreign Office in order to dispatch a cable of protest over Huerta's imprisonment of three other Maderos. Cowdray again complied and requested to meet Madero whenever he might be in London.^[28]

Occasionally, these petty courtesies became burdensome, as in the case with Aurelio Melgarejo. The Pearson group in Mexico had been retaining attorney Melgarejo, who in February of 1914 received President Huerta's appointment to serve as the Mexican minister to Colombia. Melgarejo had already forced a doubling of his retainer, saying that he could influence oil legislation. Now, however, he asked Lord Cowdray to cover the entire cost of his post in Colombia. Cowdray was embarrassed by the request but felt compelled to comply "without too great a tax," if only to prevent Melgarejo from becoming an enemy. The Pearson group later were relieved when the fall of the Huerta government allowed them to dismiss Melgarejo's services completely.^[29]

The oil companies were soon drawn into Huerta's fiscal problems, for he had to fight against zapatistas in the south and constitucionalistas in the north. As a consequence, the Madero federal army of fifty thousand troops grew under Huerta to more than two hundred thousand. Counting the rebel armies of Obregón in the west, Villa in the north, Pablo González and Aguilar in the east, and Zapata in the south, Mexico now had a lot of men — and some women and children, if the Casasola photos are to be believed — under arms. These struggles began to extract a greater economic toll than had the (comparatively) parochial

rebellions of the Madero period. The deteriorating economy did not provide the revenues for burgeoning federal expenditures. Moreover, the peso was losing its value. It slid from a conversion of fifty centavos to thirty-six centavos to the dollar within five months of Huerta's taking power. Prices rose, and government employees and federal troops experienced delays in receiving their pay. President Wilson's refusal to recognize his government prevented Huerta from securing a loan in the United States.^[30]

Thus, Huerta turned to Europe for a loan, and it occurred to him that Europeans with businesses in Mexico ought to be delighted to help him. The foreign minister asked Body to seek Cowdray's assistance in securing a one-hundred-million-peso loan. It was suggested that a number of businessmen could help with one million pesos each. Cowdray replied that he would be willing to underwrite a million pesos provided that banks would take up one-half of the loan. Cowdray then contacted José Yves Limantour in Paris, who already had considerable contacts in European banking circles. Eventually, Huerta secured a loan of £ 20 million with the Banque de Paris, of which £ 6 million was dispatched immediately. Limantour's old financial associates at Spreyer acted as brokers, earning a handsome commission. Cowdray later admitted to having participated in 3 percent of this Mexico loan, meaning that the Pearson group purchased several thousands of pounds sterling of Mexican bonds.^[31]

Such "requests" by unstable Mexican governments placed the foreign businessmen in a dilemma not inconsistent with their involvement in domestic politics. Should Cowdray have saved precious capital by refusing to subscribe to the loan and risk incurring the wrath of the Huerta government? Was a politically unstable Mexico really a good risk for additional investment? A Pearson group memo on the Mexican foreign debt listed £ 39,481,800 in government loans and £ 190,940,700 in railway bonds and direct foreign investment (see table 7). Cowdray did the right thing: he equivocated. He contributed just enough support not to "make enemies," as he so often said of his business diplomacy.

The reluctant contributions of the foreign businessmen, however, did little to satisfy Huerta's financial problems. He was still forced to increase taxes. His "friends" in the foreign business community were forced to pay them. Huerta doubled the stamp tax and increased the import tax by 50 percent. Apparently, he even assessed a forced loan of 7,500 pesos on Waters-Pierce, whose chairman, Henry Clay Pierce, had been having difficulty getting close to the Huerta regime. Huerta

then "fined" Huasteca $400,000. American diplomats suggested that Doheny's company not pay it, and Huasteca resisted at the risk of jeopardizing its business. The fine was pending throughout Huerta's term of office.^[32] All the foreign businessmen resisted these new exactions. Cowdray cabled his protest to proposing a 10 percent tax hike, which the Mexican Senate approved anyway. Oilmen at Tampico calculated that Huerta's tax increases, amounting to seventy-five centavos per ton of exported oil, now equaled 50 percent of the oil's price at the well head, according to these calculations:^[33]

To add insult to injury, Huerta's customs officials insisted on collecting these duties in U.S. currency rather than the deteriorating Mexican peso. Months later, the Huerta government decreed additional tax increases, raising the bar dues to one peso per ton. Perhaps stung by U.S. diplomatic hostility, Huerta even suggested that the oil industry, which exported so many Mexican resources without benefit to the nation, ought to be nationalized. Incensed American oilmen converged on Mexico City to protest the tax increase. Even Secretary of State William Jennings Bryan dispatched a stiff protest to a Huerta government he did not recognize.^[34]

The increased taxation failed to solve Huerta's financial problems. Ultimately, he suspended payment on the national debt, as the peso slipped to a value of twenty-nine cents.^[35] These fiscal maladies tended to dampen the ardor of the foreign community toward Huerta. They also motivated an essentially reactionary Huerta regime to propose nationalizing the Mexican oil industry.

Huerta did nothing to discourage the continuation of the bickering and rumor mongering among the oil competitors. Waters-Pierce did not see any advantage at all in Huerta's ascension to power and mounted a relentless press campaign to identify Cowdray as the chief patron of "the Usurper." American and Mexican newspapers reported a litany of spectacular charges:

that Lord Cowdray helped Huerta overthrow Madero;

that Cowdray had brought about the British recognition of Huerta;

that he had arranged the loans for Huerta's government;

that he had placed his man, Sir Lionel Carden, as ambassador to Mexico;

that Sir Lionel, as Cowdray's surrogate, criticized Wilson's policy toward Mexico;

that Huerta gave El Aguila new oil and railway concessions;

that Cowdray was about to sell his interests to Standard Oil; and

that Huerta was to nationalize Mexico's oil lands in order to transfer them to Cowdray for $50 million.^[36]

Cowdray personally countered the rumors by writing corrections and protests to editors, but much of the damage had already been done.

Fig. 10.
Concrete mound protecting Potrero No. 4, 1916. Following the nearly
disastrous fire at this prolific well, El Aguila constructed a concrete mound over
the well head and drained off the volatile gases. the cavity of the mound could be
filled with water and steam during thunderstorms to prevent another bolt
of lightning from igniting the gases. from the Pearson Photograph Collection,
British Science Museum Library, London, courtesy of Pearson PLC.

The State Department was certain that Cowdray's influence had obtained British diplomatic recognition for Huerta and that the British oilman was reaping great material benefits from Huerta.^[37] Pierce became enraged when in November of 1913 he had not been reelected to the board of directors of the National Railways bondholders in New York. An article in the New York Herald recounted how Lord Cowdray had used his influence in the new government to deny this post to his old rival. Cowdray was at his wits' end. "[U]nless [Henry Clay Pierce] is prepared to be friends all round," Cowdray warned, "we will break the [sales] arrangement now existing — which was made at his request — and go for as much of the Domestic Trade as it is possible for us to obtain." Lord Cowdray suspected that Pierce's agents in Mexico were Shelburne Hopkins, who later admitted as much, and José Vasconcelos.^[38] Their own economic competition seemed to draw the foreign interests into the whirlwind of Mexican revolutionary politics.

The Most Difficult Moment

The problem was that oilmen were forced to choose between so many conflicting authorities during the Revolution. The military factions that controlled certain areas of Mexico always took it upon themselves to collect the taxes and issue permits, denying jurisdiction to other domestic powers, no matter which of them happened to occupy the national palace in Mexico City. Oilmen who sold to the internal market had to deal with different factions in each sales area. In the fields, they often had to treat with two factions at once, one collecting export taxes at the ports of Tampico and Tuxpan and the other controlling the oil patches. The oilmen reacted as best they were able.

The confusion of authority began soon after Huerta took power, when the Constitutionalist forces loyal to Venustiano Carranza first invaded the oil fields. In May, General Lárraga and two hundred troops appeared at El Ebano. He arrested the superintendent, helped himself to supplies, exacted a "loan" of five thousand pesos, and went away with all the rifles in camp.^[39] Gen. Cándido Aguilar arrived in the southern fields in November and ordered the cessation of drilling and pipeline operations. He demanded the payment of two hundred thousand pesos to the new military authorities. Within three days, Aguilar permitted oilmen to resume pipeline operations, so long as they did not sell oil to any of the Mexican railways within federally controlled areas. Local managers were forced to shut in their prolific wells at Potrero del Llano, Alazán, and Naranjos. Around the mighty Potrero No. 4, the gas pressure soon broke fissures through the ground. It was this damage, oilmen said, that led to the three-month conflagration that nearly destroyed El Aguila's great well.^[40]

Aguilar also demanded a tax payment of fifty thousand pesos from the Huasteca oil fields, although he later accepted a payment of ten thousand pesos. Huasteca's operations had not been interrupted, although the Aguilar forces confiscated all the arms in the Huasteca camps. Still, Huasteca was not a company that relished paying taxes to two authorities. Harold Walker suspended tax payments to the federal government at Tampico, a tactic justified by the U.S. failure to recognize Huerta. Subsequently, when Walker was in Mexico City on business, Huerta threatened him with death. Walker promptly signed a draft for one hundred thousand pesos to cover the unpaid federal taxes.

Once Walker was safely out of the city, the company then canceled payment on the draft.^[41]

Most of the Waters-Pierce assets remained in Tampico, still controlled by Huerta's troops. Therefore, Pierce was worried when the Constitutionalists ordered him to discontinue fuel oil deliveries to Huerta's troop trains. Knowing of Washington's attitude toward Huerta, Pierce asked for U.S. protection, going so far as to notify the State Department of the location of his refinery, storage tanks, pipelines, oil wells, and floating craft. Was he expecting — or hoping for — a U.S. invasion? Upriver at Pánuco, Shell's employees of La Corona Company had strict orders not to meddle in Mexican politics. Yet, now La Corona too was confronted with a problem of knowing to whom to pay oil taxes. Should it pay to the Constitutionalists, whose troops occupied Pánuco after December 1913, or to Huerta's troops still in Tampico?^[42]

All of the oilmen had to use their best diplomacy in order to placate all the parties. They also had to avoid alienating competing political factions but at a reasonable cost. El Aguila's managers desired to operate with both the Constitutionalists and Huerta. Therefore, they decided to pay Huerta's new taxes — even though existing contracts gave them tax exemptions. Meanwhile, El Aguila, Huasteca, and Waters-Pierce all acceded to General Aguilar's orders not to sell fuel oil to Huerta's railroads.^[43] To complicate matters, Huerta's federal troops retained control of the isthmus, where El Aguila had a refinery and several minor oil fields. General Aguilar, a Constitutionalist, summoned J. B. Body to his headquarters at Tuxpan to pay a $120,000 tax bill on the isthmus properties. Body sent his vice president, Ryder, to temporize with the Constitutionalist commander. Body also saw fit to leave Tampico just before the arrival of Carranza, after that city had fallen to the Constitutionalists. He did not wish to arouse Huerta's suspicions. At the same time, when it appeared likely that the Constitutionalist rebellion was going to succeed, the oilmen scrambled to sell fuel oil to Carranza, so as not to appear partisans of Huerta. Then Carranza ordered El Aguila to halt deliveries of oil from Tuxpan, held by constitucionalistas, to its refinery in Minatitlán controlled by the huertistas. In response, the huertistas prevented the refined products of the Minatitlán refinery to pass into Constitutionalist-held territory.^[44] Few companies were immune from this domestic struggle for power during the Revolution. The National Petroleum Company of Richmond, Virginia, had been leasing land from the National Railways of Mexico. When the rent came due, the Constitutionalists demanded payment be

made to them. So did the Huerta government. The dilemma was shortlived, however, as the Constitutionalists soon took complete control of the National Railway system.^[45]

Such problems for oilmen even outlasted Huerta, because the Constitutionalists did not recognize any contracts that oilmen had made with the huertista government. Both Jersey Standard and Shell officials had built riverside storage and terminal facilities while Huerta controlled Tampico. After the Carranza troops took over, both companies had to present their "illegal permits and contracts" to Tampico's new officials.^[46] In the meanwhile, Huasteca had made an agreement with the Constitutionalists to supply their fuel oil needs during their struggle with Huerta. The value of these supplies was to be used to defray the future payment of taxes to Carranza. Carranza's need for funds became acute soon after Huerta's fall, when Villa and Zapata occupied Mexico City. Carranza's agents ordered Huasteca to pay them 665,000 pesos in back taxes. Huasteca declared that it had already provided the Constitutionalists with 685,000-pesos-worth of fuel oil, essentially paying these taxes in advance. Cables passed from Huasteca's New York attorney F. R. Kellogg, the secretary of state, and the British ambassador in Washington. Their diplomatic intervention helped resolve the matter.^[47] Once they realized that the Carranza victory did not end the domestic political conflict (for Villa and Zapata immediately rebelled against the new government), the oilmen openly expressed nostalgia for a simpler time — the era of Porfirio Díaz.

The longer these conflicts continued, the more the oilmen sought refuge with a new ally, the diplomatic community. They did so in violation of their Mexican government contracts and permits, almost all of which treated the companies as if they were Mexican entities. In disputes with the government, the companies were to seek remedies in Mexican courts, not with foreign governments. Of course, the Mexican court system was deteriorating as rapidly as the domestic political situation. Oilmen naturally turned increasingly to their home governments. Diplomatic support had been nearly nonexistent during the Díaz regime. Indeed, it had been unnecessary. Revolutionary times provoked more diplomatic activities in defense of the oilmen. Domestic factions least in favor with the foreign governments were encouraged to wrap themselves in the cloak of nationalism. It was a refuge of sorts for an increasingly beleaguered Victoriano Huerta. American, British, and even Dutch gunboats appeared off the shores of Tampico and Tuxpan in order to "defend" the lives of foreigners. Some managers of the

Dutch company, La Corona, began to live aboard the Dutch cruiser Kortenaer. Dutch marines and the ship's crew worked for La Corona, because many of the skilled workers had fled.^[48]

Without having been asked, the Dutch even attempted to mediate between the Constitutionalists and Huerta. One Dutch businessman laid before Huerta a plan for immediate elections approved by the American secretary of state. President Huerta was indignant. He cursed the American president and his new diplomatic representative in Mexico. He also deplored the presence of foreign naval vessels at Veracruz and Tampico. "No one has the right to intervene in our domestic politics," Huerta shouted, "and if the United States continues to do so — then I will defend the honor of Mexico as long as one Mexican is still alive." Reported the chastised mediator to the Dutch foreign minister: "That, Excellence, was the most difficult moment I have experienced in my life."^[49]

More and more, the petty vexations aroused a desire among oilmen for some diplomatic or even foreign military solution. Other companies had followed Waters-Pierce's example of informing the U.S. government of its valuable installations, presumably so that these would become an integral part of the military plans should an American invasion come. Even the British and Dutch were half expecting U.S. intervention. Given President Wilson's disgust for the Huerta regime, British and Dutch businessmen felt that the United States was obliged to protect non-American properties too. Everyone wanted to avoid in Tampico the kind of looting of the foreign community that had occurred after Villa's troops took Torreón. The Dutch and British ambassadors in Washington said they held the United States responsible for any damage the Constitutionalists might inflict, since Wilson and Bryan were backing Carranza and Villa. El Aguila began to take precautions. "My dear Hugh," Cowdray wrote to the commander of the HMS Essex, introducing him to Body in Mexico, who was to "tell you the nearest way to our oil fields in the event of trouble arising, so that they can be adequately protected."^[50]

Clearly, the demand was mounting for some kind of resolution of the unsettled situation in Tampico. But the oilmen were hardly of one mind about what should be done. "Does not the situation appeal to you as one in which our Government should see that its citizens should not be despoiled of their property?" the National Petroleum Company asked Secretary Bryan.^[51] But El Aguila looked upon military intervention with horror. "We know that if the United States decides upon

intervention as one way of dealing with the situation," Body observed, "no foreign life or property will be safe."^[52] Intervention is what they got; but it was to be intervention of the American government's choosing — not the oilmen's.

Seize the Custom House

Tension had been mounting between the federal troops of President Huerta in Tampico and the Constitutionalist forces operating in the surrounding environs. The British government recognized Huerta. The American administration openly supported the Constitutionalists. Foreign oilmen became involved insofar as they needed to operate with all parties and as they represented an increasingly substantial source of revenues for contending factions. Perhaps an explosion was not inevitable, but the revolution in the Huasteca Veracruzana was as volatile as some of the belching oil wells. A local spark (struck by a nervous foreign manager) or a bolt of lightning (sent down by diplomatic misstep taken thousands of miles away) might have been enough to set off a political conflagration consuming the entire oil industry. The Tampico incident was almost it.

For several months before the spring of 1914, Constitutionalist and federal troops had engaged in sporadic skirmishes around the city of Tampico. To protect foreign property and life, the gunboats of the United States, Great Britain, and the Netherlands cruised up and down the Pánuco River among the oil barges, tank steamers, and federal gunboats. The battleship USS Virginia had been stationed two miles off the entrance to the harbor.^[53] By November of that year, the Navy Department had been making contingency plans. Rear Admiral Frank F. Fletcher had reported no fighting or disruption of the oil industry as yet but estimated that the Constitutionalists had 4,000 men in the district while the Federalists had a force of 1,500 men at Tampico. Fletcher had drawn up plans to place 3,500 American servicemen with machine guns, field guns, and one-pound mortars into the field to protect the oil installations. On one occasion, the Americans had even ordered the evacuation of its citizens. In December 1913, when three thousand troops under General Aguilar took up positions on the Pánuco River opposite Tampico, approximately five hundred evacuees, including two hundred Chinese, gathered for evacuation. Gunboats

ferried the first refugees to the battleships Virginia, Rhode Island, and New Jersey lying offshore.^[54] The action turned out to be somewhat precipitate, and the Americans soon returned to work.

The Constitutionalist siege of Tampico began in earnest on April 7. A force under Gen. Luis Caballero probed, somewhat desultorily, the federal defenses at the railway trestle just north of the city. Meeting resistance, the Constitutionalists fell back. Federal gunboats also fired back at rebel positions in the southern industrial suburbs of Doña Cecilia and Arbol Grande. Their shells landed near the Pierce refinery, setting fire to two oil tanks and a warehouse. Some foreigners were brought aboard British and American naval craft, and the German cruiser Dresden arrived to protect German nationals. Meanwhile, Aguilar apparently had menaced El Aguila's oil fields because of Lord Cowdray's alleged support of Huerta.^[55] To this point, no group of foreigners had as yet been singled out for reprisals by any of the combatants. But the situation was tense.

The feverish activity of the American naval vessels had consumed their supply of petrol. As the city lay nervously under siege, the U.S. gunboat Dolphin dispatched its paymaster and a crew aboard a small whaleboat flying the American flag. The American refineries were now closed for business, and this crew rowed along the river and up a small canal to the wharf owned by a German merchant in order to buy gas. They landed within blocks of the northern railway bridge, where the Federalist forces were expecting a Constitutionalist advance. Once onshore, the American sailors were arrested by federal troops and held at gunpoint for one hour. American naval officers notified the federal commander, Gen. Ignacio Morelos Zaragoza, who promptly released the men with his profound apologies about the misunderstanding of his subordinate officers. The American sailors returned to their gunboat with a cargo of gasoline.^[56]

Cables passed between the American naval commanders at Tampico and Veracruz and their superiors in Washington. Admiral Henry T. Mayo demanded that General Morelos Zaragoza order his forces to fire a twenty-one-gun salute to the offended American flag. The American government also demanded that President Huerta compel his commander to comply. To some in Mexico City, Huerta almost seemed to welcome U.S. intervention as the only way he could rally enough support to shore up his weakening government. Huerta's defiance motivated the secretary of the navy, Josephus Daniels, whose assistant secretary at the time was young Franklin D. Roosevelt, to dispatch six

Map 3.
Tampico in 1918

more battleships to Tampico.^[57] Were Daniels and Roosevelt recreating the momentous decision of Uncle Theodore Roosevelt, who as assistant navy secretary in 1898 and on his own authority sent Admiral Dewey's fleet to Manila? Apparently not. The decision to "get tough" with Mexico had come from President Wilson himself. At the time, Wilson told his personal physician and golf partner: "I sometimes have to pause and remind myself that I am president of the whole United States and not merely of a few property holders in the Republic of Mexico."^[58] Cooler heads did not prevail. It soon became clear that no one was thinking at all about the oil industry in Mexico nor about the Americans who worked there.

An armed invasion of Mexico was ordered. Instead of having the marines storm ashore to protect the oil fields of the Huasteca Veracruzana and the refineries of Tampico, the Wilson administration sent the expeditionary force to the port of Veracruz. Naval planners had contemplated an invasion or at least a bombardment of Tampico. But their inability to sail their battleships across the sandbar at the mouth of the Pánuco River deterred them. Admiral Mayo worried that his smaller gunboats and cruisers on the Pánuco River would be susceptible to Mexican artillery fire. American policymakers had chosen Veracruz because Huerta still obtained arms and supplies

through the port. An American interdiction of the Veracruz port — although not invited by Huerta's principal adversary, Carranza — was intended to rid Mexico of this "tyrant" and "assassin" once and for all. A report that the German cargo vessel Ipiranga was nearing Veracruz sealed the decision. The Americans did not want Huerta to obtain arms.^[59]

In the haste of decision making, officials in Washington dismissed the danger that armed intervention posed for U.S.-Mexican relations or for the relationship between Americans working in Mexico and their hosts, the Mexican people. No one, for example, had queried the American consul at Tampico, Clarence A. Miller. He would have warned that a troop landing at Tampico or Tuxpan would lead to the Mexicans' destroying all the oil fields, tank farms, pipelines, and refineries in the district. "A war of American intervention would be a great calamity. All other nations will stand to reap all the advantages; whatever the result might be," he warned; "our country would bear all the expense and reap all the crop of resulting hatred and vengeance. Americans will be unable for many years to come to work in the outlying districts in the oil fields and other parts of Mexico."^[60] Miller had not even considered what would happen in the oil zone if American troops landed at Veracruz instead.

The navy's plans to protect the oil fields remained on the shelf. Instead, Daniels cabled his admirals: "Seize custom house [at Veracruz]. Do not permit war supplies to be delivered to Huerta government or to any other party."^[61] By the second day of the invasion, by which time the Congress had approved Wilson's action, more than 3,300 American troops were ashore at Veracruz. The German merchant vessel Ipiranga was indeed detained by the American occupation of Veracruz. But the invasion forces, not being at war with Germany, could not confiscate the cargo. Once allowed to depart, the Ipiranga headed for the federally held port of Puerto México, where the arms were off-loaded for Huerta's troops.^[62] The Americans could not even prevent the shipment of arms to Huerta, which had been the ostensible excuse for seizing Veracruz.

As soon as the news spread along the Mexican Gulf Coast that the United States had declared war on Mexico (which was not true), all American gunboats pulled out of the Pánuco River and sailed to Veracruz. The Americans at Tampico were stunned. Within hours, refugees with white skin began descending on Tampico from the oil fields. Englishmen, Dutchmen, and Germans accompanied the Americans. Europeans had little faith that the Mexicans, at the moment, cared about the differences between the nationalities. As the American workers saw it, "Brown howling mobs, armed with clubs, stones and pistols, immediately congregated all over the city, parading the streets and howling for 'Gringo' blood. To a Mexican everything with a white face is a hated `Gringo.'"^[63] The fearful Americans gathered at the Southern Hotel, where they bolted the doors against a mob of Mexicans who had gathered to wreck Sanborn's American Drug Store. No doubt, the Mexicans were not calmed by the sight of the American flag waving above the Southern Hotel. Finally, the German commander of the Dresden and a detachment of German marines marched on the hotel, where the Americans were trapped. The Germans gained the cooperation of the federal commander and escorted 150 Americans to the waterfront, where they were evacuated. The Americans credited the Germans with having saved them from being overrun by Mexican "mobs."^[64] It was a curious exchange for the U.S.'s presumption of having intercepted a German merchant vessel during peacetime.

The American naval commander, Admiral Charles T. Badger, later considered this withdrawal of the gunboats from Tampico to have been a grave error. If the gunboats had subsequently returned to save the Americans, they would have come under fire by both federal and rebel

forces, because the navy's reappearance at Tampico would have been a provocation.^[65] Indeed, the British and German commanders cautioned the American vessels not to return. They requisitioned the barges and tankers belonging to the Huasteca and El Aguila oil companies, raised the German and British flags over them, and evacuated Americans as well as their own citizens.^[66] In any case, the withdrawal of U.S. gunboats from Tampico had had the approval of the Navy Department. Secretary Daniels stated that he did not want the Mexicans to think that the United States was at war, he did not desire to endanger all foreigners at Tampico, and anyway the British naval commander had agreed to protect American citizens. Indeed, the commander of the Kortenaer, which arrived in Tampico to take on the Dutch citizens from the Dresden, was certain the Mexicans would have destroyed the oil industry if the American forces had reappeared in the river. In fact, he was concerned that the Constitutionalists might destroy the wells anyway.^[67]

Glad Enough to get Out

In the meantime, panic had spread among the American and European workers. American drillers at Pánuco heard rumors of an imminent landing of U.S. troops and did not want to be caught upriver. The Texas Company sent "a big stern-wheeler" steamboat to Pánuco. Coming downriver with a load of Americans, the British pilot, flying the Union Jack, warily floated past the federal gunboat. The Mexican gunboat did not fire. The Americans on board had been expecting to see Leathernecks scampering along the riverbanks to rescue them. None came. The Chinese employees who stayed behind at Pánuco packed up the tools and took them to the British consular office for safekeeping.^[68] Many left their personal effects behind. A blacksmith working for Mexican Gulf at Pánuco left behind his own set of tools, valued at $165. Not choosing to return, he later sent for them, only to discover that the tools had been pilfered in his absence. "At the time all the Americans were glad enough to get out themselves," the worker later wrote to the U.S. consul.^[69] The American evacuees boarded a mixed flotilla of merchant vessels and oil tankers off the coast. Naval officers came on board to draw up passenger lists, and the entire group was dispatched to Galveston. Apparently only one American had died. Weston Burwell was killed while en route from Pánuco to

Ozuluama, carrying four thousand pesos to purchase mules in order to build an earthen reservoir for La Corona. In all, some two thousand oil workers and family members had clambered aboard the ships bound for Galveston.^[70]

The recriminations began immediately. Those refugees who had either returned to their hometowns or stayed for a month at Galveston complained of the shabby treatment they had been accorded by U.S. forces in Mexico. President Wilson and Navy Secretary Daniels came under special criticism. The oil field and refinery workers grumbled about the navy's retreat from Tampico just when U.S. forces were attacking Veracruz. They felt their lives had been endangered and their personal property lost because of their government's perfidy. The refugees certainly were not philosophically against the notion of U.S. intervention in Mexico. In fact, many would have welcomed the marines at Tampico; they even demanded that U.S. military forces protect them on their return to the oil fields. Somewhat defensively, Daniels asked why these Americans were protesting a policy that had saved their lives. They had gone to Mexico to get rich, he suggested, and now expected the country to raise an army of five hundred thousand men to protect them.^[71] Perhaps no one reflected the sentiment of the American petroleum workers in Mexico better than William F. Buckley. He continued to be a bitter critic of the Wilson administration. At the 1919 Congressional hearings on Mexico, he claimed that the American troop landing at Veracruz had needlessly endangered lives at Tampico.^[72] Thereafter, the American workers in Mexico, as well as the owners, were to form a vocal lobby against what they considered Wilson's inept foreign policies.

For the moment, however, the owners of oil companies withheld their criticism, needing diplomatic support to protect their abandoned properties in Mexico. The big question concerned the oil leases. The American companies would not be able to make their rental and royalty payments to landowners during their exile. Lack of timely payment often meant breach of contract, and they feared that the British and Dutch would jump American claims. Some Americans even feared that the British gunboats might collude with British oilmen to prevent the return of the Americans. They looked to the secretary of state for help.^[73] Secretary Bryan conferred with British and Dutch diplomats in order to prevent the breach of American-held leases. The Dutch and British oilmen, as it turned out, were quite willing to agree to a policy of status quo ante. They too had evacuated Tampico and were not will-

ing to return until the Americans did. Their leases were in the same danger of being breached. The British government queried Lord Cowdray, who disclaimed any interest in taking advantage of the Americans' plight. The Dutch government also agreed to withhold any diplomatic support to Dutch citizens who sought to jump American leaseholds.^[74] Once again, the fate of the Mexican oil industry was decided outside the country.

The owners of oil properties in Tampico, of course, expected the worst. They were certain that the evacuation and lack of U.S. military protection would mean the destruction of the oil fields. A representative of the East Coast Oil Company painted a mental picture of Mexicans looting the oil fields, runaway wells catching fire, and destroyed and burning oil camps.^[75] "The oil field of Mexico is gusher country,", said a representative of The Texas Company, who warned of the danger of "unsupervised" wells filling up the storage pits and then "spreading over the lands and streams." The danger of fire grew with the oil spills. "Such a fire would burn the entire oil country and doubtless a multitude of its inhabitants," he said. Conflagration would also melt the valves of those wells that were pinched in, causing additional losses.^[76] Of course, these owners were asking, rather indirectly, for an American military escort so that the oilmen could return to Mexico.

Destruction of neither the oil wells nor the oil camps ever took place. Some oil managers had stayed on their properties. William Green of Huasteca later bragged that once ordered out to sea, he returned by boat to the oil wells in the Faja de Oro, which he managed for thirty days until the U.S. government permitted the return of the American workers.^[77] Indeed, the feared looting consisted of only a few mules and automobiles taken by Constitutionalist troops. For the most part, the refineries were untouched, and the Mexican workers in the oil fields prevented the wells from overflowing the storage capacity. The American consulate reopened in Tampico on 4 May, just thirteen days after the evacuation, protected by the forgiving attitude of the federal troops still in the city.^[78] The State Department had sought to minimize the danger to the oil zone but not by dispatching U.S. troops to protect the wells. Instead, Bryan attempted to negotiate separately with the Constitutionalists to declare the oil zone a neutral area in its revolutionary struggle with the federal forces. Carranza's answer was somewhat noncommittal. The neutrality of the oil zone, he said, depended on Huerta's leaving.^[79]

Once again, the Pearson group attempted to make friends on all sides. "I have maintained very cordial relations with [American forces at Veracruz]," said J.B. Body, "but not to such an extent as to run the risk of being called to account by our Mexican friends at some later date."^[80] All El Aguila coastal craft struck their Mexican colors and hoisted the Union Jack so as not to be captured as war prizes by the American navy. Meanwhile, the British naval officers at Tampico traveled into the oil fields, speaking to both Constitutionalist and Federalist commanders about protecting the volatile oil wells. The English managers remained in most of the oil camps; El Aguila's pipelines continued pumping crude oil, which its fleets carried to the refinery at Minatitlán. The only Pearson asset in transition during the aftermath of the Tampico incident was its Tehuantepec National Railway (TNR). Huerta's federal army took control of the TNR, which Mexican workers had operated when American workers evacuated.^[81] Operations of the British company continued.

The Americans, however, were out for most of May, during which time the Federalists had surrendered Tampico to the Constitutionalists. They began to return on 20 May, just a month after they had left, and within five days, the steam tankers resumed loading petroleum at the Huasteca terminal.^[82] In Tuxpan, June was another record-breaking month for oil exports. General Aguilar maintained order in the city for Americans and occupied himself with collecting a 15 percent tax on all Mexican properties. In Pánuco and Topila, however, in the absence of Constitutionalist troops, the local citizens greeted the returning Americans with anti-American meetings and insults. Several citizens of Pánuco demanded that Americans turn over their weapons and be treated as spies.^[83] Many Mexican citizens in the Huasteca remained hostile while the American troops still occupied Veracruz. They did not leave Veracruz until November 1914, fully four months following the collapse of the Huerta government. Like the Americans earlier at Tampico, Huerta fled to safety aboard the German cruiser Dresden. The Constitutionalists and the Federalists had shown great forbearance while American troops occupied Tampico. Both Mexican factions had found it in their interest not to destroy the oil industry, because as Navy Secretary Daniels was fond of saying, it was "the goose that laid the golden egg." Both sides needed the revenues provided by the oil fields. As for the American intervention at Veracruz, it did not seem to have accomplished very much at all except to promote the resentment of Mexican combatants toward Americans. The oil zone would never

return to normal following the Tampico incident. One colonist from Tampico said later that until the Veracruz occupation, Americans on the Gulf Coast had experienced some inconveniences.^[84] Thereafter, all foreigners were molested aplenty.

Showing Signs of Unrest

Although the oil companies had already suffered from their inevitable involvement in Mexican politics, the American invasion of Veracruz marked the beginning of wholesale depredations in the oil zone. Before April 1914, disruptions had been sporadic and isolated. Thereafter, conditions approached anarchy. Prolonged civil conflicts rendered the booming oil industry the object of attention by a penurious new government, ascending army chieftains, and destitute military deserters. Although these depredations caused countless vexations for the foreigners and Mexicans running the oil industry, little real damage occurred to the oil assets themselves. From 1914 onward, the prices increased at the same time that new drilling yielded record flows of crude oil. Most leases had been taken before that date anyway; most pipelines and oil terminals had already been well established. Refining and exporting continued almost unimpeded by the civil turmoil, except (as we shall see in chapter 5) for brief moments of labor unrest. The depredations took place primarily in the countryside. Both foreigners and local Mexicans working in the oil fields suffered robberies, hold-ups, insults, intimidations, indignities, ravages, forced loans, and assassinations. These were not part of a revolutionary program but a result of the breakdown of law and order in the Huasteca. Although revolutionary depredations made life insecure in the oil fields, they hardly affected the performance of the foreign-owned industry.

After the fall of Tampico, there were just two more pitched battles in the oil zone, both at El Ebano. No sooner had Huerta fallen than the combined forces that had brought about his government's demise began to break up. The old federal army of Porfirio Díaz and Victoriano Huerta was destroyed. Now the victorious Constitutionalist forces broke into competing factions. Villistas and zapatistas fell out with carrancistas and obregonistas. Meanwhile, Carranza made Veracruz his capital while the zapatistas and villistas occupied Mexico City. Constitutionalist forces loyal to the first chief held the Huasteca region and

Tampico. In November 1914, a force of villistas under the command of Gen. Tomás Urbina descended from the central plateau along the San Luis Potosí — Tampico rail line. They were met at El Ebano by Constitutionalist forces under Gen. Jacinto Treviño. The battle was joined in the midst of Mexico's oldest oil field. One hundred cannonballs and countless bullets pierced the oil storage tanks. Smokestacks of the topping plant were shot off. Water and oil pipelines were broken, and the crops and livestock were looted. Doheny's Mexican Petroleum Company lost eight hundred thousand barrels of oil, none of which had caught fire because it was so thick. Mexican Petroleum also had to buy foodstuffs from Texas to make up for the loss of agricultural production.^[85] The villistas did not abandon the area until a second battle, this time fought near but not in the oil camp. In April 1915, a Constitutionalist force of 1,500 men under General Lárraga, a local landowner, cut the railway line between the villistas at San Luis Potosí and General Urbina. Then they pushed Urbina's forces north out of the region.^[86]

While in the oil zone, the villistas attempted to wield some influence over the industry, adding to the administrative confusion. A certain E.J. Eivet of the Conventionalist (Villa's) Railway was having difficulties securing fuel oil from the Constitutionalist-held oil fields. The villistas had been forced to purchase fuel oil in Texas. In Mexico City, Eivet called Frederick Adams of the Pearson organization on the carpet. He demanded a fifty-thousand-peso "loan" in exchange for good treatment when the Convention triumphed. The Pearson group declined to pay the loan; it pleaded neutrality in political conflicts. Eivet threatened that Pancho Villa himself would be interested in knowing who his enemies were.^[87] Even after the second Ebano battle, General Urbina menaced the oil zone once again. "We are not all dead, but having a good time," he was reported to have said during a banquet. Urbina boasted that he could capture Ebano, and Pánuco too, anytime he wanted. Perhaps he wanted the Constitutionalists to divert troops from Celaya and Aguascalientes, where they were pressing the villistas, to defend Tampico.^[88] Perhaps Urbina was merely posturing, mocking defeat with characteristic bravado. In any case, the villistas soon abandoned the oil region to the constitucionalistas during the weeks that Gen. Alvaro Obregón drove Villa's army north through the central plateau.

Only one other time, besides the Veracruz invasion, did the foreigners have to evacuate the oil fields en masse. This occurred in 1916, during the second U.S. armed intervention in Mexico, when a detachment

of U.S. forces was sent into Chihuahua to punish Pancho Villa for his raid on Columbus, New Mexico. Unlike the first crisis, this one lingered at low intensity during the eleven months that U.S. forces were in Mexico. At the time, labor unrest was building tensions within the city of Tampico. The Constitutionalist military authorities, in their disgust for the presence of U.S. troops on Mexican soil again, now had a perfect excuse to make common cause with the Mexican working class. A rumor passed through the city that the police chief was planning to have all the Americans killed or captured before they could reach the safety of U.S. gunboats, which had quietly returned to the Pánuco River. Once again, Americans were disarmed at roadblocks throughout the oil zone, and Mexican soldiers around Tampico mounted guns on the jetties and railway flatcars. Shortly after midnight on 15 May 1916, soldiers surrounded the refinery of the Standard Oil Company. While Mexican officers positioned themselves at the gangplank of the oil tanker John D. Rockefeller, then docked at the terminal, soldiers were seen on launches in the river. A night watchman feared they were laying mines. Then at 4 A.M., according to Standard Oil executives, "Three whistles were sounded from the opposite side of the river, and the Mexican soldiers immediately took to their boats and crossed to the other side."^[89] The troops did not commit any destruction of the refinery. Some foreign workers, nevertheless, were so spooked by the incident and the rising level of tension, that nineteen men, eight women, and two children left with the John D. Rockefeller the very next day. The indignant refinery manager, J.A. Brown, claimed that "they stampeded."^[90]

As usual, the oil companies prepared themselves as best they could against the political hurricane over which they had no control. El Aguila planned to place the Mexican supervisors in charge of the oil fields if the Americans invaded. The British managers feared that the American troops would be content to secure the refineries and oil terminals on the coast and not the great oil wells just thirty miles inland. Ryder's chief Mexican assistant, Múñoz, was to take charge at Potrero, and other oil companies planned similar contingencies.^[91] British citizens were carrying translations of their passports to identify themselves to Mexicans unable to differentiate a London accent from a Texas twang. Although local commanders assured the Britons that no British-owned property would be harmed in the event of an American invasion, the Carranza government notified the diplomats that all oil wells would be destroyed. The British, of course, were concerned to prevent any disruption to the world's supply of petroleum during the world war. The

new American secretary of state, Robert Lansing, responded to British concerns. He promised that his government had no intentions of invading the oil fields.^[92] In Tampico, British officials had effected a less tense relationship with the local commander, Gen. Emiliano Nafarrete. The commander calmed the labor upheavals of the first three months of 1916, and he assured British citizens that he would protect them.^[93]

By this time, everyone suspected that U.S. troops might also be dispatched to the oil zone. The Constitutionalist authorities now moved their offices out of Tampico. General Nafarrete warned the American consul that he would burn the oil fields if U.S. troops landed at Tampico. Mexican troops covered the lighthouse at Tuxpan bar with black sacks and posted troops at the entrance to the river. All available foodstuffs from the oil camps of El Aguila were ordered to be delivered to Tuxpan. Consul Dawson was a cautious man. He immediately ordered all Americans, with their families and handbags only, out of the oil fields. They were to assemble for evacuation at the Bergan Building, at the Colonial Club (a provocative name for a social club catering to foreigners), and at the Victoria Hotel. Within a week, some 1,200 Americans and a few Britons left Tuxpan for Tampico. Others stayed. Doheny claimed that his ships alone had evacuated 900 Americans. He graciously refused reimbursement from the U.S. government, which as far as records show had offered him none.^[94] The 1916 evacuation was brief; the foreigners soon returned.

The British consul at Tuxpan despaired of saving the dangerous situation. He feared that a landing of U.S. troops would certainly mean the destruction of the oil fields. Already reeling from a shortage of foodstuffs, the rural population in the Faja de Oro were made more destitute by this second exodus of Americans. "[T]he people are shewing [sic ] signs of unrest at being without work on account of the Oil Companies having shut down, and do not hesitate to express themselves against the threats made by various commanders to destroy property, etc.," observed British Consul Hewitt. "The people realize that they are dependent in everything on the foreign interests in this section. There are many thousands now without employment and the exodus of Americans is a sore blow to them."^[95] Perhaps Hewitt may be faulted for sharing the view of his fellow Britons in Tuxpan-not necessarily that of the Mexican residents themselves. Yet, there is no denying that Mexicans suffered along with the foreigners-indeed more so.

The British Foreign Office, Lord Cowdray, and even some American owners were relieved that the United States did not intend to land

troops at Tampico. For one thing, such an invasion would have had to be "whole hog or nothing," as one British diplomat put it.^[96] Cowdray had pressured the Foreign Office to take up his concerns with the State Department. In the event of an invasion, which he counseled against, Cowdray wanted to be able to export through any naval blockade of the Gulf Coast. He also desired American troops to protect El Aguila installations and not to molest company vessels flying the Mexican flag. Nor did Cowdray want his Mexican merchant seamen captured as prisoners of war. As a precaution, nevertheless, El Aguila protected their wells with "armoured mounds"; Penn-Mex next door also placed concrete blocks over the valves of their well heads.^[97] If the foreign oilmen avoided getting foreign troops, they did have to contend with the presence of increasingly unruly Mexican government soldiers.

Applying Deleterious Epithets

The presence of troops in the oil zone, as in the rest of the country, contributed to the insecurity of economic and human life in Mexico. Troop depredations began and intensified with the Revolution itself. In the 1911 rebellion against Díaz, marauding bands of armed men operated in the oil zones. They came down the rail line from Tuxpan to sack the oil camp at Furbero, burning railway bridges on the way. Farther north, the El Aguila managers worried about the effect of an armed attack on Potrero del Llano No. 4. Ominously, someone had cut the telephone wires to the camp at Potrero. Cowdray acted prudently. He took out fire insurance, at a premium of 2.5 percent, on 2.5 million barrels of oil per year.^[98] Cowdray even suggested that the owner of the Hacienda Potrero del Llano, Crisóforo B. Peralta, who was receiving substantial royalties from the company, ought to organize its defense. "[T]he Peraltas are so largely interested in the Potrero field that they ought to be extremely alert in doing all they can to assist in ensuring its safety."^[99]

The series of revolts against Madero, commencing in 1912, brought additional problems of oil-camp security. At the time, El Aguila and other companies were engaged in expanding their pipeline and terminal facilities. None of the companies deemed the political disturbances to be sufficiently dangerous to abandon their construction plans. On the other hand, the oil companies would have suffered more if they had

not been able to get rid of their oil. In August 1912, armed "bandits" attacked the oil camp of Ixhuatlán on the Isthmus of Tehuantepec. Because the American drillers were getting edgy, El Aguila's general manager, J.B. Body, protested to the Madero government and asked for protection. Gen. Félix Díaz then led a rebellion in the Huasteca region and captured the virtually undefended port of Tuxpan. Only a few others supported the Díaz rebellion, his first of many, and government troops soon arrested and transported him to a military prison in Mexico City.^[100] In February 1913, Díaz conspired with Generals Bernardo Reyes and Victoriano Huerta to produce La Decena Trágica, the ten tragic days of bombardment in Mexico City between army forces in the National Palace and rebel army forces in the Ciudadela. That particular rebellion cost Reyes his life and Madero first the presidency, and shortly afterward, his life too.

Within a year, as the rebellion against Huerta took shape, the oil zone became even more involved. Rebel raids indicated to the foreigners that federal troops were ineffective at protecting the countryside. In May 1913, a Constitutionalist force plundered La Corona's camp at Pánuco.^[101] The Constitutionalist troops under General Aguilar began to occupy the southern fields. They besieged a small garrison of federal troops at Tuxpan during November 1913, eventually sending them fleeing to Tampico. Thus far, the oilmen were much relieved to report no damage. "I strongly consider that our relationship with the natives from the district between Tuxpan [sic ] and Tampico is such that our property will not be generally attacked," said Lord Cowdray, optimistically.^[102] Thereafter, only Tampico would remain under federal control for the rest of the year. The rebels controlled the countryside.

But conditions in the countryside only worsened following the American occupation of Veracruz and the victory of Carranza over Villa. Manuel Peláez led a local rebellion against the Constitutionalists in the oil zone. Constitutionalist officers lost control of their troops; pay was scarce, liquor was not; and rivalry between fellow officers exacerbated the depredations in the oil zone. Troops often entered the oil camps for supplies. They ate the camp's food, confiscated the livestock, and fed the camp's fodder to their own animals. The Penn-Mex Fuel Oil camps reported total losses of $84,252 and 594,544 pesos during the Revolution; Doheny's Mexican Petroleum Company set its losses at 1.6 million pesos; Transcontinental's losses of equipment and food amounted to $45,866.^[103] The officers courteously scattered about receipts and chits for the goods they took. In June 1914, El Ebano camp

lost three thousand pesos in cash and four thousand pesos worth of fodder to a visiting Constitutionalist force. The oil men preferred that the Constitutionalist troops remain in the towns of Topila and Pánuco rather than be stationed among the oil camps. Under the influence of alcohol, the soldiers became uncontrollable, dangerous, insolent, and "very obstreperous."^[104] Operations were disrupted on many mundane levels. Reported William Green of Huasteca:

I have many of the annoyances to which we are subjected by these Constitutionalists, such as the commandeering of our launches, demands on our commissaries, the holding up of emissaries between one station and another where the telephone lines are down. We are practically without mules at Casiano at present.^[105]

Moreover, the officers, each of whom recruited and paid for their own troops, displayed a good deal of friction and rivalry among themselves. A hierarchy of command hardly existed among Constitutionalist officers like Generals Millán and Alemán (father of the later president Miguel Alemán); Colonels Alberto Herrera, Adalberto Tejeda (later governor of Veracruz), Agapito Barranco, Tito Hernández, and Enrique Hernández; and Lieutenant Colonel Luis Ramos. In the southern fields, Constitutionalist officers were said to be recruiting oil workers by bragging about the abundant opportunities for looting and the violating of girls.^[106] Most of the time, the many armed groups composing rival forces went about avoiding each other and aggrandizing themselves.

The refining and exporting cities, like islands of rock in a churning and frothy sea, were only seldom threatened by contending armies. Tuxpan was calm under Aguilar, as was Tampico after the Federalists surrendered. In 1917, Generals Alvarado and Maycotte led three thousand government troops into Minatitlán to clear out the rebels who under Gen. Cástulo Pérez had threatened the Tehuantepec National Railway. The Constitutionalist generals conferred with A.S. Gulston, manager of the Minatitlán refinery, about garrisoning the oil camps at Filisola and San Cristóbal. Gulston became very apprehensive. He did not wish to antagonize the opposing armed faction on the isthmus. "[I]t is somewhat difficult not to appear as taking a prominent part in connection with advising them what operations they should undertake," Gulston admitted.^[107] In the countryside, no area was permanently cleared during the Revolution. Yet another rebellion by Félix Díaz in southern Veracruz and Oaxaca preyed on isolated, small

garrisons of Constitutionalists. In May of 1918, a band of six hundred men under Pafnuncio Martínez raided Minatitlán, killed twenty soldiers of the local garrison, threw their bodies into the barracks, which they set on fire, and took 45,000 pesos in currency and 25,000 pesos in goods from the El Aguila refinery. "I had no idea that so many as 600 rebels in one gang could exist in the Isthmus," exclaimed Lord Cowdray.^[108] The government troops swept through the area again, apparently finding few of the rebels.

The depredations and demands of armed troops in the oil zone were unsystematic and arbitrary. In the process, the oil camp managers became veritable diplomats. They learned to deal with the demands of the different factions, giving in here, resisting there, and making every general feel important. For the Huasteca company, William Green handled these chores in the southern fields. His description of one day, 1 March 1918, in the life of a supervisor is instructive of this diplomacy, as well as of Green's contempt for the Mexican officers with whom he was dealing:

On my return to Tampico from my last trip, General Acosta, who is in Tampico at present, sent for me to say that General de las Santos [sic ] had instructions to pay me the money I advanced them when we first met at Ojital. [S]ince the $1000 [pesos] I gave to Pruneda and the $1500 [pesos] I gave to Acosta, I gave $2000 [pesos] to Robinson, Jefe de Armas, Tampico, for rations for Acosta's troops; in all I have receipts for $4500 [pesos], and I will receive that as soon as the pay of Acosta's troops becomes due again. Instead of paying this to the soldiers General de las Santo [sic ] will pay it to me. . . .

Acosta tells me that many companies have made bitter complaints both against him and General Pruneda, and he informed me that he had taken pains to let his command know this, and he has especially recommended the Huasteca Petroleum Company to the consideration of all his subordinates. . . . He thanked me most effusively for not having made reports against him to [President] Carranza or [General] Dieguez, and told me that he would show his appreciations for this consideration on my part. Of course, I cannot vouch for Acosta, as this undiscopline [sic ] mob is very hard to handle, but taking into consideration our helplessness I believe it to our interests to lead him through these paths, on the theory that you can catch more flies with molasses than you can with a shot gun.^[109]

Such diplomacy, if indeed this is the word that describes Green's dealings with the local commanders, occupied a great deal of time. Their local problems multiplied considerably as new military commanders were assigned and reassigned throughout the oil zone. Generals Acosta, Pruneda, and De los Santos were replaced by other commanders from outside the district, who brought in their loyal troops.

Bribery Becoming So Customary

The military activities in the Huasteca Veracruzana had some very serious consequences. At once, transportation for foreigners and natives alike became very problematic. Troops placed barriers on the roads, stopping cars and travelers and examining the luggage. They commandeered the trains and little flatcars, called cucarachas ("cockroaches"), used by the oilmen for traveling on the narrow-gauged railways. The railway was the transport of choice among Constitutionalist troops. Rebel troops such as those of Gen. Manuel Peláez, the pelaecistas, therefore, blew up the trains and destroyed the railway bridges.^[110] River and coastal craft of the oil companies were taken continually by the troops. Soldiers once helped themselves to barges and boilers belonging to an American marine company in order to salvage a sunken gunboat, returning them when they had finished. Some Constitutionalist officers commandeered company yachts to go fishing. "The Aguila has carried over 1500 passengers during the past year," reported the company's navigation department in 1916. William Green lamented, "There have been days when we have not had a single launch in our hands for work on the laguna."^[111]

Secondly, the depredations of Mexican troops destroyed the agricultural base of the northern Veracruz economy. One American claimed that 3,500 American colonists, in addition to the Mexican rancheros and hacendados, had once produced in small farms around Tampico. Only 150 remained in 1919, the rest having been driven out after the American invasion of Veracruz. T.E. King had been a prosperous farmer in Tampico until "the government (Carranza) troops took all of my horses, mules and a great number of other live stock to[g]ether with a great quantity of grain and provisions, besides turning loose their horses in a young grape fruit orchard destroying five or six hundred trees."^[112]

Clearly, the armed bands did not single out only the Americans. Mexicans as well suffered. On a seventy-kilometer mule ride through the oil districts of the southern fields in 1917, British Consul Hewitt found the countryside outside the oil camps overgrown with weeds where a few years before cultivated fields had predominated. He noted that the few remaining people in the towns took to the bush when the Constitutionalist forces drew near. The foreign companies began to import foodstuffs from Texas in order to feed their workers.^[113] It is

difficult to ascribe these depredations to the land hunger of the lower classes, or to local peasants exacting punishment on the landlord class for past injustices. The Constitutionalist troops were underpaid, unmotivated, poorly trained soldiers from outside the Huasteca who stole from foreigner, hacendado, and small-holder alike. Social revolution in the Huasteca had become pillage, pure and simple.

One thing led to another. Small rebellions against Díaz and Madero gave way to the militarization of the oil zone. The military competition between Constitutionalists and Federalists led to double taxation on the oil industry. The American interventions contributed to the resentment of the foreigners. The Constitutionalist victory led to a struggle with the villistas and the local rebellion of Peláez in the Huasteca Veracruzana. The military depredations and requisitions led to a breakdown in transportation and agriculture. Then, the poor military pay and high cost of foodstuffs contributed to the breakdown of discipline among the Constitutionalist garrisons. By the end of 1917, the final scourge of revolution visited the oil zone: robbery and murder. The perpetrators were easily identified but not easily apprehended.

The oil camps attracted this final stage of revolution largely because they represented, for the individuals caught up in the confusing political and military campaigns as well as for the government, one of the last remaining sources of income. All the individual crimes that broke out between 1917 and 1920 had to do with robbery. The payrolls for workers and the rental payments to lessors provided the targets of opportunity. Small groups of armed bandits, usually numbering between seven and twenty, preyed on oil camps and traveling gringos. Isolated pump stations on the major oil pipelines became easy pickings, such as the robbery at the Tepetate pump station of The Texas Company that resulted in the murder of the Mexican cashier in July 1918. A month before, a band of ladrones (thieves) engaged in a series of robberies by passing leisurely through every pump station on the Huasteca pipeline.^[114] The oil camps themselves were easy, stationary, and inviting targets. Insecurity affected the foreign workers, who began to leave the country. "[A]s misery loves company their leaving might be the first step in a general exodus," reported Green of Huasteca. "The morale of the men is at the lowest possible ebb."^[115]

Mexican landowners also suffered. Company officials who were dispatched to pay them their monthly rental fees and royalties were held up. The companies resorted to calling the owners into Tampico to receive their monies. Roadways and rail lines became the favorite haunts

of small groups of robbers. The Chijol Canal, the narrow dredged passage between Tampico and the Tamiahua Lagoon, was another favorite area for bandits. They would ambush the oil company launches passing by, order them to shore, and take payroll boxes and personal valuables. Every now and again, a company paymaster was killed.^[116]

The holdup was always a harrowing experience. An exalted oilman like E.J. Sadler, president of Transcontinental and Jersey Standard's foreign production expert, was not safe in Mexico, as this report of a robbery on the Chijol Canal testifies:

Mr. Sadler was ordered ashore by these Mexicans and directed to walk along a path into the bush. Having no other recourse or any adequate means of self protection, he proceeded as commanded. He was continuously beaten upon the head and shoulders with the barrel of a cocked rifle and was told that he would be killed by a Mexican who followed him along the path. Mr. Sadler's response to this abuse was that it would be of no use to kill him. Another Mexican intervened and Mr. Sadler was allowed to return to the launch.^[117]

Not even the ports were safe. Armed robberies occurred at the Tuxpan terminal and once aboard a Tampico tugboat that was carrying the Transcontinental payroll just across the river.^[118]

There was precious little that the oilmen could do. Most of their arms had been taken from them, and those few who had arms were no match for the bandits. Every now and again, as in the case of the Americans' retaliation for the rape of the superintendent's wife, they mounted vigilante parties. On other occasions, if their phone lines had not been cut, they might lay an ambush in the oil camp on the expected arrival of bandits. William Green once noted that "our own rurales," by which he must have meant the armed watchmen (vigilantes), with a few shots scared off a group of bandits lingering on the road. Payroll men hid their money in the ashes of fireplaces, and others attempted to send the payroll from Tampico out to the camps by placing it in plain boxes among the general supplies, without any guard whatsoever. The latter stratagem was not successful. "How the matter leaked out, nobody knows," exclaimed the frustrated manager.^[119] But the oilmen did keep statistics on their victimization. In the eighty-three robberies that occurred in the twelve months following 15 August 1917, no suspects were ever apprehended. In the cases of 168 Americans who were killed in the Tampico oil district during the entire Revolution, not one killer was brought to justice.^[120] The explanation is not hard to find.

No one was apprehended for these robberies and murders because the perpetrators were the very officers charged with keeping law and

order: the Constitutionalist troops themselves. The evidence was everywhere. Robberies and outrages occurred while Constitutionalist forces were in the area. They occurred near their garrisons. Often, bandits presented themselves in their military tunics. At other times, robbers asked for the precise amount carried by paymasters who had first reported their travel itineraries to Constitutionalist commanders. Said a field report from Transcontinental: "No serious effort has been made to prevent them or to apprehend the guilty parties who are generally small bands of Carranzista [sic ] soldiers."^[121] Sometimes, in the midst of a robbery, they would say that they were villistas. But the oilmen knew better. At one point, the representatives of the companies requested that the Tampico military commander, General Magaña, send military escorts with the paymasters. "I cannot do that," he informed the oilmen. "The officers and men might steal the payrolls."^[122] William Green, ever a caustic observer of the Mexican outback, did not find it difficult to ascertain why the Constitutionalist troops were engaged in robbery. These men did not come from the Huasteca Veracruzana itself. Moreover, "[t]hey are underfed, rarely clothed, and more than one-half of their pay is stolen from them by their officers," he said.^[123]

Indeed, perhaps the decay of moral authority had started at the top. At any rate, the practical parameters of moral degeneracy meant that bribery and extortion became rampant at all levels of the oilmen's activities. In Tampico, Americans began to loathe and scorn the Mexicans on this count. They noted that, unlike Porfirian times, when only the highest official had to be paid for this license or for that infraction of the regulations, now it had become necessary to pay each subordinate official. Occasionally, a particular company, especially the larger and more powerful ones, was able to resist some new exaction. Then, it discovered that a competitor had benefited in some way by yielding to bribery. The Huasteca company began to equate resistance to bribery with resistance to each new exaction of government taxation.^[124] Perhaps the reason why corruption became something of an absolute condition at Tampico at the end of the Revolution was the unsettled state of politics. Even Carranza's own military commanders and civil authorities came and went with frequency. Did they and their retainers have to secure their incomes quickly, before they fell from favor or were ordered elsewhere?

The temptations were great for small Mexican entrepreneurs to use the influence of powerful Constitutionalist generals. One Jesús Herrera attempted to entice Gen. Pablo González, the highest Constitutionalist

military officer in northeast Mexico, into buying shares of his Mexican petroleum company at Pánuco. Herrera appealed to nationalism: if Mexicans do not buy shares, the foreigners will exploit the country's oil wealth. González declined.^[125] Nonetheless, General González soon heard of unscrupulous "Spaniards," aided by the local military chief, Capt. Armando Garcìa, forcing landowners to sign unfavorable oil contracts. González ordered the captain's dismissal. Then the general learned that a prospectus circulating in New York had attached his name as part owner of an oil firm promoted by an American. "We are in a position to get anything we ask for," such as oil concessions, said the flyer.^[126] Little in the unsettled political and military life of the oil zone prevented such frauds, which already had a long history.

At any rate, each new regulation of the industry became the excuse for another fee. When the law was passed to prevent the use of oil storage tanks with wooden tops, thought by Mexican officials to be the cause of fire, the oilmen paid their fines of five hundred pesos for each tank and went on using them as before. When oil steamers landed at Tampico, up to thirty customs officers descended on each vessel. Only five of the customs officers actually had commissions — the others were retainers — but the ship's bursar had to pay them all. Americans cooperated with the system of graft, encouraging the Mexican officials with their eager compliance but with disdain and contempt. "I believe my report will show that there is not as much diplomacy and courtesy and straightforwardness on the part of the foreigns [sic ] in Mexico as high ethical ideas would demand," wrote one U.S. naval officer in Tampico.^[127]

As an oil-leasing attorney in Tampico since 1911, William F. Buckley was in a unique position to know of such things. "[Bribery] has become so customary," he wrote, "that the Carrancista officials demand it and feel no gratitude toward the companies when they get it; they feel that the companies pay it to them because they are afraid of them and not because they like them, which is of course the truth."^[128] On the other hand, some of the larger, more powerful oil companies might have been able to withstand the pressure to pay bribes because of their superior resources. "It should perhaps be noted," wrote a Jersey attorney, "that the Standard Oil Company, on going into Mexico, adopted the policy, as a matter of principal [sic ] of declining to pay any `graft' or protection money, to anyone, and that this policy has been followed, without exception."^[129] Notwithstanding this commendable resolve, Tampico and Tuxpan had become a revolutionary Sodom and

Fig. 11.
Early rebels in the oil zone. Identified as the men of "Col. Zuig," these mounted
irregulars were typical of those few bands of rebels operating among the oil
fields against the governments of Porfirio díaz and Francisco I. Madero. they
would take a few rifles and horses from the oil camps. the systematic
despoliation came later, after 1914, when larger groups of troops and rebels
operated in the Faja de Oro. Courtesy of the DeGolyer Library
of Southern Methodist University.

Gomorrah to some foreigners. And the hinterlands of these cities became the rookery of thieves.

The True Interests of the State

Why did the popular uprisings and the participation of the masses in the Mexican Revolution impel the state to increase the regulation of the foreign-owned petroleum industry? The official answer, proposed by the politicians and thereafter by scholars who took them at their word, concerns the intolerable power of the companies. The foreign interests meddled in internal political affairs; they bribed public officials; they supported some unpopular faction or another during the rebellion; they were not interested in Mexican economic development; they exploited native workers; they used up domestic resources; and they made lots of money. Yet, the real reason why the Mexican revolution turned on the oil industry in particular was fiscal and social. The oil industry was wealthy and the state, indigent. An im-

pecunious polity cannot discharge its social obligations, and in revolutionary Mexico, those social obligations grew enormously.

In Mexico, the state had always assumed the mission of controlling the tensions of a social order composed of groups with unequal opportunities and privileges. Politicians knew that their right to rule was predicated on their ability to mediate and ameliorate social antagonisms inherent in a diverse society. No matter how powerful Díaz had been, his successors faulted him for nurturing a government that did not or could not contain these social tensions. The politicians and generals who participated in the Revolution knew firsthand the dangers of the breakdown of social control. Architect of the Mexican constitution and Carranza's cabinet minister, Pastor Rouaix, expressed it succinctly: "The revolutions have been the unavoidable consequence of an intense popular discontent provoked by the inequality of rights between the components of the conglomeration that forms the nationality, and inequality which has been exacerbated more and more in the passage of time."^[130] The first priority of the revolutionary state was to reestablish public order. Depending historically upon paternalism and coercion to maintain social control, the state badly needed the funds to fulfill popular demands and to support the vastly bloated revolutionary army. Thus, the centralization of power in revolutionary Mexico, as in the early days of the Díaz regime, necessitated broadening the state's fiscal base.

But in 1915, the economy was prostrate. The prolonged revolutionary fighting and military exactions had crippled internal transportation, ruined agricultural production, and reversed economic growth. The rail lines were cut and the rolling stock destroyed. Mining production, so dependent upon the rail industry to carry ore from mine to smelter, also diminished. As the peasant armies directed so much of the revolutionary violence toward the properties of the hated hacendados, agricultural production and exports tumbled. In the north, Villa's administrators confiscated the great cattle estates of the Terrazas family and exported the breeding stock through El Paso in order to purchase arms. Indeed, famine broke out in many parts of the country in 1915, especially Mexico City.^[131] Only the oil industry boomed.

In time, a new generation of politicians labored to reestablish the state, eventually moving beyond the mere political centralization of Díaz himself. They came to blame all the social unrest of the Revolution on the rapid, uncontrolled capitalist development of the Porfirian age. They lost sight of the fact that the reason for opening the economy

to foreign investment in the first place also concerned an earlier generation's desire to strengthen the state's capacity to control the masses. Now in 1915, the men around Carranza sought to strengthen the state's power to pacify the masses, by reform or by force. They cast about for sources of revenue. Taxing imports and exports no longer sufficed; the state had to create new taxes. To do it, the state was willing to resurrect older, colonial doctrines of the public good overriding, if necessary, the Díaz-era contracts protecting individual rights. The foreign-owned oil industry became the battleground for the state's vigorous imposition.

Venustiano Carranza was to be the agent for Mexico's economic nationalism. He was philosophically unprepared to change the status quo, yet under him, because of the extraordinary popular mobilization of the Revolution, the process of social reform began. It was not as if the first chief was motivated to seek political power because he had a blueprint for the kind of social reforms that Mexico needed. He was not a man of revolutionary spirit or ideology. But one thing Carranza was prepared for: he had the indomitable drive to dominate Mexican political life. If he had to legitimize himself in politics by taking those steps that enhanced the state's social controls, he was prepared to do that. If he needed new sources of revenue as a means to that end, then Carranza would take those steps too. Carranza fell into economic nationalism, despite himself. To the first-chief-turned-president of Mexico, political domination was the end — economic nationalism, merely the inevitable means.

Carranza did not initiate the fiscal onslaught on the oil industry. Díaz had raised the bar duties in 1909; Veracruz state increased production taxes in 1911; and Huerta raised the federal bar dues and stamp taxes in 1913. The Veracruz revolutionary general Cándido Aguilar initiated the Constitutionalist fiscal exactions. Aguilar had campaigned as a rebel military leader against the federal forces in the Huasteca Veracruzana region as early as November 1913. Soon he began collecting taxes at Tuxpan, which he held for the rebels during most of Huerta's tenure in office. General Aguilar became governor of Veracruz when the Constitutionalists triumphed. As governor and general, he faced the very same fiscal problems as his fellow revolutionary politicians. Less than three weeks after he became provisional governor, Aguilar issued Decree No. 3 of the State of Veracruz. This is what it said:

Whereas (1) petroleum lands have been sold and rented under disastrous circumstances for the owners and at "enormous profits" for oilmen;

(2) foreign companies prosper while Mexico suffers and the former ought to accept the same losses as nationals;

(3) the predominance of foreign capital poses a danger, inasmuch as it demands protection from foreign armed forces; and

(4) progress ought to benefit native Mexicans without being dangerous to our integrity.

Therefore (1) all oil contracts are to obtain authorization from the state government;

(2) no contract is legal without said authorization; and

(3) disregard of the above will be punished by confiscation of land involved in the "unauthorized" contract.^[132]

That was not all. Part of his animus toward the oil companies had to do with hatred of Huerta and the rumors that some oilmen had supported Huerta's government. Governor Aguilar declared null and void all contracts and oil leases made during "the Usurper's" tenure in office. The oilmen were stunned. To them, the language was hastily contrived and vague as to whether Aguilar referred to private leases or those made on public lands.^[133]

The oilmen operating in the Huasteca became concerned. Not only did they have to pay fees for the governmental inspection and authorization of their contracts, but there remained many questions about the clarity of their titles. "The oil people anticipate a great amount of trouble from these decrees," observed Admiral Mayo, still standing off the coast in support of the Veracruz landing, "as some of [the original land] titles are over one hundred years old and the surveys naturally more or less inaccurate."^[134] The decrees plainly seemed retroactive and contrary to the land laws under which they had operated in Mexico since the time of Porfirio Díaz. Replied Aguilar, Huerta had illegally usurped political power and all contracts executed during his regime were also illegal. He did not quite clear up whether he referred to contracts executed on publicly or privately owned land — or both. Ultimately, the first chief, Venustiano Carranza himself, provided some corrective backtracking, declaring that all concessions of the Department of Petroleum during the usurper's (Huerta's) regime were nullified.^[135] Aguilar's brand of economic nationalism anticipated Carranza's.

January 1915, the month that the Constitutionalists took back Mexico City from the forces of Zapata and Villa, turned out to be a busy

time for Carranza regarding new oil policies. The first chief learned of the outbreak of an anti-Carranza rebellion in the Huasteca Veracruzana led by General Peláez. Also, the Constitutionalists were discovering the extent of the famine in the capital, although Carranza himself kept the provisional government in Veracruz. General Obregón, meanwhile, was proceeding with the equipping of an army to challenge Villa in northern Mexico. Consequently, one of Carranza's first decrees of the new year was directed at the oil companies. All oil development not having the permission of the Constitutionalist government was to come to a halt, Carranza declared, until a new oil law was written. Construction of pipelines and the drilling of wells were to be suspended immediately. Moreover, the decree stated, any company's appeal to the diplomatic representation of its home government invited foreign interference.^[136] Once again, the company lawyers were puzzled. Did Carranza's decree apply to wells already in operation or just to new wells?

In the midst of the confusion (but not inaction, for the companies continued to export), Carranza lobbed another bombshell. In mid-January, he ordered an embargo on the exports of Huasteca and El Aguila petroleum, this over a tax dispute. Those two companies had been delivering fuel oil to the Constitutionalist railways without recompense on the understanding that the value of those oil deliveries would be deducted from future Constitutionalist taxes. Huasteca owed 375,000 pesos in taxes. Within a week, the companies were forced into a settlement. Thomas Vaughan of El Aguila went to see Carranza in Veracruz and agreed to pay a production tax to the Constitutionalists, if Carranza would acknowledge ten thousand pounds worth of oil already delivered to his railways. El Aguila then turned over fifty thousand dollars to Carranza's financial emissaries in New York.^[137] Carranza had collected.

But was that all? No. Before January 1915 was out, additional demands were made on the oil companies. "Threatening [a] close down of export shipping," Governor Aguilar imposed a fifty-thousand-dollar fine on El Aguila for polluting the Tuxpan River. Then the Constitutionalists increased the production tax to thirty cents per ton, which would have collected eight thousand pounds per month from El Aguila alone. Then Luis Cabrera, the Constitutionalist minister of the treasury, ordered a suspension of all oil-field work pending government inspection of the company's statistics. The companies were to turn over data on cost per barrel, leased and owned properties, and capitalization.^[138]

Why? So that the government could claim its share of the exploitation of this national resource.

The Carranza regime visited still other small vexations on the oil companies in January 1915. They included: a fine of £ 500 on El Aguila for filing its accounts after the deadline; delaying the departure of steam tankers at Tuxpan on technicalities; the removal of many items for pipeline and refining facilities from the duty-free list, despite existing contracts; and the issuance of no new permits for drilling and construction until companies signed statements subjecting themselves to petroleum laws not yet formulated.^[139] This latter requirement was to assume greater importance as Carranza's oil policy matured. For the moment, the government was quite incapable of enforcing its own decrees.

At the end of this eventful month, customs officers finally lifted the export embargo. But permits for pipeline and refinery construction were not forthcoming, and American skilled workers began to leave Mexico while their work was suspended.^[140] The companies reasoned that the new decrees were unjust and meant as simple harassment. They had been operating in Mexico for years under certain agreements that Carranza now wished to amend. These amendments, they argued, were unworkable, unreasonable, and an infringement of prior government contracts and of their private contracts with landowners.^[141] In the end, the oilmen complied just enough to continue their activities free of outright government crackdown.

In truth, a total crackdown, such as a halt to all oil exports, was not in the Constitutionalists' interests. After all, Carranza had bills to pay, and the oil industry remained among the few sources able to contribute to his treasury. The year 1915 was pivotal. The main Constitutionalist army under Obregón was adopting the tactics and equipment of European warfare — barbed wire, trenches, machine guns — to defeat Gen. Pancho Villa. Harassment of the oil industry occurred only intermittently after an eventful January. The Constitutionalists attacked El Aguila, claiming that the British company was responsible for all of Mexico's international difficulties. As for the American companies, Carranza threatened that Constitutionalist troops would set fire to their oil wells if the marines landed again in Mexico. Another decree again descended upon the industry in mid-November. Reiterating earlier stipulations, Pastor Rouaix ordered all oil companies to file inventories listing capitalization, properties, leases, number of wells, and other information with his new Petroleum Technical Office.^[142] The Constitutionalist

government was now creating a new bureaucracy to monitor and keep statistics on the oil industry. For the companies, this was ominous.

Meanwhile, Mexico's fiscal problems did not abate, and 1916 brought additional government constraints on the oil industry. Once again, Cándido Aguilar provided the dynamism. So far as he was concerned, there was no such thing as a private contract in Mexico. The state was a legitimate party to all contracts between individuals and between Mexicans and foreign companies. Governor Aguilar again proposed an inspection of company contracts:

The State Government shall refuse its authorization if the contract shall appear unjust or prejudicial to any of the partisans thereto, when the development to be carried on thereunder redounds exclusively to the benefit of the unnationalized [sic ] companies to the prejudice of the Mexican citizens, when [the contract in question] tends to solidify the predominance of foreign capital constituting a menace to the integrity or the progress of the nation, or in other cases when the contract is against the true interests of the State.^[143]

What constituted a "prejudice" to Mexican citizens? Precisely what menaced "the integrity or the progress" of Mexico? Exactly when was a contract against the "true interests" of the state? Needless to say, the state was to collect a fee for each contract it "inspected." Aguilar's proposal seemed to subject all oil contracts to political criteria.

During the rest of 1916, the provisional government of Carranza seemed to grapple with these questions. There were plans and discussions about the return of oil lands that the companies had purchased or leased from Indian communities. Government officials contemplated granting a concession for a common-carrier pipeline in Tuxpan, open for public use and breaking the control of the big foreign companies. More decrees nullified laws, permits, leases of oil lands, and previous decrees. Some came from Governor Aguilar, others from the Petroleum Office. An order to public notaries required that all foreign signatories of oil charters must agree to renounce "their national rights and privileges of appeal to their [diplomatic] representations."^[144] The provisional government flexed its muscles in confronting a small company. It rescinded the oil rights that the Compañía Petrolera Marítima (CPM) had acquired under Madero. Although owned predominantly by American capital, the CPM had a Mexican charter. Therefore, all American diplomatic protests on behalf of the CPM were brushed aside by Carranza's foreign minister. "The Government of Mexico," he replied, "is surprised that the Government of the United States should

make the representation transmitted when only the interests of Mexican citizens appear concerned."^[145] Nevertheless, foreign oilmen appealed to their home governments each time a new decree came down.

The year 1917 was also critical for the oil companies in a number of respects. The Constitutionalists had written a new constitution, Carranza was running for president and Aguilar for Veracruz governor in national elections, Villa was hiding in the Chihuahua mountains, Zapata was still operating in Morelos, Obregón had retired to his chickpea farm in Sonora, and Manuel Peláez eluded government forces in the Huasteca Veracruzana. Oil prices and oil exports continued to rise. In the midst of all this, Venustiano Carranza issued a new decree, establishing a 10 percent ad valorem tax on the export of all petroleum.^[146] Previously, the state had taxed only documents, bar crossings, imports of selected equipment, and the stamps affixed to all legal documents. Now its customs officers were to collect revenues on the export of petroleum as well. The oilmen once again refused, stating that their existing contracts exempted them from export taxes. This decree fell by the wayside, but even more economic nationalism was on the way.

Plans to Suit a Mexican Engineer

State formation in revolutionary Mexico brought in its train the creation of a professional bureaucracy that studied the technical aspects of the oil industry. This bureaucracy would ultimately provide the continuity in state policies that Carranza and his successors could use to bend industry to the needs of the Mexican polity. Rather than working to promote industry, to foster oil development in Mexico, this body of public-service technocrats sought, above all, to control the existing foreign-owned industry. The oil bureaucracy had its beginnings while Carranza was in Veracruz. There he attracted "many young professionals with revolutionary ideas," such as engineers Pastor Rouaix, Modesto Rolland, Manuel Urquidi, Salvador Gómez, and Alberto Langarica. In March of 1915, Carranza formed them into the Comisión Técnica del Petróleo, under the political leadership of none other than Cándido Aguilar. They were to study the industry and propose laws for its regulation.^[147]

Pastor Rouaix received the portfolio of the secretary of industry and created the Department of Petroleum within his ministry. José Vázquez Schiaffino and Joaquín Santaella became its directors. Eventually, the petroleum department established branch offices in Tampico, Tuxpan, and Minatitlán. Engineers José Colomo and Gustavo Ortega staffed these offices with petroleum inspectors. In the meanwhile, the finance secretariat of the provisional government, headed by Luis Cabrera, also established a new tax-collection unit specializing in petroleum affairs, the Petroleum Fiscal Agencies. Under the direction of Leopoldo Vázquez, it began to formulate methods for taxing petroleum exports.^[148]

The Petroleum Department in 1916 inaugurated its own Boletín del Petróleo, a journal devoted to the history of Mexican oil and the technical aspects of the industry. The tenor of the articles remained somewhat critical, not the sort of praiseworthy pieces one finds today in Pemex literature. For example, these technocrats would write about welldrilling accidents, uncontrolled fires, oil spills, and pollution. The overarching editorial policy supported increased governmental oversight of the industry. In case the readers missed the point, editorials in the Boletín helped them to focus. "Mexican petroleum ought to be considered like a great, but exhaustible, national wealth," stated the first issue, "and for that reason, the State ought to care for its conservation and best utilization."^[149] The petroleum department adopted a second long-range policy concerning oil. That is, that Mexico's production ought primarily to serve the domestic market, to promote national industry and public utilities rather than be subservient to external markets. Thus, the department pushed for the construction of a pipeline from the oil zone across the Sierra Oriental into Mexico City, where a refinery was to be built.^[150] These oil bureaucrats remained rather visionary. Many of these policies eventually would come to pass. The Boletín also promoted development of Mexico's technical knowledge. The Department sent delegations of bureaucrats on inspection trips to the United States. There they visited oil fields and conferred with regulatory agencies such as the Texas Railroad Commission, which, despite the misleading name, increasingly had come to oversee that state's oil industry.^[151] They wrote articles on refining technology and the cementing of well casings. These "technocrats" gleaned information from the U.S. oil journals and reproduced the petroleum laws of U.S. regulatory agencies.

Philosophically, the new generation of bureaucrats, even while resurrecting essentially colonial traditions of intervening in the economy,

rejected the colonial order. They did not conceive of Mexico's colonial heritage as having been a system of internal social domination — a social hierarchy defined by race, ethnicity, and differential privileges. To these bureaucrats, colonialism had been a foreign monopoly of the economy. Spain forbade the development of Mexican industry, Santaella wrote. Therefore, the foreign domination of the oil industry was but a new form of colonialism. It stifled Mexican entrepreneurship and extracted Mexican resources for the benefit and wealth of other nations. "Industry remains in the hands of foreigners, especially Anglo-Saxons," Santaella said. "Economic savings are destroyed, that is, invested savings; the economic independence of Mexico is delayed, its industry being set back, and our race remains with the stigma of slavery, voluntary death."^[152] Plainly, the technocrats were perfecting the justification for regulating the foreign interests, even though the actual reason for doing so may have been otherwise.

Subsequent to the election of 1917, the secretariat was taken over from Rouaix by other technocrats and politicians, but the petroleum department endured and expanded. The petroleum department busied itself with technical matters. Among its first acts was to study the distance between wells, which the technocrats thought was too close in certain areas of Pánuco, Topila, and Tuxpan. They considered that offset drilling on small, contiguous properties would lead to premature exhaustion of the oil fields. The department directed that the companies operate these fields as a unity, apportioning production between them and reducing the flows. The companies ignored them. It was also the Department of Petroleum that required the companies to place steel tops on the oil storage tanks in order to prevent explosions. Huasteca representatives William Green and Hilarion Branch protested the order vehemently. They also wrote to the State Department, greatly annoying the oil bureaucrats.^[153]

It was not so much that the new members of this bureaucracy were imbued with oil expertise or with revolutionary principles but that they served the state. In turn, the state served larger interests, which consisted of ameliorating social tensions. To Mexican politicians in 1915, the reestablishment of civil order and the gaining of control over the economy were one and the same thing. Unfettered capitalist expansion, after all, had brought about the social dislocations producing the Revolution. At any rate, their personal politics were those of many Mexicans at the time — having to do with survival. Take José López Portillo y Weber, for instance. From a distinguished landowning

family of Jalisco, his father had been an anti-científico governor of the state under Porfirio Díaz and minister of foreign affairs for Huerta. Young José graduated from the military academy in 1913, serving as a officer in Huerta's federal army before it collapsed. In 1919, López Portillo was offered a position in the petroleum department "through the influence of my brother-in-law." He admitted that he knew nothing about oil. His supervisor at the Tampico office sent the new technocrat on his first inspection trip to the oil camps of the Golden Lane. López Portillo's assignment: to ascertain if the storage tanks at the wells had been properly placed.^[154]

The oil managers looked somewhat askance on these neophyte inspectors — and the Mexican officials returned the contempt. A typically unenlightened view of the bureaucrats came from William Green of Huasteca, who was annoyed that "Senor Shafino" (his name was Vázquez Schiaffino) had depreciated the expense and risk of producing oil in Mexico. "The Mexican's knowledge of the oil industry, in common with his education and culture, is superficial," wrote Green, not a man to mince words:

He is sent from Mexico City to size up the oil situation, and he rides up and down the Panuco River in our launches and sees our ships being loaded, as well as those of other companies, and he knows that oil is going into them and being exported, and that is just about the extent of his knowledge. He has no idea of the time and expense necessary to arrive at that point of development.^{[ 155]}

For their part, the bureaucrats rejected the American capitalist's notion that private contracts benefited the Mexican landowner. "[I]t depended on the morality and the rectitude of the industrialists," said López Portillo. "Among the [Yankees], it was improbable because one only found among them either employees or imitators of Rockefeller. . . . All were entirely adverse to the interjection of the government into the industry. Among the Englishmen, it was because they had to be employees or imitators of Deterding."^[156] Needless to mention, the managers and bureaucrats were taking adversarial positions.

The creation of such a formal bureaucracy, leavened by a growing gaggle of young technocrats who learned the technical side of the industry while on the job, diluted the old influence of the foreign entrepreneurs. During the Porfiriato, attorneys such as Pablo Martínez del Río and Pablo Macedo had entrée into the highest circles of government. The owners met with Presidents Díaz and even Madero. No longer. Like a flood, the Revolution deposited a thick layer of inspec-

tors, government engineers, and lawyers between the foreigner businessmen and the nation's politicians. The power over policy now became diffused. Foreign companies still retained Mexican attorneys belonging to the Mexican Academy of Jurisprudence and even others who had served in Madero's cabinet. One senator, José J. Reynoso, worked closely with the companies during the Carranza presidency.^[157] The old influence was gone, however. During the Revolution, the companies' communication with government increasingly got absorbed and deflected by a phalanx of appointed officeholders.

Creation of the petroleum bureaucracy also forced the companies to deal at mundane levels with government functionaries in a manner that consumed managerial time and expense. Company accountants now busied themselves in assembling statistics of individual well production and figures accounting for losses of oil because of fire, spillage, and evaporation. All statistics were required to be converted from the English system of weights and measures to the metric system. Signs at the installations had to be in Spanish.^[158] The petroleum inspectors now issued the permits for repairs and improvements to refineries and other installations. The requirement to submit detailed blueprints, even topographical maps of entire estates, if oil field work was contemplated, multiplied the tramitaciones (paper shuffling) and delayed work schedules. It no longer sufficed to cultivate powerful insiders — Alberto Pani, for example. Executives of the Pearson group treated Pani royally when this urbane official went abroad — all to no avail. "`Government' business still takes up a large proportion of everyone's time," commented an El Aguila manager. "[I]t appears to increase."^[159]

As usual, William Green formed an opinion about the bewildering welter of requirements. "The God of all engineers could never make a map or plan of any kind that would suit a Mexican engineer connected with the Petroleum Department," wrote the Huasteca field manager, "and they would usually return them several times to be amended, with the result that when the plan is finally approved by the Inspector's office, it is neither what we want nor is it understood by any one."^[160] On the surface, the Revolution as yet had done little to influence the production and export business of the foreign oil companies in Mexico. For the moment, their performance was merely the visible one-tenth of the proverbial iceberg. Radical changes were taking place in the submerged portion of the industrial glacier floating on a sea of high-priced oil. There, beneath the waterline, beneath the optimistic statistics, the iceberg was melting.

The Limitations of Public Interest

The story of the Mexican Constitution of 1917 bears repeating if only to link the fate of the oil companies in Mexico to the pervading social and political conditions of that nation. Petroleum was not a dominant issue during the constitutional convention. Yet, as the constituyentes (those who collaborated to write the constitution) discussed basically domestic issues, they were also deciding the future of the foreign interests in their nation. Venustiano Carranza himself, however, was not a part of those discussions.

Wishing to confirm himself in power, Carranza, as first chief of the Constitutionalist Revolution, proposed a new constitution for Mexico that was essentially political. His draft provided for elections, delegated the powers of the executive, Congress, the courts, and the states, and expressed the rights and duties of citizenship. Carranza thought that all demands for social reforms could be handled by legislation, rather than by constitutional provision. In this respect, the first chief was ignoring strong precedents in Mexican constitution-writing. That of 1824 sought to acknowledge the widespread participation of the common people in the independence movement. Therefore, it removed the legal disadvantages — slavery for some blacks, head taxes for Indians and castas — borne by the nonwhites during the colonial period. Written by conservatives dismayed at the continuation of social unrest, the charter of 1836 sought to reestablish basic social controls by restoring privileges to the military and the Church. The Constitution of 1857 prominently profiled the program of the resurgent liberals, restricting the role of the Church in landowning, education, and society. This reform movement, in fact, mounted a massive land redistribution program, using some of the very same notions of state dominion over property that colonial authorities had used in reassigning peasant villages in the sixteenth and seventeenth centuries and in confiscating Jesuit holdings in the eighteenth. It was already well established that Mexico's basic political charter would also reflect the social agenda of the era in which it was formulated. Owing to the massive mobilization of peasants and labor in the revolutionary struggles, the compulsion of the constituyentes to respond to these popular demands overrode Carranza's narrow viewpoint.

As the constitutional convention convened, the delegates clearly went beyond Carranza's instructions. For one thing, the assembly was

held in Querétaro, in December of 1916 and January of 1917. Carranza, in the meantime, carried out the executive duties of the provisional government in the capital. A coalition of reformist politicians, encouraged by General Obregón, who was not a member of the assembly, and young attorneys and bureaucrats, soon gained control of the Querétaro convention. The critical articles of the new document were written in committees dominated by the forty-two-year-old Pastor Rouaix, who represented the technocracy of the new revolutionary state, and by the thirty-two-year-old Gen. Francisco Múgica of Michoacán, who represented the reformist elements of the Constitutionalist army.^[161] This coalition hammered out three reformist elements. Article 3 restricted the role of the Church in education, making the state supreme. Article 123 established the rights of labor, the obligations of employers, and the authority of the government to mediate the first two. Finally, Article 27 dealt with the ownership of property.

In essence, Article 27 reversed the late-nineteenth-century property reform laws that had moved toward vesting in private individuals absolute dominion over property. The laws of 1884 and 1892, as mentioned in chapter 1, had adopted English common-law concepts of private property so as to attract foreign capital to Mexico. The constituyentes now rejected both the property reforms and the results of foreign investment. The rapid economic development was thought to have created intense social antagonisms that spilled over into revolution. "The financial prosperity the country acquired with the dictatorial regime of General Díaz," said Pastor Rouaix, "only served to deepen even more that abyss that separated the plutocracy from the proletariat and to augment the animosities that were impregnating the popular soul with the constant abuses suffered by the disinherited classes, which formed 90 percent of the Mexican population."^[162] The object at the end of 1916 was to reapply the state's traditional obligations. Harking back to prerogatives (nay, duties) that the Crown had assumed in the colonial period, the twentieth-century Mexican state was to take a more active role in economic affairs in the interests of social stability. These reformist articles revived colonial precedents. Some lawyers for the oil companies recognized them as such. W.E. McMahon called the state's ownership of subsoil rights "a relic of absolute monarchy," a phrase that conveyed his view of its applicability to the modern age.^[163]

Article 27 had two principal objectives. First, it was to provide the juridical basis for a massive land-reform program. Among some of the constituyentes, there was a general feeling that the hacendados'

monopoly of land had goaded the peasants into rebellion. Revolutions in Mexico would end once and for all, Luis Navarro told his fellow delegates, if the peasants were to own their own land, for they would never leave it to follow some revolutionary leader.^[164] The article's second purpose was to increase the state's dominion over the mining and petroleum industries. As drafted by Rouaix's committee, Article 27 read:

Ownership of lands and waters within the boundaries of the national territory is vested originally in the Nation which has had, and has, the right to transmit title thereof to private persons, thereby constituting private property.

Expropriations shall only be made for reasons of public utility and by means of indemnification.

The Nation shall at all times have the right to impose on private property such limitations as the public interest may demand. . . .

In the Nation is vested direct ownership of all minerals . . . such as . . . petroleum and all solid, liquid, or gaseous hydrocarbons.^[165]

Naturally, in and of itself, the wording is open to interpretation. What was the precise meaning of "public utility," for example? One's exclusive enjoyment of property could be abridged by the state in the interests of the public. But what were the public's interests? Who interpreted those interests? These were political, as opposed to constitutional, questions and remained to be defined primarily through political processes and only secondarily through legal means.

Article 27 affected the oil industry in several ways. It declared that the direct ownership (dominion) of petroleum and all hydrocarbons in the subsoil was vested in the nation. Water, and the beds and banks of inlets, bays, lakes, and rivers and even intermittent streams and ravines were likewise vested in the nation. The Constitution of 1917 prescribed that the subsoil hydrocarbons and minerals and national lands were inalienable and imprescriptible. They could be granted to private parties or corporations only as government concessions, not as private property. Only Mexicans by birth or naturalization or Mexican companies had the right to acquire ownership of the lands and waters or to acquire concessions to develop mineral mines and petroleum wells. Aliens could develop minerals and hydrocarbons only if they agreed to become Mexican with respect to that property and not to invoke the protection of their own government. Otherwise, non-Mexicans would forfeit their rights. Perhaps the greatest expression of the state's reemergence as an economic arbiter was found in the provisions for expropriation. Article 27 established a justification (that is, public utility)

for the state's revocation, with indemnification, of an individual's use of land and mineral rights.^[166]

Besides the questions of public utility and who defines it, the private companies wondered about the retroactive aspects of Article 27. Did the new constitution revoke private contracts over subsoil rights that the oil companies had already acquired directly from landowners? Could those persons who had acquired land under the Porfirian-era laws, thus having private use of the subsoil wealth, still lease those rights to second parties even after 1917? Of course, the foreign oilmen believed that Article 27 should have no retroactive effect. They interpreted that they would be able to continue in the exclusive privilege of developing their pre-1917 leases, as if the Constitution did not exist. Many of them also believed that they still had a right to acquire the exclusive use of subsoil rights by continuing to make new leases on land acquired by Mexican owners under the 1884-92 laws. Why? Article 14 of the constitution specifically stated that no law should be given retroactive effect to the prejudice of any person whatsoever.^[167] As was to be expected from a charter written by two hundred individuals in just two months, the Constitution of 1917 contained a few contradictions.

The constitutional provisions concerning national lands presented another conundrum. On land contiguous to the Pánuco, Tuxpan, and other rivers, many an oil company had sunk productive wells that could easily be offset if the state conceded the riverbanks as well as the beds of intermittent streams to second interests. For example, Potrero del Llano No. 4 was located just twenty-five yards from the bank of the Buena Vista River. If the government were to give a concession on that bank to a competing interest, an offset well could be drilled nearby.

Much depended upon interpretation. Carranza himself, who was elected in August under the provisions of the 1917 Constitution, had not pushed for such a constitutional revision of the property laws. Nevertheless, he accepted it, along with the other reformist provisions, which, after all, the executive could choose to ignore, much as Porfirio Díaz had allowed the anticlericalism of the 1857 Constitution to remain unacted upon. But the bureaucrats were of a different mind. Clearly, they believed that Article 27 could be considered retroactive in its effect. "So, whatever may be the rights established by a prior constitution," said Vázquez Schiaffino, of the petroleum office, "the new basic law could abolish them without hindrance." Vázquez Schiaffino even ventured a definition of public utility. The idea behind the constitutional reform, he said, was the welfare of the greatest number of

Mexicans. Private patrimony of a few great companies had been detrimental to Mexico, because those interests had not given "any more than an insignificant part of their enormous incomes" to the Mexican people.^[168] Plainly, Article 27 was conceived in the notion that property rights in Mexico, as so much in life, could be reduced to fiscal proportions. Pastor Rouaix justified the reestablishment of colonial mining laws because the oil industry had created enormous profits for the foreign companies and little for Mexico. "But it was through drastic measures of the triumphant Revolution that the privileges of capitalism were not recognized and that obliged the companies to leave a part of their enormous profits to the Public Treasury."^[169]

Having been a constituyente, although often absent from the working sessions, Cándido Aguilar understood very well the clash between the Anglo-American conception of property and the Hispanic tradition now being revived in the 1917 Constitution. He also recognized its financial parameters. "It concerns an application of a simple principle," he wrote; "along with the right to collect taxes, the Government now has an efficacious mechanism to make the petroleum industry contribute its part to the necessities of the Nation." Aguilar also understood the unavoidable union between foreign investment and domestic affairs. Social reforms could not be brought about in Mexico without, at the same time, transforming the rights of foreign investors. "If it is declared that Article 27 is not applicable to the oilmen," he said, "it will harm the application of the social and economic reforms contained in the Constitution. Agrarian, labor and other issues will not be carried into action except by overcoming major obstacles. Those Mexicans interested in agricultural and other businesses will take delight that the foreigners are in a privileged position."^[170] And the reforms could not wait, Aguilar warned his father-in-law, the president of Mexico. He quoted the dictum of Justo Sierra, "Si no se paga, la revolución se apaga." If one does not pay, the revolution will perish.

Clearly, the Mexicans felt themselves under pressure from the extraordinary events of the Revolution to reestablish control over the foreign interests, a situation of which some of the oilmen were well aware. Early in 1917, when the provisions of Article 27 became known, the British managers of El Aguila decided to put off all plans for expansion. They resolved to acquire no new leases and to undertake no new work. Capital expenditures were to be cut back, and managers would proceed only with ongoing construction projects. "[N]either Carranza nor any other leader of the Revolution is at the present time strong enough

even if they were willing to try, to reverse the decrees of the Party embodied in the new Constitution, and directed against capitalists and foreigners," wrote Frederick Adams of El Aguila, "and any alliance with foreign interests at the present moment would have dangerous if not fatal consequences upon their political life."^[171]

For the moment, the foreign governments took a guarded view of the new constitution. Neither the British Foreign Office nor the United States State Department initiated any comment whatsoever on the questions raised by Article 27. They waited instead for specific instances of enforcement that might impinge upon the rights of the oil companies. Perhaps the Dutch took the most enlightened view of the situation. They realized the new constitution was dangerous, threatening to push out the Dutch, American, and English companies and possibly allow the Germans in. But the Netherlands was also a colonial power. In the Dutch East Indies it too held the dominium directe of the subsoil, much like the Spanish Crown had held in colonial Mexico. If the oil industry is now in trouble, said the Dutch consul-general, it was the fault of Wilson and U.S. intervention, which created the present chaos anyway.^[172] Rather than clarifying the issues, Article 27 of the Constitution of 1917 merely contributed to the fiscal and legal uncertainties. The questions raised by the constitutional charter, in time, would be settled via the political process. The remainder of the Carranza regime was but the initiation of that political settlement.

Taxation Versus Principles

The Carranza government spent much of the rest of 1917 addressing itself to political and military matters. The Constitutionalist army still had to deal with rebellions in the periphery of Mexico, such as those of Emiliano Zapata in Morelos, Félix Díaz in Oaxaca, Pancho Villa in Chihuahua, and Manuel Peláez in the Huasteca Veracruzana. Coping with the economic crisis and low agricultural productivity forced Carranza to reconsider his monetary experiments (his pesos infalsificables [unfalsifiable] had become practically worthless in 1916) and to halt land reforms. He even returned some confiscated land to the original owners, hoping that these hacendados would invest capital and produce the foodstuffs that Mexico desperately needed. In the Huasteca Veracruzana, many landowners who had become wealthy

leasing land to the oil companies also complained about the new Constitution. Their spokesman was the rebel caudillo General Peláez. Many carrancistas dismissed such opposition as the machinations of the powerful oil interests. "Behind these individuals," a confidant of Cándido Aguilar wrote about the hostile landowners of the Huasteca, "are the vicious foreign petroleum companies and all our enemy elements. . . . In these complaints, you will not see the attitude of Mexican landowners but of the oil companies."^[173]

Indeed, it was Cándido Aguilar, now the elected governor of Veracruz, who began to apply Article 27 to the oil companies. One of his first postconstitution acts concerned the revocation of some of the Díaz-era concessions granted to El Aguila. The British company had known that these concessions were going to be troublesome. Given the prevailing nationalism among the revolutionary leaders, Lord Cowdray had thought of relinquishing these extensive concessions covering state and national land but only in exchange for $2 million in tax rebates. Governor Aguilar did not give him the opportunity. In December 1917, he decreed the cancellation of the 1906 Pearson concessions of Veracruz state lands.^[174] The federal land concessions were not yet affected. (Actually, the federal government attempted to cancel Díaz-era federal concessions shortly after the sale of El Aguila to Shell. Mexican authorities, however, did not succeed because they had predicated their revocation on the incorrect supposition that Shell was part-owned by a foreign government.)^[175] Aguilar was also among the first to propose an organic petroleum law, which he submitted to the Veracruz state legislature in February 1919.^[176] At the federal level, by way of contrast, the bureaucrats were planning tax packages.

Carranza's government thought in terms of taxing first and settling the constitutional polemics later. In 1917, the federal government contemplated assessing a 5 percent federal royalty on each hectare of oil land, as if the state had originally offered these lands as concessions to the oilmen and landowners. Such a package ignored the fact that the oilmen had acquired these oil lands not as concessions but under private contract. Nonetheless, the bureaucrats dreamed of tax revenues. Joaquín Santaella of the petroleum commission calculated that had the tax been in force during the entire year of 1917, the federal treasury would have been richer by three million pesos. For good measure, Santaella also calculated the possible proceeds of a contemplated federal tax on the rents paid by lessees to landowners, which would have amounted to 3.2 million pesos in 1917. Why the tax increase? The state

considered that it had a constitutional right to impose these fiscal contributions on an industry exploiting resources over which the nation now had direct dominion. Also, the economic emergency demanded the state use all its resources to save the nation.^[177] Prompted by his oil bureaucrats, Carranza would not be long in acting to extract more from the booming oil industry.

The first important, postconstitution oil decree came on 19 February 1918. Exactly as the bureaucrats had planned, Carranza assessed an annual rental fee and a 5 percent royalty on all petroleum lands developed by the surface owners or their lessees. It also required, once again, the registration of oil properties. If not registered, or "manifested," as the saying went, within three months, third parties could "denounce," or lay claim to, the oil lands. The response was immediate. Oil companies accused Carranza of confiscating their properties through illegal taxation and enlisted the protests of their governments. The United States responded at once, saying that it "could not acquiesce in any procedure . . . resulting in confiscation of private rights and arbitrary deprivation of vested rights."^[178] The big American companies of Huasteca and the recently arrived Jersey Standard, owner of Transcontinental, resisted the Mexican government. They and others refused to register their oil lands. "The desire of the Mexican Government to enforce article 27 of the constitution, practically confiscating the subsoil rights," said E. J. Sadler, "has been demonstrated during the last six months by the promulgation of a decree on February 19th and the subsequent efforts to nationalize the industry, including a radical increase of the export tax on crude and its products."^[179]

Lord Cowdray and El Aguila likewise found much to fault in the new tax proposal. El Aguila had five hundred thousand hectares in oil leases and would have had to pay 2.5 million pesos per year for them. Most were not in production at all, although the company still paid rents to the landowners. El Aguila management decided to refuse to pay the new taxes and attempted to convince others to resist as well. Nearly all companies complied. The government calculated that although they were collecting 11.1 million pesos in production taxes, some twenty-four companies were not paying the 2.6 million pesos in royalties.^[180] The dilemma was pretty clear. In order to collect 2.6 million pesos, Carranza could ill afford to shut down the companies that refused to pay. He stood to lose a far greater amount in production taxes. Even among the bureaucrats and Mexican politicians, there was a feeling that the land tax, or royalty, was not equitable. Mexican

citizens bore the brunt of such decrees, and the tax was hardly progressive. It fell equally upon poor property-holders whose land did not yield a prolific well as on the lucky landowner whose property contained flush production. One government functionary wrote that the decree even ran the danger of "confiscating" the property of the poor landowner, just as the companies were claiming.^[181]

Nonetheless, the government still attempted to exert its new powers in order to enforce this and other decrees. It began to give out unregistered claims to Mexican citizens (most of whom were politicos, so the companies claimed). Several new claimants took up land along the Pánuco and Tuxpan riverbanks, defined as federal property by the new constitution. These claims lay astride oil pools already proved by El Aguila and other companies.^[182] The Texas Company experienced some typical difficulties. The government refused to issue drilling permits to the company until it had complied with the decree of 1918. When The Texas Company drilled three wells anyway, the government threatened to take them over. Moreover, the company soon discovered that rival claimants acquired government leases on lands in Zacamixtle, where The Texas Company already had production, and on the Isla de Potrero, where it was about to drill.^[183] There the matter stood at the end of 1918: a stalemate between the Mexican government and the companies.

The standoff continued throughout the following year too, as both prices and exports rose and the oilmen began to notice the omens of impending salt-water encroachment in the wells. Government bureaucrats developed three different vises for squeezing the companies: well permits, third-party denouncements, and government troops. Out in the field offices, petroleum inspectors routinely denied drilling permits to those companies failing to accept Article 27, to pay their rental taxes, or to "manifest" their titles.^[184] In support of the oil companies, the Department of State suggested that shipments of U.S. arms and ammunition be halted until the Carranza government relented in its pressure on the oil companies. The strategy did not deter the Mexicans in the least. The government immediately reminded oilmen that all decrees issued after 7 January 1915 were still in force and that unauthorized drilling would result in government confiscation. Sure enough, the denial of drilling permits continued.^[185]

Meanwhile, third parties continued to "denounce," or lay claim to, properties that the oil companies had been exploiting. A Mexican group acquired drilling rights from the government on several pre-

1917 leases of the Scottish Mexican Oil Company.^[186] When the oil companies induced the State Department to complain, the Mexican government responded testily. "The American companies have ill advisedly failed to comply with the laws which the Mexican government issued on the exploitation of petroleum," responded the Mexican Foreign Affairs Secretariat. ". . . [C]onsequently, if the situation of the petroleum companies is complicated by the denouncements made by third persons, the companies are doubtless[ly] the only ones blamable."^[187]

For a time, the Carranza government even attempted to play its German card against the vested interests of the Americans, Dutch, and British. The Mexicans sought — or at least, threatened — to involve German capital in the oil industry. The Allied powers could be positively paranoid about the Germans. As early as 1916, the British managers of El Aguila had heard rumors that the Germans had been enlisting the aid of Mexican labor unions to blow up British oil installations. El Aguila placed extra watchmen on duty and asked the Foreign Office for some German- and Spanish-speaking detectives. In 1917, they set up a four-inch gun at Tuxpan for use against German submarines.^[188] None appeared. The Dutch company of La Corona, in the meantime, had heard wild rumors of German sabotage as well, even that the Germans had burned twelve million barrels of El Aguila's oil at Minatitlán, which of course was apocryphal. Under the circumstances, the Dutch government had little choice but to dismiss its German-born vice-consul at Tampico, Richard Everbusch. Other ludicrous rumors hinted that the Germans were paying bandits to destroy Waters-Pierce tank cars and that twenty-five thousand Mexican troops paid by the Germans would end oil exports at Tampico.^[189] As improbable as these scenarios seemed, it was a Mexican pretext that brought the United States into the European struggle. President Wilson declared war on Germany after having intercepted a note from Foreign Minister Zimmerman offering German support if President Carranza declared war on the United States. Mexico's reward was to retrieve the territory it had lost to the Americans in 1848. Obviously, Germany did not entirely understand the Mexican situation either.

The German card was so patently feeble that the Mexicans did not get around to even using it until months after the European armistice. In 1919, German citizens were awarded some denunciations of so-called federal lands. Japanese interests too had been reported in Tampico looking for oil possibilities.^[190] Germany clearly was not the kind of alternate foreign power that Mexican nationalists could use

against the United States, for example, not like Soviet Russia would be for the Cuban Revolution of 1959. Díaz had had to play off the British against the Americans, a game having many limitations, and Carranza too was left with a deck pretty much loaded in the same way.

Still, Carranza did have an army, and the Mexican government was not unwilling to intimidate the companies through the surgical use of force. This option seldom produced anything but antipathy. The State Department once again took exception to government threats to deploy army units to stop unauthorized drilling and construction. American diplomats feared for American lives.^[191] Carranza did occasionally order his war department to use force in ending "illegal" drilling. When the Atlantic Company announced that it would not shut down its operations in the Pánuco region because compliance to government orders would imply that company's recognition of Article 27, Gen. Ricardo González dispatched troops to the Atlantic's oil field.^[192] The government obviously could not win a total victory. It needed production earnings and declined to go after the big companies like El Aguila, Huasteca, and Transcontinental that were leading the industry's resistance. Carranza settled for a degree of fiscal success, giving up the principles for the moment.

Besides confronting rebellion and economic problems, the various actors of the Mexican state hardly recited from the same philosophical script. Carranza and his bureaucrats placed taxation ahead of state ownership. Governor Aguilar counseled the reverse order. The Supreme Court indicated that it might not uphold the retroactive interpretation that the above parties were applying to Article 27. When the government revoked some of its leases, the East Coast Oil Company sought an amparo (legal injunction). Cándido Aguilar took especial interest in the court case. He corresponded with Justice A.M. González of the Supreme Court and had a subordinate meet personally with him. "Thank you for the attention that you have lent to the affair," the Constitutional army general, Veracruz governor, one-time foreign minister, and now son-in-law of the president wrote to Justice González, "and I hope that the Supreme Court passes sentence in justice, which without any doubt whatsoever is part of the general interests of Veracruz state."^[193] Nonetheless, the Supreme Court suspended the order, ruling against the government and Aguilar's position. Thereafter, government ministers attempted to delay the Supreme Court's consideration of the other amparo cases that the companies had brought against it.^[194] The hard-line nationalists evidently could not entirely erode the position of

the companies until they had concentrated the full weight of the Mexican state behind them.

The government had always intended to codify its interpretation of Article 27 into concrete legislation. The Petroleum Department, in fact, had produced a draft petroleum law as early as July 1917. It was sixty-six typewritten pages in length. But President Carranza apparently had objected to the radical interpretations that bureaucrats such as Alberto Pani and Vázquez Schiaffino had given the proposed legislation. Subsequently, a special commission adopted some of Carranza's objections.^[195] Therefore, the draft legislation that emerged from this process by 1918 did not embody the strictly retroactive aspects of previous government decrees. But to be on the safe side, C. O. Swain of Standard Oil New Jersey made some recommendations on several articles of the new bill.^[196] Oil representatives met with Pani. Some oilmen thought the government wanted to trap them in a labyrinth of regulations in order to confiscate their assets. "Mexican government officials were fully advised verbally and in writing of the exact position of the American Oil Companies and that they did not approve of law as presented to Congress," reported the oilmen.^[197] Nonetheless, an exasperated Pani ultimately repudiated the intransigence of the oil representatives and submitted his draft anyway.

When the Congress considered the legislation late in 1919, however, it could not reach a consensus. Some conservative members, encouraged if not supported financially by the oil companies, proposed countermeasures. Word also circulated among the government's supporters that Carranza himself did not wish the legislation to pass at this time. Others waited for Aguilar, who had gone off to represent Mexico in the Paris Peace Conference. The Senate passed the bill, minus two important articles, and the Chamber of Deputies failed even to consider the measure.^[198] By this time, December 1919, the political life of the country was preoccupied with the coming presidential election. Carranza was known to oppose a military candidate for the office, which appeared to foreclose the chances of the popular Gen. Alvaro Obregón. The result of all this: no petroleum legislation passed. In fact, it would have to wait until 1926.

In the meantime, the executive powers were attempting to fashion some face-saving compromise that might result in higher revenues. The new minister of industry, Gen. Plutarco Elías Calles, brought about an effort to reach an interim accord. He announced that the government would issue "provisional" drilling permits, if only the companies would

agree to be bound by future Mexican oil legislation.^[199] Naturally, the companies were no more willing to comply with future legislation, whose provisions they feared, than to pay royalties on land they already held under private contract. Of the companies, Transcontinental in particular refrained from applying for these drilling permits. The Department of State responded to the companies' complaints. Mexico's requirements as to drilling permits, it said, constituted "an admission of the correctness of the contention of the Mexican Government in the matter of the ownership of oil deposits."^[200] Herein lay the nub of the problem. The oil companies were concerned principally about the validity of their preconstitutional private property rights and only secondarily about fiscal exactions. But the carrancistas were preoccupied with the short-term problems of bringing the Revolution to an end and reestablishing political and economic stability. These were fiscal concerns. They could not await a definitive settlement of the constitutional issue.

Oilmen did not wish to accept higher taxes in lieu of property revisions. They complained, often bitterly, about how higher production and bar taxes were raising the cost of Mexican oil on world markets. Some applied the word "confiscatory" equally to the government's tax increases and to its retroactive interpretation of Article 27.^[201] Therefore, both the petroleum office and the companies drew up numerous cost estimates per barrel of exportable petroleum. Mexican bureaucrats wanted to show that the companies could sustain higher taxes and still make substantial profits. The companies wished to show how tax increases could not be supported. The differences between the two estimates were naturally quite startling. Note the 1916 estimates of El Aguila compared to the 1919 government estimates (see table 8). But as long as prices rose (they did not reach their zenith until mid-1920), the oil companies were able to sustain the higher taxes. So, they paid up. Federal revenue collections from the oil industry had risen nearly one-hundred-fold throughout the Revolution. The per-barrel tax receipts had quadrupled (see table 9).

Since the companies rejected paying more fees to get the drilling permits, the government again ordered the troops into the oil camps. In November of 1919, petroleum inspectors directed Mexican soldiers to shut down drilling operations on eight wells of Transcontinental, Island Oil, Sinclair, Amatlan, Union Oil, and The Texas Company. Additional diplomatic protests burned the telegraph cables between Washington and Mexico City. In the meantime, J.A. Brown and

Arthur Corwin of Jersey Standard traveled to Mexico City in order to interview Luis Cabrera about the stoppages. The finance minister informed them of the cabinet's resolve to withhold drilling permits until the companies complied with its decrees.^[202] The stalemate seemed interminable.

In the meanwhile, El Aguila was one of the only companies that had obtained government permits to drill new wells. Had it made its own

compromise with the government independent of the other private companies? Did it make a deal in order to get new production to make up for the expected salt-water encroachment of its older wells? Was Carranza playing one foreign national against another? It was to avoid such an eventuality that the companies as early as 1916 had formed a united front and urged strong diplomatic action. But El Aguila had always been a maverick.

In Defense of Vested Rights

In the beginning, Carranza's political faction appeared to have found favor with the oilmen — at least few harbored any outright hostilities. His victory at least offered hope. The American community in Tampico turned out to welcome the first chief in 1914, on his first (and only) trip to the newly liberated port city. The American consul hosted a dinner and reception in Carranza's honor. Carranza thanked the Americans for their neutrality during the revolution against Huerta. Fair and equal treatment would be accorded those who lived under the laws of Mexico, he assured guests at the reception. Obviously Carranza harbored no grudges toward the American community for the invasion of Veracruz, and the Americans did not hold Carranza responsible for having been forced by enraged mobs to abandon Tampico. Some of the Americans only noted that although charming enough, Carranza had a rather "unmagnetic personality" and tended to numb his listeners when he spoke.^[203] All in all, it was a not inauspicious beginning.

As all honeymoons, this one between Carranza and the Americans at Tampico was over too soon. The depredations in the countryside increased to a point that banditry and pillage became the universal order of the day. Moreover, a nationalist onslaught appeared on the verge of taxing the oilmen and removing their property rights. Such pressures could hardly be expected to go unchallenged. In order to defend themselves, the foreign oilmen strove to overcome their national and competitive instincts. They organized protective associations. They lobbied the governments. They mounted a publicity campaign to state their case. They coordinated their resistance. In the final analysis, the foreign oilmen were only partially successful in defending their privileges and rights in Mexico.

Certainly, oilmen were motivated to unite so that the government could not continue the Díaz tactic of playing off one nationality against the other and one company against another. Luis Cabrera, as minister of finance, had attempted to do just that in December of 1915. When General Manager Body protested the government policy of inspecting El Aguila's books and operations, Cabrera regretted Body's objections. Walker and Galbraith of Huasteca had just seen him in order to give their enthusiastic support to the Constitutionalist policies, he said, and they even disparaged El Aguila while they were at it. On the other hand, the personnel of Standard Oil, he continued, always refrained from criticizing other companies and were entirely neutral in their negotiations with the government.^[204] Cabrera and other Mexican officials would have preferred to deal with each company separately, whittling down their resistance to new taxes and laws.

Apparently, the impetus for a collective organization of oilmen came from below, so to speak. In May of 1916 it had become clear that the Constitutionalist army in the Huasteca was the primary cause of the insecurity of foreign personnel. A mass meeting of all American oilmen took place in Tampico. The assembly directed William F. Buckley, a local lease lawyer and oil speculator, to draft a letter to President Wilson, expressing the dissatisfaction of the oilmen with conditions in Mexico. Several months later, the company executives got together in New York and drew up a charter for an oilmen's association. No one from El Aguila was present, but Percy Furber, who had become a stockholder when El Aguila absorbed his Oil Fields of Mexico company, represented the Britons.^[205] The large British firm soon joined. The American companies, especially Huasteca and Standard Oil New Jersey, tended to dominate the new Association of Foreign Oil Producers in Mexico. Harold Walker of Huasteca's New York office was elected president. Although the oil producers' association concerned itself principally with petroleum issues, several oilmen participated actively in a second lobbying group, the National Association for the Protection of American Rights in Mexico, also headquartered in New York. The National Association represented broader business interests — taking in banking, mining, and the railway bondholders. The board in fact was made up primarily of oilmen: Amos Beaty of The Texas Company, E. L. Doheny of Pan-American, Chester O. Swain of Jersey Standard, and Thomas W. Lamont of the J.P. Morgan banking firm.

First and foremost, the oil producers' association served to coordinate the resistance of all foreign companies toward the Mexicans.

Although willing, in general, to give in to modest tax increases, the association attempted to prevent concessions eroding any of the companies' prior contractual prerogatives. Consequently, they were hostile to the retroactivity of Article 27. They relied on another article of the constitution: Article 14 guaranteed all existing Mexican contracts against retroactive application by any of the other articles. The companies, therefore, considered that any contracts they had acquired before 1 May 1917 were absolutely valid. When Jersey Standard's Swain rejected the attempted compromise of "provisional" drilling permits in 1919, all companies did the same.^[206]

The oilmen were convinced that there would be no change in Mexican policies, nor in the insecurity in the oil zone either, unless forced by Washington. Consequently, the oil companies began a campaign to pressure the American and British governments to intervene on their behalf. But President Wilson had tired of their incessant weeping and gnashing of teeth. He suspected that the oilmen supported the Republicans anyway. All the companies had was the diplomatic corps. Patrician, elitist, out-of-favor with the White House, American diplomats took over the technical (read petroleum) aspects of Mexican foreign policy. With much forbearance, Secretary of State Robert Lansing and his Latin American section received endless legal briefs from oilmen. Members of the oilmen's association dropped into Foggy Bottom — sometimes unannounced — to pester the diplomats. British diplomats too received their share of "documents relating to the attempt of the government of Mexico to confiscate foreign-owned properties," all generated by the verbose attorneys of the association.^[207] The pressure of the oilmen was relentless. When Mexican troops halted well drilling, oil executives, their attorneys, and friendly senators like Morris Sheppard of Texas inundated the Department of State with letters inquiring what it intended to do about it.^[208] Increasingly, the association's propaganda tended to become anti-Wilson and anti-Democratic.

Nonetheless, the oilmen felt perfectly justified in placing pressure on the State Department. Once the United States entered the European war, the oil producers' association increasingly took up the excuse that Mexican restrictions threatened to cut off this vital source of supply.^[209] Once the war ended in November 1918, the continuing rise of oil prices lent credence to the oilmen's new position that Mexican oil was necessary for American industries and the merchant marine. "[I]n this critical time we must look to our Government not only to protect the oil companies themselves and the thousands of their stockholders," Jer-

sey's C. O. Swain wrote to the State Department, "but also to take effective measures to secure to all the people and industries of the United States the supplies of fuel oil, gasoline and lubricants necessary to meet the demand."^[210] Indeed, the supply of fuel oil was critical in 1919. The U.S. Geological Survey encouraged the oil companies to begin exploring in the Middle East and South America. The National Association, in the meantime, was writing to remind U.S. government officials of the 427 Americans who had been killed in Mexico during the decade of 1910.^[211]

So what did the State Department do for the oil interests? It protested to the Mexican government. American diplomats responded to every new Mexican measure and nearly every paymaster robbery and death in the oil zone. There were fifty-eight different diplomatic protests between 1914 and 1919. But many oilmen suspected that the protests had become mere formalities, that the American diplomats were delivering them as if they were routine communications between friendly governments. "[Henry P.] Fletcher is not altogether the right man," an El Aguila executive said of the new U.S. ambassador. "He is doing what [former Ambassador John R.] Silliman did; that is to diminish and explain away inconvenient notes or communications he is ordered to make."^[212] In reality, the Department of State did not have much leverage to back up those protests. The government was reluctant to halt arms shipments to Carranza, fearing that a victory of his enemies could be much worse for U.S. interests. Finally, there was no longer any will in the Wilson administration to contemplate another armed intervention — especially to save the investments of some of the wealthiest men in America.^[213] Had not the first two interventions turned out badly enough?

So what did the oil companies do? They went public. The oilmen took their case to the newspapers and to Congress. They wanted to show that the Wilson administration was weak in its responses to revolution in Mexico. More than any other oilman, Doheny made himself a relentless publicist. He had always been a Democrat and had donated to Wilson's presidential campaigns. But he became increasingly critical of administration inaction. He wrote a pamphlet in which he posed the following question: Will Carranza succeed in depriving Americans of their oil supplies, "or will the people of the United States lend their encouragement and approval to the Administration in insisting upon and compelling the Carranza Government to fulfill its international obligations?"^[214] At one point, Doheny donated one hundred thousand dol-

lars to fund an ad hoc think tank. The fund supported twenty university professors from Princeton to Berkeley. "Each investigator is also expected to make suggestions of policy for improvement in the Mexican situation," Doheny instructed them. "In this he is to consider the problem from the point of view of `Mexico for the Mexicans.'"^[215] Very little came of this effort. Anyway, Doheny wanted immediate results, and the academicians had a habit of dithering and pondering. Wanting decisive action, Doheny made himself available to newspapermen. In fact, he became something of a media celebrity, never ceasing to produce a good quote.^[216]

His access to newspapers made Doheny's trip to the Paris peace conference in 1919 highly visible. If he wanted to gain the attention of the American, British, and Mexican governments, he succeeded. Even Carranza received press accounts of his trip. "The new constitution of Mexico is intended to confiscate or attack many vested rights of foreigners," he told the Los Angeles Herald.^[217] Of course, the Paris peace conferees, among them Doheny's nemesis, Woodrow Wilson, found more pressing things to discuss than the problems of foreign businessmen in Mexico. British diplomats refused to help Doheny because they suspected Doheny of helping the Irish Republican movement.^[218] Doheny left Paris empty-handed.

More than any other company official, Doheny was willing to carry his message to Congress. The oil producers' association and its members deluged senators and congressmen with its propaganda and viewpoints.^[219] But few oil executives were willing to subject themselves to congressional hearings. Doheny welcomed the opportunity. His testimony at three congressional hearings caused sensations, as he warned of Mexico's seizure of U.S. property and sparred with Democratic senators who dared question his views. His biggest audience came during the famous Mexico hearings of the Fall committee in 1919. Albert B. Fall, the Republican senator from the new state of New Mexico, and Doheny were old friends, having prospected together in the 1880s.^[220]

But many active oilmen, fearing reprisals from the Mexican government, shied away from appearing before the Fall committee. Doheny was the star witness, testifying for several days. From the oil industry, only three other company representatives appeared (Beaty from The Texas Company, Williams from Pánuco, and Buckley from Island Oil), and no current oil workers.^[221] Most men testifying before the committee were former lease-takers and colonists, despite the fact that the oil

producers' association had attempted to select sixty oilmen and forty colonists from Tampico to come to the hearings. But they balked. "The oil companies have for so many years impressed these men with the danger of criticizing the Carranza authorities in public or private," Doheny wrote later, "that this has been accepted by the employees as the settled policy of the oil companies." Apparently, the managers in Mexico in particular sabotaged Doheny's efforts to organize a truly massive protest during the hearings. Doheny was incensed at the lack of nerve of his fellow oilmen. He sent them a stinging rebuke. "I should like to call the attention of the Association to the fact that in the investigation of Mexican affairs lasting for a period of several months which was brought about largely through the influence of the oil companies, in which the oil companies have taken such a prominent part, and in which they have such a vital interest," he wrote scathingly to Swain of Jersey Standard, "no man connected with the oil business who lives in Mexico, or who lives in the states and goes to Mexico occasionally, has testified and taken any risk except myself."^[222] Obviously, there were limits to how much the oil producers' association could narrow the differences between and among the oilmen.

A Weak and Vacillating Policy

What did oilmen want from the U.S. government, anyway? The largest question then and now pertains to whether the oilmen really wanted a massive military intervention; whether they wanted American marines garrisoning the oil camps and patrolling the pipelines. There were perhaps as many answers to that question as there were oilmen in Mexico. What did Americans in Tampico want? Here are some of their answers:

support from the home government (Frederick R. Kellogg, Pan American attorney);

U.S. support short of armed intervention (Rev. Dr. Bruce Baker Corbin of Tampico);

"a just application of international law" (Ira Jewell Williams of Pánuco);

intervention from Allied creditor nations and aid to Carranza government to put down rebels (Lord Cowdray);

aid to Carranza, as "best hope in Mexico for straightening the affairs without intervention" (Commanding Officer, USS Annapolis, Tampico);

withdrawal of U.S. recognition of the Mexican government, so that its reestablishment would be the reward for better treatment of U.S. companies (Harold Walker, Huasteca);

a threat of force that would cause the Mexicans themselves to clean house (an anonymous oilman);

withdrawal of diplomatic representatives and dispatch of warships to Mexico (C. O. Swain, Standard Oil Company of New Jersey);

an invasion of Mexico if necessary to keep oil flowing (Commander James O. Richardson).^[223]

For one thing, there was no consensus among those who criticized U.S. inactivity. For another, few of these men were willing to go completely public with their most draconian suggestions. Of those offering their opinions in various forums, Lord Cowdray was one of the few who did not hector officials, publicly or privately, with his ideas. He expressed them once in a very private meeting with the American ambassador in London. Cowdray said he was convinced that unilateral U.S. intervention in Mexico would result in a protracted guerrilla war and additional unrest.^[224] Other top executives were equally chary about suggesting armed intervention. For example, not once did the voluble Doheny publicly recommend the dispatch of U.S. Marines. Both the oil producers' association and the National Association for the Protection of American Rights in Mexico denied that they were agitating for armed intervention.^[225]

But the lower one went in the hierarchy of the companies, the more one found greater support for intervention. Those in the field were like colonialists. They despised the Mexicans. They thought them weak and bumbling, incapable of resisting American fighting men, and in great need of being bossed around by the Anglo race. In the field, the social attitudes of the Americans were not much different at all from those of Spaniards who had come earlier to dominate the mestizos and indios. William Green seemed to speak for these American supervisors, drillers, and skilled workers in the oil industry:

Our Government does not encourage us in any way to stand up for our rights, and if we do stand up for our rights, we run a good chance of being deported. This condition could be changed in twenty four hours. . . . There are

6,000 fairly well armed Mexicans awaiting the opportunity to co-operate, and nine tenths of the Mexican population are praying for intervention — any other statement, from whatsoever source to the contrary, notwithstanding. Every Mexican with a dollar to protect desires intervention, as he knows that sooner or later it will be stolen from him unless it is protected by our Armies. That is the truth.^[226]

Another critic of the big oil companies did not charge them with being too rigid but with compromising too much. William F. Buckley, the American attorney and owner of the Island Oil Company, held that small compromises hurt the American oil workers. It was to protect these workers, many of whom had "invested all their savings, and were then robbed and driven out" of Mexico, that Buckley formed yet a third group, the American Association of Mexico. The Americans in Mexico, he said, had been abandoned not only by the government but by the companies too.^[227] Buckley excoriated the corporation lawyers like Chester Swain who were giving in to the Mexicans. He charged the heads of the oil companies in the United States and their managers in Tampico with having a "weak and vacillating policy very similar to that followed by the American Government in handling the general Mexican situation."^[228]

Others within the oil industry differed from the difficult-to-define mainstream. On the left bank, so to speak, were a number of small firms and independent oilmen who resented the economic power of the big companies. A few were Mexican. They might look to Carranza for special privileges, pleading, like J. B. Yzaguirre, that Mexican engineers like him ought to develop national resources "with respect for the laws."^[229] Small independent American companies would do the same. Managers of the Tal Vez Company declared that Carranza's taxation of the big companies was not at all excessive. "[T]he oil companies' objections to the new oil taxes has [sic ] little foundation," they wrote to Senator Sheppard of Texas.^[230] Joseph F. Guffy of the AGWI Company showed extraordinary independence from the other foreign oil producers. In interviews with El Universal and Excélsior, Guffy praised the Mexican Revolution and said that Doheny was responsible for 90 percent of the troubles between Carranza and the oilmen.^[231]

Then there was the rustic wildcatter from Houston, Texas, who wanted to reduce foreign oil imports. "Every Independent producer of crude in Txas and Ok. would like to see a prohibitive duty on Mexican Crude into Txas," he wrote to the secretary of state. "Importation of Mexican oil into Txas has almost put the little fellows out

of business."^[232] In truth, the competitive nature of the oil business contributed a centrifugal force, reducing the cohesion for which the oil producers' association was created. Oil companies that otherwise competed against each other around the world could not find perfect unity in Mexico. "In fact, they enter into an agreement to find shortly after the agreement has been entered into," reported one observer in Tampico, "that one of them has secretly gone to the Mexican officials and violated the agreement in order to gain a certain psychological advantage for his company."^[233] Despite the work of the oil producers' association, there remained a surprising diversity of opinion and a divisive spirit among the foreign companies.

The British government had always been less forceful in its protestations. When Carranza first raised taxes, the Foreign Office refused to relay Lord Cowdray's objections because El Aguila had been registered in Mexico, and, besides, it was already paying taxes it did not have to according to its existing contracts. "In the circumstances, I do not see how we can take up the case very strongly," a British diplomat replied.^[234]

The Foreign Office's indifference was evident in its attitude toward recognizing the Carranza government. On this issue, the oil companies and governments seemed hopelessly at cross-purposes. His Majesty's Government did not recognize Carranza, a policy increasingly favored by many American oilmen. In the meanwhile, the American government recognized the Constitutionalists in a way that pleased Lord Cowdray. The evolution of Cowdray's attitude toward Carranza merits some consideration. At first, his general manager in Mexico, J. B. Body, suggested the British government ought not to recognize the Constitutionalists until Carranza promised to respect the rights of foreigners and promised to repeal those illegal taxes. Lord Cowdray overruled him. He counseled the Americans and Britons alike to recognize Carranza in order to gain more protection of foreign businessmen there and to prevent retaliation against them. Cowdray also held Mexican bonds and wanted diplomatic pressure to fix a repayment schedule for the Mexican debt.^[235] The British government, however, acted as Body would have wished, holding out for guarantees before it recognized Carranza. So the Foreign Office was startled when in 1915 the Wilson administration extended recognition to Carranza's provisional government. By that time, Great Britain had more important problems in the European war and simply washed its hands of Mexico. British diplomats relied on the Americans to watch over their interests. The British did not think Carranza would last in power.^[236]

Cowdray bristled privately at the lack of support from the Foreign Office. He had asked for a strong British protest against the adoption of the Mexican constitution. British diplomats put him off. They said they would protest when the government passed some specific legislation rather than objecting to general constitutional principles. All of Cowdray's protests had to be conveyed by the State Department in Washington.^[237] Cowdray never tired of seeking British recognition for Carranza. To that end, he organized a meeting of British businessmen with interests in Mexico. "In the event of disastrous British losses occurring in the Oil Fields," he pleaded, "shall we not have placed the United States Government in a position to be able to disclaim all responsibility to the British Government, owing to the latter having held aloof from Carranza and refused him recognition?"^[238] Lord Cowdray opposed his government's policy in Mexico, and the American oilmen opposed their government's opposite policy.

Once the European war was over, the Foreign Office's objections to regularizing the relations between Mexico and Great Britain diminished. There was still some sentiment within the British diplomatic community that recognition at long last would display a certain weakness on the British part and would confirm Carranza in his onslaught of foreign rights in Mexico.^[239] By now, the argument was becoming very shallow, inasmuch as those Britons whose rights were under attack very much desired British recognition of Carranza. Some overtures were attempted.^[240]

No diplomatic initiatives were ever consummated. Some American oilmen began to think that British diplomatic obstinacy actually extracted more concessions from Carranza. Early in 1920, the oil producers' association suspected that the Mexican government was giving preferential treatment to El Aguila in order to obtain British diplomatic representation. Harold Walker suggested that the United States withdraw recognition of the Mexican government to protect American oilmen equally.^[241] All of this controversy was leading, seemingly illogically, to a compromise of sorts.

The reconciliation came early in 1920 because Carranza needed it as much as the oilmen did. The president of Mexico was facing a period of difficult political transition. Suspicious of the power of the military, Carranza ignored the presidential aspirations of his most successful general, Alvaro Obregón, and was about to impose the election of the relatively unknown ambassador to the United States, Ignacio Bonillas. He certainly did not need to be distracted by oil problems at the

moment. Moreover, news of the salt-water invasion (in December 1918, El Aguila's Potrero del Llano No. 4 had been shut in) caused him alarm. If the oil companies did not drill more wells soon, production would decline along with tax revenues. The companies themselves were faced with declining production. El Aguila had its greatest production in the Faja de Oro, exactly where the salt-water problem was the most severe. Beginning in mid-1919, El Aguila began to receive the drilling permits that the government had been denying to the other companies. Joseph Guffy of AGWI also obtained drilling permits, largely because having arrived after May 1, 1917, he was willing to observe Article 27 of the constitution. But El Aguila had followed the oil producers' association's policy and refused to comply with the retroactive aspect of the Carranza oil decrees.^[242] Why did El Aguila finally get the drilling permits? Was it because the Mexican government wanted to reward El Aguila for favoring diplomatic recognition? Did Carranza hope, thereby, to change the policy of the British Foreign Office? Did Carranza wish to split the united front of the oil companies? For whatever reason, the favorable treatment of the British company, now an affiliate of the Royal Dutch — Shell Company, raised suspicions among American diplomats, and especially among American oilmen.

Once El Aguila received drilling permits, the united front of the oilmen could no longer hold out. Some members were becoming restive under Carranza's restrictions on their drilling. Mexican Gulf, The Texas Company, and Island Oil (Buckley) were about to withdraw from the association and make their own deals with the Mexican government. To hold the line, the association's executive secretary, Frederick Kellogg, had proposed a pooling arrangement. Those companies not losing production because of their adherence to association policy would receive oil from those companies not injured by their compliance with association policies.^[243] Few companies, El Aguila included, wanted to be on the giving end.

For that very reason, El Aguila used its favored position to benefit its sister companies. A representative of El Aguila, Rodolfo Montes, met with President Carranza shortly after New Year's day in 1920. Worried about the salt-water problem (perhaps the election even more), Carranza announced that he was willing to compromise with the companies. He would grant them their "provisional" drilling permits, if they would accept them as temporary — without regard to future oil legislation. The deal was to be consummated between the companies and the Mexican chief executive. "I consider diplomatic pressure by foreign

governments inopportune," said Montes.^[244] (Later, some rancorous American companies would spread the rumor that El Aguila had negotiated this compromise in order to get out of the pooling agreement. Managers of El Aguila saw their leadership role as "unselfish.")^[245] Within ten days of the Carranza-Montes meeting, forty-six member companies of the oil producers' association cabled the Mexican president of their willingness to receive provisional permits, as long as their titles were not thereby prejudiced. Snatching victory from a draw, Carranza announced that the oil companies had given in and that they would submit to future oil legislation.^[246] The orders went out from Carranza to his petroleum inspectors to issue the provisional permits.

The compromise that Carranza fashioned directly with the oil companies has subsequently come under censure. His critics accuse Carranza of giving in to the companies and for not holding out steadfastly for the principles outlined in Article 27. Writing long afterwards, petroleum inspector López Portillo y Weber condemned the issuance of provisional permits. Part of his resentment centered on the fact that he learned of the compromise from Theodore River, manager of The Texas Oil Company. "They were going to formally initiate the ravaging, enormous and stupid, of the Faja de Oro," he wrote.^[247] Actually, Carranza did not compromise any principles. He did not bind subsequent governments to the provisions of his agreement. He may, in fact, have released the companies from some of the pressures, but Carranza had been motivated by short-term Mexican political considerations. Carranza had to attend to the transition of government and, financially, he could not afford the loss of petroleum revenues. Because he was determined to deny power to Obregón, his choices were otherwise quite limited, especially taking into account that oil revenues in 1920 broke previous records — by a wide margin (see table 9). In a moment of political crisis, Carranza could not antagonize any source of income.

Despite the renewed surge in production, the oil companies continued to operate with much uncertainty. Once drilling resumed, oil production, already high, rose by 40 percent in 1920. The full impact of the salt-water invasion, thereby, was put off until the next year. As for the uncertainty, Standard Oil's Transcontinental Company found itself in a particularly vulnerable position. It had arrived in Mexico after the promulgation of the constitution. Some of its best oil prospects were not pre-1917 titles, to which the compromise plainly applied, but contracts Transcontinental had made since 1917. Acquiring new leases directly from landowners after 1917 was risky, but Transcontinental had

been willing to take the risk because its best wells in the southern fields were beginning to flow to salt water.^[248]

Yet Carranza had one last hurrah in his assault on the oil companies, one that did not endanger his production revenues at all. He continued to give out concessions for the so-called federal lands that, according to Article 27, ran along riverbeds and shorelines. In March and April, his last months in office as it turned out, Carranza issued concessions along arroyos passing through the prolific Los Naranjos field. Other federal grants were also made. The oilmen were bitter, accusing Carranza of giving out these proven oil prospects to his political cronies as well as to cooperating oilmen like Guffy. The Dutch company La Corona protested that federal-lands concessions amounted to virtual confiscation of a substantial portion of its oil rights. The oilmen called it "iniquitous poaching."^[249] Clearly, Carranza had not given up all his prerogatives under the Mexican constitution. Despite the short-term financial expedience of his compromise over drilling permits, succeeding Mexican governments would again take up the struggle to substitute property laws inherited from the colonial epoch for those from the more recent liberal capitalist age.

How did the Revolution, a manifestation of popular outrage and rebellion from below, advance the cause of economic nationalism? No doubt, there had always lingered an opinion in Mexico that free-market capitalism must be handled circumspectly. The Mexican Revolution, with its peasant armies, its demands for social reforms, its brigandage and barbarism, led the new political elites to blame the foreign interests for bringing about the conditions that provoked rebellion. They were convinced in this belief by the mass participation in the armies of Villa and Zapata and in their own Constitutionalist forces, often under the command of powerful military jefes who gained popularity by promising land and labor reforms. The revolutionary elites, therefore, sought to reestablish old social controls. They wanted to tame the demands of the peasants, the Indians, the less fortunate of society, without impinging very much on their own newfound privileges.

The new leaders looked to the state. They demanded that the state in revolutionary Mexico create increasing capacity to control the populace, through the time-honored dual strategies of repression and paternalism. Therefore, the state desperately needed resources during a time of revolutionary disruption of the economy, when those sources of revenues were being destroyed by the very popular wrath they hoped to

contain. The foreign interests seemed the logical source of funds to reestablish the state's suzerainty over the popular classes. If, in the meantime, one had to sacrifice the potential for economic growth, so be it. Social control took precedence over economic dynamism. Therefore, new political elites attempting to consolidate the social revolution tended to become economic nationalists. Economic nationalism was no alternative to — no diversion from — social reform. The economic nationalists, in truth, were the indispensable coconspirators of the social reformers. They sought to reestablish control over the foreign interests, over capitalism, and over the economy so that assets could be diverted to the larger public good, that of managing social antagonisms. By virtue of their wealth and the growth of their assets during the Revolution, the oil companies became the logical target of such political antagonism.

A second, perhaps more startling conclusion of the above analysis concerns the severe political limitations of the otherwise powerful companies. Quite often, scholars find it difficult to address the limitations of the foreign interests. These Wall Street organizations were far-off yet omnipresent; they were specialized yet omniscient. They are depicted as giant octopi, tentacles reaching out, suction cups holding fast to some valuable asset. We have reviewed the record with respect to the foreign oil companies in Mexico. Their representatives suborned with bribes, entertained lavishly, wrote to senators, had meetings with diplomats, published their views in newspapers and books, testified before congressional hearings, contributed to political campaigns, organized protective associations, protested, complained, and lobbied. What did it get them? Higher taxes and the beginnings of state infringement of private property rights in Mexico. They had been abandoned by their home governments and left to cope as best they could. Despite Herculean efforts, they remained divided and competitive amongst themselves. The only things upon which they were able to rely during the great Mexican oil boom were the strength of external demand and the fecundity of the wells. As long as prices rose and nothing interrupted the flow of oil through the well heads, the companies retained enough economic strength to absorb the exactions of the Mexican revolutionary state.

Only one political factor favored the companies in delaying the erosion of their power: the weaknesses of the Mexican governments. No president during the Revolution had benefited from social peace and a healthy economy. Incessant rebellions by would-be presidents ruined

the economic base and drove the state deeper into debt. The petroleum industry escaped the worst of the economic decay because it was off to one side of the main fighting. The construction of its pipelines and terminals had been completed before the period of pillage, and it depended on outside markets. Moreover, Carranza's government and the bandits too, to a certain degree, would not have profited if the industry had been completely shut down. So they did not stop it. Yet, under the circumstances, the Mexicans acquitted themselves successfully in extracting greater amounts of the "surplus value" of "international monopoly capitalism."

There was a final tragic note. Carranza succumbed to a domestic rebellion in May of 1920. While escaping through a small town in the mountains of Puebla, high above the Huasteca, he was assassinated. His killers were identified as having ties with the rebel general Manuel Peláez, who was said to have been "in the pay" of the oil companies. These circumstances bring up an issue that this analysis so far has cast aside: being relatively unsuccessful in their other political activities, did the oil companies then engage in fomenting internal rebellion? Did they support counterrevolution? If so, perhaps the early rumors they spread about each other contained the germ of verisimilitude. If not, perhaps it provides additional proof of the limited power of wealthy companies — like leaves in the storm of the Revolution, as Mariano Azuela would say.