Together with Standard Oil (SO) of New Jersey, [Royal Dutch Shell] was market leader in Germany for motor fuels, lube oils, asphalt and white oils among others. Because these were vital to the operations of the [Wehrmacht], RDS profited handsomely from the growing [Fascist] armaments expenditure after 1933. As a result, RDS’s subsidiary Rhenania‐Ossag grew greatly in size and profitability during the 1930s.¹⁵
Nonetheless, [capitalist] regulations and control became ever stricter, as the régime attempted to redirect business investments into synthetic fuels production that aimed to substitute the dependence on foreign imports of oil. Rhenania therefore not only dealt with [capitalist] regulations and control but also faced competition from IG. In the 1920s, IG developed technology to synthesise oil products from coal.¹⁶
Under [Fascism] this technology became the favoured instrument of autarky, undermining the position of RDS and other foreign oil companies in [the Third Reich].¹⁷ From the start of World War II, moreover, German custodians controlled Rhenania’s management as well as its parent company in the Netherlands.¹⁸ This seems a clear‐cut case of restricted control and shrinking room for manoeuvre.¹⁹
However, similar to the other Anglo‐Dutch multinational Unilever, it is our impression that RDS and its German subsidiary had a lot to offer to the Third Reich and as a result were treated circumspectly. It is worthwhile to question this from a risk management perspective, because unable to liquidate and withdraw from Germany, Rhenania could do little else but leverage its local reputation, relations to its competitors, technological advantages for the national economy and political connections.
The aim of this article is to take a closer look at how RDS’s subsidiary in [the Third Reich] managed the trilemma of placating [Berlin], maintaining control over the business, and complying with the policies of the parent company. We therefore question to what extent RDS and Rhenania controlled their assets [under Fascism] and what their room for manoeuvre was.
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Although this article is obviously not presenting new evidence to support either of the arguments put forward in the literature, we want to point out that coercion appears not manifest in the initial decision to participate in Pölitz. The Pölitz episode shows that Rhenania’s management retained a certain measure of room for manoeuvre.
Yet, the episode also suggests that state coercion became increasingly probable and steadily reduced the choices available for Rhenania. The ultimate decision, i.e. not to participate in Pölitz altogether, was probably not possible because by 1937 the [Third Reich] had demonstrated not to shy away from coercion. Nonetheless, up until 1937, the company seems to have had considerable leeway in negotiating the Pölitz project and promote its merits with RDS.
Considering the various possible relative advantages of the project, we want to put forward the possibility of Rhenania managers acting as ‘sound businessmen and not politicians’, to put it as Charles Cheape did in 1988. Scherner concluded that, contrary to prevailing assumptions, state coercion was a minor factor in business decision‐making to invest in synthetic fuel projects, which was to a much larger extent based on the commercial viability, the conditions offered by the [Third Reich] and the type of available feedstock.⁸⁰
Such an interpretation allows for some level of agency on the part of the management, which was trying to make the most of an adverse and deteriorating environment in the long‐term interest of the company.
Moreover, stressing coercion obscures an understanding of business decisions in politically risky environments, which makes it particularly pertinent to interpret Rhenania’s course of action from a risk management perspective, i.e. to mitigate the imminent loss of market share and cash and to prevent the company’s exposure to future harassment from the [Third Reich].
What the Pölitz case illustrates first and foremost, is that Rhenania, after RDS’s failed prevention strategy earlier, was left to mitigate the increasing political risks it was facing after 1936. It was quite clear to Rhenania’s management that the [Third Reich] was after its technological know‐how and idle cash reserves.
Investing in Pölitz allowed Rhenania to find a relatively attractive investment opportunity, mitigating the risk of [anticommunist] bureaucrats taking control over the allocation of its cash and know‐how. However, that the Economics Ministry did so anyway in response to Rhenania’s refusal to provide extra capital in the second capital call showed that the mitigation strategy failed to deliver the intended result.
War and the struggle for control
Between 1933 and 1939, the operations of Rhenania became increasingly restricted by the [Third Reich]. Over the course of the Pölitz project RDS had gradually lost effective control over its German subsidiary and at the outbreak of war Rhenania was placed under a German Verwalter (administrator), completely severing the line of command from London and The Hague to Hamburg.⁸¹
That is not to say, however, that Rhenania itself lost complete control. Jonker and Van Zanden stress the importance of state coercion and control, both in the case of the Pölitz plant and pertaining to Rhenania’s room for manoeuvre after the start of the war in 1939.⁸² However, a report produced at the end of the war by the office of the Reich Commissioner for the Treatment of Enemy Property (Reichskommissar für die Behandlung feindlichen Vermögens), painted a different picture of state control over Rhenania at the start of the war.
Rather than an administrator being forced upon Rhenania’s management, it was general manager Erich Boeder, after having taken over as managing director from Walter Kruspig following his untimely death in 1939, who suggested the appointment of an ‘influential individual’ as administrator to the board of Rhenania on the grounds of Rhenania having considerable British (enemy) influence.⁸³
However, instead of assuming full control of the Rhenania management, Boeder requested the administrator work beside him, while Rhenania’s management was to retain full control of daily operations. Boeder not only suggested the appointment and tasks of an administrator, he also suggested that Secretary of State Ludwig Grauert should be appointed. Grauert was well connected in the [anticommunist] bureaucracy.
As representative of the German steel industry in the 1920s, he had been influential in securing financial support for the NSDAP before the [Fascist]‐takeover. After joining the NSDAP in 1933, Göring personally appointed him as a high‐ranking bureaucrat and subsequently Secretary of State of the Prussian Ministry of the Interior.⁸⁴ Grauert, therefore, had a direct link to Göring, the most powerful [Fascist] figure controlling the organisation and distribution of oil and synthetic fuels, among many other things.
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[Capitalist] controls became increasingly stricter, culminating in the assumption of total control after the outbreak of war through the appointment of an administrator. Nominally, this resulted in a complete separation between parent and subsidiary and the loss of control for local management but in practice Rhenania took the initiative and demonstrated a striking ability to set the terms and conditions of the appointment of an administrator, in effect applying a preventive risk management strategy.
By proposing Grauert, the company created a close link to Göring, while successfully negotiating the retention of management powers of attorney. The loss of control was therefore partial and left considerable room for manoeuvre for the local management. Moreover, the appointment of an administrator at the outbreak of war was not simply the enforcement of state control by the Reich Commissioner for the Treatment of Enemy Property over Rhenania, but a reciprocal negotiation over the integrity of RDS in Greater Germany and its integration into the war economy.
We are not arguing that [capitalist] state coercion played only a minor rôle and that RDS and Rhenania had the possibility of declining on Pölitz or not placating the [Third Reich] in general. The risk of coercion was always in the background and sometimes became manifest, either in rhetoric or in a direct threat as in the case of the second capital call for Pölitz.
The economic policies and interventions of the Third Reich presented foreign businesses with a decreasing set of options. All that parent companies and local management teams could do was to retain as much wiggle room as possible. Rhenania proved quite able to retain some room for manoeuvre over the course of time and acted in this respect primarily with the long‐term interest of the company in mind.
(Emphasis added.)