In May 1901, British businessman William Knox D’Arcy, who was funded by a British Syndicate and had the backing of the Royal Navy, obtained a document signed by the Shah of Persia that is regarded by many historians as the most important document of the twentieth century. In return for £20,000, and the same amount in shares to be paid at the time of the formation of the company, plus an annual royalty of 16 percent on net profits, Knox D’Arcy, described in the contract “as a man of independent means residing in London at No. 42 Grosvenor Square,” was granted the sweeping sixty-year concession to explore and exploit natural gas and petroleum throughout the Persian Empire. He was granted the exclusive concession to lay the pipelines, build storage facilities and refineries, and offer pump services in the Persian Empire.
That there was abundant oil and gas in Persia was well known for centuries. The Byzantine authors in late antiquity wrote about the “Median fire,” which was made from petroleum that used to naturally seep from the ground. By the seventh century, the Byzantines were using “Greek fire,” which was a formulation of petroleum, to burn down the ships and siege towers of the invading armies. During the first (674–678) and the second (717–718) Arab sieges of Constantinople, the technological innovation of Greek fire saved the city, and ensured the survival of the Byzantine Empire. But in 1901, it was not understood that Persian oil could be monetized in a significant way. Many in Europe and Persia were skeptical about Knox D’Arcy finding enough oil to justify his investments. There was skepticism about his ability to transport whatever oil he found to the major markets.
On 28 May 1908, the company that Knox D’Arcy had established, the Anglo-Persian Oil Company, hit the motherlode—it was the biggest oil find of that time. Black Gold was shooting high in the air. When the news of the find reached Europe, investors jumped onto the Anglo-Persian Oil Company’s bandwagon, which now had enough funds to start the work for laying down the pipelines, building storage facilities and refineries, and developing the shipping network. The world-historical significance of the discovery of Black Gold by Knox D’Arcy’s Anglo-Persian Oil Company was much bigger than that of the discovery of gold by the Spanish Conquistadors. Within four years of the discovery of Black Gold, naval warfare was revolutionized by the rise of oil and gas powered ships which were faster than the traditional coal powered ships. In 1914, the British Government purchased 51 percent of the Anglo-Persian Oil Company.
Till the end of the nineteenth century, the wars in the Middle East were over Jerusalem and Constantinople (the Holy Lands). With the discovery of Black Gold, the issue of Holy Land became less important. Henceforth the wars in the Middle East would be over the control of Black Gold. When the First World War broke out in 1914, the first military action that the British government took was to secure the Middle Eastern pipelines and refineries.