IG Farben part 1 of 2

Versailles to Standard-IG

In Germany, the homicidal nationalism that drove men like Haber into war crimes did not lessen after the Great War; it was only wounded and began to assume a more degenerate quality distasteful to open-minded businessmen like Carl Bosch. The naval blockade in the war had proven the importance of the nationalist ideal of German self-sufficiency. Carl Bosch was, like or not, emblematic of that ideal, having provided an endless supply of gunpowder to the Kaiser’s war machine through the synthetic nitrogen programs at Oppau and Leuna.

And so, he was chosen to go to Versailles with the German delegation, representing the German chemical industry. Anyway, Duisberg couldn’t go.

When they arrived at Versailles, the German delegation was greeted with a famously harsh set of terms for German surrender. When he read in the fine print that German chemical plants were to be destroyed or dismantled, he took matters into his own hands. During negotiations, they were housed inside a secure, fenced-off area, their movements surveilled and guarded. Nonetheless, one night Bosch climbed the fence and clandestinely met with Joseph Frossard, a Frenchman that Bosch knew from the prewar period. He offered the only asset left to him: the secrets of the Haber-Bosch process. The French had captured the plants at Oppau and Leuna, but they didn’t know how to run the process. In exchange for the preservation of the physical facilities, BASF would help the French build their own plants. The offer was accepted, and soon there were Haber-Bosch plants in France, and then quickly around the industrialized world. The main international producers became Du Pont and Imperial Chemical Industries (ICI, British).

Then, in the fall of 1919, the Nobel Prize committee announced that it would award the Nobel Prize for chemistry to Fritz Haber. This sparked justifiable outrage in the scientific community—since he was the father of chemical warfare—and two French winners of the Nobel Prize announced that they would refuse to accept their prizes. Dag Hammarskjöld tried to clarify that he was being honored for his invention of synthetic ammonia, not poison gas. But on February 3, 1920, when the Allies delivered a list of 900 alleged war criminals to Baron von Lersner as head of the German peace delegation, Haber’s name was on the list. It was the only person within the orbit of the I.G. to be charged. The allies decided that 900 was too many to prosecute, and Haber’s name was quietly removed from the list. Haber resumed his post at the Kaiser Wilhlelm Institute at Dahlem.¹

After the War, Richard Merton of the Metallgesellschaft retained John Foster Dulles, now a partner at Sullivan & Cromwell following his high-profile performance at Versailles, to recover the seized stock in the American Metals Company. Dulles suggested that the Metallgesellschaft declare bankruptcy so they would have a better chance of collecting from the Alien Property Custodian. Merton was furious; the Metallgesellschaft was a massive and profitable firm in Germany, and it made no sense to declare it bankrupt just to collect what had dwindled down to a $7 million claim.²

In September 1921, the plant at Oppau exploded, killing over 600 and wounding over 2,000. It didn’t happen in the building that housed the ammonia production works, and the cause of the explosion never became clear, although an official explanation was developed. When asked by an American reporter, Haber would only say, “an investigation may reveal new and terrible forces.”³ Bosch put his “protegee” and future war criminal (one of the many in this story) Carl Krauch in charge of rebuilding Oppau with orders to spare no expense.⁴

Perhaps those new and terrible forces were political rather than chemical. It was a time of political upheaval; the year before, the Communists had seized control of the Ruhr valley.

One of the founders of the Communist Workers’ Party of Germany, Peter Utzelmann alias Kempin, worked at BASF Leuna plant, which employed somewhere between 12,000-25,000 workers, half of whom were in the KAPD or the VKPD. The KAPD union at Leuna published its own newspaper.⁵ The workers in the region had kept the arms they had seized in 1918.⁶ The region had been put under martial law during the Kapp Putsch in March 1920. At that time, workers in the Ruhr valley organized and fought against the friekorps. Following those events, Bosch and Duisberg brought private security forces to keep watch inside their own factory, especially Leuna. In March 2021, the leadership of the VKPD called a general strike. In the nearest town, Halle, a Communist guerrilla fighter Max Hölz who had gone rogue, rolled in with “a motorized squad [of] between 60 and 200 men,” heavily armed. On March 21^st, the workers at Leuna deposed the old workers council and named an action committee presided over by Utzelmann. They demanded the withdrawal of the police, and declared they would strike if they saw Schupos (Reich security police) near the factory. The strike began the next day.⁷ As Hölz posted himself in the nearby copper mines while 2,000 workers at Leuna took control of their factory and barricaded themselves inside. The workers stayed inside the plant for ten days, until the police supported by artillery stormed the plant, killing thirty workers. The BASF board ordered the entire workforce of Leuna fired, and then used the re-hiring process to screen out any leftist tendencies.⁸

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The Germans couldn’t meet the reparations quotas laid out by the Versailles treaty, and in January 1293, the French occupied the Ruhr valley, which included the BASF headquarters at Ludwigschafen and the nitrate plant at Oppau. The German government declared a policy of passive resistance, and the factories came to a complete halt. On May 22, Bosch received a message from an informant in the French army that the French army was preparing to occupy the BASF plants and arrest the managers for preventing the shipment of reparations goods. Bosch immediately ordered the high-pressure hydrogenation equipment at Oppau moved to Leuna, which fell in unoccupied Germany. The massive machinery was loaded on rafts and hauled across the Rhine. The directors of BASF fled, but a French military court charged, tried, and convicted them in absentia, sentencing Carl Bosch and Hermann Schmitz to eight years. The entire board of directors of BASF became fugitives from the French Army of Occupation.⁹

The shutdown of BASF plants gave du Pont the opportunity to utilize the technical information they had gained from I.G. chemists that they had spirited out of Germany in 1921. Without German competition, du Pont was supplying almost 95 percent of the American dyestuffs market.

This growing strength of its foreign competitors convinced Bosch to reopen the matter of merging the I.G. firms into a single company. Duisberg had been advocating for a merger for years; he had visited Rockefeller in America and was convinced that a monopoly trust could do business better. But by 1924, when the bosses of the German chemical industry met at his estate to negotiate the merger, he hesitated. Bayer had survived the previous decade in a much better position than most of the other companies of the old Interessen Gemeinschaft. Aspirin had become the quintessential, and most essential, medicine, and although Bayer no longer controlled the patent, Aspirin sales had boomed during the 1918-1919 influenza. He now found himself hesitant to merge, but over the course of a year of negotiations Bosch talked him into it. BASF increased its capitalization to equal of the five other signatories, exchanged its stock for theirs, and legally assumed the new entity’s name: IG Farbenindustrie Aktienge-sellschaft, to be known to all as IG Farben. This company consisted of a supervisory board, the Aufsichstrat, led by Carl Duisberg, and a managing board that oversaw day-to-day operations, the Vorstand, headed by the chief executive, Carl Bosch.¹⁰ The newly formed I.G. Farben was the largest corporation in Europe and the largest chemical company in the world.¹¹

The biggest problem of German self-sufficiency was oil; Germany had never had any. Lots of coal, no oil. This had historically resulted in state support for alcohol fuel.¹² IG Farben was producing 60,000 gallons of synthetic ethanol a month—a fact that was reported by a representative of Ford in 1925.¹³ However, as much as alcohol was still the fuel of the future, Bosch thought he could get the IG fully into the oil business. There were a few ways to turn coal into a liquid fuel, including the Fischer-Tropp process, but Bosch was naturally drawn to the one developed by Fritz Haber’s former assistant, Friedrich Bergius, which used high-pressure hydrogenation: the same technique that uses many of the same pieces of equipment that had been lying fallow at Leuna since the occupation of the Ruhr. The Bergius process produces methanol, technically a type of alcohol but that can be used as liquid fuel and so was seen as “synthetic oil” or Synoil.

Before bringing Bergius in, Bosch set his own scientists to work, and in 1923 BASF scientist Matthias Pier had designed a commercially viable process using the high-pressure hydrogenation equipment on hand. Bosch acquired Bergius’s patents for around RM 10 million.¹⁴ “It was Bosch’s dream to liberate Germany from dependence of foreign oil wells…Bosch would do for oil what he had done for nitrates. Through the magic of high pressure chemistry and his own genius he would convert Germany’s plentiful coal into a torrent of gasoline. He would recreate a past triumph in a new setting.”¹⁵

Progress was frustrated by circumstance. In January 1923, the French moved into the Rhineland as recompense for delinquencies on the Versailles reparations. The occupied territory included both the BASF plants in Oppau and Lugwigshafen. The German government declared a policy of passive resistance, and all the factories in the area ground to a halt.

By mid-May, the BASF plants had been idle for months, and so falling behind even further on the delivery of nitrate fertilizers and dyestuffs mandated by Versailles. On May 22, Bosch was tipped off by an informant whose identity remains a mystery today (Joseph Frossard, it seems to me), that the French forces were going to take possession of the plants the next day. Bosch immediately mobilized his company to dismantle the high-pressure Haber-Bosch equipment, load it on rafts and haul it across the Rhine and then transported to Leunawerke. They all worked all night. The intel was good; the French did occupy the plants the next day. This centralized production in Leuna going forward.

Bosch wanted to go all-in on synthetic oil. The American government kept loudly proclaiming that reserves of oil worldwide were running out, as the automobile boom proceeded around the world. The “fuel of the future” debates were raging; in America it was alcohol, and in the new Germany, engines would burn German liquid coal. The idea did face opposition within the IG, and not just because of the expense of rebuilding Leunawerke.

It would put IG Farben at risk of conflict with the traditional oil industry, particularly the Standard. Up to this point the chemists and the oilmen had been symbiotic, each industry complimenting and boosting the other; Synoil would compete directly.

Farben placed all its American holdings and agreements—including the storied collaboration between Bayer and Sterling for the American manufacture of Aspirin—into a Swiss holding company. The following April, it set up the American IG Chemical Company, which then exchanged its shares against the Swiss IG’s shares of the assets. This avoided the confiscation of assets that the treaty of Versailles was intended to impose. This made it easier to raise money on U.S. capital markets. In the years to come, American IG would raise around $30 million through bond issues, making Wall Street one of IG Farben’s biggest lenders.

But on the other hand, maybe Standard Oil would like to license the Bergius process from the IG. Standard was worried about the depletion of natural oil reserves, and had done what oil companies would always do when faced with a shortage: explore sources of “unconventional” oil. In 1921, they’d bought 22,000 acres in Colorado in the hope of developing a commercially viable method of extracting oil from shale rock.¹⁶ They were also interested in the Bergius process—both in the possibility of utilizing it themselves, and in the importance of preventing other people from using it to compete. But as it turned out, The Bergius process could do more than make synthetic oil, it could hugely increase—double, in fact—the yield of refined product per barrel of natural crude.

Bosch invited Frank A Howard, the head of the Standard Development Company, to come tour Leuna in 1926. Howard cabled his boss, Walter Teagle, the president of Standard Oil, “This matter is the most important which has ever faced the company… [IG] can make high-grade motor fuel from lignite and other low quality coals in amounts up to half the weight of the coal. This means absolutely the independence of Europe in the matter of gasoline supply. Straight price competition is all that is left.”¹⁷ Teagle showed up to take the tour himself and was suitably impressed. After a year of negotiations, in August 1927, in return for the American rights to use the Bergius process on their natural oil, but only in their refineries in America, Standard agreed to invest in a joint research and development program with the IG and to build a plant for this purpose in Louisiana. The results from showed that the application of the Bergius process to natural crude oil could double the yield out of refineries. Teagle wanted to immediately apply the technology in all Standard Oil plants, but under the terms of this agreement, he was only permitted to use it in the United States. Teagle traveled back to Germany, hoping to expand the partnership.

Transfer of industrial knowledge is a contentious and subtle thing, especially when dealing with the Germans. German patent law allowed a company to copy someone else’s product if it was produced by a different process. When filing a patent, therefore, Germans took care to cover and describe every imaginable variation of their process. At the same time, they took care to speak in generalities, to obscure the actual practical steps they took in their labs. As a result German patents were cryptic, and usually useless without an accompanying transfer of “know-how,” the technical specifications of a given process. The Americans didn’t always understand this, and didn’t always think to ask for the “know-how” to be included in the contract.¹⁸

[Substack readers: My footnotes got messed up from here down, but it’s all from the 2 main books. If you are going to read one of them, I recommend The Crime and Punishment of IG Farben over Hell’s Cartel.]

The deal was concluded in June 1928. In return for 2 percent of Standard’s stock—546,000 shares with a cash value of around $35 million—the IG sold its rights to fuel hydrogenation everywhere outside of Germany. The two set up a joint firm, Standard-IG (80 percent owned by Standard). Teagle joined the board of the American IG—the company that was fully owned by the German parent. As everyone knows, the legal arrangements for these matters were handled by Standard and Cromwell, which had been the top corporate law firm since Cromwell had bribed New Jersey politicians to create the first holding companies. Following their very visible performances at Versailles, rainmaker status was passed to John Foster Dulles and his little brother.

Bosch next wanted to get Standard in on buna. In 1927, I.G. Farben hired Herman F. Mark to study synthetic organic polymers, based on the theoretical work of Hermann Staudinger. Mark directed a lab that developed a series of profitable products: polystyrene, polyvinyl chloride, polymethyl methacrylate, as well as a combination of polymers that became known as Buna-N, or Nitrile rubber.

IG labs had been producing buna from coal, but Bosch thought that substituting oil for coal would make the process more cost effective. He sent his protegee, Carl Krauch, to America, where he negotiated another joint company, the Joint American Study Company (Jasco) to develop a number of processes using oil as a raw material with particular emphasis on Buna.[7] The Jasco agreement licensed the patent for Buna to Standard, but it did not include any obligation for the Germans to share the technical know-how necessary to make use of the patent. It created a joint entity charged with research into synthetic rubber, and it obligated Standard to give any patents related to synthetic rubber to the Interessen Gemeinshelft. This is why the formula for butyl was given free of charge to Farben, even while buna remained a mystery to the Americans.

Part 2 of 2

1. Joseph Borkin, The Crime and Punishment of I.G. Farben. London: Andre Deutsch, 1979. Pg 31.

2. Crime and Punishment 138

3. The Crime and Punishment, cites New York Times, September 25, 1921, Sec. II, p. 9, col. 2.

4. Crime and Punishment cites NI-6768, p. 16, affidavit of Carl Krauch

5. Pierre Broue, Ian H. Birchall, Brian Pearce, The German Revolution 1917-1923. Brill Academic Publishers, 2004 (I think Haymarket has a different edition).

cites H.M. Bock, Syndikalismus und Linkskommunismus von 1918–1923, Meisenheim/Glain, 1969, p. 303.

6. Gilles Dauvé, Denis Authier, The March Action (1921) chapter 15: https://www.marxists.org/subject/germany-1918-23/dauve-authier/ch15.htm

Jeffrey I. Meikle, American Plastic: A Cultural History. New Brunswick: Rutgers University Press, 1995.

7. ibid.

8. Hell’s Cartel cites For the VKPD revolt and BASF’s response, see BASF UA C113, Engere Kommission des AR, 54, Sitzung 29–3, and Streller and Masalsky, Geschichte des VEB Leuna-Werke.

9. The Crime and Punishment of IG Farben, 35.

10. Hell’s Cartel

11. Bill Kovarik, History of Biofuels, Chapter One, in B. P. Sing, ed., Biofuels Crops” Production, Physiology and Genetics, CABI 2013. https://billkovarik.com/bio/cabi/

12. Kovarik’s archival research: W.H. Smith to C.E.A. Winslow, Box 101 Folder 1800, C.E.A. Winslow papers, Yale University. Forwarded to Surgeon General in Sept. 1925. Note that such correspondence is not found in the National Archives files. Winslow also attempted to have alternatives to tetraethyl lead mentioned in the final report but was voted down by others on the committee.

13. Hell’s Cartel chapter 5 says that Howard Teagle joined the board of American IG, but I think that’s a mistake because Walter Teagle was on that board, and didn’t have a son named Howard as far as I can tell.

14. Crime and Punishment 37

15. Crime and Punishment cites NI-5186, p. 7, affidavit of Ter Meer.

16. Crime and Punishment. In late 1916, following a three-year survey, the USGS concluded that Colorado shale beds would yield more than twenty billion barrels of crude oil.

17. Qtd. In Hell’s Cartel, cites Quoted in Wendell:

Wendell Berge, Cartels: Challenge to a Free World. Public Affairs Press, 1944, 2015 reprint https://ia601409.us.archive.org/17/items/in.ernet.dli.2015.189407/2015.189407.Cartels.pdf. This same quote is featured in Crime and Punishment of IG Farben pg 39

18. Hell’s Cartel