Holding Up the Empire: Colombia, American Oil Interests, and the 1921 Urrutia-Thomson Treaty

Why did the United States subsidize American multinationals' entry into countries treated as informal colonies? We study a classic case of American imperialism, the 1903 U.S. Support of Panama's secession from Colombia and subsequent U.S. payment of the 1921 reparations that opened Colombia's oil fields to Standard Oil. We test Noel Maurer's (2013) empire trap hypothesis quantitatively. Archival and econometric evidence documents Colombia's threat to Standard Oil's sunk investment, which induced the multinational to build a supermajority coalition in the U.S. Senate to back a reparations treaty. Results support the empire trap hypothesis but point out important qualifications.