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In the early 1950's Iran was swept by a
wave of intense nationalism which, under
the Prime Minister, Dr Mohammed Mussadeq,
led to the nationalization of the
Anglo-Iranian Oil Company and a breach
of relations with Great Britain. Dr Mussadeq
figured so prominently in the oil
crisis that one might suppose it began and
ended with him. Certainly, events were
dominated by the ruthlessness with which factors involved, in particular the reaction
in Asia against domination by the West.
Just as Europeans imposed themselves
upon the indigenous populations of the
Americas, so in Asia they acquired great
influence and in some parts sovereignty. In
Persia - as Iran was then called - and the
Ottoman Empire (Turkey), though these
were independent countries, Europeans
acquired a favoured position which was
buttressed by a system of judicial and
financial privileges, known as capitulations.
This system - centuries old in the
Middle East - was eventually imposed in
the Far East, first on China, and then, in
the mid-19th century, upon Japan - by
European and American pressure. The
Japanese, however, rapidly modernized
their country, and by 1899 they were
powerful enough to throw off the capitulations;
and in 1905 they defeated Russia in
a major war.
The success of the Japanese excited and
encouraged the Middle East, and helped
to bring about the revolutions in Persia
(1906) and Turkey (1908), which were
directed not only against despotism but
also against the subservience of the
despotic regimes to Western influence. In
Persia the pressure came mainly from
Russia, which had swallowed up Central
Asia, and also parts of the Caucasus which
had formerly been Persian; and for about
a century Britain gained some credit in
Persian eyes for opposing the Russian
menace, even though her object was primarily
the defence of India. Britain also
gained some popularity by favouring the
constitutionalists in the revolution of 1906.
In 1907, however, the Persians were disappointed
and enraged by the signature of
an Anglo-Russian agreement dividing
Persia into spheres of influence: Russian
in the north, British in the south, with a
neutral zone between. Britain had been
compelled, by the growing German danger,
to compose her differences with Russia in
regard to Persia (and Tibet and Afghanistan),
but nothing would satisfy the Persians
but unconditional British support
against Russia.
Great Britain steps in
It was just about this time that the oil
resources of the Middle East began to be
developed. In 1901 the Persian
government granted to an Englishman
named William D'Arcy a sixty-year oil concession
over the whole of Persia except the five
northern provinces, on which Russia kept
a jealous eye. After much unsuccessful
drilling, oil was struck at Masjid-i-Sulaiman,
in south-west Persia, in 1908, and
work developed rapidly under a group
which in 1909 took the name of the Anglo-Persian Oil Company (APOC). The APOC built a refinery at Abadan by arrangement
with the semi-autonomous Sheikh of
Mohammerah, and ensured security in the
oil-fields area by regular payments to the
chiefs of the local tribe, the Bakhtiari.
These expedients were unavoidable, because
the Persian government was powerless
in that region, but later on the Persians
alleged that they were designed to
divide the country and make it easier to
exploit.
In 1914 the British government financed
the company by the investment of two
million pounds, and acquired fifty-one per
cent of the shares and two seats on the
directorate. This aroused Persian suspicions,
though it was a condition of the
arrangement that the veto of the two
government directors should never be
exercised except in questions of the highest
policy.
In 1921 Persia came under the control
of a remarkable soldier, Colonel Reza
Khan, who became Reza Shah in 1925.
After establishing order and securing the
abolition of the capitulations in 1928 he
began to demand a larger share in the
profits of the oil industry, the more vigorously
when the Depression reduced Persia's
revenue from her oil; and in 1932, having
failed to secure agreement, he cancelled
the concession. In 1933 he granted a new
concession, by which Persia secured better
financial terms and a reduction of the concession
area by three-quarters, to be
reduced to a maximum of 100,000 sq. miles
by 1938. In return the APOC secured the
prolongation of its concession from 1961
to 1993, and a guarantee from the Persian
government that they would not annul or
alter the concession and that all differences
would be referred to arbitration.
Invasion
In addition, APOC now changed its name
to the Anglo-Iranian Oil Company (AIOC). Under
the influence of the nationalist revival,
Persia was increasingly becoming known
in the West as Iran, the name by which
the inhabitants had always referred to
their country. Iran, which means Aryan,
became the official title in 1935 by a decree
of the Shah who wished to emphasise the
ethnographic differences between his and
other Middle Eastern nations. The name
Persia, however, remained in common use.
In September 1941 British and Russian
troops invaded Persia, which was officially
neutral. The United States government,
traditionally anti-imperialist, not only
rejected Reza Shah's appeals for help and
advised him to assist the Allies, not Hitler,
but also sent 30,000 troops to help convey
military aid to Russia across Persian territory.
The blow to Persian pride was mitigated
to some extent by a treaty between
Persia, Britain, and Russia in which the Allies undertook to safeguard Persian
rights as far as possible, and British
conduct in this respect compared very
favourably with that of Russia; but invaders
cannot expect to be popular, and
Persian resentment may well have been
extended to the AIOC as a British concern.
The circumstances of the time favoured
the rise to power of a Persian landowner.
Dr. Mussadeq (or Mossadegh, or Musaddiq,
or Moussadek, or a variety of other
spellings). This flamboyant character,
whose name means 'one who has been tried
and found worthy', had held office as undersecretary
of finance in 1916 and as foreign
minister in 1922. He had opposed the
accession of Reza Shah in 1925, but had
later served in various cabinet offices,
though he fell into disgrace for a time. He
now became a deputy in the Persian
parliament (Majlis) in the first elections
after the invasion. By this time Reza Shah
had abdicated and been succeeded by his
son, Mohammed Reza. Freed from the
terrifying absolutism of Reza Shah,
deputies began to talk freely, and among
the most loquacious and violent was Mussadeq.
He led a campaign against the
AIOC, which he vilified as a bad employer -
a charge not supported by an
International Labour Organization inquiry
in 1950. He preached the simple doctrine
that the poverty of Persia was attributable
to the AIOC, and could be abolished by
nationalization of the oil industry.
Towards the end of the war applications
for oil concessions in the south were
received from Royal Dutch Shell and two
American companies. These applications
were going through the normal procedure
when the Soviet government sent to Tehran
a powerful delegation to ask for a prospecting
licence over most of northern
Persia and for a concession there if oil
should be found. The Persian government,
greatly alarmed, pleaded a cabinet decision
taken, it was said, some days before, postponing
the consideration of all applications
for oil concessions until after the war.
The Russians rebuffed
The Soviet government attacked this
decision so fiercely, both directly and
through the Persian party which it supported,
the Tudeh, that the Persian Prime
Minister resigned. The Majlis, however,
supported the government, and even went
further: it passed a law in December 1944
forbidding any negotiations whatsoever
about oil concessions. In a subsequent
debate Mussadeq dealt neatly with the Soviet
argument that the refusal of an oil
concession to Russia in the north when the
British had one in the south constituted
unfair discrimination. The Russians, he
said, wanted a positive balance, but what
Persia required was a negative balance,
i.e. no foreign concessions at all.
To put pressure on Persia the Soviet
government disregarded the undertaking
given in the treaty of 1942 about the
withdrawal of British and Russian troops
from Persia not later than six months
after the end of the war, and kept forces
in north-west Persia for some weeks after
the due date, thereby extorting from the
Prime Minister, Qavam al Saltaneh, an
undertaking to submit to the Majlis within
seven months a bill authorizing the grant
of an oil concession in northern Persia, to
be worked by a company in which Russia
would hold fifty-one per cent of the shares
for twenty-five years and fifty per cent for
the next twenty-five. Qavam skilfully
dragged out the elections and the bill was
brought in not after seven but after seventeen
months, and then it was thrown out
with only two dissensions.
When the war was over, the AIOC
entered into negotiations with the Persian
government for the revision of the 1933
agreement. This was essential, not only
on general grounds but in particular in
order to remedy the effect on Persian oil
revenue of the devaluation of the pound.
The AIOC suggested a 'fifty-fifty' policy
(equal division of the net profits before
foreign taxation) - a situation which held,
for instance, in Venezuela- but negotiations
fell through because the government
wanted the principle to be applied to AIOC
operations everywhere, not only to those
in Persia. The AIOC offered a 'supplemental'
agreement which they held was
far more favourable than 'fifty-fifty' in
good years though perhaps not so good in
bad periods, but the Persians gave the
plan little attention. The AIOC offered to negotiate with the new Prime Minister,
General Razmara, on the 'fifty-fifty' basis,
but he kept the offer secret, planning to
release it at a favourable moment, and the
Persian public knew nothing about it,
though aware that in January 1951 the
Saudi-Arabian government had concluded
a 'fifty-fifty' agreement with its concessionaire,
the Arabian-American Oil Company
(ARAMCO). Razmara never did announce
the offer; he was assassinated in
March 1951, as was his minister of education
shortly afterwards. It was in this
atmosphere that the Majlis passed a law
nationalizing the oil industry, and that
Mussadeq, the leader of the extremists,
became Prime Minister.
Mussadeq at first enjoyed wide support,
both from nationalists of various kinds
and from the crypto-Communist Tudeh,
and on two occasions the Majlis gave him
full powers for six months. Until mid-1953
he could rely, on the whole, on American
support, to a small extent because of
American anti-colonialist feelings, but
mainly because in the United States he
was regarded as the sole barrier against
Communism in Persia. The oil revenue
diminished to a trickle, and only United
States aid kept the Mussadeq regime going.
Emotional to the point of hysteria
(he often fainted after a major speech),
spoiled by power and adulation, and
ignorant of the complexity of oil marketing,
Mussadeq refused to submit the dispute
to arbitration, as the 1933 agreement
required, and rejected four proposals for
the settlement of the dispute, all backed
by America: one of them was put forward
by the International Bank, the last was
sponsored by President Truman and by
Mr Churchill, who was now again Prime
Minister.
The crisis set off violent anti-British demonstrations,
and at Abadan three British
subjects were killed. HMS Mauritius
appeared off Abadan, and at various times
vague military movements supposed to be
related to the crisis were reported; but
there was no serious expectation that a
state which had granted independence to
India, Pakistan, and Burma and was
beginning to abandon sovereignty over its
colonies would use force in this oil dispute.
Mussadeq's naive belief that the Persian
government would just take the place of
the management of the AIOC and all would
go on as before was found to be baseless.
No employee of the AIOC would take
service under the Persian government;
sales of Persian oil abroad sank almost to
nothing, partly because of the threat of
legal proceedings by the AIOC, partly
because of the solidarity of the world oil
marketing organizations and the ease with
which Persian oil was replaced by oil from
other Middle East sources. The closing of the British consulates by Mussadeq and
his rupture of diplomatic relations with
Great Britain at the end of 1952 served no
practical purpose.
Mussadeq's arbitrary methods, and his
failure to create the promised paradise with
Persia's 'own' oil, caused his right-wing
following to fall away, and although he had
a landlord's dislike of Communism he had
to depend more and more on the Tudeh. He
appeared to be aiming at dictatorship. He
dismissed the Supreme Court; he compelled
the Shah to dissolve the Senate; he dismissed
the Majlis in virtue of a so-called
referendum; he insisted on being made
minister of war, and in this and other ways
he seemed to threaten the Shah and his
dynasty.
The final blow to Mussadeq's popularity
was dealt by the discovery in mid-1953
that he had applied secretly to President
Eisenhower for special financial help, and
had been told that this would never be
approved by the American people so long
as Persia made no serious effort to settle
the oil dispute.
The Shah now appointed General Zahedi
Prime Minister. This was within his rights,
only according to the constitution the
appointment required the approval of the
Majlis. Mussadeq refused to recognize
Zahedi as Prime Minister, but having got
rid of the Majlis he had deprived himself
of the constitutional means of opposing the
appointment. He had however some military
support, and a state of civil war
existed for several days. The result, which
seems to have been influenced, by means
which are still obscure, by American and British
Intelligence Services, was in favour of
Zahedi; the Shah, who had left the country,
returned; and Mussadeq was tried.
A colourful hearing
The trial was a dramatic one. The Manchester
Guardian reported: The ex-Premier, who entered the court in his grey
woollen pyjamas and dressing gown,
seemed weary as he took his place opposite
the chief prosecutor, Brigadier Hossein
Azemodeh. But he was far from a passive
observer of the Court proceedings. He frequently
interrupted, challenging the
Court's competence to put him on trial.
Once, after a fit of weeping and fist-banging,
he pointed at the chief prosecutor and
shouted: "This gentleman has come here
illegally. You have arrested innocent
people illegally." When he began his protest
against the jurisdiction of the Court,
the President called Dr Musaddiq to
order several times on the grounds that
he was quoting past history which was
irrelevant to the case. The President
ruled that he could protest only against
the jurisdiction of the Court. "I definitely and categorically state that I do protest against its jurisdiction," replied the ex-
Premier. "I protest first against the competence
of the prosecutor, who is illiterate."
Brigadier Azemodeh [the prosecutor]
pointed out that Dr Musaddiq had appointed
him to be head of the Army Judicial
Commission - a strange appointment for
one considered to be illiterate, the Brigadier
remarked. He added: "He's an actor,
laughing and crying when he likes."
The court considered its verdict for seven
hours. Though the prosecutor had called
for the death sentence, the Shah intervened
and asked that a 'not too severe'
sentence should be imposed. He said in a
letter read in court: 'I forgive Mussadeq
because of his services during the first
year of his premiership.'
But Dr Mussadeq shouted out: 'I never
requested clemency, and will never seek it.
I have done nothing wrong. You must give
a verdict according to justice.'
Mussadeq was imprisoned for three
years, after which he lived in retirement
until his death in 1967.
Return to normal
Diplomatic relations between Persia and
the United Kingdom were resumed, and an
oil consortium was formed which concluded
an agreement with the Persian
government in October 1954. The shares
of the various interests in the consortium
were: AIOC (later named British Petroleum),
forty per cent; American, forty;
French, fourteen; Dutch, six. The Persian
government paid the AIOC only £25
million in settlement of all claims and
counter-claims, but the AIOC received from
its partners in the consortium £210
million-£32 million down, the rest gradually
at five cents a barrel. The 'fifty-fifty'
principle was the basis of the agreement;
the period of the concession was fixed at
twenty-five years, with three possible extensions
over a diminishing area.
The solution gave satisfaction to Persia,
for a while at least, except
that since then foreign concessionaires in
the Middle East were wary of building
refineries there, preferring to carry the
crude oil away to be refined in security
elsewhere. The British participants in the
consortium were in a less invidious position
than the AIOC used to be, in that other
foreign elements too were included in the
consortium. The political position of
Britain in regard to Persia did indeed change though:
she was no longer responsible for the defence
of India, and in any case the integrity of
Persia, which was an important element
in that defence for a long period, was now
dependent on the United States who were happy to usurp Britain's responsibilities in the region; at least until the Shah himself was overthrown!
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