The Riches of the World - 6
Mosaddeq, Iranian Oil and the Coup of 1953
By Professor Nazeer Ahmed
Concord, CA
Reza Shah proved himself to be a far sighted monarch. He surrounded himself with capable administrators, brought corruption under control, built schools and industrial plants, introduced modern education, constructed roads, built the Trans-Iranian railroad, introduced universal health care, and spearheaded the Women’s Awakening Movement (1936-41). In 1934, he established the University of Teheran. It was he who changed the name of his country from Persia to Iran (1936) because the Persians were only one group in his composite nation which included Baluchis, Azeris, Arabs and Kurds.
On the legislative front he reaffirmed the constitution, reformed the marriage laws (1931) and removed the compulsory wearing of veils. Minorities, including the Sunnis, the Armenians, the Zoroastrians and the Jews were given equal rights. The emancipation of women was resented by the religious establishment but the Shah deftly contained their objections. For his reforms, many Iranians nationalists consider him to be the father of modern Iran.
On the international front, Reza Shah invited American economists to reform his tax collection and fiscal administration. Italians were hired to supply and train the Iranian navy. German engineers built a host of industrial plants and Lufthansa Airlines connected Tehran with Europe. In 1928 he abrogated the 19 th century capitulations to the Europeans under which European offenders were judged by their own juries rather than the Iranian legal system. He transferred the printing of Iranian money from the British Imperial Bank to the National Bank of Iran. Well aware of the presence next door of the Soviet Empire and the British Indian Empire, he was careful to avoid dependence on any one foreign power so as not to invite military intervention by any of them.
Reza Shah was less successful on the oil front. The British juggernaut held Iranian oil tightly in its grip. Reza Shah sent his minister of court Teymourtash to London to negotiate a wide range of issues including a revision of the 1901 D’Arcy concession which had granted exclusive rights to the British to prospect for oil in all of Iran. Iran received only 16% of the profits from the Anglo Iranian Oil Company but there was no independent audit of the company books to ensure that the profits were calculated correctly. The Shah asked for 25% of the profits and a reduction in the area of concession but the long and arduous negotiations lasting over five years came to naught. Imperial Britain was unwilling to budge. However, in 1933 the Shah made an about-face and concluded a hasty agreement with APOC on slightly better payment terms and reducing the area of concession to 100,000 square miles but at the cost of extending the life of the D’Arcy concession by another 30 years.
World War II erupted in 1939 and Iran declared its neutrality, as it had done in WWI. However, in 1941, the Soviet Union and Great Britain, in a blitzkrieg, invaded and occupied Iran and forced the Shah into exile. His young son, Mohammed Reza was hoisted onto the peacock throne. Reza Shah was suspected of being too close to Hitler. The geopolitical reason was that the Allied Powers needed a supply corridor to the Soviets through Iran.
WWII demonstrated the critical importance of oil. The nation that controlled oil controlled the engines of war. Oil was no less important for peacetime economies. It was for this reason that the first act of President Roosevelt at the conclusion of the Yalta Conference (1945) was a dash to Suez, Egypt, where he met King Abdel Aziz Ibn Saud of Saudi Arabia and cemented a strategic relationship that remains a cornerstone of United States foreign policy.
It was this post-war world, dominated by oil, which saw the rise of Mohammed Mosaddeq of Iran, arguably one of the most colorful personalities of the post-war era. Mohammed Mosaddeq was born into an aristocratic family in Tehran in 1882 and received his education at the University of Paris and the University of Neuchatel in Switzerland. He was elected to the first majlis after the Constitutional Revolution in 1906 and held important positions over the years as governor of Fars province, Finance Minister and Foreign Minister. In 1944 he formed the Jabhe Milli or National Front of Iran together with some of the leading political figures of the day. The goal of the Jabhe Milli was to end the foreign domination of Iran and to establish democracy. As oil was the principal reason for foreign domination, the goals of Jobhe Milli included nationalization of Iran’s oil resources.
Nationalization was a popular issue in Iran. Negotiations with the oil companies went nowhere. Not only were the foreigners draining Iranian resources while paying scant compensation to Iran, the presence of oil was an excuse for foreign intervention and direct or indirect occupation. Foreign domination fostered corruption. All the major factions in the Iranian body politic supported nationalization: the communists, the nationalists, the mullahs and the monarchists. The Shah vacillated.
Mosaddeq’s moment in the sun came in March 1951 when Prime Minister Haj-Ali Razmara was assassinated and the democratically elected majlis (national parliament) voted for full nationalization of oil. In April 1951, the majlis elected Mosaddeq as the prime minister. Mosaddeq was a consummate orator, a master of public theatrics, a cultivated diplomat and a deft politician. He was the man of the hour who could articulate the yearnings of Iranian society to shake off the foreign yoke.
Mosaddeq was unyielding in his stand on nationalization. Britain responded by pulling out its technicians from the oil refineries, blocking Iranian assets in foreign banks, boycotting Iranian oil and blockading Iranian ports. The loss of oil from Iranian oil wells was made up by increasing production in the oil wells of Iraq, Kuwait and Saudi Arabia. Oil production fell from 240 million barrels in 1950 to 10 million barrels in 1951. Oil revenues plummeted. The Abadan refinery shut down. Mosaddeq’s plans for reconstruction and industrialization came to a grinding halt.
Greed, power, naiveté, obstinacy are as much characteristics of nations as they are of individuals. So many of the issues between nations can be resolved on the basis of equity and sound business principles. Half a loaf for me and a half for you. That is a win-win proposition. But no! Greed and power goad powerful nations to take the entire loaf — and more - and deny even a crumb to the weaker ones. Britain was obstinate in its refusal to concede a 50:50 formula and accept transparency in the company operations so that the profits of the oil company could be assessed correctly and independently. This was bad business. On the other hand, Mosaddeq was rigid in his stand on complete nationalization and was not willing to let the British in. This was bad politics. As a result, an entire nation suffered.
Nations, like individuals, are prisoners of their historical experience. It is like driving on the freeway with your eyes riveted on the rear view mirror and losing sight of an oncoming truck. Britain was looking at Iran through the imperial lens, even though it had lost India and the days of Pax Brittanica were gone. It was unyielding and lost out to the Americans. Mosaddeq lived in the heady post-war years when newly independent nations sought a utopian world, losing sight of global power politics and the interests of global players. He demanded too much and got nothing. (Continued next week)
