From “Oil Nationalisation and Managerial Disclosure: The Case of Anglo-Iranian Oil Company, 1933-1951”
Chapter 2: AIOC History, oil and Iranian politics.
AUTHOR: NEVEEN ABDELREHIM | THE UNIVERSITY OF YORK
After the Second World War, oil played an important role in world economics and Iranian people wanted the AIOC to adopt the same attitude to Iran as the oil companies in the world showed towards those who had granted them concessions. Iranians were doomed to be poor, in spite of their vast underground resources, since their share of the oil profits served to satisfy the AIOC instead of being used for public welfare. As important as Iran receiving fair revenue for Iranian oil, the British government was often seen as an instrument of British policy toward Iran and the Middle East. This could be achieved through being the majority shareholder in the AIOC. Britain had occupied Iran in World War II in order to have access and to maintain control over Iran‟s oil after the war, through the AIOC. It is important to emphasise that all of the AIOC‟s oil came from Iran and the loss of Iranian oil in 1951 dispossessed Britain of a significant percentage of its oil needs. The AIOC claimed to be an important arm of the British Empire and continued to promote itself therefore as an imperial company with strong British status. This was reinforced by the fact that, in a military sense, the strength and union of empires were based largely on naval and air supremacy, and that supremacy, at that time, was based on oil. The inter-war period created the possibility, and saw the growth of horizontal mass political organisations in Iran, which included the rapid growth of an Iranian communist party (Tudeh Party) along with a national movement led by the National Front Party. Both new parties had the effect of cutting through traditional political allegiances. The Tudeh Party had the motivation to pursue economic growth since economic development was viewed as top priority for the Iranian economy Musaddiq was a nationalist politician and the spokesman for the tide of public opinion demanding a change to the relationship between the UK and the state of Iran. Musaddiq was eager to improve the terms of the concessions offered, in Iran‟s favour. In 1944, Musaddiq was elected in the Majlis and expressed his aims as follows. His first aim was to end Iran‟s subjection to foreign powers. He believed that the existence of the AIOC had provided a vested interest for Britain in the Iranian political economy, exposing the country‟s domestic and foreign political relations to covert British interference and manipulation. Thus, he wanted to be permanently rid of the foreign-dominated enclave as a route to achieving real national sovereignty and independence. His second aim was to establish parliamentary rule in a way that representatives of Iranians would control the affairs of the state. For Musaddiq, the past behaviour of the AIOC and its long record of profit extraction was the major source of injustice. Downplaying the economic significance of oil, Musaddiq said that „Persia must at all cost maintain her independence and that he would be content to sell no more than 10 million tons a year which he thought would be enough to balance the budget,‟ and that henceforth „we value independence more than economics.‟ Musaddiq explained that the real purpose of nationalisation was “to transfer all the company‟s assets and the installations of the former concession folder to the Persian government as well as the control of the production and exploitation of the oilfields…..The Persian government has at its disposal the necessary means to ensure oil production and the technical and financial management of the oil industry in Persia and is confident that there will be no interruption or reduction in production”. He was concerned with maintaining political control over Iranian oil resources. Because of the oil question, Musaddiq had acquired strong nationalist dimensions which rendered a liberal compromise with the AIOC impossible. To understand Musaddiq, it is worth digressing a little into his personal background: he was an eccentric European-educated lawyer from a rich landowning family “whose father was a bureaucrat and whose mother descended from Persian kings”. Musaddiq in particular was a controversial figure. His strengths and weaknesses have been much debated, although it is agreed that he appealed to & operated in diverse constituencies. Not all commentators on his character have been kind…… Also there were the highly polarised views of the person that confronted Fraser as the chief threat to the value of the AIOC‟s very substantial Iranian investments. Nonetheless, George McGhee, the US Assistant Secretary, liked Musaddiq “as a man and admired his patriotism and courage in standing up for what he believed best for his country”. Meanwhile, McGhee criticized the AIOC for “subordinating broader political considerations to purely commercial interests” and added that “the British government had failed to exercise sufficient control over the company‟s policy”…. Musaddiq perceived the nationalist mood because he was the nucleus of the National Front which successfully blocked the adoption of the Supplemental Agreement. He was appointed as the Chairman of the Committee on Iranian Oil Policy and rejected the existing concession since it did not safeguard Iranian interests. Thus, Musaddiq considered the 1933 Agreement to be void because it was endorsed during a dictatorship when Iranians were conceded no authority. Meanwhile, the aim of the Supplemental Agreement was to reinforce what was earlier pronounced as a null agreement, so that for the next forty-three years the nation would be burdened with a disgrace which could not easily be eradicated.
Nationalisation by Musaddiq did not gave the opportunity to AIOC to choose or reject the process, and this explains why he was seen by Britain as an anti-colonial figure. Musaddiq was aware that Iranian rights had been violated by the oil concession granted to the AIOC and this was the main reason for asking for better terms. Iran struggled to improve its concession but secured nationalisation. It is worth noting that 1951 marked the start of a difficult period for the AIOC in Iran: not only were its investments affected by the storms of great economic depression but, also, by the nationalist movements led by Musaddiq. The latter gained momentum in much of the region, demanding that the AIOC should make more generous concessions to the Iranian labour force and provide better conditions for the locals. Musaddiq insisted that Iran should have the right to regulate the performance of subsidiaries and reach a settlement with regards to the amount of taxes paid to the Iranian government. After Musaddiq nationalised the assets of the AIOC, he said “our biggest national resource has come back to the nation” and asserted that if these resources were properly used then Iran “can in future live comfortably and fulfil its duty to world civilization shoulder to shoulder with other nations”. Furthermore, he demanded that the Iranian workers should “maintain order and not afford any excuse to our foes” because any disturbance or enmity would result in the loss of the efforts of the Iranian people. The change of government in Persia and the sharpening of its oil policy “seem bound to usher in a new period of anxiety”. Musaddiq was willing to give the National Iranian Oil Company (NIOC) full control of operations under the following management structure: four Iranian directors and eight experts from “neutral” countries such as Sweden, Switzerland, and Holland. Musaddiq‟s governmental action angered the British because it seemed part of a growing pattern of pressure on their interests (by wresting control of the oil industry) and raised the whole question of British influence in the Middle East. Musaddiq‟s challenge, therefore, to the position of the Anglo-Iranian Oil Company and British interests was regarded as a crucial test of British nerve. Musaddiq criticised the AIOC for not contributing sufficiently to the Iranian economy “as might be inferred from the fact that Iranian oil workers lived in hovels”. He accused the British government of using imperialism to suit their cause through their access to politicians and government officials at the highest level. Moreover, he accused Britain of “interfering in Iran‟s internal affairs and the AIOC of treating Iranian employees like animals while manipulating Iranian governments in order to have a free hand in plundering Iran”. As a result, no settlement was reached. In December 1951 Musaddiq gave a clear statement of his political objective to the Majlis: „we should assume that like Afghanistan and the European countries we do not have oil, we should reduce our spending and increase our revenues, the nation should tolerate the burden of hard times in order to free itself from the yoke of slavery‟. Musaddiq believed that Iranian oil resources should be developed by Iranians themselves because the company had expanded its operations by reducing Iran‟s share in oil revenues. For Musaddiq, the past behaviour of the AIOC and its long record of profit extraction were the major sources of injustice. The AIOC was exploiting the Iranian resources and making trifling payments in return. “AIOC had become the personification of the exploitative imperialism of the British Empire and the source of social and economic injustice”. Musaddiq was hailed as a hero for his fiery speeches on the evils of British control of Iran‟s oil industry. Obviously, Musaddiq‟s anti-British position was an important reason for his increasing and enduring political power as the crisis unfolded. His government was democratic, popular, and with a broad base of support…… others would view him as a kind of national hero because of his push towards nationalism in response to the perceived excesses of the British.
Notes & References
221. New York Times (2000). http://www.nytimes.com/library/world/mideast/041600iran-cia-index.html, visited 10th of August 2008.
222. Marsh, Continuity and Change reinterpreting the policies of the Truman and Eisenhower administrations toward Iran, 1950-1954.
223. Johnson, British multinationals, culture and empire in the early Twentieth century, 168.
224. Karshenas, Oil, State and Industrialization in Iran, 84.
225. Katouzian, The Political economy of Modern Iran 1926-1979, 157.
227. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 59.
228. The Times, September 26, 1952, 4(c).
229. Middleton to Foreign Office, July 25, 1952, BP 100571.
230. Ferrier, The History of the British Petroleum Company: Vol. 1, The Developing Years 1901-1932,
180; Kinzer, All the Shah’s Men, 74.
231. The Times, May 3rd , 1951, 4(C), Issue 51991.
232. Karshenas, Oil, State and Industrialization in Iran, 84.
233. New York Times (2000). http://www.nytimes.com/library/world/mideast/041600iran-ciaindex.html, visited 10th of August 2008.
234. De Groot, Religion, Culture and Politics in Irans, 221.
235. Bamberg, The History of the British Petroleum Company, 413; Heiss, Empire and Nationhood, 74; Keddie, Modern Iran, 125.
236. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 117.
237. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 219.
238. Ibid, 86.
239. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 121.
240. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 71.
241. The Times, May 1st, 1951, 4(E), Issue 51989.
244. The Times, April 30, 1951, 5(B), Issue 51988.
245. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 137.
246. Onslow, Battlelines for Suez: The Abadan Crisis of 1951 and the formation of the Suez Group.
247. Pirouz, Iran’s oil nationalisation: Musaddiq at the United Nations and his negotiations with George McGhee, 111.
248. Ibid, 210.
249. Cited in Mansoor, State-Centered vs. Class-Centered Perspectives on International Politics: The case of U.S. and British Participation in the 1953 coup against premier Mosaddeq in Iran, 14.
250. The Times, September 26, 1952, 4(c).
251. Cited in Elm, 81; William Roger Louis, The British Empire in the Middle East, 1945-1951 (Oxford, 1984), p.649).
252. New York Times http://www.nytimes.com/library/world/mideast/041600iran-cia-index.html, visited August 10, 2008.
253. Curtis, The coup in Iran, 1953. http://markcurtis.wordpress.com/2007/02/12/the-coup-in-iran-1953/, visited August 10, 2008.
254. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 136.