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
As mentioned earlier in this chapter, the AIOC had no clear founder-chairmen or founding family because William Knox D‟Arcy financed the exploration in Persia but never visited the country himself (which was, even then, quite unusual).
After oil was discovered, D‟Arcy traded his rights and remained mostly unimportant to the company‟s further development, regardless of becoming a non-executive director of the Anglo Persian Oil Company. Since power was retained at the top, the Chairman was certainly of key importance in the company. Thus, the Chairman‟s statement provided in the annual report gives an indication of the internal perception of the company and reflects the objectives and attitudes that the company was seen publicly to espouse. Despite his relative power, he never acted in isolation but had to enlist support from the members of the Board of Directors when taking national and imperial interests into consideration.
Sir William M. Fraser (1888-1970) took over from Cadman as Chairman of the AIOC from 1941 to 1956. He was a man with few doubts about the national role of his company. Fraser had been born into oil because he inherited from his father the largest company in the Scottish oil-shale industry which was merged with other six companies into the AIOC to provide them with Scottish outlets. Later on, Fraser joined the Board of Directors and helped to negotiate the 1933 Agreement. It is worth noting that he lacked Cadman‟s breadth of outlook. Fraser had no flexibility at all and did not like to be told what to do by the government. He alone wished to determine both the AIOC‟s and Britain‟s policies with regard to Iranian oil. “He had contempt for civil servants and on occasion tried to intimidate them into doing what he wanted”. Fraser‟s chief asset was his commercial insight, and his chief weakness was his lack of political insight. According to Sir Edward Bridges, Permanent Secretary to the Treasury, Fraser was narrow-minded, lacked political insight and should be removed. People within the AIOC considered Fraser “a silent, craggy Scotsman, with an intimidating Glasgow accent and a bleak sense of humour”. Fraser “did not think politics concerned him at all and had all the contempt of a Glasgow accountant for anything [which] could not be shown on a balance sheet”. Eden described Fraser as living in “cloud-cuckoo land”. After World War II, there was significant friction between His Majesty‟s Government and the autocratic Sir William Fraser, because the Government began to see Fraser and the company‟s Board as the real problem behind British difficulties in Iran.
Kenneth Younger, a British Labour politician who served during the Attlee government, described Fraser as a thoroughly second-rate intellect and personality which is incompatible with the position of Chairman of a company like the AIOC operating in so complex and unsettled area as the Middle East. In similar vein, Sir Frederic Leggett, the company‟s labour adviser, suggested that the company required a fresh start on the basis of equal partnership because the AIOC‟s management was considered to be blind and unaware. Bamberg sums up Fraser as a competent practical oilman but poor diplomat.
From the U.S perspective, George McGhee, Assistant Secretary of State, agreed that the continual ineptitude of the company had helped Musaddiq‟s cause. McGhee met Fraser at a meeting characterized by tenseness and sparring comments when McGhee tried to persuade the latter to consider current realities in Iran and be more forthcoming. Fraser, unfortunately, was adamant, saying that McGhee‟s understanding of the situation was wrong and that there was no need to give Iran any concessions. Indeed, Acheson, Secretary of State Dean, and many Americans had for some time been annoyed by Fraser because of “his parochial arguments about commercial feasibility, and by the apparent failure of the British government to control company policy”. Moreover, William Harriman, President Truman‟s special envoy to the Iranian government, believed that Fraser was completely out of touch with reality and his men were trying to impose archaic policies on the British government. The Washington Post reported that American officials were “convinced the company must abandon the stiff-necked policies followed for many years by its president, Sir William Fraser”. Both the Labour government and the U.S State Department urged that Fraser had to be replaced by someone with “a broad outlook and statesmanlike qualities” or at least the Foreign Office should not allow him to dictate British policy. In short, as far as U.S negotiators were concerned, after several rounds of diplomacy it was clear that either Fraser or Musaddiq would need to be removed if matters were to be progressed and they did not care either way. It is easy to see that this was the correct conclusion: Musaddiq was concerned with politics and ignored commerce, but Fraser ignored politics and applied only commercial logic. Britain was aware of the Iranian claims that were upheld and as a result they urged the United States to support her, but Fraser felt that no support from other countries was needed. He believed that the Iranians would soon yield in desperation and said: “When they (Iranians) need money they will come crawling to us on their bellies”. He was resolute in not paying any attention to such warnings and was confident that Musaddiq would collapse and that the Iranians would be forced to negotiate. Fraser had calculated that oil, being by far Iran‟s biggest export would mean that the withdrawal of tankers by AIOC and other major companies would bring Iran‟s oil exports to a halt, thus making Iranian workers idle and “would be fruitful material for stirring up trouble”. Fraser was convinced that the AIOC should maintain its monopoly of Iranian oil and squeeze out of Iran as much as it could. His blatant short-sightedness in running this empire made his position and by extension that of the AIOC potentially vulnerable, because the forces ranged against the AIOC were very powerful. These forces, once unleashed, eventually led to the biggest political upheaval in the history of oil. Members of the British government believed that the Supplemental Oil Agreement was a reasonable proposal to the Iranians but they heavily criticised Fraser who drew it up in a manner which made it seem less favourable than the Aramco Agreement in Saudi Arabia. Consequently, after several rounds of diplomacy, it was clear that there was a vigorous and ever growing sense of autonomy and nationalisation, fuelled by Prime Minister Musaddiq. The AIOC was of strategic importance because it captured a large market share in the economy and was highly visible in the public eye. There were many internal and external factors that influenced Fraser to disclose information during the company‟s nationalisation. Fraser lobbied against protecting Iran from communism and was thereby able to further exploit Iranian resources. He disclosed in the Times that “the recent disturbances in the Abadan area, which the Iranian government were obliged to repress with a firm hand, were undoubtedly of communist inspiration and are a timely reminder of their ability to fish in troubled waters”. The AIOC believed that the essence of the dilemma in nationalisation would “help nobody except the communists who alone have an interest in the impoverishment and disturbance of the Middle East”. Fraser disclosed information in his chairman statement as a company requirement but also to influence the attitudes of various stakeholders and further the company‟s own interests and goals. His actions had important consequences for key AIOC stakeholder groups, including domestic investors and Iranian employees and society. For instance, Fraser enjoyed incredible lobbying power in Iran in relation to the fair treatment of the Iranian labour force and also in determining the company‟s performance. The nationalisation crisis brought these into sharp focus, and they became the subject of claim and counter-claim from the AIOC board and Iranian nationalist opinion. In general, contrasts were made between a well managed company playing a progressive and developmental role in Iran on the one hand, and on the other a rapacious exploitative representative of British imperialism. To the extent that the latter is true, the AIOC‟s policies are implicated in the nationalisation and the resulting international crisis, particularly if Iranian claims about the unfair distribution of the proceeds of oil production, discrimination against Iranian employees and misadministration, are upheld. as a consequence, several issues are worthy of further investigation. First, did the company mislead the Iranians and others about shares of the oil revenues? Second, did the company discriminate against the Iranian employees? Third, how well did Fraser succeed in defending the interests of AIOC shareholders and maintain the confidence of its investors? In particular, how did Fraser explain his performance to shareholders in the year in which three quarters of the firm‟s assets were lost through nationalisation? In short, was the company the chief architect of its own downfall? To investigate these questions, contrasts are drawn between the AIOC‟s management‟s public view of the crisis and the actual events as documented in the literature, official papers, and financial records. In these respects, consideration is also given to how AIOC‟s management attempted to influence the lobbying process and news agenda to counter the accusations of the Iranian nationalists.
Notes & References
255. Ibid, 113.
258. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 66.
259. Ibid, 120.
260. Bamberg, The History of the British Petroleum Company, 463.
261. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 113.
262. Ibid, 120.
263. Cited in Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 242.
264. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 120.
265. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 66.
266. Bamberg, The History of the British Petroleum Company, 413.
267. Ibid, 462.
268. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 86.
269. Marsh, HMG, AIOC and the Anglo- Iranian Oil Crisis, 163.
270. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 143.
271. Ibid, 88.
272. Ibid, 105.
273. Cited in Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 122.
274. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 120.
275. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 119.
276. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 113.
278. The Times, May 2nd, 1951, 6(A), Issue 51990.
280. For a list of the Iranian accusations against the company, and the company‟s defence of these see
Anglo Iranian Company Annual Report and Accounts 31st December 1950 (published 19th November 1951), 22.