From «Oil Nationalisation and Managerial Disclosure: The Case of Anglo-Iranian Oil Company, 1933-1951»
Chapter 4: Profit distribution by the AIOC
Author : Neveen Abdelrehim | The university of york
In the light of the literature reviewed in chapter 2, the question of distribution of
oil income continued to be a major source of rising conflict between the AIOC and the Iranian government. In October 1947, the Iranian government committed to renegotiate the 1933 concession and demanded fair compensation. Later, the AIOC provisionally agreed a Supplemental Oil Agreement with the Iranian government but its ratification in the Majlis was successfully opposed by the National Front party. Iranians were not happy with the Supplemental Agreement and with the idea of extending the life of the concession for 32 more years.
A subsequent proposal by the Iranians, for a fifty-fifty division of the company‟s total profits was proposed but the AIOC rejected the offer and insisted on dividing only “Iranian” profits. There was continuing economic and political conflict between the AIOC and Iran.
The AIOC claimed that the search for oil was an expensive risk and to transform oil into actual value required vast capital, skill, tenacity and a widespread organisation. The company believed that it had mutual interests with Iran, asserting that the continued operations of the Anglo Iranian Oil Company were vital to Persia‟s wellbeing. In fact, the company held the view that their operation in Iran was a remarkable success, and capital was spent on an unprecedented scale with the result that production rose in Persia at a greater rate than other territories. Herbert Morrison, Leader of the House of Commons and Foreign secretary, highlighted the benefits that the AIOC offered to Iran by asserting that The company operations consist not only of extracting oil from the ground but of the extensive refining operations undertaken in the great Abadan installations and in a widespread marketing organisation, including a great fleet of tankers.
It is worth noting that there was cooperation and joint decision-making between the company and the British authorities at home and abroad through the government‟s shareholding in the company and its power of veto. The AIOC was eager to present a united front, listing its achievements and recounting the benefits it showered equally on both producers and consumers to defend its innocence against charges of deception and exploitation. The Iranian government and the locals, however, held a quite different opinion.
Iran saw control of oil by the AIOC as damaging national control and argued that the country should gain as much revenue as possible from their oil reserves. Iranians believed that Iran should begin profiting from its vast oil reserves because the Supplementary Agreement proposed by Britain did not offer Iran as much as it wished and the definition of profits was difficult. Iranians strongly felt the injustice of the 1933 concession and argued that the AIOC „stole‟ their established rights, giving them, in return, a small fraction of their own oil. The Iranian government made great capital of the suggestion that the AIOC was only “the British Government under another form”. Iranian accusations were numerous in regards to the unfairness and injustice of the AIOC whilst they were alert to the reality that the company‟s worldwide business had been built up on Persian oil. Iranians argued that in spite of their rich underground resources and vast wealth on land and in the sea, the population was mostly poor, claiming that if any other nation possessed onetenth of their advantages, it would have made their country a paradise. The Iranian government was annoyed with the fact that the company had done little or nothing for the people of Persia in return for the natural wealth which the company had won and carried away. The Iranian government believed that their negligible share of the oil profits served to meet unnecessary expenditures such as satisfying the demands of certain influential people, instead of being used for public welfare. Ali Mansur, Iranian prime Minister, March-June 1950 , explained that the company enjoyed a range of privileges from their operation in Iran such as cheap labour, exemption from customs duties and charges, exemption from income tax and from any supervision over its imports and exports. Iranians were extremely annoyed with the low bargaining power of the Iranian government in relation to the AIOC. This was in part because their government‟s oil revenues constituted only a small percentage of the value of oil exports which naturally slowed down the accumulation of capital reserves over the period. From the Iranian point of view therefore, the lack of trust in AIOC‟s adopted policies was the precursor for the issuance of the Gidel Memorandum. The following section will therefore examine the key points in the Memorandum, addressing the validity of both parties‟ claims and counter claims.
Notes & References
495. Karshenas, Oil, State and Industrialization in Iran, 81.
496. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 44.
497. House of Commons, Parliamentary debates 1 May 1951, 1011.
499. BP 72017, Memorandum by Admiral Sir Edmond Slade, 23rd May 1922, 3.
500. Elm, Oil, Power and Principle: Iran’s oil nationalisation and its aftermath, 107.
501. BP 68386, Report by Sir John Cadman, visit to Persia and Iraq, spring 1926, 31.
502. BP 071181, Press extracts No. 798 on 6th September 1948, 1.
503. Ali Mansur is an Iranian Politician. Governor-General of Khurasan and then Azerbaijan. Head of Seven-Year Plan Organisation.
504. BP 126343, Notes on Supplemental Agreement handed by Ali Mansur to Shepherd on 3rd June 1950, 1.
505. Karshenas, Oil, State and Industrialization in Iran, 234