It all started in 1908 when a British millionaire bought the rights to explore and drill for oil in Iran. (Persia) He spent his entire personal fortune and went bankrupt before finally striking oil at the 11th hour. He formed a company, Anglo-Iranian Oil Co (AIOC) that would eventually become BP. Royalties were given to the Shah in exchange for the right to extract the oil for the next 60 years.
Even though they had a legally binding agreement, the Shah and his people eventually felt they were getting a raw deal. The agreement was amended to give the Shah a greater share. Within a decade the British Navy, led by a young Winston Churchill, wanted to free itself from dependence on foreign coal so the British Government became part owner.
But by the time of the Great Depression, the Persians weren’t receiving their usual share of the profits. Because there were none. Problem of course was that the Persian government was counting on that money. Oil rich nations are easily lured into a false sense of economic security. Unearned wealth leads to poor spending and allocation.
Keep in mind the British probably had the finest fighting force on earth at the time. Did they invade? No. They went to The Hague and had the matter settled by third party mediation. Barbarians! An equitable arrangement was agreed upon including a minimum guaranteed royalty payment whether AIOC made money or not.
Now we have WW2. The Persian government was Pro-Nazi. After repeated diplomatic attempts to get them to expel the Axis presence from Iran, the British and Russians invaded. They couldn’t afford to let the Nazi’s get their hands on the oil fields and/or cut off the vital supply route. The Shah appealed to FDR, champion of Liberty and The Atlantic Charter. FDR said no can do. It had nothing to do with oil money. It was a matter of life and death. FDR made it clear that we didn’t want to infringe on their sovereignty. We just didn’t want the Nazi’s to rule the world.
WW2 ended and the British promptly pulled out of Iran. But the Soviets were rather cozy. In fact, they found themselves rather cozy in pretty much every other nation they liberated. Iran came very close to being part of the new Soviet Union. However, the Persians filed a complaint with the brand new United Nations. The very first complaint filed. The U.N. didn’t actually do anything (shock) but the Soviets abandoned their designs.
Back to business as usual. Or was it? The age of Colonialism was officially over. So what of the Brits role in Iran?
The National Front, eventually led by Mohammed Mossadeq marched to power the same way men whom history calls Fascist marched to power. You have your scary outright Communists fighting for power against the ruling status quo Monarchists when the seemingly middle ground Nationalists take the stage.
The Tudeh Party was a remnant of the Soviet occupation. Ironically they opposed Imperialism and foreign influence. Of course so did the National Front. They both had very Left leaning economic aims. Improved working and living conditions. All nice things. Tudeh was certainly more radical, more drastic in their approach. Hence the appeal of The National Front.
The biggest issue of the day was the nationalization of the oil fields to pay for all these nice things. The British took issue with this because they still had a legally binding agreement. Keep in mind, the Brits nationalized their coal industry, so it wasn’t an ideological opposition.
Democracy in action. People love to excuse bad behavior by saying, “democratically elected.” Mossadeq was democratically elected . . . sort of. The sitting Prime Minister and opponent of nationalization, Ali Razmara was assassinated. Leaflets were spread by Leftists and Militant Muslims alike warning that anyone who opposed the nationalization would be killed. Democracy!
Razmara was also a reformer fighting for social and economic justice. But he was going in the Right direction. He reduced the size and scope of government to make it more effective and moral. He wanted local district governments to address their own issues. He opposed the nationalization of oil for a simple reason. No one knew how to run it. To say nothing of the international ramifications.
After more assassinations and violence Parliament voted unanimously to nationalize the oil fields. The Shah, still the true power in Iran, named two other Prime Ministers. One resigned fearing for his life. Ultimately The Nationalist Party which controlled Parliament ascended Mossadeq to the position of Prime Minister. Sort of Democracy.
Mossadeq would become Times Man of the Year for being the epitome of Democracy. Like all Leftists, he believed in Democracy so long as everyone agrees with him. Just like those historical Fascists, he was repeatedly granted absolute emergency powers until the day he stopped asking permission. He sent the Shah into exile.
Britain took their legal grievance to the U.N. who were as effective as usual. The Democracy loving Mossadeq expelled all British diplomats and closed negotiations. The U.S. was a key factor in persuading the Brits not to use force. With negotiations and force off the table, the Brits organized an international boycott of Iranian oil.
Mossadeq approached President Eisenhower for aid and an end to the boycott. Ike told him to negotiate an equity agreement with the Brits. Mossadeq warned that he would be forced to get in bed with the Soviet Union. Big . . . mistake.
America’s only concern was Soviet expansion into the middle east, the life-blood of the West and her allies. The situation now mimicked WW2.
Mossadeq, the champion of Democracy, dissolved the Iranian Parliament, aligned with former enemies the Communist Tudeh Party and officially accepted aid from the USSR. The coup was on. The Shah was back in town and Mossadeq was thrown in jail for treason. (remember when he exiled the Shah?)
Negotiations finally took place after all those years. Iran retained ownership of the oil fields. The AIOC was made majority owner of a new consortium comprised of 8 different oil companies. They split their profits 50/50 with Iran for the right to buy and sell Iran’s oil on the international market.
Ironically this was a deal that Mossadeq probably would’ve jumped at as he complained about the sweetheart deal the Saudi’s were getting from U.S. companies years earlier. When it was actually on the table (thanks to the U.S.) both parties balked. Moral of the story, use your words to solve problems.
America gets a lot of shit for supporting the Shah. But keep in mind Iran was financially devastated because of the boycott. Surely massive amounts of aid were to follow once the issue was settled. And we give aid to everyone. Who don’t we give aid to? We’re giving money to the Muslim Brotherhood.
Some final quotes to ponder from Eisenhower’s letter to Mossadeq,
“It has been the belief of the United States that the reaching of an agreement in the matter of compensation would strengthen confidence throughout the world in the determination of Iran fully to adhere to the principles which render possible a harmonious community of free nations; that it would contribute to the strengthening of the international credit standing of Iran; and that it would lead to the solution of some of the financial and economic problems at present facing Iran.
“it would not be fair to the American taxpayers for the United States Government to extend any considerable amount of economic aid to Iran so long as Iran could have access to funds derived from the sale of its oil and oil products if a reasonable agreement were reached with regard to compensation”
I fully understand that the Government of Iran must determine for itself which foreign and domestic policies are likely to be most advantageous to Iran and to the Iranian people. In what I have written, I am not trying to advise the Iranian Government on its best interests. I am merely trying to explain why, in the circumstances, the Government of the United States is not presently in a position to extend more aid to Iran or to purchase Iranian oil.
In case Iran should so desire, the United States Government hopes to be able to continue to extend technical assistance and military aid on a basis comparable to that given during the past year.
I note the concern reflected in your letter at the present dangerous situation in Iran and sincerely hope that before it is too late, the Government of Iran will take such steps as are in its power to prevent a further deterioration of that situation.”
USE YOUR WORDS.