By Sadegh Abbasi*
The first illegal concession to explore, obtain, and market oil, natural gas, asphalt, and ozocerite was given to William Knox D’Arcy and became known as D’Arcy concession. This concession was gained through bribes to those Iranian officials who were the signatory of the deal(1). Since the illegal D’arcy Concession was reached, Britain agreed to pay %16 of the net oil profits(2). But Britain has always been committed in falsifying its books for calculation of the Iranian share of the profits(3). The sum received through taxation from APOC by the British government was higher than the share of Iranians(4). The public opposition to this illegal concession mounted to the Constitutional Revolution of Iran and establishment of Majlis in 1906 so people can take royal decisions under the balance of a parliament.
British government came into possession of %51 of the shares of APOC and thus became directly involved in the oil concession(5). As oil was a better fuel than coal(6) for the British fleet, and as it was gained through plundering of Iranian resources ended up to be cheaper for the British Navy. Britain were receiving reports that Germans are building all-oil battleships and thought that it is necessary to have such battleships to match the speed and power of the German fleet(7).
British government bought oil at a considerable discount from APOC and by adding the taxation it received from the company, oil price was actually close to zero for the this country. Therefore, British government immediately converted to oil fuel. British government began to throw its support behind APOC with indirect financial assistance and political backing in 1909. Thanks to the cheap Iranian oil, British Navy became mightier during the two World Wars and in their colonial conquests in the face of its rivals. Oil soon became a strategic asset for political dominance of Britain over the whole world as Britain was at the time in possession of the biggest refinery in world; Abadan Refinery in Iran.
During World War I all efforts were made by Britain to secure the continuous flow of oil from Iran. But Germans managed to launch an attack on Iranian pipelines through their proxies in Iran and achieved to make an interruption in the oil flow. As Abadan Refinery had a critical importance for winning the war, the British army were sent to Iran to maintain a total control over southern Iran in a total breach of International conventions. Even the British went further by claiming that Iran was responsible for this attack and as a result cut the falsified royalties that used to be paid to Iran until the damage caused by this attack was being settled.
In order to gain a much tighter control on Iran politically and economically, the British preceded to have the 1919 Agreement being signed. But at this time, they were faced with a democratic institution called Majlis(8). According to the 1906 Iranian Constitution (article XIV), Parliamentary approval was necessary for every agreement to make it binding and operative but thanks to British illegal actions and bribery they managed to strike a deal with the Iranian government and the king and managed to circumvent the ratification by the Parliament(9). To get the Agreement, the British started to bribe the Qajar princes, Prime Minister and the king(10). They even started to exert their influence on the Iranian Parliament by dictating the candidates who were favorable to them(11), to prevent any opposition from the Parliament.
300,000 pounds were paid to the Iranian press to support the 1919 Agreement which was very unpopular among the Iranian public.(12) There was a growing opposition from the Iranian public about the 1919 agreement(13) and the bribery that was used to get the signs under this agreement. Modarres, a Shia clergy and the speaker of Parliament was a proponent of political Islam and the main figure of opposition against the Anglo-Persian Agreement. Modarres was an able and strong popular politician with an impeccable constitutionalist and anti-imperialist record, and had excellent connections within the political establishment as well as among the Ulema, the bazaar and ordinary people. But finally the Agreement was signed in August 1919 in total negligence of Iranian public opinion.
It caused the second Jangali campaign in Gilan by Kuchek Khan who was encouraged also by Modarres.(14) This campaign was driven back by the British Norperforce (North Persia Force)(15). Khiyabani, another opposition figure to the 1919 Agreement, launched his successful revolt in Tabriz in the beginning of April 1920, when the draft agreement reached Tehran. But this uprising was finally suppressed and Khiyabani was killed. These opposition events were examples among so many other movements that occurred across the country and were formed in reaction to the 1919 Agreement and were all suppressed in the end.
Following the 1919 Anglo-Iranian Treaty, Britain's position was so powerful that the Council of Peace in Paris was disturbed that the secret treaty would make Persia (later renamed by Reza Khan to Iran) a British protectorate(16). A point that was shared by all political spectrum in Iran(17). Due to domestic and international mounting pressures, this Agreement was suspended and then annulled by Parliament in February 1921(18). But all these events did not stop Iran’s oil being extracted by the British over another illegal agreement called Amitage-Smith which was also not ratified by Majlis. All these agreements excluded the northern area of Iran for exploration. Despite this fact, British government who controlled APOC founded a new subsidiary called North Persian Oil Company. Aware of the double cause for discontent among the Iranian public, the British staged their first coup in Iran in 1921 and brought a repressive dictator named Reza Khan who was famous for his brutal character.
The flow of oil was secured by Reza Khan and all who were discontent were killed, imprisoned or exiled and the terms under D’Arcy Concession continued to be viable for the British government. Under 1901 agreement, Iran was to receive only %16 of the share from the net oil profits which actually never took place. From 1901 to 1919 this share amounted to Zero and in 1920-29 period, Iran received only about 5 percent of the net profit(19). Even now Iran has a highly oil-reliant economy, and considering this it becomes obvious what it means to receive the meager sum of £ 300,000 a year from the APOC (AIOC under Reza Khan) as a contribution to the Iranian GDP.
The British company never permitted its books to be audited so as to show the Iranian side that they are paying what has been promised which soon became a source of outrage among the Iranian public and culminated in a temporary cancelation of the D’Arcy Concession by Reza Shah.
Reza Shah who came to power with a British-backed coup did not seek to terminate the British monopoly on the Iranian oil but was urged by the public opinion of the time to do something about it. So he renegotiated the terms of the previous concession to create more transparency in payment of the royalties but instead extended the D’Arcy Concession up to 1993, which was initially set to expire in 1961. Nevertheless, AIOC continued to falsify its accounts. As by 1950, Iran received only 8 percent of the total oil exports.
By the time when the Iranian parliament voted to nationalize oil on 15 march 1951, almost all political views were against the monopoly of the British over the Iranian oil. In London, the Labour government of Clement Attlee was shocked by this decision: “It labeled the Iranian nationalists ‘ungratefuls,’ ‘paranoiacs,’ ‘thieves’ and ‘unreliable,’ to cite a few of epithets wielded by British ministers and diplomats at the time. Labour’s obdurate and reactionary attitude was quite paradoxical for a government that made ‘nationalization’ a pillar of its political program and was undertaking several operations of that kind in Great Britain.”(20) Attlee nationalized one fifth of the British government(21) but considered nationalization to be forbidden in Iran.
The Abadan Refinery and its oil became subject of a cruel sanction by Attlee’s cabinet who labeled the sales of Iran’s oil as ‘theft’ and all who may get involved in the transaction of Iranian oil would be prosecuted under ‘international law’. Consequently, Iran’s oil production rate plummeted from 650,000 barrels per day in 1951 to only 20,000 bpd in 1953. The flow of cheap oil was being threatened in the midst of Cold War and the Korean War. Under Churchill this policy was reinforced as he viewed Mossadeq as a reckless demagogue intent on the theft of ‘British property’(22). Iranian property was even considered as British property! Meanwhile the U.S. which took the path of its close ally Britain has already became reliant on Iranian oil as the latter had become the main U.S. supplier of oil during its Korean war. So these two countries with the collaboration of one another finally staged the 1953 coup against the democratically elected government of Mohammad Mosaddegh in Iran to guarantee cheap oil flow under the pro-Nazi government of General Zahedi who was installed by them after the coup. It was under Zahedi that Anglo-Iranian Oil Company renamed its name to be able to return to Iran.
The nationalization of oil did not truly take place up until the popular uprising of Iranian nation in 1979 and the sole revolution that brought democracy and independence that was unprecedented in Iranian history.
*Sadegh Abbasi is a Junior M.A. student at Tehran University. As a student in history he has also worked as a contributor to different Iranian news agencies.
1. Daniel Yergin (2011). The Prize: The Epic Quest for Oil, Money & Power. Simon and Schuster. p. 121. https://books.google.com/books?id=WiUTwBTux2oC&pg=PA121&lpg
3. Boghoziyan, Albert. One for Us, Six for Britons!: William Knox D'Arcy in History of Iran. 28 May 2015. Web. 25 Oct. 2015. http://www.iranreview.org/content/Documents/One-for-Us-Six-for-Britons-.htm
4. Mohaddes, K. and M.H. Pesaran (2013), One hundred years of oil income and the Iranian economy: a curse or blessing, Cambridge Working Papers in Economics 1302, Faculty of Economics, University of Cambridge. http://www.econ.cam.ac.uk/people/cto/km418/100_Iranian_Oil.pdf
6. For technical superiority of oil over coal in navies see: David C. Evans; Mark R. Peattie (30 October 2012). Kaigun: Strategy, Tactics, and Technology in the Imperial Japanese Navy 1887-1941. Seaforth Publishing. p. 158. https://books.google.com/books?id=iSDOAwAAQBAJ&pg=PA158&lpg and Roy Nersesian (18 December 2014). Energy for the 21st Century: A Comprehensive Guide to Conventional and Alternative Sources. Routledge. p. 139. https://books.google.de/books?id=bFDfBQAAQBAJ&pg=PA139&lpg
7. Manfred Weissenbacher (2009). Sources of Power: How Energy Forges Human History. ABC-CLIO. p. 373. https://books.google.de/books?id=dcYHzuFLZP0C&pg=PA373&lpg
8. Iranian Parliament
9. Encyclopedia of Iranica. ANGLO-PERSIAN AGREEMENT OF 1919. Retrieved October 25, 2015.
10. Cyrus Ghani; Sīrūs Ghanī (2000). Iran and the Rise of the Reza Shah: From Qajar Collapse to Pahlavi Power. I.B.Tauris. p. 55. https://books.google.de/books?id=VGZItY9kL0AC&pg=PA55&lpg
11. Ibid. pp. 53
12. Touraj Daryaee (19 January 2012). The Oxford Handbook of Iranian History. Oxford University Press. p. 343. https://books.google.de/books?id=KjQ_AwAAQBAJ&pg=PA343&lpg
13. Ghani, (5 September 2013). Iran & The West. Taylor & Francis. p. 368. https://books.google.de/books?id=Xdy3AAAAQBAJ&pg=PT368&lpg
14. Ervand Abrahamian (1993). Khomeinism: Essays on the Islamic Republic. University of California Press. p. 101. https://books.google.de/books?id=iQgS6ZRg9gQC&pg=PA101&lpg
15. Touraj Atabaki (4 September 2006). Iran and the First World War: Battleground of the Great Powers. I.B.Tauris. p. 97 https://books.google.de/books?id=M3adD9kNH1gC&pg=PA97&lpg
16. Associated Press, 28 August 1919
17. Homa Katouzian (2012). Iranian History and Politics: The Dialectic of State and Society. Routledge. p. 165. https://books.google.de/books?id=MYT2mo92KowC&pg=PT165&lpg
19. Op. Cit. Mohaddes and Pesaran (2013) http://www.econ.cam.ac.uk/people/cto/km418/100_Iranian_Oil.pdf
20. Leonardo Maugeri (2006). The Age of Oil: The Mythology, History, and Future of the World's Most Controversial Resource. Greenwood Publishing Group. p. 66. https://books.google.com/books?id=JWmx5uKA6gIC&pg=PA66&lpg
22. Jim Newton (4 October 2011). Eisenhower: The White House Years. Knopf Doubleday Publishing Group. p. 103. https://books.google.de/books?id=bbH1QYXxtMcC&pg=PA103&lpg