Tuesday, July 20, 2010

Iran's Record, Part 2

In Part 1 of this series, I discussed the 1941 invasion and occupation of neutral Iran by Great Britain and the Soviet Union, aided and abetted by the "neutral" United States. Like all Allied war crimes, this one went unpunished. Do as we say, not as we do.

The United States, of course, dropped all pretense at neutrality following the "unprovoked" Japanese attack at Pearl Harbor. The Roosevelt Administration had tried, unsuccessfully, to provoke an attack by Hitler. When the United States declared war on Japan, however, Hitler honored his treaty obligations with the Japanese and declared war on the United States, thus sealing his fate.

In 1943, at the Tehran Conference, Churchill, Stalin, and Roosevelt pledged their commitment to Iranian sovereignty:

"The Three Governments realize that the war has caused special economic difficulties for Iran, and they are agreed that they will continue to make available to the Government of Iran such economic assistance as may be possible, having regard to the heavy demands made upon them by their world-wide military operations, and to the world-wide shortage of transport, raw materials, and supplies for civilian consumption." (Declaration of the Three Powers Regarding Iran—December 1, 1943)

The three belligerents pledged to leave Iran within six months of the cessation of hostilities. The Soviets spent the three years of occupation fomenting separatist movements in Azerbaijan and Kurdistan, and refused to honor the withdrawal deadline until they were granted oil concessions. Following the Soviet withdrawal, the Iranian government suppressed the separatist movements and cancelled the oil concessions.

The British, however, retained oil concessions held by a firm much in the news these days. The Anglo-Iranian Oil Company (AIOC) will be familiar to modern readers as British Petroleum (BP). Yes, the very same BP that presently is spewing oil all over the Gulf of Mexico. The Anglo-Iranian Oil Company, and the sincerity of Anglo-American guarantees of Iranian sovereignty, are the subjects of the next two installments.

In 1901, William Knox D'Arcy, an English millionaire, negotiated an oil concession with the Shah Mozzafar al-Din Shah Qajar of Persia. He assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000, an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits.

The venture proved unsuccessful for several years, and D'arcy was forced to sell most of his rights to a Glasgow-based syndicate, the Burmah Oil Company. By 1908, the firm was on the verge of dismantling operations but, on In May 26 of that year, they discovered a large field of oil at Masjed Soleiman. Burmah Oil Company created the Anglo-Persian Oil Company (APOC) and publicly issued shares in the new company.

In 1913, the company acquired a new customer: Winston Churchill, who was then First Lord of the Admiralty. At Churchill's suggestion, and in exchange for secure oil supplies for its ships, the British government injected new capital into the company and, in doing so, acquired a controlling interest in APOC. APOC, in turn, acquired a 50% interest in the Turkish Petroleum Company (TPC), an anti-competitive trust formed by some of the world's biggest oil companies to obtain concessions in the Ottoman Empire and outflank their newer, more entrepreneurial competitors.

TPC's operations were interrupted by the First World War. After the war, the company reorganized and, in 1927, struck a large field of oil near Kirkuk, Iraq. The company was renamed the Iraq Petroleum Company (IPC).

In 1933, following four years of protracted negotiations In Tehran, London, Paris, Lausanne, and The Hague, Iran signed a new concession with APOC. The terms of the new agreement provided for a new 60-year concession. The Agreement reduced the area under APOC control to 100,000 square miles, required annual payments in lieu of Iranian income tax, as well as guaranteeing a minimum annual payment of £750,000 to the Iranian government. These provisions, while appearing favorable, are widely agreed to have represented a squandered opportunity for the Iranian government. The agreement extended the life of the D'Arcy concession by an additional 32 years, negligently allowed APOC to select the best 100,000 square miles, the minimum guaranteed royalty was far too modest, and in a fit of carelessness the company's operations were exempted from import or customs duties. Finally, Iran surrendered its right to annul the agreement, and settled on a complex and tediously elaborate arbitration process to settle any disagreements that would arise.

In 1935, APOC was renamed the Anglo-Iranian Oil Company (AIOC).

In 1949, Britain offered Iran a "Supplemental Oil Agreement" which guaranteed royalty payments would not drop below £4 million, reduced the area in which it would be allowed to drill, and promised more Iranians would be trained for administrative positions." The agreement, however, gave Iran no "greater voice in company's management" or right to audit the company books. When the Iranian Prime Minister, Mohammad Sa'ed, tried to dicker with AIOC head Sir William Fraser, Fraser "dismissed him" and flew back to UK.

By 1950, resentment against the low share of profits given Iran had been percolating for several decades. These resentments were exacerbated by AIOC's longstanding practice off cutting off royalty advances when its demands weren't met; poor working conditions for Iranians employed by AIOC; the company's refusal to honor its promise, under a 1933 agreement with the Shah, to improve working conditions, train Iranians for administrative positions, and build schools, roads and hospitals; the death, destruction and national humiliation wrought by the Anglo-Soviet invasion and occupation of neutral Iran during World War II; and the dependency on oil revenues for capital and modernization projects. Nationalization became a popular idea among the majority of Iranians. Nationalization sentiment was further inflamed when Iranians learned that both Standard Oil of New Jersey and the American-owned Arabian American Oil Company (ARAMCO) had agreed to more equitable terms with Venezuela and Saudi Arabia, respectively. The UK Foreign Office rejected the idea of any similar agreement for AIOC.

Among the organized forces calling for nationalization, the two most powerful were the outlawed Tudeh (Communist) Party and the Jebhe Melli (National Front of Iran). Mohammed Mossadegh, a Western-educated teacher, lawyer, and member of the Majlis (Parliament) was one of the founders of the National Front and, in 1950, was the party's leader.

On June 26, 1950, General Haj Ali Razmara became Prime Minister of Iran. Razmara's appointment was urged on the Shah by the British Foreign Office and AIOC, as they believed he was the only man capable of backing down Mossadegh and the National Front and getting the Supplemental Agreement ratified. Razmara was an intelligent and capable administrator and made a number of positive changes in the Iranian government and economy. But he also made many enemies, notably by streamlining the bloated and patronage-ridden civil service and devolving government to the local level, and by his opposition to nationalization. Razmara did ask for modifications to the Supplemental Agreement: payment of some royalties in advance; allowing Iranians into managerial positions; and allowing Iranian auditors to review the company's books. AIOC refused.

On March 7, 1951, while entering a mosque for a memorial service, Razmara was assassinated by a gunman in the crowd. Khalil Tahmasebi, a 26 year-old carpenter and member of the fanatical Islamic organization, Fadayan-e Islam, was arrested on the spot (Tahmasebi was pardoned by a vote of the Majlis and released from prison in November, 1952).

On March 15, 1951, the Majlis voted to nationalize Iran's oil fields. On March 20, the Majlis voted to expropriate the AIOC refinery at Abadan, then the world's largest. 25% of oil revenues were to be set aside to pay AIOC's claims for compensation.

Tudeh, the National Front, and Fadayan-e Islam had been busy since the assassination of Ali Razmara. Demonstrations, riots and assassinations continued. The discovery of an assassination plot against the Shah and his family led to the arrests of several Fadayan members, including its leader, Navab Safavi. The appointment of Hussein Ala as Prime Minister only served to increase the unrest, and he resigned after less than two months in office. The Shah thought to replace Ala with former Prime Minister Sayyid Ziya al-Din Tabatabai, but on April 28, the Majlis, led by the National Front, elected Mohammed Mossadegh Prime Minister.

The young Shah, seeing the writing on the wall all too clearly, appointed Mossadegh to the Premiership. That decision, and the Anglo-American reaction to it, would prove fateful to Iran and the West right up to the present day. Stay tuned for Part 3.

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