The new emperor, Reza Shah, was a self-made man of humble origins. He had started out as a stable boy in the Cossack Brigade, and, over the years, had risen steadily through the ranks. A staunch nationalist, he put in place many important reforms.
His achievements included major construction programs, factories, ports, hospitals, schools and infrastructure development. He cracked down on brigands and bandits who infested different parts of the country, created Iran's first civil service and also its first national army in centuries. In 1935, the name of the country was officially declared to be Iran; the name Persia, was no longer to be used.
There was, to be sure, also a downside to Reza Shah. He did not take kindly to opposition or dissent, and his methods of governance were, all too often, drastic and even draconian. Once, during a tour of western Iran, he was informed that bakers were hoarding wheat to push up prices, as a result of which a large number of people were going hungry. Reza "ordered the first baker he saw thrown into an oven and burnt alive". Low-priced bread was in plentiful supply in every bakery the very next day.
In financial matters he had few scruples, and accumulated a considerable fortune through bribes from foreign business concerns, extortion from tribal leaders and confiscation of land. A British Member of Parliament commented drily that he had "eliminated all the thieves and bandits in Iran, and made his countrymen realize that henceforth there would be only one thief in Iran"!
Reza Shah admired Kemal Ataturk, and visited Turkey in 1934 to see at firsthand what the latter was trying to achieve. He lacked, however, Ataturk's statesmanship and political skills, and alienated a large section of his own population with his disregard for Iran's traditions, social patterns and religious beliefs.
Iran opted to be neutral when World War II began. Reza Shah's neutrality, however, was weighted in favor of Germany; German agents were allowed to function freely in Iran. This would not be countenanced by either Britain or the Soviet Union. On August 25, 1941, both countries intervened militarily. Reza Shah was forced to abdicate. His 21-year-old son, Mohammad Reza-diffident and untested in politics-succeeded him on the Peacock Throne. Reza Shah would die in exile three years later.
The D'Arcy concession bore fruit in May of 1908. After years of patient effort and considerable investment of funds, oil was discovered in huge quantities in western Iran. Prior to that D'Arcy had accepted the Scottish syndicate, Burmah Oil Company, as partners in his enterprise.
After the discovery of oil, a new corporation, the Anglo-Persian Oil Company (APOC), was organized to administer the bonanza and, of course, to rake in the profits. The discovery of oil has been an extraordinary boon and blessing for Iran. In the early decades, however, it also entailed consequences that were largely avoidable, and anything but wholesome.
Britain benefitted enormously once oil was discovered. Within five years, the British government was persuaded by the then First Lord of the Admiralty, Winston Churchill, to purchase, for the sum of Pound Sterling two million, 51% of the APOC, which enjoyed a "lucrative monopoly on the production and sale of Iranian oil", and became one of the "most profitable British businesses" in the world. It sold oil across Europe at ten to twenty times the cost of producing it. It paid huge amounts as taxes to the British government, which also received 50% of its profits-as a share holder-and oil at very concessional prices for the Royal Navy.
The Company built the world's largest oil refinery on the island of Abadan in the Persian Gulf, which all too soon was transformed into an archetypal "colonial enclave". British administrators and technicians lived in luxury, while thousands of Iranian workers lived in slum-like squalor.
Working conditions were deplorable; the workers toiled hard for low wages, and without the ancillary benefits of vacation pay, sick leave or disability compensation. The Iranian authorities did not have a voice in the management of the Oil Company, or the right to audit its accounts, and there was a widespread impression in Iran that, through dubious accounting methods, the country was even being deprived of the full amount of its legitimate-if not overly generous-share of the profits. Such a situation clearly was not tenable.
In 1928, Reza Shah decided that a new agreement, on more equal terms, should be negotiated with APOC. The Company, which was quite content with the existing accord, prevaricated, until on 26 November 1932, a thoroughly exasperated Reza Shah revoked the concession.
The Chairman of APOC, Sir John Cadman, travelled to Tehran, to retrieve the situation, and a new agreement was worked out. It reduced the area covered by the D'Arcy concession by three-quarters, guaranteed minimum annual payments to Iran and also improved working conditions in Abadan.
The concession, due to expire in 1961, was extended by an additional period of thirty-two years, and the name of the company was changed to Anglo-Iranian Oil Company (AIOC). The Company, however, did not quite live up to all its commitments, and there was little change or improvement for the Iranian labor force, either in conditions of work or level of wages. The AIOC did not comply with its commitment to build schools, hospitals and roads. Discontent among Iranian workers, thus, did not abate, but simmered with the passage of time.
In March 1946, workers in Abadan went on strike; they demanded improved housing, health care, and for AIOC to abide by Iranian labor laws. AIOC chose to resist rather than to negotiate. There was rioting when people from outside the region, including tribesmen, were brought to Abadan, as representatives of a hurriedly constituted "bogus union", to break the strike. Dozens were killed and more than a hundred wounded in the riots. Eventually AIOC did agree to observe Iranian labor laws, but this was yet another commitment that was not honored.
The unrest in Abadan revivified the labor movement in Iran, and also had another more far-reaching effect. The Majlis, which had kept a low profile during Reza Shah's years of power, asserted itself. The following year it enacted legislation that prohibited concessions to foreign companies in the future, and called upon the government to renegotiate the 1933 accord with AIOC. The person who drafted and piloted the bill through the Majlis was Mohammad Mossadegh.
In 1947 Mohammad Mossadegh was not an unfamiliar name or personality in Iran. He was born to privilege; his mother was a princess of the Qajar dynasty, and his father had served for many years as Finance Minister during the reign of the Qajar monarch Nasir al-Din Shah.
He was educated in Europe and had a doctorate degree in Law from the University of Neuchatel. When the Majlis was constituted in 1906, Mossadegh was elected Member from a constituency in Isfahan. He had served in the government of Reza Khan after 1921 as Finance Minister, and later Foreign Minister, but resigned after a brief stint because of differences that related as much to personality as to policy and principles. Subsequently-after Reza Khan ascended the throne as Reza Shah-he repeatedly declined offers of high office, including the offices of Chief Justice and Prime Minister.
In 1949, AIOC-under great pressure and in an attempt to allay public discontent-proposed a set of reforms or changes in the shape of a Supplemental Agreement. The Agreement provided for an increase in the guaranteed minimum annual royalty payment to Iran, a decrease in the area of exploration or drilling, and training of Iranians for administrative-but not managerial-jobs.
Iran would not, however, have a greater say in the management of the company, or the right to audit its accounts. Britain, of course, endorsed the Agreement, as did the young monarch Mohammad Reza, who owed to Britain and wanted to keep on its right side. The Iranian cabinet, under instructions from the Shah, also gave its approval within weeks.
The Majlis, whose concurrence was required for the Agreement to take effect, was, however, less than enthusiastic. In June 1950, it appointed a committee of 18 members to study the Agreement. Members of the committee elected Mohammad Mossadegh to chair their deliberations. In the same month the Shah named General Ali Razmara-a graduate of Saint Cyr-to succeed Ali Mansur as Prime Minister. He was recommended by both Britain and AIOC as the one person who could persuade a recalcitrant Majlis to ratify the Supplemental Agreement.
Razmara had no illusions as to the magnitude of his task. To many Iranians, the Supplemental Agreement was "too little, too late". It could be a basis for negotiations, but not a "take it or leave it" proposal. Razmara wanted a few modest improvements in the Supplemental Agreement; namely, training of Iranians for managerial positions, access of Iranian auditors to AIOC's books, and some advance payments of royalties. These changes, he felt, would strengthen his hands in seeking approval of the Majlis for the Agreement. Britain, however, would not relent.
At that time Arabian-American Oil Co. had agreed to share profits equally with Saudi Arabia, and Standard Oil of New Jersey had granted similar terms to Venezuela. By comparison, AIOC's profit sharing arrangement with Iran, as per the D'Arcy concession and the 1933 accord with Reza Shah, was less than generous.
In 1948, for example, out of AIOC's net revenue of sixty one million pounds, twenty eight million went to the British treasury as income tax; Iran's share was a relatively modest nine million pounds. To the Chairman of the Majlis committee, Mossadegh, the main issue, in any case, related to national sovereignty rather than to finances or barrels of oil. In November, the Majlis committee recommended, by unanimous vote, that the Agreement be rejected.
Under instructions from the Shah, Razmara soldiered on manfully, without support from AIOC or Britain, until on March 7, 1951, he fell to an assassin's bullet. With Razmara died any realistic chance or hope of conciliation or compromise. The very next day, the Oil Committee of the Majlis, headed by Mossadegh, recommended the nationalization of AIOC. Somewhat belatedly, Britain saw the writing on the wall.
The British Ambassador, Sir Francis Shepherd, called on the new Prime Minister, Hussein Ala, and argued forcefully against the Oil Committee's recommendation. For the first time he also mooted the possibility of a fifty-fifty profit sharing arrangement. This again was an offer made too late. Public opinion had so hardened that Ala did not dare to publicly oppose nationalization.
(To be continued….)
The writer is a distinguished former Bangladesh diplomat
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