67 years ago today Iran’s national parliament voted to nationalise the country’s immense oil wealth. In practical terms this meant taking the Anglo-Iranian Oil Company (AIOC), a predecessor of today’s BP, into public ownership.
While the AIOC started life in 1908 – and was previously called the Anglo-Persian Oil Company – its genesis was seven years earlier when William Knox D’Arcy negotiated an oil concession with the country’s ruler, Shah Mozaffar al-Din.
In return for exclusive rights to prospect for oil across most of the country for six decades, the Shah received £20K (£2m in today’s prices), an equal amount of equity in D’Arcy’s company and 16% of any future profits.
Initially, with the Englishman unable to locate anything of value, his investment appeared a misjudgment. But by 1908 that had decisively changed, and within a few decades the refinery at Abadan would be the single largest in the world, and Iran the leading producer of oil in the Middle East. Yet despite tapping such extraordinary abundance, the country saw little return for its geological good fortune. By WW2 the British exchequer received more money through taxes paid by the AIOC than Iran did in royalties.
This is important when considering the so-called ‘spirit of ’45’. While Britain could have built its welfare state in the absence of overseas possessions, as was the case with Sweden, it would have been unable to do so while maintaining pretensions of global military reach and reducing the national debt. Tax revenues from commercial interests abroad, many the ongoing spoils of colonialism – not to mention generous Marshall Aid – were what made the British welfare state possible.
Furthermore the strategic importance of Iran’s oil extended beyond Britain. A report published by the US state department in 1951 noted that the loss of the country’s oil on the world market would significantly impact Europe’s economic recovery, a major problem given the prospect of Moscow’s rising influence on the continent. Of even greater concern, however, were projections regarding a crisis based on the loss of all Middle Eastern oil – a possibility given growing nationalist sentiment and the demise of Europe’s empires. For Washington this would make European rearmament, something of critical importance in arresting the spread of communism, “impossible of accomplishment” and would force “profound changes” in the economic structure of key allies in what was now NATO.
None of this concerned Iran’s new National Front, a political party led by Mohammed Mossadegh that fused national-popular, liberal and social democratic forces around the aim of nationalising of the country’s oil. When word reached Tehran in 1950 that the threat of precisely that had persuaded the Arabian American Oil Company (ARAMCO) to a profit-sharing agreement of 50/50 with Saudi Arabia, the impulse to emulate the Kingdom seemed inarguable.
The only problem was that Britain’s finances were far more stretched than those of the US, and the Foreign Office had no interest in a similar arrangement regarding the AIOC. With defence spending above 10% of GDP, and domestic politics requiring greater government intervention than ever before, Britain couldn’t afford to renounce such prized revenues.
In February 1950 Mossadegh, along with seven other members of the National Front, were elected to the Majlis – Iran’s parliament. That November the Majlis’ Oil Committee, now headed by Mossadegh, recommended the rejection of the ‘Oil Supplemental Program’, a proposal to reform arrangements concerning the AIOC so as to defuse the campaign for nationalisation.
Mossadegh’s manoeuvring was opposed by the new prime minister, Ali Razmara, the leading establishment voice against nationalisation. On 4 March Razmara told the Majlis that Iran was incapable of running its own oil industry – three days later he was assassinated by a young militant attached to the Fada’iyan-e Islam. From there events moved quickly with the impetus of the nationalisation movement gaining an air of inevitability. On 15 March, the Majlis overwhelmingly approved the ‘Oil Nationalisation Plan’ before the Senate ratified it two days later. By late April Mossadegh had been chosen as the country’s new prime minister.
Oil nationalisation and Mossadegh’s elevation should have been a founding moment for modern Iran. Here was the emergence of something the great powers so frequently claimed to desire: a democratic government based on principles of constitutionalism and national sovereignty. Furthermore Mossadegh, previously a lawyer, was secularly minded and would in time oversee land reform, the introduction of social security and a deeper separation of powers.
The response from Britain’s Labour government, which had embarked on such a radical domestic agenda, was threatening legal action against anyone who purchased Iranian-refined oil. As a result the country’s industry came to a halt and after several failed attempts to reach a compromise Dean Acheson, then US Secretary of State, concluded that the British were “destructive and determined on a rule-or-ruin policy in Iran.”
While American ambivalence meant Iran’s fragile experiment in self-government briefly endured, that decisively changed with the election of Dwight Eisenhower in 1952. After entering the White House the following January, Churchill persuaded the former general that Mossadegh – while a secular liberal – would ultimately have to work with the country’s Moscow-aligned Tudeh party to succeed. Consequently it was agreed to remove him through what would be known as ‘Operation Ajax’, an ultimately successful coup funded and coordinated by America’s CIA. That meant re-centralising power in the monarch Shah Reza Pahlavi, unwittingly laying the foundations for the country’s Islamic Revolution in 1979. Confronted with a rising nation, whose pursuit of self-government was perceived to be at odds with their national interests, Britain and America removed an elected leader and empowered an autocrat. It would not be the last time.
The first steps towards nationalisation of its oil industry 67 years ago today was a declaration of hope by a country looking to join the ranks of prosperous, democratic nations. The response it elicited from Britain and the US made a mockery of their supposed sincerity in assisting such aspirations. Importantly, at the very moment the old empires were crumbling, it illustrated how colonialism is more than merely political rule or military occupation – it is also a relationship of enforced economic dependence.
In an age where ‘sovereignty’ has become a touchstone for the far-right and xenophobes, it’s important to remember that for the world’s poor – now more than ever – the struggle for it is tied to the pursuit of democratic government. The animus that guided Mohammed Mossadegh was a simple one: government of the people, by the people, for the people. Rather than a feature of western political thought – some legacy peculiar to the nations of Europe and North America – we must recognise that democratic yearning for what it is: a universal impulse.