Dealing in Oil – 1933-1949

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Abbreviations inside brackets indicate sources which can be seen in the web/bibliography.

Concerned about the rising nationalism in such countries as Turkey, Mexico and India, [the British government] did not want Iran to flare up and irreparably compromise the critical link between Iranian oil and Britain’s defense. Rumblings of discontent at [newly renamed] AIOC’s “imperialism” had already appeared in the [Iranian] press, supported by such diverse factions as the left and the clergy.  [MF p98]

[In 1933-34 Reza Shah] signed a new agreement with the Anglo-Iranian Oil Company. In return for a measly 4 percent increase in royalties, the shah extended the concession all the way to 1993.   [EA2 p96]

AIOC never worried about domestic stability in the way its American counterparts did, confident that if circumstances should dictate, the government would intervene militarily to protect British interests either adding the oil fields to Iraq or dividing Iran in half. [It never failed to contend] that the 1933 agreement was more than generous and that the Iranians were ingrates.            [MF p218]

Another deal struck in 1947 was equally unfair to Iran. To pay off a war debt London owed Washington, AIOC had agreed to sell oil at a discount to a number of American companies operating in the Middle East. The debt had nothing to do with [Iran], and yet once again Iranian income was being used for British national purposes.   [MF p210]

In matters of practical management [also] the company was failing miserably to live up to the terms of the concession. AIOC refused to pay royalties on any of the oil products consumed in its operations. And, it was flaring (or otherwise wasting) the natural gas released as a by-product of drilling, disregarding Iran’s repeated request to re-inject it into the fields or to pipe it to nearby towns for use as fuel for heating and cooking.  [MF p211]

The company also continued to disregard the Iranization clause, which specified that Persian workers be trained and placed in positions of rank and responsibility. Meanwhile AIOC imported workers, and at one point the Ministry of Finance had applications for three thousand visas for unskilled workers from Palestine.            [MF p211]

The Supplementary Agreement – negotiated in secret [in 1949] – offered Iran too little, too late. … Iran’s share of the company profits would rise from 17 to 24%. Iran, citing a recent American-Venezuelan Agreement, had sought 50%. The company, however, took the position that Iran should be grateful for the AIOC’s “civilizing mission” It had invested generous sums in Iran, converted “deserts” into flourishing towns, created 75,000 jobs – over 70,000 of them for Iranians – and had provided “people with such amenities as swimming pools.” Morevover, it refused to set deadlines on earlier promises to promote Iranians to technical-managerial positions on the grounds that few had the “skills” needed for such “responsible” positions.            [EA1 p185]

Furthermore, the company failed to address many of Iran’s other complaints: the duration of the contract (it ran until 1993); the payment of the royalties in pounds (this tied Iran to the sterling area); the sale of oil to the British navy at substantial discounts, the sale of oil to Iran at world market prices rather than at local production costs (they differed substantially); the refusal to open up company books to Iranian auditors; the burning of natural gas instead of piping it for local consumption; and the running of Abadan as a company town where stores and clubs routinely discriminated against the “natives.” What is more, the company was seen as a typical colonial power manipulating the host government, by making and unmaking ministers as well as governors, mayors, army commanders, police heads, majlis deputies, and, of course, local tribal chiefs. [EA1 p186]

[The Supplementary Agreement] was not based on the 50/50 principle and was “drafted so obscurely and so ambiguously that no one in the world” could possibly understand it. The AIOC publicly insisted that the 50/50 suggestion was impractical because it was “extremely difficult to calculate profits” but privately told the British cabinet that such a division would be “uneconomical, absurd, and astronomical”. In a blunt conversation with the Iranian premier, the British ambassador… declared that Iran was being “greedy” and the “only thing the company might be willing to add to these concessions was perhaps the free medical treatment of certain hysterical deputies who continued to denounce the Supplementary Agreement.”            [EA1 p186]

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