Britain’s Dark Shadow Over Iran

In the years following World War II, Iran was a devastated country barely recovering from famine and starvation and subsisting on meager U.S. handouts.

Ironically, Iran was also a wealthy country with ample oil reserves that were fueling the engines of the British Empire. Much of Iran’s oil was controlled by the Anglo-Iranian Oil Company (AIOC), whose majority shareholder was the British government.

Sucking Iran dry

By 1950, the AIOC’s annual profits from Iranian oil amounted to 200 million pounds, while Iran’s share of the revenues was a mere 16 million.

The AIOC’s oil concessions had been negotiated in the early twentieth century when the British lion imperiously roamed the Middle East, coaxing local monarchs and princes to acquiesce to its whims.

In the early 1950s, when assertive nationalism was sweeping the emerging Third World, such anachronistic colonial arrangements seemed not only iniquitous but undignified.

Iran’s original demands were modest and focused on a more generous profit-sharing arrangement and better working conditions for Iranian laborers living in squalid conditions.

At a time when the U.S. oil firms were offering 50-50 profit-sharing deals to the governments of Saudi Arabia and Venezuela, Iran perceived that it could demand no less. Accustomed to their profits and fearing that such concessions would establish an improper precedent for their global holdings, the AIOC and the British government demurred.

The best that Iran could get was an additional four million pounds per year and further pledges for improvement of working conditions.

Behind the times

Before World War II, Britain could have dictated terms like this with impunity, but the problem in the early 1950s was that nationalism was now the defining ideology of the developing world — a fact the British failed to recognize when dealing with Iran.

This failure to acquiesce to the prevailing winds of change would embroil Britain in a crisis that a more imaginative policy may have averted. The oil controversy inevitably provoked a political crisis inside Iran.

The young Shah, eager to consolidate his rule and perennially in search of Western benefactors, was inclined to accept the British proposal. An array of conservative forces, ranging from large landlords to court politicians on the British payroll, similarly seemed amenable, giving AIOC’s executives the illusion of control.

This was a grave misreading of the popular and parliamentary mood, as Iran was about to enter one of the most acute crises in its history.

The National Front

The provocative and callous British conduct only managed to unite the differing strands of Iranian opposition into a remarkable coalition, the National Front.

The National Front was essentially composed of liberal reformers, the intelligentsia, elements of the clerical class, socialist activists and middle-class professionals.

It is important to appreciate that the demands of the National Front soon transcended the oil issue as the party pressed for a more representative government with constitutional demarcations of power. The National Front government that emerged sought to improve public education and establish an accessible health system.

Its proposed judicial reforms were designed to ensure equality before the law, while its efforts to broaden the prerogatives of the local governments were intended to decentralize power. This was not just a movement to reclaim Iran’s resources, but a new progressive alliance seeking to revamp Iranian society and government.

Enter Mohammad Mosaddegh

The politician who emerged at the heart of this movement was the prominent parliamentarian Mohammad Mosaddegh.

Born into an aristocratic family and educated in Switzerland, Mosaddegh belonged to a narrow class of Iranian elite that considered high government office its patrimony.

Respectful of the monarchy and the traditions of its class, this cohort would constitute the cabinets, parliaments and civil service that ruled Iran.

An ardent nationalist, Mosaddegh was dubious of foreign control and came to articulate the concept of “negative equilibrium,” under which Iran would preserve its autonomy by playing one empire against another. A man prone to the histrionics of Persian politics, he would weep while making speeches, feign illness and play the part of a fragile old man.

To Iranians such theatrics were comprehensible, but to an international audience accustomed to a more stoic class of politicians, Mosaddegh appeared eccentric, even bizarre. All this should not discount the fact that Mosaddegh was a genuine patriot seeking to emancipate his country from the clutches of the British Empire.

British intransigence 

The continued British obstinacy further antagonized Iranian nationalistic feelings, eroding the consensus behind the 50-50 profit sharing arrangement.

The minority position in the parliament, led by Mosaddegh, had been pressing for outright nationalization of the oil industry, and now it gained strength. On April 30, 1951, the Iranian parliament passed the nationalization bill, defying the monarch and propelling Mosaddegh to the post of prime minister.

Had Britain been more imaginative in its recognition that it was impossible to rebuff Iran’s demands — particularly in light of the arrangements that the United States was offering to countries where it operated its oil industry — and embarked on a more generous package, the crisis might have been averted.

But the imperial arrogance of the British government and the rapacious nature of the AIOC had inexorably radicalized Iranian politics.

Regime change

In terms of dealing with Mosaddegh’s challenge, the British contemplated a policy of what we would now call “regime change.” Britain imposed a stringent embargo on Iran’s oil, depriving Tehran of much of its revenues.

The AIOC’s announcement that it would take legal action against anyone seeking to purchase Iran’s oil proved a sufficient deterrent to many international oil firms, who were already wary of Tehran’s nationalization act.

In the meantime, the departure of British technicians essentially crippled the Iranian oil industry. It was hoped in Whitehall that by undermining Iran’s fragile economy and depriving it of its oil revenues, sufficient popular pressure could be generated, leading in due course to Mosaddegh’s overthrow.

For good measure, the British intelligence services also began covert planning and mobilizing their ample assets in Iran.

The notion of a malevolent United States plotting against Iran conceals much about the actual course of events in the Mosaddegh crisis. The Truman Administration appreciated the shortcomings of the British strategy and pressed London to accept Iran’s legitimate demands.

As for Iran, successive U.S. diplomats led by the indefatigable Averell Harriman sought to similarly adjust Mosaddegh’s positions and make the prime minister realize that a dogmatic assertion of Iran’s rights was unlikely to resolve the dispute.

The U.S. as a mediator, for now

In the initial stages, the United States played the role of mediator, pressing both sides toward accommodation and compromise.

The Truman Administration sustained its assistance to Iran, which helped ease the pain of British economic sanctions, and it was instrumental in dissuading Britain from precipitous military action, seeking instead to craft a negotiated solution somehow acceptable to both parties.

The United States has much to account for in its later behavior during the nationalization crisis, but Truman’s efforts on behalf of Iran should also be acknowledged. By 1953, as the oil crisis entered its third year, a combination of events would lead the United States to contemplate Mosaddegh’s overthrow.

A new president, Dwight D. Eisenhower, came to power with a determination to wage a more aggressive Cold War, and his administration displayed a marked suspicion of Third World neutralism.

Eisenhower and his hawkish Secretary of State, John Foster Dulles, proved more sensitive to the British assertion that only a change in the Iranian regime could resolve the impasse.

But the United States’ zero-sum Cold War rivalry with the Soviet Union, Third World nationalist struggles were too often subsumed in the framework of the containment policy. Mosaddegh became just one more victim of the stark Cold War duality — that every government was either “with us or against us.”

Adapted from the Book HIDDEN IRAN: Paradox and Power in The Islamic Republic by Ray Takeyh. Reprinted by arrangement with Times Books, a division of Henry Holt and Company, LLC.. Copyright (c) 2006, by Ray Takeyh. All rights reserved.