Greed and Influence: the Role of the Anglo-American Oil Company in Iran’s 1953 Coup D’etat Shakiba Fadaie

When analyzing contemporary relationships between the United States and Iran, the 1953 coup d’état emerges as a critical focal point in postwar history. In retrospect, the deep mistrust generated by the U.S.-British sponsored upheaval has rendered complex and hostile affairs over the past three decades. The 1953 coup was initially rooted in the 1951-53 oil crisis between Iran and Britain, eventually leading to the Central Intelligence Agency (CIA) overthrowing the popular Muhammad Mossadegh and thus laying the groundwork for the establishment of monarch Muhamad Reza Shah Pahlavi. While the United States utilized the language of the Cold War and the spread of communism as their primary concern for the coup, their interests were deeply rooted in the repercussions that oil nationalization could render throughout the world. Moreover, the 1953 coup induced American policy makers to continue strikingly similar coups as demonstrated in the cases of Chile, Indonesia and Guatemala.

Through analysis of the history of the Anglo-Iranian Oil Company (AIOC) and the 1953 coup d’état, I examine the prominent role of the AIOC in facilitating the CIA-sponsored upheaval against Prime Minister Mohammad Mossadegh. I begin by offering a historical account of the early establishment of the AIOC in Iran, followed by an analysis of motives present for Britain and the United States. I conclude by investigating the negative spillover effects of the coup, leading to the looming presence of anti-Western sentiment felt in Iran’s contemporary age.

This paper begins by outlining the history of the Anglo-Iranian Oil Company’s presence in Iran. In 1901, William Knox D’arcy purchased the sixty-year rights to extract, refine and export oil products across the entire country, in return for 16% of net annual profits and $50,000 in cash (Abrahamian, 9). As oil was struck in 1908, D’arcy sold his rights to the Burmah Oil Company, later becoming the Anglo-Persian Oil Company (APOC). At the time, the British government secured 52.5% voting rights over the company and privately reserved the right to change the company’s board of directors. As a result of these changes, Britain successfully secured control over oil supplies for British ships during the world wars (Abdelrehim, Maltby, & Toms 833). By the end of World War II, the Anglo-Iranian Oil Company had six new oil fields near Masjed-e-Suleiman producing more than 357,000 barrels per day. (Abrahamian, 11). Moreover, the AIOC continuously paid heavy sums to the British treasury, with more than 24 million a year in taxes and 92 million in foreign exchange (Abrahamian, 13). Its oil production in Iran was estimated to be the third largest in the world, and by far the largest industrial employer in Iran at the time.

Despite their impressive numbers, the AIOC was routinely criticized by the public due to their covert bookkeeping tactics and evident exploitation of Iranian resources.  By the late 1940s, Iranian critics revealed the AIOC’s generous 170 million payment in British taxes, 115 million in dividends to British shareholders, yet a trivial 105 million payment in Iranian royalties (Abrahamian, 17). Complaints against the AIOC peaked in 1950, when ARAMCO – an American oil company located in the Persian Gulf – agreed to split half its profits with both Kuwait and Saudi Arabia.

Ensuing the rise of anti-Western sentiment, the Iranian majority began to view the AIOC as a controlling apparatus for British imperialism within Iran. Thus, the turbulent years of World War II allowed for the emergence of Mohammad Mossadegh as a national icon and hero.  In response to the growing power of Reza Shah Pahlavi and the strong influence of colonial powers in Iran, Mossadeq formed the National Front – a political coalition consisting of opponents to the Shah. By 1951, his party had won the majority of the seats in Iran’s Parliament (or “Majlis”), and he was soon appointed prime minister of Iran by the Shah. Mossadegh aimed to democratize Iran through the transfer of legislative power from the Shah to the Majlis. As a wealthy landowner and strong nationalist, Mossadegh viewed the AIOC as a test of Iranian sovereignty and feared the Shah would submit to the unfair demands of the West. Having had strong democratic beliefs, he allowed the growth of various political parties, notably Iran’s communist party: Hezb-e-Toudeh.

In an effort to appease Iranian criticism, the AIOC proposed another round of renegotiations with Iran in 1947. The new proposal, named the Supplemental Oil Agreement (SOA) failed ratification by the Majlis, explicitly due to criticism by the Iranian communist party and Mossadegh’s National Front. The unequal distribution of profits combined with the poor treatment of Iranian workers created an obvious foundation for opposition by the parties. Finally, during the Spring of 1951, the Iranian parliament approved Mossadegh’s oil nationalization act, thus ceasing AIOC assets. Great Britain, which quickly boycotted Iranian oil following the nationalization, expanded its attempt to control Iranian oil through the help of its trusted ally: the United States. The growing nationalist sentiment from the Majlis along with the emergent post-war unanimity on decolonisation further aggravated Britain, as they strategized for another surge of British imperialism. In response, Iran dismissed British workers at its Abadan refinery, halted oil exports to Britain, and banned the sailing of Britain-owned oil tankers (Onslow, 5).

The retaliation following Iranian nationalization was primarily conducted through the central British government, and not the AIOC solely. These efforts included but were not limited to: imposing financial blockades to the purchase of Iranian oil, spreading anti-Mossadegh propaganda, withdrawing British engineers from the Abadan refinery and freezing Iranian financial assets within British banks (Israeli, 253).  Additionally, the AIOC and British government refused to recognize the legitimacy of Iranian nationalization. The loss of the AIOC rendered an exponential financial and political loss for Britain, which was further exacerbated by their losses after World War II.

 

Britain, without a doubt, feared that Iranian control over its oil would influence the greater global market price for oil, and therefore concluded that pulling Mossadegh out of power would protect their domestic interest. More importantly, if Britain’s regional power appeared as though it was eroding, the nationalization of the Suez Canal by Nasser could quickly shadow (Onslow 13).  Therefore, The British government and the AIOC utilized three primary means to regain their control over Iran’s natural resource. Gasiorowski argues that this three-track strategy included legal manipulation, undermining Iran through economic sanctions and military power, and the removal of Mossadegh from power (263). The British also engaged with the International Court of Justice in an effort to undermine Mossadegh. The appeal was quickly rejected as the conflict involved Iran – a country – and the AIOC – a corporate entity. The British also went further and attempted to persuade other countries to refrain from purchasing Iranian oil.

However, by 1952, British efforts did not triumph. The pro-Western Shah feared publicly antagonizing his fragile image, hence he did little to outwardly oppose Mossadegh. While U.S. administration under Truman staunchly opposed military intervention, the later election of President Eisenhower in 1952 produced fertile grounds for a U.S.-backed coup to occur. Eisenhower’s campaign was rooted in the growing anti-communist sentiment throughout the West, and Iran’s geopolitical importance further aggravated the growing need for intervention. Additionally, the new administration was well acquainted with the Middle Eastern oil crisis, especially since Secretary of State, John Dulles, and his brother Allen Dulles – director of the CIA – were long-time partners in a “law firm representing AIOC in the United States” (Abrahamian, 197). It wasn’t long before Britain had convinced the U.S. that intervention in Iran would effectively control the expansion of the Soviet Union within the Middle East. The prominence of the Iranian communist party, Tudeh, and its support for Mossadegh further exacerbated Washington’s efforts to protect their Cold War objectives. It is critical to note that British efforts to fiscally weaken Iran at the time had taken a toll on living conditions in Tehran, therefore the Tudeh Party was able to flourish in this weakened economic climate.

In February of 1953, British delegates arrived in Washington for a series of “formal meetings” which included Allen Dulles, then head of the CIA (Heiss, 3). The Dulles Brothers were firm in their warnings of a communist “takeover” within the Middle East, and quickly warned of the “communist challenge in Iran” (248). At the time, the U.S. relied heavily on Britain to exert their influence within the Middle East as the U.S. could not single-handedly “police the globe” (Heiss, 3). The evident overlap of British and American interests quickly actualized, and plans to overthrow Mossadegh were finalized by Churchill and Eisenhower by July of 1953 (Abrahamian, 197). The documents outlining the CIA’s exhaustive plans did not surface until nearly sixty years after the coup. These documents revealed the recruitment of fake protesters in order to drive off Mossadegh and install an American-backed Shah to power (Israeli, 248). They also revealed the extravagant $20 million budget allocated for the covert operation, later named “Operation AJAX” which was finally carried out by the CIA (Kinzer, 210).

The CIA also targeted Ayatollah Kashani, a prominent political figure and ally of Mossadegh. His confidant, Ahmad Aramesh, was given $10,000 by President Esisenhower to turn Kashani against Mosssadegh. The rise of Mossadegh not only threatened the domestic power of the Shah, but also that of the Iranian mullahs and clerics. Hence, Kashani eventually split sides against Mossadegh, creating further political turmoil and signifying the loss of the Islamic clergy support. In fact, newly released documents show Kashani was in close communication with the U.S. before the coup occurred, further indicating the clash of motives among the domestic factions in Iran.

The coup attempt began on August 15 and eventually succeeded on August 19, 1953 (Abrahamian, 210). Through the aid of protestors paid by the CIA, and intense propaganda efforts by the SIS, the coup had succeeded. Mossadegh was shortly imprisoned; peacefully spending the remainder of his life in house arrest and his foreign minister, Hossein Fatemi, faced execution. More importantly, the pro-Western monarchy was restored and the Anglo-Iranian oil company had prevailed. Although latter nationalist opposition left AIOC sharing Iranian oil with other countries, the covert operation had already fanned the flames for a lingering future of anti-Western sentiment within Iran.

 

The spillover effects from the 1953 coup greatly altered Iran in the coming years. Notably, Iran lost a great deal of progress made prior to the coup – progress towards a representative government and away from foreign interference (Gasiorowski, 278). The coup also left the Shah even more determined to fight his opposition. Through the establishment of SAVAK, the Shah’s internal secret police aided by the CIA, and the incessant arrests of ex-Tudeh Party figures, the Shah deliberately limited the Iranian people’s freedom of expression, association and democracy. Britain and the U.S., who had placed the Shah into power, ensured that concessions were provided to the AIOC over the production, refinement and distribution of Iranian oil, and granted AIOC over 40% of shares (Abrahamian, 212). The early corporate ambitions of the AIOC had rendered the corporation as an instrument of British foreign policy. The distorted power dynamic between Iran and the West plus the push against Britain’s imperialistic tendencies intensified Iranian nationalism and Western resentment. This unintended consequence also damaged Western geopolitical interests within the Middle East, and sowed the seeds for the Iranian Islamic revolution in 1979. The period of Mossadegh’s reign is often recalled as the only period in Iranian political history where democratic ideologies and liberalization thrived. Thus, the Iranian people confided in the Islamic revolution’s promises to rid Iran of malign foreign interference and presence.

Historians, such as Abrahamian argue that Iranian oil was the primary cause for the coup, for Britain and the U.S. alike. Should Mossadegh have succeeded in nationalizing the British oil industry, it would set a harmful precedent for imperialistic countries during the post-war era. In juxtaposition to this perspective, other historians argue the political climate of the Cold War and Iran’s strategic geopolitical importance led the U.S. to believe “they had to take whatever steps necessary to prevent Iran from falling into Soviet hands” (Gasiorowski, 274).  Additionally, the prominence of U.S. involvement in the coup significantly shaped the trajectory of future Iran-U.S. relations; from the terrorist attacks on U.S. citizens to the U.S. hostage crisis following the revolution, the central anti-American theme within Iran prevailed for years to come (Gasiorowski, 280). More recently, the strain on Iran-U.S. relations rendered vast tension during the Obama-backed nuclear deal and the consequent economic sanctions by the Trump administration.

 

The legacy left behind by the 1953 coup in Iran had far-reaching consequences for the world of international politics. The United States, which had attempted to maintain an image of liberal democracy, became involved in strikingly similar upheavals for decades to follow. The coup also became a warning for neighboring states of the innumerable dangers and long term repercussions of foreign meddling in a state’s internal affairs. It challenged the very notion of state sovereignty and the right to rule. The presence of the Anglo-Iranian Oil Company, now named British Petroleum (BP) characterizes the overlapping interests of major corporations and governments alike.  While the AIOC played a colossal role in the upheaval, it was also a tool for British imperialistic ambitions and an apparatus for foreign intervention. Further, it stands to showcase how covert actions by the world governments can be a short term and cheap solution to alter the course of world politics in their political (and economic) favour. In the end, however, the overthrow of a democratically elected government cast the darkest shadow on Iran. The overthrow of Mossadegh and the forceful placement of the monarchy subjugated Iranians to dictatorship for several years to follow, and set the stage for the events of the 1979 revolution. I conclude that the 1953 coup should not be overlooked when assessing Iran-U.S. relations within the contemporary age. More importantly, the events of 1953 illustrate the immense power of corporations such as British Petroleum, and the effective utilization of a corporate entity as an apparatus for government’s exercise of power.

 

 

 

 

 

 

 

 

 

 

 

 

 

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