Danial Jarrahi Wrote In a Note To The  International Relations Think Tank: In 1901 the D’Arcy concession gave Britain exclusive rights in Iran (then Persia) for a period of sixty years. British influence in Iran continued to expand, particularly after the 1915 Constantinople Agreement. Iran’s oil supplies became so important that it was estimated in 1951 that their loss would incur Europe an additional dollar oil charge. The U.S. wanted to court Iranian friendship without accepting responsibility for the country. This was reflected in the carefully limited nature of their agreement. Other regions were accorded higher priority and even within the Middle East the Policy Planning Staff ranked Turkey and Greece more important than Iran. The biggest potential problem was to convince the Americans of this, although the initial portents for Britain were unusually favorable. The British government undoubtedly relied upon the Anglo-Persian Oil Company as an agent to protect British oil interests in the Mideast. A.C. Millspaugh deemed it ‘to all intents and purposes as well’. Ambassador John Wiley believed Iran to be vulnerable to Soviet subversion. The British government was determined to maintain its traditional preeminence in Iran. The US was more interested in harnessing Greek and Turkish power to its containment policy. US policymakers deferred primary responsibility for Iran to Britain and accepted that the achievement of their objectives there was closely associated with British fortunes. The U.S. Embassy in Tehran was closed in 1953 after a coup led by Ayatollah Ruhollah Khomeini. Iran’s proven oil reserves are estimated to hold at least 95 billion barrels. Oil has made the region strategically important for those countries which demand energy and power more than the others. After Second World War, UK and America as super powers countries got the entire revenue of oil in the Middle East by means of establishing companies under the name of Anglo-Persian and American Oil Companies. UK intervened in internal political matters of Iran and was attempted to keep down Iran in the field economy and decision making over the crucial matters, writes Alireza Nader. He says Iran challenges the global hegemony of the United States; are its possession of excellent natural resources. The size of Iran’s underlying reserves, or ‘oil-in-place,’ could well be significantly larger, says Nader. Britain had first competed with Russia for influence in the region. Developed a network of defensive treaties with Transjordan, Iraq, and Egypt. After World War II its interests in the Middle East were accorded ever-greater importance. Loss of Greece, and especially the ‘loss’ of India, did not appear to have influenced strategic thinking. Britain’s leaders readily concurred that ‘in peace and in war [it] is an area of cardinal importance to the United Kingdom. 

Written by: Danial Jarrahi  British Studies MA Student, Faculty of World Studies (FWS), University of Tehran

IRTT: Are you interested in British-American roles in the Middle East during the history to the current time? In this essay you can find that a brief history of British-American Relations in the Middle East after Second World War to contemporary times over the oil crisis. Initially, providing some significant headlines of the whole essay will conduct you what the content is.

A while after the Second World War crises oil happened in 1973; when the Arab members of OPEC decided to increase the price of oil dramatically. The US, Britain and also the other major countries which consumed half of oil of region such as Japan and Western Europe faced serious predicament in terms of economy in the field of oil energy. In hence, the Britain and other capitalist countries such as America made a special policy to overcome the oil crisis which you will read in the body of this essay.

When the Churchill got the power as the prime mister, the Britain has many problems in the field of balancing the payments crisis, trading with communists and the main concern of British authorities was the nationalization of many Anglo-Iranian oil companies which led by Mosadegq, the Iranian leader. This movement attempted to seize control the oil industry of Iran in order to prevent the intervention of strong countries such as Britain and America.

The Important Questions of This Essay and the Hypothesis

At end of this essay you have a brief perception regarding the significant incident after the Second World War at the times of oil crisis. You will find that how the oil crisis led to powerful countries like United State and United Kingdom face economic recession? Why and how Mohammad Mosaddeq, the prime minister of Iran ran Nationalization of the Iranian oil industry movement? We think those days the oil was a crucial energy in the world. Some powerful countries which has consumed half the oil of Middle East tried to colonized or meddled in the Arab countries and also Iran which are the owner of huge resources of oil in the world. So their foreign policy generated based on intervention and colonization the rich countries in terms of natural resources. In 1951 the movement of Nationalization of the Iranian oil industry happened due to the country wanted to being independent in extraction and the revenue of Iran’s oil. Those days Britain and America used Iran’s oil resource to enhance and develop their country in terms of economy and power in the region. The Anglo-Persian oil companied increased the price of oil and announced the oil is national and the revenue of that must spend in the country for economic activities and social welfare.

Variables

In this research the important variables are British and American Foreign policy in the Middle East, the importance of Oil in the Middle East, oil crisis after Second World War to 1979. These variable formed this research to show the British-American relations in the Middle-East in post-II WW over the oil crisis. The approach of this research is under the liberalism construction.

Theoretical Frame Work  

Liberalism adds values into the equation.  It is often called idealism. It is a state level theory which argues that there is a lot of cooperation in the world, not just rivalry. States don’t just compete or worry about power.  States try to build a more just world order.  They often do so because they have learned that in many instances cooperation is a better strategy that conflict.  States try to create enforceable international law. States are progressive forces for social justice.  Liberalism might look at the cold war and examine the different values of the US and USSR and point out the repressive and murderous nature of the Soviet state as the key to the US and USSR animosity.  It also might look at the decades-worth of US-USSR cooperation in the midst of the cold war (arms control, the lack of direct conflict). (Newmann)

Neo-liberalism is an offshoot of liberalism. It is a system level version of liberalism and focuses on the way in which institutions can influence the behavior of states by spreading values or creating rule-based behavior.  Neo-liberals might focus on the role of the United Nations or World Trade Organization in shaping the foreign policy behavior of states.  Neo-liberals might look at the cold war and suggest ways to fix the UN to make it more effective. (Newmann)

Methodology

The topic of this research has historical resources and background. Hence, the researcher decided to choose “documentary method” as the methodology of this article. Moreover, documentary-methods are the techniques used to categorize, investigate, interpret and identify the limitations of physical sources, most commonly written documents, whether in the private or public domain (personal papers, books, commercial records, or state archives, communications or legislation).

1. Britain, America and Iran Relations

Those of their global and Middle Eastern relations have been supplemented by the general contours of Anglo-American relations in Iran. That being said, an especially strong British interest in the nation and an initial American disinterest in Iran added variables, following the Iranian crisis during 1946 forcing the first US stand against the Soviets. Regarding the relations of these countries, some values were significant which will be mentioned respectively. First, British interest had been established during the nineteenth and early twentieth centuries when Iran was a source of oil in the region. Second, in 1901 the D’Arcy concession gave Britain exclusive rights in Iran (then Persia) for a period of sixty years. Third, in 1909, the Anglo-Persian Oil Company (APOC) was founded. British influence in Iran continued to expand, particularly after the 1915 Constantinople Agreement and reduced Russian interest in Iran following the Bolshevik revolution. Britain accorded Iran even greater significance in the aftermath of World War II. Forth, Iranian oil supplies became so important that it was estimated in 1951 that their loss would incur Europe an additional dollar oil charge. Fifth, Britain would lose vital dollars and soft currencies derived from Iranian oil. It would also lose its enormous investment in Iran. Control over Iranian oil was of major strategic importance and a source of prestige. Sixth, the Abadan refinery was ‘one of the greatest and most complex industrial undertakings in the world’ Many people believed also that the AIOC was an instrument of British policy towards Iran. Seventh, the government undoubtedly relied upon it as an agent to protect British oil interests in the Middle East. A.C. Millspaugh deemed it ‘to all intents and purposes as well. Eighth, Iran, and control over its oil reserves, assumed major importance within British plans to secure the Middle East as bastion of power. Ninth, the biggest potential problem was to convince the Americans of this, although the initial portents for Britain were unusually favorable. Other regions were accorded higher priority and even within the Middle East the Policy Planning Staff ranked Turkey and Greece more important than Iran. Tenth, The U.S. wanted to court Iranian friendship without accepting responsibility for the country. This was reflected in the carefully limited nature of their agreement. Eleventh, American reports also saw Iran’s economy as backward but ‘not in a state of crisis, being probably about as stable as at any period in recent years. Twelfth, Ambassador John Wiley believed Iran to be vulnerable to Soviet subversion. He sharply criticized US failure to provide resources to combat the communist threat. Thirteenth, In March 1949 he warned that’ A carefully engineered coup in the North of Iran might go down even more smoothly than the business of the Sudeten Germans’ State Department officials, though, dismissed his warnings. Fourteenth, The British government was determined to maintain its traditional preeminence in Iran and the AIOC’s monopoly on Iranian oil. This meant protecting its territorial integrity vis-à-vis the Soviet Union and promoting stable pro-Western Iranian leadership. The US was more interested in harnessing Greek and Turkish power to its containment policy. Fifteenth, US policymakers deferred primary responsibility for Iran to Britain and accepted that the achievement of their objectives there was closely associated with British fortunes. In 1947 the then US Ambassador to Iran, George V. Allen, defended the AIOC before Iranian authorities. (Marsh, Anglo American Relations and cold war oil, Crisis In Iran, chapter 1 page 29, 2003)

It is important to say that Iran is a crucial resource for Britain and America region. Bear in mind that oil has made the region strategically important for those countries which demand energy and power more than the others. The powerful countries in the world were looking for cheap and available energy resources in the Middle East. As we all know that oil is one of them that is why the countries attempted in the course of history to control the power of countries in the Middle East. After Second World War, UK and America as super powers countries got the entire revenue of oil in the Middle East by means of establishing companies under the name of Anglo-Persian and American Oil Companies. In terms bilateral relations between Iran and UK, in most of the time UK intervened in the internal political matters of Iran and was attempted to keep down Iran in the field economy and decision making over the crucial matters. In terms of economy, those days Iran has not independency and the big scale of the oil revenue of Iran was owed to Britain and UK. This reason led to some politicians in addition to Shah, decided to increase the price of petroleum while OPEC started its work with aims of secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry. One of the two origins from which Iran challenges the global hegemony of the United States; are its possession of excellent natural resources. Undoubtedly, its proven oil reserves are large and generally estimated to hold at least 95 billion barrels, which means which only Saudi Arabia, whose deposits are estimated to contain 260 billion barrels, Canada’s 170 billion barrels, and then maybe Iraq’s, which are estimated to contain around 115 billion barrels, are outsized. In addition, like many other countries, the size of Iran’s underlying reserves, or ‘oil-in-place,’ could well be significantly larger, as most experts feel confident that there are many more undiscovered deposits, particularly in Caspian waters.

Britain had first competed with Russia for influence in the region, and developed in the process a network of defensive treaties with Transjordan, Iraq, and Egypt. After World War II its interests in the Middle East were accorded ever-greater importance. For a nation imbued with a tradition of empire, the setbacks of the war, withdrawal from Greece, and especially the ‘loss’ of India had been bitter pills to swallow. Constrained in Europe and with a diminished role in the Far East, Britain made the Middle East the focus of its attempts to maintain great-power status. The war did not have the same disruptive effect on British influence in the Middle East as in the Far Eastern colonies. Even the ‘loss’ of India, as Darby has observed, does not appear to have influenced strategic thinking significantly, especially as a complacent belief in ultimate Indian cooperation lingered in the corridors of Whitehall. British prestige demanded that, as far as possible, traditional control over the Middle East be maintained, and Britain’s leaders readily concurred that ‘in peace and in war [it] is an area of cardinal importance to the United Kingdom’. (Marsh, The Special Relationship and the Anglo-Iranian oil crisis , 2000)

2. Foreign Exchange Earnings from Oil

In north Tehran the signs of an affluent and fast growing middle class are unmistakable. Large, flashy and expensive Land cruisers glide up and down the highway, while along the streets walk well-dressed young people. This was certainly not how I had imagined the capital of the Islamic Republic of Iran to be. Iran has made vast earnings from the sale of oil. Proceeds initially fall only into governmental bands. But they can easily be circulated more widely in Iranian Society when they are Spent on or allocated to particular projects. Iran’s output of oil had been hit very hard by the long and protracted war with Saddam Hussein in the 1980s. Iran was forced to lower its oil prices in a bid to boost exports. In 1988 the shrinkage of national income forced Ayatollah Khomeini to strike a ceasefire with Iraq. Iran still managed to produce a daily average of about 2 million barrels during the conflict. After the end of the eight-year war, both oil production and its export increased in Iran. Annual revenues from its sale averaged more than $19 billion in the period 1990to 1996. By 1997, independent analysts were openly warning that the price of a barrel could fall to just $15. By June the following year market prices had hit a new ten year low, and at one point Iranian crude was traded at just $9.50. (Howard, 2007)

Prices jumped to $17.98 in 1999 and then again to $2824 in the course of the following year. The causes of such a dramatic transformation were complex. The problem may have also been aggravated by a drop in American refining capacity over the preceding 20 years. As President Bush has put it, ‘a single accident, a single shutdown, can send the price of gasoline and heating oil spiraling all over the country’ The major reason for the dramatic increase in oil prices is lack of refining capacity in the U.S. in the late 1990s and early 2000s. Oil prices dropped further in early 2002 before reversing course once again and ending the year sharply higher. Price of a barrel of (OPEC basket’ crude rose from a low of $18.51 in early February 2002 to a new high of $30.50 in late December. This happened despite 3″ atmosphere 0f Political uncertainty over the Middle East that had been created 91′ the attacks on the World Trade Center. (Howard, 2007)

There was political turmoil in some of the more unstable oil-producing countries, notably Venezuela and Iraq. Venezuelan output suffered at the hands of industrial disputes within the state-owned oil company. Oil traders and consumers had many good reasons to feel concerned about Iraq’s supply of oil. There was also concern that a US invasion of Iraq could provoke unrest or terrorism in other Muslim countries, writes John Defterios. The latest upsurge in oil prices was caused by the usual suspects, Defterio says. (Howard, 2007)

3. Mohammad Musaddiq takes on Anglo-American Oil

In 1950s Britain regrouped around the more profitable empire of world oil and strategic raw material control. Egypt and the Suez Canal, through which the bulk of Middle East oil flowed into Europe, became a strategic priority. Maintaining British interests in the oil-producing Middle East Gulf states, especially Iran. Britain tried to gain monopoly of Persian oil rights at the time of William Knox d’Arcy in 1901–02. Persuaded Russia to join forces in invading Iran on flimsy pretext of German engineers in neutral territory. Tens of thousands of Iranians died of hunger while 100,000 Russian and 70,000 British and Indian troops were given priority in supplies. Diversion of supplies along the Iranian railroad to carry Anglo-American lend-lease goods to Russia during the winter of 1944 to 1945 killed thousands more. (F.William Engdahl, 2004)

In 1942 an American military officer, General M. Norman Schwarzkopf, went to Iran to train the national police force. SchwarzKopf and his Iranian army contacts were later to prove crucial in the toppling of Iran’s nationalist Premier Musaddiq. Russia demanded an extensive exclusive oil concession in the northern part of Iran bordering Azerbaijan. Britain demanded further concession for the government-linked Royal Dutch Shell. Musaddiq introduced a bill in the Iranian parliament which would prohibit oil negotiations with foreign countries. (F.William Engdahl, 2004)

By 1948, Iran had finally succeeded in forcing a withdrawal of foreign troops from her soil. But the country and its economy were still under the effective control of the British government. Iran’s southern region contained the richest oil province then known in the entire world. After the Second World War, with the anticolonial movement emerging from India across Africa into Asia, Iran would no longer tolerate such an abrogation of its national sovereignty. Iran cited the case of Venezuela, where the American Standard Oil companies had agreed on a 50–50 split with the government of Venezuela. Iran had calculated that in 1948 on its production of 23 million tons of Iranian oil, the Anglo-Iranian Oil Co. made a profit of $320,000,000. The government of Iran suggested in light of the data presented, the original concession be renegotiated. This suggestion was not greeted with joy in London. BBC radio began broadcasting faked news accounts designed to embarrass the Iranian government. (F.William Engdahl, 2004)

The talks about altering the Anglo-Iranian agreement dragged on through 1949 without significant concession from the British side. Musaddiq and his small National Front party campaigned on the issue of the oil negotiation. Iran had asked for a 50–50 split of the profits as well as for Iranian participation in the management of Anglo Iranian Oil Co. Iranian Parliament voted to nationalize the Anglo-Iranian Oil Company in 1951. Britain promptly threatened retaliation and within days British naval forces arrived near Abadan. Abadan was the site of the world’s largest oil refinery, part of Anglo- Iranian Oil Co. British Foreign Office had refused to intervene into negotiations between Anglo- Iranian and Iran, claiming it would not interfere in the affairs of a private company. Iran was fully within her legal rights to nationalize a company on her territory so long as she offered just compensation. Musaddiq’s government had done. Iran would guarantee to Britain the same level of oil supply she had enjoyed before nationalization. (F.William Engdahl, 2004)

By September 1951, Britain had declared full economic sanctions against Iran, including an embargo against Iranian oil shipments. British warships were stationed just outside Iranian coastal waters and land and air forces were dispatched to Basrah in British-controlled Iraq. British secret intelligence bribed informants within the Iranian central bank, Bank Melli, to gain a minute-by-minute reading of the exact effect of their economic sanctions. Oil revenues in Iran plummeted from $400 million in 1950 to less than $2 million between 1951 and the fall of Musaddiq. Oil revenues fell as a major source of the country’s export earnings. Anglo-Iranian Oil Co. and the British refused to sign any compensation agreement. Musaddiq went to the United States in person that September to address the UN Security Council. U.S. ‘mediator’ W. Averill Harriman had gone to Iran accompanied by a delegation packed with people tied to Big Oil interests. When Musaddiq goes to Washington, the only suggestion he heard from the State Department was to appoint Royal Dutch Shell as Iran’s management company. (F.William Engdahl, 2004)

Musaddiq was educated in law in Belgium and Switzerland. He argued Iran’s case at the World Court, which denied Britain jurisdiction in the case. There were few, if any, leaders of small nations with Musaddiq’s courage, who, watching their country suffer under a massive financial and economic blockade imposed by Britain, and now the United States, would say to Truman and Churchill, ‘No’.  Eisenhower turned down Musaddiq’s request for economic aid in 1953. CIA director Allen Dulles met with the US ambassador to Tehran, Loy Henderson, and the Shah’s sister in Switzerland. Gen. Norman Schwarzkopf, Sr. arrived in Tehran to see ‘old friends’ after a 30-year absence. He was close to the Shah and key army generals. With the aid of royalist elements in the Iranian armed forces, British and American intelligence staged a coup and forced Musaddiq’s arrest. Britain’s Secret Intelligence Services had convinced the CIA’s Allen Dulles and his brother, Secretary of State John Foster Dulles, to stage the coup. (F.William Engdahl, 2004)

CIA, under code name AJAX, cooperated fully with British SIS in overthrow of Mohammed Musaddiq in August 1953. The young Reza Shah Pahlevi was backed by the Anglo-Americans as opposition. Shah returned, and economic sanctions were lifted. British and U.S. intelligence services used tactic of painting opponents of policy initiatives as communist or ‘communist-leaning’ Musaddiq was to become known in Western accounts as an irresponsible wild radical who was working with communists. This was the tactic used by London and by Washington all too often during the postwar decades. (F.William Engdahl, 2004)

4. Anglo-Iranian Oil and Anglo-American Policy Toward Iran

Iran re-examined the oil concession granted to the AIOC in 1933. The British and American governments largely monitored the situation and agreed that it was a commercial dispute to be settled. The US came to share British recognition of a vital security interest in the Eastern Mediterranean and the Middle East. The region could provide offensive and reserve defense bases. More importantly, its enormous oil reserves had to be denied to the Soviets. In 1950 the US Bureau of Near Eastern and African affairs concluded that access to the Persian Gulf was a historic Soviet objective. Iran was most significant for its oil, albeit it later gained prominence also within ideas of a Northern Tier for Middle Eastern defense. Iran’s oil production subsequently soared from16.8 million tons in 1945 to 31.75 million tons by 1950. In the event of their loss, Europe was liable to incur an additional dollar oil charge of $700,000,000. Britain would suffer disproportionately because of its extraordinary dependence on overseas trade. (Marsh, Anglo-American Crude Diplomacy:, March 2007 )

Iranian oil supplies were the lifeblood of the British economy and a major source of soft currency generation and tax revenue for the British government. The British government was, in fact, the majority shareholder in the AIOC – a situation that dated back to 1914. In 1951 Foreign Secretary Herbert Morrison declared that Britain’s ‘primary objective must be to ensure that effective control of oil operations in Persia remain with the Company’ The Abadan oil refinery, located on an island at the confluence of the Euphrates and Tigris rivers was a high profile source of British prestige. The foremost considerations underpinning Anglo-American interest in Iran were protecting Iranian oil and safeguarding the AIOC. Cold War concerns began to overlay the commercial dispute, especially on the American side. Iran’s economic weakness and vulnerability to communist subversion was seen as the principal threat to maintaining the country and its oil reserves within the western orbit. (Marsh, Anglo-American Crude Diplomacy:, March 2007 )

British analyses were less alarmist but agreed that Iran’s economic fortunes needed improvement. US policymakers feared that this would both simply be squandered by Iranian economic mismanagement and cause great tension with the British. Truman administration saw little prospect of Congress approving large-scale aid while Iran potentially had the solution to its problems. This put the onus squarely on finding an oil settlement that improved revenues for the Iranian government and kept Iranian oil flowing to the West. American frustration with British refusal to make timely concessions to secure an oil settlement was substantial. But just how much the US could ask Britain and the AIOC to concede to Iran was limited by the concerns of the international oil industry and of governments for the stability of oil concessions elsewhere. To do so would open a Pandora’s Box of claims and counterclaims that would be extremely expensive to the oil majors and destabilizing for the world oil market. Even the US government eventually recognized the limits that these considerations imposed upon what could be squeezed out of the AIOC. The ARAMCO deal effectively set the benchmark for a settlement in Iran, which was reflected in the AIOC’s hasty sweetening of the Supplemental Oil Agreement. (Marsh, Anglo-American Crude Diplomacy:, March 2007 )

In Iran where the British remained the most important outside power the situation deteriorated. In other countries of the Middle East the Americans were offering a “half-and-half’ share of profits between themselves and the host governments. In Iran the government did not even have the right to inspect the books of the British concession, by then renamed the Anglo-Iranian Oil Company (AIOC). Oil revenues were paid in pounds sterling, but the amount was fixed. Because oil prices rose about threefold between 1933 and the 1950s, Iranian revenues declined as a percentage of the total earnings. The net profits of the AIOC between 1945 and 1950 were almost three times the royalties paid to Iran. The inflation of the pound also hurt Iran’s real income. Further, Iranians were not being trained for managerial or skilled positions in the oil fields. (Sorby, 2001)

In the face of the rising anti-British agitation the terms of the 1933 oil agreement had to be changed, and the AIOC acknowledged this. Talks were opened with Teheran in 1947, and while the government concluded a new arrangement, it failed to satisfy the Iranian parliament (majlis). Consequently elections for a new assembly brought a coalition of nationalists to power, and in March 1951 the parliament voted in favour of nationalizing the oil industry. Massive demonstrations indicated widespread support for such action.67 Then Muhammad Musaddiq became prime minister, against the wishes of the Shah. (Sorby, 2001)

5. Iran: Britain Loses Control over its Jewel in the Middle East

Iran nationalized the Anglo-Iranian Oil Company (AIOC) in 1951. AIOC was Britain’s largest overseas investment, and the company’s refinery in Abadan was the largest oil refinery in the world. Iran was excluded from all top level positions in the company, and Iran had to pay more for its own oil than the British did. It would have been cheaper for Iran to import oil from the Soviet Union than use its own domestically produced oil. Truman and Acheson believed that the British approach was outdated, and that social change in the third world was inevitable. Eisenhower administration believed Mossadeqh was the only bulwark left in Iran to prevent the country from falling prey to the Soviets. U.S. pried the door of the British oil monopoly open and gained access for American oil companies to Iran. Truman’s ‘lame duck’ status prevented any serious efforts to that effect, however, and Mossadekh was eventually removed. The situation in Iran closely resembled the situation in Egypt. In both countries the United States supported nationalist leaders who were in conflict with the British, but Nasser skilfully gained American support. (Tore T, 2000)

The Anglo-American disagreement over Iran was in the future, at this time, and shortly after taking office, Eisenhower was far more interested in coordinating American policies with Britain. To break the deadlock, the United States and Britain put forward new proposals to Mossadeqh on 20 February 1953, to settle the dispute through the International Court of Justice. Unfortunately, as soon as he received the February 20 proposals, Mossadekh indicated that he probably would reject them, and he finally did so on 20 March 1953, after many twists and turns. Eden visited Washington for nine days in early March 1953. Eisenhower and Dulles feared losing Iran to the Soviet bloc. The U.S. wanted to extend aid to Iran to keep it afloat and to avoid a communist takeover. Eden had no objections to aid for Iran, but protested when he learned the U. S. wanted technicians. (Tore T, 2000)

Eisenhower and Dulles only reluctantly agreed with Eden, and still differed with him over Mossadeqh. Eden had suggested that they search for alternatives to the latter, rather than attempting to buy him off. Although there was a general Anglo-American agreement on Iran, Eden was not entirely pleased with the discussions. He reported his conclusions to Churchill:

“The difficulty in this situation is that the Americans are perpetually eager to do something. The President repeated this several times. I reminded him that in response to American pressure, we had modified our terms over and over again for an Iranian settlement. For my part, I had many times felt in the last two years that if we could stay put for a while, the chances of settlement would be improved”. (Tore T, 2000)

For the Americans, Iran was considerably more than a mere business problem. It was vital to prevent Soviet expansion into Iran because of its key strategic location and large petroleum resources. A ‘loss’ of Iran might well mean a major Soviet threat to the remainder of the Middle East, including India and Pakistan. The United States made one last attempt to solve the dead-locked Anglo-Iranian negotiations, and proposed that the major American oil companies should buy out AIOC. The offer was bluntly rejected by the British, who were not about to give up their monopoly of the largest oil concession in the Mideast to their strongest competitors. Negotiations remained in a limbo for several months. The United States did not take any new initiatives, and neither Britain nor Iran made further concessions. U.S. continued to strengthen its hand in Iran through the large number of Americans administering the aid given to Iran. American advisers were engaged in programmes to increase wheat production, to train teachers, to build textile mills. In addition, the United States provided $22m annually, in financial aid, which, according to a historian of Iran ‘would continue only to prevent Iran’s complete collapse by assuring that military and bureaucratic salaries were paid’. (Tore T, 2000)

The American ambassadors to Iran and Britain disagreed on the extent to which American aid should be given to Iran. Loy Henderson argued that it would only strengthen the American position in Iran. Mossadeqh had become more and more dictatorial and inflexible in the oil negotiations. The United States had but little choice but to overthrow him. With the use of CIA operatives, the British intelligence network in Iran, and the support of disgruntled Iranians and the Shah, the coup was successfully carried out on 22 August 1953. The U.S. government was forced to maintain a difficult balancing act between her European allies and the Middle East nations. The decision to overthrow Mossadequh was made when Henderson returned home for consultations in late June 1953. (Tore T, 2000)

Herbert Hoover, Jr, oilman and son of the former President, was appointed as America’s chief negotiator on the Iranian oil problem. Hoover restored lost revenue to Iran by getting its oil production started up again, thus preventing further chaos and a possible communist coup. Hoover was able to fuse an agreement between the major oil companies in the Middle East to cut back production elsewhere to make room for Iranian oil, preventing price wars and loss of market share. To gain the participation of American oil companies. in the consortium, the administration granted them immunity from anti-trust prosecution. The U.S. extended $45m to tie Iran over the crisis, but at the same time made clear that future assistance depended on settlement of the oil dispute, writes Peter Bergen. The problems over Iran would severely strain the Anglo-American alliance, he writes. But the first problem facing the United States after the coup was an Iran close to bankruptcy. (Tore T, 2000)

The British had no objections to the United States extending interim emergency aid to Iran, as Aldrich cabled Dulles, in order to ensure its survival. The British, while anxious for American participation in the upcoming negotiations, wanted the U.S. to adhere to the February proposals. They were not willing to consider any changes, only to modify proposals as a form of window dressing. Britain could not afford to pay dollars for Iranian oil or to worsen its balance of payments position by buying Iranian oil above market prices. The United States wanted to retain Iran in the Western camp, but believed that reparation payments from Iran could complicate the task by alienating the Iranians. The American oil companies feared that, if adopted, the Feburary proposals would create a wave of oil nationalization around the world. (Tore T, 2000)

Henderson claimed that if the British received more than a 51 per cent share of the consortium, it would cause the Shah to fall. Henderson was not willing to recommend to American oil companies to invest in a consortium where AIOC held majority position. Hoover also hinted to the British that he might go back to Teheran to see if the Iranians showed greater flexibility than the politicians in London. Eden expressed strong misgivings about Hoover returning to Tehran before Britain had re-established relations with Iran. He was motivated by the fear that Hoover’s presence would encourage the Iranians to postpone the resumption of diplomatic relations. (Tore T, 2000)

Britain was now willing to coordinate its policies with the United States. He had previously discussed with Eisenhower the need to reach an agreement on British participation in a consortium. Hoover had received a broad mandate when appointed, including the power to find a way to provide the Shah with revenues. The logical solution was to bring Iranian oil back on the world market again. Getting AIOC and the British to accept the idea of a consortium was only the first step toward an acceptable solution for the U.S., Hoover says. The situation called for cooperation from the industry because oil production had to be cut elsewhere in order to make room in the market for Iranian oil, he says. (Tore T, 2000)

After Mossadeqh was ousted, the British approached the U.S. hoping to restart talks about a joint Anglo-American oil policy. They argued that their main concern was not to protect British investments, but to assure a free and uninterrupted flow of oil to Europe. The State Department was well aware that Britain was under pressure from American oil companies and Middle East nationalists. There was therefore little enthusiasm on the American side for a coordinated Anglo- American oil policy, and after several off-and-on sessions, the discussions fizzled out. (Tore T, 2000)

The end of the Iranian crisis was a significant triumph for American diplomacy. American pressure reduced AIOC’s share of the consortium to only 40 per cent. The British were forced to accept less in compensation from the other consortium members and Iran than they had bargained for. Britain now had to be content with being junior partner in Iran to the United States. Thereafter the U.S. would merely inform Britain with regard to its policies towards Iran, no longer finding it necessary to consult her. The deal was reached in September 1953. Hoover put forward his proposals for a solution to the Iranian problem in a speech in Washington on October 6, 1953. The proposal was put forward by President Dwight D. Eisenhower on October 7, 1953, and approved by President Richard Nixon on October 8. (Tore T, 2000)

6. Mohammad Musaddiq and Oil Nationalization

Musaddiq‘s political attitude and practice were entirely consistent with these fundamental principles. He opposed the 1919 Agreement and the granting of an oil concession to the Soviet Union, and nationalized Iranian oil expressly in order to guarantee Iran’s ‘freedom and independence’. He opposed Rem Shah’s dictatorship and his successor’s attempts to do the same whenever he could, fought against election rigging and other encroachments on the rights of the people, and against financial privilege and bureaucratic Corruption, and defended democracy and extended it further through progressive legislation in the brief period when he was prime minister. He supported the adaptation of modern ideas and techniques, but opposed romantic emulations which went against what he himself described as Iran’s cultural identity (iraniyat). He wanted ‘freedom and independence’, the rule of law, democracy, and modernization based on cultural realism and the people’s consent. (Katouzian, 1990)

7. Iran and American Hostility

The American intervention of August 1953 was the momentous event in the history of Iranian-American relations, which were damaged for the next 25 years; following the revolution of 1987 to 1989, American’s trouble relations with Islamic republic of Iran turned into open hostility. From the Iranian perspective, in manner which the United States choose to intervene in their internal affairs was at least as reprehensible as the decision to intervene itself. The fact that the CIA joined hands with interventionist England in coordinating the activities of Royal Iranian and distributing money to hired demonstrators was a matter discussed and condemned by Iranian citizens for years after forwards. This was recalled in the anti-American chants and speeches heard during the revolution in the late 1970s. Over the years following after the fall of Musaddiq, the word CIA became the most pejorative political term in the vocabulary of Iranian nationalist. (James A.Bill and WM.Roger Louis, 1988)

Conclusion

The study attempted to reassess the importance of oil in politics and economics, why Iran is an important country in the Middle East and how the nationalization of oil happened in Iran. Furthermore, the research provides a brief analysis of the impact of oil nationalization and a democratic approach to the system. Based on the delivered parts in the study, the hypothesis of the article and also the questions which are “how the oil crisis led to powerful countries like United State and the United Kingdom face economic recession?” and “Why and how Mohammad Musaddiq, the prime minister of Iran ran Nationalization of the Iranian oil industry movement?” were elaborated, ratified and answered its questions. In this article the case study method is “how oil is important” the methodology of this article is “documentary method” to examine the importance of Iran resources in the Middle East and how after Second World War Britain and America lose its natural resources of Iran.

Egypt and the Suez Canal, through which the bulk of Middle East oil flowed into Europe, became a strategic priority. Maintaining British interests in the oil-producing Middle East Gulf states, especially Iran. Persuaded Russia to join forces in invading Iran on the flimsy pretext of German engineers in neutral territory. Tens of thousands of Iranians died of hunger while 100,000 Russian and 70,000 British and Indian troops were given priority in supplies. In Iran, the government did not even have the right to inspect the books of the British concession. Oil revenues were paid in pounds sterling, but the amount was fixed. Net profits of the AIOC between 1945 and 1950 were almost three times the royalties paid to Iran. Iranians were not being trained for managerial or skilled positions in the oil fields.

In a world dominated by imperial forces, ravaged by wartime inflation, and economically divided, Mohammad Reza Shah took the throne. Nevertheless, paradoxically, the war and occupation brought a greater degree of economic activity, freedom of the press, and political tolerance than was possible under Reza Shah. In this time, several political parties, including the pro-British National Will and the pro-Soviet Tūdeh (“Masses”) parties, were created. These, along with a fledgeling trade union movement, contested the influence of the young shah, who did not exercise his father’s full authority. At the same time, Reza Shah’s abdication had bolstered conservative clerical factions, which had chafed under the secularization policy of that leader.

After the war, under Mohammad Mosaddegh, a career politician and lawyer who sought to limit the forces of the king and the clergy in Iran, a loose alliance of nationalists, clerics, and non-communist left-wing groups, known as the National Front, coalesced. Most notably, the National Front, upset by years of foreign manipulation, sought to reclaim control of Iran’s natural resources, and he quickly nationalized the country’s oil industries when Mosaddegh became prime minister in 1951. Britain, the principal benefactor of Iran’s oil concessions, placed an economic embargo on Iran and asked the International Court of Justice to consider the matter. Mosaddegh was under both domestic and foreign scrutiny despite this obvious success. British politicians Winston Churchill and Anthony Eden lobbied for the ousting of Mosaddegh by a joint U.S.-British coup and the election of Pres. In November 1952, in the United States, Dwight D. Eisenhower assisted those within the U.S. The Central Intelligence Agency (CIA), which wanted to support such an operation.

The thing which the world should remember is, after the Second World War the only country that didn’t damage and destroy as much as the others were United State America. Some scholar said the reason for that is because America was far from the war. Due to this reason America could impose political and economic power to the Middle-East especially Iran. As far as the evidence shows UK and US support each other in many cases and the researcher thinks that the UK implemented its dark and brutal policies by mean of America over the Iran activities in the region.

According to the neo-liberalism theoretical framework of the article. Iran after the nationalization of Oil and independent from the UK and US in terms of Oil refining it couldn’t implement the approach of independence completely. According to history, the relations of the US and Iran ran into the tunnel of hostility. According to the neo-liberalism approach which supported international organizations and the free market, Iran must join some of these organizations to empower itself toward America. At this circumstance, Iran is torturing from isolation from the world in the field of economics which is the result of the extremist approach to controlling the country. While Iran nationalized its oil and even the industry, it cannot sell its product officially in the free market due to not joining the FATF (Financial Action Task Force) and CFT (Combating the Financing of Terrorism) conventions In hence, Iran colonizes and ruin itself literally rather than the UK or US do it and also scarify its legitimacy and power in international and national societies.