Notes on Iran III

Of a vexed relationship

Notes on Iran III

“During its first few years in existence,” Stephen Kinzer tells us “Anglo-Persian drilled scores of wells, laid more than a hundred miles of pipeline, and extracted millions of barrels of oil. It established a network of filling stations throughout the United Kingdom and sold oil to countries across Europe and as far away as Australia. Most impressive of all, it began construction of what would for half a century be the world’s largest oil refinery on the desert island of Abadan in the Persian Gulf.”

“Before long, Abadan was a bustling city with more than one hundred thousand residents, most of them Iranian laborers. From its private Persian Club, where uniformed waiters served British executives, to the tight-packed Iranian workers’ quarters and the water fountains marked ‘Not for Iranians,’ it was a classic colonial enclave. Almost all of the technicians and administrators were British, and many enjoyed handsome homes with terraces and manicured lawns. For them and their families, Abadan was an idyllic place.”

“Life was much different for the tens of thousands of Iranian laborers. They lived in slums and long dormitories with only primitive sanitation. Shops, cinemas, buses, and other amenities were off limits to them. With their British employers, however, they shared life amid networks of giant pipes, beneath cavernous holding tanks, and in the shadow of towering smokestacks from which plumes of flame leapt up day and night. The air was heavy with sulfur fumes, a constant reminder of the vast wealth that was pouring from Iranian soil into Anglo-Persian’s coffers.”

“Oil could have made Qajar kings rich and powerful. They did not have the resources to find or exploit their deposits without foreign help, but with more foresight they could have struck a far better deal with their British partners. Instead they sold their birthright for a pittance. Iran’s royalty payment for 1920, set according to the concession agreement at 16 percent of the company’s net profit, was £47,000. Ahmad Shah considered it manna from heaven, but it was a small sum compared to what was pouring into the oil company’s coffers.”

“The next year brought the fall of Qajar power and the rise of Reza Khan. As Reza consolidated his rule over Iran, he cast a scornful eye on Anglo-Persian and the D’Arcy concession that was its central asset. The company’s profits were reaching astronomical levels, the means by which it calculated Iran’s 16-percent royalty were becoming more questionable, and the gap between the living conditions of its British and Iranian employees widened steadily. In 1928 Reza, who was by then Reza Shah, directed his ministers to seek a new and more equitable accord with the company. The British did not take him seriously. For four years they turned aside his demands with a combination of refusals and delays. While he stewed, the worldwide depression spread and the royalties Anglo-Persian paid to Iran began to shrink. Finally, and inevitably, Reza Shah exploded in anger. At a cabinet meeting on November 26, 1932, he cursed his ministers for their failure and then demanded to be shown the file of documents covering the four years of talks. When it was brought to him, he cursed some more and then threw the entire file into a blazing stove. The next day, he notified Anglo-Persian that he had canceled the D’Arcy concession.”

“This act, if allowed to stand, would have meant the end of Anglo-Persian’s operations in Iran and, in effect, the death of the company.”

“Sir John Cadman, Anglo-Persian’s chairman, realized that he had to negotiate directly with Reza Shah, whose coronation he had attended eight years earlier. Cadman flew to Tehran, and the two old friends took only a few days to reach a compromise. Under its terms, the area covered by the D’Arcy concession was reduced by three-quarters, Iran was guaranteed payments of at least £975,000 annually, and the company agreed to improve working conditions at Abadan. In return, Reza Shah extended the concession, which was to expire in 1961, for an additional thirty-two years. It was also agreed that since the Shah did not like the name Persia, the company would henceforth be known as the Anglo-Iranian Oil Company.”

“The 1933 accord stabilized the oil company’s position for the rest of Reza Shah’s reign. When the British forced him to abdicate eight years later, however, they removed the one leader who was strong enough to impose his rule by fiat on an increasingly restive country. Discontent over the company’s privileged position grew steadily during the war years as the amount of oil it extracted rose from six and a half million tons in 1941 to sixteen and a half million tons in 1945.”

“In March 1946, less than a year after the guns finally fell silent, laborers at Abadan did something they would never have dreamed of doing in Reza Shah’s time: they went on strike. Marching through the teeming streets, they carried signs and chanted slogans demanding better housing, decent health care, and a commitment by employers to abide by Iranian labor laws. Accustomed by long experience to challenges from restless natives, the British not only refused to negotiate but chose the path of active resistance. They organized ethnic Arabs and separatist tribesmen from nearby regions into a bogus union of their own and sent it to confront the strikers. Bloody rioting broke out, leaving dozens dead and more than one hundred injured. It ended only after Anglo-Iranian’s directors grudgingly agreed to begin observing Iranian labor law. They never did, and to remind Iranians of their power, they arranged for two British warships to stage threatening maneuvers within sight of Abadan. With this show of force, they believed they had resolved the crisis. In fact, they had further inflamed public opinion and taken another step toward the abyss.”[1]

Regardless of what newspapers write today, Iran’s vexed relationship with the West is nothing new.

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[1] pp.49-52 All the Shah’s Men, Stephen Kinzer