The Riches of the World
Mosaddeq, Iranian Oil and the Coup of 1953
Professor Nazeer Ahmed
The coup that toppled the Iranian nationalist leader Mohammed Mosaddeq had all the ingredients of a James Bond movie: a charismatic but fallible democratically elected popular hero, international intrigue and spy agencies, turncoat mullahs, thugs, street gangs, patriots and a despotic but handsome young king with a scheming sister and a beautiful queen. There is a prize at the end of the movie, that is, the riches of Iranian oil. The difference is that in the deadly game of geopolitics, the events of 1953 determined the fate of a proud, ancient nation and fueled the pent up energies that erupted with volcanic convulsions in the Iranian revolution of 1979, followed by the deadly Iran-Iraq war (1979-87) and the ghastly events that led to the invasion and destruction of Iraq (1992-2010).
The primary players in this drama were the Anglo Iranian Oil Company (AIOC), the Iranian nationalists led by Mosaddeq, the religious establishment led by Kashani, the communist Tudeh party, and Shah Reza Pevlavi of Iran. There were clients and followers. The British government backed AIOC. The nationalist support base was the urban middle class in Tehran and the major cities. The mullahs had their base in the impoverished slums of the cities and in the countryside. The communists, supported by the Soviet Union, looked to the workers and the artisans for support. The Americans were reluctant entrants to the melee, but when they did intervene, they sealed the fate of Iran and launched it on a trajectory, which in historical hindsight, led to the Khomeini revolution of 1979. The democratically elected leader of Iran, Mosaddeq, was toppled, arrested, tried and sentenced, and the voice of the nationalists was silenced.
There were winners and losers in the fray. The Americans were the clear winners. In the post-coup oil grab, an oil consortium was formed to replace the Anglo Iranian Oil Company and divided up the riches. American oil companies took 40% shares in the consortium where they had no prior stake. Standard of New Jersey, Socony, Standard Oil of California, Texas Company and Gulf, each received 8%. The British retained a substantial interest with a 40% stake. The rest was divided up between Dutch and other international oil companies. The communist Tudeh party was decimated. The mullahs were suppressed. But the success came with a heavy price. Resentment built up in Iran over the American intervention, and when it did blow up in 1979, it was the far right religious establishment that was the beneficiary of the revolution. Unlike the nationalists who knew how to speak the language of compromise, the religious right was uncompromising in its relations with the west. American influence, hoisted on Iran on the back of the despotic Shah, disappeared after 1979.
History is a guide but it is only a guide. It does not repeat itself. Wisdom demands that individuals and nations learn from history and do not try to replicate it. The Will of God moves on the canvas of history with inexorable momentum, creating new facts, revealing the Divine hand in the affairs of man and nature alike. Men and women of intellect observe these Signs, learn from them and guide their destinies with equity and justice. Those who violate justice suffer, and ultimately perish. That is the law of history.
We take our point of departure the Constitutional Revolution of Persia in 1906. It was a momentous event which shaped the history of Iran in the 20th century. It was the first such revolution in the Middle East and it presaged the Young Turks Revolution in the Ottoman Empire in 1908. It awakened an entire nation to its existential possibilities. It touched all segments of Iranian society and made them politically aware. It established a majlis (parliament), elected by popular suffrage, and transformed a despotic, absolute kingship to a constitutional monarchy.
The constitutional reforms did not alter the intrigues of foreign powers or their schemes to dominate, control and subjugate Iran. The principal players were the British who were firmly entrenched in India and the Russians who, having consolidated their colonies around the Caspian Sea, were looking for an outlet to the warm waters of the Arabian Sea. Both powers preferred a weak Iran ruled by a pliant Shah than a resilient one energized by democratic institutions. Without consulting the majlis or the Shah, the two powers signed the Anglo-Russian Convention of 1907 in St. Petersburg, Russia, partitioning Iran between a Russian sphere of influence in the north and a British sphere of influence in the South. A small area around Tehran was left as a buffer state between the two zones. Russian Cossack troops moved in from the north and occupied Azerbaijan and Kurdistan while Anglo-Indian troops moved into Baluchistan and the districts around the Persian Gulf. Similar understandings were reached about Afghanistan and Tibet. The Convention replaced the Great Game between the British Empire and Imperial Russia for control of Central Asia and Afghanistan and forged a détente between the two imperial powers which allowed the two to focus on the challenge from the rising power of a unified Germany in continental Europe.
In 1908, the British geologist Reynolds struck oil in Masjed Soleiman, Iran, This was the first of the large oil finds that changed the history of the Middle East, and indeed the history of the world. The British were the first to exploit the discovery. The Burmah Oil Company formed the Anglo-Persian Oil Company (the precursor of British Petroleum) as a subsidiary. In 1913, the British Government bought a 50% stake in the company. APOC thus became a commercial venture of the British Government. The oil concession, granted under duress in 1901 by a weak Iranian government, was lopsided in favor of the British with Iran receiving 16 percent of the net profits, calculated using suspicious accounting practices. The Iranians had no way of knowing what these profits were because they did not have access to the books. APOC grew rich while Iran remained poor.
World War I broke out in 1914. Iran was wooed by Turkey, Germany, Russia and Britain as an ally but Iran wisely decided to remain neutral. This decision, however, did not protect it from the imperial chess game. Iranian territory was used as battleground. The War ended with the capitulation of Germany and the Ottomans. The stresses of the War exacerbated the tensions within Czarist Russia which exploded in the Bolshevik Revolution of 1917 and pulled out of the War. The French and the British, heady in their triumph, imposed harsh terms on Germany and carved up the Ottoman territories. By the Sykes-Picot agreement of 1919, Britain took Palestine and Iraq while France helped itself to Syria and Lebanon. Arabia was captured by the Saudis. Britain tried to establish a protectorate over Iran. However, the majlis and Shah successfully resisted this attempt. In 1924-25, the Saudis, encouraged by Britain, moved in from the desert and captured the Hejaz which included the cities of Mecca and Madina. Thus was born the modern state of Saudi Arabia which was to play a pivotal role in the oil equations of the twentieth century.
Iran, weak, corrupt and bankrupt, was fertile ground for foreign intrigue. The Bolsheviks continued to meddle in Iran and tried to set up puppet communist governments in Rasht and Azerbaijan while the British firmed up their control of Iranian oil and maintained their military presence in the south. The last of the Khajar monarchs, Ahmed Shah was unable to contain the chaos. Iran was coming apart at the seams. Alarmed by the spreading anarchy, a young colonel Reza Khan, marched on Tehran in 1921 at the head of a Cossack brigade, and brought a semblance of stability to the capital. He gradually expanded his powers, first becoming the War Minister and then the Prime Minister. In 1923, the majlis deposed Ahmed Shah Khajar and appointed Reza Shah as the monarch. Thus was born the Pehlavi dynasty.
Reza Shah proved himself to be a far sighted monarch. He surrounded himself with capable administrators, brought corruption under control, built schools and industrial plants, introduced modern education, constructed roads, built the Trans-Iranian railroad, introduced universal health care, and spearheaded the Women’s Awakening Movement (1936-41). In 1934, he established the University of Teheran. It was he who changed the name of his country from Persia to Iran (1936) because the Persians were only one group in his composite nation which included Baluchis, Azeris, Arabs and Kurds.
On the legislative front he reaffirmed the constitution, reformed the marriage laws (1931) and removed the compulsory wearing of veils. Minorities, including the Sunnis, the Armenians, the Zoroastrians and the Jews were given equal rights. The emancipation of women was resented by the religious establishment but the Shah deftly contained their objections. For his reforms, many Iranians nationalists consider him to be the father of modern Iran.
On the international front, Reza Shah invited American economists to reform his tax collection and fiscal administration. Italians were hired to supply and train the Iranian navy. German engineers built a host of industrial plants and Lufthansa Airlines connected Tehran with Europe. In 1928 he abrogated the 19th century capitulations to the Europeans under which European offenders were judged by their own juries rather than the Iranian legal system. He transferred the printing of Iranian money from the British Imperial Bank to the National Bank of Iran. Well aware of the presence next door of the Soviet Empire and the British Indian Empire, he was careful to avoid dependence on any one foreign power so as not to invite military intervention by any of them.
Reza Shah was less successful on the oil front. The British juggernaut held Iranian oil tightly in its grip. Reza Shah sent his minister of court Teymourtash to London to negotiate a wide range of issues including a revision of the 1901 D’Arcy concession which had granted exclusive rights to the British to prospect for oil in all of Iran. Iran received only 16% of the profits from the Anglo Iranian Oil Company but there was no independent audit of the company books to ensure that the profits were calculated correctly. The Shah asked for 25% of the profits and a reduction in the area of concession but the long and arduous negotiations lasting over five years came to naught. Imperial Britain was unwilling to budge. However, in 1933 the Shah made an about-face and concluded a hasty agreement with APOC on slightly better payment terms and reducing the area of concession to 100,000 square miles but at the cost of extending the life of the D’Arcy concession by another 30 years.
World War II erupted in 1939 and Iran declared its neutrality, as it had done in WWI. However, in 1941, the Soviet Union and Great Britain, in a blitzkrieg, invaded and occupied Iran and forced the Shah into exile. His young son, Mohammed Reza was hoisted onto the peacock throne. Reza Shah was suspected of being too close to Hitler. The geopolitical reason was that the Allied Powers needed a supply corridor to the Soviets through Iran.
WWII demonstrated the critical importance of oil. The nation that controlled oil controlled the engines of war. Oil was no less important for peacetime economies. It was for this reason that the first act of President Roosevelt at the conclusion of the Yalta conference (1945) was a dash to Suez, Egypt where he met King Abdel Aziz Ibn Saud of Saudi Arabia and cemented a strategic relationship that remains a cornerstone of United States foreign policy.
It was this post-war world, dominated by oil, which saw the rise of Mohammed Mosaddeq of Iran, arguably one of the most colorful personalities of the post war era. Mohammed Mosaddeq was born into an aristocratic family in Tehran in 1882 and received his education at the University of Paris and the University of Neuchatel in Switzerland. He was elected to the first majlis after the Constitutional Revolution in 1906 and held important positions over the years as governor of Fars province, Finance Minister and Foreign Minister. In 1944 he formed the Jabhe Milli or National Front of Iran together with some of the leading political figures of the day. The goal of the Jabhe Milli was to end the foreign domination of Iran and to establish democracy. As oil was the principal reason for foreign domination, the goals of Jobhe Milli included nationalization of Iran’s oil resources.
Nationalization was a popular issue in Iran. Negotiations with the oil companies went nowhere. Not only were the foreigners draining Iranian resources while paying scant compensation to Iran, the presence of oil was an excuse for foreign intervention and direct or indirect occupation. Foreign domination fostered corruption. All the major factions in the Iranian body politic supported nationalization: the communists, the nationalists, the mullahs and the monarchists. The Shah vacillated.
Mosaddeq’s moment in the sun came in March 1951 when Prime Minister Haj-Ali Razmara was assassinated and the democratically elected majlis (national parliament) voted for full nationalization of oil. In April 1951, the majlis elected Mosaddeq as the prime minister. Mosaddeq was a consummate orator, a master of public theatrics, a cultivated diplomat and a deft politician. He was the man of the hour who could articulate the yearnings of Iranian society to shake off the foreign yoke.
Mosaddeq was unyielding in his stand on nationalization. Britain responded by pulling out its technicians from the oil refineries, blocking Iranian assets in foreign banks, boycotting Iranian oil and blockading Iranian ports. The loss of oil from Iranian oil wells was made up by increasing production in the oil wells of Iraq, Kuwait and Saudi Arabia. Oil production fell from 240 million barrels in 1950 to 10 million barrels in 1951. Oil revenues plummeted. The Abadan refinery shut down. Mosaddeq’s plans for reconstruction and industrialization came to a grinding halt.
Greed, power, naiveté, obstinacy are as much characteristics of nations as they are of individuals. So many of the issues between nations can be resolved on the basis of equity and sound business principles. Half a loaf for me and a half for you. That is a win-win proposition. But no! Greed and power goad powerful nations to take the entire loaf—and more- and deny even a crumb to the weaker ones. Britain was obstinate in its refusal to concede a 50:50 formula and accept transparency in the company operations so that the profits of the oil company could be assessed correctly and independently. This was bad business. On the other hand, Mosaddeq was rigid in his stand on complete nationalization and was not willing to let the British in. This was bad politics. As a result, an entire nation suffered.
Nations, like individuals, are prisoners of their historical experience. It is like driving on the freeway with your eyes riveted on the rear view mirror and losing sight of an oncoming truck. Britain was looking at Iran through the imperial lens, even though it had lost India and the days of Pax Brittanica were gone. It was unyielding and lost out to the Americans. Mosaddeq lived in the heady post war years when newly independent nations sought a utopian world, losing sight of global power politics and the interests of global players. He demanded too much and got nothing.
There is a consistency and predictability to the response from the industrialized powers whenever their hegemony is challenged. Economic boycott, freezing of assets, trade embargoes, travel restrictions and massive propaganda are standard tools. When these fail, military force is an option, often as a group attacking a weak prey. In the aftermath, terms of capitulation are dictated which allow the victorious powers unlimited access to the natural resources of the vanquished land and control over its political and economic institutions. Alas! One would have hoped for a world in which the industrialized nations sat down across the table with non-industrialized nations and negotiated an equitable distribution of the benefits from the application of technology of the industrialized nations and the exploitation of natural and human resources of the host nations.
Faced with an acute economic crisis, Mosaddeq resigned and called for elections. According to some accounts, British intelligence was very active in influencing the elections, paying off influential businessmen, legislators, street gangs, newspaper editors and columnists to influence the elections. There were four principal players in the electoral melee: the nationalists who derived their support from the urban middle class; the mullahs who had their power base in the slums and the countryside; the communists who were supported by the workers, and the monarchists who were supported by the Shah. Into these complex equations was injected foreign intrigue and foreign money, creating a chaotic, unpredictable matrix.
The nationalists won the election and Mosaddeq became the democratically elected prime minister. To face the economic crisis, Mosaddeq asked for emergency powers from the majlis but the majlis refused. He also asked for the power to appoint the War Minister and the Army Chief of Staff as stipulated in the constitution but the Shah refused. Mosaddeq resigned and the Shah appointed a pragmatic, old time politician Ahmed Ghavam as the prime minister. Ghavam was disposed to negotiate with the British over oil but mass demonstrations forced his resignation and Mosaddeq was once again appointed the prime minister. This time, the majlis gave him emergency powers for six month.
Mosaddeq strengthened his political base by appointing a powerful cleric, Kashani as majlis speaker and forming an alliance with the Tudeh party. He limited the powers of the Shah to what the constitution had stipulated and strengthened the legislative powers of the majlis. He instituted land reforms, broke the feudal land structure, established village councils and gave the peasants a share in their crops. These reforms made him enormously popular at home but there was also resistance from the old guard. The resistance grew as the British boycott took its toll and British money did its work. Former allies turned against him. Kashani, who Mosaddeq had trusted as speaker of the parliament, denounced him.
Unable to dislodge him through their own efforts, the British turned to the United States for help in toppling Mosaddeq. But its approach to President Truman in November 1952 was rebuffed. However, when General Eisenhower became president in January 1953, Churchill, the prime minister of Britain, renewed his plea. The cold war was at its height and there was anti-communist hysteria in Washington. Churchill made the case that Mosaddeq was too close to the communist Tudeh party and would take Iran into the Soviet orbit. Iran was too strategic a prize to be ignored, for its oil, its location and its size. President Eisenhower and Secretary of State John Foster Dulles signed on to a joint British-American plan to topple Mosaddeq.
This was the first known large scale foreign intervention by the United States to topple a democratically elected popular government. Pious professions to the contrary, the Americans toppled a democracy and hoisted a despot on an ancient, proud nation which was struggling for the same ideals articulated by Thomas Jefferson.
In May 1953 the Central Intelligence Agency sent Dr. Wilber to the Middle East to meet with his British counterpart Darbyshire and together coordinate the operations to topple Mosaddeq. General Fazlulla Zahedi was chosen as the point man within the armed forces to stage a coup. Provocateurs were paid to stage street demonstrations and create chaos. Newspaper editors were bought off to run inciting articles. CIA operatives pretending to be communists threatened the ulema that if they opposed Mosaddeq they would be harmed. This alienated the mullahs. The agencies worked through princess Ashraf, the half sister of the Shah, to gain his concurrence for the plot. Roosevelt, the grandson of President Teddy Roosevelt was appointed as the overall coordinator for the mission.
On August 13 the Shah issued two decrees, one firing Mosaddeq as the prime minister, and another appointing General Zahedi to replace him. Both decrees were in violation of the constitution which stipulated that only the majlis had that privilege. However, the initial uprising was a failure. Army units loyal to Mosaddeq and the constitution blocked the renegade units headed by Zahedi. The Shah fled the country, first to Baghdad and then to Rome. General Zahedi went into hiding. Forces loyal to Mosaddeq took over key installations and renegade soldiers either fled or were arrested. Roosevelt himself was advised to abandon the plot and return home.
However, on August 19, a new attempt was made; this time led by Iranian CIA operatives. The Shah made the announcement from Baghdad that he had indeed removed Mosaddeq from office and installed Zahedi as the prime minister. Street hirelings were back in action. Some of the army officers switched sides. A mob incited by provocateurs took over the telegraph office. Telegrams were sent to district headquarters that a coup had toppled the government. Soon the police headquarters fell. Army tanks surrounded Mosaddeq’s offices and arrested him. The radio station was captured in the evening. Zahidi was brought out from hiding and made the announcement of a successful coup.
The Shah returned to Iran, this time as a puppet of foreigners. Dissidents were hunted down, punished or executed. The communist Tudeh party was crushed. Several army officers who were sympathetic to the Tudeh party were tortured. The clerics were sidelined and persecuted. One of these clerics, Ayatollah Ruhollah Khomeini was first imprisoned and then exiled to Iraq and then to France. Twenty five years later it was the same Khomeini who triumphantly rode back into an Iran which had turned fiercely anti-American, had toppled the Shah, and had taken hostages at the American embassy in Tehran. The saga of American domination of Iran was over.
The American intervention of 1953 that toppled Mosaddeq was a historical blunder for the United States. There was initial jubilation in American official circles over the success of the coup. But the price was a destruction of the moral credibility of America in the eyes of the world. Many in the newly independent nations had looked to America as the champion of democracy, the land of Jefferson and Lincoln. The coup demonstrated that the United States would not shy away from toppling a democratically elected government when it suited her interests. It brought the United States down to the same level as Great Britain. The ease with which a successful coup was concluded encouraged similar ventures in Latin America and elsewhere, further eroding America’s moral credibility and stature.
The role of the American press during these events was a sad chapter in the annals of journalism. In their book, The U.S. Press and Iran, Dorman and Farhang make the following observation: “The American news media more often than not followed the cues of foreign policy-makers rather than exercising independent judgment in reporting the social, economic and political life of Iran under the Shah…..Throughout the association of the United States with the shah, the press tended to serve Washington’s short sighted policy goals by portraying political opposition to the regime in such a way as to suggest that the shah’s critics were nothing more than benighted reactionaries”.
The overthrow of Mosaddeq derailed Iran’s experiment with democracy and its evolution towards a representative government. The fruits of fifty years of a national struggle for democracy and representative government, dating back to the Constitutional Revolution of 1906, were destroyed. Instead, the United States and Britain hoisted a despot on the peacock throne. The frustrations and anger felt at this intervention erupted with uncontrolled fury in the revolution of 1979, but this time it was not the western trained nationalists who led the charge but right wing mullahs who wanted to purge Iranian society of all things western.
Recommended further readings: Time Present and Time Past: CIA Coup in Iran by Dr. M. Reza Behnam, https://www.tikkun.org/time-present-and-time-past-cia-coup-in-iran, January 2021