Nationalisation: The Anglo-Iranian Oil Company, 1951 Britain vs. Iran
BY: Edward Henniker-Major*
Abstract: This paper looks at the history of the British firm, the Anglo-Iranian Oil Company (AIOC), and focuses on the events surrounding the Iranian nationalisation of the AIOC’s assets in May 1951. During the period in question, the British were unable to come to terms with their imperial decline and could not appreciate the strength of popular opposition to their control of the oil industry in Iran. The AIOC was reluctant to meet Iranian demands for a fairer oil arrangement, giving the Iranians little option but nationalisation. This essay examines the reasons and motivations behind nationalisation and analyses whether the path chosen by the Iranian Government was ethical. The paper concludes that British behavior was intransigent, outdated, and insincere, which provoked Iranian demands and ultimately led to the nationalisation of the oil industry in Iran.
Introduction
British involvement in the oil industry of Iran began in 1901 when William Knox D’Arcy obtained a 60-year concession for the exclusive right to prospect for oil throughout the country. By 1908, oil was discovered, and a short time later, the Anglo-Iranian Oil Company (AIOC) was formed.[1] In 1933, the AIOC agreed terms with the Shah of Iran for a new 60-year concession, which continued the company’s exclusive right to carry out oil operations within designated areas. In practise, this meant that the company controlled all the oil in Iran.
In the wake of the Second World War, the AIOC rapidly expanded production and investment to meet an increased global demand for oil. By 1950, Iran, via the AIOC’s activities, had become hugely important to the global oil industry. It was the second largest exporter of crude petroleum and contained the third largest oil reserves, and in Abadan, the AIOC had the world’s largest refinery.[2] Between 1930 and 1950, the company’s pre tax profits grew from approximately £6.5 million to nearly £85 million, bringing in large amounts of income, but disproportionately shared, to the British Treasury, company shareholders, and the Iranian Government. By the late 1940’s, the AIOC was the largest foreign investor in Iran and its employees and contractors numbered some 80,000. The refinery at Abadan was also Britain’s largest single overseas investment, and represented a source of enormous national pride.[3]
After the Second World War, nationalism and democracy became important features in Iranian politics. There were demands from nationalists to revise the concessionary agreement in order to increase royalty payments and improve conditions for Iranian workers. By the late 1940’s, Iranians were no longer willing to tolerate low wages, poor housing, and the refusal of the company to train and advance locals for the more skilled jobs, which were generally monopolised by the British.[4] The British employees enjoyed luxurious conditions, while the AIOC kept its Iranian workers segregated, often in slums. The British were very reluctant to have their monopolistic control of the oil industry diluted, and therefore did not want Iranians in higher positions within the company. It was also apparent that the AIOC was not fairly sharing its enormous profits with the Iranian Government. As a result of these injustices, the Iranians demanded better terms.
However, the AIOC and the British Government were determined to hold on to their advantageous position in Iran. The company provided enormous profits and protected wider British economic and strategic interests. His Majesty’s Government (HMG) was also reluctant to appease the Iranians for fear that it might encourage nationalist aspirations in other regions where Britain had interests. The AIOC and HMG were thus desperate to maintain its control of the oil industry, and in the process failed to appreciate Iranian demands. According to Wm. Roger Louis, the company ‘was proving itself to be an anachronism’.[5] It was an outdated remnant of imperial power and needed reform in a rapidly changing political environment. However, the AIOC’s offers at reform were too limited and too slow. The Iranians, after failed negotiations with the British, officially nationalised the oil and the AIOC’s assets on 1 May1951.
Although short lived, the Iranian nationalisation of the oil industry provides an interesting insight into the ethics nationalisation. On the one hand, the Iranians considered it a legitimate reaction to rapacious colonialism, and on the other, the British considered it as an affront to the rights of private property, an insult to the sanctity of contracts, and thought the Iranians ungrateful and greedy.
This paper focuses on the reasons that led to the nationalisation of the oil industry of Iran. It will look at the attitudes behind British and Iranian motivations, and will analyse the issue of compensation. This essay will seek to exonerate Iranian actions and condemn British behaviour as disingenuous, imperialistic, and antiquated.
*Edward Henniker-Major is British and studied a BA in History at the University of East Anglia, Norwich, and an MSc in Empires, Colonialism, and Globalisation at the London School of Economics. Edward is currently working in historical research at the University of East Anglia.
[1] Originally, the frim was called the Anglo-Persian Oil Company, changing its name to the Anglo-Iranian Oil Company in 1935 at the request of the Shah. In 1954, it became the British Petroleum. Throughout this paper, the firm is referred to as the Anglo-Iranian Oil Company (AIOC).
[2] E. Abrahamian, ‘The 1953 Coup in Iran’, Science & Society, Vol. 65, No. 2 (Summer, 2001), p. 185
[3] J. Bamberg, The History of the British Petroleum Company Vol. 2 The Anglo Iranian Years 1938-1954 (Cambridge, 1994), p. 513
[4] M. Elm, Oil, Power, and Principle Iran’s Oil Nationalisation and its Aftermath (New York, 1992), p. 49
[5] Wm. R. Louis, The British Empire in the Middle East 1945-1951 Arab Nationalism, the United States, and Postwar Imperialism (Oxford, 1984), p. 648
