All the Shah’s Men

by Stephen Kinzer

  The Scottish financiers who took charge of the drive to find oil in Iran recognized that an epochal change was about to reshape Britain and the world. Internal combustion engines would soon revolutionize every aspect of human life, and control over the oil needed to fuel them would henceforth be the key to world power. Oil had been discovered around the Caspian Sea, in the Dutch East Indies, and in the United States, but neither Britain nor any of its colonies produced or showed any promise of producing it. If the British could not find oil somewhere, they would no longer be able to rule the waves or much of anything else.

  By 1908 D’Arcy and his Scottish partners had sunk more than half a million pounds into their Persian venture and had come up with nothing. Finally they concluded that they must abandon their explorations and begin looking elsewhere. At the beginning of May they sent Reynolds a telegram telling him that they had run out of money and ordering him to “cease work, dismiss the staff, dismantle anything worth the cost of transporting to the coast for re-shipment, and come home.”

  It must have been a crushing moment for Reynolds, who had spent years in some of the most trying conditions imaginable looking for a treasure he knew could reshape the world. Desperate to buy whatever time he could, he told his men that in such a remote region, telegrams could not be trusted. They must continue working until the message was confirmed by post.

  Reynolds was sleeping in his tent near an outpost in western Iran called Masjid-i-Suleiman when, at four o’clock on the morning of May 26, 1908, rumbling noises and wild shouting awakened him. He bolted up, ran across a stony plain, and saw oil spurting high above one of his derricks. In what might have been one of his last attempts, he had drilled into the greatest oil field ever found.

  It did not take long for British leaders to grasp the scope and implications of this find. In the autumn of 1908 they arranged for a group of investors to organize a new corporation, the Anglo-Persian Oil Company, to absorb the D’Arcy concession and take control of oil exploration and development in Iran. Five years later, at the urging of First Lord of the Admiralty Winston Churchill, who saw world war on the horizon and knew he would need oil to power the ships that would win it, the British government spent £2 million to buy 51 percent of the company. From that moment on, the interests of Britain and the Anglo-Persian Oil Company became one and inseparable. “Mastery itself was the prize of the venture,” Churchill asserted.

  During its first few years in existence, 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.

  Abadan, at the Gulf’s northern end, had come slowly into existence over a period of a thousand years, built up by silt running from the rivers that meet to form the Shatt-al-Arab waterway. The first engineer Anglo-Persian sent there, twenty-eight-year-old R. R. Davidson, wrote home in 1909 that it was a place of “sunshine, mud and flies,” totally flat and without a single stone bigger than a man’s hand. It was also among the hottest places on earth. Nonetheless, within a couple of years Davidson had more than a thousand tribesmen at work building piers, barges, and brick buildings. Soon Abadan boasted a power-generating station, several stores and workshops, a water filtration plant, and even a small railway. In 1911 the first pipeline from Fields, as the oil-producing region was called, was completed, and the next year oil began to flow.

  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.

  Any doubts about the value of this new resource were resolved by the experience of World War I, in which, as Lord Curzon put it, the Allies “floated to victory on a wave of oil.” Over the years that followed, the amount of oil flowing from Abadan increased steadily, from less than three hundred thousand tons in 1914 to five times that amount in 1920. Anglo-Persian gave first priority to the Royal Navy, which bought its oil at a great discount. What remained was sold to industrial customers and drivers in Britain and then, as supplies increased, to others around the world.

  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. British officials were in turn shocked, outraged, and desperate. They appealed to the League of Nations, only to be met with a scathing counterattack from Iranian representatives who charged that Anglo-Persian had systematically falsified its accounts and cheated Iran out of its legitimate royalties. 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.

  “Am personally satisfied,” Cadman wired home, “that new Concession in every respect will open new era in our relations with Persia.”

  The 1
933 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.

  The Iranian labor movement was not the only long-dormant institution that came back to life after Reza Shah’s departure. So did the Majlis. It had never ceased to exist, but Reza Shah had not allowed it to function freely. Now, angered like the rest of Iran by the rioting at Abadan, it began asserting itself. In 1947 it passed a bold law forbidding the grant of any further concessions to foreign companies and directing the government to renegotiate the one under which Anglo-Iranian was operating.

  This law was the first blow in a long battle. It set Iran on the course of cataclysmic confrontation with Britain. The deputy who wrote it and pushed it through the Majlis had been an active nationalist in the early years of the century but was forced out of politics by Reza Shah and had lived in obscurity for twenty years. Now he was back, as fervent a defender of Iranian interests as ever. His name was Mohammad Mossadegh.

  Two central beliefs shaped Mossadegh’s political consciousness. The first was a passionate faith in the rule of law, which made him an enemy of autocracy and, in particular, Reza Shah. The second was a conviction that Iranians must rule themselves and not submit to the will of foreigners. That made him the nemesis, the tormentor, the implacable foe of the Anglo-Iranian Oil Company. In mid-twentieth-century Iran, he and the company faced off in an epic confrontation. Fate bound them together. The story of one cannot be told without the story of the other.

  From the moment of his birth on May 19, 1882, Mossadegh had advantages that few of his countrymen enjoyed. His mother was a Qajar princess from a family that had produced governors, cabinet ministers, and ambassadors. The man she married came from the distinguished Ashtiani clan and served for more than twenty years as Nasir al-Din Shah’s finance minister. He died when their son was still a child, but according to custom, young Mohammad was schooled in his father’s profession. At the tender age of sixteen he was named to his first government post. It was no sinecure; he was chief tax auditor for Khorasan, his home province. This post introduced him not only to the complexity of public finance but also to the corruption and chaos that were eating away at the Qajar dynasty. By all accounts he performed brilliantly. A visitor who met Mossadegh soon after he assumed his post estimated that he was in his midtwenties. The visitor wrote presciently in his journal:

  Among men of intelligence and learning, his decorum cannot be surpassed. He speaks, behaves, and receives people with respect, humility and courtesy, but without undermining his own eminence and dignity. He may at times have treated his colleagues, including high officials and finance ministers, with a measure of contempt, but in his dealing with other people he has shown warm human feeling, courtesy and humility. Such an impressive young man is bound to become one of the great ones.

  Mossadegh came of age during a tumultuous time in Iranian history. He was eight years old when the Tobacco Revolt broke out, and considering how precocious he was and how involved his parents were in public life, it is safe to assume that he followed its course carefully. Several of his relatives, including his uncle, the formidable Prince Farman Farma, played important roles in the Constitutional Revolution. When elections for the first Majlis were convoked in 1906, Mossadegh became a candidate and won a seat from Isfahan. He could not assume it because he had not yet reached the legal age of thirty, but his political career was under way.

  In those early years, Mossadegh developed more than a political perspective. He also began showing extraordinary emotional qualities. His boundless self-assurance led him to fight fiercely for his principles, but when he found others unreceptive, he would storm off for long periods of brooding silence. He did this for the first time in 1909, when Mohammad Ali Shah launched his bloody assault on the Majlis. Rather than stay and fight alongside his fellow democrats, he concluded that Iran was not ready for enlightenment and left the country. Like many Iranians of his class, he considered Paris the center of the civilized world, and he made his way there to study at l’Ecole de Sciences Politiques.

  During his stay in France, Mossadegh suffered from illnesses that would plague him all his life. No one could precisely identify them. They were certainly real and periodically flared up to cause ulcers, hemorrhaging, stomach secretions, and other symptoms. But they also had a nervous component that led to fits and breakdowns. Neither purely medical nor psychosomatic, they both reflected and became a part of Mossadegh’s persona. He was as dramatic a politician as his country had ever known. At times he became so passionate while delivering speeches that tears streamed down his cheeks. Sometimes he fainted dead away, as much from emotion as from any physical condition. When he became a world figure, his enemies in foreign capitals used this aspect of his personality to ridicule and belittle him. But in Iran, where centuries of Shiite religious practice had exposed everyone to depths of public emotion unknown in the West, it was not only accepted but celebrated. It seemed to prove how completely he embraced and shared his country’s suffering.

  The onset of illness forced Mossadegh to give up his studies in France after a year and return to Iran. There he was able to rest, partly because the ruler he detested so viscerally, Mohammad Ali Shah, had been forced from the throne. After his recovery he returned to Europe, this time to the Swiss town of Neuchâtel, accompanied by his wife, their three small children, and his beloved mother. He entered the university there, earned his doctorate of law in 1914—the first Iranian to win such a degree from a European university—and decided to apply for Swiss citizenship. First, though, he would travel home to complete research for a book about Islamic law.

  Mossadegh returned to a country ablaze with conflict. The Constitutional Revolution had given Iranians a taste of the forbidden fruit of democracy, and they were anxious for more of it. Qajar rule was crumbling. Most important, the outbreak of World War I had thrown all political certainties into question and made everything seem possible. Britain and Russia, having effectively divided Iran between them in 1907, still held the reins of true power, but resentment over their role was leading many Iranians to sympathize with the Kaiser’s Germany. A group of intellectuals centered around Hasan Taqizadeh, who had been a key figure in the Constitutional Revolution, went so far as to set up a “liberation committee” in Berlin that published a radical newspaper and aimed ultimately to seize power in Tehran. Mossadegh was much encouraged by these developments, and instead of returning to Switzerland, he joined the faculty of the Tehran School of Law and Political Science, which was becoming Iran’s first modern university. His book Iran and the Capitulation Agreements argued that Iran could develop
modern, European-style legal and political systems if it took one vital step. It must impose the law equally on everyone, including foreigners, and never grant special privileges to anyone.

  After Mossadegh had been home for less than a year, his uncle, Farman Farma, who had become prime minister, asked him to join the cabinet as minister of finance. Mossadegh declined because he did not want to be accused of rising to power through family connections. In 1917 he suffered an attack of appendicitis and was operated on in Baku, and while recovering, he received another offer, this time to become deputy finance minister. By this time his uncle was no longer prime minister, and at his mother’s urging he accepted the offer. He upset his new colleagues by unearthing a series of corrupt schemes and insisting that the wrongdoers be punished, and after less than two years in office he was dismissed. Once again he decided that Iran did not deserve his services, and he returned to Neuchâtel. By doing so he showed, as he would show repeatedly throughout his life, that he was a visionary rather than a pragmatist, preferring defeat in an honorable cause to what he considered shameful compromise.

  Mossadegh was in Neuchâtel when he received news of the infamous 1919 Anglo-Persian Agreement that effectively reduced Iran to the status of a British protectorate. He was outraged and did all he could to protest, as an Iranian biographer reported:

  He talked and corresponded with other prominent Iranians in Europe, published leaflets, and wrote to the League of Nations protesting against the agreement. He even traveled to Bern for the sole purpose of having a rubber stamp made for the Comité de Résistance de Nations in whose name the anti-agreement statements were issued. Anger, frustration and loneliness must have taken their toll on his nerves, for it is unlikely that, as he suspected, he was being watched by British agents—one of them in the shape of the “chic, pretty and bouncy” woman next door who called from her balcony, “Est-ce que vous voulez fumer ce soir?” and was disappointed when Mosaddegh answered, “Pardon, madame. Je suis malade. Je suis très occupé. Je suis fatigué. Excusez-moi. Je n’ai pas le temps.”