This week's important date continues with the theme of oil and its impact on the modern Middle East. On March 20, 1951, the Iranian parliament - the Majlis - voted to nationalize the country's oil industry. This meant that the Anglo-Iranian Oil Company (AIOC) - the predecessor of British Petroleum (BP) - lost all of its assets in Iran, including not only the right to drill for oil, but also the facilities and infrastructure that it had built.
The relationship between the AIOC and Iran dates back to 1908, when an agreement was reached between D'Arcy, a British millionaire, and the Shah of Persia. The agreement gave D'Arcy the exclusive right to prospect for oil in virtually the whole of the country in exchange for a lump sum and 16% of future profits. Over the ensuing decades, Iranian discontent with the terms of the contract - which favored the AIOC far more than similar agreements in other countries in the Middle East at the time - lead the Iranian government to seek a new contract. In the meantime, however, the British government - under the leadership of then First Lord of the Admiralty Winston Churchill - had aquired a large stake in the AIOC in order to ensure a constant supply of oil for its navy. With the backing of the British government, the AIOC saw no need to make concessions to the Iran and as a result negotiations stalled.
In a sudden bold move, the Shah of Iran in 1933 canceled the D'Arcy agreement and informed the AIOC that it no longer had the right to drill in Iran. Furious, Churchill declared that the British government would "take all such measures as the situation demands for the Company's protection." Frightened by British power, the Shah backed down and agreed to slightly improved terms to the original D'Arcy agreement - but which were much weaker than those enjoyed by other Middle Eastern countries.
In 1950, a strong nationalist movement swept through Iran, bringing with it a desire to reform, modernize and develop the country's economy. The politicians of the day, led by a man named Mohammad Mosadegh, planned to finance their reforms through oil proceeds. The unfavorable terms of the AIOC contract again came under intense criticism, and the Iranian government demanded that the treaty be re-negotiated. Again, the AIOC was obstinate, but as popular discontent and anger towards the British (who were embattled throughout their dying empire) grew, the AIOC agreed to a 50-50 profit sharing agreement. By this time, however, Mossadegh (who was voted Prime Minister) had become so popular that he no longer felt the need to deal with foreign companies at all, and on March 20, 1950 declared that all of the AIOC's assets in Iran were the property of the Iranian government, and that all proceeds from the sale of oil would go directly into Iranian coffers. The D'Arcy agreement was annulled once and for all.
The British were furious and pestered the Americans to help them remove Mossadegh from power. The Truman administration was unsympathetic and supported Mossadegh, citing British arrogance and obstinacy. Mossadegh quickly became a dictator, however, demanding - and receiving - absolute power for 12 months, and finally dissolving the Majlis entirely. This turn of events frightened the administration of US President Eisenhower, who feared that his dictatorial style and socialist leanings would lead Iran into the Soviet camp. Mossadegh's iron-fisted rule destroyed his popularity, and in 1953, the CIA engineered a coup which toppled his government.
The Iranian oil industry was again privatized, but the AIOC only held 40% of the consortium, and a 50-50 profit sharing agreement was reached. The fallout from the coup, however, is felt even today. The Shah, who was installed as the absolute ruler of Iran after the fall of Mossadegh, became even more unpopular than his predecessor had been, and in 1979 a popular revolt removed him from power and established the Islamic Republic of Iran. To this day, Iran views the United States with a great deal of distrust - distrust predicated on American intervention in Iranian affairs, primarily in the name of oil.
For more information, check out the following links:
http://en.wikipedia.org/wiki/Anglo-Persian_Oil_Company#Exploration_and_discovery
http://www.iranchamber.com/history/oil_nationalization/oil_nationalization.php
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