DIVVYING UP THE LOOT
The Iran Oil Consortium Agreement of 1954

Ebrahim Norouzi & Arash Norouzi
The Mossadegh Project
| October 29, 2019                                                     


Divvying Up the Loot: The Iran Oil Consortium Agreement of 1954

As a new era of autocratic rule was taking hold in Iran following an Anglo-American sponsored coup, the United States moved in on Iran’s nationalized oil industry by establishing and taking a major share in a negotiated multi-national consortium.

Britain’s ideal objective was the complete return of the Anglo-Iranian Oil Company to its pre-nationalization condition. However, they soon accepted the inevitability of a consortium, as persistent anti-British sentiment in Iran, coupled with growing U.S. influence there, had made it impossible for them to return as the sole operator of the Iranian oil industry. Besides, the British recognized a golden opportunity to score majorly in both compensation from Iran over the nationalized properties and loss of revenue, while still securing a substantial ownership in the consortium for decades to come.

The historic agreement, sold to the Iranian public at the time as a national victory, was actually a plunder of epic proportions. The full extent of this plunder has never been fully quantified, but in the course of our research, we have exclusively deciphered the most shocking aspect of the deal, hereby revealed for the first time.

To begin with, here is a chronology of the complicated diplomatic process, spanning over 13 months, that led to the formation of the historic consortium finalized 65 years ago.


Timeline

August 27, 1953

During a National Security Council meeting in Washington, Secretary of State John Foster Dulles proposes that the U.S. appoint a skilled and knowledgeable negotiator, representing either the President or himself, to lead a task force to settle the oil matter.1

1 Memorandum of Discussion at the 160th Meeting of the National Security Council — August 27, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

August 31, 1953

In a one-on-one meeting, the new Prime Minister, Fazlollah Zahedi, warns Loy W. Henderson, the U.S. Ambassador in Tehran, that the U.S. and Britain should be mindful not to press for an unfair oil settlement, which would outrage Iranians and result inevitably in his immediate overthrow.

Henderson wants the government to quell anti-British propaganda in the Iranian media, which he says is hampering their ability to continue extending financial aid. Both agree that Iran and Britain should feel things out, perhaps during secret meetings, to gauge one another’s positions prior to formal negotiations.1

The National Security Council notes concurrently that, “Both the prime minister and the shah would resist any attempt to negate the oil nationalization [law]. Zahedi has been considered anti-British and in addition he cannot risk a quick solution favorable to Britain which would lay him open to charges of being a British stooge.”2

1 Loy Henderson to the State Department — August 31, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

2 Immediate Prospects In Iran — August 27, 1953 [link]

September 3, 1953

While in Denver, President Dwight D. Eisenhower is briefed on the NSC meeting by his Special Assistant for National Security Affairs, Robert Cutler. Ike approves the idea of sending a special envoy to Iran and suggests oil expert W. Alton Jones of Cities Service, who had previously been invited to Iran for talks by none other than Premier Mossadegh in Sept. 1952.1

1 Robert Cutler to John Foster Dulles — September 3, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

September 8, 1953

Sec. Dulles indicates that Eisenhower has approved his friend Herbert Hoover, Jr., son of the 31st President, as Special Consultant to the Secretary of State on oil affairs.1

Hoover, a trained mining engineer, had spent some time as an oil adviser to the Iranian government in 1944 and was somewhat familiar with the country. He was one of the two Americans whose advice Iran sought when American oil companies Standard-Vacuum and Sinclair Oil showed interest in the oil of the southeastern province of Baluchestan.2

1 John Foster Dulles to Walter Bedell Smith, Henry Byroade and Herman Phleger — September 3, 1953.
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989), 888.2553/9–353 — cited in footnote #2.

2 Mossadegh, the years of struggles and resistance by Col. Gholamreza Nejati, Volume I, pp. 47-48

September 12, 1953

Herbert Hoover, Jr. begins as consultant to Secretary of State Dulles.1

1 State Department press release No. 548 (Oct. 4, 1954)

September 17, 1953

Under Sec. of State Walter Bedell Smith explains at an NSC meeting that Hoover accepted the special envoy mission on two conditions: “(a) if he could be assured of the cooperation of the big oil companies in making room on the market for Iranian oil; and (b) if he could be assured of the cooperation of the Department of Justice in not pressing the cartel suit.”1

1 Memorandum of Discussion at the 162d Meeting of the National Security Council, Washington — September 17, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

September 23, 1953

Despite British willingness to resume negotiations from the final Anglo-American proposal of Feb. 20th, Dulles instructs Loy Henderson that the prior offer is “no longer feasible” and thus requires an “alternate solution”.1

The joint proposal had called for the World Court to determine the amount of compensation owed to the Anglo-Iranian Oil Company (AIOC) as a result of oil nationalization. Prime Minister Mohammad Mossadegh accepted the World Court adjudication but, to avoid committing Iran to an undefined and possibly unaffordable obligation, requested that the British specify the maximum amount of their claim in advance.2 There was no reply to his inquiry from Britain, and a subsequent Anglo-American statement failed to assure him, as Henderson phrased it, that “Iran would not be saddled with [a] burden [of] indebtedness greater than it could bear”.

1 John Foster Dulles to Loy Henderson — September 23, 1953 [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

2 Loy Henderson to the State Dept. — January 28, 1953 [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

   Mossadegh’s Memoirs (farsi) pp. 285-86

Herbert Hoover, Jr. and U.S. Ambassador Loy Henderson.

October 7, 1953

In a secret meeting held in Amsterdam, Hoover promises AIOC officials that in the end, Iran will not get a better deal than other oil producing countries.1 Hoover’s assertion flagrantly contravenes Iran’s longstanding desire for a greater than 50-50 share of the profits, an idea that originated prior to the premiership of Dr. Mossadegh.2

Meanwhile, the Shah, Premier Zahedi, Foreign Minister Abdollah Entezam and Court Minister Hossein Ala meet with Henderson to discuss the timing and logistics of an eventual resumption of diplomatic relations with Britain. The Iranians are adamant that an oil deal precede any rapprochement with the British, but Henderson argues in favor of the reverse, saying that the two matters ought not be connected. Leery of appearing to be a British or American puppet, Zahedi fears a public backlash were this to occur.3

1 John Foster Dulles to Loy Henderson, October 7, 1953, from Foreign Office records cited in Mostafa Elm, “Oil, Power, and Principle: Iran’s Oil Nationalization and Its Aftermath” (1994) p. 312.

2 Note the strong objection to a 50-50 arrangement detailed in Loy Henderson’s Oct. 29, 1953 telegram to the State Department.

3 Christopher Gandy’s Minutes on Resumption of Diplomatic Relations With Persia, October 13, 1953, British Foreign Office [link]


October 17, 1953

To lay the groundwork for negotiations, Hoover arrives in Tehran and meets with the oil advisory commission.1, 2 In a subsequent meeting with the Shah, Hoover states that due to a world oil surplus, the major oil companies need to be brought in to help with the Iranian oil operation. The Shah concurs, but to avoid exacerbating the impression of Iranian subservience to the Western powers, cautions that Iran’s government should only be pressed so far.1

1 Loy Henderson to John Foster Dulles, Oct. 22, 1953 (888.2553/10-2253), cited in Elm, p. 312.

2 L. P. Elwell-Sutton, Persian Oil: A Study in Power Politics, p. 316
   (The date of the meeting is indicated by both Elwell-Sutton and Elm)

October 28, 1953

Over dinner with Zahedi, Entezam, Henderson and Hoover, Zahedi says that since the British capital investment has been recovered many times over through “exorbitant profits realized by the AIOC”, if 50-50 profit sharing is the goal there is no justification for Iran to pay compensation to the AIOC.1

Zahedi also fears that Iran might be forced to accept foreign control of oil production, a return of the AIOC in a new form, and compensation to Britain for the seized oil refinery and loss of profits. Hoover suggests having the World Bank, representing a group of Western distributors, act as an intermediary to help disguise the foreign hand, an idea previously floated during discussions with the British the month prior.

1 Loy Henderson to the State Department, October 29, 1953 (888.2553/10–2953) [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)
Note: Quotation is from Henderson’s paraphrasing, not a direct Zahedi quote.

November 1, 1953

As promised on Oct. 28th, Entezam transmits a non-binding working outline, pre-approved by the Shah and Premier, of the Iranian position thus far.1 Considering the “colonial” nature of the AIOC and its meddlesome behavior in the country, he says, their complete return would be “impossible”. However, it could still join a group of other oil companies, not more than 50% of British origin, to purchase Iranian oil and distribute it independently.

Once they achieve profitability, the oil companies should loan substantial sums of money to the Iranian government. Any discussion of compensating AIOC for prior losses must be worked out with said companies, not Iran. The suggestion for the World Bank to act as intermediary in a final oil settlement is welcome. In the event of any increase in oil prices, Iran must benefit at least equally with the other parties.

1 Loy Henderson to the State Department, November 2, 1953 (888.2553/11–253) [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

November 4, 1953

Following a two week period of consultations with various members of the Iranian government, Hoover leaves Tehran for London.1

1 The Ambassador in the United Kingdom (Winthrop W. Aldrich) to the State Department - November 5, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

Elwell-Sutton, p. 316

November 12, 1953

In a preemptive move, Attorney General Herbert Brownell Jr., offer to waive the threat of legal action1 against the American oil companies if they join the consortium, a violation of U.S. anti-trust laws.2 The exemption is justified by claiming it is for “the security interests of the United States.”3

On April 21, 1953, the U.S. Justice Department had filed a lawsuit against the very same five U.S. oil companies for improper monopoly practices. (The U.S. vs. Standard Oil Company (New Jersey), Socony-Vacuum Oil Company of California, The Texas Company, Gulf Oil Corporation)

1 Memorandum of a conversation between Herbert Hoover, Jr. and the Attorney General, November 12, 1953, cited in Elm, p. 315.

2 Herbert Brownell to the National Security Council, January 20, 1954
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)


November 27, 1953

The CIA’s Kermit Roosevelt reports that while in London days earlier, Prime Minister Winston Churchill expressed to him that not only was the restoration of Anglo-Iranian relations not necessary prior to an oil settlement, he would even endorse British aid to the new regime. Furthermore, “He commented that the AIOC had really fouled things up in the past few years and that he was determined that they should not be allowed to foul things up any further.”1

1 Information Bearing on Current Discussions with the British Concerning Iranian Oil Settlement (Kermit Roosevelt, Chief of the Near East and Africa Division, Directorate of Plans, to CIA Director Allen Dulles - Nov. 27 attachment to Dulles’ Dec. 1 memorandum)
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, (2017)

December 3, 1953

AIOC Chairman William Fraser invites foreign (mainly U.S.) oil companies to London for “purely hypothetical” discussions.1

1 A. E. C. Drake, letter to Mr. E. Holman, Standard Oil Company (New Jersey), Dec. 3, 1953. The letter is from Fraser, yet signed by Drake for some reason.

Memorandum by State Dept. Legal Adviser Herman Phleger, December 8, 1953 [link]

The State Department approved the meeting, but insisted that Hoover be present.

December 4, 1953

Orville Harden, Vice President of Standard Oil of New Jersey, writes Sec. Dulles to ask if there would be any U.S. objection to their acceptance of the AIOC proposal to meet in London. Harden states that his company has little interest commercially, but would participate for the sake of national security.1

1 Orville Harden to John Foster Dulles, Dec. 4, 1953. Dulles’ Acting Secretary replied Dec. 8th, saying this was fine and that Hoover would be attending.

December 5, 1953

The resumption of diplomatic relations between Iran and Britain is announced in Tehran.1

1 Elwell-Sutton, p. 314-315

Orville Harden of Standard Oil of New Jersey shakes hands with Premier Fazlollah Zahedi.

December 8, 1953

While coincidentally in Bermuda, Henry Byroade, Assistant Secretary of State for Near Eastern, South Asian, and African Affairs, meets with Sir Pierson Dixon, Deputy Under-Secretary of State for Foreign Affairs, to assess the Anglo-Iranian dilemmas in Iran and Egypt.

Byroade fears a long, tedious arbitration lies ahead in Iran, jeopardizing the new regime’s political stability and futher tarnishing British prestige there. Dixon finds him “unduly pessimistic”, and dispells rumors that Britain would work to overthrow the Iranian government should negotiations not go to their liking. Britain knows the full return of AIOC is highly unlikely, adds Dixon, and is prepared to acquiesce to a consortium of interested oil companies, as Hoover and Fraser had already been discussing in London.

1 Memorandum by Pierson Dixon, December 8, 1953 [link]

December 14, 15 & 17, 1953

Representatives from eight oil companies — six American and two European — meet in London for three days of talks, with Hoover present as an observer.1 William Fraser insists that the AIOC should retain 50% interest in the proposed consortium, while receiving ample compensation from all other oil companies joining the enterprise. He also asks for an unspecified amount of compensation from the Iranians in the form of free Iranian oil, plus cash and a percentage of future profits from all future partners.

The group agree that a final deal with Iran must not surpass the most favorable arrangement elsewhere, or else it would set a baneful precedent.2

1 The participating companies were: Anglo-Iranian Oil Company (AIOC), Compagnie Française des Pétroles (CFP), Royal Dutch Shell, Gulf Oil, Socony-Vacuum, Standard Oil Co. of California, Standard Oil Co. of New Jersey and The Texas Company (Texaco).

2 W. Walton Butterworth to the Department of State — December 18, 1953
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)
   Note: Quotation is from Butterworth’s description, not a direct Fraser quote.

December 21, 1953

The new Charge d’Affaires in the British embassy, Denis Wright, and his 15 member team arrive in Tehran. Perhaps not coincidentally, the same day the military court sentences Mossadegh to three years in solitary confinement for treason.1

1 Nejati, Volume II, pp. 269-74 | Elwell-Sutton, p. 315 | Rouhani, p. 500 | The Situation in Iran — NSC Briefing, December 28, 1953 [link]

December 23, 1953

In Washington, the National Security Council listens to a report from Vice President Richard Nixon on his recent trip to Iran.

Forewarns Nixon, “it will cost us a hundred to a hundred and fifty million per year as long as the oil thing is unsettled. We must either settle it or else.”

The British, however, “are showing the same intransigence as always. Henderson is privately very pessimistic about a settlement in Iran unless somebody topside in Britain puts the screws on.” The Shah told him, “When the oil thing is settled, I will lead.”1

1 Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989), p. 854

December 28, 1953

The National Security Council attempts to anticipate how the ongoing negotiations and Iran’s eroding economy will affect the political stability of the new regime. Premier Zahedi must convince the public that he is defending their rights in the oil talks, though “Since his government has just sentenced to prison former prime minister Mossadeq, father of oil nationalization, Zahedi will find it difficult to prove that he is not a British tool”.1

1 The Situation in Iran — NSC briefing, December 28, 1953 [link]

January 4, 1954

Though Britain wants AIOC to be completely restored or, failing that, take at least 50% of multinational consortium, Iran advocates that it be divided such that no company has a predominant share. Anthony Eden, Secretary of State for Foreign Affairs, bristles at the thought, advising “we should not allow Persian ideas to harden”. Nevertheless, he concedes, Britain must prepare to accept a consortium arrangement, with the possible involvement of the World Bank.1

1 Memorandum by Anthony Eden — January 4, 1954 [link]

British Charge d’Affaires Denis Wright and Premier Fazlollah Zahedi meet for the first time (Jan. 6, 1954).

January 8, 1954

In a meeting with Anthony Eden, Sir William Fraser says that the AIOC is prepared to tell the Iranians that it has abandoned its hopes of a complete return to Iran, and will instead accept a major part in a negotiated consortium. Alarmed, Eden finds this decision “premature”, especially considering its additional impact on the British government. This, despite his prior confirmation of the consortium as a near inevitability.

Privately, Fraser confesses to Eden that he fears U.S. officials will push back hard on their desired 50% share in the consortium, and that negotiations would proceed from the assumption that the AIOC were “bad boys.”

Fraser is also keen on asking Iran to allow an AIOC mission to arrive in Abadan to survey the oil installations, but is very wary of a diplomatically damaging rebuff. Indeed, the consensus from both the U.S. and British, adds Eden, is that all signs indicate that the AIOC is still very unpopular in Iran. “Dr. Musaddiq and his ideas still had a powerful following, and the Shah was only too prone to pay attention to them.”1

1 Memorandum by the Secretary of State for Foreign Affairs | Jan. 11, 1954 [link]

Also present were Neville Gass (AIOC) and Pierson Dixon (Deputy Under-Secretary of State for Foreign Affairs).

Penultimate quote derives from Eden’s memorandum on the meeting.

Oil experts from London tour the Abadan oil facilities (Feb. 14, 1954).

February 11, 1954

A 20 member team of experts representing the oil companies, headed by former AIOC field manager Peter Cox, begins a week long tour of the oil installations in the province of Khuzestan. To their surprise, the inspection reveals that the Iranians had kept the facilities in excellent condition and were nearly ready to resume operations.1

1 Fuad Rouhani, The Political Life of Mossadegh, p. 501 | James A. Bill, The Eagle and the Lion, p. 105 | Australian Associated Press (AAP), Feb. 10, 1954 (AIOC officials flew in from London Feb. 10th, and were later accompanied by American and French experts)

February 18, 1954

Sir Roger Stevens, the new British ambassador, arrives in Tehran, representing the official end to a 16 month diplomatic interval between the two nations.1

1 Rouhani, p. 500 | Nejati, Volume II, pp. 331-32.

Diplomatic relations were severed during the Mossadegh period on October 22, 1952 [link]

Sir Roger Stevens, the new British Ambassador, arrives at the palace in Tehran to present his credentials to the Shah. He is accompanied by Entezam on the right.

February 24, 1954

After much contentious haggling with the other oil companies, the AIOC settles for a 40% interest in the consortium with the remaining 60% to be distributed among the five major American companies as well as Royal Dutch Shell, which was jointly owned by Dutch (60%) and British (40%) companies.

Fraser asks that the Compagnie Française des Pétroles (CFP), a French oil concern under heavy AIOC influence, be given an 8% share. The Americans oppose this, since that would have provided the AIOC practical control over the consortium operation.1

1 Elm, p. 316 | Elwell-Sutton, p.315 | Bill, p. 105

Fathollah Nafisi, an oil expert who was a member of Iran’s advisory oil committee, later described the talks primarily as “a tug of war between the avarice of William Fraser and the acquisitiveness of the major oil companies”. (Cited by James A. Bill from 1985 interview with Nafisi, pg. 105).

March 12, 1954

Hoover and the oil companies meet again in London, this time to determine the amount of compensation payable to the AIOC. Fraser begins by asking the other companies to pay $1.267 billion for their 60% share in the consortium. They consider Fraser’s demand excessive, saying that compensation should be based on the commercial value of the oil industry (which they estimate to be no more than $800 million), of which they are responsible for 60%.

Fraser also wants Iran to pay compensation with $110 million tons of free oil for the loss of future profits resulting from the “rupture of Agreement”.1 Its projected value is $1.463 billion at the rate of $13.3 per ton or $1.90 per barrel (seven barrels in a ton). Many, including Hoover, Henderson and the American oil companies, believe there is no justification for any such compensation, since the AIOC would be compensated for selling its rights to the oil companies.2

1 Memorandum by Anglo-Iranian Oil Company: Basis for the Settlement with Anglo-Iranian (March 12, 1954) [link]

2 Elm, p. 289 and pp. 316-18, from correspondence between U.S. and British officials on Feb. 24 and March 12 | Mary Ann Heiss, Empire and Nationhood: The United States, Great Britain, and Iranian Oil, 1950-1954, p. 204

March 13, 1954

Roger Stevens, the new British ambassador in Tehran, cautions Foreign Secretary Anthony Eden to keep in mind that “Nationalistic principles remain sacred” in Iran, and there is still a “necessity of satisfying, or appearing to satisfy, Persian national pride” during the sensitive negotiations. Mossadegh’s legacy, he says, cannot be ignored.1

1 Roger Stevens to Anthony Eden — March 13, 1954, cited in Elm, p. 318.

Stevens: “Present discussions with the Persians should not be treated as ordinary negotiations; necessity of satisfying, or appearing to satisfy, Persian national pride.”

March 16, 1954

In a cable to the State Department, Henderson points out that Iran also has hundreds of millions of dollars in counterclaims, most of which were found legitimate by French and Belgian jurists, and that asking for compensation to Britain “will generally be considered in Iran despite all face saving devices as national capitulation”.

Nevertheless, for the sake of expediency, Henderson nervily recommends that Iran’s counterclaims and AIOC’s claims for compensation should simply cancel each other out.1

1 Loy Henderson to John Foster Dulles — March 16, 1954, cited in Elm, pp. 317-318.

March 17, 1954

William Fraser’s outrageous demands unite Henderson, Hoover and Dulles in their indignation. In reaction, Sec. Dulles sends a message to Anthony Eden threatening to break off negotiations if Fraser does not moderate his stance.

To defuse the situation, Eden responds that instead of the $1.463 billion worth of free oil arrogated by Fraser, Iran could pay only “a net sum in the order of £100 million” ($280 million).1

1 Elm, p. 317

March 19, 1954

After a week of haggling in London, Fraser agrees to receive a sum of $600 million from the other companies, but wants it mostly in oil at the price of 10¢ per barrel. As for Iran, Fraser expects £100 million in compensation, a demand deemed completely unwarranted by the American diplomats.

The British circumvent this U.S. objection by assigning Roger Stevens to negotiate directly with Iran on the question of compensation. Recognizing the likely collapse of negotiations otherwise, the Americans once again cave to the British, allowing them to deal with Iran as they see fit.1

1 Winthrop Aldrich to the State Department (March 18, 1954) | Loy Henderson to Sec. Dulles, March 20, 1954, as cited in Elm, p. 318.

Abdollah Entezam, Denis Wright and Premier Fazlollah Zahedi (Jan. 12, 1954). “There were some difficult moments and exhausting afternoon and evening sessions in a stiflingly hot, un-airconditioned room before agreement was reached...”, Wright recalled in 1991.

March 21, 1954

At Entezam’s request, Amb. Stevens arranges for an interview with The Times journalist/spy Shapoor Reporter, a well-connected double agent for the U.S. and British who had helped in the downfall of Premier Mossadegh.

The softball questions, “designed to elicit a certain amount of information without embarrassing Entezam”, are largely constructed by Stevens himself, and, it is agreed, will be published at a time coinciding with the conclusion of talks in London.

In an off the record aside, Entezam admits to Reporter that all the government really wants is “decent window dressing”.1

1 Roger Stevens, March 27, 1954, British Foreign Office [link]

Date is an approximate guess. According to Stevens’ letter, Entezam approached him “some 10 days ago” — the interview occurred sometime after.

March 27, 1954

In a statement to both houses of parliament, 34 prominent nationalist and religious leaders warn against any agreement which would “put to waste all the struggles, privations and sacrifices of the Iranian nation in the quest to recover their national rights”.1

1 Nejati, Volume II, p. 348 (translated from Persian by Ebrahim Norouzi)

Herbert Hoover, Jr. with Ali Amini.

April 11, 1954

The representatives of the eight Western oil companies arrive in Tehran for talks with Iran’s negotiating team, headed by Finance Minister Ali Amini. The other two members of the team are S. Bayat, Managing Director of the National Iranian Oil Company (NIOC) and Nuri-Esfandiari, a member of the Plan High Council.1

1 Nejati, Volume II, p. 335 | Elm, pp. 319-20 and 383, #40

April 13, 1954

Henderson and Hoover hold an an hour and a half conversation with the Shah, who is skeptical of British intentions, worrying particularly about payments in sterling currency pressed by Britain. They assure the Shah of British sincerity and fair mindedness, but Henderson notes internally, “[the] British [are] obviously playing [their] cards very close to [the] chest and have refused [to] consult with us regarding their full intentions.”1

1 Loy Henderson to the State Department — May 17, 1954 [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

April 14, 1954

Formal talks between the Iranians and the oil company representatives, with the presence of technical and legal advisers on both sides, begin. Participating are Orville Harden, VP of Standard Oil of New Jersey, Harold Snow, AIOC Managing Director, John Loudon, Managing Director of Royal Dutch Shell, Sir Roger Stevens, Herbert Hoover, Jr., Denis Wright, and two experts from the British Treasury department and Ministry of Fuel and Power. Amb. Loy Henderson and William Rountree of the U.S. embassy, who had a history of close association with the U.S. oil companies, are present as observers.

From the outset, Stevens takes a hard line, demanding that the two Iranian oil advisers be replaced by Torkild Rieber, a renowned oil expert who is in fact working for the consortium, and his American legal assistant Wortham Davenport. At one point, when the Iranians ask them how much oil Iran can sell on her own, they are told, “As much as you can pour in your hat”.1

On the principal question of who should operate the oil industry, the Iranians wish to remain in charge unless the consortium agreed to run the industry as their agent. The oil companies, however, insist that management and operational control should remain fully in their hands. Ultimately, the deep differences between the parties bring the talk to a halt, leading to its suspension and the departure of the Western negotiators from Tehran.2

1 Elm, pp. 320, citing two 1987 Persian language books by Fuad Rouhani.

2 Rouhani, pp.502-03 | Elwell-Sutton, p. 318-19 | Elm, pp. 318-21 | Nejati, Volume II, p. 335

Rieber was also the former chairman of Texaco and had previously met with Premier Mossadegh in 1951.

April 25, 1954

The Shah tells Henderson “that he could never accept the kind of arrangement the oil consortium is proposing”, according to a CIA report based on information from Henderson. “Its plan to incorporate two companies in Britain which would produce and refine Iranian oil is particularly preposterous, according to the Shah, and is “illustrative of the consortium’s ignorance or callousness toward Iran’s feeling.” The Shah concludes by saying that Mossadegh was not the only Iranian who could say “no.”

Though the Shah and Ala appear allergic to British domination, Zahedi is far more conciliatory, for “the desperate need of Iran for revenue from oil production and Zahedi’s apparent recognition that the continuation of his regime depends on a settlement will cause him to exert every effort to make a satisfactory arrangement.”1

1 Iranian Reactions To Oil Consortium Proposals — April 28, 1954 [link]

April 30, 1954

While negotiations are on hold, the AIOC suddenly makes a tactical move and announces that it is no longer asking Iran to pay compensation for the loss of future income, but instead wants 100 million tons of free oil (worth $1.33 billion at market price) for having been deprived of oil revenue since nationalization.

The Iranians reject the new claim, arguing that in fact it was the British who refused to buy Iran’s oil, even at a much discounted rate. What’s more, they present their counterclaims of more than £300 million ($840 million) for matters such as back taxes and royalties, Iran’s share of the AIOC reserves and dividends as well as the loss of millions of dollars due to the British imposed oil embargo.1

1 Elm, p. 322

May 15-17, 1954

Talks between the consortium and Iranian representatives, mainly focusing on management and agency arrangements, continue in Tehran. Entezam and Amini express anxiety over the difficulty in coming to agreement, and ask Hoover to intermediate. Hoover says he would do so only if parties jointly request it, lest his assistance be misconstrued.1

1 Loy Henderson to the State Department — May 17, 1954 [link]
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

May 26-27, 1954

Hossein Ala informs Henderson that the Shah has the impression that Zahedi is disliked by the U.S. and particularly Britain, and is therefore thinking of replacing him to safeguard the consortium process. The next day, the Shah asks Henderson directly if this would be a good idea. Henderson assuries the Shah that Zahedi is perfectly acceptable to them, and that “it would be preferable not change horses in mid-stream unless really necessary.”

Yet confidentially, Henderson writes that Zahedi is indeed vulnerable and has made poor decisions like appointing poorly-reputed officials, “rather stupidly” opening himself up to constant charges of corruption.1

1 Loy Henderson to the State Department — May 28, 1954
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

May 27, 1954

Hoover presents his oral report on the status of negotiations at the 199th Meeting of the National Security Council before an array of high ranking officials including President Eisenhower and the Dulles brothers.1 Speaking frankly about the exhaustive nature of the multinational talks, constituting in his view the largest commercial deal ever arranged, Hoover states that the chances of a final settlement are about 75%.

One stickler was that the British were insisting the operating company in Iran be incorporated in England, essentially amounting to management control — anathema to the Iranians. Yet according to Hoover, the Iranians would have to accept foreign control as they are “incapable” of efficient management. After this update, Eisenhower and Sec. Dulles praise Hoover for his persistence and patience.2

1 CIA Director Allen Dulles and Secretary of State John Foster Dulles

2 Memorandum of Discussion at the 199th Meeting of the National Security Council, Washington, May 27, 1954 — S. Everett Gleason
   Foreign Relations of the United States, 1952–1954, Iran, 1951–1954, Volume X (1989)

June 14, 1954

Various British and U.S. diplomats debate the question of the nationality of the operating companies, location of a holding company and servicing company, and residence of a Managing Director. Hoover indicates that the U.S. and Shell prefer Dutch nationality, and all agree on a British holding company. AIOC wants a London based Managing Director, but the other companies and the Iranians alike think he belongs in Iran.1

The CIA reports that although the Shah believes Zahedi is deeply unpopular due to “widespread corruption”, he will maintain his support for fear that any appearance of friction between them would jeopardize oil negotiations.2

1 Middle East Oil Committee memo — June 15, 1954 [link]

2 Corruption in the Zahedi Government — CIA Information Report, June 14, 1954

June 22, 1954

Talks between Iran and the consortium negotiators officially resume in Tehran. This time, Howard Page, vice president of Standard Oil of New Jersey, acts as the chief representative of the American companies, replacing his colleague Orville Harden, who had fallen ill.

Page had earned the trust of the British for his staunch support of their imposition of the Iranian oil boycott. Not surprisingly, when the Iranians ask Page for a greater than 50% share of the consortium profits, he swiftly turns it down.

1 Elm, pp. 323-24 | Rouhani, pp. 502-03

Ali Amini, Abdollah Entezam, John Loudon, Harold Snow, Orville Harden, Fazlollah Zahedi.

July 8, 1954

Believing that the embattled Zahedi’s hold on power is tied to a successful response to a final oil settlement, the CIA employs psy-ops techniques to bolster his image. The agency finds it efforts most effective, noting, “The considerable amount of propaganda put out over the principal informational media has probably increased the chances of public acceptance of an oil agreement, if one is concluded. Propaganda and political action has helped Zahedi retain the premiership in the face of strong pressure from rival political factions.”1

1 Quarterly Report Prepared in the Directorate of Plans, Central Intelligence Agency — July 8, 1954 [link]

August 4, 1954

The negotiatiors reach an agreement based primarily on terms set by the oil companies.1

In a personal letter, President Eisenhower expresses his “deep appreciation” to Herbert Hoover, Jr. for his work in reaching a successful oil settlement, “due in significant measure to your expert knowledge of the international oil business, to your persistence and to your skillful diplomacy”.2

The President also writes Loy Henderson, commending the Ambassador for his “tireless patience in the face of repeated frustration”.3

1 Elm, pg. 324

2 Letter to Herbert Hoover, Jr., on His Contribution to the Settlement of the Anglo-Iranian Oil Dispute [link]

3 Letter to Ambassador Loy W. Henderson on His Contribution to the Settlement of the Anglo-Iranian Oil Dispute [link]

Surrounded by consortium members and news media, Ali Amini reads an announcement on the conclusion of the agreement (Tehran, August 5, 1954).

August 5, 1954

A flurry of statements, press releases and congratulatory messages are released.

Eisenhower writes the Shah, praising him for making a “valuable contribution” to the efforts and that the agreement would be “a significant step in the direction of the realization of your aspirations for your people.”1

1 Exchange of Letters Between the President and the Shah of Iran Concerning the Settlement of the Oil Problem [link]

A joint statement by Ali Amini and Howard Page announcing the oil accord is released, along with a separate statement by Page, who praises Amini as a “brilliant, capable and tough negotiator” who along with his colleagues “squeezed the maximum benefit for Iran out of every point.”1

1 Joint Statement by Government of Iran and Oil Consortium | Statement by Howard Page, Chairman of the International Consortium [link]

Ali Amini’s flag-waving statement is the most propagandistic of all, contrasting the noble “heroism” of the “unprecedented” diplomatic achievement with the misery and poverty of the demagogic Mossadegh’s policies, which nearly resulted in the “total ruin of the country”.1

1 Announcement by the Chairman of the Iranian Delegation [link]

Loy Henderson says the news “should bring joy to the heart of every true friend of Iran”, and that the ressumption of oil revenue “will assure [Iranians] a future in keeping with their glorious past”.1

1 Statement By Loy W. Henderson, U.S. Ambassador to Iran [link]

John Foster Dulles extends his “heartiest congratulations” to Zahedi and Entezam on the deal, which will benefit all parties and help maintain “peace and security on the Middle East”.1

1 Secretary Dulles to Prime Minister and Foreign Minister of Iran [link]

The Anglo-Iranian Oil Company statement emphasizes the “only” £25 million in compensation owed by Iran for the next ten years.1

1 Statement by Anglo-Iranian Oil Company | August 5, 1954 [link]

Anthony Eden sends congratulations to Abdollah Entezam. “I am particularly glad to know that it has been possible to satisfy both Persia’s aspirations and the practical requirements of the oil industry”, he writes.1

1 Message from the Foreign Secretary to the Persian Foreign Minister [link]

The British Foreign Office statement summarizes the terms of the deal and offers felicitations to the parties who brokered it, “a major contribution to the stability of the whole of the Middle East area”.1

1 Foreign Office statement dated August 5, 1954 [link]

Britain and Iran release two joint statements: one covering general compensation terms,1 the other focusing on the agreed upon currency, sterling, for all future payments to AIOC.2

“This agreement, in conjunction with the agreement to be concluded with the consortium, will settle a long-standing dispute, and it is hoped, will inaugurate a new era in Anglo-Persian relations.”1

1 Joint Statement by Iranian and United Kingdom Delegations, August 5, 1954 [link]
2 Foreign Office statement released in Tehran, August 5, 1954


John Foster Dulles proclaims the deal marks “a new era for Iran”, demonstrating that “when good will exists and people strive earnestly and realistically a way can always be found with with honor and with fairness to overcome differences.”1

1 Statement by Secretary Dulles [link]
   Dulles Hails New Iranian Oil Pact Triumphantly — Associated Press, Aug. 5, 1954


August 6, 1954

In an editorial praising the agreement, The New York Times takes the opportunity to denigrate the imprisoned Dr. Mossadegh.1

“Underdeveloped countries with rich resources now have an object lesson in the heavy cost that must be paid by one of their number which goes berserk with fanatical nationalism. It is perhaps too much to hope that Iran’s experience will prevent the rise of Mossadeghs in other countries, but that experience may at least strengthen the hands of more reasonable and more far-seeing leaders.”

1 The Iranian Accord, Aug. 6, 1954

August 7, 1954

In a message to the Shah, Winston Churchill calls the oil deal “a great advantage to both our countries”. “I am confident that you have done your best to reach an honorable agreement”, replies the Shah.1

1 Prime Minister to His Imperial Majesty the Shah [link]

August 9, 1954

In an open letter to both houses of parliament, 33 prominent activists express their objection to the agreement.1 Among the signatories are Allameh Dehkhoda, Iran’s eminent linguist, Ayatollah Zanjani, founder of the National Resistance Movement and Allahyar Saleh, Dr. Mossadegh’s former ambassador to Washington and close associate.

Moreover, the chancellor of Tehran University, Ali Akbar Siassi, signs a petition along with a dozen professors condemning the agreement. The Shah asked Siasi to terminate the faculty members involved in the petition and when he refused, the Shah fired the chancellor himself.2

1 AZADI, Quarterly Review, No, 26 & 27, Summer & Autumn 2001, p. 69
Col. Gholamreza Nejati, The Movement to Nationalize the Iranian Oil Industry and 28 Mordad, 1332 Coup, pp. 616-20

2 Bill, p. 109

August 11, 1954

At a morning news conference, Pres. Eisenhower lists recent developments that reduce the probability of a hot war: “In Iran the situation has been greatly ameliorated; it looks much better, and we are very hopeful that the new agreement will soon bring back income to Iran on the basis that they can continue to advance, raising the standards in that country.”1

Republican Senator Everett Dirksen remarks in Congress that “Only now, as a result of the excellent efforts of the son of Herbert Hoover, are they getting ready to reopen that refinery, which is so necessary to the economy of the whole world.”2

1 The President’s News Conference of August 11, 1954 [link]

2 Congressional Record

August 29, 1954

The final version of “The Iran-Consortium Agreement of 1954” and related documents are signed by Ali Amini and Howard Page. Under its conditions:1

Iran relinquishes control of its southern oil industry for the next 40 years (25 years, renewable for three additional five-year extensions at the consortium’s pleasure).

Iran must also compensate AIOC with a sum of £25 million ($70 million) — £15 million for the AIOC’s loss of oil revenue from 1951-1954, and £10 million to transfer ownership to Iran of the Naft-e-Shah oil fields, small refinery in Kermanshah and domestic fuel distribution facilities.

In lieu of 60% shares in the consortium, the American, Dutch and French companies agree to pay $600 million to the AIOC — $90 million in cash and the rest in oil or refined products, but at 10¢ per U.S. barrel, until the equivalent of $510 million has been paid off.

Two operating companies; one for exploration and production, and the other for refining, both incorporated under the laws of the Netherlands, are established.

1 Elm, p. 316, 322-25 and 328 | Rouhani, pp. 504-510 | Nejati, Volume II, p. 336 | Heiss, pp. 214-16 | Elwell-Sutton, pp. 324-25

Joint Statement by Government of Iran and Oil Consortium | Statement by Howard Page, Chairman of the International Consortium [link]

Many Iranians at the time referred to it as the “Amini-Page Contract”.

September 9, 1954

Dr. Mossadegh, still on trial in military court, issues a statement from prison condemning the oil deal as an “insult” to the nation amounting to “the enslavement of my country for 40 years.”1

1 Oil Pact Insults Iran, Mossadegh Says in Jail — Associated Press, Sept. 9, 1954, [link]

September 21, 1954

Ali Amini presents his bill to the Majles for ratification of the consortium agreement.1

From prison, Mossadegh writes a 29-page petition to the Supreme Court ostensibly regarding his prison sentence, but 27 pages are devoted to the topic of the consortium. The ex-Premier warns that passage of bill would be an act of treachery for defilement of the nationalization law, the constitution and the political and economic independence of the country. He also rebukes Amini, who had said that during the past three years that Iran’s oil stopped flowing, Kuwait, Iraq and Saudi Arabia have compensated the loss, and the world no longer needs oil from Iran. Mossadegh asks if that is the case, why is each one of the consortium companies eager for their share of Iranian oil?2

1 Elm, p. 326

2 Nejati, Volume II, pp. 346-47

Ironically, in April 1955, the State Department persuaded the major American oil companies to transfer 5% of their shares (1% each) to several small independent companies who had complained about being left out of the Iranian deal. (Elm, p. 328)

September 25, 1954

In yet another act of intimidation, Howard Page says that “The Majles will have to take it or leave it. We cannot go on negotiating for ever.”1

Meantime, with the imposition of martial law, many critics of the agreement are detained. Among them is Iran’s most distinguished oil specialist, Mostafa Fateh, who as AIOC’s Assistant General Manager was its longest serving and highest ranking Iranian employee.2

1 Elwell-Sutton, p. 326

2 Elm, p. 326

October 4, 1954

With his famous parents, the 31st President and First Lady, beside him, Herbert Hoover, Jr., 51, is sworn in as Under Secretary of State, taking over for the retiring Walter Bedell Smith.1

1 State Department press release No. 548. (Eisenhower appointed him in August).

October 10, 1954

The 18th Majles begin debating the consortium bill. Only five deputies dare to rise in opposition.

Deputy Mohammad Derakhshesh, also the head of the Teachers’ Union, whose hundreds of colleagues had been arrested for opposing the bill, speaks defiantly for a total of seven hours spread over three days. He chastises the ruling class for collaborating with the usurping foreign powers, and laments the economic, political and social hazards of the bill. To back up his argument, he presents documents covertly provided to him by Khalil Maleki and Kazem Hassibi, two well-known supporters of Dr. Mossadegh.

Meanwhile, the Shah warns dissenting deputies that a vote against the consortium is tantamount to a vote against him.1

1 Elm, p. 327 | Nejati Vol. II, p. 348

In a private meeting, the Shah tried everything to persuade Derakshesh from speaking out, but all attempts failed. The Shah’s final plea was that he be able to read the speech first to edit and make corrections. Derakhshesh refused, saying that the consortium agreement violated the Oil Nationalization Law and was against the interests of the Iranian people. Frustrated, the Shah abruptly left the room.

Source: The Text of the Imposed Agreement to Control Iranian Oil (2005, Persian) by Mohammad Derakhshesh

October 19, 1954

With Sec. Dulles in attendance, President Eisenhower presents Ambassador Loy Henderson with the highest Distinguished Service Award for his help ending the Anglo-Iranian oil dispute and preventing Iran from falling into Communist hands.1

1 Loy Henderson Honored for Iran Victory — United Press, October 19, 1954

October 21, 1954

The Majles ratifies the Consortium bill with 113 yes votes, 5 no votes and 10 abstentions.1

1 Elm, p. 327

October 28, 1954

The Senate follows suit and approves the agreement with 41 yes votes, 4 no votes and 4 abstentions.1

1 Nejati, Volume II, p. 349 | Elwell-Sutton, p. 327

October 29, 1954

The Shah, Mohammad Reza Pahlavi, signs the bill into law.1

1 Nejati, Volume II, p. 349 | Elwell-Sutton, p. 327 | House of Commons – Nov. 1, 1954

October 30, 1954

Three years after British AIOC employees completely evacuated Iran, the first consortium tanker belonging to the AIOC, the British Advocate, is loaded with crude oil in Abadan.1 During the first three days, ten American, British, French and Dutch tankers leave Abadan with a total of 135,000 tons of oil.2

1 Elwell-Sutton, pp. 326-27

2 Persian Oil Flows Again - The Spectator, Nov. 5 1954

November 25, 1954

In a speech before the House of Commons, Queen Elizabeth notes, “My Government welcome the settlement of the oil dispute with Persia and the resumption of the traditional relations between the two countries.”1

1 The Queen’s Speech On the Prorogation of Parliament

December 7, 1954

The State Department announces that interested American oil companies have until April 29, 1955 to partake in the consortium. The five U.S. oil companies in the consortium are permitted to transfer up to ⅛ of their share to qualifying partners.1

The new terms are a response to complaints from independent oil companies that the U.S. government had created a monopoly excluding other players at the behest of the AIOC and Britain.2

1 Arrangements for Participation in Iranian Oil Consortium — State Dept. press release, Dec. 7, 1954 [link]

2 Elm, pg. 328

December 16, 1954

Anglo-Iranian Oil Company directors agree to rechristen themselves with a new name — The British Petroleum Company Limited (BP).1 By this time, the value of British Petroleum stock has quadrupled, a windfall of 400%.2

1 December 1954 press release by William Fraser [link]

2 Elm, p. 328


Conclusion

Reaction to the agreement in Iran was less than jubilant. An array of Majles members, university figures, and religious leaders condemned it as a death blow to the nation’s quest for economic and political independence.

To dispel public resentment, the government embarked on a propaganda campaign. Ali Amini declared before the newly inaugurated 18th Majles, itself the byproduct of a rigged election: “We don’t claim that we have found the ideal solution to the question...or that it is what the Iranian nation has hoped for...but in comparison with other agreements that have so far been negotiated in the world, it is absolutely the best and second to none.”1

Premier Zahedi, for his part, defended the 40 year extension with an audacious assumption. In a speech before both houses of parliament, he said, “...with the extension of the agreement, in fact the losers were the British and the Americans, since after 7-8 years, nuclear power will replace oil and Iran’s oil reserves would become obsolete, thus whatever we get from the consortium after 10 years is a bonus.”2

On the other hand, Jafar Sharif Emami, a prominent pro-regime senator, boldly told the Senate that the agreement was even worse than the 1933 oil concession signed by Reza Shah and the Anglo-Persian Oil Company, as AIOC was then known. Emami said: “Wherever in the 1933 contract, there was a constraint on the operation of the company [APOC], it was abolished in the current contract, and wherever freedom of action was available to the Iranian government, that freedom has been abolished in this agreement...”.3

As to the U.S. motivation behind the formation of the consortium; Eisenhower gave a veiled explanation in his letter of August 4, 1954 to Henderson. Without even mentioning Iran or her people, Eisenhower wrote, “The present solution of the Anglo-Iranian Oil dispute...is a major achievement which will not only further our objectives in the Middle East but also contribute to our good relations with our European allies and our friends in other parts of the world as well.” In truth, the Americans had coveted Iranian oil for more than a decade. Even though the United States viewed Britain as a competitor in regard to oil, for strategic reasons the U.S. needed their cooperation to further their influence in the Middle East and beyond. This, in part, was why the U.S. was unwilling to offend Britain for the sake of Iran; no matter how unjust the British position may have been.




The consortium agreement was a complex document containing numerous provisions detrimental to Iran. These included:

Iran was excluded from the decision making process regarding oil production. While Iran preferred a higher level of production, the consortium was more concerned about their overall oil interests in Kuwait, Iraq and Saudi Arabia.

The method used to determine Iran’s share of the profit from the sale of the oil was based in part on U.S. tax laws, for the benefit of U.S. companies.

Iran agreed to expand the oil fields in the south and Persian Gulf region to eight islands, among them Gheshm, Khark and Hormuz.

The NIOC was to provide services in the oil region for housing, public transport, road maintenance, medical care and social welfare, the cost of which was only partially reimbursed by the operating companies.

Iran’s yield from the sale of refined products was based on a lengthy and complicated formula, which Amini artlessly explained: “...they [the companies] would not agree with 50-50 division of profits. Therefore it was decided to get a fixed amount for the refined products which in effect was the same 50-50 percentage, but without calling it as such.”4

To bolster Britain’s gold and dollar reserves, the oil was sold in pound sterling and Iran was paid with that currency. However, Iran was prohibited from converting more than 40% of her holdings into dollars or other currencies.5 Furthermore, there were no guarantees against devaluation of the pound by the British government, a situation Iran faced in 1949; as shortly after the signing of Supplemental Oil Agreement with the AIOC, the Bank of England proceeded to devaluate the pound by 30%. This prompted Premier Sa’ed Maraghei to request a revision, since the allotted increase royalties to Iran to about 35%, had been essentially wiped out by the devaluation.6

The wording of the agreement was subject to different interpretations, with priority given to the English text over the Farsi version.

The agreement stated deceptively: “The operating companies have received from Persia and the National Iranian Oil Co. (NIOC) a free lease with the sole and unrestricted right to operate the oilfields and refinery, on behalf of NIOC.” The misleading use of “on behalf of NIOC” falsely implied that the consortium was working as an agent of NIOC, which they had in fact adamantly rejected.

To Iran’s grave disadvantage, $510 million of compensation to the AIOC was to be paid with oil at the price of 10¢ per barrel; a 95% discount!


Oil expert Fuad Rouhani The inequity did not end there, as according to oil expert Fuad Rouhani, the cost to Iran was much greater than the publicized figure of £25 million ($70 million).

Rouhani, an adviser in the consortium talks who later became the first head of the Organization of the Petroleum Exporting Countries (OPEC), says that Iran also paid £21 million for the depreciation of the oil installations. Furthermore, Iran missed out on a sum of £51 million that, according to the 1949 Supplemental Oil Agreement, was owed to her by the AIOC. Additionally, Iran relinquished her claim of £50 million for the loss of oil revenue due to the British embargo.

Consequently, Rouhani believes that the minimum cost to Iran was £147 million ($412 million). He further claims that as the true owner of the oil resource, Iran should have been the one receiving the $510 million that the seven western oil companies paid to the AIOC as an admission fee.7

Consortium talks with Fuad Rouhani seated 2nd from right, and Ali Amini to his right.

British Lord Privy Seal Richard Stokes Rouhani’s assertion is largely corroborated by an unlikely source: Lord Privy Seal Richard Stokes. As adviser to the British government, his mission of resolving the oil dispute in Tehran in the summer of 1951 had ended in failure. Upon his return to London, Stokes confided to Prime Minister Clement Attlee that “Ever since I began to learn some of the facts concerning the oil business whilst I was in Teheran I have been very uneasy in my mind.” In reviewing the AIOC’S consolidated balance sheet for the year 1949, Stokes was taken aback by the company’s massive ‘write off’. His conclusion was that there was no legitimacy in asking Iran for reparation since “in our asking for compensation they are being asked to pay twice”. Stokes’ confession is noteworthy since at the time, Iran had full possession of the oil industry; long before the advent of the consortium. Stokes even suggested that Iran should be offered a better than 50-50 deal, in part because “Iranian oil is the cheapest to produce in the world.”8

Worse still, the cost to Iran was much greater if the 10¢ per barrel scheme is added to the calculation. As stated, soon after negotiations began the British demanded that a major portion of the $600 million compensation from the other oil companies be paid with oil at the rate of 10¢ per barrel. No reason was ever given to justify this demand, nor is there any evidence that any explicit discussion of this issue ever took place, with or without the participation of Iran.

Nevertheless, a cursory appraisal of this British scheme reveals that instead of getting $510 million in cash, BP actually got 5.1 billion barrels of Iranian oil at the outrageously low price of 10¢ per barrel. Had the consortium sold this oil, even at half the market rate (meaning $1), and paid Iran only 50% of the net profit, Iran’s share would have been greater than $2 billion dollars.

In short, British Petroleum, in lieu of $510 million, received oil with a full market value of more than $10 billion. Furthermore, the American and European companies paid their debt to BP with oil belonging to Iran, apparently without spending a penny. With this act of trickery, BP and the other consortium companies made out like bandits, while Iran became the victim of what was perhaps the world’s greatest oil robbery.

As far as we are aware, this finding of ours — the specific calculation and its enormous implications — has never been stated before.


At the time, of course, the U.S., British, and Iranian governments alike all portrayed the deal as a great victory for the Iranian nation. Yet years afterward, some of these same figures were more forthcoming.

In 1983, Ali Amini justified his lackluster defense of Iran’s national rights by recalling that whenever he pressed for better terms, Howard Page would say “The U.S. government has asked us to find markets for your oil; if you don’t like our terms we will go back home.”9

Four years before he was vanquished by the revolution, the Shah of Iran told a similar story. In a 1975 TV interview,10 the monarch complained bitterly about the West’s decades of shameful treatment: “...we have just been terribly exploited”, he said acidly, “in a very mean way”.

Asked the interviewer, “But weren’t you a kind of partner to that exploitation when you signed the Oil Agreement of 1954, for instance?”

“Well, we had no choice — what else?”, replied the Shah....“They dictated to us....they were telling us, ‘Well, take it or leave it’, and we had to take it.”

The Shah’s frank words aligned closely with those of his late nemesis. In 1954, when Dr. Mossadegh, still in prison, learned about the decision to amend the Nationalization Law for ratification of the consortium agreement in the Majles, he told his lawyer:

“This is not a real government. A pillager is better than them. What difficulties have we not endured? So many nights and days that we lived in uncertainty? I read in the newspaper that they would like to change the nine-point procedure act in the Majles. Do whatever the British want. Sir, this is not a country. Nor a nation…. Last night, I couldn’t sleep until morning, thinking of all the wasted anguish and suffering…. This country is disappearing, our beloved country, we wanted to become independent, almost made it, isn’t it a calamity that they are giving away the country?11




Notes:

To convert the British pound to the dollar we used the $2.80 = a pound for calculation.

1 Nejati, Volume II, pp. 344-45. (Translated by Ebrahim Norouzi)
2 Rouhani, pp.511-512, from a Zahedi speech in the Majles on September 27, 1954. (Translated by Ebrahim Norouzi)
3 Nejati, Volume II, p. 349. (Translated by Ebrahim Norouzi)
4 Mohammad Ali Movahed, The Oil Nightmare: From the Coup of 28 Mordad to the Fall of Zahedi (1999), pp.370-71. (Translated by Ebrahim Norouzi)
5 Heiss, p. 210
6 Elm, pp.55-56
7 Rouhani, p. 510 | Elm, p. 384 #65 | Heiss, 215-16
8 Dick Stokes to Clement Attlee, September 14, 1951. Source: A Prime-Minister Remembers: the War and Post-war Memoirs (1961) by Francis Williams, pp. 249-251
9 Oil, Power and Principle by Mostafa Elm, pg. 324, from an interview with the author in Paris, May 22, 1983
10 CBC Interview with Adrienne Clarkson, The Fifth Estate (1975). See video below.
11 The Political Woes of Dr. Mossadegh, Jalil Bozorgmehr, 2nd printing, (2001), pp.47-8. (Translated by Ebrahim Norouzi). Bozorgmehr was Mossadegh’s court-appointed attorney.

CBC Interview with Adrienne Clarkson, The Fifth Estate (1975).



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Related links:

The Iran Oil Consortium | Archive of Documents (1953-1954)

Indecent Proposals — Oil, Iran, and the Anglo-American Art of Non-Negotiation (1951)

Assessment of the Iranian Situation — First Examination of Overlooked CIA Document



MOSSADEGH t-shirts — “If I sit silently, I have sinned”

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