The change of government in Persia and the sharpening of its oil policy seem bound to usher in a new period of anxiety. [Premier Mossadegh took office April 28th] The troubled and obscure situation in which the oil industry has become entangled in Persia will be better understood if it is considered in the larger setting of the world-wide oil industry, which operates in strange conditions in many parts of the world.

Oil companies follow the oil deposits; the production branches go where exploration leads them, and often this is to fields of operation which no trader would choose with a light heart. Discoveries of oil, and its development as one of the principal sources of energy for man’s use, have within living memory brought sudden activity and the promise of great wealth to a succession of countries and regions.

Only in the United States, the greatest of the oil-bearing countries, have the effects of oil development differed essentially from the experience of all those other countries that now contribute on a large scale to the need of the Western world for oil. The United States, having already an industrial economy of its own, with capital, technical skill, industrial manpower, and a developed market, was able to absorb the oil industry into its own system, using its earnings and its products directly for further growth and development. Even Venezuela, the main rival to the Middle East as an exporter of oil, has found — and is still finding difficulty — in turning its huge income from oil to the best account in general economic and social advancement

These are not problems that will solve themselves. A recent review of economic conditions in the Middle East prepared by the United Nations observed that because of their lack of economic development the countries of the Middle East “are at present little able to benefit from the economic activity which centres around the petroleum industry . . . The technological gap between local industries and the petroleum industry will have to be reduced before the situation can be greatly changed.”

[Also: “There is therefore, a striking contrast between the huge potential wealth represented by the oil reserves of the Middle East and the current benefits so far derived by the countries to which such reserves are attributed.”]

Persia is a more sophisticated society than her neighbors, a relatively complex economy, an ancient and self-conscious nation; these characteristics partly explain why the helpless economic stagnation of Persia in the years since the war — stagnation in every branch of production except oil — has been accompanied by mounting social disturbance and vociferous national protest.

The oil company is not to blame for the failure of the Persian economy to grow, but as the one advanced enterprise, the one important source of new wealth, and the principal foreign interest in the country, it is inevitably the target for resentment. Within the limits of responsibility generally accepted by trading concerns, the company has conducted its affairs with credit; if room for criticism exists it concerns only a failure of prescience or initiative outside those accepted limits.

No true incompatibility divides the British from the Persian interest in Persian oil. If the production of oil in Persia were cut off from the organization that brings it to market in many countries, the loss to the Western world would be serious; it would not, however, be irreparable, while the loss to the Persian economy would indeed be difficult to repair.

When, therefore, the agitation against the Anglo-Iranian Oil Company hardened into an outright demand for “nationalization”, reason suggested that the Persian government — unable, as it seemed, to resist the demand — should seek to give “nationalization” a meaning that would not run counter to this vital Persian interest. A solution that would offer Persia both larger revenue and national participation in the oil industry ought not to be impassible to devise.

But the demand for “nationalization”, however imperfectly apprehended, has come to be fiercely held. Its gathering momentum has allowed time neither for reflection in Teheran nor for proposals from London.

Inflamed opinion in Persia found fresh ground for complaint in the fact that British and American representatives discussed in Washington the implications of the Persian oil dispute for their governments. The plain truth is that the talks were not only necessary but overdue. The need for a better correlation of British and American policy in the Middle East is urgent.

In Persia the British and American attitudes towards economic, financial, or technical forms of aid have signally failed to support one another; a great deal can be blamed on Persian faults, but the fact remains that the Persian economy has been going downhill, and the two Western governments principally interested in the area, being equally concerned to check the decline, have never been able to concert measures to do so.

Britain and the United States are jointly concerned at the possible lass of the oil, and jointly interested in the possible repercussion of events in Persia on the neighboring oil-bearing countries. In the dangerous phase that has now opened, British and American consultation will need to be close. The proposed one-sided breach of Persia’s solemn obligations under the lease to the Anglo-Iranian Oil Company is bound, by right as by interest, to be resisted; but it remains a fact fundamental for the policies of Western governments’ and companies in all under-developed regions, and especially in those with mineral wealth that, unless means are devised to stimulate and improve the economy and enable th people to help themselves, foreign industrial enterprises will inevitably suffer frustrations and be exposed to hazards.