By: Jacqueline Gill
On this day in 1909, William Knox D’Arcy founded the Anglo-Persian Oil Company (APOC)—today known as BP—in conjunction with the Burmah Oil Company. In 1901, D’Arcy’s emissaries signed a contract with the Shah of Persia which entitled him to scour for oil beneath 480,000 square miles of Persian land. D’Arcy exchanged “£20,000 in cash, plus shares of equal worth, £650 in annual rent, bribes to notables and 16 percent of net profits” to the Persian government for the right to the land and its oil for sixty years. He abandoned the search for oil in April 1908 after seven years of prospecting left his enterprise nearly penniless. Fortunately for D’Arcy, the project’s chief geologist, George Reynolds, ignored D’Arcy’s request to halt work, and by sheer luck, Reynolds struck oil on May 26, 1908.
Overnight, D’Arcy became the chief proprietor of what would become the most profitable foreign enterprise of the British Empire. APOC’s profits skyrocketed in 1914 when Winston Churchill convinced the British parliament to pass a bill which made the United Kingdom the majority shareholder of the company. Churchill’s acquisition was quite timely, as the bill passed just two weeks prior to the assassination of Archduke Franz Ferdinand in Sarajevo. Cheap oil from Iran became essential to the British war effort during WWI, and Churchill regarded any threat to Britain’s ownership of APOC to be a major threat to the kingdom’s national security. D’Arcy profited handsomely from the government’s constant demand for oil. Despite Iranian dissent, the British maintained control of Iranian oil throughout the world wars. By the 1950s, “the oil company had somehow become a symbol of British greatness.”
In 1951, frustrated by the loss of billions of dollars-worth of oil revenue to the British, the Iranian parliament voted to nationalize the oil industry. In response, the British imposed a trade war on Iran. British nationals abandoned Iran’s oil refinery, and convinced foreign governments, including the United States, to boycott Iranian oil, effectively destroying the Iranian economy. In 1952, the government of the United Kingdom submitted a case against Iran to the International Court of Justice. The British government accused the Iranian government of violating past contracts regarding APOC through its attempt to nationalize its oil industry. The case was thrown out due to a lack of the court’s jurisdiction in Iran, but the British employed extralegal measures to ensure their success. In 1953, the British turned to U.S. President Dwight D. Eisenhower, and to the CIA to eradicate the democratically elected Iranian prime minister and the leader of the Iranian oil nationalization movement, Mohammad Mossadegh. Within a month, the CIA removed Mossadegh; it was the first time the CIA had ever overthrown a government. In his place, the United States allowed Reza Shah to return to power as an unelected dictator.
The CIA ensured western control over Iranian oil for the near future, but Reza Shah’s return to power posed a great threat to future U.S.-Iranian relations. Both the Americans and the British underestimated the Shah’s disconnect from the general population. During the years between the Shah’s reinstatement and the 1979 Iranian Revolution, the Iranian general public labeled him as a puppet of the United States. The Shah’s western policies did not correspond with the culture and economic needs of the Iranian people. On January 16, 1979, the Shah fled Iran, and Ayatollah Khomeini became the Supreme Leader of the new Islamic Republic of Iran. The Ayatollah claimed the United States as its number one enemy. In response to Iran’s seizure of the U.S. Embassy in Tehran, the United States began three decades of sanctions against Iran.
To this day, mistrust driven by past British oil control and American intervention clouds foreign relations between Iran and Western powers. The 2015 Iran nuclear deal signals a step in the direction of peace. Still, decades of mistrust cannot be healed overnight.