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History, Mosaddeq and Oil Nationalization

AIOC, world superpowers, Western bloc, important natural resource, foreign interference

In the mid-1940s Mohammad Mosaddeq, an Iranian statesman and a member of the Majlis, emerged as the leader of the oil nationalization movement. This movement sought to transfer control over the oil industry from foreign-run companies to the Iranian government. Throughout his political career, Mosaddeq consistently advocated three goals: to free Iran of foreign intervention, to ensure that the shah remained a democratic monarch and not a dictator, and to implement social reforms. He believed ending foreign interference was a prerequisite for success in other areas, and he was convinced that as long as the AIOC controlled Iran's most important natural resource, foreign influence was inevitable. Beginning in 1945 he led a successful campaign to deny the Soviet Union an oil concession in northern Iran. Although he resisted joining political parties, Mosaddeq agreed in 1949 to head the National Front, a coalition of several parties that supported oil nationalization. Within a year the National Front had members in cities and towns throughout the country and had become adept at organizing mass political rallies.

Conservative political groups, backed by the shah, opposed nationalizing the AIOC, partly because they believed such a course would cause irreparable harm to relations with Britain and partly because they distrusted Mosaddeq's populism. However, as the nationalization movement grew, fewer and fewer politicians openly challenged Mosaddeq on the oil issue. In an effort to forestall nationalization, the shah appointed military officer Ali Razmara as prime minister in 1950. This move increased the scale of demonstrations in favor of nationalization and against a government that increasingly was denounced as a puppet of foreign interests. Razmara was assassinated in 1951 after only a few months in office, and the more militant supporters of nationalization applauded his death. Sensing the popular mood, the Majlis passed a bill nationalizing the AIOC, then took the unprecedented step of appointing Mosaddeq prime minister over the shah's objections.

In response to these events, Britain enforced a blockade on oil exports from Iran, a move that deprived Iran of foreign exchange. Although Iran had not relied on oil revenues prior to 1951, Mosaddeq's development budget anticipated this income; its absence severely hindered efforts to stimulate the economy and implement social reforms. Attempts to secure foreign financial assistance proved unsuccessful because most countries and international financial institutions feared offending Britain. The escalating crisis also discouraged private investment inside Iran. Mosaddeq, like many other Iranian political leaders, hoped the United States would intervene to resolve the crisis. Initially, the United States tried to mediate a compromise. By 1952 it had persuaded Britain to accept the principle of oil nationalization. However, the various diplomatic efforts ultimately failed to resolve the dispute.

In early 1953, when a new administration came to power in the United States, U.S. policy toward Iran began to change. The United States now became sympathetic to British arguments that Mosaddeq's government was causing instability that could be exploited by the USSR to expand its regional influence. As the Cold War escalated, world superpowers began to interpret political developments around the globe as "wins" or "losses" for the U.S.-led Western bloc and the Soviet-led Eastern bloc. Although Mosaddeq advocated Iranian neutrality in the Cold War conflict, neither side wanted to "lose" Iran. Consequently, the United States decided to use its Central Intelligence Agency (CIA) to help overthrow Mosaddeq. By this time, many conservative politicians in Iran, some senior military officers, and the shah were prepared to work with the CIA to bring down the Mosaddeq government. The coup, carried out in August 1953, failed initially, and the shah was forced to flee the country. After several days of street fighting in Tehran, however, army officers loyal to the shah gained the upper hand. Mosaddeq was arrested, and the shah returned in triumph.

The Iranian government restored relations with Britain in 1953 and concluded a new oil agreement the following year. Under the new agreement, the concession formerly held by the AIOC passed to a consortium of British, Dutch, French, and U.S. oil companies; this consortium was to share the profits of oil operations in Iran with the Iranian government. Although the agreement increased Iranís share of the oil profits, production levels and sale price remained under foreign control.

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