American Socialist, April 1955

How the international oil cartel carved up the oil resources of Iran after the overthrow of Mossadegh. A full account of a little-known story by an expert in the oil-industry field.

The Iranian Oil Grab

By Harvey O'Connor

(O’Connor, whose most recent book ‘The Empire of Oil’ will be published by Monthly Review Press in the fall, is the well-known author of ‘The Guggenheims," ‘Steel-Dictator,’ ‘Mellon’s Millions,’ and other important works.)

BACK in the 1920’s it was called Dollar Diplomacy when the State Department forced the British to move over and let Standard Oil in on Iraq’s petroleum. Decent people either deplored such strong-arming or preferred not to contemplate it. Nowadays when the State Department forces the British to move over and let Standard in on Iranian oil, it comes under the heading of Fighting for the Free World, and our chief agent in the deal is appointed Under Secretary of State. His name just happens to be Herbert Hoover, Jr., the fellow who now runs Uncle Sam’s foreign affairs when the peripatetic Secretary is peripatting around the globe, sticking his Lingers into holes in the dikes to hold back the Red Tide.

The leading facts about Iran are pretty well known, even if not openly acknowledged. The Persian oil-field job, from the day in 1901 when an Australian soldier fortune, William K. D’Arcy, cajoled a concession covering most of the country from the Shah, has been perhaps the single biggest bit of legal larceny the world has ever statement is made putatively and will be cheerfully withdrawn on adequate proof that a bigger job was elsewhere.) On the deal rose Anglo-Persian Oil, known as Anglo-Iranian, now hélas!, merely British Petroleum. Anglo’s assets of $1,016,400,000 and its 1953 profit of $70,000,000 contrast with the poverty-stricken land, the bankrupt government and the squalid company of Abadan on the Persian Gulf. For years the nervous Nellies of the State Department had feared that the Russian Bear would descend on this corrupt mess and take it over by default, but the steady fellows in the Foreign Office knew the situation was under control. Wasn’t the Shah their man, and weren’t the headmen tribes of southern Persia in their pay?

When the boil finally burst, it turned out that the Russians were nowhere around; the needle was wielded by a bunch of nationalists allied with the atavistic Moslem Brotherhood people (who think that Persia about the time Omar’s ‘Rubaiyat’ was a pretty ideal place). It was Ayatollah Kashani, the Moslem leader, who said that oil stank in Persia and he’d prefer any day a rose blooming by the ruins of the Temple of Solomon to a noisome oil well. The new prime minister, Mossadegh, was by no means so other-wordly; he believed against all the evidence of Iran’s past history that something good might come out of the petroleum Nature had stored so lavishly beneath her rocky soil, so he promptly nationalized it and drove out Anglo.

WHAT happened when Anglo-Iranian—and then all the brothers of the international oil cartel—tried to rescue Iran from a fate worse than death is something for the historians (and don’t think they’re not busy grinding out a lot of dry books fully exhuming dates and personalities, in which all the relevant facts are marshalled and no conclusion worthy of an eighth-grader is drawn). One relevant fact which is mentioned, but barely, was the bothersome business that led to Mossadegh’s abrupt overthrow.

You may remember that Anglo-Iranian and its business agent, the Foreign Office, had been speculating on Mossadegh succumbing because his government would become bankrupt and his people hungry. These hopes, so flattering to the Christian gentlemen in charge of Anglo and the Foreign Office, turned out fruitless, for bankruptcy and hunger are the rule and not the exception in Iran. It was at a certain point that Action with a capital A became imperative. That point is usually slurred over in the published accounts although it sticks Out obviously enough, like a thorn in the thumb. The nationalized Iranian oil company was beginning to sell appreciable tonnage of oil products to the Italians and the Japanese. Although Her Majesty’s Navy was hauling the tankers into Aden, Singapore and other convenient ports because they carried ‘stolen goods,’ a good bit of the oil was seeping through the international cartel’s embargo. All negotiations having snagged, Mossadegh was about to play his trump card—he would sell Iranian oil to all comers at half price. This was a good bit like a five-alarm in a firehouse—all hands turned out immediately.

Just what happened is not known publicly. It is a cloak-and-dagger story in the files of Allen DuIles’ Central Intelligence Agency, which has been bragging a good bit lately of its proficiency in such situations. Suddenly the Iranian Army was swung over from nationalism to the cartel’s service, Mossadegh was out, and quite a few people were hanged. General Zahedi, the new dictator, announced publicly that Iran would not commit the Sin against the Holy Ghost, the unpardonable transgression, selling oil below the price fixed by Standard, Royal Dutch/Shell and Anglo. After that it was merely a matter of detail.

To say that is not to detract from the difficulty of Herbert Hoover, Jr.’s, task or to bedim the shining medals he won for his achievements in Teheran, London and New York. It took Junior from September 1953, to August 1954, to unravel the tangled skein. First, he had to accept the fact of Iranian nationalization of its oil. Whatever may be the prowess of our CIA boys with generals and colonels in Guatemala and elsewhere, they didn’t even try the gargantuan task of trying to make the Persian people love Anglo-Iranian. A formula had to be found that left the title of ownership to Iran and the fact of ownership to the oil cartel. Finally it was agreed that the new oil consortium would act ‘on behalf of’ the National Iranian Oil Company.

The second job was to reconcile Anglo-Iranian to the facts of life, or, to be blunt about it, that the big U.S. companies wanted in. The British can be stubborn on such things, particularly when pelf supports pride, and especially when uncouth Yankee cousins from across the sea demand their share of the swag. Anglo-Iranian stood in de jure, if not de facto, ownership of Iranian oil, according to the tenets of the international oil cartel. But the cold fact was that as a result of expropriation and dislocation of the world oil trade caused by the drying up of the Iranian supply for more than two years, this oil could come back on the world market and find adequate outlets only if the U.S. companies agreed to absorb some of it. The wells of Arabia, Kuwait and Iraq had been opened to make up the Iranian deficit; there was no current need for Iran’s oil. If Anglo hoped to market Iranian oil, it could do so only with the consent of Standard and its U.S. allies, and that consent had a big dollar sign on it. Anglo put up a long and bitter fight but was forced to yield. That took months.

In the final deal, a consortium (this sounds better than trust or cartel) was set up, in which Anglo-Iranian had a 40 percent share; its sister company, Royal Dutch/Shell, 14 percent; and the five U.S. companies, Standard of New Jersey, Socony, Standard of California, Texas Company and Gulf, 8 percent each. As the Compagnie Francaise des Petroles was a partner with the British companies and Standard of New Jersey in the Iraq Petroleum ‘red-line’ agreement, it had to be cut in for 6 percent. So Anglo, which had had 100 percent, emerged with only 40 percent; with Shell’s help, it had 54 percent.

The consortium values its properties (technically, the property of the Iranian government) at $1,000,000,000. So Anglo’s share of this is $400,000,000. Profits for 1957, based on stipulated production, will be $89,700,000 for Anglo, $26,600,000 for Royal Dutch/Shell, and a mere $15,200,000 apiece for the five U.S. companies, plus a pourboire of $11,500,000 for the French company.

The consortium will make a payment equal to its profits to the Iranian government which, for the first time in history, will get an appreciable sum for its property. Before Mossadegh, Anglo was paying about 12 1/2 percent of its take to Iran in return for the oil it gathered. The government will be obliged, however, to forego some of its revenue, which is to be applied as compensation to Anglo for nationalizing the oil. This amounts to some $84,000,000.

JUST who owns Iran’s oil is a nice question. Vice President Howard W. Page of Standard of New Jersey,. was one of the three top negotiators, said it was ‘that even top-notch lawyers will argue themselves about.’ As he put it, the difference between ownership and the consortium agreement is ‘about same as whether someone sells you a car, or sells you full rights to its use for the life of the car.’ Obviously a legal point!

Given the state of affairs at the moment in the East and the propensity toward assassination cultivated by many Moslem Brotherhood members, it would take a optimist to believe that the agreement General Zahedi signed for 40 years will last that long. The members of consortium are realists, not optimists; they have cheerfully taken the attitude of ‘after us the deluge.’ They console their stockholders by pointing to the rate of profit— a $200,000,000 a year by 1957 on something which in cost them not a penny, as Anglo-Iranian had amortized its investment many a time over before 1951.

There arc a few angles to be considered. One is the internal situation in Iran. About that there are only a few hints from time to time in the business press, but World Interpreter, Devere Allen’s paper up in Connecticut, which has unusually good sources around the globe, reported January 14:

"The background weakness in the current situation control, is the Zahedi regime, which is more cooperative on the oil question, but which is regarded internally as corrupt, repressive, harsh with political opponents whether or not these are pro-Communist or anti-Communist, and hostile to long-needed social reforms. Individual Americans and other outsiders are treated courteously but there is popular animosity toward the United States which has taken credit for putting and keeping Zahedi in power. Objective observers do not exclude the possibility of another political upheaval, later, unless the regime changes its ways.”

Zahedi himself is quite a type. It was he whom the Allies had to push out of the way during World War II because he was openly pro-Nazi and had made Teheran a base for Hitler. A strange bedfellow now! Characteristically, when Zahedi needed an informed adviser during the negotiations with the consortium, to whom did he turn but to Torkild Rieber, one-time head of the Texas Cormpany. Torkild had to get out of Texaco shortly before the war because of his too open pro-Nazi sympathies, and he now heads a minor U.S. oil company. Another fitting bedfellow!

The New Statesman and Nation of London, which has protested the Iranian terror, carried a letter in its January from a ‘Persian Student,’ which makes interesting reading:

"It was the Americans, rather nervous at the time that the oil agreement was being concluded, who discovered a Communist plot. They were probably right, for there is always some plot or plan afoot amongst our extremists. It was, however, when the Americans insisted on arrests that the Administration, almost deliberately, rounded up the wrong people. There was, indeed, something frivolous about the whole affair until the Americans insisted on sanctions, and 21 alleged leaders were shot after a secret trial. The Persian Government sensed the reaction and almost in hysteria organized more arrests. There followed a coup of suicides and, to complete the pattern, a series of letters were published from detained persons proclaiming their abhorrence of the Socialism that had ensnared them, their reconversion to the true faith and their loyalty, admiration and affection for the Shah. These ridiculous letters, much publicized in the Persian press available for anyone to read in London, usually procured the liberty of their writers if they were for- enough to have friends at Court or amongst the wealthy.”

Ah, how we let our government endear America to the world!

Another angle of interest is whether the creation of this right international oil consortium is not open evidence it is indeed a trust, something very specifically forbid- by the Sherman Anti-Trust Act, so far as the five companies are concerned. But think nothing of it! General Brownell, who is quite acute in detecting violations of the Smith Act and other laws for thought control has declared formally that the consortium does violate the Sherman Act. That, apparently, makes it final: The public prosecutor has set himself up as judge and jury to decide which laws are to be enforced rigorously I which are to be ignored among gentlemen.

A RATHER comic fillip was given this business when U.S. partners in the consortium offered generously to ‘transfer, at cost a portion of their participation’ to other qualified U.S. oil companies.. This proved indeed there was no trust—anybody could get into the consortium if he had a few lousy millions to spare. So far there have been no takers. The domestic independents look on the offer with some disdain. What many of them have been urging on the State and Justice’ Departments is, not that they have to buy into the consortium to be given access to Middle Eastern oil ‘at cost,’ but that they have a chance to buy the Middle Eastern oil’ at a reasonable price. The consortium charges about the same for Middle Eastern oil as for Texas oil, although the Iranian product probably costs half or less to market.

Another angle of interest is the plunge in British prestige in the Middle East. By refusing to deal with Mossadegh, Britain has had to surrender control of Iranian oil to a consortium in which U. S. companies predominate in numbers. The effect was electric in Iraq, which borders Iran. The Iraq government,, which has been Britain’s best friend in the Middle East, promptly announced that it would seek to repeal the Anglo-Iraq treaty and kick the Royal Air Force out of the country. Now it has teamed up with the Dulles Turkish-Pakistan axis. So far as the British Lion is concerned in the Middle East, he seems to be on the outside looking unhappily in on what used to be his own preserve.

Another interesting sidelight on the Iranian business is the rapid rise to fame of Herbert Hoover, Jr. He was a director of Union Oil, the big West Coast firm, had served as consultant to the Venezuelan, Iranian and other governments on oil problems, and had quite a reputation as a petroleum engineer. Upon his triumphant return from Teheran he was hoisted upon Dulles’ shoulders and made Under Secretary of State. There is nothing wrong about that, of course. Why shouldn’t a successful defender of oil’s private interests become the tribune of the public interest? What is good for Standard Oil, as well as General Motors, must be good for the country.

What was extraordinary about the business was that he was confirmed as Under Secretary without even an open hearing before the Senate foreign affairs committee. After his confirmation he refused to have a press conference, although there were plenty of reporters with plenty of interesting questions. Some of the questions would have been of the old-fashioned God and Mammon stripe—how did the Under Secretary keep his right hand from knowing what his left was doing? Other questions might have speculated on whether he agreed with his illustrious father, whose Fortress America ideas are rather well known. Does he believe, with the old man,. that Europe and Asia are just a lot of spinach and that a Monroe Doctrine America, from Greenland’s icy mountains to the Patagonian deserts, is what we should defend, with a concomitant heavy cut in taxes on business and the wealthy, and. a drastic reduction in military expenditures? It is unfair, of course, to saddle Junior with Papa’s notions, but the public would seem to be entitled at least to a candid look into Junior’s mind before he is. elevated to such a sensitive post. But what young Hoover believes apparently is not considered fit for the common herd to know—ours but to pay the taxes and die, for the greater glory of the international oil consortium.

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