Anglo-Persian Oil Company
Encyclopedia
The Anglo-Persian Oil Company (APOC) was founded in 1908 following the discovery of a large oil field
in Masjed Soleiman, Iran
. It was the first company to extract petroleum
from the Middle East
. In 1935 APOC was renamed the Anglo-Iranian Oil Company (AIOC) and in 1954 it became the British Petroleum Company (BP), one of the antecedents of the modern BP
plc.
, a millionaire London
socialite, negotiated an oil concession
with the Shah
Mozzafar al-Din Shah Qajar of Persia. He assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000, an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits.
D'Arcy hired geologist George Bernard Reynolds to do the prospecting in the Iranian desert. Conditions were extremely harsh: "small pox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 50°C". After several years of prospecting, D'Arcy's fortune dwindled away and he was forced to sell most of his rights to a Glasgow-based syndicate, the Burmah Oil Company
.
By 1908 having sunk more than £500,000 into their Persian venture and found no oil, D'Arcy and Burmah decided to abandon exploration in Iran. In early May 1908 they sent Reynolds a telegram telling him that they had run out of money and ordering him to "cease work, dismiss the staff, dismantle anything worth the cost of transporting to the coast for re-shipment, and come home." Reynolds delayed following these orders and in a stroke of luck, struck oil shortly after on May 26, 1908.
created the Anglo-Persian Oil Company (APOC) as a subsidiary and also sold shares to the public.
Volume production of Persian oil
products eventually started in 1913 from a refinery built at Abadan, for its first 50 years the largest oil refinery in the world (see Abadan Refinery
). In 1913, shortly before World War I, APOC managers negotiated with a new customer, Winston Churchill
, who was then First Lord of the Admiralty. Churchill, as a part of a three-year expansion program, sought to modernize Britains navy by abandoning the use of coal. Furthermore, Churchill wanted to free Britain from their reliance on the Standard Oil, and Royal Dutch-Shell oil companies. In exchange for secure oil supplies for its ships, the British government injected new capital into the company and, in doing so, acquired a controlling interest in APOC. The contract that was set up between the British Government and APOC was to hold for 20 years. The British also government became de facto hidden power behind the oil company.
APOC took a 50% share in a new Turkish Petroleum Company organized in 1912 by Calouste Gulbenkian
to explore and develop oil resources in the Ottoman Empire
. After a hiatus caused by World War I
it reformed and struck an immense gusher at Kirkuk
, Iraq
in 1927, renaming itself the Iraq Petroleum Company
.
During this period, Iranian popular opposition to the D'Arcy oil concession and royalty terms whereby Iran only received 16 percent of net profits was widespread. Since industrial development and planning, as well as other fundamental reforms were predicated on oil revenues, the government's lack of control over the oil industry served to accentuate the Iranian Government's misgivings regarding the manner in which APOC conducted its affairs in Iran. Such a pervasive atmosphere of dissatisfaction seemed to suggest that a radical revision of the concession terms would be possible. Moreover, owing to the introduction of reforms that improved fiscal order in Iran, APOC's past practice of cutting off advances in oil royalties when its demands were not met had lost much of its sting.
, spanned 1928-32. The overarching argument for revisiting the terms of the D'Arcy Agreement on the Iranian side was that its national wealth was being squandered by a concession that was granted in 1901 by a previous non-constitutional government forced to agree to inequitable terms under duress. In order to buttress his position in talks with the British, Teymourtash retained the expertise of French and Swiss oil experts.
Iran demanded a revision of the terms whereby Iran would be granted 25% of APOC's total shares. To counter British objections, Teymourtash would state that "if this had been a new concession, the Persian Government would have insisted not on 25 percent but on a 50-50 basis. Teymourtash also asked for a minimum guaranteed interest of 12.5% on dividends from the shares of the company, plus 2s per ton of oil produced. In addition, he specified that the company was to reduce the existing area of the concession. The intent behind reducing the area of the concession was to push APOC operations to the southwest of the country so as to make it possible for Iran to approach and lure non-British oil companies to develop oilfields on more generous terms in areas not part of APOC's area of concession.
Apart from demanding a more equitable share of the profits of the Company, an issue that did not escape Teymourtash's attention was that the flow of transactions between APOC and its various subsidiaries deprived Iran of gaining an accurate and reliable appreciation of APOC's full profits. As such, he demanded that the company register itself in Tehran as well as London, and the exclusive rights of transportation of the oil be cancelled. In fact in the midst of the negotiations in 1930, the Iranian National Consultative Assembly approved a bill whereby APOC was required to pay a 4 percent tax on its prospective profits earned in Iran.
In the face of British prevarication, Iran decided to demonstrate Iranian misgivings by upping the ante. Apart from encouraging the press to draft editorials criticizing the terms of the D'Arcy concession, a delegation consisting of Reza Shah
and other political notables and journalists was dispatched to the vicinity of the oilfields to inaugurate a newly constructed road, with instructions that they refrain from visiting the oil installation in an explicit show of protest.
In 1931, Teymourtash who was travelling to Europe to enroll Crown Prince Mohammed Reza Pahlavi at a Swiss boarding school, decided to use the occasion to attempt to conclude the negotiations. According to Cadman, Teymourtash worked feverishly and diligently to resolve all outstanding issues, and succeeded in securing an agreement in principle:
However, while Teymourtash likely believed that after four years of exhaustive and detailed discussions, he had succeeded in navigating the negotiations on the road to a conclusive end; the latest negotiations in London were to prove nothing more than a cul de sac.
Matters came to a head in 1931, when the combined effects of overabundant oil supplies on the global markets and the economic destabilization of the Depression, led to fluctuations which drastically reduced annual payments accruing to Iran to a fifth of what it had received in the previous year. In that year APOC informed the Iranian government that its royalties for the year would amount to a mere £366,782 while in the same period the company's income taxes paid to the British Government amounted to approximately £1,000,000. Furthermore, while the company's profits declined 36 percent for the year, the revenues paid to the Iranian government pursuant to the company's accounting practices decreased by 76 percent. Such a precipitous drop in royalties appeared to confirm suspicions of bad faith, and Teymourtash indicated that the parties would have to revisit negotiations.
However, Reza Shah was soon to assert his authority by dramatically inserting himself into the negotiations. The Monarch attended a meeting of the Council of Ministers in November 1932, and after publicly rebuking Teymourtash for his failure to secure an agreement, dictated a letter to cabinet cancelling the D'Arcy Agreement. The Iranian Government notified APOC that it would cease further negotiations and demanded cancellation of the D'Arcy concession. Rejecting the cancellation, the British government espoused the claim on behalf of APOC and brought the dispute before the Permanent Court of International Justice at the Hague, asserting that it regarded itself "as entitled to take all such measures as the situation may demand for the Company's protection." At this point, Hassan Taqizadeh, the new Iranian Minister entrusted with the task of assuming responsibility for the oil dossier, was to intimate to the British the cancellation was simply meant to expedite negotiations and that it would constitute political suicide for Iran to withdraw from negotiations.
After the dispute between the two countries was taken up at the Hague, the Czech Foreign Minister who was appointed mediator put the matter into abeyance to allow the contending parties to attempt to resolve the dispute. Ironically, Reza Shah
who had stood firm in demanding the abolishment of the D'Arcy concession, suddenly acquiesced to British demands, much to the chagrin and disappointment of his Cabinet. A new agreement with the Anglo-Persian Oil Company was agreed to after Cadman visited Iran in April 1933 and was granted a private audience with the Shah. A new agreement was ratified by the National Consultative Assembly on May 28, 1933 and received Royal assent the following day.
The Anglo-Persian Oil Company continued its large Persian operations although it changed its name to the AIOC in 1935. By 1950 Abadan had become the world's largest refinery. In spite of diversification the AIOC still relied heavily on its Iranian oil fields for three-quarters of its supplies, and controlled all oil in Iran.
Conditions for Iranian oil workers and their families were very bad. The director of Iran's Petroleum Institute wrote that
Under the 1933 agreement with Reza Shah, AIOC had promised to give laborers better pay and more chance for advancement, build schools, hospitals, roads and telephone system. It had not done so.
In May 1949 Britain had offered a "Supplemental oil agreement" which guaranteed royalty payments would not drop below £4 million, reduced the area in which it would be allowed to drill, and promised more Iranians would be trained for administrative positions." The agreement, however, gave Iran no "greater voice in company's management" or right to audit the company books. When the Iranian Prime Minister tried to dicker with AIOC head Sir William Fraser
. Fraser "dismissed him" and flew back to the UK.
In late December 1950 word reached Tehran that the American-owned Arabian American Oil Company
had agreed to share profits with Saudis on a 50-50 basis. The UK Foreign Office rejected the idea of any similar agreement for AIOC.
By now expressions of Iranian anger against lack of support for nationalization included a distinct lack of mourning following the assassination of anti-nationalization prime minister Haj Ali Razmara
, and a raucous walkout of protest by newspaper reporters when a visiting American diplomat urged 'reason as well as enthusiasm' to deal with the British embargo of Iran.
This led to the Abadan Crisis
where foreign countries refused to take Iranian oil under British pressure and the Abadan refinery was closed. AIOC withdrew from Iran and increased output of its other reserves in the Persian Gulf.
Mossadeq broke off negotiations with AIOC in July 1951 when the AIOC threatened to pull its employees out of Iran and warned tanker owners that "the receipts from the Iranian government would not be accepted on the world market." The British ratcheted up the pressure on the Iranian government and explored the possibility of an invasion to occupy the oil area. US President Harry S. Truman
and US ambassador to Iran Henry F. Grady
opposed intervention in Iran but needed Britain's support for the Korean War
. Efforts by the U.S. through the International Court of Justice
were made to settle the dispute, but a 50/50 profit-sharing arrangement, with recognition of nationalization, was rejected by both the British government and Prime Minister Mossadegh.
As the months went on, the crisis became acute. By mid-1952, an attempt by the Shah to replace Mossadegh backfired and led to riots nationwide; Mossadegh returned with even greater power. At the same time however, his coalition was "fraying," as Britain’s boycott of Iranian oil eliminated a major source of government revenue, and made Iranians "poorer and unhappier by the day."
led tanks to Mosaddeq's residence forcing him from office.
) was created, with the Anglo-Iranian Oil Company holding 40% of the shares. The consortium agreed to share profits on a 50-50 basis with Iran, "but not to open its books to Iranian auditors or to allow Iranians onto its board of directors."
. It was formed between 1918 and 1920 by the merger of five smaller Scottish oil shale
companies: Youngs, Broxburn
, Pumpherston
, Oakbank and Philpstoun
.
Shale oil production in Scotland
ceased in the early 1960s but there was an unsuccessful attempt to revive it in 1973.
The company still exists but is no longer in the shale oil business.
(BTC) was formed in 1915, after the Anglo-Persian Oil Company decided to become a fully self-contained operation, directly owning a fleet of tankers
for sea transport. On formation, the BTC had an initial budget of $144,000 with which to build seven steam-powered tankers. The Company’s first tanker was the British Emperor, which was launched in 1916. The names of the first seven ships, and all later additions to the fleet, bore the prefix ‘British’.
Over the next decade, the demand for oil grew throughout the developed world, and the BTC expanded accordingly. By 1924, the fleet numbered 60 ships, with the 60th being the flagship, 10,762 deadweight tonnes (dwt), British Aviator. She was the BTC’s first diesel engine oil tanker, and at that time was the most powerful single-screw motor ship in the world.
The economic depression of the early 1930s saw rising unemployment amongst merchant navies around the world. However, the BTC undertook a series of strategic mergers, and coupled with the continued support of the Shah of Iran, the APOC succeeded in strengthening its position within the industry.
In 1939, the British government chartered the whole fleet of 93 tankers to supply fuel to its armed forces during the Second World War
. The fleet lost a total of 42 ships sunk during the war.
Within a year of peace in 1945, the BTC fleet had returned to its pre-war total of 93 vessels. The recovery continued with the building of 57 new tankers, each 12,000
dwt, which increased the tonnage of oil transported from Abadan refinery in Iran, whilst remaining light enough for the tankers to pass through the shallow waters of the Suez Canal
.
In 1951, however, the situation changed dramatically, when the Iranian oil industry was nationalised, and the APOC removed all its staff from Iran.
Oil field
An oil field is a region with an abundance of oil wells extracting petroleum from below ground. Because the oil reservoirs typically extend over a large area, possibly several hundred kilometres across, full exploitation entails multiple wells scattered across the area...
in Masjed Soleiman, Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
. It was the first company to extract petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
from the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
. In 1935 APOC was renamed the Anglo-Iranian Oil Company (AIOC) and in 1954 it became the British Petroleum Company (BP), one of the antecedents of the modern BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
plc.
Exploration and discovery
In 1901 William Knox D'ArcyWilliam Knox D'Arcy
William Knox D'Arcy was one of the principal founders of the oil and petrochemical industry in Persia .-Early life:...
, a millionaire London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
socialite, negotiated an oil concession
D'Arcy Concession
The D'Arcy Concession was a petroleum oil concession that was signed in 1901 between William Knox D'Arcy and Shah Mozzafar al-Din of Persia. The oil concession gave D’Arcy the exclusive rights to prospect for oil in Persia...
with the Shah
Shah
Shāh is the title of the ruler of certain Southwest Asian and Central Asian countries, especially Persia , and derives from the Persian word shah, meaning "king".-History:...
Mozzafar al-Din Shah Qajar of Persia. He assumed exclusive rights to prospect for oil for 60 years in a vast tract of territory including most of Iran. In exchange the Shah received £20,000, an equal amount in shares of D'Arcy's company, and a promise of 16% of future profits.
D'Arcy hired geologist George Bernard Reynolds to do the prospecting in the Iranian desert. Conditions were extremely harsh: "small pox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 50°C". After several years of prospecting, D'Arcy's fortune dwindled away and he was forced to sell most of his rights to a Glasgow-based syndicate, the Burmah Oil Company
Burmah Oil Company Ltd.
The Burmah Oil Company was a leading British oil business which was once a constituent of the FTSE 100 Index.-History:The company was founded in Glasgow, Scotland in 1886 by David Sime Cargill to develop oil fields in the Indian subcontinent...
.
By 1908 having sunk more than £500,000 into their Persian venture and found no oil, D'Arcy and Burmah decided to abandon exploration in Iran. In early May 1908 they sent Reynolds a telegram telling him that they had run out of money and ordering him to "cease work, dismiss the staff, dismantle anything worth the cost of transporting to the coast for re-shipment, and come home." Reynolds delayed following these orders and in a stroke of luck, struck oil shortly after on May 26, 1908.
Creation of APOC
Burmah Oil Company Ltd.Burmah Oil Company Ltd.
The Burmah Oil Company was a leading British oil business which was once a constituent of the FTSE 100 Index.-History:The company was founded in Glasgow, Scotland in 1886 by David Sime Cargill to develop oil fields in the Indian subcontinent...
created the Anglo-Persian Oil Company (APOC) as a subsidiary and also sold shares to the public.
Volume production of Persian oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
products eventually started in 1913 from a refinery built at Abadan, for its first 50 years the largest oil refinery in the world (see Abadan Refinery
Abadan Refinery
The Abadan refinery was located in Abadan near the coast of the Persian Gulf. It was completed in 1912 and was one of world's largest oil refineries when it was destroyed in 1980 by Iraq in the Iraq-Iran war. Its nationalisation in 1951 prompted the Abadan Crisis and ultimately the toppling of the...
). In 1913, shortly before World War I, APOC managers negotiated with a new customer, Winston Churchill
Winston Churchill
Sir Winston Leonard Spencer-Churchill, was a predominantly Conservative British politician and statesman known for his leadership of the United Kingdom during the Second World War. He is widely regarded as one of the greatest wartime leaders of the century and served as Prime Minister twice...
, who was then First Lord of the Admiralty. Churchill, as a part of a three-year expansion program, sought to modernize Britains navy by abandoning the use of coal. Furthermore, Churchill wanted to free Britain from their reliance on the Standard Oil, and Royal Dutch-Shell oil companies. In exchange for secure oil supplies for its ships, the British government injected new capital into the company and, in doing so, acquired a controlling interest in APOC. The contract that was set up between the British Government and APOC was to hold for 20 years. The British also government became de facto hidden power behind the oil company.
APOC took a 50% share in a new Turkish Petroleum Company organized in 1912 by Calouste Gulbenkian
Calouste Gulbenkian
Calouste Sarkis Gulbenkian was an Armenian businessman and philanthropist. He played a major role in making the petroleum reserves of the Middle East available to Western development...
to explore and develop oil resources in the Ottoman Empire
Ottoman Empire
The Ottoman EmpireIt was usually referred to as the "Ottoman Empire", the "Turkish Empire", the "Ottoman Caliphate" or more commonly "Turkey" by its contemporaries...
. After a hiatus caused by World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
it reformed and struck an immense gusher at Kirkuk
Kirkuk
Kirkuk is a city in Iraq and the capital of Kirkuk Governorate.It is located in the Iraqi governorate of Kirkuk, north of the capital, Baghdad...
, Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
in 1927, renaming itself the Iraq Petroleum Company
Iraq Petroleum Company
The Iraq Petroleum Company , until 1929 called Turkish Petroleum Company , was an oil company jointly owned by some of the world's largest oil companies, which had virtual monopoly on all oil exploration and production in Iraq from 1925 to 1961...
.
During this period, Iranian popular opposition to the D'Arcy oil concession and royalty terms whereby Iran only received 16 percent of net profits was widespread. Since industrial development and planning, as well as other fundamental reforms were predicated on oil revenues, the government's lack of control over the oil industry served to accentuate the Iranian Government's misgivings regarding the manner in which APOC conducted its affairs in Iran. Such a pervasive atmosphere of dissatisfaction seemed to suggest that a radical revision of the concession terms would be possible. Moreover, owing to the introduction of reforms that improved fiscal order in Iran, APOC's past practice of cutting off advances in oil royalties when its demands were not met had lost much of its sting.
Renegotiating of terms by Iran
The attempt to revise the terms of the oil concession on a more favourable basis for Iran led to protracted negotiations that took place in Tehran, Lausanne, London and Paris between Abdolhossein Teymourtash, Iran's Minister of Court 1925-32 and its nominal Minister of Foreign Affairs, and the Chairman of APOC, John CadmanJohn Cadman, 1st Baron Cadman
John Cadman, 1st Baron Cadman FRS, GCMG was a British mining engineer, petroleum technologist and public servant.-Early life:...
, spanned 1928-32. The overarching argument for revisiting the terms of the D'Arcy Agreement on the Iranian side was that its national wealth was being squandered by a concession that was granted in 1901 by a previous non-constitutional government forced to agree to inequitable terms under duress. In order to buttress his position in talks with the British, Teymourtash retained the expertise of French and Swiss oil experts.
Iran demanded a revision of the terms whereby Iran would be granted 25% of APOC's total shares. To counter British objections, Teymourtash would state that "if this had been a new concession, the Persian Government would have insisted not on 25 percent but on a 50-50 basis. Teymourtash also asked for a minimum guaranteed interest of 12.5% on dividends from the shares of the company, plus 2s per ton of oil produced. In addition, he specified that the company was to reduce the existing area of the concession. The intent behind reducing the area of the concession was to push APOC operations to the southwest of the country so as to make it possible for Iran to approach and lure non-British oil companies to develop oilfields on more generous terms in areas not part of APOC's area of concession.
Apart from demanding a more equitable share of the profits of the Company, an issue that did not escape Teymourtash's attention was that the flow of transactions between APOC and its various subsidiaries deprived Iran of gaining an accurate and reliable appreciation of APOC's full profits. As such, he demanded that the company register itself in Tehran as well as London, and the exclusive rights of transportation of the oil be cancelled. In fact in the midst of the negotiations in 1930, the Iranian National Consultative Assembly approved a bill whereby APOC was required to pay a 4 percent tax on its prospective profits earned in Iran.
In the face of British prevarication, Iran decided to demonstrate Iranian misgivings by upping the ante. Apart from encouraging the press to draft editorials criticizing the terms of the D'Arcy concession, a delegation consisting of Reza Shah
Reza Shah
Rezā Shāh, also known as Rezā Shāh Pahlavi and Rezā Shāh Kabir , , was the Shah of the Imperial State of Iran from December 15, 1925, until he was forced to abdicate by the Anglo-Soviet invasion of Iran on September 16, 1941.In 1925, Reza Shah overthrew Ahmad Shah Qajar, the last Shah of the Qajar...
and other political notables and journalists was dispatched to the vicinity of the oilfields to inaugurate a newly constructed road, with instructions that they refrain from visiting the oil installation in an explicit show of protest.
In 1931, Teymourtash who was travelling to Europe to enroll Crown Prince Mohammed Reza Pahlavi at a Swiss boarding school, decided to use the occasion to attempt to conclude the negotiations. According to Cadman, Teymourtash worked feverishly and diligently to resolve all outstanding issues, and succeeded in securing an agreement in principle:
He came to London, he wined and he dined and he spent day and night in negotiating. Many interviews took place. He married his daughter, he put his boy to school [Harrow], he met the Secretary of State for Foreign Affairs, a change took place in our government, and in the midst of all this maze of activities we reached a tentative agreement on the principles to be included in the new document, leaving certain figures and the lump sum to be settled at a later date.
However, while Teymourtash likely believed that after four years of exhaustive and detailed discussions, he had succeeded in navigating the negotiations on the road to a conclusive end; the latest negotiations in London were to prove nothing more than a cul de sac.
Matters came to a head in 1931, when the combined effects of overabundant oil supplies on the global markets and the economic destabilization of the Depression, led to fluctuations which drastically reduced annual payments accruing to Iran to a fifth of what it had received in the previous year. In that year APOC informed the Iranian government that its royalties for the year would amount to a mere £366,782 while in the same period the company's income taxes paid to the British Government amounted to approximately £1,000,000. Furthermore, while the company's profits declined 36 percent for the year, the revenues paid to the Iranian government pursuant to the company's accounting practices decreased by 76 percent. Such a precipitous drop in royalties appeared to confirm suspicions of bad faith, and Teymourtash indicated that the parties would have to revisit negotiations.
However, Reza Shah was soon to assert his authority by dramatically inserting himself into the negotiations. The Monarch attended a meeting of the Council of Ministers in November 1932, and after publicly rebuking Teymourtash for his failure to secure an agreement, dictated a letter to cabinet cancelling the D'Arcy Agreement. The Iranian Government notified APOC that it would cease further negotiations and demanded cancellation of the D'Arcy concession. Rejecting the cancellation, the British government espoused the claim on behalf of APOC and brought the dispute before the Permanent Court of International Justice at the Hague, asserting that it regarded itself "as entitled to take all such measures as the situation may demand for the Company's protection." At this point, Hassan Taqizadeh, the new Iranian Minister entrusted with the task of assuming responsibility for the oil dossier, was to intimate to the British the cancellation was simply meant to expedite negotiations and that it would constitute political suicide for Iran to withdraw from negotiations.
After the dispute between the two countries was taken up at the Hague, the Czech Foreign Minister who was appointed mediator put the matter into abeyance to allow the contending parties to attempt to resolve the dispute. Ironically, Reza Shah
Reza Shah
Rezā Shāh, also known as Rezā Shāh Pahlavi and Rezā Shāh Kabir , , was the Shah of the Imperial State of Iran from December 15, 1925, until he was forced to abdicate by the Anglo-Soviet invasion of Iran on September 16, 1941.In 1925, Reza Shah overthrew Ahmad Shah Qajar, the last Shah of the Qajar...
who had stood firm in demanding the abolishment of the D'Arcy concession, suddenly acquiesced to British demands, much to the chagrin and disappointment of his Cabinet. A new agreement with the Anglo-Persian Oil Company was agreed to after Cadman visited Iran in April 1933 and was granted a private audience with the Shah. A new agreement was ratified by the National Consultative Assembly on May 28, 1933 and received Royal assent the following day.
1933 agreement
The terms of the new agreement provided for a new 60-year concession. The Agreement reduced the area under APOC control to 100000 square miles (258,998.8 km²), required annual payments in lieu of Iranian income tax, as well as guaranteeing a minimum annual payment of £750,000 to the Iranian government. These provisions, while appearing favourable, are widely agreed to have represented a squandered opportunity for the Iranian government. The agreement extended the life of the D'Arcy concession by an additional 32 years, negligently allowed APOC to select the best 100000 square miles (258,998.8 km²), the minimum guaranteed royalty was far too modest, and in a fit of carelessness the company's operations were exempted from import or customs duties. Finally, Iran surrendered its right to annul the agreement, and settled on a complex and tediously elaborate arbitration process to settle any disagreements that would arise.The Anglo-Persian Oil Company continued its large Persian operations although it changed its name to the AIOC in 1935. By 1950 Abadan had become the world's largest refinery. In spite of diversification the AIOC still relied heavily on its Iranian oil fields for three-quarters of its supplies, and controlled all oil in Iran.
Discontent in Iran
By 1951 Iranian support for nationalisation of the AIOC was intense. Grievances included the small fraction of revenues Iran received. In 1947, for example, AIOC reported after-tax profits of £40 million ($112 million) - and gave Iran just £7 million.Conditions for Iranian oil workers and their families were very bad. The director of Iran's Petroleum Institute wrote that
Wages were 50 cents a day. There was no vacation pay, no sick leave, no disability compensation. The workers lived in a shanty town called Kaghazabad, or Paper City, without running water or electricity, ... In winter the earth flooded and became a flat, perspiring lake. The mud in town was knee-deep, and ... when the rains subsided, clouds of nipping, small-winged flies rose from the stagnant water to fill the nostrils ....
Summer was worse. ... The heat was torrid ... sticky and unrelenting - while the wind and sandstorms shipped off the desert hot as a blower. The dwellings of Kaghazabad, cobbled from rusted oil drums hammered flat, turned into sweltering ovens. ... In every crevice hung the foul, sulfurous stench of burning oil .... in Kaghazad there was nothing - not a tea shop, not a bath, not a single tree. The tiled reflecting pool and shaded central square that were part of every Iranian town, ... were missing here. The unpaved alleyways were emporiums for rats.
Under the 1933 agreement with Reza Shah, AIOC had promised to give laborers better pay and more chance for advancement, build schools, hospitals, roads and telephone system. It had not done so.
In May 1949 Britain had offered a "Supplemental oil agreement" which guaranteed royalty payments would not drop below £4 million, reduced the area in which it would be allowed to drill, and promised more Iranians would be trained for administrative positions." The agreement, however, gave Iran no "greater voice in company's management" or right to audit the company books. When the Iranian Prime Minister tried to dicker with AIOC head Sir William Fraser
William Fraser, 1st Baron Strathalmond
William Fraser, 1st Baron Strathalmond, MBE , was a Scottish businessman and a leading expert on the oil industry. He served as chairman of the Anglo-Persian Oil Company from 1941 to 1956....
. Fraser "dismissed him" and flew back to the UK.
In late December 1950 word reached Tehran that the American-owned Arabian American Oil Company
Saudi Aramco
Saudi Aramco , officially the Saudi Arabian Oil Company, is the national oil company of Saudi Arabia.Saudi Aramco is the world's largest and most valuable privately-held company, with estimates of its value in 2011 to be $7 trillion USD.Saudi Aramco has both the largest proven crude oil reserves,...
had agreed to share profits with Saudis on a 50-50 basis. The UK Foreign Office rejected the idea of any similar agreement for AIOC.
By now expressions of Iranian anger against lack of support for nationalization included a distinct lack of mourning following the assassination of anti-nationalization prime minister Haj Ali Razmara
Haj Ali Razmara
Sepahbod Haj Ali Razmara was a military leader and Prime Minister of Iran....
, and a raucous walkout of protest by newspaper reporters when a visiting American diplomat urged 'reason as well as enthusiasm' to deal with the British embargo of Iran.
Nationalisation
In March 1951, the Iranian parliament (the Majlis) voted to nationalise the Anglo-Iranian Oil Company (AIOC) and its holdings, and shortly thereafter elected a widely respected statesman and champion of nationalisation, Mohammed Mossadegh, Prime Minister.This led to the Abadan Crisis
Abadan Crisis
The Abadan Crisis occurred from 1951 to 1954, after Iran nationalised the Iranian assets of the Anglo-Iranian Oil Company and expelled Western companies from oil refineries in the city of Abadan .-Prelude:...
where foreign countries refused to take Iranian oil under British pressure and the Abadan refinery was closed. AIOC withdrew from Iran and increased output of its other reserves in the Persian Gulf.
Mossadeq broke off negotiations with AIOC in July 1951 when the AIOC threatened to pull its employees out of Iran and warned tanker owners that "the receipts from the Iranian government would not be accepted on the world market." The British ratcheted up the pressure on the Iranian government and explored the possibility of an invasion to occupy the oil area. US President Harry S. Truman
Harry S. Truman
Harry S. Truman was the 33rd President of the United States . As President Franklin D. Roosevelt's third vice president and the 34th Vice President of the United States , he succeeded to the presidency on April 12, 1945, when President Roosevelt died less than three months after beginning his...
and US ambassador to Iran Henry F. Grady
Henry F. Grady
Henry Francis Grady was an American diplomat. Born in San Francisco, California to John Henry and Ellen Genevieve Grady, he earned a PhD in Economics from Columbia University. On October 18, 1917 he married Lucretia Louise del Valle Henry Francis Grady (February 12, 1882 - September 14, 1957)...
opposed intervention in Iran but needed Britain's support for the Korean War
Korean War
The Korean War was a conventional war between South Korea, supported by the United Nations, and North Korea, supported by the People's Republic of China , with military material aid from the Soviet Union...
. Efforts by the U.S. through the International Court of Justice
International Court of Justice
The International Court of Justice is the primary judicial organ of the United Nations. It is based in the Peace Palace in The Hague, Netherlands...
were made to settle the dispute, but a 50/50 profit-sharing arrangement, with recognition of nationalization, was rejected by both the British government and Prime Minister Mossadegh.
As the months went on, the crisis became acute. By mid-1952, an attempt by the Shah to replace Mossadegh backfired and led to riots nationwide; Mossadegh returned with even greater power. At the same time however, his coalition was "fraying," as Britain’s boycott of Iranian oil eliminated a major source of government revenue, and made Iranians "poorer and unhappier by the day."
Coup
By 1953 both the US and the UK had new, more anti-communist and interventionist administrations and the United States no longer opposed intervention in Iran. Britain was unable to subvert Mossadegh as its embassy and officials had been evicted from Iran in October 1952, but successfully appealed in the U.S. to anti-communist sentiments, depicting both Mossadegh and Iran as unstable and likely to fall to communism in their weakened state. If Iran fell, the "enormous assets" of "Iranian oil production and reserves" would fall into Communist control, as would "in short order the other areas of the Middle East". In August the American CIA with the help of bribes to politicians, soldiers, mobs, and newspapers, and contacts/information from the British embassy and secret service, organized a coup. The Shah issued an edict removing Mosaddeq from power and General Fazlollah ZahediFazlollah Zahedi
Mohammad Fazlollah Zahedi was an Iranian general and statesman who replaced democratically elected Iranian Prime Minister Mohammed Mossadeq through a western-backed coup d'état, in which he played a major role.-Early years:Born in Hamedan in 1897, Fazlollah Zahedi was the son of Abol Hassan...
led tanks to Mosaddeq's residence forcing him from office.
Consortium
With the new pro-Western Prime Minister, Fazlollah Zahedi, Iranian oil began flowing again and the Anglo-Iranian Oil Company, which later changed its name to British Petroleum, tried to return to its old position. However, "public opinion was so opposed that the new government could not permit it." Instead, an international consortium under the nationalised name (National Iranian Oil CompanyNational Iranian Oil Company
The National Iranian Oil Company , a government-owned corporation under the direction of the Ministry of Petroleum of Iran, is an oil and natural gas producer and distributor headquartered in Tehran. It was established in 1948...
) was created, with the Anglo-Iranian Oil Company holding 40% of the shares. The consortium agreed to share profits on a 50-50 basis with Iran, "but not to open its books to Iranian auditors or to allow Iranians onto its board of directors."
Scottish Oils Ltd
Scottish Oils Ltd (owned by Anglo-Persian) was a producer of shale oilShale oil
Shale oil, known also as kerogen oil or oil-shale oil, is an unconventional oil produced from oil shale by pyrolysis, hydrogenation, or thermal dissolution. These processes convert the organic matter within the rock into synthetic oil and gas...
. It was formed between 1918 and 1920 by the merger of five smaller Scottish oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
companies: Youngs, Broxburn
Broxburn, West Lothian
Broxburn is a town in West Lothian, Scotland located west of Edinburgh on the A8 road. It is situated approximately from Edinburgh Airport, and to the north of Livingston....
, Pumpherston
Pumpherston
Pumpherston is a small dormitory village in West Lothian, Scotland. Originally a small industrial village to the nearby shale mine and works, it now adjoins the new town of Livingston, which was constructed alongside Pumpherston in the late 1960s and quickly grew much larger than its...
, Oakbank and Philpstoun
Philpstoun
Philpstoun is a small village in West Lothian, Scotland, situated roughly east of the historic county town of Linlithgow. The village originated in the oil shale mining boom of the 19th century. Surrounded by rich arable farm land, the village has a Community Education Centre, a Category B listed...
.
Shale oil production in Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
ceased in the early 1960s but there was an unsuccessful attempt to revive it in 1973.
The company still exists but is no longer in the shale oil business.
Tanker fleet
The British Tanker Company LimitedBritish Tanker Company
British Tanker Company Limited was the maritime transport arm of the Anglo-Persian Oil Company, the forerunner of BP. The British Tanker Company was formed in 1915 with an initial fleet of seven oil tankers...
(BTC) was formed in 1915, after the Anglo-Persian Oil Company decided to become a fully self-contained operation, directly owning a fleet of tankers
Oil tanker
An oil tanker, also known as a petroleum tanker, is a merchant ship designed for the bulk transport of oil. There are two basic types of oil tankers: the crude tanker and the product tanker. Crude tankers move large quantities of unrefined crude oil from its point of extraction to refineries...
for sea transport. On formation, the BTC had an initial budget of $144,000 with which to build seven steam-powered tankers. The Company’s first tanker was the British Emperor, which was launched in 1916. The names of the first seven ships, and all later additions to the fleet, bore the prefix ‘British’.
Over the next decade, the demand for oil grew throughout the developed world, and the BTC expanded accordingly. By 1924, the fleet numbered 60 ships, with the 60th being the flagship, 10,762 deadweight tonnes (dwt), British Aviator. She was the BTC’s first diesel engine oil tanker, and at that time was the most powerful single-screw motor ship in the world.
The economic depression of the early 1930s saw rising unemployment amongst merchant navies around the world. However, the BTC undertook a series of strategic mergers, and coupled with the continued support of the Shah of Iran, the APOC succeeded in strengthening its position within the industry.
In 1939, the British government chartered the whole fleet of 93 tankers to supply fuel to its armed forces during the Second World War
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. The fleet lost a total of 42 ships sunk during the war.
Within a year of peace in 1945, the BTC fleet had returned to its pre-war total of 93 vessels. The recovery continued with the building of 57 new tankers, each 12,000
dwt, which increased the tonnage of oil transported from Abadan refinery in Iran, whilst remaining light enough for the tankers to pass through the shallow waters of the Suez Canal
Suez Canal
The Suez Canal , also known by the nickname "The Highway to India", is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea and the Red Sea. Opened in November 1869 after 10 years of construction work, it allows water transportation between Europe and Asia without navigation...
.
In 1951, however, the situation changed dramatically, when the Iranian oil industry was nationalised, and the APOC removed all its staff from Iran.
See also
- Anglo-Persian AgreementAnglo-Persian AgreementThe Anglo-Persian Agreement was a document involving Great Britain and Persia and centered around drilling rights of the Anglo-Persian Oil Company. It was never ratified by the Majlis. This "agreement" was issued by British Foreign Secretary Earl Curzon to the Persian government in August of 1919...
- Anglo-Soviet invasion of IranAnglo-Soviet invasion of IranThe Anglo-Soviet invasion of Iran was the Allied invasion of the Imperial State of Iran during World War II, by British, Commonwealth, and Soviet armed forces. The invasion from August 25 to September 17, 1941, was codenamed Operation Countenance...
- National Iranian Oil CompanyNational Iranian Oil CompanyThe National Iranian Oil Company , a government-owned corporation under the direction of the Ministry of Petroleum of Iran, is an oil and natural gas producer and distributor headquartered in Tehran. It was established in 1948...
- Abadan Crisis timelineAbadan Crisis timelineThe Abadan Crisis was a major event in Iranian history. It began in 1951 with the nationalization of the Anglo-Iranian Oil Company by the government of Iran, and the shutting down by the British of the Anglo-Iranian Oil Company's huge oil refinery in Abadan...
- 1953 Iranian coup d'état
- Mohammad Mossadegh
- Hossein FatemiHossein FatemiHossein Fatemi was a scholar, journalist, and famous politician of Iran. A close associate of Prime Minister Mohammad Mosaddegh, he proposed nationalization of Iranian oil and gas assets. Initially a journalist, he served as Foreign Affairs Minister of Iran from 1951 to 1953...
- Dariush ForouharDariush ForouharDariush Forouhar was a founder and leader of the Hezb-e Mellat-e Iran , a pan-Iranist opposition party in Iran and served as Minister of Labor in the Provisional Revolutionary Government of Mehdi Bazargan in 1979...
- Operation AjaxOperation AjaxThe 1953 Iranian coup d'état was the overthrow of the democratically elected government of Iranian Prime Minister Mohammad Mosaddegh on 19 August 1953, orchestrated by the intelligence agencies of the United Kingdom and the United States under the name TPAJAX Project...
- Abdolhossein Teymourtash
- John Cadman, 1st Baron CadmanJohn Cadman, 1st Baron CadmanJohn Cadman, 1st Baron Cadman FRS, GCMG was a British mining engineer, petroleum technologist and public servant.-Early life:...