Excerpt from J.H. Bamberg on Soviet Interest in Iranian Oil During World War II, The History of the British Petroleum Company, Volume 2, The Anglo-Iranian Years, 1928 (Cambriage: Cambridge University Press, 1994), pp. 250-257.


POLITICS, FOREIGN INFLUENCE AND OIL CONCESSIONS

At the same time as the Company's pattern of employment was affected by the war, a chain of events was set in motion which was to have an unsettling effect on the Company's concessionary position. Those events were closely connected with the revival of political currents and personalities which had been suppressed during Riza Shah's reign, and with the foreign domination of Iran by the occupying powers.

After the abdication of Riza Shah and the accession to the throne of his son, Muhammad Riza Shah, politics in Iran entered a new phase. The authoritarian rule of Riza Shah, under whom all forms of political opposition were suppressed, was at an end and the young Muhammad Riza Shah was not able, at that early stage of his reign, to establish autocratic power in the same manner as his father. The power of the Majlis, which had been subdued by Riza Shah, revived. New political parties were formed, such as the Iran Party, composed largely of urban middle class intellectuals; the Tudeh (Masses) Party of the extreme left, formed in 1941 as a successor to the Communist Party which Riza Shah had outlawed; and the right-wing National Will Party led by Sa'id Zia al-Din Tabataba'i, the former Prime Minister who returned from exile to form the party as a means of counteracting the Tudeh. Religious leaders, who had suffered a diminution of power and influence under Riza Shah, also re-asserted their authority. An extreme religious group, Fida'iyan-i Islam (Devotees of Islam), emerged, one of its leading lights being Ayatullah Abul Qasim Kashani, who had a long history of opposition to both the British and the Pahiavi dynasty. He was to play a prominent part in the concessionary crisis of 1951-4, described in later chapters. So too, but to a still greater extent, was Muhammad Musaddiq who, after years of political exile during Riza Shah's reign, came back to the centre of Iranian political life, being elected to the Fourteenth Majlis (1944-6) in which, as will be seen, he played an important role. Others who came back to political prominence after long years in the wilderness during Riza Shah's reign were Qavam al-Saltana, who had been Prime Minister in the early 1920s, and Taqizadeh who, after his years in exile at the School of Oriental and African Studies in London, became Acting Minister in London and then Ambassador after the Iranian Legation in London was raised to an Embassy in 1944.

The re-emergence of political and religious leaders with their various followings and factions brought a hubbub of political activity which, stimulating as it may have been after the dictatorship of Riza Shah, did not produce strong or stable government. As table 9.8 indicates, prime ministers came and went with great alacrity, rarely holding office for more than a few months at a time. Governments were not only short-lived, but also had little authority in the outlying provinces, where separatist movements grew to the point of threatening the integrity of the country. At the same time, Iran's independence was circumscribed by the presence of military forces from the two powers which for many years had aroused Iranian fears of foreign domination: Britain and the Soviet Union. Theoretically, of course, those two powers were allies of Iran after September 1943, when Iran declared war on Germany. Moreover, in the Tripartite Pact of January 1942 Britain and the Soviet Union had pledged themselves to uphold Iran's independence. This principle was re-affirmed at the Tehran Conference in November 1943, after which Churchill, Roosevelt and Stalin signed the Tehran Declaration confirming that their Governments were 'at one with the Government of Iran in their desire for the maintenance of the independence, sovereignty and territorial integrity of Iran'. Yet the extensive influence and control which the occupying Allies exercised over Iranian affairs inevitably raised the spectre of foreign domination which, by offending Iranian pride, was a reliable formula for releasing the emotive power of nationalism.

In the eyes of Iranian nationalists, the threat of foreign domination came not only from the presence of Allied forces, but also from the foreign interest which was shown in obtaining new oil concessions. In the autumn of 1943 both Royal Dutch-Shell and the Standard Oil Company of New York (Socony) were known by the British Foreign Office to be enquiring into the prospects of concessions in Iran. In November, representatives of Royal Dutch-Shell visited Tehran where they met the Iranian Prime Minister, Ali Suhaili, who told them that Iran would 'welcome foreign capital but that everything depended on the terms as there were other

Table 9.8 Iranian Prime Ministers, August 1941-December 1947

Mirza Muhammad Au Khan Furughi August 1941-March 1942
Ali Suhaili March-July 1942
Qavam al-Saltana August 1942-February 1943
Au Suhaili February 1943-March 1944
Muhammad Sa'id March-November 1944
Murtiza Quli Bayat November 1944-April 1945
Ibrahim Hakimi May-June 1945
Sa'id Muhsin Sadr June-October 1945
Ibrahim Hakimi October 1945-January 1946
Qavam al-Saltana January 1946-December 1947

applicants'. Negotiations dragged on inconclusively until the end of December, when the negotiators returned to London. They returned to Tehran in February 1944. A negotiator for the Standard-Vacuum Oil Company was also in the capital being encouraged by Suhaili. By March both companies had submitted proposals, to which was added an approach from the US oil company, Sinclair, also competing for a concession. The Iranian Government went so far as to retain the services of Herbert Hoover Junior and A. A. Curtice, two US geologists, to study the proposals. In March, Suhaili was replaced as Prime Minister by Muhammad Sa'id and in August rumours began to circulate in the press that Sa'id was secretly, i.e. without reference to the Majlis, offering a southern oil concession to the US and British companies and that Standard-Vacuum would get a northern concession once Soviet troops had withdrawn after the war. The Soviet Union, wishing to press its own claims, despatched an oil mission led by an Assistant Minister for Foreign Affairs, Sergei Kavtaradze, to Tehran in September. In his talks with Sa'id, Kavtaradze demanded an oil concession in Iran's five northern provinces. Sa'id promised to refer the matter to the Cabinet and the Majlis, but Kavtaradze, seeking a more definite commitment from Iran, saw the Shah at the beginning of October and sought permission to explore for oil in northern Iran. He warned that the future of Irano-Soviet relations depended on a favourable reply. It was not a tactic which, in the opinion of Sir Clarmont Skrine, British Consul in Mashad, was likely to further the Soviet cause. As Skrine commented: 'In Persia it is not good manners to say no to a friend; you make vague promises and verbose excuses and do nothing until he gets tired and goes away. Now, however, the Soviet envoy tactlessly insisted on an answer, yes or no, and opposition at once began to build up in the Majlis. The Iranian Government gave its reply on 8 October when it announced that it would not grant any new oil concessions to foreigners until after the war was over.

Kavtaradze, frustrated that his attempts to force the experienced Sa'id to grant a concession had been unsuccessful, was determined to remove him from power and undermine the Shah. He held a press conference to emphasise the social and economic benefits to be derived from Soviet expertise and exploitation of Iranian oil resources, accompanied both by threats of reprisals against Sa'id for having worsened relations between the two countries and by ill-disguised pressure on prominent Iranian politicians. The Red Army hampered Iranian troop movements and communications and was on the streets of Tehran during anti-Sa'id demonstrations organised by the Tudeh Party in front of the Majlis. Tudeh and pro-Soviet newspapers were also active in the campaign to bring down the Government, and on 10 November 1944 Sa'id resigned. However, in spite of Soviet pressure, his successor, Murtiza Quli Bayat, refused to change Sa'id's oil policy and told the Soviet Ambassador that the matter of the concession would have to await the end of the war and the departure of foreign troops. In the Majlis, the leader of Iranian resistance to Soviet oil demands was the nationalistic Musaddiq who, on 2 December, introduced a Bill to prevent Iranian governments from entering into negotiations or signing oil concessions with foreign interests without the assent of the Majlis. It was passed by 80 votes to 7. Russian reaction was furious and Kavtaradze's mission unceremoniously left Tehran on 9 December.

Soviet pressure for an oil concession did not, however, end with the return of the Kavtaradze mission to Moscow. It soon re-surfaced in connection with negotiations over the evacuation of Soviet troops from Iran and, relatedly, Soviet support for the separatist movement in the northern province of Azerbaijan. After the fall of Bayat's Government in April 1945, the new Prime Minister, Ibrahim Hakimi, began to press for the withdrawal of Soviet troops during his brief period of
office in May-June 1945.85 The matter was discussed further, but inconclusively, during the administration of the next Prime Minister, Sa'id Muhsin Sadr, whose stay in office lasted only the few months from June to October 1945. It was long enough, however, to see World War II come to an end with the surrender of the Japanese on 2 September. It was one of the provisions of the Tripartite Pact of 1942 that within six months of that date, i.e. by 2 March 1946, all Allied forces were to be withdrawn from Iran.

For the Iranian Government, the evacuation of Soviet troops by the due date, if not sooner, was given added importance by the threat to Iran's integrity which was posed by the Soviet-backed separatist movement in Azerbaijan. During Sadr's premiership Azeri claims to autonomy gained momentum under the leadership of Jafar Pishevari and the Azerbaijan Democratic Party, formed in September 1945. After Sadr's Government fell in October, Hakimi formed his second Government which faced mounting problems over Azeri claims to autonomy and the continuing presence of Soviet troops. In November, the People's Congress of Azerbaijan openly rebelled against the central Government of Iran, sending a declaration of autonomy to Tehran. When, in that same month, the central Government sent troops to re-establish its hegemony, they were blocked by Soviet forces. On 19 January 1946, after attempting without success to obtain a Soviet commitment to withdraw its troops, the Iranian Government lodged a complaint with the Security Council of the United Nations that the Soviet Union was interfering in the internal affairs of Iran. The complaint was left on the agenda of the Council pending negotiations between the two sides. Meanwhile, the Hakimi Cabinet fell and on 26 January Qavam al-Saltana, who was believed at the time to be well disposed towards the Soviet Union, was again appointed Prime Minister. In mid-February he set off for Moscow for negotiations which included meetings with Stalin and his Foreign Commissar, V. Mob-toy. The matters discussed went beyond the withdrawal of Soviet troops from Iran. Molotov suggested that Iran should recognise the autonomy of Azerbaijan and Stalin proposed the formation of an Irano-Soviet oil company for the exploitation of Iranian oil. The Iranians, Stalin suggested, should have a 49 per cent interest in the new company while the Soviet Union would hold the remaining 51 per cent. Despite Soviet denials, it was an inescapable conclusion that Soviet interference in Azerbaijan and the evacuation of troops were being connected with Soviet desires for an oil concession.

While no specific agreements were reached in Moscow, relations between Iran and the Soviet Union became noticeably more cordial as a result of Qavam's visit. It was a sign of their less tense relations that, after Qavam returned home on 10 March, the Soviet Union replaced its hard-line Ambassador in Iran, Mikhail Maximov, with a more conciliatory diplomat, Ivan Sadchikov. On 24 March Sadchikov called on Qavam and formally presented the Soviet decision to withdraw its troops from Iran within six weeks, at the same time making demands for the formation of a joint Irano-Soviet oil company and the recognition of Azerbaij an's autonomy.

Qavam was in a difficult position, for politically he could not afford to jeopardise the prospect of a Soviet troop withdrawal; he could not undermine Iranian sovereignty in Azerbaijan by agreeing to the province's autonomy; and he could not defy the Majlis over oil concessions in the light of the law of 2 December 1944. On 29 March he told the British Chargé d'Affaires, Farquhar, that he felt he had no option but to appear to acquiesce with Soviet demands for the formation of an Irano-Soviet oil company. However, he retained some bargaining leverage by linking an oi1 agreement to the withdrawal of Soviet troops and by playing on the need for the oil agreement to be approved by the Majlis.

Although Soviet interference in Azerbaijan remained on the agenda of the Security Council, no substantive progress was made on the matter in that procedure-bound forum. Instead, Qavam and Sadchikov reached an agreement which was announced by the two sides on 4 April 1946. The main points were that Soviet forces would be withdrawn from Iran within six weeks of 24 March as previously agreed; the government of Azerbaijan was recognised as an internal Iranian matter; and it was proposed to form an Irano-Soviet oil company for a period of fifty years. For the first twenty-five years the Soviet Union would own 51 per cent of the shares and Iran 49 per cent; for the second twenty-five years each was to own 50 per cent; and profits were to be divided according to the shares held. The Iranian Government was to submit a Bill on the organisation of the company to the Majlis within seven months of 24 March.

In compliance with the Qavam-Sadchikov Agreement of 4 April the Soviet Union completed the evacuation of its troops from Iran by 9 May. As British and US forces had already been withdrawn, Iran was finally free of foreign forces on her soil. A few months later, in December, the movement for autonomy in Azerbaijan was crushed when Iranian troops led by General Au Razmara entered the province and the separatist regime collapsed. In the meantime, the acute political instability in Iran and the preoccupation with separatist tendencies caused the elections for the Fifteenth Majlis, which should have commenced in March, to be delayed. So too, to the annoyance of the Soviet Union, was the submission to the Majlis of the proposal for an Irano-Soviet oil company)

Eventually the elections, which under the Iranian electoral system were held in various districts over a period of several months, took place in the first half of 1947. The new Majlis, which finally convened in mid-1947, was strongly hostile to the Qavam-Sadchikov Agreement. On 22 October, by an overwhelming majority of 102 votes to 2, the Majlis rejected the proposals for an Irano-Soviet oil company in a single article law which contained five clauses. Clause (A) interpreted the law of 2 December 1944 to mean that Qavam should not have entered into negotiations and drawn up the agreement for the proposed Irano-Soviet oil venture, which was therefore null and void. Clause (B) instructed the Iranian Government to make arrangements for a technical survey of oil prospects in the country so that the Majlis could make arrangements for the commercial exploitation of Iran's national resources by enacting the necessary laws. Clause (C) absolutely forbade the future grant of oil concessions to foreigners. Clause (D) permitted the Iranian Government to negotiate an agreement to sell any oil discovered in commercial quantities in the northern areas of Iran to the Soviet Union, informing the Majlis of the results. Finally, with implicit reference to the Company's concession in the south of Iran, clause (E) ran:

In all cases where the rights of the Iranian nation in respect of the country's natural resources, whether underground or otherwise, have been impaired, particularly in regard to the southern oil, the Government is required to enter into such negotiations and take such measures as are necessary to regain the national rights and inform the Majlis of the result. [Emphasis added]

The Soviet Union was furious at the Iranian reversal of the Qavam-Sadchikov Agreement. However, it was the Company's concession as much as the Soviet Union's desire for one which stood to be affected by the single article law. Michael Cresswell, the British Chargé d'Affaires, rightly imagined that the article referring to the Company 'may come to assume major importance'. At a meeting attended by representatives of the Company and officials from the Foreign Office and Ministry of Fuel and Power, Sir John Le Rougetel, who had succeeded Bullard as British Ambassador in Tehran, stated his belief that clause (E), implicitly about the Company, had been included in order to show impartiality between the Britain and the Soviet Union. However, it was also noted, ominously for the Company, that 'the provision may give the Persians the right to nationalise the petroleum industry'.

CONCLUSION

The single article law of 22 October 1947 was the culmination of an eventful period in the internal affairs and external relations of Iran, which rebounded on the Company. The interest shown by US companies and Royal Dutch-Shell in oil concessions in Iran injected an element of competition into the concessionary situation and drew the Soviet Union into the hunt for concessions which, coupled with the presence of Soviet troops in Iran and Soviet support of the separatist movement in Azerbaijan, developed into a crisis in Irano-Soviet relations. The Company was not directly involved, but was dragged into the limelight by clause (E) of the single article law which marked the beginning of a period in which Iranian politics was dominated by the Company's concession.


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