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Formative Times

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Anglo-American Relations and Cold War Oil

Part of the book series: Cold War History Series ((CWH))

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Abstract

There was little indication when the oil dispute began in late 1947 that it would become a major test of Anglo-American relations. Iran had a number of issues that it believed required renegotiation of the AIOC’s 1933 oil concession.1 The most pressing of these was that countries elsewhere were seemingly getting a better deal, notably Iraq and Venezuela, the latter benefiting from a 50:50 profit-sharing arrangement. Iran’s existing agreement entitled it to a fixed royalty per ton, 20 per cent of the dividend paid to ordinary shareholders above £671,250, and 20 per cent of the sum allocated to the AIOC’s General Reserve between 1932 and 1993, the latter being payable upon the expiry of the concession. Over time an obviously unjust situation had developed. For example, in 1947 the British Treasury reaped £16.82 million in tax revenue whilst Iran received just £7.1 million in royalties and taxation.2 Matters were exacerbated by the Labour government’s income tax and dividend restriction policy. This effectively reduced Iran’s entitlement because it restricted the dividend payable by the AIOC to its ordinary shareholders.

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Notes and References

  1. For 1933 concession details, Bamberg, History of BP, pp.48-50.

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  2. Ibid., p.325.

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  5. Bamberg, History of BP, p.389.

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  6. For these, and fuller, details, ibid., p.398.

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  7. FO 371/75496, FO to Teheran Embassy, Apr. 1949; FO 371/75497, Bevin to Le Rougetel (Teheran), 28 Apr. 1949; Ibid., Strang to Chancellor, 29 Mar. 1949. For the 1930s dispute, P.J. Beck, ‘The Anglo-Persian Oil Dispute 1932–33’, Journal of Contemporary History (1974), vol. 9, pp.123-51.

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  8. FRUS 1950, vol. 5, ‘Discussions with the A.I.O.C, by R. Funkhouser, 24 Jan. 1950, pp.14-15. Acheson voiced similar sentiments at a Foreign Ministers meeting in May. Ibid., vol. 3, US Delegation at Tripartite Foreign Ministers Meeting to Acting Sec. State, 11 May 1950, pp.1027-31.

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  9. Ibid., vol. 5, US Delegation at the London Tripartite Foreign Ministers Meeting to Acting Sec. State, 16 May 1950, p.547.

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  10. FO 371/82374, Le Rougetel to FO, 10 Jan. 1950.

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  11. These views became widely known and Ambassador Wiley suspected the British Ambassador of actively supporting, at least initially, Mansur’s candidature. FRUS 1950, vol. 5, Wiley to Sec. State, 30 Jan. 1950, p.462.

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  14. Ibid., State Dept Paper, ‘Present Crisis in Iran’, u.d., p.517.

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  15. Ibid., Acting Sec. State to Embassy UK, 22 May 1950, pp.550-51.

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  16. Ibid. 1949, vol. 6, Statement by the UK and US Groups, annex 1, 14 Nov. 1949, p.64.

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  24. Ibid., Collins quoted in McGhee to Sec. State, 25 Apr. 1950, p.523.

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  31. Essential reforms included more effective import and foreign exchange controls, more realistic budgetary procedures, and the adoption of a more practical taxation system. To achieve these the Americans considered extending small-scale tied aid of no more than $50 million through the Exlm Bank.

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  32. These figures were given by the NSC in January 1954 but given the loss of Iranian production in 1951 can be assumed to be indicative of the position in 1950. FRUS 1952–54, vol. 10, NSC Statement of Policy, 2 Jan. 1954, p.873.

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  35. CAB 129, CP(51)114, ‘Persian Oil’, memo, by Foreign Secretary, 20 Apr. 1951.

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  36. See next chapter.

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  37. McGhee, for example, believed that, Cold War considerations apart, the Iranian oil dispute was a highly unnatural one for the US to be involved in. HST, Acheson Papers, box 76, Princeton Seminars, folder May 15–16 1954, reel 5, track 1, p.6.

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  38. FO 371/75496, FO minute, u.d.; FO 371/82374, minute Leavett, u.d..

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  41. Cited McGhee, Envoy, p.322.

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  44. Ibid., memo. Wilkins and Funkhouser, 15 Mar. 1950, p.35. Under the substitution policy all American fuel oil and one third of gasoline imports to the UK and dependent territories were banned to displace 3.8 million tons of dollar oil, thereby easing Britain’s balance of payments by approximately $50-60 million.

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  46. Longhurst, Adventure, p.137.

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  49. FO 371/75495, Cresswell (Teheran) to Burrows, 17 Jan. 1949; FO 371/82376, Wright to Butler, 11 Oct. 1950; FO 371/82377, minute P.E. Ramsbotham, 22 Nov. 1950; ibid., Rodgers to Wright, 16 Nov. 1950; FO 371/82375, Shepherd to Furlonge, 21 Aug. 1950; BP 87229, memo, of meeting between Company (Rice and Gass) and FO (Wright and Furlonge), 28 Sep. 1950.

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  50. FO 371/75495, FO draft letter by J.E. Chadwick to Chancellor, 2 Feb. 1949. Also Michael Wright, cited Bamberg, History of the BP, p. 390.

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  51. Louis, British Empire, p.642. For American beliefs of the AIOC dominating British policy see FRUS 1950, vol. 5, Rountree to McGhee, 20 Dec. 1950, pp.634-5. For examples of sweeping criticism of the AIOC, Elwell-Sutton, Persian Oil, p.8; Bill, Eagle, p.67. For specific criticism, J.F. Goode, who blames the attitude and character of Fraser, and H. Katouzian, who claims that the AIOC offered too little too late and was a source of British interference in Iranian politics. In similar vein, Keddie, Horowitz and Kolko all blame the AIOC’s failure to offer Iran a more equitable settlement. Goode, Diplomacy of Neglect, p.48; H. Katouzian The Political Economy of Modern Iran (London: Macmillan, 1981), pp.157-8; Keddie, Roots of Revolution, pp.133-4; Horowitz, Free World Colossus, p.182; and J. and G. Kolko, Limits of Power, p.417.

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  52. Ferrier has argued along lines more sympathetic to the AIOC. ‘The company was hemmed in by the lack of flexibility in the government’s fiscal policy and by the narrowness of legal advice.’ R.W. Ferrier, ‘A Triangular Relationship’, in Bill and Louis (eds), Musaddiq, p.171. Interestingly, Bamberg inverts the problems of the government-company relationship: ‘it was not in the Company’s interest to be closely associated with a declining imperial power in an age of rising nationalism’. Bamberg, The History of BP, p.519.

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  57. Jointly financed in that HMG would surrender 45 per cent of tax on this amount.

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  59. FO 371/52735, Bevin to Minister of Fuel and Power and Exchequer, 20 Jun. 1946.

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  60. Cottam has famously condemned their approach. The British ‘for practical and psychological reasons... persisted in their antiquarian conviction that the Iran of 1951 differed little from the Iran of 1901’. R.W. Cottam, Nationalism in Iran (Pittsburgh: University of Pittsburgh Press, 1973), p.273.

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  61. The bill passed the Majlis on 2 Dec. 1944. For the text of the clause referred to see L. Lockhart, ‘Causes of the Anglo-Persian Oil Dispute’, p.144. For expressions of some British misgivings see Bamberg, The History of BP, p.256.

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  63. Whigham cited Cottam, Nationalism, p.160. Also CR. Attlee, As it Happened (London: Heinemann, 1954), p.175; FO 371/82375, minute Barnet following AIOC-HMG meeting, 2 Aug. 1950; FO 371/75497, record AIOC-HMG meeting, 19 May 1949; M. Elm, Oil, Power, and Principle, p.122; R.W. Bullard, ‘Behind the Oil Dispute in Iran: A British View’, Foreign Affairs (1952-3), vol. 31, p.465.

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  66. In July 1949 Ambassador Le Rougetel anticipated little serious opposition in the Majlis. Two months later Valentine G. Lawford, British Chargé d’Affaires Teheran, still saw no reason to make further concessions to Iran. FO 371/75498, Teheran Embassy to FO, 18 Jul. 1949; FO 371/75500, Teheran Embassy to FO, 26 Sep. 1949.

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  106. Inducements included: measurement regulators; gas provision for, and special rates on, certain goods to the Iranian government; and a £1 million grant to the Teheran University. FO 371/82379, minute Wright, 23 Oct. 1950; ibid., 24 Oct. 1950.

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Marsh, S. (2003). Formative Times. In: Anglo-American Relations and Cold War Oil. Cold War History Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230287655_3

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