Anglo-Persian Oil Company

• 1. Introduction

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  The Anglo-Persian Oil Company began not with corporate strategy but with a telegram ordering a geologist to stop. On the 26th of May 1908, George Bernard Reynolds was told to pack up, send anything salvageable to the coast, and come home. He delayed following those orders. Days later, oil erupted from the Persian desert at Masjed Soleiman. That stroke of luck set in motion a company whose reach would shape empires, topple a prime minister, and eventually become one of the largest oil corporations on earth.

  The company that grew from Reynolds's discovery was formally founded on the 14th of April 1909. The British government would buy into it, navies would run on its fuel, and millions of Iranian workers would live and die within its shadow. By the time its name changed to British Petroleum in 1954, the story behind those initials had already run through coup plots, international courts, and the shanty towns of Abadan. How did a single concession negotiated in 1901 come to dominate the entire oil industry of a sovereign nation, and why did it end in a CIA-backed overthrow? Those are the questions this documentary sets out to answer.

• 2. The D'Arcy Concession

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  William Knox D'Arcy was a millionaire London socialite who had made his fortune from shares in the Mount Morgan Mine in Queensland, Australia. In 1901 he travelled to Persia and negotiated an oil concession directly with Mozaffar al-Din Shah Qajar. In exchange, the Shah received £20,000 in cash, an equal sum in company shares, and a promise of 16 percent of future profits. D'Arcy received exclusive rights to prospect for oil across most of Persia for 60 years.

  D'Arcy hired geologist George Bernard Reynolds to do the actual work. The conditions Reynolds encountered were brutal. The source records his own account: "small pox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 50°C." As the years passed without a discovery, D'Arcy's fortune dwindled and he was forced to sell most of his rights to the Burmah Oil Company, a Glasgow-based syndicate.

  By 1908, Burmah and D'Arcy had spent more than £500,000 on the venture with nothing to show for it. The telegram they sent Reynolds that spring ordered him to dismantle all equipment, dismiss his staff, and return to England. Reynolds waited. On the 26th of May 1908, oil came in at Masjed Soleiman. Arnold Wilson later observed that the service Reynolds rendered to the British empire and to Persia "was never recognized."

• 3. Churchill, the Navy, and State Control

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  Volume production of Persian oil began in 1913 from a refinery built at Abadan, which for its first 50 years held the distinction of being the largest oil refinery in the world. That same year, APOC managers opened negotiations with a new customer: Winston Churchill, then serving as First Lord of the Admiralty.

  Churchill wanted to convert Britain's Royal Navy from coal to oil as part of a three-year expansion program. Oil offered a clear military advantage: it packed more energy per unit of storage, giving ships a longer range at sea. Churchill also wanted to free Britain from dependence on Standard Oil and Royal Dutch Shell. Securing Persian oil seemed to solve both problems at once.

  In exchange for a guaranteed fuel supply, the British government injected new capital into APOC and in doing so acquired a controlling interest. The government purchased 51 percent of the company in 1914, effectively nationalizing it while also becoming, in the source's words, "a de facto hidden power behind the oil company." The contract between the British government and APOC was set to run for 20 years. That arrangement planted the government's financial interests directly inside the company, a fusion that would prove explosive when Iranian nationalism eventually demanded it be undone.

  In 1923, Burmah employed Churchill as a paid consultant to lobby for APOC to be given exclusive rights to Persian oil resources. Those rights were subsequently granted.

• 4. The Renegotiation That Went Nowhere

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  Persia's share of the oil profits had been 16 percent since D'Arcy struck his original deal in 1901. By the late 1920s, the Persian government regarded that figure as the legacy of a non-constitutional regime that had agreed to inequitable terms under duress. Abdolhossein Teymourtash, Persia's Minister of Court and nominal Foreign Affairs minister, led negotiations with APOC Chairman John Cadman across Tehran, Lausanne, London, and Paris from 1928 to 1932.

  Teymourtash pushed hard. He demanded that Persia receive 25 percent of APOC's total shares and stated plainly that if this were a new concession, Persia "would have insisted not on 25 percent but on a 50-50 basis." He also asked for a guaranteed minimum dividend of 12.5 percent, two shillings per ton of oil produced, and a reduction in the company's concession area so that other companies might be attracted to develop fields outside APOC's reach. He further demanded that APOC register itself in Tehran as well as London, arguing that the flow of transactions between APOC and its subsidiaries made it impossible for Iran to know the company's true profits.

  In 1931 the situation grew acute. Oil prices had collapsed under the weight of global oversupply and the Great Depression. APOC informed the Iranian government that its royalties for the year would be just £366,782, while the company simultaneously paid approximately £1,000,000 in income taxes to the British government. The company's profits had fallen 36 percent, but the payments to Iran had dropped 76 percent. While travelling in Europe in 1931 to enroll Crown Prince Mohammed Reza Pahlavi in a Swiss boarding school, Teymourtash made one final push to close the talks. Cadman later said Teymourtash worked feverishly, but succeeded only in securing an agreement in principle. Key figures were never settled.

  In November 1932, Reza Shah personally attended a meeting of his Council of Ministers, publicly rebuked Teymourtash, and dictated a letter cancelling the D'Arcy Agreement outright. Britain took the dispute to the Permanent Court of International Justice at the Hague. After a Czechoslovak mediator was appointed and the parties were urged to negotiate directly, Reza Shah unexpectedly acquiesced. A new agreement was ratified by Iran's National Consultative Assembly on the 28th of May 1933, and received Royal assent the next day.

• 5. The 1933 Agreement and Its Limits

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  Historian Daniel Yergin's account of the 1933 deal records its terms clearly. The concession area was cut by three-quarters. Iran was guaranteed a fixed royalty of four shillings per ton, shielding it from the price swings that had slashed its income so dramatically in 1931. It would also receive 20 percent of the company's worldwide profits distributed to shareholders above a minimum threshold, plus a guaranteed minimum annual payment of £750,000 regardless of all other variables. The royalties for 1931 and 1932 were to be recalculated on the new basis, and the company committed to accelerating the "Persianization" of its workforce. In exchange, the concession's expiry date was extended from 1961 to 1993.

  Abadan had grown into the world's largest refinery by 1950. The AIOC, as the company had been renamed in 1935 when Reza Shah formally asked foreign countries to use the endonym Iran, still drew three-quarters of its supplies from Iranian oil fields and controlled all oil extraction in Iran.

  But the 1933 deal carried a structural weakness: the promises made to Iranian workers were not honored. Under the agreement, the AIOC had pledged to give labourers better pay, greater prospects for advancement, and to build schools, hospitals, roads, and a telephone system. The AIOC did not fulfill these promises. Workers lived in a settlement the source describes as Kaghazabad, or Paper City, without running water or electricity. Wages ran to 50 cents a day with no vacation pay, no sick leave, and no disability compensation. The conditions described by Iran's Petroleum Institute director set the stage for the nationalisation movement that followed.

• 6. Nationalisation and the Abadan Crisis

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  In late December 1950, word reached Tehran that the American-owned Arabian American Oil Company had agreed to split profits with Saudi Arabia on a 50-50 basis. The British Foreign Office rejected any equivalent arrangement for the AIOC. The contrast was not lost on Iranians.

  On the 7th of March 1951, Prime Minister Haj Ali Razmara was assassinated by the Fada'iyan-e Islam, a Shia organization that supported nationalisation. Later that month, the Iranian parliament voted to nationalise the AIOC and all its holdings. In April, Mohammed Mossadegh, leader of the National Front, was elected prime minister. The Abadan Crisis had begun.

  Mossadegh broke off negotiations with the AIOC in July 1951 after the company threatened to pull its employees out of Iran and Britain warned tanker owners that receipts from the Iranian government would not be accepted on world markets. Britain drew up a detailed invasion plan code-named "Buccaneer" to occupy Abadan; both Clement Attlee and Winston Churchill ultimately rejected it. US President Harry Truman opposed intervention but needed British support for the Korean War.

  Averell Harriman arrived in Tehran on the 15th of July 1951 carrying an American proposal: the United States accepted nationalisation in principle but insisted on keeping a foreign-owned company as the operating agent of the new National Iranian Oil Company. Mossadegh refused, saying such an arrangement would only "revive the former AIOC in a new form." His opposition led British officials at the Ministry of Fuel and Power to conclude, in writing, that he "had to go."

  In October 1951, Mossadegh visited Washington after the US embassy accidentally sent him an invitation intended for Churchill. In talks with George C. McGhee, he agreed to a complex settlement under which Iran would own the refinery in Kermanshah and administer the oil fields, with the larger Abadan Refinery sold to a non-British company and the proceeds paid to the AIOC as compensation. The incoming Conservative government of Winston Churchill rejected the deal. On the 22nd of July 1952, the International Court of Justice ruled that the dispute was between the Iranian government and a foreign corporation, not two governments, and was therefore subject to Iranian domestic law.

  Mossadegh expelled the British embassy in October 1952. Britain appealed to US anti-communist fears, arguing that if Iran fell, the oil production and reserves of the entire Middle East would follow. The CIA's plan ran under the code-name "Operation Ajax"; MI6 called its parallel effort "Operation Boot." The CIA used intelligence from the British and bribed politicians, soldiers, mobsters, and journalists to destabilize the country. General Fazlollah Zahedi led tanks to Mossadegh's residence and arrested him for treason. On the 21st of December 1953, Mossadegh was sentenced to three years of solitary confinement in a military prison, a far lighter sentence than prosecutors had sought. He remained under house arrest at his Ahmadabad residence until his death on the 5th of March 1967.

• 7. The Consortium Settlement

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  With Mossadegh gone, the company that had by 1954 renamed itself British Petroleum tried to resume its old position in Iran. Iranian public opinion was too opposed to allow it. The new pro-Western government could not survive granting BP a full return.

  Under American pressure, BP was folded into a consortium formally called Iranian Oil Participants Ltd (IOP), incorporated in London in 1954 as a holding company. BP took a 40 percent share. Royal Dutch Shell held 14 percent. Compagnie Française des Pétroles, now known as TotalEnergies SE, held 6 percent. Gulf Oil held 8 percent. The four Aramco partners, Standard Oil of California, Standard Oil of New Jersey, Standard Oil Co. of New York, and Texaco, each held 8 percent. To join the consortium, these companies paid Anglo-Iranian about $90 million for their collective 60 percent share, plus a further $500 million paid out of a ten-cent-per-barrel royalty. The Shah signed the agreement on the 29th of October 1954, and oil flowed from Abadan the following day.

  All IOP members acknowledged that the National Iranian Oil Company owned both the oil and the facilities. IOP's role was to operate and manage them on behalf of NIOC. The consortium agreed to a 50-50 profit split, mirroring the Saudi-Aramco arrangement, but did not open its books to Iranian auditors and did not allow Iranians onto its board of directors. The founding members of IOP became known as the "Seven Sisters" or the "Consortium for Iran" cartel, and by the time of the oil crisis of 1973 they controlled around 85 percent of the world's known oil reserves.