A recent list compiled by the Associated Press reveals the top 20 oil-producing countries (in barrels per day). According to 2009 statistics by the U.S. Energy Information Administration Iran is #4 on that list, producing 4.0 million barrels of oil daily.
Whether we like their nuclear program or not, Iran’s oil is critical to meeting the world’s energy needs.
Importantly, the strikes and protests currently shaking the Middle East are also affecting Iran.
Last I heard, an important occurrence was taking place at the oil refinery installation at Abadan, the most important refinery in Iran.
In 1978, strikes in the Abadan refinery were instrumental in bringing down the shah. But, from the beginning, the history of the oil industry in Iran is full of stories of protests and turmoil. They often revolve around workers’ grievances.
Today, at least officially, workers are claiming that unpaid wages for the last six months are the main reason behind their strike.
Here’s a short history of the early oil industry in Iran.
A concession for oil rights in Iran was signed by the W.K. D’Arcy group in 1901.
This concession provided for a 60 year exclusive privilege to explore for and develop petroleum sites over a 500,000 square mile area of Iran.
The provinces that bordered on the Soviet Union in the north of the country were excluded from the concession.
The Iranian government agreed to protect the interests of the company in Iran and, in return, was to receive 16 percent of the company’s net profits.
Eight years later, in 1909, the Anglo-Persian Oil Company, the precursor of the Anglo Iranian Oil Company (AIOC), began its operations. They exploited a major field that had been discovered in the southwestern province of Khuzistan a year earlier.
In May 1914, the British government acquired 51 percent ownership of the company, becoming a direct partner in corporate affairs.
With the onset of World War I, the strategic significance of oil was widely acknowledged.
Churchill’s decision to fuel the British naval fleet with oil rather than the traditional coal was critical.
The Central Powers and the Americans also became concerned with the security of their oil supply.
Iran became disgruntled with the British early on, expressing dissatisfaction with the financial terms of the agreement.
The Iranians argued that the 16 percent profit-sharing arrangement extended to all companies under the Anglo-Persian Oil Company umbrella.
Britain, on the other hand, countered that profits from the refining and distribution of Iranian oil outside of Iran were excluded.
Accordingly, as early as the mid 1920s, the Iranian government — headed by its new leader Reza Khan — began to pressure for fundamental changes in the terms of the concession.
A more advantageous arrangement giving the Iranian government 25 percent of the company’s shares was agreed to by the British in 1928-1929.
The Iranians refused to approve the plan, hoping to acquire even more favorable adjustments.
Reza Shah canceled the D’Arcy Concession in November 1932. He then negotiated a new agreement that took effect in 1933.
This arrangement pulled back the original concession area to 100,000 square miles, exempted the company from all taxes other than those provided for in the original concession and, most importantly, extended the concession for another 60 years.
The AIOC became a chief target of Iranian nationalists in the late 1940s, and the 1933 agreement became the center of criticism.
By this time, oil had been identified as the key to Iran’s social and economic development.
Despite the oil industry’s importance, however, during the course of the war, conditions for workers in the oilfields deteriorated markedly.
As Manucher Farmanfarmian, a former Minister of Finance and board member of the National Iranian Oil Company writes in his memoir:
Wages were 50 cents a day. There was no vacation pay, no sick leave, no disability compensation. The workers lived in a shantytown called Kaghazabad, or Paper City, without running water or electricity, let alone such luxuries as iceboxes or fans. In winter the earth flooded and became a flat, perspiring lake. The mud in town was knee-deep, and canoes ran alongside the roadways for transport. When the rains subsided, clouds of nipping, small-winged flies rose from the stagnant waters to fill the nostrils, collecting in black mounds along the rims of cooking pots and jamming the fans at the refinery with an unctious glue . . . . In every crevice hung the foul, sulfurous stench of burning oil — a pungent reminder that every day 20,000 barrels or 1 million tons a year, were being consumed indiscriminately for the functioning of the refinery, and AIOC never paid the Iranian government a cent for it.
In the British section . . . there were lawns, rose beds, tennis courts, swimming pools, and clubs . . . .
As in earlier protests involving textile workers in Isfahan, oil industry laborers began to press for higher wages and better living conditions.
Protest actions included wildcat strikes, newspaper campaigns, and street demonstrations supported by nationalist and communist groups.
In July 1946, for example, a widespread riot killed forty-seven and injured more than 170 workers.
Importantly, demonstrations were not limited to workers associated with the AIOC. Nor were they confined to any one region of the country. According to Ervand Abrahamian:
As soon as news of the street killings reached Isfahan, the pro-Tudeh unions organized sympathy strikes in the main textile mills, in the smaller factories, and even in the bazaar workshops. Ettela’at-e-Haftegi reported that the strikes involved over 30,000 workers and were the most impressive in the city’s history. To contain the strikes, the military placed machine guns, tanks, and armoured vehicles around the mills and the working class districts. Despite these precautions, one worker and one policeman were killed as some 10,000 demonstrators tried to make their way from the mills to the city’s central square.
AIOC officials complained of Communist penetration and used Tudeh involvement as an excuse to avoid financing reform. Nationalist groups as well as the Tudeh Party continued to pressure for change.