In January 1966, Iran and the Soviet Union signed an agreement which provided that the USSR would advance credits of $286 million at 2.5 percent interest over a twelve year period for the construction of a steel mill, a gas pipeline to the Soviet Union, and a machine tool plant.
Regarding the steel mill, it was agreed that the Soviet Union would be responsible for the following: planning and exploratory work; the delivery onsite of any equipment, machinery, and materials unobtainable in Iran; sending Soviet experts to Iran to collect initial data; furnishing supervision and advice in the construction of the projects; giving technical-industrial training to Iranian citizens; assisting in the assembly, installation, and initial operation of the equipment; and receiving Iranian citizens for technical-industrial training in the Soviet Union.
The Isfahan Steel Mill: A Russian Turnkey Installation
The agreement envisioned a turnkey installation with
a complete metallurgical cycle and an annual capacity of 500,000 to 600,000 tons of steel, which might be increased to 1 to 1.2 million tons.
The gas pipeline was to go into operation in 1970, the steel mill in 1971.
The pipeline was designed to be more than 1,000 kilometers long and to carry up to ten billion cubic meters of gas annually to the Soviet Union.
The Soviets were to deliver increasing amounts of equipment for heavy and light industry, road building, and other infrastructure projects. In return, Iran was to deliver to the Soviets gas, cotton, wool, and nonferrous material.
Thus, the accord included mutually beneficial technical and economic exchanges.
The Isfahan Steel Mill Site: Aryamehr
A site for the steel mill was quickly agreed upon (near the Zayendeh River on the outskirts of Isfahan) and the facility was named Aryamehr. It was built using the latest technology, with Soviet engineers and technicians supervising both construction and the installation of machinery and equipment obtained from the USSR.
The complex employed 1,300 Russian engineers and technicians, 900 Iranian engineers and technicians, and 33,000 other Iranians, including 8,000 specialists.
Business was conducted in both Russian and Persian, so three years of language classes were provided for the technicians and other specialists.
Since essential ingredients for its industrial processes came directly to the site, new rail lines were constructed.
A cement block factory in the vicinity of the plant provided some of the required materials for the construction of housing for staff and workers.
The plant increased mining activity in the Isfahan region and, in addition to steel, produced secondary products which were beneficial to the city’s chemical industries.
The agreement also called for the construction of a mechanical engineering facility in the Isfahan area which was projected to have an annual output of 25,000 to 30,000 tons of metal products.
Overall, the total cost of the mill was estimated at $1.4 billion, an amount which includes the housing project and associated housing operations.
The Isfahan Steel Mill: Production and Associated Housing
Shortly after the first blast furnace came into operation in January 1972, production was rated at 750,000 tons per year. A later agreement with the Soviets (August 10, 1972) provided a basis for increasing capacity to 2 million tons and later to 4 million tons annually.
As mentioned above, a planned community, Aryashahr, was constructed to house workers and their families. The first stage called for the building of 200 multiple family units which were to provide housing for 50,000 inhabitants. A later phase would increase the number of residents to 300,000 and the number of dwellings to 800.
In addition to housing, Aryashahr, a modern community built in the Soviet manner, allowed for 4,200 hectares of greenspace, two schools, a dispensary, and a large 400 room hotel.
In sum, the Russians provided a turnkey operation with workers housed in a self-contained complex, a distance from the center of Isfahan. Buses were used to transport advisers and specialists for downtown shopping and other excursions.
In all instances, workers were supervised and there was little opportunity f9r the improper and highly visible activities that the Americans later became known for.
The American presence became highly noticeable and intrusive, in large part, because Americans lived and shopped in Isfahan proper. Although some had undergone cultural sensitivity classes in the US before leaving for Iran, most tried to live their lives as they would have at home.
The American openness and brashness ensured a higher profile than that of the Soviets, and made them much more accessible to criticism.
Interestingly, many Isfahanis were not even aware of the Russian presence — or even of the mill’s existence. R.K. Ramazani says that
Ruffled political relations between Iran and the Soviet Union pushed the news of the Aryamehr Steel Mill off the front pages of Iranian newspapers.