One of the most important factors shaping America’s post World War II interest in Iran was oil.
As early as the autumn of 1944, it was rumored that a southern oil concession had been secretly offered to American and British companies.
It was also rumored that a northern concession would be offered as soon as Iran was free of Soviet troops.
The Soviets reacted by demanding the northern concession for themselves.
This action launched the Cold War in Iran and further consolidated the position of the shah by sharpening foreign policy differences among his parliamentary opponents.
As the British consul in Mashhad explained:
It was the vigorous American intervention, the financial, military, and gendarmerie missions, the apparent drive by the US to capture the Persian market, and, above all, the efforts of Standard Vacuum and Shell to secure oil-prospecting rights that changed the Russians in Persia from hot-war allies into cold-war rivals.
At the same time that foreign powers were vying for access to Iran’s oil, the country’s development initiatives assured that dependence on oil and, therefore, on the world market would spiral.
Oil provided one-third of Iran’s overall budget and financed 60 percent of all visible imports between 1946 and 1950.
Iran’s first development plan (1949-1956) was to have received more than 37 percent of its budget from oil revenues.
The flow of oil provided some camouflage for the real depression of the urban sector. The sector had been affected by:
- a lack of state investment expenditure
- a loss of private investment due to increased risk and uncertainty
- low demand
- high unemployment
- widespread poverty.
State policy had negatively affected bazaaris and domestic industries.
Although Allied troops spent large sums of money in Iran temporarily increasing the number (and profits) of bazaaris, at war’s end, cheap Western goods flooded the market causing bankrupties among artisans and bazaar shopkeepers.
Importation of goods led to the closure of many factories, including a number of textile and weaving factories in Isfahan.
This situation was exacerbated by a conflict between Iran and Britain over the Anglo-Iranian Oil Company which generated massive political confrontation by the early 1950s.
Since the history of the Anglo-Iranian Oil Company provides the key to America’s first covert intervention in Iran — and in the less developed world — posts in days to come will concentrate on laying the groundwork for the important events to follow. Stay tuned!