Indecent Proposals : 1951
Oil, Iran, & the Anglo-American Art of Non-Negotiation
Oil, Iran, & the Anglo-American Art of Non-Negotiation
Ebrahim Norouzi & Arash Norouzi
As soon as Iran’s nine-point Oil Nationalization Act passed in the Senate in May 1951, the government had another challenge to overcome: the settlement of all outstanding financial issues with the former company. The main issues to resolve were compensation payments for the takeover of the Abadan oil installations, settlement of previous accounts, and the question of oil sales to former buyers, of which Britain was by far the largest.
Yet the Iranians would soon discover that their hopes for a negotiated settlement were doomed from the start. Internal documents and other available information prove that the British never had any intention of accepting nationalization as a reality. And despite its alleged observer role, America’s position soon aligned with that of its closest ally. Together, they reached not for compromise, but, in the words of U.S. Assistant Secretary of State George McGhee, to merely “do lip service to nationalization”.
The charade began in the summer of 1951, after Prime Minister Mohammad Mossadegh’s administration and representatives from both houses of Parliament invited the British to Tehran for talks.
On June 11th, the first British negotiating team arrived, headed by Basil R. Jackson, the deputy chairman of the Anglo-Iranian Oil Company (AIOC). On the 13th, Jackson had an hour long discussion with Premier Mossadegh, and upon his suggestion, visited the vast, overpopulated slums of Southern Iran. The experience would have little effect on AIOC’s negotiating terms. After several meetings with Iranian officials, the British team submitted an astonishing offer:
The proposal, in absolute contradiction to the hard-fought Oil Nationalization Law, was merely a way for AIOC to revive the former company in a new form. Mossadegh, quoted in Western media, described it as “childish and designed to deceive children”. Negotiations broke off immediately, and, on June 22, the Jackson delegation returned to London, empty-handed and exasperated. “There is no hope of oil negotiations reopening while the present Persian government is in power”, Jackson told the press upon his arrival.
Shortly after Jackson’s failed mission, U.S. President Harry S. Truman, concerned about the gravity of the matter and its potential harm to American interests, offered to send one of his closest advisers, W. Averell Harriman, to Iran as a mediator. Dr. Mossadegh accepted the offer provided that Iran’s precise nine-point Oil Nationalization law of May 1, 1951 was recognized as the basis for further talks, repeatedly emphasizing its sacredness in his reply to Truman on July 11th. “...No proposal or suggestion has been made, up to the present, by the former oil company denoting their acceptance of the principle of nationalization...”, Mossadegh explained. “Provided, of course, that our indisputable national rights are respected in accordance with the laws concerning the nationalization of the oil industry, the government and the people of Iran are ready to enter into immediate discussions with the aim to remove all the disputes...”
The following is a summary of subsequent events as they unfolded:
As the timeline demonstrates, from the beginning of negotiations, the British engaged in a deliberate strategy of “non-negotiation”. Using the process as a stalling tactic, they hoped the economic sanctions they themselves had imposed would bring about a financial collapse in the country, leading to the fall of Mossadegh’s democratic government. As British scholar (and former AIOC staff member) Elwell Sutton later expressed it,
Britain’s animus towards Mossadegh preceded everything, with all maneuvering rooted in the conviction that Mossadegh should be removed from power by any means possible and replaced by a figure more amenable to their demands. Stokes knew, for example, that his offer was in essence the exact same ploy that Basil Jackson had brought to Tehran six weeks earlier, but, acording to Foreign Office records, had been instructed to “dress it up and present its main points in a different order, together with trimmings or sweetenings as might be required.” Stokes, in fact, “was later to acknowledge much of the validity of Mossadegh’s claims”, according to the 1978 memoirs of Vernon Walters, who accompanied Harriman in Tehran as a translator.3 Anthony Eden, the British Foreign Secretary in Churchill’s government, had decided that under no circumstances should there be any compromise with Mossadegh, since it would only strengthen his position.
Subsequent attempts to settle the dispute, including the Churchill-Truman scheme and the World Bank proposal, also attempted to circumvent Iran’s prerequisite for negotiations. As Mossadegh’s office chief Nosratollah Khazeni explained many years later, “Every one of the four proposals was incompatible with the Oil Nationalization Law”.
Much has been made of the supposed “inflexibility” of Dr. Mossadegh during Iran’s dispute with Britain. Yet Mossadegh was actually willing to make concessions on just about everything — including the price and production levels of oil — but not on the operational control of the refinery, which had to remain in Iranian hands. For him, Iran’s independence from foreign exploitation and interference was of far greater importance than increased oil revenues.
The notion that America was an impartial intermediary acting in good faith is also not supported by their actions. Before leaving the U.S. for Iran, Harriman met with the representatives of leading U.S. oil companies who advised him to stick with equal division of profits, something that Iranians had long rejected.4 Besides, the international oil cartel had no intention of allowing Iran to become an independent player.2 Harriman himself had also ruled out the use of Iran’s nine-point nationalization law as a basis for settlement — in part because it might encourage other oil producing countries to do the same. He went as far as promising the British that U.S. officials would not push them to go beyond the Jackson proposal. The composition of Harriman’s mediation team, too, involved clear conflicts of interest. According to Truman’s Assistant Secretary of State George McGhee, both William Rountree and Walter Levy played favoritism towards the five largest American oil companies, and Levy was even on the payroll of some of these companies.6
In an essay, The United States and Great Britain Navigate the Anglo-Iranian Oil Crisis, Mary Ann Heiss, a specialist in the history of U.S. foreign relations, explored the shifting Anglo-American relationship regarding Iran’s oil nationalization. She identifies three phases in the American position: benevolent neutrality through mid-1951, followed by Anglo-American partnership as the Truman administration decided to back up the British against Iran. Heiss writes that the third phase—the era of U.S. domination—began with Eisenhower’s inauguration, resulting in the creation of the international oil consortium that replaced the AIOC in Iran.
It is highly questionable, however, that a period of “benevolent neutrality” ever existed in the American attitude towards the oil dispute. Aside from scattered rhetoric either encouraging Iran or declaring neutrality, in practical terms, the Americans were always antagonistic towards nationalization. Harriman’s own views on Iran’s oil nationalization prior to going to Iran, and his efforts to pressure Iran to accept the British line also do not support the “benevolent neutrality” theory.
Even before Mossadegh’s premiership, the American government looked upon the notion of Iranian Oil Nationalization with disfavor. In March of 1951, Assistant Secretary of State George McGhee, himself a prosperous oil man and a millionaire by age thirty, had been sent to Iran to appraise “the threat by the National Front to nationalize the [AIOC’s] oil concession.”6 McGhee then met with the Prime Minister Hossein Ala and Shah Mohammad Reza Pahlavi, both of whom told him that “...they could not [openly] oppose nationalization”. Unphased, McGhee told the Shah that “we would support him in standing up to the National Front and their Nationalization program.”
“I then went over various alternative arrangements with the Shah”, recalled McGhee, “that might do lip service to nationalization, but cut it so thin that it would be workable for the AIOC and Iran and not upset concessionary arrangements elsewhere”.
On March 20th, 1951, as McGhee was leaving Iran, he learned that in a unanimous decision, the Majles enacted into law the principle of Oil Nationalization. As soon as he returned to Washington, he began preparing for talks with the British in an attempt to develop a “common policy toward Iran.” McGhee assured the British that his government found nationalization “as distasteful as the British...”, yet suggested neutralizing it through “negotiation conducted to assure continuing AIOC operational control and a suitable share of the profits”.6
By late 1954, following the violent overthrow of Dr. Mossadegh’s legal government in a CIA/MI6 plot, the Anglo-American “common policy” resulted in the establishment of an international oil consortium with full control on the exploration, production and refining of Iranian oil. Thus, the fulfillment of an American aim that dated back to the early 1940’s: a major ownership in the strategic and highly lucrative trade of Iranian oil...with the additional bonus of a pliable client state in the heart of the Middle East.
1 Persian Oil: A Study in Power Politics (1955), L.P. Elwell Sutton
2 The Anglo-Iranian Oil Dispute of 1951-1952 (1954), Alan W. Ford
3 Silent Missions (1978), Vernon A. Walters
4 Oil, Power, and Principle: Iran’s Oil Nationalization And Its Aftermath (1992), Mostafa Elm
5 50 Years of Iranian Oil (2005), Mostafa Fateh
6 Envoy to the Middle World (1983), George C. McGhee
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