Rethinking “Oil Nationalism”: The Case of Anglo Iranian Oil Company (AIOC)

Introduction

Oil was important to the global economy because it had advantages over coal which became apparent in the 1950s. Oil had the advantages of being pumped rather than manhandled and when burnt properly it enabled a complete absence of smoke, an attribute that was of particular importance to the British Admiralty and the British Government¹. Crude oil was one of the major commodities in the world trade arena, transferred between a range of international firms². Oil was important for both producing and consuming nations because it generated major revenue (taxation and royalties) and satisfied a whole range of consumer requirements³. In a wider sense, oil had come to be synonymous with maintaining imperial integrity⁴. As oil became more important, British willingness to maintain control became more necessary⁵.

For Iran, oil played an important role in facilitating its ability to engage in global markets and giving it the opportunity to become more involved in oil production for exports⁶. In the post war years, the development of the Iranian oil industry was considered to be an important event that had occurred during the previous fifty years⁷. Iran’s participation in the world economy has been greatly emphasised by its strategic location and by its prized oil resources⁸. Indeed, Iran’s oil reserves have accounted for the greater part of the total assets of the petroleum industry of the Middle East and the country has become a major supplier of oil to Britain following the initial oil exploration by AIOC.

Since oil was important for Britain in order to satisfy the whole range of consumer requirements and to generate a considerable source of government revenue, the Anglo Iranian Oil Company (AIOC)⁹ was considered a suitable company upon which Britain could rely because it had significant political, strategic and economic power in Iran in the 20th century. In 1914, British interests influenced the Iranian deposits according to its own requirements, where the British government controlled oil for its navy and acquired a majority shareholding (51%) stake in the AIOC (Chandler, 1990; Millward, 2007). The AIOC was Iran’s main source of income because it had in Iran the world’s largest refinery, the second largest exporter of crude petroleum, and the third largest oil reserves which were mainly managed by the British government and British private citizens (Abrahamian, 2001) Moreover, AIOC ‘was so dominant within the Iranian economy that it was effectively a state within a state and regarded to all intents and purposes as an arm of the British Admiralty and the British Strategic policy (Cited in Marsh, 2003).