Professional Documents
Culture Documents
“
TPAJAX was in fact
rooted in a complex web
of political and economic
British-backed coup d’état on
19 August 1953, the landscape
of Western involvement in the
Middle East was forever
changed. The event, today seen
threat in order to encourage US
action. The British concerns
were less political, however.
They were primarily economic
and centered on the threatened
as one of the most prominent loss of currency reserves that
gamesmanship.
examples of US intervention in would follow nationalization of
the Middle East, was rooted in the Anglo-Iranian Oil Com-
All statements of fact, opinion, or analysis expressed in this article are those of the
author. Nothing in the article should be construed as asserting or implying US gov-
ernment endorsement of its factual statements and interpretations.
and the company had Once the global repercussions of significant economic sanc-
repeatedly flagrantly dis- tions were assessed, and the hesitancy to use them grew, the
regarded its previous possibility of military intervention increased.
promises to train and pro-
mote Iranians. 5
unemployment in Persia’s oil- also undoubtedly negatively
These uncertainties and producing regions would result, affect Britain’s relationship
unkept promises caused the and its internal financial stand- with other Middle Eastern
Persians to reject the new ing would further weaken. Put countries. 10
terms. Instead, with extreme simply, “Persia would be faced
nationalists in control, the with ‘economic chaos.’” 8 Once the global repercussions
Majles, Persia’s parliamentary of significant economic sanc-
body, began in February 1951 to The British also determined tions were assessed, and the
advocate nationalization of the that the political risks of impos- hesitancy to use them grew, the
oil fields at Abadan. This coin- ing sanctions were cause for possibility of military interven-
cided with the assassination of concern. Economic chaos would tion increased. One of the pri-
Prime Minister Ali Razmara work to the advantage of the mary questions became how to
after he renounced nationaliza- communists and the Tudeh extract British citizens work-
tion proposals and was labeled Party, 1 which might create hos- ing for the AIOC in Abadan
a “British stooge.” The cham- tility toward Britain in the (particularly if Persia were to
pion of nationalization, Moss- United Nations and the United try and take the fields by force),
adeq replaced him, and on States. The US response was both to ensure the safety of
30 April, the Majlis voted to London’s primary worry, how- British employees of AIOC and
nationalize Persian oil. 7 ever, as described in a 5 May to send a message to the Per-
1951 Foreign Office telegram: sian government that its deci-
sion to nationalize oil was
Nationalization Rather than see Persia unacceptable and would be
Nationalization presented a fall into economic and costly to the country. The
slew of issues for the British political chaos, the U.S. removal of British workers, who
government. As a result, its government might even supplied most of the expertise
ideas on how to deal with the decide to send oil experts behind the operations, would
situation varied. The possibil- and U.S. tankers to Aba- have severely slowed opera-
ity of imposing economic sanc- dan and provide financial tions.
tions on Persia frequently made aid to offset H.M.G.’s
its way to the top of agendas in financial sanctions. 9 A fundamental split in Brit-
Parliament, but the conse- ish and US ideological
Not only did British Foreign approaches soon emerged, as
quences of these sanctions were
Office officials fear US inter- the British government pre-
estimated to be severe. Accord-
vention because it would be ferred to use force to mitigate
ing to a telegram sent from
harmful to British negotia- any problems that might arise,
Britain’s Tehran post to the
tions, but also because it might while the United States, partic-
Foreign Office, economic penal-
be detrimental to Anglo-Ameri- ularly Secretary of State Dean
ties would affect about 75 per-
can relations, as the United Acheson, believed that military
cent of Persia’s foreign
States would appear to have intervention would drive Per-
exchange earnings, and around
“stepped into AIOC’s shoes.” sia into what would be welcom-
30 percent of its foreign
The economic impact would ing Soviet arms. Furthermore,
exchange resources. Large-scale
1 Formed in 1941 by Marxists who had been jailed by Mohammad Reza Shah, the Tudeh Party had been encouraged by Stalin and the
Soviets to stir up political awareness for their causes. The party would ultimately be most utilized by the CIA, however, which staged dis-
turbances in the guise of the Tudeh that eventually led to riots and the overthrow of Mossadeq.
Despite US qualms about the use of force, the British contin- Herbert Morrison, Britain’s
ued to draw up plans to evacuate their AIOC employees from secretary of state for foreign
Abadan. affairs, advocated protecting
British lives while seizing, hold-
Proposals for Military ing, and operating the refinery.
the US government felt that Intervention Not only would this allow the
Mossadeq and his nationalist flow of refined oil to continue,
followers were in fact capable of Despite US qualms about the he determined, but it could
revising Iran’s political struc- use of force, the British contin- result in the downfall of Moss-
ture and ensuring that the ued to draw up plans to evacu- adeq and perhaps even encour-
country did not fall into the ate their AIOC employees from age a regime more friendly to
hands of the Soviet Union. 11 Abadan. In a July 1951 cabinet the British to take over. This
meeting led by Attlee, both the was in direct contrast to the
The use of force, US officials AIOC and Britain’s ambassa- wishes of Washington, which at
feared, might change this. The dor in Tehran favored the pol- the time felt that the sitting
British were well aware of US icy as a way of displaying their Persian government should
concerns; a cabinet document resilience to Persia. Attlee maintain power in order to pre-
titled, “The Political Implica- agreed with this stance, while vent the country from falling
tions of Armed Intervention in warning that it was unwise to into communist hands. 15
the Persian Oil Dispute” notes, assume that if Britain suc-
ceeded in overturning the Per- The British insistence on the
The U.S. government sian government, any successor use of military force, despite US
draws a distinction would be more favorable to the concerns, showed that they
between the use of force to British government and the believed they were in complete
protect the oil installa- AIOC. After all, Mossadeq had control of the situation. This
tions: a) when there is a gained power by earning the sentiment is best seen in a cabi-
regularly constituted gov- support of Persians who were net meeting in July 1951, when
ernment in Persia, and b) dissatisfied with corrupt groups Morrison discouraged Sir Fran-
to counter a Communist in Persian political circles. 13 cis Shepherd, British ambassa-
coup. They don’t accept dor to Iran, from meeting with
the argument that to fail With this in mind, the British US Ambassador to Britain
to protect Persia’s oil moved forward with prepara- W. Averell Harriman 1 because a
industry might invite tions for military intervention. meeting might cause harmful
such a coup. We could not Three plans, Midget, Midget speculation in the press and
expect support from the Reinforced, and Lethal, were among Persians. If Harriman
U.S. Government, and proposed. Plan Midget was helped mediate the dispute,
American opinion at-large designed solely to protect and Morrison argued, the Persian
would be actively withdraw British nationals. government might be led to
hostile. 12 Midget Reinforced would pro- believe that he was acquiring
tect UK nationals but also more favorable terms for
This distinction would later allow forces to remain in Aba- Persia. 16
lead Attlee and Churchill to dan if the opposition was weak.
present oil nationalization as Plan Lethal would seize and Ultimately, Attlee’s concern
an issue of communism rather hold Abadan Island in case of over the potential negative con-
than one of financial stability. Persian opposition. 14 sequences of military action
seemed to win out in the early
stages of the oil nationalization
1 Harriman would maintain a close relationship with the British government throughout his public service career, in this instance as
dispute. Rather than withdraw The Atlantic Charter would come to be seen as a sign of Amer-
AIOC personnel and provoke a ica’s growing economic leadership and of the dire straits of Brit-
disastrous Persian response, he ain’s sterling currency.
decided that the British should
instead remain in Abadan and
execute Midget only if ately to produce and export United States stopped its Lend-
necessary. 17 This would allow goods to gain currency to pay Lease Program, which had been
further negotiations to occur, for imports and to pay back its a vital contributor to Britain’s
and would give the British gov- large war loans. economy throughout the war.
ernment time to discuss joint- Under Lend-Lease, the United
force operations with the By contrast, as the war drew States had provided the United
United States, which was still to a close, the United States Kingdom, Soviet Union, China,
apprehensive about involving had been able to improve its France, and a host of other
itself in the issues in Abadan position in international trade Allied countries with war mate-
and in greater Persia. and enter markets it previ- rials and supplies. Britain
ously could not access. In many received an estimated $31.4 bil-
Attlee’s cabinet meetings in ways, the 1941 Atlantic Char- lion in wartime shipments, the
the summer of 1951 would ter paved the way for American most of any country listed
prove to be only the start of a macroeconomic leadership. under the agreement. 21 When
long line of discussions of force- Among the eight points listed Lend-Lease was abruptly can-
ful action in Persia. They would under the agreement were the celled, the UK was virtually
also prompt conversations on principles of lowering trade bar- bankrupt and still in need of
what would prove to be a much riers; establishing more global financial assistance, even
broader and more strategic economic cooperation and though the United States had
attempt to garner US diplo- advancement of social welfare; decided to negotiate Lend-
matic and military support for and ensuring freedom of the Lease settlements without
intervention in Iran. seas, a key component for requiring repayments on war-
advancing the shipment of US time deliveries. This arrange-
goods and exchanges on the ment had other costs for the
America’s Growing international market. 19 recipients of Lend-Lease aid:
Economic Leadership
The charter, drafted by Win- The decision to settle Lend
The Atlantic Charter ston Churchill and President Lease debts without mon-
While on the surface the Franklin D. Roosevelt, solidi- etary or financial
United Kingdom faced an fied the bond between Britain repayments had a pro-
immediate loss of revenue with and the United States and found impact on the shape
the nationalization of Iran’s oil, would serve as a model for of the postwar economic
its larger concern was deeply future international contracts, system. The United States
rooted in a growing currency including the General Agree- decided to extract foreign
crisis that plagued the British ment on Tariffs and Trade and policy promises from the
economy throughout the post- the postwar liberalization of United Kingdom and
war period. With the conclu- trade in French and British require its participation
sion of the war, Britain was goods. 20 It would come to be in a new world economic
slow to realign from wartime seen as a sign of America’s framework. This also
production back to a peace time growing economic leadership meant that the State
economy. At the end of the war, and of the dire straits of the Department, rather than
nearly 55 percent of Britain’s pound sterling. the Treasury Department,
gross domestic product was
would be the lead US gov-
derived from production associ- Lend-Lease ernment agency
ated with making war. 18 As a Shortly after the Japanese responsible for handling
result it was unable immedi- announced their surrender, the
The Problem with Servicing British Treasury officials were particularly concerned about the
Dollar Loans to Persia effects of dollar loans.
British concerns over sterling
convertibility and decreasing Mr. Razmara (the new could reasonably expect
dollar reserves extended beyond Prime Minister) has the Americans on their
postwar repayments to the applied to the American side to provide all the dol-
United States. By providing Export-Import Bank for a lar assistance required,
monetary assistance to Persia, loan, which the bank is including the servicing of
the British feared additional virtually committed to the dollar loans, and also
depletion. In a 25 September grant up to a figure of $25 the dollar backing for half
1950 memorandum on the ser- million and to the Inter- Persia’s internal currency
vicing of dollar loans to Persia, national Bank for a loan needs 32
Britain’s situation with regard which will probably
to providing loans to Moss- amount to $9 mil- Through this, Britain’s con-
adeq’s government becomes lion…the difficulty which cern over the nationalization of
clear, as do Anglo-American has arisen is in respect of oil and America’s role in the cri-
agreements and disagreements the dollar servicing sis peaked. If Persia acquired
on the issue. The memorandum them…. dollars from the United States,
notes, then it would not need Brit-
The Persian Government ain’s dollars under the Memo-
We and the Americans are has virtually no source of randum of Understanding. This
agreed on the urgent dollar income and her would allow Britain to preserve
necessity of providing dollar needs are provided dollar holdings and trade with
immediate financial by ourselves under the the US government, helping it
assistance to Persia. Last terms of an agreement to remain a major economic
Spring the influence of the known as the Memoran- power. If Britain could buy oil
communist-controlled dum of Understanding in pounds in sterling areas, Per-
Tudeh party was increas- between the Bank of Eng- sia would be empowered to buy
ingly disturbing because a land and the Persian British manufactured goods
series of inefficient Gov- Bank Melli, under which with those pounds, leading to a
ernments had destroyed sterling held by Persia is better balance of trade. If oil
public confidence in the convertible into dollars for started to be priced in dollars
ability of the regime to the purposes of a) essen- and Persia was lost, however,
improve economic stan- tial imports not then Britain would be left with
dards…. The importance obtainable from sterling the question of where to acquire
of Persia’s oil to our econ- sources, and b) certain dollars to pay for oil, poten-
omy, and the political other specific items such tially leading to the cutoff of its
necessity of preventing her as diplomatic and educa- pipeline.
falling under communist tional expenses.
domination, need no British Treasury officials were
emphasis. 31 We have been considering particularly concerned about
giving sterling aid to Per- the effects of dollar loans. In a
The latter half of this passage sia…but the Treasury note from the Treasury Cham-
is most important, as it reflects have felt that if we were to bers to the prime minister, they
the importance of Persian oil to do this, and if we were argued,
Britain as well as Britain’s also to agree to provide
emphasis on the communist the sterling backing or We could not tolerate a
threat in discussions with the half of any assistance in situation where Persia
United States. The memo con- local currency which Per- was freely converting her
tinues, sia might require, we sterling balances here into
dollars…they can use the
❖ ❖ ❖
Endnotes
1. Foreign Office telegram No. 350, addressed to Tehran telegram No. 352. 5 May 1951, Foreign Office Papers,
the National Archives (Kew).
2. Kenneth M. Pollack, The Persian Puzzle: The Conflict Between Iran and America (New York: Random
House, 2005), 51.
3. Ibid., 53.
4. Ibid., 54.
5. Ibid.
6. Stephen Kinzer, All the Shah’s Men: An American Coup and the Roots of Middle East Terror (Hoboken, NJ:
John Wiley & Sons, 2003), 89.
7. Elton, L. Daniel, The History of Iran (Westport, CT: Greenwood Press), 149; Mark J. Gasiorowski, U.S. For-
eign Policy and the Shah: Building a Client State in Iran (Ithaca, NY: Cornell University Press, 1991), 49–50;
Nikki R. Keddie, Modern Iran: Roots and Results of Revolution (Updated Edition) (New Haven, CT: Yale Uni-
versity Press, 2006), 124; Kinzer, 76-80; Barry M. Rubin, Paved with Good Intentions: The American Experi-
ence in Iran (New York: Penguin, 1981), 51–52.
8. Telegram #350.
9. Ibid.
10. Ibid.
11. James A. Bill, The Eagle and the Lion: The Tragedy of American-Iranian Relations (New Haven, CT: Yale
University Press, 1989), 61–63; Gasiorowski, U.S. Foreign Policy and the Shah, 82; Gasiorowski, “The 1953
Coup d’État Against Mosaddeq” in Malcolm Byrne and Mark J. Gasiorowski, Mohammad Mosaddeq and the
1953 Coup in Iran (Syracuse, NY: Syracuse University Press, 2004), 229–30; Kinzer, 86–92; Wm. Roger Louis,
“Britain and the Overthrow of the Mosaddeq Government,” in Byrne and Gasiorowski, 151–53; Rubin,. 43–45.
12. Cabinet Papers, Document Six. Cabinet meeting on Persia. 13 July 1951. The National Archives (Kew). Accessed 15 July
2010.
13. Cabinet Papers, Document One. Cabinet meeting on Persia. 12 July 1951. The National Archives (Kew).
Accessed 15 July 2010.
14. Cabinet Papers, Document Six.
15. Cabinet Papers, Document Fourteen. Cabinet meeting on Persia. 20 July 1951. The National Archives.
Accessed 15 July 2010. Signed Herbert Morrison.
16. Cabinet Papers, Document Fourteen. Persian Oil. 27 July 1951. The National Archives. Accessed 15 July 2010.
17. Cabinet Papers, Document Twenty-One. Persian Oil. 27 July 1951. The National Archives. Accessed
15 July 2010.
18. Richard J. Evans, The Third Reich at War: How the Nazis led Germany from Conquest to Disaster (London:
Allen Lane, 2008), 33.
19. “Atlantic Charter.” The Avalon Project. Yale Law School. Lillian Goldman Law Library. 2008. Accessed 8
August 2010. http://avalon.law.yale.edu/wwii/atlantic.asp
20. Douglas Irwin et al., “The Genesis of the GATT.” 13 Feb. 2008. Accessed 8 August 2010, 25. Made avail-
able through the University of Chicago Booth School of Business.
21. Leo T. Crowley, “Lend-Lease” in Walter Yust, ed. 10 Eventful Years (1947) 1:520, 2: 858–60.
22. Irwin, 14.
23. Ibid., 15.
24. Ibid., 27.
❖ ❖ ❖