Anglo-Persian Oil Company

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The Anglo-Persian Oil Company (APOC) was founded in 1909 following the discovery of a large oil field in Masjed Soleiman, Iran. It was the first company using the oil reserves of the Middle East. APOC was renamed 1935 in Anglo-Iranian Oil Company (AIOC) and eventually became the British Petroleum Company (BP) in 1954, as one root of the BP Company today.

1 The D'Arcy Oil Concession
2 Anglo-Iranian Oil Dispute
3 See also
4 External links

[edit] The D'Arcy Oil Concession

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The D'Arcy Oil Concession was granted to the British during the reign of Mozzafar al-Din Shah Qajar, a Turkmen descent who was deeply hated by the Iranians, thereby effectively giving away control of Iranian oil reserves to Britain for 60 years.

William Knox D'Arcy had negotiated a 60 year oil concession with the Shah of Persia in 1901 but within a few years was almost bankrupted by the cost of exploration. He sold his interest to the Burmah Oil Company Ltd. who created APOC as a subsidiary, and also sold shares to the public.

Volume production of Persian oil products eventually started in 1913 from a refinery built at Abadan. The British government, at the impetus of Winston Churchill, First Lord of the Admiralty, partly nationalised the company in 1913 in order to secure British-controlled oil supplies for its ships.

APOC took a 50% share in a new Turkish Petroleum Company organised in 1912 by Calouste Gulbenkian to explore and develop oil resources in the Ottoman Empire. After a hiatus caused by World War I it reformed and struck an immense gusher at Kirkuk, Iraq in 1927, renaming itself the Iraq Petroleum Company.

By this period, Iranian popular opposition to the D'Arcy oil concession and royalty terms whereby Iran only received 16 percent of net profits was widespread. Since industrial development and planning, as well as other fundamental reforms were predicated on oil revenues, the government's lack of control over the oil industry served to accentuate the Iranian Government's misgivings regarding the manner in which APOC conducted its affairs in Iran. Such a pervasive atmosphere of dissatisfaction seemed to suggest that a radical revision of the concession terms would be possible. Moreover, owing to the introduction of reforms that improved fiscal order in Iran, APOC's past practise of cutting off advances in oil royalties when its demands were not met had lost much of its sting.

The attempt to revise the terms of the oil concession on a more favourable basis for Iran led to protracted negotiations that took place in Tehran, Lausanne, London and Paris between Abdolhossein Teymourtash, Iran's Minister of Court from 1925-1932 and its nominal Minister of Foreign Affairs, and the Chairman of APOC, John Cadman, 1st Baron Cadman, spanning the years from 1928 to 1932. The overarching argument for revisiting the terms of the D'Arcy Agreement on the Iranian side was that its national wealth was being squandered by a concession that was granted in 1901 by a previous non-constitutional government forced to agree to inequitable terms under duress. In order to buttress his position in talks with the British, Teymourtash retained the expertise of French and Swiss oil experts.

Iran demanded a revision of the terms whereby Iran would be granted 25% of APOC's total shares. To counter British objections, Teymourtash would state that "if this had been a new concession, the Persian Government would have insisted not on 25 percent but on a 50-50 basis. Teymourtash also asked for a minimum guaranteed interest of 12.5% on dividends from the shares of the company, plus 2s per ton of oil produced. In addition, he specified that the company was to reduce the existing area of the concession. The intent behind reducing the area of the concession was to push APOC operations to the southwest of the country so as to make it possible for Iran to approach and lure non-British oil companies to develop oilfields on more generous terms in areas not part of APOC's area of concession.

Apart from demanding a more equitable share of the profits of the Company, an issue that did not escape Teymourtash's attention was that that the flow of transactions between APOC and its various subsidiaries deprived Iran of gaining an accurate and reliable appreciation of APOC's full profits. As such, he demanded that the company register itself in Tehran as well as London, and the exclusive rights of transportation of the oil be cancelled. In fact in the midst of the negotiations in 1930, the Iranian Majles approved a bill whereby APOC was required to pay a 4 percent tax on its prospective profits earned in Iran.

In the face of British prevarification, Iran decided to demonstrate Iranian misgivings by uping the ante. Apart from encouraging the press to draft editorials criticizing the terms of the D'Arcy concession, a delgation consisting of Reza Shah, and other political notables and journalists was dispatched to the close vicinity of the oilfields to inaugurate a newly constructed road, with instructions that they refrain from visiting the oil installation in an explicit show of protest.

In 1931, Teymourtash who was travelling to Europe to enrol Crown Prince Mohammed Reza Pahlavi at a swiss boarding school, decided to use the occasion to attempt to conclude the negotiations. The following passage, from John Cadman, 1st Baron Cadman confirms that Teymourtash worked feverishly and diligently to resolve all outstanding issues, and succeeded in securing an agreement in principle:

"He came to London, he whined and he dined and he spent day and night in negotiating. Many interviews took place. He married his daughter, he put his boy to school [Harrow], he met the Secretary of State for Foreign Affairs, a change took place in our government, and in the midst of all this maze of activities we reached a tentative agreement on the principles to be included in the new document, leaving certain figures and the lump sum to be settled at a later date."

However, while Teymourtash likely believed that after four years of exhaustive and detailed discussions, he had succeeded in navigating the negotiations on the road to a conclusive end, the latest negotiations in London were to prove nothing more than a cul de sac.

Matters came to a head in 1931, when the combined effects of overabundant oil supplies on the global markets and the economic destabilization of the Depression, led to fluctuations which drastically reduced annual payments accruing to Iran to a fifth of what it had received in the previous year. In that year APOC informed the Iranian government that its royalties for the year would amount to a mere 366,782 pounds, while in the same period the company's income taxes paid to the British Government amounted to approximately 1,000,000. Furthermore, while the company's profits declined 36 percent for the year, the revenues paid to the Iranian government pursuant to the company's accounting practices, decreased by 76 percent. Such a precipitous drop in royalties apppeared to confirm suspicions of bad faith, and Teymourtash indicated that the parties would have to revisit negotiations.

However, Reza Shah was soon to assert his authority by dramatically inserting himself in to the negotiations. The Monarch attended a meeting of the Council of Ministers in November 1932, and after publicly rebuking Teymourtash for his failure to secure an agreement, dictated a letter to cabinet cancelling the D'Arcy Agreement. The Iranian Government notified APOC that it would cease further negotiations and demanded cancellation of the D'Arcy concession. Rejecting the cancellation, the British government espoused the claim on behalf of APOC and brought the dispute before the Permanent Court of International Justice at the Hague, asserting that it regarded itself "as entitled to take all such measures as the situation may demand for the Company's protection." At this point, Hassan Taqizadeh, the new Iranian Minsiter to have been entrusted the task of assuming reponsibility for the oil dossier, was to intimate to the British that the cancellation was simply meant to expedite negotiations and that it would constitute political suicide for Iran to withdraw from negotiations.

After the dispute between the two countries was taken up at the Hague, the Czech Foreign Minister who was appointed mediator put the matter into abeyance to allow the contending parties to attempt to resolve the dispute. Ironically, Reza Shah who had stood firm in demanding the abolishment of the D'Arcy concession, suddenly acquiesced to British demands, much to the chagrin and disappointment of his Cabinet. A new agreement with the Anglo-Persian Oil Company was agreed to after Sir Cadman visited Iran in April 1933 and was granted a private audience with the Shah. A new Agreement was ratified by Majles on May 28, 1933 and received Royal assent the following day.

The terms of the new agreement provided for a new sixty year concession. The Agreement reduced the area under APOC control to 100,000 square miles, required annual payments in lieu of Iranian income tax, as well as guranteeing a minimum annual payment of 750,000 pounds to the Iranian government. These provisions while appearing favourable, are widely agreed to have represented a squandered opportunity for the Iranian government. The agreement extended the life of the D'Arcy concession by an additional thirty-two years, negligently allowed APOC to select the best 100,000 square miles, the minimum guaranteed royalty was far too modest, and in a fit of carelessness the company's operations were exempted from import or customs duties. Finally, Iran surrendered its right to annul the agreement, and settled on a complex and tediously elaborate arbitration process to settle any disagreements that would arise.

The Anglo-Persian Oil Company continued its large Persian operations although it changed its name to the AIOC in 1935. By 1950 Abadan had become the world's largest refinery. In spite of diversification the AIOC still relied heavily on its Iranian oil fields for three-quarters of its supplies, and controlled all oil in Iran. The Iranian government wanted to take a significant share in the company, and would not negotiate when only offered a larger share of revenues. This culminated in the nationalization of the industry by the Iranian Prime Minister Mohammed Mossadegh in 1951, which led to the Abadan Crisis. Foreign countries refused to take Iranian oil and Abadan refinery was closed. AIOC withdrew from Iran and traded off its other reserves until military intervention restored its ownership in 1954, although it lost its monopoly. It was forced to operate as one member of a consortium of Iranian Oil Participants. That was the year AIOC changed its name to British Petroleum Company.

[edit] Anglo-Iranian Oil Dispute

The crisis began under the government of Clement Attlee. At the time, the British were taking 85% of Iranian oil profits. In March 1951, the Iranian parliament (the Majlis) voted to nationalise the Anglo-Iranian Oil Company (AIOC) and its holdings by passing a bill strongly backed by the elderly statesman Mohammed Mossadegh, a man who was elected Prime Minister the following April by a large majority of the parliament.

The International Court of Justice was called in to settle the dispute, but a 50/50 profit-sharing arrangement, with recognition of nationalisation, was rejected by both the British government and Prime Minister Mossadegh. Direct negotiations between the British and the Iranian government ceased, and over the course of 1951, the British ratcheted up the pressure on the Iranian government and explored the possibility of a coup against it. U.S. President Harry S. Truman was reluctant to agree, placing a much higher priority on the Korean War. The effects of the blockade and embargo were staggering and led to a virtual shutdown of Iran's oil exports.

Mossadegh also held an important speech for the UN Security Council in New York which was covered by all newspapers and he was pictured on the Times magazine's "Man of the Year" issue. After the U.S. chose a new president, the British changed their strategy of getting the U.S. on their side from economic/colonial to anti-communist. This new strategy found listening ears in the new U.S. president and the newly established CIA. The CIA finally toppled the democracy in Iran and brought back the Shah with the help of the British contacts/information it had from the British embassy and secret service.

After the regime change the Iranian oil started flowing again with the blessing of the U.S. and Britain under the power of a group of American and British oil companies of which included the Anglo Iranian Oil Company.