Sadeq Zibakalam

The first oil well in Iran hit oil in Masjed Soleiman region just 100 years ago (in May 1908), or two years after triumph of the Constitutional Revolution. During those 100 years, oil has gradually penetrated into the Iranian economy, in fact, during the first years after the oil find, the Iranian government had not realized what treasure had been found in the south of the country. It was for the first time during World War I (1914-1918) that the Iranians gradually realized what role oil had played in industrial development of advanced countries. However, before long, Iranians came to realize the strategic role played by oil in bringing victory to Britain and its allies in their war with Germany.

Since that time, Iranians thought more about the profits they could reap from that treasure. The main problem we are facing with regard to oil is that we think all pre-revolution statesmen were traitors who either did not know the value of oil and its role in industrial development of countries, or were lackeys of colonialist powers and easily sold the Iranian oil to them. Of course, our past statesmen have not been angels and symbols of patriotism, but many Iranians did their best to derive the highest possible profits from oil. In reality, however, they could not do that because they were either unable to do that, or were stymied by the mighty power of Great Britain.

Despite common notions, when our statesmen, who belonged to Qajar dynasty at that time, realized that what a precious wealth was being plundered by Great Britain, they decided to increase Iran’s share of those revenues. However, Darsi Contract had drawn a clear framework for our relations with Britain. According to that contract, since the Iranian government did not make any investment in developing oil fields, it was not a partner to losses or profits. The Iranian government only received 16 percent of Darsi’s profits.

Another wrong notion is that those statesmen who concluded the Darsi Contract and delegated absolute powers to Britain for discovery, extraction and exploitation of the Iranian oil for 60 years were traitors, proxies of foreign powers and corrupt. Perhaps many Qajar statesmen were as such, but some of them were also patriotic people whose first and foremost priority was Iran’s national interests.

From the viewpoint of most Iranian officials, the Darsi contract was not a bad deal. Before Darsi, other foreigners from Russia and the Netherlands had explored oil in Iran and all of them lost their wealth on their futile quests. They either left Iran after a few years with no money or went bankrupt. It was not clear for the Iranian government whether the same fate would befall Darsi. He was risking the loss of his property. In fact, since 1901, when Darsi obtained the concession from the Qajar king up to 1908 when the first well hit oil, Darsi had spent a lot in the country.

He owed a lot to the British government and had taken loans from British banks. He had also sold a great deal of his company’s stocks to the British government in order to gain more money and continue his work in hot deserts of Khuzestan region. However, seven years of futile efforts and drilling well after well, brought him to his knees. Finally, in early 1908, he decided to cease exploration activities in Iran and the company sent a telegram to its personnel in Iran telling them not to drill new wells, stop drilling wells where operations had already started, pack up their equipment and get ready to leave Iran. In fact, the first group of personnel left Iran and the rest were waiting for their turn to come. A few months after the telegram was sent, the last well hit huge oil and gas reserves at a depth of 300 meters and it was in May 1908 that oil gushed into the air. Therefore, the Darsi contract was not so bad for the Iranian government because it did not pay anything, did not invest in any project, and was not a partner to any loss. If the company hit oil, 16 percent of profits belonged to the Iranian government.

From the viewpoint of those who believe in “conspiracy theory”, what the Iranian government did was a great crime against the nation. They also think that the Darsi Contract was part of a complicated, organized, and well-calculated plot by colonialist powers and international Zionism. However, realities show that the Darsi Contract was simply a venture project, which could have failed; just in the same manner that it nearly failed.

Since the Iranians realized what great profits were reaped by the British company, they decided to increase Iran’s share of those profits. However, they were told to read the contract again. Perhaps it was the first time that some of the Iranian statesmen read that contract carefully and realized that Iran’s share cannot be increased beyond 16 percent and the company was obliged to give its installations over to the Iranian government after 60 years. Even that percentage was reduced because, for example, the company claimed that it had taken a loan and had to pay the interest rate. They deduced the interest rate from profits and calculated Iran’s 16-percent share afterwards. In this way, that share was further reduced.

The first protest by Iranians was to the way the net profits were calculated. Apart from the Iranian government’s weakness in the face of the British government, another problem was lack of political stability in Iran. Chaotic economic and social conditions combined with a weak central government during the first two decades of the 20^th century, had led to rapid changes in governments. Most governments did not last more than 4-6 months on average. As governments changed, so did the official in charge of oil negotiations, who was also minister of economic affairs and finance and some new ministers did not take the oil very seriously. Iranian officials soon found that they could file lawsuits with the British judiciary over many cases of differences with company officials. Although it seemed unbelievable by Iranians, the British judicial officials took sides with Iranians in some cases and their decisions were not in the interest of the British company.

Another notion is about the ole played by Reza Shah in signing the 1933 contract. We maintain that the contract was another conspiracy by the British government to plunder more of our oil. In this theory, the British government ordered its stooge (Reza Shah Pahlavi) to cancel the Darsi Contract and sign a new contract which was much worse than Darsi’s. A negative point which is mentioned is that the 60-year duration of the Darsi Contract (half of which had gone by when new the contract was signed) was practically increased by 30 years when the 1933 contract was concluded.

Also, the period of the contract was increased by 60 years to 90 years, but it had some positive points. One of the most important issues to which the new Iranian government had paid attention was use of Iranian personnel at engineering and managerial levels of the oil industry. In fact, a major problem Iran was facing was lack of enough knowledge about the situation and performance of the company.

If they told us that the company was producing loss, we had to accept because there was no way to ascertain that claim. Most Iranians employed by the oil industry were simple workers, gardeners, cooks, guards, or drivers. Therefore, an article was included in the 1933 contract according to which the company had to train Iranians and allow a set percentage of Iranian personnel to enter its engineering and managerial levels every year. Establishment of Abadan oil faculty, which is now one of the most important higher educational centers for training technical specialists for the Iranian oil and gas sectors, was a result of that article of the 1933 contract.

Another point was that upon recommendation of British advisors, the Iranian government decided to change the base of its profits from net profit which was vague, to the quantity of sold oil. In this way, Iran would have received its profit according to total volume of sold oil regardless of whether the company has been producing loss or making profit.

Another important advantage of the 1933 contract was that the British company lost its monopoly over oil exploration and extraction in Iran. The Iranian government was allowed to enter into cooperation with other companies and countries. Subsequent differences between the British government and Reza Shah over oil were not made-up. Reza Shah had decided to nationalize the oil industry and unilaterally rescinded the Darsi Contract. However, he could not withstand the power of the British government and accepted the 1933 contract. However, that contract was much better than the Darsi Contract.

Perhaps the biggest delusion in Iran, which is a result of oil, was that the British government was behind everything that happened in the country. During the past 100 years, political officials and leaders of Iran have linked their opposition groups to the British government and see invisible hand of that government behind any conspiracy in their country.

Both Pahlavi kings suffered from that “delusion”. Reza Shah was extremely suspicious of the British government and that delusion was handed down to his successor. If Reza Shah simply suspected that Britain was conspiring against him, his son, Mohammad Reza Pahlavi, had no doubt about that. The memoirs of Alam (one of the Shah’s close aides) include surprising points on the Shah’s suspicions of the British government. He not only attributed many unfavorable developments in the country to the British, but also considered them to be working behind many developments in the world and the region. The Shah’s suspicion of the British government was so profound that Alam thought on many occasions that the Shah had gone down with some form of psychiatric disorder. It was not only Alam who was fed-up with the Shah’s pessimism toward Britain.

Sir Anthony Parsons, the last British ambassador to Tehran before the revolution, complained that the Shah considered Britain to be behind all problems and the unrests his government was facing. In his memoirs, Parsons writes that he had gotten used to unending complaints of the Shah about Britain’s role in revolutionary unrests. At first he tried to argue with the Shah and ask him what benefit the British government could expect from brewing unrests in Iran. However, he gradually found out that it was in vain and the idea that Britain was behind all the unrest was so nested in the Shah’s mind that nobody could have moved him from that position.

During revolutionary unrests in November 1978, on one occasion, demonstrators tried to put the British embassy on fire by hurling incendiaries at the complex. The same evening, Parsons had a meeting with the Shah and was afraid of what had happened earlier that day. The Shah, however, told him ironically: “You see! You almost burnt in the fire that you have kindled.” Parsons, who was at his wits’ end, forgot about diplomatic demeanor and told the Shah that if somebody thought that his opponents were in cahoots with the British government, he should be hospitalized at a mental hospital. (Zibakalam, An Introduction to the Islamic Revolution, 7^th Edition, Rozaneh Press, 2007, pp. 15-17)