Disputes Britain had come to appreciate the importance of the Iranian concession it had obtained through William Knox D’Arcy. This, however, did not cause either the Company or the British government to be grateful to Iran. On the contrary, their greed increased with the rising importance and value of oil. Although Iran had declared neutrality in WWI, the feuding parties turned Iranian territory into a warzone. Crude oil transfer from Masjed Soleiman to Abadan was interrupted by German inspired saboteurs, and the repair job took 5 months to complete.
Reza Khan and the oil issue Reza Khan, who entered Iranian politics as a result of the 1921 coup d’etat, became Prime Minister in 1923 and had his coronation in 1925. First, he made all efforts to put an end to the activities of Sheikh Khazal who had practically pulled Khorramshahr and Ahwaz out of the control and authority of the central government of Iran. The Sheikh was apprehended in early 1925 and spent the rest of his life in Tehran under house arrest. Reza Khan established arrangements that served the Company’s interests.
The government had banned workers from forming unions or voicing their objections. The first stoppage by southern oil workers occured
in 1929. Living conditions of local workers were
intolerable. The total number of oil industry’s workers
was 30,000, out of which 6000 were British. Indian
Government forces put an end to the strike and about 200
strikers were arrested.
Some of them were kept imprisoned until the culmination of Reza Shah’s rule.
A year after coronation, Reza Shah focused his attention on oil. He needed money for his ambitious plans of cross-country railroad and military programs. The government first believed that the oil conflict had to be referred to arbitration, but the Company suggested that they should solve the problem through negotiation.
Cancellation of D’Arcy Concession and the Signing of the New Agreement The government appointed Teimoortash, the powerful court minister, as the chief negotiator with the Company. The government wanted an arrangement to give Iran 25% of the Company’s shares, a two Shillings royalty per ton of oil, return of ¾ of the concession area to Iran, payment of tax by the Company according to Iranian taxation rules and recognition of Iran’s rights in all of the Company operations even after the termination of the terms of concession.
Once those conditions were accepted, the government was ready to extend the agreement for another 20 years. Negotiations continued until 1931. In that year, Iran’s oil income plunged to 30 thousand pounds or a quarter of its revenue of 1.28 million pounds in the previous year. The Company blamed global recession for the fall in revenues. But Reza Shah, who was unhappy with lengthy negotiations and Company’s excuses, ordered his ministers to abolish the D’Arcy concession.
The Company was immediately informed of the Shah’s order, and the parliament (Majlis), endorsed his decision.
The British government strongly denounced the decision. Several warships were dispatched to the Persian Gulf, and a complaint was filed with the League of Nations. The Security Council, however, advised the two sides to find a solution to their problem through negotiations.
