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Authors: Stephen Kinzer

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Reza Shah was not averse to denouncing the British in public, but he and they had fundamental interests in common. He was the strongman they had sought, a reliable figure with whom they could bargain and whom they could, if necessary, depose. “The old Persia was a loose-knit pyramid resting on its base,” observed the always-perceptive British diplomat Harold Nicholson. “The new Persian pyramid is almost equally loose, but resting on its apex; hence, it is much easier to overthrow.”

It was impossible for Reza Shah to pull his country out of the orbit of foreign powers, especially the all-powerful British, but after consolidating his power, he worked steadily to limit their influence. He accepted no loans from foreign financiers, banned the sale of property to non-Iranians, revoked a concession that gave the British-owned Imperial Bank of Iran the exclusive right to issue Iranian currency, and even forbade officials of his foreign ministry to attend receptions at foreign embassies. When the British insisted that he hire European engineers to build the rail line that was one of his grandest dreams, he did so on the condition that the engineers and their families agree to stand beneath each bridge they built when a train passed over it for the first time.

Subduing the vast expanse of Iran by military force would have required an enormous army. Instead, Reza Shah imposed his will by exemplary terror. Stories of his ruthlessness terrified and then pacified his people.

In 1935 religious leaders called a protest against Reza Shah’s ban of the veil for women and his order that men wear billed caps that would prevent them from touching the floor with their foreheads during prayer. They gathered with several hundred believers in the sacred Khorasan mosque. As soon as Reza Shah learned of their assembly, he ordered soldiers to storm the mosque and massacre them. More than one hundred were killed. There were no further protests against his religious reforms.

Time and again, Reza Shah resolved problems with this brand of brutal decisiveness. Once during a visit to Hamedan in western Iran, for example, he is said to have learned that people there were going hungry because bakers were hoarding wheat in order to drive up prices. He ordered the first baker he saw thrown into an oven and burned alive. By the next morning, every bakery in town was filled with low-priced bread.

Many Iranians were appalled by stories like these, but many others, remembering that their country had enjoyed glory only when it was ruled by a powerful leader, remained silent or applauded. None could deny Reza Shah’s achievements. He began by wiping out gangs of bandits that terrorized many parts of Iran. Then he embarked on a huge construction program that gave the country new avenues, plazas, highways, factories, ports, hospitals, government buildings, railroad lines, and schools for both boys and girls. He created the country’s first civil service and the first national army it had known for centuries. He introduced the metric system, the modern calendar, the use of surnames, and civil marriage and divorce. Ever ready to scorn tradition, he restricted traditional clothing and forbade camel caravans to enter cities. He promulgated legal codes and established a network of secular courts to enforce them. In 1935 he announced that he would no longer tolerate references to his country as
a word used mainly by foreigners, and would insist on
the name by which its own citizens knew it. With typical resolve, he ordered that any mail from abroad addressed to Persia be returned unopened.

Yet for all Reza Shah’s reformist passion, he did not manage a true social transformation. Under his rule, newspapers were strictly censored, labor organizing forbidden, and opposition figures murdered, jailed, or forced to flee. He forced nomadic tribes, which he considered relics of the past incompatible with a modern state, into barren settlements where thousands suffered and died. Commerce was centralized in the hands of the state and a small cadre of loyal entrepreneurs. The Shah himself became enormously wealthy by extracting bribes from foreign businesses and extorting money from tribal leaders. He confiscated so much land that at the peak of his power, he was the country’s largest landowner.

“Reza Shah eliminated all the thieves and bandits in Iran,” one member of the British Parliament observed, “and made his countrymen realize that henceforth there would be only one thief in Iran.”

In 1934 Reza Shah traveled to Turkey to meet Atatürk. The two men got along famously, but as they toured the Turkish countryside, the Shah became depressed and frustrated as he realized how quickly Turkey was progressing toward modernity and secularism. He returned home determined to redouble his campaign to transform Iranian society. In his zeal, he charged ahead without regard to the country’s long-established social patterns or its religious beliefs. Utterly lacking Atatürk’s statesmanship and political skill, he turned much of the population against him.

Reza Shah was fascinated by the fascist movements that emerged in Europe during the 1930s. Mussolini, Franco, and Hitler seemed to him to be embarked on the same path he had chosen, purifying and uniting weak, undisciplined nations. He launched an oppressive campaign to obliterate the identity of minority groups, especially Kurds and Azeris, and he established a Society for Public Guidance to glorify his ideas and person. Baldur von Schirach, head of Hitler Youth, led a stream of Nazi dignitaries who visited Iran and spoke glowingly of the emerging German-Iranian alliance.

“The cardinal goal of the German nation is to attain its past glories by promoting national pride, creating a hatred of foreigners, and preventing Jews and foreigners from embezzlement and treason,” one of the Shah’s newspapers declared. “Our goals are certainly the same.”

Partly because he needed a foreign friend who shared his growing enmity toward Britain and the Soviet Union, Reza Shah developed great sympathy for the German cause. When World War II broke out, he declared a policy of neutrality that tilted decidedly toward Germany. He allowed hundreds of German agents to operate in Iran. Many worked to build support networks among regional warlords. Western leaders feared that the Nazis were planning to use Iran as a platform for an attack across the Soviet Union’s southern border that would greatly complicate the Allied war effort. To prevent that, British and Soviet troops entered Iran on August 25, 1941. Their planes dropped leaflets over Tehran. “We have decided that the Germans must go,” they said, “and if Iran will not deport them, then the English and the Russians will.”

Some Iranians must have appreciated the irony of these two countries positing themselves as Iran’s friends and protectors, but there was little they could do. Iran’s army yielded in a matter of days. After seizing strategic points around the country, Allied commanders demanded that Reza Shah sever his government’s ties to Germany and allow the free use of his territory by their forces. If he had not alienated himself from almost every segment of Iranian society, and if he had kept a cadre of wise advisers around him instead of systematically exiling or murdering them, he might have been able to resist. Instead he found himself alone, his dreams shattered by his own narrow-mindedness, corruption, and boundless egotism.

Reza Shah did not wish to work for the Allies, and they had no use for him either. He abdicated on September 16, 1941. The next day his eldest son, twenty-one-year-old Mohammad Reza, was sworn in to succeed him. No more was heard from Reza, who died in Johannesburg three years later.

Although Reza Shah imagined himself a modernizing visionary, in fact he reinforced the tradition of
or absolute rule, that lies at the heart of Iranian history. His reforms were superficial and, because of the brutality with which they were imposed, deeply resented by his subjects. He made no progress toward creating the sense of shared enterprise and civic responsibility that is at the heart of successful societies. His efforts to rid Iran of foreign influence were praiseworthy in theory but disastrous in effect. In the end, his dictatorial impulses brought him down by driving him toward an alliance with fascist powers. His departure left Iran in the hands of foreigners and a weak, confused young king. Monarchy had once again failed to resolve the country’s continuing crisis of development and identity. When World War II ended, Iranians were desperate for a new kind of leader.


A Wave of Oil

Years in the rocky Iranian desert, where smallpox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 120 degrees, might have driven lesser men than George Reynolds to madness or worse. Reynolds, however, was one of those legendary figures whose persistence and audacity have changed world history. He was a self-taught geologist and a petroleum engineer with several expeditions in the Sumatran jungle to his credit. During the first decade of the twentieth century, already in his fifties, he crisscrossed the barren wastelands of Iran in search of oil. To help him pull his wagonloads of equipment and dig his wells, he had at his service a ragged band that included a handful of Polish and Canadian drillers, a comically incompetent Indian doctor, and several dozen tribesmen who had trouble even understanding what oil is. “A more helpless crew I seldom saw,” he lamented in one letter home.

Home for Reynolds was London, and there his patron, the millionaire dandy William Knox D’Arcy, waited anxiously for good news. D’Arcy had made a fortune prospecting for gold in Australia but was not satisfied. He sensed that oil would prove even more valuable than gold and knew that Iran was, in the words of one geologist who had surveyed its terrain, “unquestionably petroliferous territory.” In 1901 he signed an agreement with the Shah of Iran, Muzzaffar al-Din, under which he assumed the exclusive right to prospect for oil in a vast tract of Iranian territory larger than Texas and California combined. To secure it, he gave the Shah, whom the British minister in Tehran described as “merely an elderly child,” the sum of £20,000, an equal amount in shares of his company, and a promise of 16 percent of future profits.

D’Arcy, an elegantly mustachioed lion of London society known for extravagant gestures like hiring Enrico Caruso to sing at private parties in his Grosvenor Square mansion, never considered traveling to Iran himself. He hired Reynolds instead, and month after month, year after year, he wrote checks to support their venture. His spirits soared in January 1904 when Reynolds finally struck oil but crashed a few months later when the well ran dry. Bit by bit, his fortune slipped away. Finally he was forced to sell most of his rights to a Glasgow-based syndicate, the Burmah Oil Company, that was even wealthier than he was.

The Scottish financiers who took charge of the drive to find oil in Iran recognized that an epochal change was about to reshape Britain and the world. Internal combustion engines would soon revolutionize every aspect of human life, and control over the oil needed to fuel them would henceforth be the key to world power. Oil had been discovered around the Caspian Sea, in the Dutch East Indies, and in the United States, but neither Britain nor any of its colonies produced or showed any promise of producing it. If the British could not find oil somewhere, they would no longer be able to rule the waves or much of anything else.

By 1908 D’Arcy and his Scottish partners had sunk more than half a million pounds into their Persian venture and had come up with nothing. Finally they concluded that they must abandon their explorations and begin looking elsewhere. At the beginning of May they sent Reynolds a telegram telling him that they had run out of money and ordering him to “cease work, dismiss the staff, dismantle anything worth the cost of transporting to the coast for re-shipment, and come home.”

It must have been a crushing moment for Reynolds, who had spent years in some of the most trying conditions imaginable looking for a treasure he knew could reshape the world. Desperate to buy whatever time he could, he told his men that in such a remote region, telegrams could not be trusted. They must continue working until the message was confirmed by post.

Reynolds was sleeping in his tent near an outpost in western Iran called Masjid-i-Suleiman when, at four o’clock on the morning of May 26, 1908, rumbling noises and wild shouting awakened him. He bolted up, ran across a stony plain, and saw oil spurting high above one of his derricks. In what might have been one of his last attempts, he had drilled into the greatest oil field ever found.

It did not take long for British leaders to grasp the scope and implications of this find. In the autumn of 1908 they arranged for a group of investors to organize a new corporation, the Anglo-Persian Oil Company, to absorb the D’Arcy concession and take control of oil exploration and development in Iran. Five years later, at the urging of First Lord of the Admiralty Winston Churchill, who saw world war on the horizon and knew he would need oil to power the ships that would win it, the British government spent £2 million to buy 51 percent of the company. From that moment on, the interests of Britain and the Anglo-Persian Oil Company became one and inseparable. “Mastery itself was the prize of the venture,” Churchill asserted.

During its first few years in existence, Anglo-Persian drilled scores of wells, laid more than a hundred miles of pipeline, and extracted millions of barrels of oil. It established a network of filling stations throughout the United Kingdom and sold oil to countries across Europe and as far away as Australia. Most impressive of all, it began construction of what would for half a century be the world’s largest oil refinery on the desert island of Abadan in the Persian Gulf.

Abadan, at the Gulf’s northern end, had come slowly into existence over a period of a thousand years, built up by silt running from the rivers that meet to form the Shatt-al-Arab waterway. The first engineer Anglo-Persian sent there, twenty-eight-year-old R. R. Davidson, wrote home in 1909 that it was a place of “sunshine, mud and flies,” totally flat and without a single stone bigger than a man’s hand. It was also among the hottest places on earth. Nonetheless, within a couple of years Davidson had more than a thousand tribesmen at work building piers, barges, and brick buildings. Soon Abadan boasted a power-generating station, several stores and workshops, a water filtration plant, and even a small railway. In 1911 the first pipeline from Fields, as the oil-producing region was called, was completed, and the next year oil began to flow.

Before long, Abadan was a bustling city with more than one hundred thousand residents, most of them Iranian laborers. From its private Persian Club, where uniformed waiters served British executives, to the tight-packed Iranian workers’ quarters and the water fountains marked “Not for Iranians,” it was a classic colonial enclave. Almost all of the technicians and administrators were British, and many enjoyed handsome homes with terraces and manicured lawns. For them and their families, Abadan was an idyllic place.

Life was much different for the tens of thousands of Iranian laborers. They lived in slums and long dormitories with only primitive sanitation. Shops, cinemas, buses, and other amenities were off limits to them. With their British employers, however, they shared life amid networks of giant pipes, beneath cavernous holding tanks, and in the shadow of towering smokestacks from which plumes of flame leapt up day and night. The air was heavy with sulfur fumes, a constant reminder of the vast wealth that was pouring from Iranian soil into Anglo-Persian’s coffers.

Any doubts about the value of this new resource were resolved by the experience of World War I, in which, as Lord Curzon put it, the Allies “floated to victory on a wave of oil.” Over the years that followed, the amount of oil flowing from Abadan increased steadily, from less than three hundred thousand tons in 1914 to five times that amount in 1920. Anglo-Persian gave first priority to the Royal Navy, which bought its oil at a great discount. What remained was sold to industrial customers and drivers in Britain and then, as supplies increased, to others around the world.

Oil could have made Qajar kings rich and powerful. They did not have the resources to find or exploit their deposits without foreign help, but with more foresight they could have struck a far better deal with their British partners. Instead they sold their birthright for a pittance. Iran’s royalty payment for 1920, set according to the concession agreement at 16 percent of the company’s net profit, was £47,000. Ahmad Shah considered it manna from heaven, but it was a small sum compared to what was pouring into the oil company’s coffers.

The next year brought the fall of Qajar power and the rise of Reza Khan. As Reza consolidated his rule over Iran, he cast a scornful eye on Anglo-Persian and the D’Arcy concession that was its central asset. The company’s profits were reaching astronomical levels, the means by which it calculated Iran’s 16-percent royalty were becoming more questionable, and the gap between the living conditions of its British and Iranian employees widened steadily. In 1928 Reza, who was by then Reza Shah, directed his ministers to seek a new and more equitable accord with the company. The British did not take him seriously. For four years they turned aside his demands with a combination of refusals and delays. While he stewed, the worldwide depression spread and the royalties Anglo-Persian paid to Iran began to shrink. Finally and inevitably, Reza Shah exploded in anger. At a cabinet meeting on November 26, 1932, he cursed his ministers for their failure and then demanded to be shown the file of documents covering the four years of talks. When it was brought to him, he cursed some more and then threw the entire file into a blazing stove. The next day, he notified Anglo-Persian that he had canceled the D’Arcy concession.

This act, if allowed to stand, would have meant the end of Anglo-Persian’s operations in Iran and, in effect, the death of the company. British officials were in turn shocked, outraged, and desperate. They appealed to the League of Nations, only to be met with a scathing counterattack from Iranian representatives who charged that Anglo-Persian had systematically falsified its accounts and cheated Iran out of its legitimate royalties. Sir John Cadman, Anglo-Persian’s chairman, realized that he had to negotiate directly with Reza Shah, whose coronation he had attended eight years earlier. Cadman flew to Tehran, and the two old friends took only a few days to reach a compromise. Under its terms, the area covered by the D’Arcy concession was reduced by three-quarters, Iran was guaranteed payments of at least £975,000 annually, and the company agreed to improve working conditions at Abadan. In return, Reza Shah extended the concession, which was to expire in 1961, for an additional thirty-two years. It was also agreed that since the Shah did not like the name Persia, the company would henceforth be known as the Anglo-Iranian Oil Company.

“Am personally satisfied,” Cadman wired home, “that new Concession in every respect will open new era in our relations with Persia.”

The 1933 accord stabilized the oil company’s position for the rest of Reza Shah’s reign. When the British forced him to abdicate eight years later, however, they removed the one leader who was strong enough to impose his rule by fiat on an increasingly restive country. Discontent over the company’s privileged position grew steadily during the war years as the amount of oil it extracted rose from six and a half million tons in 1941 to sixteen and a half million tons in 1945.

In March 1946, less than a year after the guns finally fell silent, laborers at Abadan did something they would never have dreamed of doing in Reza Shah’s time: they went on strike. Marching through the teeming streets, they carried signs and chanted slogans demanding better housing, decent health care, and a commitment by employers to abide by Iranian labor laws. Accustomed by long experience to challenges from restless natives, the British not only refused to negotiate but chose the path of active resistance. They organized ethnic Arabs and separatist tribesmen from nearby regions into a bogus union of their own and sent it to confront the strikers. Bloody rioting broke out, leaving dozens dead and more than one hundred injured. It ended only after Anglo-Iranian’s directors grudgingly agreed to begin observing Iranian labor law. They never did, and to remind Iranians of their power, they arranged for two British warships to stage threatening maneuvers within sight of Abadan. With this show of force, they believed they had resolved the crisis. In fact, they had further inflamed public opinion and taken another step toward the abyss.

The Iranian labor movement was not the only long-dormant institution that came back to life after Reza Shah’s departure. So did the Majlis. It had never ceased to exist, but Reza Shah had not allowed it to function freely. Now, angered like the rest of Iran by the rioting at Abadan, it began asserting itself. In 1947 it passed a bold law forbidding the grant of any further concessions to foreign companies and directing the government to renegotiate the one under which Anglo-Iranian was operating.

This law was the first blow in a long battle. It set Iran on the course of cataclysmic confrontation with Britain. The deputy who wrote it and pushed it through the Majlis had been an active nationalist in the early years of the century but was forced out of politics by Reza Shah and had lived in obscurity for twenty years. Now he was back, as fervent a defender of Iranian interests as ever. His name was Mohammad Mossadegh.

Two central beliefs shaped Mossadegh’s political consciousness. The first was a passionate faith in the rule of law, which made him an enemy of autocracy and, in particular, Reza Shah. The second was a conviction that Iranians must rule themselves and not submit to the will of foreigners. That made him the nemesis, the tormentor, the implacable foe of the Anglo-Iranian Oil Company. In mid-twentieth-century Iran, he and the company faced off in an epic confrontation. Fate bound them together. The story of one cannot be told without the story of the other.

From the moment of his birth on May 19, 1882, Mossadegh had advantages that few of his countrymen enjoyed. His mother was a Qajar princess from a family that had produced governors, cabinet ministers, and ambassadors. The man she married came from the distinguished Ashtiani clan and served for more than twenty years as Nasir al-Din Shah’s finance minister. He died when their son was still a child, but according to custom, young Mohammad was schooled in his father’s profession. At the tender age of sixteen he was named to his first government post. It was no sinecure; he was chief tax auditor for Khorasan, his home province. This post introduced him not only to the complexity of public finance but also to the corruption and chaos that were eating away at the Qajar dynasty. By all accounts he performed brilliantly. A visitor who met Mossadegh soon after he assumed his post estimated that he was in his mid-twenties. The visitor wrote presciently in his journal:

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