BRITAIN NO LONGER A WORLD POWER TO ACT ALONE: THE NATIONALISATION OF THE ANGLO-IRANIAN OIL COMPANY’S CRISIS: AN EXAMPLE BRITAIN SHOULD HAVE LEARNT IN THE SUEZ CANAL CRISIS OF 1956

BRITAIN NO LONGER A WORLD POWER TO ACT ALONE: THE NATIONALISATION OF THE ANGLO-IRANIAN OIL COMPANY’S CRISIS: AN EXAMPLE BRITAIN SHOULD HAVE LEARNT IN THE SUEZ CANAL CRISIS OF 1956

Iran was facing a serious foreign exchange crisis and had been losing approximately £260 million each year. By this time the Iranian Prime Minister, Dr. Musaddiq, was anxious to obtain an emphatic popular endorsement for his policy and the Majlis (the Iranian Parliament) which was as far committed as he was himself to such a policy. The new Majlis which assembled in April 1952 voted by a large majority for the reappointment of Dr. Musaddiq as Prime Minister. In accordance with the constitution, Musaddiq had resigned on the election of a new Majlis. To solve the country’s economic crisis, on 13th July 1952, Musaddiq asked the Majlis to grant him full powers for a period of six months. This request involved his taking over the Ministry of War Portfolio. The Shah refused his demand. Musaddiq promptly resigned. Therefore the Shah appointed Qavam as-Saltane, as the new Prime Minister.

 

Immediately the supporters of Musaddig, in alliance with the clerics, organised violence against the government of Qavam, as a result of which in Teheran alone 20 people were killed and about 100 wounded in the course of the following days. By coincidence the International Court of Justice announced at this time that it had no Jurisdiction in the oil dispute; this was regarded as a triumph for Musaddiq. In view of this predicament, the Shah became convinced that Musaddiq had the popular support, and that the only way to suppress such a support would be use of force to a degree that he was not prepared to countenance. Since some rioters were even calling openly for a republic, the use of force in the Shah’s view would definitely jeopardise his own position. On 21st July 1952, Qavam resigned. The following day Musaddiq returned to position. On 3rd August 1952 the Prime Minister asked the Majlis to be granted full powers. His request was accepted by the Majlis.

 

Due to the lack of oil revenue, the financial situation in Iran deteriorated. The British Government has also frozen Iran’s sterling fund in the UK. There was a huge budget deficit which was exacerbated by the Iranian Government’s subsidisation of the oil workers. In September 1952, Dr. Musaddiq, the Iranian Prime Minister, invited Dr. Hjalmar Schacht, the German financial expert, to Iran for consultation. At the end of his four-day visit to Iran Dr. Schacht announced that he had been asked to prepare a new economic plan for Iran. Following Schacht, Camille Gutt, former Belgian Minister of Finance and director of the International Monetary Fund, who had been recommended to the Iranian Prime Minister by Trygve Lie, Secretary-General of the United Nations, visited Iran by the beginning of October. Camille Gutt’s purpose was to examine Iran’s economy in detail. The results of either of these two missions were not concrete.

 

Later in October, the Majlis voted to dissolve the Senate. In November the Iranian Supreme Court was dissolved. In January 1953, the Majlis extended Musaddiq’s powers for another twelve months. These powers were implemented to reject any proposal emanating from any quarter for a settlement of the oil dispute.

The Shah became anxious about the growing power of the Prime Minister. Politicians, landowners, merchants, and the army became increasingly concerned about the oil situation and economic problems which had been created or accentuated by the cessation of oil exports.

 

Ever since the end of 1951, according to the reports from the British Embassy in Teheran, anxiety had been shown in Iran towards Musaddiq:

Increasing numbers of moderate minded people are worried by the growing activities of the Tudeh.¹

      1.  PRO, London, FO 371/91472, The General Political Correspondence of the Foreign Office, report from the British Embassy, Teheran to the Foreign Office, to the Foreign Office on Musaddiq, Confidential, 15th November 1951.

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