British Diplomatic Oil Crisis: Contemporary Anglo-Saxon Geopolitical Rivalries in the Persian Gulf: Drawing a Lesson? Or Sir Anthony Eden‘s Delusion of Grandeur.

of the
world. Refinery throughput increased proportionately. This
increase of oil production in Iran brought nearly £4.3 million
income for Iran by 1939, from just over £1.5 million in 1932. The
increased revenue provided the Shah the bulk of the finance that he
needed for his programme to modernise Iran.

All this changed with the
outbreak of the Second World War, which
had at first a very different effect from its predecessor. Instead
of production being stimulated, predecessor. Instead of production
being stimulated, it had to be cut back, since the British
Government because of the German U-boat campaign, decided to
concentrate its scarce shipping resources in the Atlantic, drawing
oil products from the USA and Caribbean instead of from more distant
Iran. This reduced the Shah’s royalties with the result that in July
1940 he threatened to cancel the 1933 Concession, but he was
persuaded to acquiesce a fixed royalty of

£4 million p.a. until oil
exports revived. The Shah reluctantly
accepted AIOC’s5

£4
million p.a. royalty, as it was a great deal less than the £14
million p.a. he had demanded.

The British Government was
unhappy about the political situation in
Iran. The Germans had considerable influence in the country. When
Hitler invaded Russia in 1941, Churchill of all people was not
likely to overlook the importance of safeguarding Iranian oil from
the chronically oil-short Nazis. He joined with Stalin with the
ultimate intention of forcing all Germans from Iran. On 25th August
1941, British forces occupied south Iran and Soviet forces moved
into north Iran. On 27th September 1941 Reza Shah abdicated in
favour of Muhammad Reza, his 22 year-old eldest son.

Meanwhile, AIOC’s role in
the war effort grew in importance. Not
only was Iran now a crucial route for supplies to the Soviet Union,
but after Japan attacked the USA on 7th December 1941, and went on
to overrun most of south-