Oil Is Discovered in Persia Summary

  • Last updated on November 10, 2022

The discovery of oil in Persia by an Englishman who had purchased oil concession rights gave Great Britain control of Persian oil, making Persia of tremendous strategic importance during two world wars. The discovery also initiated the opening of the Middle East to oil exploration and development, making the region of vital importance to the world economy. Initial Western control of oil production produced an anti-imperialist reaction that remained for many decades.

Summary of Event

During the last half of the nineteenth century, Persia (modern-day Iran) was of interest to Europeans mainly for its fine carpets and for whatever monopolies could be gained from monetary gifts to the corrupt shahs (emperors) of the Qājār Dynasty. Q{amacr}j{amacr}r Dynasty[Qajar Dynasty] By 1900, Russian interests controlled the five northern Persian provinces, while the British sphere was in the south and controlled monopolies for commodities such as tobacco. It was business as usual when Moẓaffar od-Dīn Shāh sold a concession to a wealthy Englishman, William Knox D’Arcy, who had made his fortune mining gold in Queensland, Australia. For ten thousand pounds, D’Arcy purchased the rights to explore, develop, and sell natural gas, petroleum, and asphalt in all of Persia, except for the five northern provinces controlled by Russia, for the next sixty years. After two years, D’Arcy was required to form a company and give the shah twenty thousand additional pounds and twenty thousand pounds in shares of the company’s stock. The shah was also to receive 16 percent of any profits from annual oil revenues. Oil discoveries;Persia Oil industry Persia;oil discovery [kw]Oil Is Discovered in Persia (May 26, 1908) [kw]Persia, Oil Is Discovered in (May 26, 1908) Oil discoveries;Persia Oil industry Persia;oil discovery [g]Iran;May 26, 1908: Oil Is Discovered in Persia[02140] [c]Trade and commerce;May 26, 1908: Oil Is Discovered in Persia[02140] [c]Diplomacy and international relations;May 26, 1908: Oil Is Discovered in Persia[02140] [c]Government and politics;May 26, 1908: Oil Is Discovered in Persia[02140] [c]Energy;May 26, 1908: Oil Is Discovered in Persia[02140] [c]Natural resources;May 26, 1908: Oil Is Discovered in Persia[02140] D’Arcy, William Knox Mo{zsubdot}affar od-D{imacr}n Sh{amacr}h Reza Shah Pahlavi Mohammad Reza Shah Pahlavi Mosaddeq, Mohammad Sykes, Sir Percy Reynolds, George B.

The natural seepage of oil from the ground in Persia, which had been used for centuries to caulk boats and bind bricks, attracted European interest in the 1870’s as technology for oil drilling developed. Baron Julius de Reuter (founder of Reuters News Agency) made two unsuccessful efforts to locate oil, and in the early 1890’s a French geologist surveyed western Persia and published a scientific paper on the region’s oil-producing potential. These efforts sparked D’Arcy’s interests and resulted in his 1901 purchase of the shah’s concession. That year, D’Arcy hired George B. Reynolds, one of the few Englishmen with experience in oil exploration, and sent him to find oil fields in western Persia.

From 1901 to 1905, Reynolds drilled for oil without success. Harsh weather conditions, difficult terrain, and the shortage of skilled labor slowed progress. Running low on capital, D’Arcy signed an agreement with the Burmah Oil Company, a British corporation, to gain the funding necessary to continue exploration. Reynolds began drilling in southern Iraq, but through 1906 and 1907 he continued to lose money. The venture was close to collapse when, at 4:00 p.m. on May 26, 1908, oil began to gush over the top of oil rig number one at Masjed Soleymān, rising to a height of fifty feet above the rig. Two more wells were sunk, with equally productive results. The first major oil strike in the Middle East had been made. Today, a small outdoor museum preserves what is known as Well Number One, which still retains its original rig, boiler, and pump.

In 1909, the Anglo-Persian Oil Company Anglo-Persian Oil Company[Anglopersian Oil Company] was founded. D’Arcy led the company, and by the time of his death in 1917 he had made a massive fortune, despite the fact that he never set foot in Persia and operated only through his agents. The company began construction in October, 1909, and by 1911 the number of employees had risen to twenty-five hundred. The export of oil began in 1912, and by 1914, thirty oil wells had been drilled at Masjed Soleymān.

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The British government took an active interest in D’Arcy’s venture: The internal combustion engine was becoming increasingly important, and the British navy had discovered that diesel oil was far cheaper than coal and that ships powered by diesel oil could go longer distances between fuelings. In 1910, the British government bought one square mile of land on an island in the Shatt al-Arab region of the Persian Gulf, where it planned to build an oil refinery and shipping point. The British also negotiated a concession to run a 130-mile-long pipeline from the oil fields to the refinery. As a result, oil extraction, refining, and shipping could be handled in one efficient operation.

By June of 1914, the British government had purchased D’Arcy’s shares in the company, although he retained his position as company director. The Anglo-Persian Oil Company was renamed the British Petroleum Company, British Petroleum Company and Great Britain owned 51 percent of its shares. This was a timely development: Britain became involved in World War I in August, 1914, and as George Nathaniel Curzon, viceroy of India, aptly stated, “the war was won on the waves of oil.”

Significance

During World War I, both Russia and Great Britain sent troops to Persia to protect their interests. Since 1911, Persian nationalists had looked to Germany for help in freeing Persia from Russian and British economic control, but Britain placed a high priority on protection of its oil fields. In 1917, Sir Percy Sykes led the South Persian Rifles to defend British interests in Persia. After World War I, Reza Khan, a Persian Cossack formerly under Russian command, founded the Pahlavi Dynasty. Pahlavi Dynasty Iran;Pahlavi Dynasty A secular reformer and ardent nationalist, Reza attempted to obtain an equal division in oil profits from the British Petroleum Company. He was able to secure a more favorable settlement as Depression-ridden Britain left the gold standard in April of 1933, but the reallocation was still far from an even split.

For Reza, Adolf Hitler’s rise to power in Germany seemed to offer Persia (officially renamed Iran in 1935) the possibility of total control of its oil fields. A large number of German officials were present in Iran at the outbreak of World War II, and this was a major source of concern for the British. After Reza ignored a demand for the expulsion of all German officials, Great Britain occupied Iran on August 25, 1941. Reza was forced to abdicate, but the dynasty remained. His cooperative young son, Mohammad Reza Shah Pahlavi, continued the Pahlavi Dynasty as the British maintained control of Iranian oil, the lifeblood of the British war effort. Although the British had uncovered what they believed were vast oil fields in Saudi Arabia, these could not be developed during World War II.

After World War II ended, the British needed cheap oil to rebuild their infrastructure, but Iran’s political situation became increasingly complicated after 1951, when a nationalist named Mohammad Mosaddeq became premier of Iran. After failing to obtain the long-requested fifty-fifty split, he threatened to nationalize Iranian oil. The shah left Iran as the U.S. Central Intelligence Agency and British Intelligence organized a coup, called Operation Ajax, to overthrow Mosaddeq. When the shah returned, it was to a new arrangement: A conglomerate of U.S. companies would control 40 percent of oil production, and the British Petroleum Company would control another 40 percent. The shah would receive 20 percent.

The Iranian crisis convinced the British Petroleum Company to invest its resources in areas outside Iran, and the company started explorations in Kuwait, Libya, and Iraq. Outside the Middle East, British Petroleum found huge oil reserves at home in the North Sea, and it helped develop the biggest oil field in the United States at Prudhoe Bay, Alaska. The overthrow of the shah in 1979 by a nationalist and fundamentalist Shiite movement was, in part, a strong reaction against the Western control of Iranian oil that began at Masjed Soleymān in 1908. Oil discoveries;Persia Oil industry Persia;oil discovery

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Farmanfarmaian, Manucher. Blood and Oil: Inside the Shah’s Iran. New York: Modern Library, 1999. A detailed account of the development of twentieth century Iran by a princely insider, with particular attention given to oil politics. Maps, footnotes, and index.
  • citation-type="booksimple"

    xlink:type="simple">Ferrier, Ronald W. The Developing Years, 1901-1932. Vol. 1 in The History of the British Petroleum Company. London: Cambridge University Press, 1982. Massive scholarly analysis of the history of the British Petroleum Company draws on company archives and other unpublished primary sources. Illustrations, maps, appendixes, biographical details, index, and bibliography.
  • citation-type="booksimple"

    xlink:type="simple">Ghani, Cyrus. Iran and the Rise of Reza Shah: From Qajar Collapse to Pahlevi Power. New York: I. B. Tauris, 1998. A detailed analysis based on primary-source documents of the events in twentieth century Iran that led to the coming to power and the policies of Reza Khan. Bibliography, footnotes, and index.
  • citation-type="booksimple"

    xlink:type="simple">Keddie, Nikki R. Modern Iran: Roots and Results of Revolution. New Haven, Conn.: Yale University Press, 2003. An excellent and readable history of modern Iran by a noted scholar in the field. Illustrations, footnotes, select bibliography, and index.

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