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Iran of the early 50's: Mosaddegh and the West

Thursday, April 28, 2011 - 09:04

In 1951-1953 Iran was involved in the second mass social movement. The struggle for the nationalization of oil, led by Mohammad Mosaddegh, caused a clash between the people and the Shah and there was antagonism of external forces. The coalition, supported by broad sections of rural and urban population, achieved considerable success at first, but soon it faced with the resistance of the internal forces and foreign intervention, and did not reach its goals. As for the social membership of the movement for the nationalization of oil, it involved students, factory workers, artisans, shopkeepers, merchants, clergy and others. For a better understanding of the objectives of the Mosaddegh government we should analyze the economic situation in the country of the early 50's. This will also help to understand better the true reasons for the coup in 1953 and the goals of the government of Mohammad Reza Pahlavi.
The entire economic system of Iran in 1951-1953 was focused on oil. Mosaddegh nationalized the Iranian oil for economic and political reasons. Mosaddegh knew that the nationalization of oil would lead to a substantial replenishment of the budget, which in turn would allow the government to conduct an effective social policy. But in the process of implementation of the policy of nationalization of the oil industry the oil production curtailed significantly. Mosaddegh came to the conclusion that in such a situation, Iran's position would not change. Because of the curtailment in oil production, revenues in the budget of the country decreased, but the government opposed the foreign diktat. The unfavorable situation was also in the international arena. Since 1951 oil exports of Iran reduced dramatically and some sanctions were imposed on Iran on the UK initiative. The situation was aggravated by a military blockade of the country from Britain. International oil companies strictly complied with the sanctions against Iranian oil. Iran was forced to implement economic policies without oil revenues, thus striving to demonstrate readiness to defend its interests. Development of the economy without oil revenues implied settlement and adaptation of foreign policy to the needs of the country, and the increase of domestic production. In 1952 the export of Iranian oil was reduced heavily, but, despite that country's budget was balanced and the economic policy was successful. This process was repeated the following year. The state in 1952 reduced the import and simultaneously increased the export of such goods as carpets, fish, Caspian caviar, rice, tobacco and cotton in order to provide foreign currency earnings to import needed goods. Total production was reduced slightly, but there was a curtailment of gross production.
In the 50s the process of industrialization of the country faced with some difficulties. Clear indication of this was the reduction of the volume of imports and foreign investment in general. At the same time Iran, because of the reduction in imports, set up the production of many goods inside the country, which contributed to the considerable development of industry. Production of sugar and cement factories, textile and mineral processing industry increased, production of construction materials, the house-building, the construction of large shopping centers rapidly developed. Although we must admit that the governmental opportunities in house-building were limited. In general, if to compare with the previous years, domestic industry began to grow again under the government of Mosaddegh. Static data showed a steady increase of the strike movement of workers, which indicated the improvement of political climate, when the workers were able to put forward their demands. If in 1948-1950 there were 4-5 cases of strikes, then in 1951 there were 42, and in 1952 there were 55, and for 8 months in 1953 there were 71 such actions.
In the 50s there was a growth of handicraft production, as a lot of the small-scale production of Iran concerned this area. Artisans received a lot of profit because of the significant reduction of import. Providing the internal market with the own goods also served as a sign of the improvement of the economic situation in the country. Production volume of agriculture held the line and even experienced a slight increase.
As a result of the oil crisis the biggest damage was to the state budget. Reduction in imports cut down the state customs fees. Difficulties existed in the collection of direct taxes. Strengthening of indirect taxation especially for commodities such as tobacco and tobacco products caused a discontent in society.
Iran's monetary reserves to the amount of 26,000,000 pounds were frozen on the UK initiative. In February 1952 the government set a bond of a national loan of $ 25 million. It’s interesting that the representatives of the lower social strata, the simple traders gained bonds of a national loan in the markets, but wealthy people refused to buy them. Despite all the predictions, in 1951-1954 the state budget increased in 6 times in comparison with the previous years. Government liability to the workers of the oil industry on the payroll, despite the reduction in oil imports, remained valid. Nevertheless, the government's position was getting worse with every day.
In general, the economic situation of Iran was unstable under the government of Mosaddegh, but it was not completely hopeless. In foreign trade there was a decline that led to changes in the consumer market, but the government took resolute steps for the production of domestic goods, which served as the basis for the economic self-sufficiency. Standard of living in cities and rural areas remained unchanged. The reasons for the economic difficulties of Mosaddegh’s government were not only in the government itself. On the contrary, many of the problems were inherited from previous governments. It was the reason for the Mosaddegh’s government to face serious financial difficulties. Urban residents felt the influence of high inflation (from 7 to 16% per year), factory workers received low wages, and there were a lot of unemployed people. Government's course on the economic policies without reliance on oil revenues could lead to positive results. Economic difficulties caused people’s discontent. If the economic situation was not very depressing, then the political events led the country to crisis.
Political objectives of the program of Mosaddegh government were aimed at promoting democracy in the society. On this way the government achieved some success: political prisoners were released from prisons, the People's Party of Iran (Tudeh) operated more freely, various opposition papers were produced and distributed openly.
Personality of Mosaddegh was popular. He led a modest life, was adamant to corruption, didn’t like luxury. Mosaddegh government reformed the judicial and electoral systems. Changes also concerned education. However, the government didn’t succeed in carrying out reforms in the economy, especially in agriculture. In the program of Mosaddegh government there was a concern that the struggle for democratization was accompanied by the increased state control.
In January 1952 a new crisis erupted. Mosaddegh resigned because of the disagreements about the control over the army with the Shah. Shah appointed Kawama to be the Prime Minister. The National Front protested against the king and threatened to organize a general strike. Shah had to fire the new prime minister and Mosaddegh again unanimously got a vote of confidence in Majlis. Using an opportune moment, Mosaddegh began the struggle for the strengthening of his influence and fro the achievement of full control over the activities of state bodies. He started using the offensive tactics to the royal court.
International position of Iran in 1951-1953 was complicated. Subsequent events, related to the Iran's foreign policy, particularly relations with major countries of the world such as Britain, the United States and the Soviet Union, paved the way for a coup and an overthrow of the government of Mosaddegh.
Foreign policy of Mosaddegh was founded on the principle of active neutrality, that meant that along with the implementation of the policy of neutrality and non-alignment, the main aim was to strengthen the national independence. Mosaddegh refrained from granting the benefits of any foreign country and tried not to let the strengthening of their influence. This contradicted the practice that was traditionally formed since the Kajars to maintain a balance and to take into account the conflicts between foreign countries. Such policy was based on the principle of an open refusal of the demands of world powers, and even in the most prosperous situation for Iran, it created extreme difficulties for Iran. The nationalization of oil and the cold war with Britain led to a serious complication of the Iranian-British relations, increased the risk of a serious conflict with the U.S. and contributed to the increase of a discord between Iran and Moscow. All these factors ultimately decided the fate of Mosaddegh government. Pendency of the oil controversy between Britain and Iran had serious consequences for Iran. Fruitless talks in 1951-1952 showed that the UK was not inclined to accept the nationalization of Iranian oil, and furthermore in order to preserve its prestige and position in the world the UK could not refuse excessive revenues that it received from the oil companies in Iran.
After April, 1951, when the British were expelled from Abadan, together with a dramatic reduction of oil production, in summer the same year they carried a naval blockade of Iran and with the introduction of international sanctions against the Iranian oil prevented its exportation abroad. This led to the reduction of oil export from 241.4 million barrels in 1952 to 10,6 million barrels in 1952. The conservative government of Great Britain, instead of finding ways to solve the crisis, took steps to implement the coup. The U.S. also supported the UK.
At first it seemed that the U.S. supported the government of Mosaddegh in its struggle against Great Britain. The American administration promised to continue its assistance to Iran and to provide a loan of Impexbank of $ 25 million. Negotiations about this were in 1951. And in November 1952, Mosaddegh sent a request for a loan to the President Truman, and stated that "... Iran has an opportunity to obtain huge profits from oil sales". Later Mosaddegh and Kashani again appealed to Eisenhower asking for a loan of $ 100 million and offered U.S. oil companies to buy Iranian oil. Eisenhower informed Mosaddegh that the U.S. currently didn’t have an opportunity to provide assistance to Iran and buy its oil. The only assistance provided to Iran by the U.S. were military advice and assistance to the army and the Iranian police. But Mosaddegh refused to accept this help, because he didn’t want the issues relating to national defense to dependent on Western assistance.
After Stalin’s death, Soviet diplomacy was no longer strong. Non-aligned policy, supported by Iran, was estimated as pro-Soviet by the West and the result of such a course of foreign policy was to isolate Iran, which deprived Iran of effective international support in the struggle against England. Moreover, at the same period the national liberation movement in Iran was going through difficult times. Diplomatic circles of the U.S. joined forces against the Popular Front and on March 19, 1953 there was a military coup.
The new regime headed by Prime Minister Zahid, who came to power after the coup, returned Reza Shah to Iran. In 1954 the regime signed an agreement with an international oil consortium, whose terms were humiliating for Iran. The Americans, British and some conservative circles in Iran were developing the plan of coup and its implementation in the camp of the conspirators. Shah coordinated all activities of the conspirators. The king and the army mostly acted on a plan that was developed by foreigners.
In the 50-70's Mohammad Reza like his father wanted to press the Iranian society with the help of social leverage. He relied on the army and the oil revenues and became more dependent on the U.S. entry into the block CENTO. Shah after a decade turned Iran into the monarchical dictatorship, relying on military power and oil revenues. They were a solid foundation of his power.
As we can see from the analysis of the reasons that led to the coup, the government of King Reza Shah didn’t have specific goals for the development that would rely on the principles of respect for the balance of power and independence. Mosaddegh Government set a goal to fight against the dependence on the West and to implement a policy of active neutrality and to protect the independence of the country using national wealth for the benefit of all people, but this government was overthrown. In other words, the overthrow of Mosaddegh testified that the regime of Pahlavi was essentially dependent on the West.

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