It is a fair statement because ownership was granted via concession to the British, originally by the Qajar dynasty. Moreover, a company is allowed to own resources and infrastructure outside of its country of domicile, just the same as Royal Dutch Shell is allowed to own resources and infrastructure in the USA.
I often see on HN that, when the topic of Iran comes up, people who don't know much about the history of the country try to interpret its facts through a modern lens that is tinged with a hint of leftism. The reality is that the development of the global petroleum market was a fiercely capitalistic and competitive phenomenon that yielded immense wealth for major oil companies and host governments alike. That context cannot be amputated when discussing topics like Mosaddegh and the British sphere of influence in Iran during the first half of the 20th century.
Why should a concession made by a monarch pre-constitutional revolution be expected to be upheld by a democratically elected leader operating after significant changes in the form and nature of government?
I have noticed all such principled defenses of "property rights" and "capitalism" are built upon a very specific and convenient view of what exactly counts as "legitimate property". Was the oil even the Shah's to give away in the first place?
Why should a treaty signed by Obama be expected to be upheld by Trump?
Continuity of governance, honoring good-faith agreements, maintaining confidence of foreign investors...the list goes on.
Are you suggesting that all governmental responsibilities ought to be thrown out the window every time power changes hands? This is not a realistic perspective in most of the third world, where power changes hands frequently and change of government is often established via change of regime.
Ultimately Iran made a killing on the oil business, and that would never have happened without petroleum concessions. In the parlance of the oil business, a "concession" is a deal where the host government allows oil rights in return for profit share, ownership, or some other financial benefit. It is an asymmetrical but symbiotic contract, and the term doesn't carry the same pejorative connotation as it would in standard parlance.
Not to mention that the monarch in question was also the one who ratified the Persian Constitution of 1906.
I think that people would question whether the agreement was in fact good-faith. The British company had agreed to various obligations to improve the working conditions of Iranian workers, train more Iranians to work in administrative roles, and generally contribute to the development of infrastructure in the country. It had done none of those things in the decades since signing the deal.
Under that light, it's not really a case of buyer's remorse, where Iran signed a fair deal, and unjustly decided to renege on it. It's a case of the British company acting exploitatively, violating their agreement, refusing to renegotiate, and the Iranians declaring the agreement void as a result.
Are we talking about the D'Arcy Concession? I ask because none of what you are describing is found in the text of that agreement.
It's immediately obvious upon observation of modern Iran's highly developed petroleum industry that concessions sparked the development of infrastructure on a massive scale.
> Under that light, it's not really a case of buyer's remorse, where Iran signed a fair deal, and unjustly decided to renege on it.
I think it's precisely a case of buyer's remorse. In Iran prior to the development of infrastructure, 16% share in profits generated by AIOC with no initial capital commitment from the Qajars sounds like a great deal. In Iran after the wells are pumping, 16% share in profits sounds like a pittance. I reject your framing of the issue as an exploitation by British interests. That may be a palatable narrative for the times we live in today, but it's a distorted perception of the actual facts. Petroleum production was the single greatest driver of wealth and development in 20th century Iran. If not for foreign investment, the industry could not have boomed as it did.
D'Arcy took massive personal risk and even took the British government as an investor, but he failed several times in the process of exploring for oil before he was ultimately successful. Risk is the nature of the wildcatting business.
If you study the process of oil rights and nationalization in the Middle East, you will see that it is a topic marked by extremely brutish behavior from local parties as well as faraway beneficiaries like the US and the UK. Even OPEC is full of deception about production numbers as it sets production amongst member nations.
For that reason as well as others beyond the scope of the current conversation, there aren't many clean hands in the oil production business. Look at the massive corruption and cronyism taking place in Venezuela's PDVSA. Iran has the same kind of problem, where the country's dictators finance their corrupt practices using petroleum income.
See Section II (D) beginning on page 4, for violations of the original concession, and Section III (D) beginning on page 16 for violations of the 1933 agreement.
I'm not simply casting the British behavior as exploitative in some hand-waving appeal to the evils of imperialism. I'm talking about real, substantive, and specific violations of their own agreement.
That document highlights Iran's government's objections to AIOC, and we have to contextualize those objections within the backdrop that Iran had already nationalized AIOC a year prior, and needed to justify its actions internationally in order to keep selling oil abroad. World Bank member nations and other buyers also needed to know they would not invite grievances with the UK by continuing to buy from a nationalized company.
The author of the document you cite says that prior to the 1933 agreement, AIOC withheld royalties under guise of covering damages but really to squeeze Iran into accepting the new agreement; the problem with this logic is that damage to a pipeline also causes revenue loss, so you can't indemnify the company by simply paying them for the repair costs. The 1901 agreement says that Iran will protect the infrastructure, which it failed to do. In any case, those payments were addressed in Article 23 of the new agreement.
It does not appear to me that Section II (D) demonstrates that the contractual stipulations you mentioned (training/hiring of locals and establishment of medical facilities at AIOC sites) were violated. That part of the document also says nothing about infrastructure investment. Maybe I am missing something but I have read it three times now to make sure.
I don't see how Section II (D) could be any clearer. The agreement stipulates a reduction of foreign staff in Article 16 (III), and the document shows a substantial increase. The agreement stipulates the development of sanitation, health services, and housing meeting the most modern standards found throughout Iran in Article 17, and the document shows that workers live in unsanitary tent cities.
> Are we talking about the D'Arcy Concession? I ask because none of what you are describing is found in the text of that agreement.
The agreement was re-negotiated in 1933, according to terms that the grandparent pointed out. At this point I have to wonder if you are being disingenuous on purpose. The rest of your comment is a moral appeal making a case for why D'Arcy "deserved" the profits. You have to pick a lane, are you arguing on the basis of who "deserves" a countries natural resources, or from the point of view of adherence to contracts and agreements?
The financial risk of the initial investor is a reasonable justification for his profits. This applies to D'Arcy as well as AIOC. Their cut of the concession deal was reflective of their risk premium.
Iran didn't take the risk -- or the cost outlay -- of building rigs, importing engineers, etc. The idea that the British were somehow exploitative by resisting renegotiation is ignorant of this fact. Both the 1901 agreement and the 1933 agreement laid out responsibilities for the
Article 16 of the 1933 agreement covered the introduction of more Iranian nationals into the petroleum business, which AIOC did in fact carry out. Article 17 talks about sanitary and public health facilities for workmen, which sounds like bathrooms and medical tents/clinics to handle workmen's injuries and treat their families.
However, I see nothing in the 1901 agreement nor the 1933 agreement that says AIOC will invest in the general infrastructure of Iran. That is what the grandparent said ("generally contribute to the development of infrastructure in the country"). That idea is at best a false pretext for breaking the deal, and at worst just a blind restatement of something on Wikipedia. Actually, the text of the 1933 agreement says that AIOC would require Iran's consent to improve AIOC's infrastructure (including aviation and telephone).
Fortunately, the specific violations have been compiled by the world bank, as pointed out in a sibling comment.
I just have one part I found incredibly funny
> The idea that the British were somehow exploitative by resisting renegotiation is ignorant of this fact
If overthrowing a democratically elected government is not exploitative, I don't know what is. "Resisting renegotiation" is a very Orwellian way of phrasing such. I'm guessing something along the lines of "we will topple your government and hand over absolute power to a brutal dictator if the terms are violated" was also part of the the agreement?
What about all the other Iranians, the ones that had nothing to do with APOC or oil or the government. Did they also "deserve" their fate?
I would consider the construction of housing, sanitation and public health to be "general infrastructure", but if you prefer a different description, I won't argue. It strikes me as a bit of a moot point anyway, because the obligations to improve its workers' living conditions are clear and those obligations were not met. It doesn't matter whether you want to call them "infrastructure" or not.
> I expect you to be cheering when Iran assassinates Trump for reneging
Trump pulled a lever that was explicitly listed and offered in the treaty. It was not "reneging" on the deal any more than using a backout clause is reneging on a home purchase. Yes, it is rarely used, and yes, you may piss off the counter party who was really hoping for their payday, but the fact remains that the possibility is explicitly listed in the contract.
> I expect you to be cheering when Iran assassinates Trump
I understand that the HN zeitgeist is not circumspect about topics like Iran and petroleum because there is a strong distaste for anything that seems imperialistic here, but that's not a reason to make uninformed arguments and accuse me of cheering the idea of someone's death. I'm making some fairly informative and historically accurate comments. If you disagree with the substance then please do so without accusing me of being inhumane.
> Governments have responsibilities to their own citizens, not foreign corporations.
Governments ensure citizens' prosperity by protecting economy and trade via foreign-facing agreements. The beneficiaries of smart foreign trade are the citizens themselves. Iran is an example of this; its government's budget has been funded almost entirely by petroleum revenue for decades.
> If you disagree with the substance then please do so without accusing me of being inhumane.
I'm not accusing you of being inhumane. I'm wondering if you would apply similar moral standards when the shoe is on the other foot, or if you are a hypocrite.
Wait a moment, you're equating a change of administration (Obama - Trump or any preceding transfer of power in the US) with a change of governance, as in a structural change in the system of governance (which is explicitly spelled out in the comment you were replying to).
It's particularly odd that you make this argument given Trump's unilateral withdrawal from the P5+1 agreement as well as many other bi- and multilateral arrangements. If we're just going to rely on realpolitik, why not accept that the oil companies also made bank out of Iran for a while and hey, nothing lasts forever?
> Wait a moment, you're equating a change of administration ... with a change of governance
In the context of a monarchy, that's the appropriate way to consider it. When Reza Shah Pahlavi took power from the Qajars, the deals with the British remained. There is a level of continuity of governance that exists in the developed West but doesn't exist in the Third World. Ecuador for example was until recently an OPEC nation, but it has had twenty constitutions. However, it is in the nation's best interests, economically speaking, to ensure a peaceful transition of operation across those political perturbations. (I am reminded of software revisions that do not alter the API, so that the software can be treated like a black box and mated to applications without a rewrite of API calls every time revisions are made.)
A current example would be Argentina, where the return of Cristina Kirchner to the country's executive branch has spooked foreign investors (including miners and petroleum companies) because she froze the dollar during her presidency about a decade ago. Ultimately this has a very damaging effect on the country's economy and its people's ability to eat.
In present-day Argentina, we see economic investment chilled by a new administration that operates under the same constitution but endangers foreign investors. In early-20th-century Iran, we saw economic activity boosted by continuity of international agreements across several different monarchical administrations within two separate dynasties.
Please choose the correct lens when you are evaluating a third-world country's economy. What we all learned in social studies class about the differences between regimes, governments, etc.....well it is not necessarily applicable to developing nations where change of administration is frequently carried out by coup or the establishment of a new constitution that is as ephemeral as the previous one.
I tried to communicate this succinctly in my earlier post, quoted here:
> Are you suggesting that all governmental responsibilities ought to be thrown out the window every time power changes hands? This is not a realistic perspective in most of the third world, where power changes hands frequently and change of government is often established via change of regime.
Your extraneous mentions of Argentina are jarring. First, please don't attempt to sell yours as the unanimous view of what's happening to Argentina, who damaged it and who attempts to recover from the damage, and the dollar reserves/policy. Second, we do have a more or less stable constitution (the latest interruption to our democracy, via coup d'etat, was backed by the US in the 70s, by the way). Comparing our democracy to Iran's government is bizarre.
You are conflating not investing in a country with overthrowing a democratically elected government. Are you really arguing that it was OK for the US and UK to overthrow Iran's government because otherwise foreigners might not have invested in Iran, or otherwise threatened their investments? Truly, this is what they call "capitalism with a human face".
British companies would not have purchased/built that equipment without the resource access that had been established via contractual agreements with the Iranian government.
Sure. But the Iranian government has sovereignty, just like the US government. That means that they cannot be bound by any contract if they decide to change their mind, the most that can be done is that you might press for a fair market value.
Why do you hold the Iranian government to a standard no other government in the world is held? Would you expect the American government to be forever bound to treaties signed by the British, or to agreements made by the executive alone ranging from two decades to a century ago?
Not strange at all when you consider the Iranians had absolutely no means of extracting it themselves.
They gave willing access to their natural resources in exchange for a relatively massive revenue windfall then seized the sizable British capital investments with no compensation.
Right, so if BP drills for oil in South Texas that means that the Texas oil reserves should be under their control? This viewpoint reeks of racism and Anglo-Saxon exceptionalism.
Very strange how oil underneath the Iranian soil can be considered a "British resource".