A Short History of BP

British Petroleum is the UK’s largest corporation. It is among the largest private-sector energy corporations in the world. It is a vertically integrated cartel that operates oil and natural-gas exploration, marketing, and distribution all over the globe.

BP, however, goes beyond petroleum, indeed, beyond business. The mess we have today in the Gulf of Mexico is not the first time BP has committed crimes against the environment and against people. This is a proverbial drop in the bucket for BP. This outfit has been cheating humanity since its inception.

Many people do not know that BP was born, named after, and committed many crimes against the people of Iran. For nearly 80 years, it seized the wealth of that nation, interfered in its politics, and destroyed its future.

The history of crude-oil exploration and production in the Middle East began with William Knox D’Arcy (1849-1917), a British subject living in Australia who became very rich very quickly—twice. D’Arcy, a lawyer, invested in gold mines in Rockhampton, Queensland. After becoming a millionaire by the end of 19th century, he and his family returned to England.

In 1901, D’Arcy obtained a concession from the government of Iran to drill for mineral resources, with the exception of the five northern provinces the Russians wanted. This concession, called the “Green Document,” was written on a page of green paper signed by the Shahanshah, king of kings, of Iran. D’Arcy was to pay the government of Iran £20,000 in cash and £20,000 in stock in the proposed operation, plus a royalty of 16% of net profits from all enterprises formed under the agreement.

D’Arcy founded the First Exploration Company in 1903. He never set foot on the land that made him a wealthy man. D’Arcy conducted business through representatives and later through the UK government. He hired G. B. Reynolds, an experienced geologist-engineer, to oversee the drilling. Reynolds had worked in India and been drilling in Sumatra.

Reynolds had visited Baghdad frequently and had paid close attention to local legends, especially the stories about Zoroastrian temples built on eternal fire and tar pits in southwestern Iran. He hired scouts from local nomadic tribes. These were akin to Native Americans guiding Ponce de Leon to the Fountain of Youth.

He had two areas in mind. The very first attempt at drilling in western Iran, in Qaser Shirin, near the border with the Ottoman Empire, was disappointing. A third well was drilled near Masjid Sulaiman, 80 miles northeast of Ahvaz, the capital of Khuzestan province. There was no oil here either.

D’Arcy had spent more than £225,000 to no avail and was ready to sell his precious Green Document. He mortgaged his remaining gold holdings but was still running out of money. D’Arcy telegraphed Reynolds and told him to close down the operation.

But Reynolds was sure he would find oil. He telegraphed back and asked for written confirmation to be sent by mail. While waiting for the mail, which normally took two weeks, he and his scouts followed their noses day and night, searching for that rotten-egg smell. Reynolds ordered drilling for a fourth well where he had found traces from a natural seepage in the same vicinity as the third.

This one was a gusher. The crude shot 50 feet over the derrick from a well that was 1,180 feet deep. On May 26, 1908, the most significant chapter in the history of the Middle East—if not the whole of mankind—opened.

By its 100th anniversary, this well had produced more than one billion barrels of light crude oil. Reynolds had struck one of the world’s richest oil fields on the edge of the Persian Gulf basin. With 314 wells, the Masjid Sulaiman field was still producing about 7,000 barrels of oil per day in the early 1980s.  And this was only the first of many productive Persian Gulf reservoirs.

In 1909, D’Arcy formed the Anglo-Persian Oil Company (APOC). Britain’s First Lord of the Admiralty, Winston Churchill, had been following the progress of the burgeoning petroleum industry because he was thinking of converting the British navy’s ships from coal to oil, which he implemented in 1911. In order to protect its supplies of this now-crucial military resource, the British government became part owner of APOC in 1914, acquiring 50 percent of the voting stock, reimbursing all of D’Arcy’s expenditures, and granting him £900,000 worth of shares. D’Arcy remained a director until his death in 2000. In 1923, the company secretly paid £5,000 to Churchill to lobby the UK government to grant APOC a monopoly on Iranian oil resources (Myers 2009).

The rush was on. Western oil companies eventually attained total control over the middle-eastern oil industry. These companies often became de facto rulers of these semi-colonial territories. All aspects of exploration, production, refining, and marketing were controlled by these multinational corporations. The owners not only discouraged but prevented native populations from obtaining the skills and education to manage their own resources, and workers were treated no better than slaves.

In 1935, the Iranian government sent a memorandum to all foreign embassies in Tehran to address the country by its correct name: Iran—not Persia. Persia, or Pars, is only one of 30 provinces in Iran; Greek historians mistakenly assumed that all people in Iran were Persians, and the British and others kept repeating this mistake (Kamiar 2007). APOC was forced to change its name to Anglo-Iranian Oil Company (AIOC).

Oil concessions generally covered very large areas and were for long durations. They paid a small, fixed, non-negotiable royalty. Until 1953, AIOC was paying Iran a 16% royalty. The government of Iran was not even allowed to check AIOC’s records.

More importantly, these oil imperialists were supported by the full military might of their respective governments. Iran’s shah, who was installed by the Allies in 1941, headed a corrupt dictatorship. There is no telling what or how much he stole from his people. With the help of these corrupt shahs, first backed by the British then by the US, AIOC appropriated the lion’s share of Iran’s wealth.

By the post-WWII era and the beginning of decolonization, educated people in Iran realized the country was in effect occupied and controlled by AIOC. They’d had enough. Coinciding with the growth of a new nationalist fervor in the region, the shah was forced aside, remaining primarily as a figurehead, and a new prime minister, Mohammad Mossadeq, was elected in 1951. Mossadeq, with the approval of Majlis (the Iranian parliament), nationalized Iran’s oil industry. The British government contested the nationalization at the International Court of Law, but its complaint was dismissed.

The British had, in effect, been kicked out of Iran.

AIOC responded with a boycott of Iranian oil, but that was not enough to bring the country to its knees. The British then approached Washington for help. Nothing much developed during the remainder of the Truman presidency, but the incoming president, Dwight D. Eisenhower, was a very close friend and ally of Churchill’s and did not ignore his comrade’s pleas for assistance.

In 1953, the year Eisenhower took office, the CIA went into action, in partnership with the British. Eisenhower approved the plan, called Operation Ajax, of instigating a counter-coup designed to return the shah to total power. The director of the operation was Theodore Roosevelt’s grandson, Kermit Roosevelt, who headed the CIA’s Middle East division. The CIA paid out $1 million to hire demonstrators—mostly gang members, prostitutes, drug addicts, and thugs (Gelvin, 2005, p. 279; Fayazmanesh, 2003, p.4). This same tactic had been used successfully in Italy in 1948 to prevent the communists from winning the elections. Operation Ajax, mostly planned by Donald N. Wilbur, an architecture expert, was also supported by few ayatollahs, powerful landlords, and big merchants. The riots and chaos that ensued did the trick, and Mossadeq was forced to resign. (See Alexander Cockburn’s The Crude Truth.)

When the shah triumphantly returned to Tehran on August 19, he personally expressed his gratitude to his savior, Kermit Roosevelt, for putting him back on his Peacock Throne. Upon returning to the US, Roosevelt accepted a job with Gulf Oil. He remained in demand as a consultant and liaison between American oil companies and Middle Eastern governments.

The shah’s return opened a reign of terror, funded by the US, in Iran. Mossadeq was found guilty of treason, spent three years in solitary confinement, and was put under house arrest until his death in 1967. The majority of his supporters, however, were turned over to firing squads. Mossadeq’s foreign minister, Hossein Fatemi, was taken from a hospital to be executed.

In return for US help, AIOC agreed to share its Iranian concession with US oil companies. American victory in Iran resulted a newly formed oil consortium, expansion of the right of extraterritoriality (meaning US and UK nationals could not be tried in Iranian courts), and the establishment of SAVAK, the shah’s secret police. SAVAK was created in 1957 with CIA assistance and US tax dollars. Its primary mission was to eliminate threats to the shah. Its tactics included censorship, “disappearances” of dissidents, torture, and execution.

The shah showed his gratitude to US foreign-policy makers. During the wars of 1967 and 1973 between Israel and its Arab neighbors, the shah provided cheap fuel for the Israeli war machine even as Arab members of OPEC decreased oil production and created an oil embargo directed at the western nations, causing oil prices to quadruple in two months. By 1975, as the world’s second-largest oil producer (after Saudi Arabia), Iran was earning nearly $20 million per hour. Much of this money went to the US as Iran became the largest purchaser of American weapons.

In 1954, AIOC changed its name to British Petroleum. In 1959, BP expanded beyond the Middle East to Alaska, and in 1965 it was the first company to strike oil in the North Sea. Today, the oil company that began in Iran has gone global. It has oil wells and gas stations on all continents.

At $1 million, the counter-coup in Iran seemed like a bargain for the US. But was it? Drawing a straight line from the overthrow of Mossadeq’s government in 1953 to the Iranian revolution of 1979—and perhaps to the events of September 11, 2001—we begin to see Operation Ajax’s ultimate cost in terms of money and lives.  From 1953 to 1979, Iran was a BP prison, polluted and poor, run with an iron fist by the company and its puppet, the shah.

Now it is drilling offshore near the US in the Gulf of Mexico. Many Americans in the region are beginning to feel the pain and outrage Iranians endured for 70 years—getting a small taste of how BP goes Beyond Politics.

Dr. M. KAMIAR is a professor of geography at Florida State College. With Professor Stanley D. Brunn, he is editing Native World Geography. Each chapter on a region in this book is going to be written by a geographer with a doctoral degree from that region. He can be reached at mkamiar@fscj.edu.

Sources cited:

CIA. The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html.

Fayazmanesh, S. “In Memory of August 19, 1953: What Kermit Roosevelt Didn’t Say.” www.counterpuch.org, August 18, 2003.

Gelvin, L. G. The Modern Middle East: A History. Oxford: Oxford University Press, 2005.

Kamiar, M.  “Country Name Calling: The Case of Iran vs. Persia.” The American Geographical Society’s Focus on Geography, Vol. 49, No. 4, Spring 2007, pp. 1-11.

Myers, K. “The Greatest 20th Century Beneficiary of Popular Mythology has been the Cad Churchill.”  Independence, Thursday September 03, 2009. http://www.independent.ie/opinion/ columnists/kevin-myers/the-greatest-20th-century-beneficiary-of-popular-mythology-has-been-the-cad-churchill-1876680.html.

Pollack, K. M. The Persian Puzzle: The Conflict Between Iran and America. New York: Random House, 2004.