The Oily Americans

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For more than a half-century, American foreign policy dealing with oil has typically been manipulative and misguided, often both at the same time. The pattern of intrigue has ranged from U.S. officials' secretly writing tax laws in the 1950s (so the Saudi royal family could collect more money from the sale of its oil and American companies could write off the added payments on their tax returns) to overthrowing a government that showed too much independence in handling its oil sales. To illustrate the dark side of American oil policy, we offer two tales, stitched together from declassified government documents and oil-industry memos, involving a pair of Iraq's neighbors, Iran and Afghanistan.

The first one begins with the rise of a member of Iran's parliament, Mohammed Mossadegh, an impassioned speaker and popular politician who had long chafed at British domination over his country's oil. The Anglo-Iranian Oil Co., partly owned by the British government and a predecessor of today's British Petroleum, held the concession for all of Iran. It set production rates and prices as well as Iran's token share of the proceeds. Mossadegh sought a fifty-fifty sharing agreement, which was then becoming the common arrangement between other oil-producing countries and U.S. companies. The British refused. In 1951 Mossadegh successfully pushed to nationalize Anglo-Iranian, became Iran's Premier and established the National Iranian Oil Co.

The British boycotted Iranian oil, and the U.S. joined them. No international oil company would buy Iran's oil. The Iranians had no independent system for delivering it. They had no technical skills to produce it, since the British had long relegated Iranian workers to menial jobs. Even when Mossadegh threatened to flood the world with half-price oil, he was able to deliver only a trickle because of the economic blockade. As the Iranian government withered, the Eisenhower Administration cut off foreign aid. Unrest followed, and angry citizens took to the streets. This prompted suggestions that the communists were coming, even though Mossadegh was as anti-Soviet as he was anti-British. On Aug. 19, 1953, after the deaths of about 300 people in street riots, the 71-year-old Premier was overthrown. He was replaced by a retired army general, Fazollah Zahedi. The American-friendly Shah, Mohammed Reza Pahlavi, who had earlier fled the country, returned triumphantly, resumed the throne and reasserted his control.

Media accounts of the coup were seemingly straightforward. The Washington Post reported that Iran had been saved from falling into communist hands and that the communists were blaming Brigadier General H. Norman Schwarzkopf "for alleged complicity in the coup." The paper said Schwarzkopf, whose namesake son would lead U.S. forces nearly a half-century later as they drove the Iraqi military out of Kuwait, had visited Iran "but only to see friends, the State Department said." TIME reported: "This was no military coup, but a spontaneous popular uprising."