US-Led Coup Over Oil Burns in Iran's Memory

NOWHERE in the Middle East did cold-war politics and nationalism collide with such long-term consequences as in Iran, scene of the first major post-World War II oil crisis. Virtually unremembered by most Americans, a 1953 US-led coup to preserve Western access to Iranian oil was a pivotal event leading to the emergence of the United States as the dominant foreign power in the Middle East.

But 40 years later, the "Mossadegh affair" remains an evocative symbol of Western imperialism throughout the Arab world.

In Iran, memories of the affair fueled anti-American sentiment, eventually contributing to the downfall in 1979 of Washington's leading Middle East ally, Shah Mohammad Reza Pahlavi.

The crisis began in 1950 when Iran complained that it was receiving an unfair share of profits earned by the British-run Anglo-Iranian Oil Company, holder of the first foreign-oil concession granted by a Middle East country.

The campaign to revise the concession quickly gained popular support in Iran and catapulted Mohammad Mossadegh, a fiery, nationalistic parliamentarian to political power.

As prime minister, Mossadegh pressed Britain for a larger share of the company's profits. When the company refused, he swiftly implemented legislation to nationalize Anglo-Iranian, legally abolishing the third largest producer of crude oil in the world.

Fearing that acquiescence would place all of its holding in the region in jeopardy, Britain responded by placing an embargo on Iranian oil. Production was halted and the country slowly sank into economic chaos.

But despite threats to launch a military operation to seize its largest Iranian refinery, Britain backed down. On Oct. 4, 1951, the last British employees of Anglo-Iranian were evacuated.

"In retrospect, some would see the public threat to use force in the first months of the crisis, and then not doing it, as the real beginning of the end of Britain's credibility and position in the Middle East," writes Daniel Yergin in a newly published history of the oil industry entitled, "The Prize: The Epic Quest for Oil, Money, and Power."

One restraining influence on Britain was the United States, whose foreign policy was now dominated by fears of Soviet expansionism.

Dean Acheson, President Truman's secretary of state, warned that if Britain resorted to strong-armed methods, the Soviet Union would probably invade, posing "the gravest risk of having Iran disappear behind the Iron Curtain."

Angered by Britain's intransigence but eager to preserve the North Atlantic alliance, the US backed measures to mediate the dispute.

But Mossadegh's radicalism, plus growing concern that the mercurial leader was falling under Soviet control, produced a change of heart in Washington.

By the start of the Eisenhower administration the question was no longer how to deal with Mossadegh but how to dispose of him. At the urging of the Dulles brothers - John Foster, secretary of state, and Allen, head of the CIA - the Eisenhower administration took charge of a British plan to topple Mossedegh and replace him with Army Gen. Fazlollah Zahedi, a Shah loyalist.

"Operation Ajax" began disastrously. When word of the plan leaked, the Shah fled to Rome for what he then believed was the start of a life-long exile.

But weary of economic hardship and Mossadegh's theatrics, public opinion and key Army officers switched loyalties. A military coup resulted, and in late August 1953, the Shah returned in triumph to a reign that would end in another, final exile 25 years later.

With the Shah restored and Mossadegh in prison, the stage was set to start oil flowing again. To break the deadlock over compensation to Anglo-Iranian, the US and Britain agreed to accept the principle of Iranian ownership of its oil resources.

In return, Iran ceded production and marketing rights which were given to a consortium, including 40 percent US participation, that formally ended Britain's oil monopoly in Iran.

"With the establishment of the Iranian consortium, the US was now the major player in the oil, and the volatile politics, of the Middle East," Dr. Yergin writes.

But the speedy solution of the Mossadegh crisis also had unintended side effects. It set the pattern of US dependence on Middle East oil, eventually leading the US into the Gulf war.

US intervention also engendered resentments that continue to fuel anti-American sentiment in Iran and around the Arab world.