OIL AND THE IRANIAN ECONOMY - FROM DISCOVERY OF OIL TO FORMATION OF THE ANGLO PERSIAN OIL COMPANY TO 1933 OIL AGREEMENT

Abstract

ABSTRACT William Knox D’Arcy, an Englishman who had made a fortune in the gold mines of Australia, is the man who first discovered oil in Iran. He was able to receive a concession from Persian king, Mozaffar ed-Din Shah, in 1901 to explore and exploit oil in the designated southern area of Iran for a period of 60 years. He had to pay annually 16 percent of the net profits to Iranian government. D’Arcy established the first Exploration Company in May 1903 with a capital of 600,000 in shares of £1 each. Oil was struck on May 26, 1908, and subsequently in 1909 the Anglo Persian Oil Company (APOC) was formed with an initial capital of £ 2,000,000. When British Admiralty decided to convert the British navy from coal to oil burning, the British government in 1914 bought 51 percent share in the APOC in exchange for infusion of new capital. Reza Khan, an officer in the Persian Cossack, was able to carry a bloodless coup and declared himself the first King of Pahlavi dynasty in 1925. Reza who tried to modernize Iran needed cash for his ambitious development projects. He unilaterally cancelled the oil concession of 1901. The cancellation created a political crisis between Iran and the British government on behalf of the APOC. However, after lengthy negotiations a new concession was signed between the Iranian government and APOC in 1933 known as the “1933 oil agreement.” Keywords D’Arcy concession, APOC, 1933 oil agreement, oil & Iranian economy