Interviews November 2, 2023

Petroleum and Progress in Iran: An Interview with Gregory Brew

Between the 1940s and the 1960s, Iran developed into the world’s first petro-state. In the recently published Petroleum and Progress in Iran: Oil, Development, and the Cold War (2022, Cambridge University Press), author Gregory Brew argues that Pahlavi petro-state emerged from a confluence of global and local forces in the context of the Cold War, the global oil economy, and the nascent practice and discourse of international development assistance. The Toynbee Prize Foundation interviewed Gregory Brew on the main arguments and events of his book.

Next to providing a brief chronology of the political and economic development of Iran in post-WW2 decades – including the episode of the failed attempt to nationalize Iranian oil industry in the early 1950s followed by the coup d’état in 1953 – Brew explained the concept of dual integration introduced in his book, which tries to account for both local and global integration of the Iranian oil industry. He also highlighted the role of the international development actors, including the World Bank, American developmentalists and development economists in shaping the Pahlavi regime and the Iranian development project.

Mirek Tobiáš Hošman, University of Bologna, Paris City University

Mirek Tobiáš Hošman: How did you start working on this project?

Gregory Brew: This book grew out of my doctoral dissertation at Georgetown University, where I studied the history of oil and the Cold War, the impact of oil on postwar diplomatic history and the US foreign relations. I am a historian of oil by training and I got very interested in US relations with Iran, particularly in the immediate postwar period. I was drawn to events such as the nationalization crisis, the Mosaddeq’s crisis, and the coup of 1953. I got deeper into the literature, studied Persian, the Iranian history, and I became fascinated with the relationship between Iran and the US during the Cold War, especially during the era of the shah and Mosaddeq.

But even more fascinating was noticing how inextricably the history of Iran was with the history of oil. Iran was the first country in the Middle East to become an oil producer. It was for a long time the most important producer of oil in the Middle East and, of course, oil became the foundation of the Pahlavi state during the 1950s and the 1960s – it was deeply intertwined with the shah’s rise to power, his consolidation of power and later his fall from power during the Islamic revolution in 1979.

So, oil played a very important role in that history, but as I conducted more research and as I flashed out the dissertation that would become the book, I found there to be a disconnect between the ways the oil was studied within Iran and the way Iran was studied in the broader context of the global oil economy.


Mirek Tobiáš Hošman: And it is not the only book you published on Iran recently…

Gregory Brew: True, while I was writing this book for Cambridge University Press, I was also co-writing another book titled The Struggle for Iran: Oil Autocracy and the Cold War, 1951–1954 (2023) for the University of North Carolina Press. I wrote it with my former mentor and colleague David S. Painter at Georgetown University. The Struggle for Iran is a history of the nationalization crisis, the period of Mohammad Mosaddeq and the coup d’état of 1953. These are all events that also appear in Petroleum and Progress in Iran, but they are studied and examined in much closer details in The Struggle for Iran.


Mirek Tobiáš Hošman: One of the things worth mentioning about your book is that you also relied on Persian-language sources, even though as you clarify on the early pages you were not able to enter archives in Iran. Could you tell us a bit more about what these sources are and how did you used them in your analysis?

Gregory Brew: This book is a work of international history, a work of Cold War history, and a work that is deeply concerned with the US foreign relations and the US in the world, broadly speaking. For that reasons, it is a book that draws heavily on US sources from the National Archives in College Park, archives of presidential libraries, records of private oil companies, and development organizations like the World Bank.

But at the same time, it is a work of Iranian history and I was very eager to incorporate as many Persian language sources as I could. It wasn’t possible for me to visit Iran for archival work, primarily due to personal safety concerns, but there are quite a lot of Persian language sources that are very important if one wants to study this period. They have to be used with care; many of them are memoirs, personal correspondence, recollections, interviews – and these, of course, can be problematic sources to use for historians, as they generally reflect personal biases. Particularly Iranian officials who worked at the shah’s government and later gave interviews once the Islamic revolution had occurred – these interviews are infamous for giving somewhat colored views of the past and the interviewees clearly tend to embellish their own roles. But it was important for me to use these sources as they speak to the Iranian side, the Iranian perspective on the US-Iranian relationship.

One excellent resource in this sense was the Library of Congress, which has hardcover copies of memoirs, letter collections, and collections of documents that had been published by the Islamic Republic of Iran. There are also quite a few periodicals and Iranian newspapers, which represent an excellent resource. Next to the Library of Congress, there are large oral history collections at Harvard University and the Foundation for Iranian Studies. Both have extensive collections of the interviews conducted mostly in the 1980s with officials from the shah’s government, prominent individuals, businessmen, and social figures.


Mirek Tobiáš Hošman: In your book, you say that oil became the foundation of the Pahlavi state and, similarly, oil is the foundation of your book, as it provides you with the backbone narrative structure around which you carefully untangle an incredibly complex story with all sorts of different actors, states, domestic interests and private companies. Why did you choose to primarily focus on oil as the main organizing principle of your book?

Gregory Brew: I do think the book is distinctive in its specific focus on oil. As I mentioned before, when I was conducting the research for this book and the work on my doctoral dissertation, I did find oil to be curiously absent in the broader scholarship. It is always addressed as an important factor, but rarely integrated to the extent that I thought was necessary. Because oil was not only a crucial aspect of the US-Iranian relationship, crucial aspect of the Iranian economy, but it was the foundation of the Pahlavi state’s very existence. The shah could not have held on to power between 1953 and 1979 in the way that he did, if it weren’t for the access to oil revenues. And these revenues were created not by Iran, not by the shah, but by large Western oil corporations operating the international oil economy. This seems to me to be an incredibly important aspect of Iran’s modern history as well as Iran’s relationship with the US, but not one that had been examined in detail before. And then later oil became essential to the economic development inside Iran, so not only you need to address how Iranian oil is moving through an international oil system, you also need to talk about what the oil is actually doing inside Iran and that is what this book tries to do.

Oil is also useful to follow because it is so fungible in both the ways it moves through the international economy and also in terms of what it touches. It is sort of a truism to say that oil is both economic and political, that it is so deeply enmeshed in international relations and you can see it on the nationalization crisis and the coup, but also subsequently on the rise of OPEC, the oil shocks of the 1970s, and even on what is happening today in the was in Ukraine and how oil and energy resurfaced as crucially important elements in geopolitics and international relations.

In this way, I think that oil does function very effectively as a through line, as a foundation for a book like this, a book that is not only concerned with diplomacy and international relations, but also with development economics, the rise of the developmental state, and the ways in which development projects were conceived and then executed in Iran. Oil binds it all together – in the same way as it binds together modern society. We consume oil in huge quantities not just to drive our cars and power our aircraft, but to produce all of our commodities, to heat our homes, provide our electricity to power modern consumer society. Oil is everywhere. So, it made a lot of sense to use it as a foundation for the book.


Mirek Tobiáš Hošman: Before we go further, I wanted to ask you to explain one idea that is central in your analysis and goes through all your story, and that is the idea of dual integration. What do you mean by that?

Gregory Brew: Dual integration is a concept that I introduced in this book. It is one of the major interventions and innovations that the book provides and adds to the existing scholarship. It emerges from the problem that I had in researching and crafting this book, which was how to engage with the concept of the resource curse. For people who may not be familiar with the concept, it stems from the idea that once an economy becomes a major producer of oil – oil or a similar commodity – it becomes tied to the volatility of oil on the international market. And while the state can have access to a phenomenal wealth that is produced from the trade of oil, at the same time, it becomes vulnerable to the volatility of the global oil market. The resource curse refers to the vulnerability and instability that emerge from over-reliance on one commodity.

The resource curse plays an important role in Iranian history and it shapes the narrative that leads to the fall of the shah in 1979. As the scholarship goes, the shah became dependent on oil and used the wealth of oil to power economic development, modernization programs and the military buildup during the 1960s and the 1970s. He forced the prices of oil higher, he increased the Iranian production of oil, until the price fell, and his government became so squeezed, so pressured, that it laid the foundation for its own collapse in the late 1970s. And this story of a sudden rise and sudden fall is then repeated in places like Venezuela, Mexico, and other states that emerged as oil producers in the 20th century.

And while that story is compelling, I had a problem with it, which is that it was leaving something out – the connection to the global market. The story of the resource curse seemed to be sort of hermeneutically sealed within distinct national context. And coming at it from the point of view of oil history, oil history to me was inherently global. Oil is an international commodity, it is moved internationally, and the volatility that creates the instability within oil dependent states, this volatility comes from the market, it doesn’t come from the national context. So, the concept of dual integration that I present in the book is an attempt to merge this global context with the local context.


Mirek Tobiáš Hošman: How do you employ dual integration in your analysis?

Gregory Brew: What I argue is that during the postwar period, the Pahlavi state pursued this idea of dual integration. In other words, Iran would be integrated into a global oil economy and its oil would be moved and sold by major Western oil corporations. That movement, that global integration, then created wealth in the form of oil revenues that could be integrated into local projects of economic development to stabilize the Pahlavi state and ensure the survival of the shah’s regime. So, global integration through the companies, local integration through the Pahlavi state with the assistance of foreign developmentalists, most of whom were American. Local integration, global integration – dual integration happening simultaneously.

This was the concern of the Pahlavi state, and it was also the concern of the US government. The US project in Iran during the postwar period was to encourage and to foster dual integration with the idea that it would stabilize Iran and more importantly maintain Iran’s pro-Western strategic alignment and prevent its slide into communism. This view was driven by something else that I emphasize in the book, this consistent American view of Iran as a country teetering on the brink of a collapse. The view of Iranian incapacity that Americans repeated again and again from 1941 to 1965 claimed that without access to oil and the wealth that oil could create, Iran would inevitably fall into crisis and collapsed.


Mirek Tobiáš Hošman: What would be the role and position of the private oil companies toward dual integration? Perhaps it would be useful if you could first describe the functioning of the global oil economy at that time.

Gregory Brew: The book covers a period of history where the oil market is dominated by a small number of large vertically integrated Western corporations. Most of these corporations still exists in one way, shape or form, most of them had changed their names, but they are still around, and these companies were the first companies to develop the oil resources of the Middle East and Latin America. They did so by signing what were known as concessions with local governments. A concession was signed in Iran, similar ones were signed in Iraq, Saudi Arabia, Kuwait and so on. These concessions were legal contracts between the companies and the local governments, but the contracts gave the companies sweeping powers to exploit the oil that they discovered in any way that they saw fit. At the same time, there was a fairly small number of these companies, which led to their close cooperation – what is termed in the scholarship as the oil oligopoly. These companies essentially formed informal networks to manage supply in order to maintain stable prices.

In the context of Iran, the most important company was the Anglo-Iranian Oil Company (AIOC), which later changed its name to British Petroleum and is now the BP. The AIOC controlled all of the oil in Iran from 1901 to 1951 and also happened to be majority-owned by the British government. So, the AIOC was a private corporation, but it was closely connected to the British state, to the British imperial project, and the interest of the British foreign policy and finance. This was a more general setting: the oil companies acted as commercial entities, but they were also closely bound up in the international relations surrounding oil and concerns over maintain access to oil.

What did they think of dual integration? The point that the book makes is that the companies were predominantly concerned with their own bottom lines, that they were profit driven more than anything else, that they didn’t always saw eye to eye with the US government and certainly not with the Iranian government, but they were often forced both by the US and later by Iran to adjust their management of oil to meet the needs both of the US foreign policy and later the demands of the Pahlavi state. The companies are interesting actors in the book, they were often pressured by states interests but they were ultimately the ones managing oil and the supply of oil and they were the ones producing the wealth.


Mirek Tobiáš Hošman: One major event analyzed in your book is the nationalization attempt of Muhammad Mosaddeq in the early 1950s. Could you unpack that? We can start with a question whether you think that nationalization was inevitable.

Gregory Brew: Nationalization, in a sense, was inevitable, for reasons that are tied to the concessions that I mentioned before. These concessions that the companies signed with local governments meant to be legally binding contracts, but they were signed between private corporations and sovereign state – or states that were approaching sovereignty in some cases. And there is a natural imbalance within the international legal system between private corporations and sovereign states. The issue of nationalization would be at the center of that imbalance. The way that oil resources were regarded from the legal point of view – except for the US, because the US was an exception to this rule –  was that the oil in the ground belonged to the state, and only when the oil was drawn from the ground and it was refined, transported, moved, and sold on the market, that it was regarded as property of either the state, or state-owned enterprise, or private enterprise. At the same time, there was an imbalance in relations between the private companies which were able to produce massive amounts of wealth through their management of oil supplies and local states who were generally only given a portion of that wealth. The concessions were always imbalanced in favor of the companies; the companies drafted them in that way.

This situation was initially manageable because the companies had technical expertise, they were often able to bribe local officials to sign agreements that were generally unfavorable to state interest, and they could lean on support from great powers like the British and the US governments. But eventually and certainly after the Second World War, there was a rising nationalist resentment and opposition to the concessionary system. And this is true in Iran, but it is also true elsewhere. Mexico famously nationalized its oil industry in 1938 and there would be subsequent nationalizations in the 1970s. The threat of nationalization was always there from the start.

The problem facing the companies was how to delay and discourage nationalization for as long as possible. But to get back to your question, was nationalization inevitable, in a way, yes, and the companies recognized that. I have sources from the 1930s and the 1940s in which the executives of the oil companies admit that they were living on a borrowed time, that what they were effectively doing was finding a rear-guard action against the force of national sovereignty. This is something that Christopher Dietrich argues in his book, Oil Revolution, that there was this consistent pressure from the 1940s to the 1970s on the oil companies to hand over more control with the governments consistently using the threat of nationalization as a lever. And this culminated in the oil shocks in the 1970s, when the companies were finally kicked out, they were finally pushed to sides by the states of OPEC. But in the period before, the 30 years or so from the 1940s to the 1970s, the companies were more or less in the driver seat. They were able to control the flow of oil even if they were consistently under pressure from governments over the terms of their arrangements.


Mirek Tobiáš Hošman: Even if the companies recognized, at least privately, that they were living on a borrowed time, they were very active in trying to shape the definition of nationalization and its specific parameters. Could you say a bit more on this?

Gregory Brew: Yes, this is very important in the context of Iran and the 1951 nationalization. As I mentioned, nationalization was a sovereign right. It was recognized as something that governments could do, seizing privately owned assets, provided that they offered compensation for those assets. So, the British and the Americans had to recognize Iran’s right to nationalize, but what they wanted to do was manage nationalization in such a way that the companies would not lose control. Control became the key factor of nationalization, which was sort of a broad term that the Americans and the British tried to define in terms that served the existing status quo, while Mosaddeq defined it in very start terms – Iran’s control of its own industry. For Mosaddeq and for Iranian nationalists, the idea that Iran should manage its own oil industry was irrefutable, whereas for the British and the Americans, it was a question of, you know, how do we retain control while acknowledging the principle of nationalization.

And while this was present in Iran in the 1950s, it was a consistent issue moving into subsequent decades, because the constant concern for the West – for the US, for the British and others – was how do you maintain access to this resource that is increasingly falling under the control of governments that are potentially hostile. And looking further ahead, after the nationalizations of the 1970s, what the US did was to become much more involved militarily in the major oil producing regions of the Middle East, right? So, once the companies had been kicked out, the US military moved in in the 1980s and the 1990s. The flow of oil was now being left to local sovereign states and the US government was leaning to military power to ensure access to those resources. So, in a way, the US military played the role that the US companies had played previously, at least from the point of view of the United States.

To come back to your question, an important point that the book makes is that there was no reason why Iran in 1951 couldn’t manage it own oil industry. It could. It had the technical expertise it needed, and it was in a position to manage the oil resources. The problem was that the US did not see it that way. The US government was not willing to allow Iran to manage its own oil industry. So, it stepped in to prevent that from happening.


Mirek Tobiáš Hošman: You make this point in your book very strongly that this idea of Iranian incapacity was a myth spread mainly by the companies – I think you specifically mention the companies as the ones disseminating this idea.

Gregory Brew: Yes. This idea that came about in the wake of the nationalization – that Iranians are shooting themselves in the foot because they cannot manage their own industry – was something that the companies said repeatedly, and it was repeated by the US and British officials in public. In private, they acknowledged that Iran could produce its own oil with its own technical expertise, that it did have the means to produce oil. What it was prevented from doing was marketing that oil and gaining access to markets. And the way that nationalization was crushed, the way that Mosaddeq was prevented from succeeding in the nationalization process, was that Iran was kept out of markets, that it was blocked from being able to sell its oil. It wasn’t that Iran wasn’t capable of doing so, but that it was actively prevented from doing so.


Mirek Tobiáš Hošman: In my view, this was one of the most fascinating parts of your book for people who are interested in studying the interactions between states and the global economy. You clearly demonstrate how Iran was de-integrated from the global oil economy and how the embargo system against his oil production functioned. Could you say a few words about how did the embargo work and how it led to the conception of Iran as an oil-less economy and the subsequent fears it stimulated in the US?

Gregory Brew: I will add a bit of context here. In 1951, the prime minister Muhammad Mosaddeq nationalized the foreign oil industry. He kicked the British out, the British left, and there was a series of negotiations where the US and the British tried to define nationalization in ways that would allow the British companies to stay. These negotiations were ultimately unsuccessful and the response from the British and from the oil companies was to place an embargo on Iran; to basically say that Iran was not permitted to sell any of the oil that it could produce, and which had been previously sold by the British oil companies.

The embargo was very successful. From 1951 all the way up to 1954, when the post-coup government, signed a new oil agreement, Iran effectively exported no oil. There were two main reasons why the embargo was successful. The first one was the excess supply on the market at that time. The global oil market lost Iran, it lost around 600.000 barrels of oil a day, but the companies were able to increase supply elsewhere to make up for the loss; they increased supply in places like Iraq, Saudi Arabia, and Kuwait. Iran had been a major producer of refined products – the Abadan refinery was the biggest refinery in the world and produced a large number of refined products, not just crude oil – but the companies were also able to increase the refinery output in other places to make up for the loss in Abadan refinery products.

So, the fact that there was excess capacity that the companies were able to bring on meant that nationalization was a failure. There is an interesting aspect connected to this. One of the major concerns of the oil companies was that if nationalization in Iran succeeded, other countries would try to nationalize as well. But, in fact, other countries were discouraged from nationalizing in large part because they were able to increase production and earn more money as the result of the embargo against Iran. The embargo against Iran created opportunities for other oil producing states to produce more oil, to make more money, and this was one of the reasons why nationalization was a failure.

The second main reason was access to transportation. How do you move oil? You have two options, you can move it by pipeline, but Iran didn’t have any pipelines that linked to other markets. It was entirely dependent on the second option, which was oil tankers. You have to put oil on tankers to move it to consuming markets. Now, virtually all of the oil tankers in 1951 were either owned or chartered by a major Western oil corporation that were behind the embargo. Iran had virtually no access to tanker capacity and as a result, even if it could produce the oil, even if it could prepare it for markets, it had no way of accessing those markets because it had no access to tankers. So, by restricting tanker access and by displacing Iranian supply in the market by increasing supply elsewhere, the companies were able to effectively de-integrate Iran from the international oil economy.

As a result, Iran was left without an operating oil industry and Mosaddeq, against his desires, was forced to embark upon the course of oil-less economics – essentially, you know, exploring how do you chart a course forward for Iran without oil revenues, without the wealth produced by oil. And Mosaddeq did this in 1952, he rolled out a series of economic policies designed to make Iran oil-less, he basically acknowledged that nationalization had failed and that in order to survive Iran will have to move forward without access to oil revenues. And what I argue in the book is that this was a crucial factor behind the US decision to depose Mosaddeq by coup d’état in 1953. The US was very concerned about Iran’s survival without a functioning oil industry and without access to oil revenues. And the fact that Mosaddeq was trying to do go on this path was a key motivating factor behind the US decision to remove him in 1953.


Mirek Tobiáš Hošman: One thing that to me is a bit difficult to understand is this schizophrenic position of the US foreign policy, which on one side was worried about Iran becoming an oil-less economy, getting unstable and potentially sliding to the other side of the Iron Curtain, but at the same time supported the embargo, which effectively prevented Iran from obtaining any oil revenues. Mosaddeq’s attempt to reorient Iran’s economy away from oil seems to be a very rational move in this context, but the US also wanted to prevent that. A related question I have is about the British position: were they concerned about the Cold War dimension?

Gregory Brew: I will address your British question first, because it is the easier question. Your question about the US is very interesting and more complex. So, once nationalization happened in 1951, the British took a very firm position that they really didn’t retreat from, which is that Mosaddeq has to go. The British wanted to reverse nationalization and for them the easiest way to do that was to get rid of Mosaddeq, push him out of power, and replace him with somebody else, presumably someone more amenable to their interest.

It should be remembered that by 1951, the British had been interfering in Iranian politics for nearly a century, if not more. The British had been very active in Iran, they had a considerable diplomatic and economic presence there, they had regularly bribed or influenced cabinet officials, they had a large number of local politicians, businessmen, some tribal leaders, provincial figures and elites who were on their side, essentially. There was a pro-British faction in Iranian politics, which genuinely followed the British line and served the British interests.

In 1951, the British felt that rather than working with Mosaddeq, they should just get rid of him. And the embargo was just meant to serve that policy. The British felt that the embargo would create enough pressure on Iran that Mosaddeq would be forced either to agree to a favorable oil deal or would be forced from power. The British never really felt that the embargo was going to push Iran towards communism or widespread social instability. They generally argued that Iran was an agrarian country, that it had an underdeveloped economy, that even if you took away oil revenues and kept embargo in place, the fiscal pressures would not result in some kind of economic collapse.

The Americans were very concerned that it would create a broader crisis. They felt that there needed to be an oil deal, to get the oil flowing again. Not because Iran’s oil was super important to the global oil economy, but because oil was important to Iran from the American point of view. They felt that without oil revenues, without the oil wealth, Iran would continue teetering along and would eventually reach a crisis point where its government wouldn’t be able to function, when its economy would be set under pressure, when the ingredients of a communist uprising and takeover would be created.

And remember, Iran shared a 1500-mile-long border with the Soviet Union. There had been a major crisis in northwestern Iran in 1946 involving Soviet troops occupying a number of Iranian provinces. Iran also had a fairly large and fairly active communist party, the Tudeh party, so, you know, from the US point of view, looking at it through the Cold War lens, the ingredients for a communist crisis in Iran were certainly there and the broader concern was, you know, if you lose Iran to the communists, you lose access to Iranian oil, but you may also lose access to the oil in the broader region. If Iran fell, it could potentially lead to the loss of the rest of the Persian Gulf. So that was the broader US concern.

You mentioned that their policy appears to be schizophrenic and in a way it was. They wanted a deal in Iran, they wanted to stabilize Iran, they generally saw Mosaddeq as the best of the limited options. The British hated Mosaddeq, but to the Americans, Mosaddeq appeared to be a partner they could work with. He wasn’t a communist, he was a nationalist, he seemed to be a little irrational, a little unreliable, but there weren’t really any other figures in Iran that the US saw as being reliable or strong enough to push back against the communist party. They didn’t think the shah was strong enough. In the early 1950s – and the book emphasizes this – the US had a fairly dim view of the shah. So, for them, Mosaddeq was kind of the best they could do. But at the same time, they rejected Mosaddeq’s view of nationalization. They rejected the idea that Iran should have control over its oil industry. So, from 1951 through 1953 what the US tried to do was to push the two sides together and get the British and Mosaddeq to agree to a deal that would restart the flow of Iranian oil and therefore restart the flow of oil revenues.

A consistent problem that they ran into is that the British would not budge on key issues and that the British would rather get rid of Mosaddeq than make a deal with him. And the concerns over Iran’s oil-lessness, the concerns that by early 1953 Mosaddeq will have no choice than to side with the communists, to lean on communists support, eventually pushed the US towards abandoning its policy of trying to make a deal with Mosaddeq towards a policy of regime change, removing Mosaddeq by a covert operation, which had been the British goal from the very beginning. The British had been actively trying to get rid of Mosaddeq from 1951 and the US finally joined them in that attempt in 1953 and of course it succeeded. Mosaddeq was pushed out of power and a year later, a new oil agreement was reached between the shah’s government and the major corporations that effectively reversed nationalization. The coup was successful in a sense that it resolved the nationalization crisis to the satisfaction of the US, but it created a whole plethora of political problems that the US and the shah then had to face for the remainder of the shah’s reign.


Mirek Tobiáš Hošman: One thing you focus on in your reconstruction of the nationalization episode is the small role of the World Bank in it. How was the World Bank involved?

Gregory Brew: I preface by saying that I was very fortunate to get access to World Bank archives and to use a lot of World Bank records and documents while writing this book and I would strongly encourage other folks who are interested in this period to check out the World Bank archives. It is a very interesting source. The World Bank was all over the place in the 1950s and the 1960s, and it hasn’t gotten quite the attention that I think it deserves, particularly in the Iranian context.

The World Bank, which was involved in Iran since the late 1940s, before the nationalization, came in during nationalization crisis and tried to arrange a settlement to the crisis. Led by its Vice President Robert Garner, the World Bank tried to find a middle ground between the British and the Iranians. But the problem was that the Bank took the British position before it took the Iranian position. The Bank shared the British and the companies’ view that Iran couldn’t operate its oil industry, that the industry must be operated for Iran or on Iran’s behalf.

The views of the Bank reflected this broader myth of Iranian incapacity that we discussed earlier, and it was a position that the Bank held for this whole period. Something that I discovered going through the Bank records was this view that Iran needed foreign assistance, both to run its oil industry and to run its development operations. So, the World Bank played a specific role, both in the story of Iran’s economic development but also in this particular story of the nationalization crisis. It also offers a fairly unique insight into the broader Western view of Iran during the postwar period.


Mirek Tobiáš Hošman: The interesting thing about Garner in your narrative is that he was clearly unable to read the political dimension of the crisis, but viewed it from the perspective of a banker, from purely commercial interests, which led to a lot of confusion and the inability to understand the dynamics of the negotiation. To me, Garner was in a striking contrast to Mosaddeq, who actually and perhaps quite surprisingly seemed to understand very well how to play the political game. Yes, he eventually lost, but he knew which cards he was given and how to play the political gamble, especially if compared to someone like Garner.

Gregory Brew: That is an excellent point and it is causing me to realize that another potential insight or the theme of the book is that there were frequent confusions between the US diplomats, people working in the State Department and for the US government, and individuals coming from the business or finance background, especially in the context of the diplomatic crisis. It goes against this idea of private-public partnership between the US enterprise, the World Bank, and the US state, that they somehow see eye to eye. I think what the book shows is that this was usually not the case, that there was a huge number of frictions, confusion, and even suspicion between people like Garner, or, say US oil executives, and the White House and the State Department. They were very rarely able to see perfectly eye to eye on many issues.

And you raised the excellent point which is that another thing that the book tries to show or tries to push back against is this view of Mosaddeq as somehow confused or irrational individual. Mosaddeq perfectly understood the context in which he was operating. He was a lawyer, he was a statesman, and he knew enough about the oil industry to know how nationalization would work. Unfortunately, he didn’t know the context of the international oil markets well enough to judge how nationalization would succeed or fail, he did misjudge in that respect, but he did understand what nationalization meant and he understood his negotiation position well enough to reject the offers of both the Bank and the British. He could see a bad deal for what it was and, in many cases, seemed more clear-eyed and possessed greater clarity than someone like Garner, who completely misjudged the situation he tried to resolve in 1952.


Mirek Tobiáš Hošman: This inability to escape the narrow banking perspective seems to be a broader characteristic of Garner and people around him. There was a lot of debate inside the World Bank about this perspective, which culminated in the early 1960s, which is what I study in my own work. Where our findings overlap and what your book also clearly demonstrates is that the relations between the US state, the World Bank, and the private sector were extremely complex and very rarely you would see them all lined up behind one policy or idea, right?

Gregory Brew: Totally. There seems to be this idea that institutions like the World Bank or some other development organizations somehow operate as tools of the US interests or tools of US foreign policy. But most of the time, there was friction or even frustration or anger between the US state and what these institutions were doing. So, either they were confused, or they had distinct interests and distinct perspectives and they didn’t see the world the way the officials at the State Department did. Someone like Garner, you know, he was blundering around, trying to get himself involved in crises in which he really didn’t have a useful role to play.


Mirek Tobiáš Hošman: One important characteristic of your book is that it is not only a book about the history of oil and Iran, but also essentially and importantly a book about the history of international development and development economics in the context of the Cold War. What role does development as a relatively new international practice and discourse after the Second World War play in your story?

Gregory Brew: The concept of development planning really came to the fore in Iran after the Second World War. The war, as I should note, was a period of pretty profound instability and economic deterioration inside Iran because Iran was under occupation, its prewar regime was shattered by the invasion of the British and the Soviets in 1941. So, by 1945–6 there really is this very potent sense that there needs to be some kind of projects for national economic rejuvenation.

The most important figure in the postwar narrative of economic development was Abolhassan Ebtehaj. He came out of Iran’s banking sector, he ran the national bank during the 1940s, and he was more of a banker and a financial administrator than he an economist. But he was essentially the theorist behind Iran’s post war economic development plans. And the economic development theory that was driving Iran’s policies was this big push concept that was replicated throughout the postwar period and about which there has been a tremendous amount of scholarship. Ebtehaj and those around him, including the shah to a pretty significant extent, were fairly strongly wedded to this idea that you could have a large centrally managed economic development plan funded both through oil but also through loans and credit.

What Iran presents, I think, in the broader scholarship on international development is a case where the major problem facing underdeveloped countries – the lack of foreign exchange – was not present. If anything, there was too much foreign exchange. If anything, Iran had too much money and had to figure out how to spend it all. The economic development struggle that Iran faced in the 1950s and the early 1960s, which the book covers, was not a struggle of finance but a struggle of administration. Iran’s ambitions outweighed its capacity. Also, the shah and Ebtehaj were pursuing economic development as an overtly political program of legitimacy, a way to strengthen the Pahlavi regime, particularly after the 1953 coup. Development was also a way of wedding Iran more closely to the West and the US.

So, the narrative of economic development in Iran matches the broader themes in the global development movement, but it also represents Iran’s unique political trajectory of having a fairly unstable and weak pro-Western government that had a lot of money and was very interested in bringing the US in, both diplomatically, but also to a material extent, bringing in Western companies, US experts, organizations, and tying them to the Pahlavi state project. In the book, I emphasize the role of the World Bank, but also of American developmentalists like David Lilienthal, who saw Iran as a test case for modernization.

The story is largely one of a failure, it is largely a story of money being wasted…

Mirek Tobiáš Hošman: As is often the case…

Gregory Brew: As is often the case, right, so few of these stories end up in success. But the story of Iran is one of waste and friction. Developmentalists like Lilienthal or Max Thornburg came to Iran imagining that they would have more control, imagining that Iran needed Western help and Iranians would listen to them. They didn’t realize that the shah’s regime had its own interests and that the shah was, in fact, the dominant political figure. So, if you are looking for a winner, the winner is really Mohammed Reza Pahlavi, who emerged in 1965 not only as the country’s undisputed ruler, but also as the figure who took full control over Iran’s economic development and mostly sidelined or kicked out these Western developmentalists, who had been meddling in Iran since the early 1940s.

So, that’s where Iran fits in the broader development story. It was a resource and money rich country, had no lack of foreign exchange, but it was seen by Western developmentalist as a potential test case for their expertise, for their own ambitions. And it shows how the ambitions of foreigners can very often conflict and be overwritten by the interests of the local state and local political elites.


Mirek Tobiáš Hošman: I wanted to ask you about the role of economists as international advisors in your story and their connections with the rise of the shah as the major development actor in Iran. Perhaps a good illustration is the episode of the Economic Bureau and its economists like Edward Mason in the early 1960s. Could you tell us a bit about what the Economic Bureau was, how it rose to prominence and how and why it eventually failed?

Gregory Brew: This comes at the end of the book, but the experience of the Economic Bureau nicely shows the consistent friction between the US and the shah, who was viewed by the US as a fairly weak and indecisive ruler who needed to rely on Western support and Western expertise to maintain Iran’s pro-Western strategic alignment. The Economic Bureau was a US-backed project to bring US economists into Ebtehaj’s organization; it was basically an attempt to bring in Western expertise to guide Iran’s national development project.

By the early 1960s, it became closely tied to the Kennedy administrations’ interests in pushing Iran towards reform. There was a brief period when the shah actually took a step back and made space for a new prime minister, ‘Ali Amini, who the Kennedy administration strongly encouraged to work with the Economic Bureau. At that point, the Bureau became a way for the US to quietly take over Iran’s development project and to use US expertise to guide it towards some kind of US envisioned solution. But it didn’t work because the shah was able to undermine Amini and launch what he called his White Revolution, which was essentially a development project aimed at undermining the Iran’s existing development project and consolidating the power around the shah and his key constituencies. And the Kennedy administration, when faced with this, effectively surrendered. Its officials admitted that they were wrong, that foreigners and foreign experts will never successfully influence the shah’s government or guide Iran’s development, that they really just need to rely on the shah and hope for the best.

The Economic Bureau collapsed. Edward Mason from Harvard University that you mentioned, who had influence over the Bureau, left in 1963 together with other Western experts and Western economists who had worked in the Bureau. They departed at the same time when Western organizations like the Ford Foundation were also giving up on Iran. The Ford Foundation, which had been active in Iran since 1954, closed its mission in 1964 and essentially said, you know, we cannot work in Iran anymore because no one in the shah’s government will listen to us. This points out the friction that was there from the very beginning. From the US point of view and the point of view of developmentalists, the main question was: how do we bring Iran towards stability as we see it and how do we help Iran utilize its oil revenues to reach that point? And it ended with them giving up and essentially saying: Iran has the shah, it has the oil wealth, we don’t think the shah is in particularly strong position, but we have no alternative and let’s see how this goes.

One of the themes that emerges from the end of the book is this recognition in the US that the ingredients for the revolution in Iran were present and the shah was living on a borrowed time. It didn’t necessarily prefigure the revolution, but the book suggests that by the mid-1960s, the US recognized this. And, importantly, the US was ultimately incapable of changing that. The Americans realized that even though they attempted to bring a positive development change inside Iran for twenty years, this project was eventually unsuccessful.

Image of author, Gregory Brew

Gregory Brew is a historian of oil, US foreign relations and the modern Middle East and Iran. His work explores the connections between the global oil economy, the geopolitics of the Cold War, and the contemporary energy transition. He received his doctorate from the Georgetown University in 2018 and was a post-doctoral fellow at the Jackson School for Global Affairs at Yale University. He is currently an analyst at Eurasia Group.


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