The establishment of the AIOC, importance of oil

From “Oil Nationalisation and Managerial Disclosure: The Case of Anglo-Iranian Oil Company, 1933-1951”

Chapter 2: AIOC History, oil and Iranian politics.


An aerial view of the Abadan oil refinery showing cracking plant and special product plant. (Photo by © Hulton-Deutsch Collection/CORBIS/Corbis via Getty Images)
An aerial view of the Abadan oil refinery showing cracking plant and special product plant. (Photo by © Hulton-Deutsch Collection/CORBIS/Corbis via Getty Images)

The establishment of the AIOC
The literature on the AIOC emanates from a number of very different sources[98]. In the post war years, the development of the Iranian oil industry was considered to be an important event that had occurred during the previous fifty years[99]. Iran‟s participation in the world economy has been greatly emphasised by its strategic location and by its prized oil resources[100]. Indeed, Iran‟s oil reserves accounted for the greater part of the total assets of the petroleum industry of the Middle East and the country became a major supplier of oil to Britain following the initial oil exploration by the AIOC. The AIOC had the world‟s largest refinery in Abadan so the company continued to expand its oil production from this major oil installation. Iran, via the AIOC‟s activities consequently became the second largest exporter of crude petroleum, having the third largest oil reserves during that period. In the following section, the importance of oil is discussed and the evolution of the AIOC in Iran is reviewed.

The importance of oil
Oil was important to the global economy because it had advantages over coal which became apparent in the 1950s. Products of the oil industry “had a greater impact than those of any other industry on the way people lived their lives during the 20th century as oil products became an essential element in many industrial processes, consumer products and different modes of transport”[101]. Oil had the advantages of being pumped rather than manhandled and when burnt properly it enabled a complete absence of smoke which was one of the Admiralty‟s crucial requirements for a fuel[102]. Crude oil was one of the major commodities in the world trade arena, transferred between a range of international firms[103]. Obviously, oil was important for both producing and consuming nations because it generated major revenue (taxation and royalties) and satisfied a whole range of consumer requirements[104]. For Iran, oil played an important role in facilitating its ability to engage in global markets and giving it the opportunity to become more involved in oil production for exports[105]. In a wider sense, oil had come to be synonymous with maintaining imperial integrity[106]. As oil became more important, British willingness to maintain control became more necessary[107]. Iranian oil supplies were “a major source of soft currency generation and tax revenue for the British government”[108]. Iranian oil was essential to Britain‟s balance of payments and “the Abadan oil refinery was the largest in the world and a source of national pride”[109]. In fact, Iran was not militarily strong but its geo-strategic location made it invaluable[110]. Iran remained the jewel in the crown of the AIOC because of its unlimited oil supply[111]. Iran was the oldest oil producing country in the Middle East region accounting for 74.2 per cent of the net income of the oil industry in the period 1913-47[112]. Those writing about the period, and whose accounts have been consulted for this thesis, are clearly in unison over the importance of Iranian oil in terms of its potential for economic growth in Iran.


Notes & References

98. Bamberg, The History of the British Petroleum Company; Elm, Oil Power and Principle: Iran’s oil nationalisation and its aftermath; Bamberg, British petroleum and global oil, 1950-1975; Bill and Louis, Musaddiq, Iranian nationalism, and oil; Brumberg and Ahram, The National Iranian Oil Company in Iranian politics; Ferrier, The History of the British Petroleum Company: Vol. 1, The Developing Years 1901-1932; For this research, I used the corporate reports of BP and substantial archival documents using advantaged access to BP archives which are located in Coventry.

99. Karshenas, Oil, State and Industrialization in Iran, 2.

100. Esfahani and Pesaran, Iranian Economy in the Twentieth Century: A global perspective, 11.

101. Unerman, An investigation into the development of accounting for social, environmental and ethical accountability: a century of corporate social disclosures at Shell, 19.

102. Jones, The State and the emergence of the British oil industry, 11.

103. Penrose, The large International firm in developing countries, 19.

104. Unerman, Enhancing organizational global hegemony with narrative accounting disclosures: an early example.

105. Esfahani and Pesaran, Iranian Economy in the Twentieth Century: A global perspective, 19.

106. Onslow, Battlelines for Suez: The Abadan Crisis of 1951 and the formation of the Suez Group.

107. Odell, The significance of oil, 93.

108. Marsh, Anglo-American Crude Diplomacy: Multinational Oil and the Iranian Oil Crisis, 1951-1953, 28.

109. Marsh, The United States, Iran and operation ‘Ajax’: Inverting Interpretative orthodoxy, 9.

110. Ibid, 1-38.

111. Sampson, The Seven Sisters: The Great Oil Companies and the world they made, 116.

112. Issawi and Yeganeh, The Economics of Middle Eastern Oil, 121.

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