Negotiating Iranianisation and Article (16)

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

Chapter 3: Employee relations and Iranianisation

Author : Neveen  Abdelrehim | The university of york

An engineer of the world’s largest oil refinery in Abadan is an English citizen (Captain Reed). 1939 (photo by Wolfgang Weber / ullstein image via Getty Images)

The Iranian government argued that the employment of foreigners entailed heavy costs of expatriation, travel, relocation not incurred by Iranians. The aim was therefore to reduce the number of non-Iranians by an increasing figure each year and a scheme was provided with illustrative figures to show a reduction of 150 nonIranians in the first year, 200 in the second year and 50 more in each subsequent year[354]. Abbas Golshayan, the Minister of Finance, acting as the government representative, made it clear that the principal concern of the Iranian government was about having a ratio, as the matter should be judged by tangible results. Therefore, the concession made provision for this via a yearly and progressive reduction of nonIranian personnel[355]. Ali Zarrinkafsh, the Iranian government’s representative and Imperial Delegate to the AIOC (1933-39) explained that Article (16) could not be interpreted piecemeal and highlighted that efficiency and economy in the administration and operation of the company in Iran was a major factor, not only by the Article but of the entire concession. Therefore, he suggested that the company should prepare a plan and provide figures to indicate the extent of annual and progressive reduction of non-Iranian employees and submit it to him after completion[356].Zarrinkafsh was willing to satisfy public opinion anddemonstrate that full weight was given to the terms of the concession, in order to minimise subsequent public criticism[357].
Article (16) revealed that the Iranians were very conscious of national independence and prone to react to any charge that their national interests and rights were being impaired. Consequently, Ali Razmara, the Iranian Prime Minister, studied the position in Iran with all the diligence it demanded and was left in no doubt that an improvement in social and economic conditions throughout the country was needed to save Iran from utter disintegration[358]. Razmara advised Northcroft that “certain changes in the Supplemental Agreement would be necessary if it were to be ratified by the Majlis (increased Iranianisation)”[359]. He was extremely concerned and distressed about the current situation in Iran because of the large numbers of unemployed persons in Tehran. He had studied the general plan and his views were that at the end of ten years, all posts in Iran except very top management ones should be held by Iranians[360]. Meanwhile, his plan was to receive “at least fifty-five millions sterling to put his projects in hand in such a manner as to ensure full employment and stable contentment throughout the country”[361]. However, Razmara believed that the Supplemental Agreement would be ratified if he were able to implement his programme within six months. He estimated that, after that period, the country would then solidly be behind the government and the Majlis could carry the ratification[362]. Razmara held the belief that the present time was not opportune for securing the ratification of the Supplemental Agreement. In fact, there should be no excuse for replacing British employees with Iranians in many non-technical posts in the company such as administration, accountancy, health services and railways since none of these jobs required technical training. Golshayan confirmed that there were a large number of company employees in Abadan and Tehran whose posts needed no technical qualifications which could reduce the ratio[363].
From the AIOC point of view, it is worth noting that the company was aware of the Iranian rights and the importance of Article (16) to the Iranians because Mr. Jameson, Director of the AIOC, mentioned in his report on a visit to Tehran that “Iranianisation is so important to the company that everything possible should be done to make the policy fully effective”[364]. Moreover, Edward Elkington, the General Manager in Persia, asserted

 Our plan of education has got to start very high up the tree, and our friends in Persian circles must be taught that the company has not reached its present stage of development on any grounds which I term purely theoretical, such as those of nationality, but of the practical efficiency of the individuals forming every cog in a great machine, and not least the spindles at the centre of each cog-wheel[365].

However, regardless of the importance of Iranianisation, the reduction of nonIranian personnel and the improvement in the conditions of Iranian employees and workmen, Article (16) gave the British authorities and the AIOC management cause for concern. This was because they were worried about their British staff whom they did not plan to replace under any circumstances. This was the main motive behind Gass‟s suggestion to rearrange the company‟s present proposal in a rather different form to gain a better prospect of its acceptance[366]. Gass had hoped to obtain agreement with the Iranian government to all the other provisions of the General Plan, and left the main questions that deal with annual and progressive reduction of foreigners until the last, but the Iranian government insisted on taking this clause first with the ingenuous remark that a settlement of the other clauses would largely depend on our agreement to their proposal for this one[367]. The Article appeared impractical from the British point of view and would never come into effect, as the existence of non-Iranians as part of the workforce was considered vital to keep the company in the forefront of modern trends of scientific development and improved production methods. The company argued that its programme in the housing and amenity sphere was as a separate Memorandum and not part of the General Plan. Therefore, from the company‟s perspective they did not consider it to be a concessional obligation which they undertook willingly and with pride as an industrialist‟s contribution to the oil industry of Iran. The AIOC was inclined to postpone the implication of Article (16) to safeguard themselves from any obligations and commitments and company representatives tried to find several excuses for not implementing the Article. Their first excuse was that the Iranians would not be able to run their own industry without the assistance of the British. Diplomats from London perpetuated the colonial myth that Iran was not ready to exploit its own oil and needed to be protected from itself. For instance, to overcome the implementation of Iranianisation the British thought of rewording the General plan in their own favour when Rice, company representative in London, asserted:

So as to bridge the gap between its present form of words and our [British] position under the new General Plan (from which, I [Rice] repeat, we cannot in any way depart[368]. 

Moreover, Northcroft, chief representative of the AIOC in Tehran, in strictly confidential correspondence to Rice on 19th of October 1950 explicitly revealed the duplicitous methods that were adopted by the company for rewording the General Plan. For instance, he said:

I have devised a form of words which (in a suitable legally worded version) might be used in substitution of the existing preamble of the General Plan, to be read in conjunction with the remainder, as a definition of its spirit[369]. I enclose for your consideration a form of words which it seems to us does not alter the sense of the text as signed, and which we believe would when translated into Persian produce a text free from any possible misunderstanding[370].

Similarly, Rice asked Northcroft to convey the company‟s attitudes and views without giving “the impression of unwillingness to cooperate or closing the door to further discussion of points which fall outside the limitations which [they] have stressed to the point of redundance”[371]. To avoid any commitments towards the local population, it is important to mention that Gass was worried about the wages and salaries that would have to be paid to the Iranians. As a result he suggested that Article 16 should be amended and the words “of the salary and conditions of service applicable to, applicants‟ occupation and grading” should be deleted to avoid discussions of salary scales[372]. Gass and other members of the AIOC tried to disabuse the Iranian government minds of the conception of transforming men into figures, claiming that it was quite impracticable and contrary to their interpretation of the concession, and when projected into the future would be highly impossible to forecast the trend of consumption of oil products in the world in future years[373]. British authorities claimed that the formula of estimated reduction of foreigners must be a practicable one to which they must feel they could safely subscribe[374]. It is important to note that Jacks mentioned in his correspondence to Fraser that “the company would agree to no interpretation of annual and progressive reduction”[375]. Also, Dr. Idelson, AIOC‟s representative, was not happy with the basis of the percentage figures, and favoured a ratio between non Iranian employees and the total employees[376].
His argument was:

I would prefer to exclude all unskilled staff from the picture and adopt a ratio between the strengths of non-Iranian employees and total staff, exclusive of unskilled staff, and then diminish them in some progressively declining percentage. If this latter basis was adopted what ultimate percentage would you regard as reasonably safe, taking into account the safeguards with which the percentages are hedged round? Reverting again to the former basis, you will notice that I have reduced the percentage to 8% and had in mind that it would be safe to go to 5% as an ultimate limit. In other words I kept 3% in hand for negotiation or for a stage subsequent to the next 10 years. I realise of course that percentages to-day are below 10% but I look upon that result as being covered by the undertaking in my plan to accelerate the rate of progress if no indeterminable factors operate to our disadvantage[377].

To confirm the company‟s intentions not to reduce British staff, Gass disclosed that the company held to the previous formula of a reduction in the proportion of foreigners to total skilled workers. But after a survey of the expected results of the training schemes came to full fruition over the following 7 to 10 years, the general management were satisfied that they could make a concession to the government‟s point of view, and reduce their non-graded or artisan categories to a definite figure and this concession had been offered at the earlier talks[378]. Within this context, it is quite clear that the British authorities were clever by declareing that they were prepared to make a concession to the Iranian government and reduce the non-graded or artisan categories to a definite figure[379]. However, it is quite clear that the British authorities were willing to reduce the non graded or artisan categories which included Indians and other nationalities and would not affect any of the British staff because they were always classified as skilled workers. In a nutshell, while foreign oil workers were getting richer, the Iranian employees were destined for low-paid jobs and deteriorating housing: a recipe for revolution that the British ignored[380].
It is important to point out that the company distorted the facts, when releasing public information. The impression was given that the company was anxious to obtain the services of every suitable Iranian who came forward for employment; setting out in great detail the various measures which the company of its own volition proposed to take and was in fact already taking to increase the supply of suitable Iranians and to minister to their continued well-being.[381] Obviously, Northcroft was completely aware that the general plan was unlikely to be effected and highlighted that if Britain had to base their “activities on Persian manpower to the degree which he [Razmara] envisaged, we [Britain] should be driven out of business”[382]. This reveals Britain‟s plans to maintain and achieve their own commercial interests in the area, regardless of Iranian aspirations. The company‟s stated policy had always been to “keep standards of education in Iran at their lowest, in order to prevent Iranians from acquiring any knowledge other than that which suits the AIOC. The company attempts to prevent the development of public health schemes in Iran. It is the company‟s objectives to keep in power governments which subserve its own ends. But free from men who are not willing to sign the agreement as the company wishes”[383].Noticeably , the General plan was just a plan and would never be put into practice because the AIOC was unwilling to reduce the number of British staff in Iran. There was no wish to accede to the Iranian request for an arithmetical reduction each year to ensure a rigid control of the number of foreigners employed.


Notes & References
354. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 36.

355. BP 126422, Note of second meeting of the understanding committee on 3rd May 1949, 10.

356.BP 52887, Jacks to Fraser, 15th December 1933, 2.

357. Ibid, 3.

358. BP 126347, Reference number 318, Northcroft to Rice, 29th July 1950.

359. BP 126347, letter 307, Tehran correspondence regarding position of Iranian government and Supplemental Agreement, 16th July 1950.

360. BP 126347, Reference number 318, Northcroft to Rice, 29th July 1950, 5.

361. Ibid, 3.

362. Ibid, 6.

363. BP 126422, Note of second meeting of the understanding committee on 3rd May 1949, 11.

364. BP 67627, Jameson, Report on a visit to Iran, 1938; Johnson, British multinationals, culture and empire in the early Twentieth century.

365. BP 070268, Fraser to Jacks on 16 November 1933.

366. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 50.

367. Ibid, 36.

368. BP 126347, Reference number 604, Rice to Northcroft, 6th October 1950, 3

369. BP 126347, Reference number 425, Northcroft to Rice, 19th October 1950, 3.

370. Ibid, 2. 371 BP 126347, Reference number 604, Rice to Northcroft, 6th October 1950, 3.

371. BP 126347, Reference number 604, Rice to Northcroft, 6th October 1950, 3.

372. BP 070266, Gass to Elkington on 29th May 1935, 2.

373. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 37.

374. Ibid, 35.

375. BP 52887, Jacks to Fraser, 15th December 1933, 2.

376. BP 070266, Gass to Elkington on 14th May 1935, 2.

377. Ibid.

378. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 35.

379. Ibid.

380. Stern, Who won the Oil wars.

381. Gidel Memorandum.

382. BP 126347, Reference number 318, Northcroft to Rice, 29th July 1950, 5.

383. BP 126347, Northcroft to Rice, 15 October 1950.


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