Response of Fraser to Iranian accusations: Empirical Evidence


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

Chapter 4: Profit distribution by the AIOC


Fraser was aware that the existing concession gave advantage to the AIOC. He therefore stressed that the company should not request the amendment of the current concession on the grounds that a new concession would never be as favourable to the company as the one now in existence[637]. Fraser feared Iranian claims for redistributions of the company‟s profits in which the Iranian government should take part[638]. Historical evidence reveals that Fraser was keen to safeguard the current concession and that he did not wish for any change to the situation. For instance, Fraser had disclosed: I thought the fact was that we had favourable terms- our royalty payments, taxation position etc., all seemed favourable relative to others and I felt that if I had to open up the whole question of the concession I would very likely get demands from the Iranian government to bring the terms more in line with what is being paid in other countries…..I stated that my feeling was that the really important thing for us was to try to safeguard the terms of the concession for the post-war period. I mentioned that if concession terms were opened up doubtless the American advisers would now take a part in the negotiations[639].
Foreign Office officials, as well as the Americans, urged Fraser to propose to Iran a fifty-fifty profit-sharing but he remained unwilling to take this step and expressed his irritation towards the Americans, stating that they had not been helpful in Tehran[640]. In fact, Fraser was unwilling to accept the fifty-fifty profit sharing proposal and believed that there was no need to give Iran any concessions. He demonstrated this attitude by saying that “Fifty-fifty is a fine slogan, but it seems to be of dubious practicality”[641].

However, Fraser did not disclose the truth in his statement to stockholders and asserted: Despite the Company‟s endeavours to persuade the Prime
Minister to make known in Iran both the company‟s offer to reopen negotiations for a fifty-fifty profit sharing scheme and its action in undertaking to make advances, General Razmara refused to do so and maintained the closest secrecy regarding both matters[642].
Razmara‟s objective was to avoid a conflict with the British authorities and keep the details of the fifty-fifty discussions secret, in part because he feared public opinion would be disappointed if aware that anything less than nationalisation were being considered[643]. Razmara was convinced that the present time was not opportune for securing the ratification of the Supplemental Agreement and it would be defeated if it were to be put in the next Majlis so he thought of waiting six months, at which time the ratification could be carried in the Majlis[644]. Razmara planned to set up an entirely a new Ministry under the title “Ministry of Mines” to be entrusted with the conduct of all matters concerning the AIOC, which, at that time, came within the province of the Ministry of Finance[645]. However, it can be concluded that Fraser did not understand Razmara‟s royalist political objectives and the essential role of secrecy to be achieved. As previously discussed in Chapter 3, Fraser‟s strategy was to use financial reporting as propaganda to portray a reasonable company in front of the public whilst depicting nationalism as insignificant and short-lived[646]. Fraser was vigilant and influenced the lobbying process to counter the Iranian accusations and maintain various stakeholders‟ confidence by using the annual reports as a means of communication and a part of a wider propaganda battle. He was aware of the fact that Reports of listed company Annual General Meetings, at which the Chairman would also present the published statement, appear in the national press[647]. Fraser‟s communication with the shareholders is an important issue and thus the key to an understanding of the company‟s portrayal of itself and its actions. Did he wish to appear resolute or accommodating, determined or responsive; how far was he aligning his behaviour with British interests generally; and, finally, was he open to further negotiation with Iran? With reference to Fraser‟s statement in the 1950 report which was published in
19th November 1951[648]. it is clear that he was aiming to avoid the wrath of AIOC shareholders and maintain their confidence. Fraser convinced the investors, both potential and actual, that the risk of nationalisation had decreased. He therefore advised the shareholders to be aware of the fact that nationalisation made the company less profitable for a while but claimed this would not affect their dividends. Fraser stated: However, after reviewing all the circumstances, I feel I can
say that unless there is some wholly unforeseen happening in the remaining few weeks of this year the company will be in a position to pay the same rate of dividend on the ordinary stock for 1951 as has been paid for some years past[649].
Meanwhile, Fraser informed the shareholders that: New arrangements had been made because of the situation in Iran, described earlier in this statement; there have been important developments during the current year in the company‟s widespread interests and operations outside the country[650].
The momentum behind the AIOC‟s new strategy involved switching the
company‟s exploration efforts towards Alaska and the North Sea to overcome any threats to its existence[651]. Fraser believed that the best chance of delivering something which would be of any value to the shareholders of the company would be by the company itself negotiating some new and quick bargain[652].

Consequently, he reported in his 1950 Chairman‟s Statement that on hearing of the improvements in the Saudi Arabian Agreement concession The company lost no time in communicating to General Ali Razmara, the prime Minister, its willingness to examine with the Iranian Government suggestions for a new agreement on similar lines…There was no question of the Company being behindhand or less generous[653].
However, the records show that the reverse is true and that again he distorted the facts in this statement to maintain the shareholders‟ confidence. For instance, he refused to improve the terms that the AIOC had offered to Iran by going beyond the Supplemental Agreement, claiming that “one penny more and the company goes broke”[654]. Moreover, he asserted that any more concessions “would leave nothing in the till”[655]. It worth noting that the view of the Times correspondent was that Fraser‟s statement of 19th November 1951 “is conciliatory and restrained in tone. It burns no bridges”[656]. As previously illustrated in Chapter 3, for more emphasis from the AIOC annual
reports, counts of keywords for the annual reports published in 1950 and 1951 were examined to contrast Fraser‟s use of different groups of words and vocabulary that are particularly relevant to an understanding of the AIOC‟s self-presentation and response to the shareholders. The software DICTION[657] has been used, as indicated below, to examine the incidence of a number of significant terms in the AIOC‟s annual reports pre-and post-nationalisation, with the aim of investigating how far their vocabulary was adapted as a response to circumstances. Table (11) below gives a brief summary of a textual analysis of Fraser‟s Statement to the shareholders. It contrasts keyword counts for the annual reports published in 1950 and 1951, in order to examine the validity of the statements with reference to historical evidence from the AIOC annual reports.

As shown in Table (11), the specific word counts contrast Fraser‟s use of different
groups of words and vocabulary that are particularly relevant to an understanding of the AIOC‟s self-presentation. For instance, the word “agreement” was used 26 times during nationalisation (1951) compared with 19 times in 1950, suggesting that Fraser aimed to demonstrate to the public that he was seeking to reach an agreement with Iran which was difficult to achieve. For instance, he disclosed in his statement in 1951 that he found it impossible to make a deal with Musaddiq and “….all efforts to reach a friendly settlement having proved abortive”[659]. Furthermore, he asserted that There seemed no immediate prospect of reaching agreement with the Iranian government, either for arrangements to enable large scale activity of the industry to be restored, or for the assessment and payment of compensation to the company[660].
Moreover, according to the above table, the frequency of the word “profit”
increased to 11 times in 1951, which was much higher than in 1950. This indicates that Fraser‟s use of the word “profit” was comparatively higher during nationalisation to reassure the investors. From the above, it is clear that Fraser‟s tactical plan was to distort facts and not to reveal to the public his desire to maintain full control over Iran. He was willing to be seen as a key visible figure within the AIOC by making public statements and speeches which were not only calculated to enhance his own personal image, but also, crucially, to portray the company to the public as fair. In addition, the AIOC became more aggressive in buying advertising space in the newspapers[661] response to the nationalisation crisis, to publicize its preferred policies and to maintain a flourishing image to the public, regardless of nationalisation.


As the existence of the AIOC depended on power and control, the contrast of the powerful AIOC with the weak Iranian government provides interesting evidence about the AIOC‟s industrial dominance in Iran. To illustrate the role of the company as an arm of the British Empire, this chapter reviewed the evidence on accusations of unfairness in the distribution of profits from oil production with reference to the Memorandum and other major neglected documents to examine the Iranian claims and the AIOC counter claims. The recurrent themes of the clash between the Iranian government and the AIOC
were the unfairness of the royalty and tax payments made by the company. Iran stressed that the AIOC used an unfair basis – quantity of oil production rather than profit – to calculate royalties, and keep down the dividend payable to the Iranian Government, using accounting practices which overstated the charge to reserves. A related concern of the Iranian government was that the AIOC reports concealed the performance of subsidiaries. Iranians argued that it the AIOC‟s deliberate intention to adopt this method of royalty payments, thereby allowing the company to retain very large amounts of reserves. This would naturally result in a significant growth in the company‟s prosperity at the expense of Iran. Meanwhile, they argued that the process of integrating and ignoring the performance of subsidiaries was not only an economic process but also a political one, through which the British Government had an impact on the behaviour of the AIOC in Iran and deprived the Iranian government of profits it generated from overseas operations. The AIOC‟s argument was that the accounting records which the Iranians sought were potentially misleading because the data depended so heavily on judgement, explaining the company‟s consistent invocation of quantity rather than profit as a basis for royalties. In any case, AIOC representatives contended, Iran should be considering not solely its income from tax and royalties, but also the variety of other benefits conferred such as the level of investment that the AIOC had made in Iran, and the jobs it had created. However, as illustrated in Chapter 3, the AIOC failed to fulfil its Corporate Social Responsibility obligations towards the Iranian employees and Iranianisation never came into practice. The AIOC management was alert to the reality that the company had an extremely
good deal which they were willing to maintain, because their royalty payments and taxes paid to the British Government were evidently better relative to those of other countries. As a consequence of this, Fraser used his annual Chairman‟s statements as a tool to defend his position from the claims made by the Iranian government about unfairness in profit distribution to the Iranians and to portray the Iranian government as unreasonable. Fraser used the annual reports as a propaganda tool and, in doing this, succeeded in maintaining shareholders‟ confidence during nationalisation. This freed him of any blame for the international crisis. Allegations levelled at the Iranians, such as secrecy and the use of propaganda were made with great vigour by the AIOC. In the light of reviewed empirical and historical evidence, the validity of the key Iranian claims and the AIOC counter claims are examined to justify and explain the major elements leading up to the nationalisation of AIOC‟s assets by Musaddiq in May 1951. The AIOC had a weak case as far as the equity of oil production was concerned, and the accusations against the AIOC of not sharing the profits from oil fairly can be upheld on the basis of the illustrated evidence. The financial analysis of profit shares between stakeholders clearly shows that AIOC shareholders and the British Government were increasingly benefiting at the expense of the Iranians. Unfairness of profit distribution and the Iranians‟ strong mistrust of the AIOC led to deep resentment of imperialism which was the precursor to the vigorous and evergrowing desire for autonomy and nationalisation. In summary, the financial analysis of profit shares between stakeholders shows
that AIOC shareholders and the British Government were increasingly benefiting at the expense of Iran. The AIOC clearly exploited Iranian oil resources for its own advantage. Moreover, it was unwilling to accept the Iranian argument that it should improve the concession in order to give them the chance to improve living conditions in their own country.

637. BP 101099, AIOC opinion on 20th June 1948, 6.

638. Ibid, 15.

639. BP 72188, Meeting between Sir Maurice Peterson, FO and Fraser on 17th February 1943, 2.

640. FO371/91522, record of meeting held in Sir William Strang‟s Office with Treasury and AIOC officials, Jan 23, 1951.

641. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 86.

642. AIOC Annual Report and Accounts, 1950, 15. The advances referred to were concessional payments on account £5m as a lump sum and £2m per month throughout 1951.

643. Ansari, Modern Iran since 1921, 111.

644. BP 126347, Reference number 318, Northcroft to Rice, 29th July 1950, 6.

645. BP 126343, Reference No. 261, Northcroft to Rice on 22nd June 1950, 2.

646. Ansari, Modern Iran since 1921, 112.

647. The AIOC 1950 statement for instance appeared in The Economist December 1st 1951, 59-65.

648. The publication of the 1950 report was delayed until November 1951 by the nationalisation crisis.

649. AIOC Annual Report and Accounts, 1950, 30.

650. Ibid, 29.

651. Jones, Multinational strategies and developing countries in historical perspective.

652. Cited in Elm, 242; FO371/98691, Minute by Fergusson, 18 July, 1951, with notes by Eden on the margin.

653. AIOC Annual Report and Accounts, 1950.

654. Elm, Oil, Power, and Principle: Iran’s oil nationalisation and its aftermath, 69.

655. Kinzer, All the Shah’s Men, 87-88; Elm, Oil, Power and Principle: Iran’s oil nationalisation and its aftermath, 61. In response, an American briefing paper, showed the company‟s operations to be „exceptionally profitable‟ (Heiss, Empire and Nationalism, 34), which can be confirmed by a cursory glance at the figures presented here and elsewhere, for example Bamberg, The History of the British Petroleum Company, table 10.3, 275, and table 4(below), and appendix.

656. The Times, November 28, 1951, 9(c).

657. DICTION is a computer-aided content analysis programme, developed from linguistic research that analyses unique aspects of a text (Hart, DICTION 5.0).

658. Hart, DICTION 5.0: The Text-analysis Programme that analyses rhetoric and was used in this research as a computerized content analysis approach.

659. AIOC annual report 1950, 16.

660. AIOC Annual Report 1953, 16.



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