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New sanctions on Iran, it’s an old story that started in 1951

The UN Security Council, on June 9, 2010, implemented new sanctions against Iran. US president Obama called this fourth round of sanctions in response to Iran’s nuclear program as “the toughest ever faced by Iran.”

The new sanctions add little in the way of increased legal barriers to Iran’s trade, energy sector, or political organizations. It does create political and diplomatic barriers because of the heavy symbolic character of the sanctions, which will likely favour growing political and economic ties between Iran and eastern countries, particularly China, as the Western investors and diplomats bump their heads against a hardening wall of rhetoric (see an earlier post for details on this).

But is it true that Iran has not seen tougher sanctions in its modern history?

The Company [the Ango-Iranian Oil Company, now BP] is confident that no oil company of repute or any tanker owners or brokers of standing will countenance any direct or indirect participation in the unlawful actions of the Persian Government. Should, however, any concerns or individuals enter into transactions with the Persian Government in regard to the oil products concerned, they are warned that this Company will take all such actions as may be necessary to protect its rights in any country. (1)

This is a statement by the precursor of British Petroleum (BP), in 1951, while they had a monopoly on oil in Iran’s south, where lie the bulk of the country’s energy reserves. In 1951, the government of prime minister Mohammad Mosaddeq, held power in Iran. This government, over time, challenged and succeeded in temporarily ousting the last Shah during what became a popular democratic movement that drew an astounding number of people to the streets to defend the government. Mosaddeq infuriated the British by nationalizing the country’s oil and offering new terms to the British, who were, prior to this, reaping the benefits of a monopoly on Iran’s oil to the delight of their industries and economy.

Then, as now, oil was a significant source of government income, though it is much more important to Iran’s government today since Iran only received a tiny fraction of profits from the British. The British boycott of Iranian oil in 1951 was joined by the US and others, creating a very serious financial crisis for Iran. The boycott lasted until the summer of 1953, during which prime minister Mosaddeq was overthrown by a CIA orchestrated coup and the last Shah of Iran was reimposed as an increasingly autocratic monarch.

The boycott of Iranian oil at the time was used as economic warfare to maintain Britain’s established control of Iranian oil. This British led and US supported boycott was largely successful because the times were different. Petroleum companies and tanker fleets were largely under the influence of these two countries, a situation which is not quite true today. (2)

At the time, the US State Department gave strong support to the boycott, stating that “the US Government should not make the nationalization of Iranian oil a success for others to emulate.” (3) This was a serious problem, since other countries in the region also had significant oil concessions and they might have moved to nationalize their oil or use the threat of such to increase their share of spoils from sales.

Oil in hands

The US support of Britain’s boycott caught Mosaddeq off-guard. He had expected the US to assist Iran against the perceived holdover of a colonial and imperial era following the US promise of a new post-colonial world that would not be snared by the old European imperialism which saw the world plunge into the Second World War.

At that time, Mosaddeq tried to invigorate Iran’s non-oil based economy. Some of his measures at least succeeded. He managed to somehow take Iran’s trade balance from a significant negative to a significant positive by 1953. (4) Such rapid transition was made at least partially possible because of the situation of crisis; Iran simply had no other choice than to reform its general economy or have the government face the possibility of fiscal collapse from lack of oil revenues. This doesn’t mean that life was easy for the average person. The economy was in rough shape, and people suffered because of the boycott, but the worst case domestic political and economic scenarios were avoided.

In the end, the Mosaddeq government was able to break the long trend of government deficits under the Shah, and actually had a positive net balance. Even inflation was kept to reasonable rate, performing better than the previous government which was not even hamstrung by a boycott.

As for today, perhaps the UN Security Council would have done a service to Iran by really cutting off its sales of oil, forcing the country to reform its economy and government budget. However, an effective boycott of Iranian oil is no longer possible without a declaration of war. Other countries, such as Japan, and China, have their own capacity to extract and refine oil, as well as to ferry it in their own substantial tanker fleets. So these countries’ would have to willingly join in a Western boycott of Iranian oil or their vessels would have to be blockaded by US and allied naval power.

Well, it is possible that Obama was referring to these new sanctions being the toughest Iran has faced since the 1979 revolution which saw it become the Islamic Republic of Iran, so let’s for now forget pre-revolution 1951.

In that case, president Obama is forgetting the near decade long Iran-Iraq War of the 1980s.

The Iran-Iraq War

That period of long war began after an invasion by Iraq, which Saddam Hussein falsely believed would lead to a quick defeat of Iran. In that span of time, the Islamic Republic of Iran was internationally isolated and there was broad economic boycott of its products. During that period, the country not only suffered from economic sanctions, but was also burdened with the human and economic cost of a war that saw the death of one million people on both sides of the conflict.

As a child, I lived in Iran during the war. My family was comfortably in the middle class. Goods were scarce, the country was under military and economic siege. I was delighted when my family splurged every few months to buy me a single over-ripe banana, a luxury item that was caught up in the price hikes caused by sanctions and war.

Though it took a severe blow, the country’s economy did not collapse, nor did the post-revolution government collapse though it was internationally expected to fall under the weight of fiscal deficits. The war and severe sanctions put an end to the fervor of revolutionary competition for power, and what has emerged as Iran’s current political power-holders were aided by the international situation to consolidate their position: people were fighting for the very existence of the country in the face of foreign intervention, so how much would people be willing to risk internal division over the new government under the threat of national collapse and conquest?

So, let’s be clear, this is certainly not the worst economic sanctions Iran has faced in its modern history. Today’s sanctions engender tough talk, but to what end? What is the gain of distorting facts? What the US gains with such talk is the perception of Iran being faced by the toughest sanctions in its history, a narrative that flies in the face of truth. This perception serves to reinforce an increasingly hostile attitude between the West and Iran, shapes a US domestic image of jingoistic bravado that limits the possibilities of diplomacy while favouring antagonistic strategies.

This is a rhetoric that displaces facts and promises heightened tension and conflict disguised by empty gestures of a false diplomacy that doesn’t even regard the basic lessons of recent history as worth considering.

Sources:

(1) Gasiorowski, Mark J., and Byrne, Malcolm (ed.), ‘Mohammad Mosaddeq and the 1953 Coup in Iran.’ Syracuse University Press, 2004, Syracuse, New York, USA, p. 178.

(2) Ibid., p. 182

(3) Ibid., p. 186

(4) Ibid., p. 191

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