1. Rights granted before nationalization of oil industry (1901-1951)
Among all the rights granted to foreigners between 1901 and 1951, the right that was granted by Mozafareddin Shah (Qajari king) to an English person, William Naxi Darsi, was the best but still unfair.
The king agreed with Darsi in 1901 to allow him the right of exploration, exploitation, transportation, and sale of Iran’s oil and oil products obtainable across the territory with an exception of five northern provinces of Iran (with an approximate area of 400 square meters).
In return, Darsi took commitment to pay 16 percent of the whole profits as the franchise to Iran’s government.
So an English-Iranian joint company was set up under the control of English men. For about 22 years (1907-1931), Iran’s government used to receive its franchise that was usually much less than its real share of profits since the fluctuations of oil price was not calculated by the English side. On the other hand, Iran did not have any share of the profits that was earned from foreign subcontractors working out of Iran’s territory, although the contract had underlined the 16-percent franchise of Iran.
In practice, the money payable to Iran’s government – as the owner of the oil fields - was relatively less than what the English government was paid as tax. In addition, Iran had no access to the fiscal books and therefore the payments were made based on personal favors. For instance, in 1931, Iran was paid 306,782 lire only as its franchise for what the company noted as oil price fall. However, in the same year, the company paid some one million lira as tax to English government.
In protest to the company’s performance, Iran cancelled the right of English side in 1332 that caused English government to complain against Iran to the United Nations Council. However, the council asked the foreign minister of Czech and Slovakia to judge it. The two sides finally signed a new contract one year later reducing the area of the operation of the company to 100,000 square miles, extending the contract to 32 years, and changing the franchise of Iran.
According to the contract, the franchise included three parts: firstly, a fixed sum that was payable by the British side per each ton of sale or export of oil; secondly, 20 percent of the profits of the shareholders exceeding 671.250 lira per year; and thirdly, a tax that included the franchise but was not that much.
However, the main commitment of the company returned to the first second parts amounting to 19 cents each barrel. The tax part was not exceeded 2 cents per barrel.
Although Iran tried to have a fair share in the new contract, it was deprived to have any share in the affiliated companies. In addition, Iran’s government was not allowed to supervise accounting process or the research activities carried out by the company. By the new contract, Iran earned no extra revenues but it earned more since the output of the price was increased.
The new contract was harshly criticized by not only the government but also the educated people. So another contract annexed to 1933 contract was singed between Iran’s government and the joint company in 1947 to improve the situation but it was not approved in Parliament. But the annexed contract caused a movement that led to nationalization of oil industry in 1951.
(To be contd.)
ARA/MA
END
MNA
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