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Why Blockading Iran Could Lead to Global Disaster

Economic war will not take down the Iranian government, but it could lead to actual armed war.

| Thu Apr. 12, 2012 1:22 PM EDT

A History Lesson Ignored

As yet, Iran has shown no signs of yielding to the pressure. For its leaders, future nuclear power stations promise independence and signify national glory, just as they do for France, which gets nearly 80 percent of its electricity from nuclear reactors. The fear in Tehran is that, without nuclear power, a developing Iran could consume all its petroleum domestically, as has happened in Indonesia, leaving the government with no surplus income with which to maintain its freedom from international pressures.

Iran is particularly jealous of its independence because in modern history it has so often been dominated by a great power or powers. In 1941, with World War II underway, Russia and Britain, which already controlled Iranian oil, launched an invasion to ensure that the country remained an asset of the Allies against the Axis. They put the young and inexperienced Mohammed Reza Pahlevi on the throne, and sent his father, Reza Shah, into exile. The Iranian corridor—what British Prime Minister Winston Churchill called "the bridge of victory"—then allowed the allies to effectively channel crucial supplies to the Soviet Union in the war against Nazi Germany. The occupation years were, however, devastating for Iranians who experienced soaring inflation and famine.

Discontent broke out after the war—and the Allied occupation—ended. It was focused on a 1933 agreement Iran had signed with the Anglo-Iranian Oil Company (AIOC) regarding the exploitation of its petroleum. By the early 1950s, the AIOC (which later became British Petroleum and is now BP) was paying more in taxes to the British government than in royalties to Iran for its oil. In 1950, when it became known that the American ARAMCO oil consortium had offered the king of Saudi Arabia a 50-50 split of oil profits, the Iranians demanded the same terms.

The AIOC was initially adamant that it would not renegotiate the agreement. By the time it softened its position somewhat and began being less supercilious, Iran's parliamentarians were so angry that they did not want anything more to do with the British firm or the government that supported it.

On March 15, 1951, a democratically elected Iranian parliament summarily nationalized the country's oil fields and kicked the AIOC out of the country. Facing a wave of public anger, Mohammed Reza Shah acquiesced, appointing Mohammed Mosaddegh, an oil-nationalization hawk, as prime minister. A conservative nationalist from an old aristocratic family, Mosaddegh soon visited the United States seeking aid, but because his nationalist coalition included the Tudeh Party (the Communist Party of Iran), he was increasingly smeared in the US press as a Soviet sympathizer.

The British government, outraged by the oil nationalization and fearful that the Iranian example might impel other producers to follow suit, froze that country's assets and attempted to institute a global embargo of its petroleum. London placed harsh restrictions on Tehran's ability to trade, and made it difficult for Iran to convert the pounds sterling it held in British banks. Initially, President Harry Truman's administration in Washington was supportive of Iran. After Republican Dwight Eisenhower was swept into the Oval Office, however, the US enthusiastically joined the oil embargo and campaign against Iran.

Iran became ever more desperate to sell its oil, and countries like Italy and Japan were tempted by "wildcat" sales at lower than market prices. As historian Nikki Keddie has showed, however, Big Oil and the US State Department deployed strong-arm tactics to stop such countries from doing so.

In May 1953, for example, sometime Standard Oil of California executive and "petroleum adviser" to the State Department Max Thornburg wrote US ambassador to Italy Claire Booth Luce about an Italian request to buy Iranian oil: "For Italy to clear this oil and take additional cargoes would definitely indicate that it had taken the side of the oil ‘nationalizers,' despite the hazard this represents to American foreign investments and vital oil supply sources. This of course is Italy's right. It is only the prudence of the course that is in question." He then threatened Rome with an end to oil company purchases of Italian supplies worth millions of dollars.

In the end, the Anglo-American blockade devastated Iran's economy and provoked social unrest. Prime Minister Mosaddegh, initially popular, soon found himself facing a rising wave of labor strikes and protest rallies. Shopkeepers and small businessmen, among his most important constituents, pressured the prime minister to restore order. When he finally did crack down on the protests (some of them staged by the Central Intelligence Agency), the far left Tudeh Party began withdrawing its support. Right-wing generals, dismayed by the flight of the shah to Italy, the breakdown of Iran's relations with the West, and the deterioration of the economy, were open to the blandishments of the CIA, which, with the help of British intelligence, decided to organize a coup to install its own man in power.

 

A Danger of Blowback

The story of the 1953 CIA coup in Iran is well known, but that its success depended on the preceding two years of fierce sanctions on Iran's oil is seldom considered. A global economic blockade of a major oil country is difficult to sustain. Were it to have broken down, the US and Britain would have suffered a huge loss of prestige. Other Third World countries might have taken heart and begun to claim their own natural resources. The blockade, then, arguably made the coup necessary. That coup, in turn, led to the rise to power of Ayatollah Khomeini a quarter-century later and, in the end, the present US/Israeli/Iranian face-off. It seems the sort of sobering history lesson that every politician in Washington should consider (and none, of course, does).

As then, so now, an oil blockade in its own right is unlikely to achieve Washington's goals. At present, the American desire to force Iran to abolish its nuclear enrichment program seems as far from success as ever. In this context, there's another historical lesson worth considering: the failure of the crippling sanctions imposed on Saddam Hussein's Iraq in the 1990s to bring down that dictator and his regime.

What that demonstrated was simple enough: ruling cliques with ownership of a valuable industry like petroleum can cushion themselves from the worst effects of an international boycott, even if they pass the costs on to a helpless public. In fact, crippling the economy tends to send the middle class into a spiral of downward mobility, leaving its members with ever fewer resources to resist an authoritarian government. The decline of Iran's once-vigorous Green protest movement of 2009 is probably connected to this, as is a growing sense that Iran is now under foreign siege, and Iranians should rally around in support of the nation.

Strikingly, there was a strong voter turnout for the recent parliamentary elections where candidates close to Supreme Leader Ali Khamenei dominated the results. Iran's politics, never very free, have nevertheless sometimes produced surprises and feisty movements, but these days are moving in a decidedly conservative and nationalistic direction. Only a few years ago, a majority of Iranians disapproved of the idea of having an atomic bomb. Now, according to a recent Gallup poll, more support the militarization of the nuclear program than oppose it.

The great oil blockade of 2012 may still be largely financially focused, but it carries with it the same dangers of escalation and intervention—as well as future bitterness and blowback—as did the campaign of the early 1950s. US and European financial sanctions are already beginning to interfere with the import of staples like wheat, since Iran can no longer use the international banking system to pay for them. If children suffer or even experience increased mortality because of the sanctions, that development could provoke future attacks on the US or American troops in the Greater Middle East. (Don't forget that the Iraqi sanctions, considered responsible for the deaths of some 500,000 children, were cited by al-Qaeda in its "declaration of war" on the US)

The attempt to flood the market and use financial sanctions to enforce an embargo on Iranian petroleum holds many dangers. If it fails, soaring oil prices could set back fragile economies in the West still recovering from the mortgage and banking scandals of 2008. If it overshoots, there could be turmoil in the oil-producing states from a sudden fall in revenues.

Even if the embargo is a relative success in keeping Iranian oil in the ground, the long-term damage to that country's fields and pipelines (which might be ruined if they lie fallow long enough) could harm the world economy in the future. The likelihood that an oil embargo can change Iranian government policy or induce regime change is low, given our experience with economic sanctions in Iraq, Cuba, and elsewhere. Moreover, there is no reason to think that the Islamic Republic will take its downward mobility lying down.

As the sanctions morph into a virtual blockade, they raise the specter that all blockades do—of provoking a violent response. Just as dangerous is the specter that the sanctions will drag on without producing tangible results, impelling covert or overt American action against Tehran to save face. And that, friends, is where we came in.

Juan Cole is the Richard P. Mitchell Professor of History and the director of the Center for South Asian Studies at the University of Michigan. His latest book, Engaging the Muslim World, is available in a revised paperback edition from Palgrave Macmillan. He runs the Informed Comment website. To listen to Timothy MacBain's latest Tomcast audio interview in which Cole discusses the consequences of sanctions on Iran, click here, or download it to your iPod here. TomDispatch on Twitter @TomDispatch and join us on Facebook. To stay on top of important articles like these, sign up to receive the latest updates from TomDispatch.com here.

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