The CIA’s Involvement in the 1953 Iranian Coup d’État

The publication Foreign Relations of the United States, 1952-1954, Iran, 1951-1954 — an official historical record of major United States (U.S.) foreign policy decisions — and the U.S. government’s acknowledgment of the plot to overthrow Mosaddegh may be the first step in acknowledging the lasting impact of the U.S. intervention in Iran, an event that set the stage for decades of political and social turmoil that can still be seen today in Iran’s strained relationship with the U.S. and its ongoing struggle to balance modernization with traditional values. The coup had its roots in the intensifying tensions between the U.S. and the Soviet Union following the end of World War II. Despite their ideological differences, the U.S. and the Soviet Union shared a common strategy of spreading influence through foreign intervention. The Middle East was one of the most highly disputed regions for both superpowers because of its vast oil reserves, which were rapidly becoming a crucial energy source. Iran had one of the largest such reserves, then under the control of the United Kingdom (U.K.) government’s majority-owned Anglo-Iranian Oil Company (AIOC). With the growing political conflict between Iran’s Shah Mohammad Reza Pahlavi and the popular prime minister, Mohammad Mosaddegh, the Soviet Union saw an opportunity to intervene and separate Iran from Western influence. Mosaddegh sought to nationalize the AIOC and reduce the economy’s dependence on oil, and U.S. uncertainty about the effects of Mosaddegh’s economic policies resulted in the impulsive decision to overthrow him in a coup d’état in 1953. The coup allowed the monarchy to dominate the country and ultimately led to the establishment of an anti-Western government.

William Knox D’Arcy, a U.K. business owner, and Iran’s shah, Mozaffar ad-Din Qajar, signed an oil concession in 1901, which gave D’Arcy the exclusive rights to prospect oil in Iran. These oil rights, officially referred to as the D’Arcy Concession, were granted for sixty years and covered three-fourths of the country. The AIOC purchased D’Arcy’s stake in 1908, and in 1933, the AIOC and Shah Reza Pahlavi agreed to extend the concession, with minor changes, for thirty-two more years. The new concession reduced the area that D’Arcy could access from 1,242,000 to 260,000 square kilometers and guaranteed Iran 20% of the company’s profits and minimum annual payments of £750,000 in lieu of income taxes. However, the deal was still highly unfavorable for Iran. Not only did the U.K. maintain control of Iranian oil production for thirty-two more years, but by then, the AIOC had identified the most productive areas to drill within its allotted 260,000 square kilometers. Furthermore, Iran was set to profit far less than the AIOC. In 1947, the AIOC reported a profit of £40 million after taxes, while Iran received only £7 million, just 17.5% of the company’s profits. The U.K.’s operations were even exempt from import and customs duties. For the first half of the twentieth century, the U.K.’s hold on Iranian oil was ironclad.

Mosaddegh, representing the pro-democratic National Front in Tehran, was reelected to the Iranian Parliament in February 1950. As chair of the Oil Committee of Majlis, he proposed an end to the D’Arcy Concession in November 1950. Despite his best efforts, his proposal was rejected by Iran’s prime minister, Haj Ali Razmara. Shortly thereafter, however, Razmara was assassinated by a Shia fundamentalist group, Fada’iyan-e Islam. This event allowed Mosaddegh and his supporters to advance his agenda to nationalize Iran’s oil industry. The proposal passed unanimously, and the AIOC was nationalized. In April 1951, the National Consultative Assembly pressured Shah Reza Pahlavi into appointing Mosaddegh as prime minister. Mosaddegh’s new position meant he could now challenge Shah Pahlavi on specific political and economic issues, such as the shah’s opposition to nationalizing the oil industry. Tensions between the shah and the prime minister quickly escalated.

The deterioration of the shah’s relationship with Mosaddegh culminated with the latter’s decision to step down in July 1952. His resignation was welcomed by the shah, who immediately appointed Mosaddegh’s successor, Ahmad Qavam, a politician with close relations to the royal family and the West. Upon his appointment, Qavam expressed interest in negotiating another oil agreement with the U.K. However, Mosaddegh returned to power just three days after stepping down. Supporters of the National Front and the communist Tudeh Party protested in front of the shah’s residence in support of his return. Once again, the shah succumbed to the pressure of Mosaddegh’s supporters.

At this point, the U.S. began to take closer notice. Following his reappointment, Mosaddegh continued to reduce the economy’s reliance on oil. An increase in non-oil exports could not compensate for the loss of oil revenue, however, and government debt consequently skyrocketed. As a result, many U.S. officials believed that an economic crisis was on the horizon. The Deputy Executive Secretary of the National Security Council, S. Everett Gleason, claimed that the economic crisis would result in “the loss of Iran to … the free world” by leaving an opening for the Tudeh Party to overtake the government. This fear of a communist takeover was prevalent among U.S. officials. The U.S.’ decision to overthrow Mosaddegh was based on the concern that his decision to nationalize Iran’s oil industry would cause an economic decline in Iran and lead to the collapse of the Iranian government.

The U.S. ambassador to Iran, Loy W. Henderson, claimed in November 1951 that the Iranian government could not “turn to public works or improvement of the miserable social and economic conditions of the majority of the population” if they continued to reduce their oil dependence. Henderson feared that without economic reform, the Iranian people would become increasingly discontent with their government and, as a result, they would be “bound to [be] attract[ed] towards … communism.” That is, Henderson was claiming that Mosaddegh’s desire to reduce the economy’s dependence on oil would inevitably lead to an economic crisis which, in turn, would lead to a welcomed communist takeover of the government.

The Central Intelligence Agency backed Henderson’s claims by stating that Mosaddegh’s economic policies would result in “bankruptcy, internal unrest and, at worst, communist control of the state.” Following the shah’s failure to depose Mosaddegh, U.S. officials saw no other option but to take matters into their own hands. Because it was one of the earliest and most successful examples of the U.S. using covert action to overthrow a foreign government deemed unfriendly to American interests, the CIA's involvement in the 1953 Iranian coup d'état was of extreme significance in the context of the Cold War. Henry A. Byroade, the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs, was one of the first to propose replacing Mosaddegh. He put the plot on the table and outlined a plan for achieving it.

Not all U.S. officials agreed with Byroade, however. Many senior U.S. officials, including the director of the CIA, Walter B. Smith, and the U.S. Secretary of State, Dean G. Acheson, did not initially find a viable alternative to Mosaddegh or other Iranian politicians. The problem, in their view, was that no one possessed sufficiently strong backing to challenge Mosaddegh and the National Front’s control over the government. Of the few candidates, Sayyed Abol-Ghasem Mostafavi-Kashani, an ayatollah, was by far the most powerful and popular alternative. However, the U.S. deemed the Shia cleric too radical after learning of Kashani’s hard-line position on oil negotiations. He refused to negotiate with foreign oil companies and once claimed that oil was a “curse rather than a blessing.” Kashani supported Mosaddegh for opportunistic reasons in hopes that his support would lead to the creation of an Islamic republic. Lacking any viable alternative, the U.S. ultimately backed Mosaddegh.

At the time, the U.S.’ primary focus was to prevent an economic collapse in Iran, which the Truman administration had grown to believe was a serious threat. Some officials, including Henry A. Byroade, the assistant secretary of state for the Middle East, South Asia, and Africa, stepped forward with proposals to resolve this issue. Byroade suggested arranging “substantial financial assistance” and “a program of economic development.” Despite the U.S.’ fears, though, there was very little evidence that Iran was facing an economic collapse. Although inflation rates and the cost of living were stable and profits from non-oil exports were increasing, U.S. fears of a financial crisis persisted. Officials were convinced that “if present trends continue[d] unchecked,” Iran’s government would collapse, resulting in a communist takeover, which in turn would cause Iran to break ties with the U.S.

In early 1952, President Harry S. Truman briefed President-elect Dwight D. Eisenhower on the situation in Iran, at which point Truman told Eisenhower that the political climate had reached a critical point. Truman stated that Mosaddegh’s policies would result in “a state of chaos.” He criticized Mosaddegh for his decision to nationalize the oil industry, which, according to him, would lead to the “grave disintegration” of the Iranian government. Truman's concerns about the nationalization of Iran's oil industry were rooted in fears about losing Western control over Iran's resources, economic instability, and political unrest in the region. He also feared that Mosaddegh would break political ties with the U.S. and ally with the Soviet Union. At the time, many U.S. officials, including Eisenhower, did not share Truman’s fears. Furthermore, while the CIA was convinced that the “Tudeh [Party] represent[ed] a serious threat,” they knew that the political party did not have “the intention or the ability to gain control of the government … by force or by political means.”

U.S. officials were convinced they could resolve the economic issue in Iran by providing financial aid and other economic benefits. However, they soon realized that doing so was financially unfeasible because it was highly unlikely that any U.S. congressperson would approve such a spending bill. In desperation, President Eisenhower once admitted that “if [he] had $500,000,000 … to spend in secret, [he] would give $100,000,000 of it to Iran.” Because the administration could not provide financial aid, it was left with few other means to prevent Iran’s potential economic collapse. One of those options — overthrowing Mosaddegh — would become more popular over time.

The U.S. chose to take immediate action in Iranian politics out of the fear that the increasingly tenuous relationship between Mosaddegh and the shah would affect the stability of the government. It worried that if government instability worsened, Mosaddegh would resign (or perhaps die, given his advanced age), thereby creating a political vacuum that would open the way for a communist takeover. America’s concerns became a reality in February 1953 when Mosaddegh demanded the departure of the shah, who acquiesced to his demands. His previous attempts to depose Mosaddegh had failed and resulted in a shift in power, with Mosaddegh gaining the upper hand. It was Henderson who came to the shah’s rescue, persuading him not to leave. Afterward, Henderson met with Mosaddegh at his home to beg him to see the situation as he saw it: the shah was crucial to the security and stability of the country’s government. Mosaddegh refused to back down. Following this meeting, Mosaddegh’s house was raided by a group of pro-shah supporters, organized in part by Kashani. Mosaddegh escaped, but just barely. For U.S. officials, these events indicated government instability in Iran. In response, the U.S. Counselor of Economic Affairs, led by Henderson and Robert Carr, performed a hasty, superficial analysis of the situation in Iran. President Eisenhower and his secretary of state, John F. Dulles, decided that an immediate response was crucial to preventing a communist takeover of the Iranian government.

Dulles argued that such a response was entirely feasible, noting that the CIA had both “a considerable supply of … arms [and] … cash” to support a coup to control the future of the Iranian government. He was not alone: In the eyes of many U.S. officials, the time for negotiations was long over. Eisenhower claimed that even if Mosaddegh was willing to negotiate, an agreement “might not be worth the paper it was written on” and would result in a concession for Iran’s oil that was “too favorable” for Iran. Ultimately, the U.S. feared the creation of a new communist state, and, in doing so, it acted prematurely. Had the U.S. performed a careful analysis of the state of Iran’s economy and government, it would have realized that the economy was not on the brink of collapse and that immediate action was, therefore, not necessary. Kenneth Pollack arrives at this same conclusion, arguing that the U.S. government’s intervention in Iran was a “classic case of overreaction” and that the Iranian economy was not as fragile as the U.S. believed.

Their cursory analysis of Iran’s political and economic climate prompted the U.S. to abruptly and prematurely facilitate the ouster of Mosaddegh. Eisenhower and Dulles held two National Security Council meetings in March 1953. At the first meeting, the two supported negotiations with Mosaddegh. However, after receiving Henderson and Carr’s report at the second meeting, they changed their stance, fearing that negotiations were insufficient. As a result, they succumbed to fears of an imminent collapse of the Iranian government, the establishment of a communist state, and the loss of access to one of the world’s largest oil suppliers.

On August 15, 1953, the CIA, under the command of Kermit Roosevelt Jr., commenced operations to overthrow Mosaddegh. Fortunately for Roosevelt, Kashani and Mosaddegh’s relationship dissolved a few months earlier. Kashani’s early support for Mosaddegh was based on his belief that Mosaddegh would help him establish an Islamic republic. However, after Mosaddegh refused to oblige, Kashani joined forces with the shah to topple Mosaddegh. With support for Mosaddegh dwindling, Roosevelt found an opportunity to convince the shah to agree to a coup and write a decree to replace Mosaddegh with General Fazlollah Zahedi. Roosevelt selected Zahedi as the best person to lead the post-coup government due to his competence and commitment to pursuing an oil settlement. Zahedi was “anxious to settle the oil issue” and was willing to sign an oil concession with the U.S. immediately. The shah gave a decree to Zahedi and dismissed Mosaddegh. In response, Mosaddegh’s followers stormed the streets, causing the shah to flee. The coup failed initially; however, Roosevelt did not give up and attempted to overthrow Mosaddegh yet again. This time he hired mobs to beat Mosaddegh’s followers, which gave Zahedi an excuse to mobilize tanks on the streets. On August 19, Zahedi’s forces surrounded Mosaddegh at his home. To avoid bloodshed, Mosaddegh decided against asking his supporters for help. Mosaddegh’s time as prime minister had come to an end. The CIA transferred the remaining $45 million as loans to the Iranian government on the condition that Zahedi accept an oil agreement and effectively hand over control of the Iranian oil reserves to Western oil companies. After a lengthy trial, Mosaddegh was exiled to Ahmedabad, Iran, and placed under house arrest. Several of his allies were imprisoned, and his closest friend and ally, Hossein Fatemi, the Minister of Foreign Affairs, was sentenced to death. In addition, many members of the Tudeh Party faced a death squad. Mosaddegh’s decision to nationalize the oil industry was reversed, and U.S. oil companies were subsequently given partial control over Iranian oil reserves.

Foreign Relations of the United States, 1952-1954, Iran, 1951-1954 indicates that the fear of a communist takeover, the uncertainty about the stability of the Iranian government, and the prospect of losing Iranian oil reserves triggered the U.S. overthrow of Mosaddegh. At its root, however, Cold War paranoia and attendant anti-communist hysteria were critical factors in the flawed analysis of the events in Iran that led the U.S. government to impulsively orchestrate the coup without considering the long-term consequences. Not only did U.S. officials overlook the fact that the pro-Western shah’s popularity was rapidly declining, but they also failed to see that Shia fundamentalists led by Kashani were a growing threat to the U.S.’ interests. Kashani’s desire was, as stated above, to transform Iran into an Islamic republic. While he would not live to see his dream realized, Kashani’s follower, Ruhollah Khomeini, prepared to fulfill the Shia clerics’ historic goal. The Iranian people revolted against the shah in 1978, demanding greater freedom and prosperity, and the shah fled to the U.S. in January 1979. A month later, the monarchy collapsed, and Khomeini came to power. The shah’s suppression of democracy had likely enabled Khomeini’s supporters to influence the people’s movement toward establishing an anti-Western Islamic authoritarian regime. The consequences were far-reaching: The U.S. government’s participation in the overthrow of Mosaddegh stultified Iran’s economic growth and sparked political and social unrest, setting the stage for decades of political and social turmoil.

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