Oil, War, and Lies: Iran’s Relationship With the United States

               Iran and the United States have spent the past few decades provoking each other and maneuvering for influence in the Middle East. The relationship between the two countries is fractured, hostile, and is expressed through the political actions of both nations and their global proxies. Undermining the power of the other nation in the Middle East and beyond is a primary goal for both countries. The United States has not even had formal diplomatic relations with Iran since 1980, and considers it an authoritarian terrorist state. However, the mid-20th century saw periods of extremely warm Iranian-American relations during which the two considered each other allies. Why then, are proxy wars and antagonism the norm today? This current state of affairs was not inevitable. It came about through a series of decisions made by both states, although this post will demonstrate that the United States created the conditions for the present relationship. The saga of Iran and the United States is a prime example of how the pursuit of “rational” foreign policy objectives in the service of imperialism can produce violent consequences.

 The Pahlavi Dynasty: Oil and Blood

To fully understand Iranian-American relations, it is first necessary to relate some of Iran’s earlier interactions with great powers. In 1917, the British army used Iran as a staging area for their counterrevolutionary invasion of the newly formed Soviet Union. As British and Soviet troops occupied parts of Iranian territory over the next few years, the ruling Iranian Qajar dynasty began to lose its grip on power. The occupying armies certainly contributed to the growing unrest, but decades of mismanagement had instilled a great deal of anger in the Iranian populace. With the power of the Qajar Shahs waning, and the threat of a full Soviet takeover of Iran looming, the British ordered an Iranian brigade led by Reza Khan Mir Panj into the capital city of Tehran in February 1921. Reza Khan then suspended the government, intimidated the ruler Ahmad Shah into accepting a new government, installed a new prime minister, and installed himself as Minister of War. Subsequent years saw military campaigns to pacify the rest of the country and a steady growth of Reza Khan’s influence, including his ascension to prime minister. Finally, in late 1925 the national Mejlis parliament formally removed Ahmad Shah from his ruling position and crowned Reza Khan as the new dynastic ruler of Iran. The newly minted head of state took the royal surname Pahlavi, but the world would come to know him as Reza Shah.

Reza Shah greets the British Princess Margaret

               Reza Shah ruled Iran with an eye on reform. The new government overhauled the education and legal systems with the goal of reducing religious influence. Universities and secondary schools sprouted across the country. It promoted Western standards of dress, improved infrastructure and altered the financial system. These new reforms aimed to simultaneously modernize the country and ensure an efficient government. Conversely, the long rule of the Shah and his eventual heir was marked by harsh political and social repression. Along with the reforms came a silencing of dissident press and repression of Iran’s democratic institutions. Extrajudicial murders of political opponents by the government were common. Over the years, the administration became increasingly autocratic and stagnant. Rampant nepotism and patronage filled the growing government bureaucracy with incompetent ministers. The Mejlis parliament ceased to perform any meaningful function, centralizing most Iranian power with the Shah and top ministers. Funds which could have been used in service of the people of Iran were instead directed to the military or into the pockets of officials. After years of royal rule, ordinary Iranians became frustrated with the continued brutal repression and impositions on their religion.

In 1941, Reza Shah’s reign was dealt a blow it could not recover from. British and Soviet troops rolled into Iran and jointly occupied the country, justifying their actions by citing the ongoing Second World War and the Soviet need for Middle Eastern oil and supply lines. Reza Shah had cultivated a relatively friendly relationship with Nazi Germany, mainly as a method of counterbalancing British and Soviet influence. As a result of the German connection and his hostility to foreign demands, he was deposed and replaced with his son Mohammad Reza Pahlavi. The United States saw Iran as a vital barrier to Soviet interests in the region, and resolved to defend Iran’s repressive dynasty. After the British and Soviet military withdrawal in 1946, the man known to most people simply as “the Shah” sat at the head of the Iranian Government.

Mossadeq and US Policy

The new Shah had an interesting political landscape to deal with. Soviet occupation had left behind a substantial communist movement represented by the Tudeh Party. The United States was now an entrenched supporter of the regime. Growing nationalism and anti-imperialism had amplified calls for a new oil policy. Since 1909, the Anglo-Iranian Oil Company (AIOC) had controlled the Iranian petroleum industry. This company was essentially a puppet of the British government, and the AIOC-Iranian profit sharing agreements entitled Britain to an egregious ~80% of oil profits. Calls for renegotiation or an outright Iranian seizure of the oil fields grew louder throughout the 1940s. In March 1951, after several failed rounds of negotiations, the Iranian parliament voted to renege on the AIOC contract and seized control of oil production. Britain immediately employed every economic weapon at its disposal to punish Iran, freezing its assets and implementing an embargo on Iranian oil. Always the champion of crushing imperialism, Britain even brought the case of Iran taking control of its own oil exports before the International Criminal Court.

Supporters of Prime Minister Mosaddeq demonstrating in his favor.

One of the main drivers of oil nationalization was Prime Minister Mohammed Mosaddeq. Elected by democratic vote and supported by a political coalition that included portions of the Tudeh Party, Mosaddeq was rapidly gaining power and popular support. His social welfare policies and nationalism generated great enthusiasm among Iranian citizens. Mosaddeq challenged the Shah’s power within the government and refused to negotiate with the British oil companies, which enraged them. The UK appealed to newly elected American President Dwight D. Eisenhower and the Shah himself for assistance in solving their Mossadeq problem. Mossadeq was no communist, but convincing Eisenhower to help overthrow an elected leader with even minimal communist support was likely a breeze. American anti-communism was always strong, but reached feverish highs during the 1950s. As a result, the CIA played an integral role in the 1953 coup that removed Mosaddeq from power. Coordinating with the British, the Shah, and the Iranian military, the Americans made their move in August. CIA agents spread discord, bribes, and misinformation throughout Iran, provoking a riot that gave the Shah a pretext to replace Mossadeq with another Prime Minister. Although Mossadeq rebuffed the Shah, his forces proved no match for the Iranian military. He was arrested and forced out of government. Subsequently, Tudeh Party members and others who made up Mossadeq’s coalition were hunted down and imprisoned or murdered.

For the second time in 20 years, the Iranian government had been forcibly altered by foreign powers, this time involving the overthrow of a democratically elected leader by the United States.

1953-1979: Repression, Reform, and Revolution

               The next ten years saw a spike in oil revenues, but this newfound wealth did not adequately trickle down to the population. The Shah and different Prime Ministers tightly controlled society and locked down the press. Widespread arrests and torture of suspected dissidents by the SAVAK secret police were common occurrences. SAVAK, known worldwide for their brutality, were allegedly advised by CIA operatives. Growing discontent with the economy and the strict policies of repression began to worry the Iranian government. During the first half of the 1960’s, bans on political parties such as those who supported Mossadeq were relaxed. This slight opening of the political process was followed by the implementation of a list of reforms by the Shah in 1963. The “White Revolution”, as it came to be known, brought about limited land reform, electoral and business management reforms that granted greater access to workers, and women’s suffrage. However, this package did not entirely ameliorate the problems of the working classes, and antagonized some of the more religious Iranian factions. Iran’s population is multiethnic, but it has a long history of adherence to Shia Islam. This contrasts them with many of the Sunni Islamic nations in the Middle East. Ayatollah Ruhollah Khomeini was an Iranian religious leader who voiced opposition to some of the White Revolution reforms. After his subsequent arrest, the Shah violently crushed the unrest and riots that followed. However, the simmering religious anger had not been eradicated.

               Throughout the 1970’s, the Shah cultivated cordial relationships with both the United States and Soviet Union while allowing neither country to dominate it. Richard Nixon believed Iran to be an important factor in the Cold War, providing it weapons and assistance. On its face, the economy appeared to be doing well in the first half of the 1970s. Oil revenues were up, and Iran had willing trade partners. However, religious anxiety had been building over the course of the 1960’s, fueled by the Shah’s relative indifference to the whims of the Islamic clerics and the failure of the great oil wealth to raise the fortunes of the working class. The 1970’s Shah governments implemented sweeping social welfare policies, but many of these programs were either too ambitious or half-baked. Attempts at “modernization” or even the barest socialized services failed due to poor planning and incompetent management. The people of Iran appeared outwardly prosperous, but the working class and clergy came to view the Shah as a cruel puppet of the US who cared little for the Iranian people. Many pious Iranians felt that their religion was being ignored while their country’s wealth was wasted. The population turned to several outlets for their frustration at the government. Some joined revolutionary Marxist organizations such as the Feyadin, but even more were drawn to Khomeini and his Islamic revolution. 

12/7/1979: Ayatollah Hussein Ali Montazari leads a prayer in Tehran, Iran.

Beginning in 1977, largely secular protests against the government gave way to more fervently religious ones in 1978. Protestors called for the overthrow of the Shah in favor of Khomeini and his governmental system of rule by Islamic councils. They felt that the country’s acceptance of foreign ideals and the Shah’s modernization programs were stripping the country of its Islamic identity and heritage. While they never seemed to control the direction of the unrest, leftist groups were also heavily involved in the street protests. The protesters material concerns melded with Khomeini’s fervent Shia Islam to create a formidable opposition to the Shah. Violent repression of the protests only fueled the anger of the masses, causing strikes that brought the economy to a standstill. Finally, in early 1979 the Shah ran out of breathing space. Discussions with the National Front opposition party made it clear that the Shah could no longer remain in the country if stability was to be maintained. On January 16, the Shah was exiled from Iran forever. The entire US-Iran relationship was about to radically change.

The Ayatollah Khomeini (front right) returns to Iran in 1979.

Petrodollars and the Oil War

Meanwhile, the 1973 Yom Kippur War between Israel and a coalition of Arab states introduced a new wrinkle to the US-Iran relationship. During that conflict, the United States greatly angered Saudi Arabia by supporting Israel. The Organization of Petroleum Exporting Countries then placed an embargo on the sale of oil to the US at the direction of Saudi Arabia. While this wreaked havoc on the US economy, America saw a rare opportunity. American diplomats struck a deal with the Saudi leadership; in exchange for an oil profit arrangement that would result in American companies investing in Saudi Arabia, America required Saudi oil transactions to be conducted exclusively in US dollars. Tying the fortunes of the dollar to oil markets so closely had far reaching implications. In 1971, Richard Nixon had taken the US off of the gold standard, meaning that American dollars would no longer be convertible into gold. This removed most reasons for international markets to utilize the dollar exclusively and reduced US influence in those markets. When one of the world’s largest oil exporters agreed to accept US dollars exclusively, it made those dollars the de facto official currency of the oil market. Countries now needed US dollars to purchase oil, which fueled the growth of a US currency trading market and subsequently the entire US finance industry. Economics aside, this all meant that the US now had a vested interest in supporting the Saudi regime that protected this system of control. Iran and Saudi Arabia would develop their own proxy conflict over the next few decades, and the United States has always been eager to prop up their Saudi business partners against Iran. The US alignment against Iran in this proxy conflict, its ferocious desire to protect its oil markets, and rising resentment of American economic imperialism will be factors that affect every aspect of Iran-US relations post-1979.

 The Islamic Republic and Open Hostility

The relatively moderate 1979 government was led by a National Front prime minister, but Khomeini eventually secured the support of the military and the US ambassador, who apparently saw Khomeini’s form of “Islamic Republic” as a more stable outcome. The revolutionaries were initially a mixed group of Marxists, nationalists, and Islamists. However, they all coalesced around their distinct Islamic-Iranian identity and a hatred of American interference. By mid-February, Khomeini supporters had ousted most of the former government officials and the Pahlavi dynasty was officially dead and buried.

After a period of revolutionary chaos, Khomeini, now styled as Supreme Leader of Iran, established the Revolutionary Guard forces in order to counterbalance the military and suppress the leftist organizations that hoped to spark a working class revolution. The street level followers of Khomeini had proven themselves to be fanatical vigilante fighters, and had exactly zero reservations about killing political or religious opponents in broad daylight. The Islamist followers of Khomeini eventually managed to dominate the other factions, although not without difficulty. The Islamic Republic was established with a focus on Islamic law and a relative disregard for democracy. Presidential and legislative elections were retained, but leftist and moderate parties were banned, Marxist and ethnic guerrillas were suppressed, and Khomeini alongside the new Guardian Councils wielded power over the legislature. However, Khomeini’s government retained a characteristic of Marxism-Leninism that has always driven the United States mad: a desire to export its revolution to other countries.

November 1979 hostage crisis protest, Washington D.C.

The famous 1979 Hostage Crisis may have happened regardless, but was touched off when the United States admitted the dying Shah for medical treatment. This resulted in protests, fueled by anger against the US for its role in the 1953 overthrow of Mosaddeq and its longtime support of the hated Shah. Student protestors were able to overwhelm the American Embassy in the city of Tehran, and held 52 Americans hostage inside the building for over a year. This obviously destroyed relations between the United States and Iran, and set the stage for the present hostile relationship between the two states. The crisis was filled with awful public relations moments for the US, including a disastrous rescue attempt during which US special forces crashed a helicopter into their own cargo plane and killed eight American soldiers. The wreckage and bodies lying in the desert provided Iran with a great piece of propaganda. Khomeini endorsed the takeover, and public pressure forced the moderate Prime Minister Barzagan to resign. America then imposed their now-trademark economic sanctions on Iran, creating a permanent sticking point. In American eyes, the Iranians had broken a sacred international law by encouraging the hostage takers. Standing up to the United States bought Khomeini a massive amount of goodwill with his people.

Since the revolution, Iran has been a consistently anti-imperialist and pro-Shia Islamic power. Opposition to the US, Israel, and Saudi Arabia is almost a requirement of that mindset. The leadership of Iran is represented by the Supreme Leader, but it’s important to remember that they are not a monolith. Some are more religiously motivated than others, and there exists a political spectrum within Iranian politics. Regardless of who holds the most influence, it would be a grave mistake to think that any Iranian leader is irrational. American propaganda has painted Iran as a country led by insane zealots, but only fools should believe that this is uniformly true. American generals assuredly don’t.

The 1980s: Iran-Iraq and the Proxy Wars

On September 22, 1980, Saddam Hussein’s Iraqi forces attacked Iran. Hussein’s vision for the Middle East was incompatible with Khomeini’s. Iran’s new government was a champion of Shia Islam, and Iraq’s government was concerned about a copycat revolt by its majority Shia population. Hussein also saw an opportunity to seize the valuable Shatt al-Arab shipping region on the Iran-Iraq border. Iran’s military was also in the midst of a weak moment, without American equipment and directly after a large purge of officers. This was Iraq’s play for security, oil, and regional dominance. The major powers overwhelmingly supported Iraq, for a variety of reasons. The Soviets wanted to counter what they saw as an inspiration for their Islamic populations and an alternative revolutionary theory to Marxism-Leninism. American elites viewed Iran as a threat to their influence on the region, and were prepared to align with repressive autocracies if it meant protecting their Saudi Arabian petrodollar scheme from a newly anti-imperialist Iran. A desire for vengeance against the newly hostile Iranian regime for toppling their stooge of choice was also likely a factor. This war would rage for nearly 8 years, and saw some of the most savage combat of the late 20th century.

Entrenched Iranian troops during the Iran-Iraq War

The Iranian army was still divided, and Iran was only able to repulse the Iraqi invasion through the fanatical willingness of its soldiers to die for the new Islamic Republic. This would develop into a grinding, early 20th century style stalemate. Iraq was able to push its way back into Iran with the help of American aid, vehicles, intelligence, and funding. The US found it convenient to ignore Hussein’s blatant use of internationally banned chemical weapons against Iranian civilians, including sarin and nerve gas. The American military provided naval support as well, directly attacking Iranian oil platforms. In 1988, a US missile cruiser even shot down an Iranian civilian airliner, killing nearly 300 people. At the time of this incident, vice president George H.W. Bush was campaigning for the presidency on a slogan: that he would “never apologize for the United States of America. Ever. I don’t care what the facts are”.

 The war ended in 1988 in what is generally regarded a strategic stalemate, but set the stage for the first US-Iraq War and the current balance of power in the region. Eventually, it would be revealed that the US was exploiting both sides of this deadly struggle. While publicly supporting Saddam Hussein, the US was secretly (illegally) selling arms and ammunition to Iran. The proceeds from these sales were funneled to Nicaraguan right-wing paramilitary groups on a campaign to overthrow the country’s socialist Sandinista government. These groups, known as the Contras, were trained by the CIA and amounted to little more than terrorist death squads funded by clandestine arms sales and drug trafficking. While the Reagan administration attempted to explain this scheme away as a method of negotiating the release of American hostages from Iran, it resulted in convictions for American personnel involved in the illegal arms sales (although they would mostly be pardoned by the first President Bush).

Hezbollah fighters during the 1990s.

The presence of Israel in the Middle East has been a source of friction since its formation in 1948. Many Islamic Middle Eastern countries, including Iran, view Israel as an American proxy power that occupies rightfully Muslim land. In the early 1980s, the Shia Islamic paramilitary group Hezbollah was formed in southern Lebanon. This is generally viewed as a response to the Israeli invasion of Lebanon, and the group is generally agreed to have received assistance from Iran. Information is obviously murky, but it is accepted that Iran and Hezbollah maintain a financial and institutional relationship. Despite this, it is more accurate to refer to Hezbollah as an Iranian ally rather than a proxy. Hezbollah’s main goal is to oppose Israel and maintain representation for Shia Muslims inside Lebanon. During the 1980s and through the 2000s, the group perpetrated many high profile attacks on Western and Israeli targets in Lebanon and beyond, earning designation as a terrorist group by many powers. These attacks included the kidnapping, torture and execution of the CIA station chief of Beirut in 1985. The US has long supported Israel militarily and financially, and Iran’s support of groups like Hezbollah has created a proxy war with Iran/Hezbollah/etc. on one side, and America/Israel on the other. Long years of military buildup and planning has paid off for Hezbollah in a myriad of ways, including a shocking victory over Israel in the 2006 Lebanon War. Hezbollah has slowly transformed into a major force within Lebanon, earning seats in the Lebanese government and partnering with the military. They enjoy wide support among Shia and some Sunni Muslims in Lebanon due to their steadfast opposition to Israel and the US. Hezbollah is now considered one of the best trained, organized, and effective non-state military groups in the world.

This proxy war is not the only geopolitical conflict being waged between the US and Iran. Saudi Arabia has emerged as a powerful opponent to Iran, and the two countries routinely compete for dominance in the region. Both nations seek to counter the other by taking advantage of weak states and supporting proxy forces against each other’s interests. Iran is opposed to essentially all that Saudi Arabia stands for, politically and especially religiously. While Iran is a Shia Muslim state, Saudi Arabia is a proponent of an extreme branch of Sunni Islam called Wahhabism or Salafism. This branch holds that Shia are not true Muslims, and that only Salafi clerics can safeguard Islam. An interesting duality in the Saudi American relationship is revealed here. Saudi Arabia promotes Salafi ideology worldwide, funding mosques, imams, and religious schools. The US trained and armed radical Salafi fighters gathered by Saudi Arabia in order to resist the 1979 Soviet invasion of Afghanistan. These fighters fought the Soviet Union viciously, but after the war, their ideology morphed into a comprehensively anti-Western, jihadi form. This group of fighters included luminaries such as Osama bin Laden, and jihadi groups such as al-Qaeda would germinate within this US-Saudi created force.

Saudi Arabia has been embroiled in the Yemeni Conflict for several years as of 2019. This pits the Saudi military, US special forces, and Yemeni government against the Houthi rebels. These rebels have been tenuously linked to Iran in the past, and even though it is doubtful that Iran wields significant clout with them now, Saudi Arabia has framed this conflict as a containment of Iranian influence. The United States, due to its heavy ties with the Saudi government, has an incentive to support Saudi Arabia with weapons and aid. For their part, the Saudi-US led war and bombing campaign has produced nothing but civilian casualties and gains for the rebels.

 The US has shackled itself to the Saudi side of the proxy conflict for several reasons. First, the previously mentioned petrodollar scheme and oil supplies are still important motivators. Second, the US is now so deep into its paradigm of opposition to Iran that it would naturally support a different country that seeks to politically dominate the region. Politics in the Middle East are often played out against the backdrop of one or both of the two major proxy conflicts. The current Saudi war in Yemen and the Israel-Palestine conflict are just two threads that contain elements of the proxy wars. The Iranian-Israeli and Iranian-Saudi variants, both of which pit the US against Iran, are ongoing.

1990-2008: The Axis of Evil

The 1990s were a period of relatively stable, if tense US-Iranian relations. The demise of the Soviet Union removed their influence from the Middle East and sent world socialism into retreat. Khomeini’s death led to the election of Ali Khamenei as Supreme Leader of Iran, and although not as charismatic as the founder, Khamenei has mostly maintained the original principles of the Islamic Republic. Relations with the George H.W. Bush administration were cool. The main US concern regarding Iran (besides the ongoing proxy struggles for regional power) was obtaining the release of American hostages held by Hezbollah. Iran and the US did cooperate on this issue, but Iranian leaders grew bitter at the lack of concessions (for example, lifting sanctions) from the American side. Bush and Clinton mostly sought to counter any spread of Iranian/Shia Muslim influence, and propped up opposing powers. For example, the 1990 Iraqi invasion of Kuwait finally caused American support for Saddam Hussein to break down. Hussein’s aggression and potential dominance of Kuwait’s oil reserves immediately set off alarm bells in Washington. The US military then led a coalition force to push Iraq out of Kuwait, and Iran was likely overjoyed at the sight of American bombs decimating its regional rival’s army. However, the coalition stopped short of destroying Hussein’s regime, leaving Iraq in place as a potential balance to Iranian power.

By the time of Bill Clinton’s presidency, the US no longer had an interest in balancing Iran and Iraq against each other. The fall of the Soviet Union left the US as the ascendant superpower in the world, and the Clinton administration viewed both Iran and Iraq as “rogue” actors in the Middle East. While Clinton and his advisors likely would’ve jumped at the chance to overthrow the Iranian regime, the shifting loyalties of the Iranian elite and a lack of options forced them into a policy of “containing” Iran.  Clinton essentially ended trade with Iran, kept up the harsh sanctions, and stationed troops in Saudi Arabia. Although he eased up on his denunciations of Iran in the later 1990s, relations with Iran never substantially improved. Meanwhile, Iran recovered from the Iran-Iraq War and began to build up its oil and energy empire.

The George W. Bush administration’s 2001 and 2003 invasions of Afghanistan and Iraq were sure to shift the balance of power in the region. Iran pledged millions of dollars in funding to rebuild Afghanistan, and were undoubtedly thrilled to see their longtime rival Saddam Hussein deposed. However, Bush had lumped Iran into his “axis of evil” and had just smashed two of their neighboring countries into bits. At this moment, Iran apparently reached out to the United States (through intermediaries) with an interesting proposal. It offered to negotiate many of the United States major issues with Iran, including its nuclear program, the structure of Hezbollah, and support for Palestinian groups. It also proposed cooperation in the hunting of al-Qaeda members and the reconstruction of Iraq. In exchange, Iran asked for negotiation on the abolishment of sanctions, the end of US support for the MEK (a formerly Marxist, currently cult-like militant group), and respect for Iran’s political and nuclear power ambitions.

When a version of this proposal was given to American officials by a Swiss ambassador in 2003, the United States instantly dismissed it and rebuked the diplomat for even bringing it to their attention.

2008-// : What Now?

Where do US-Iranian relations stand now? After long years of war in Iraq and Afghanistan, the US has made itself hard to trust. The aggression of the Bush administrations, the surgical warfare of the Obama administration, and Israeli expansion continue to agitate the Iranian government. The Iranian government trended toward the conservative side during the late 2000s-early 2010s, but the relatively more moderate President Hassan Rouhani has ushered in an era of slightly more cordial Iranian foreign relations. The 2015 Obama Administration-sponsored “nuclear deal” provided Iran with relief from the hated sanctions in exchange for allowing its nuclear program to be monitored. However, the Trump administration has reversed that deal and re-imposed the sanctions. These sanctions deprive Iran of billions of dollars in revenue a year, and impact neighboring countries that rely on Iranian exports. Trump advisors John Bolton and Mike Pompeo seem hell-bent on trying to spark a poorly planned revolution in every country with a leadership they aren’t fond of (see: Venezuela), and have openly supported the bizarre MEK cult inside Iran as possible revolutionaries. For their part, Iran continues to support Hezbollah, which has inserted itself into the ongoing Syrian Civil War. The Iran-Saudi and Iran-Israel proxy wars continue to shape Middle Eastern geopolitics, and the United States is a major backer of Iran’s opponents in each. The foreign policy stances of the US government, the Saudi-Iran-Israel proxy conflicts, and the degree to which the political desires of Iran run counter to the interests of the US imperialists will define the future of US-Iran relations.


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