The Iran that emerged from the chaos of the early 20th century bore little resemblance to the mighty Persian Empire of antiquity. Weakened by foreign interference, territorial losses, and internal strife, the country desperately needed strong leadership to navigate the treacherous waters of modern geopolitics. That leadership would come from an unlikely source: a military officer who would transform himself from an obscure cavalry commander into the founder of a new dynasty.
Reza Khan’s rise to power marked the beginning of Iran’s forced march into modernity. His authoritarian methods would modernise the country’s infrastructure, institutions, and society, but they would also create new tensions between tradition and progress, between national pride and foreign dependence. When his son Mohammad Reza inherited the throne, he faced a challenge that would test everything his father had built: a popular movement led by a man who dared to imagine an Iran free from foreign control.
This is the story of how Iran’s struggle for independence became personified in the figure of Mohammad Mossadegh, whose confrontation with Western oil interests would lead to one of the most consequential covert operations in modern history.
The rise of Reza Shah and the birth of modern Iran
Reza Khan’s coup and early consolidation
The catalyst for Iran’s transformation was Reza Khan, a cavalry officer in the Persian Cossack Brigade, who seized power in a military coup on 21 February 1921. The coup was initially supported by the British, who saw Reza Khan as a strong leader capable of preventing Iran from falling into Soviet hands during the chaotic post-World War I period. However, Reza Khan quickly demonstrated that he had his own agenda for Iran’s future.
Initially serving as Minister of War in a civilian government, Reza Khan gradually accumulated power while eliminating potential rivals. His rise was facilitated by Iran’s desperate need for a strong central authority. The country was plagued by tribal rebellions, separatist movements, and foreign occupation. Soviet forces controlled much of northern Iran, while British influence dominated the south. Regional warlords operated with virtual independence, and the central government in Tehran controlled little beyond the capital city itself.
Reza Khan moved systematically to restore central authority. He suppressed tribal rebellions with ruthless efficiency, using modern military tactics and equipment to defeat forces that had maintained their independence for centuries. He negotiated the withdrawal of foreign forces while avoiding any commitments that would compromise Iran’s sovereignty. Most importantly, he began building the institutions of a modern state: a professional army, an efficient bureaucracy, and the infrastructure necessary for economic development.
In 1925, after four years of consolidating power, Reza Khan took the decisive step of deposing the last Qajar shah and establishing his own dynasty. He chose the surname Pahlavi, connecting his rule to the ancient Persian language and emphasising his role as restorer of Iranian greatness. As Reza Shah Pahlavi, he embarked on an ambitious program of modernisation that would transform every aspect of Iranian society.
Authoritarian modernisation
Reza Shah’s modernisation program was comprehensive, systematic, and often brutally enforced. His vision for Iran was inspired by the example of Mustafa Kemal Atatürk in Turkey, who had transformed the Ottoman Empire into a modern, secular nation-state. Like Atatürk, Reza Shah believed that modernisation required breaking with traditional institutions and practices that he saw as obstacles to progress.
The most visible symbol of this transformation was the Trans-Iranian Railway, a massive infrastructure project that connected the Persian Gulf to the Caspian Sea. Completed in 1938, the railway required tunnelling through mountains, bridging deep valleys, and overcoming enormous engineering challenges. More than just a transportation link, the railway represented Iran’s determination to join the modern world on its own terms, financed by Iranian revenues rather than foreign loans.
Educational reform was another priority. Reza Shah established Tehran University in 1934, creating Iran’s first modern institution of higher learning. Primary and secondary education were expanded and modernised, with new schools built throughout the country. The University of Tehran began sending students abroad for advanced training, creating a generation of Iranian professionals educated in modern techniques but loyal to their homeland.
Legal and administrative reforms swept away centuries of traditional practice. A new civil code based on European models replaced Islamic law in most areas of civil life. The traditional court system was abolished in favour of modern courts with trained judges and standardised procedures. Government ministries were reorganised along modern lines, with professional civil servants replacing the traditional system of court appointees.
Perhaps most controversially, Reza Shah implemented sweeping social reforms designed to remake Iranian society. In 1935, he officially changed the country’s name from Persia to Iran, emphasising its Aryan heritage and connections to modern nationalism. Dress codes required men to wear Western-style clothing and banned traditional robes and headgear. In 1936, he extended these requirements to women, banning the chador and requiring Western dress in public.
The costs of forced modernisation
While Reza Shah’s achievements were impressive, his methods created deep resentment among significant segments of Iranian society. The dress code reforms were particularly unpopular among religious communities, who saw them as attacks on Islamic values and Iranian traditions. Many women stopped leaving their homes rather than appear in public without traditional covering.
Reza Shah’s centralisation campaign crushed traditional sources of power and identity. Tribal leaders who had maintained their authority for centuries found themselves stripped of power and forced to send their children to Tehran as hostages. Regional autonomy was eliminated as the central government expanded its control to the most remote corners of the country. While this created national unity, it also destroyed local institutions that had provided stability and identity for their communities.
The shah’s authoritarian methods brooked no opposition. Political parties were banned, newspapers censored, and potential rivals eliminated. The Majles (parliament) continued to exist but became a rubber stamp for royal policies. Independent thinkers, whether secular or religious, found themselves marginalised or imprisoned if they challenged government policies.
Religious authorities faced particular pressure as Reza Shah sought to reduce the influence of Islam in public life. Religious education was restricted, religious courts were abolished, and clerical privileges were eliminated. While these reforms were intended to modernise Iranian society, they also alienated a significant portion of the population that remained deeply religious.
The German connection and downfall
Reza Shah’s efforts to reduce foreign influence led him to seek new international partners who could counterbalance the pressure from Britain and the Soviet Union. In the 1930s, he increasingly turned to Nazi Germany, which offered modern technology and military equipment without the imperial baggage of Britain or the Soviet Union.
German engineers helped build Iranian infrastructure, German advisors trained Iranian military officers, and German companies provided modern equipment for Iranian industries. By 1941, there were thousands of German nationals in Iran, and German influence had grown significantly. This relationship was motivated more by pragmatic considerations than ideological sympathy. Reza Shah saw Germany as a “third force” that could help Iran maintain its independence.
However, this strategy proved disastrous when World War II began. Britain and the Soviet Union could not tolerate German influence over Iranian oil resources that were crucial to the war effort. In August 1941, British and Soviet forces invaded Iran from the south and north, respectively, encountering minimal resistance from Iranian troops.
Faced with the choice between abdication and occupation, Reza Shah chose to step down in favour of his 21-year-old son, Mohammad Reza Pahlavi. The older shah was sent into exile, where he died in 1944. His forced abdication marked the end of his modernisation program and left Iran once again subject to foreign occupation.
The young shah and post-war challenges
Mohammad Reza’s early reign
Mohammad Reza Shah inherited a country that had been transformed by his father’s reforms but was once again under foreign occupation. Young, inexperienced, and lacking his father’s forceful personality, the new shah initially served more as a figurehead while real power lay with the occupying forces and Iranian politicians.
The war years were difficult for Iran. The country became a crucial supply route for Allied aid to the Soviet Union, but this strategic importance came at a high cost. Inflation soared as foreign forces competed for local resources, food shortages became common, and social order deteriorated. The young shah had little power to address these problems while foreign armies controlled his country.
The end of World War II brought new challenges. Soviet forces were slow to withdraw from northern Iran, creating an international crisis that was one of the first confrontations of the Cold War. With American support, Iran succeeded in regaining control of its northern provinces, but the experience reinforced the lesson that Iran’s independence remained fragile.
The post-war period also saw the emergence of new political forces that had been suppressed during Reza Shah’s authoritarian rule. The communist Tudeh Party gained significant support, particularly among workers and intellectuals. Separatist movements emerged in Azerbaijan and Kurdistan with Soviet backing. Most importantly for Iran’s future, a new nationalist movement began to form around the issue that would define the next decade: oil.
The oil question emerges
The transformation of Iran into a modern state had been expensive, and Reza Shah had largely financed his reforms through oil revenues. However, the terms under which Iran received these revenues were increasingly seen as unfair and humiliating. The Anglo-Iranian Oil Company (AIOC), successor to the Anglo-Persian Oil Company established in 1901, controlled all aspects of Iran’s oil industry while providing relatively small payments to the Iranian government.
By the late 1940s, this arrangement had become a source of national humiliation. The AIOC operated the world’s largest oil refinery at Abadan, employing tens of thousands of workers and generating enormous profits. Yet Iranian workers were paid a fraction of what their British counterparts earned, lived in substandard housing, and were excluded from technical and managerial positions. The company operated like a colonial enclave, with separate facilities for British and Iranian employees.
More galling still was the financial arrangement. Iran received only 16% of the net profits from its own oil, while the British government collected more in taxes from the AIOC than Iran received in royalties. By the late 1940s, the company was generating hundreds of millions of pounds in revenue; however, Iran’s share remained modest, even as the country’s development needs grew.
This situation became particularly frustrating when compared with arrangements elsewhere. In 1950, Saudi Arabia negotiated a 50-50 profit-sharing agreement with American oil companies, which dramatically increased the country’s oil revenues. Venezuelan oil agreements also provided much better terms than Iran received. Iranian nationalists began demanding similar treatment, arguing that the AIOC was systematically exploiting their country.
Mohammad Mosaddegh and the National Front
The rise of a nationalist leader
Into this atmosphere of growing frustration stepped Mohammad Mosaddegh, a figure who would become synonymous with Iranian nationalism and the struggle against foreign interference. Born into an aristocratic family in 1882, Mosaddegh had been educated in Europe and had participated in Iranian politics since the Constitutional Revolution of 1905-1911.
Mosaddegh was an unusual politician in many ways. By the time he rose to national prominence, the older man was already known for his dramatic speaking style, principled opposition to foreign interference, and genuine popularity among ordinary Iranians. His speeches in the Majles were legendary performances that combined legal expertise, emotional appeals, and theatrical gestures. He would sometimes faint from emotion while denouncing foreign exploitation, earning him the nickname “the weeping politician.”
Yet beneath the theatrical exterior lay a shrewd political mind and unwavering principles. Mosaddegh had consistently opposed foreign interference throughout his career, refusing ministerial positions when he believed they would compromise Iranian sovereignty. He had been imprisoned by Reza Shah for his opposition to the government’s authoritarian methods. His reputation for integrity and patriotism made him a natural leader for Iranians frustrated with their country’s treatment by foreign powers.
In 1949, Mosaddegh formed the National Front, a coalition of parties and groups united by their opposition to foreign control of Iranian oil. The National Front brought together diverse elements of Iranian society: secular intellectuals, religious conservatives, bazaar merchants, and ordinary citizens who had grown tired of seeing their country’s wealth flow to foreign powers.
The nationalist platform
The National Front’s platform went beyond simple opposition to the AIOC. Mosaddegh articulated a vision of Iran as a truly independent nation, free from foreign interference and able to use its natural resources for national development. This vision resonated powerfully with Iranians who had experienced decades of foreign domination.
The nationalisation of oil was the centrepiece of the National Front’s program, but it was connected to broader themes of national dignity and democratic governance. Mosaddegh argued that Iran could never be truly independent as long as foreign companies controlled its most valuable resource. He proposed that Iran take control of its oil industry and use the revenues to fund education, healthcare, infrastructure, and industrial development.
The National Front also advocated for democratic governance and an end to foreign interference in Iranian politics. Mosaddegh believed that Iran’s problems stemmed not just from economic exploitation but from political arrangements that gave foreign powers too much influence over Iranian affairs. He called for an end to foreign military bases, foreign advisors in the Iranian government, and foreign manipulation of Iranian elections.
Mossadegh’s message was not anti-Western in the sense of rejecting modern technology or democratic values. Instead, he argued that Iran should be treated as an equal partner in international relations rather than as a client state. He expressed admiration for American democratic traditions while criticising American support for British imperial policies in Iran.
The oil nationalisation crisis
The parliamentary victory
The National Front’s popularity grew throughout 1950 as oil negotiations between Iran and the AIOC reached an impasse. The British company had offered some improvements in terms of its concession, but these fell far short of the 50-50 arrangements that other oil-producing countries had achieved. Iranian public opinion increasingly favoured taking control of the oil industry entirely.
In March 1951, the Iranian parliament voted overwhelmingly to nationalise the oil industry and establish the National Iranian Oil Company. The vote was not close. The parliament was responding to overwhelming public demand for an end to foreign control over Iranian resources. Shortly afterwards, Mohammad Mosaddegh was appointed Prime Minister, making him responsible for implementing the nationalisation policy.
The nationalisation law was carefully drafted to provide compensation to the AIOC for its installations and investments, but it insisted that the era of foreign control over Iranian oil was over. Iran would operate its own oil industry, set its own production levels, and use the revenues for national development rather than foreign enrichment.
British reaction and economic warfare
The British reaction was swift and uncompromising. Prime Minister Winston Churchill and Foreign Secretary Anthony Eden viewed the nationalisation as theft of British property and a dangerous precedent that might encourage other oil-producing countries to follow suit. If Iran succeeded in taking control of its oil, what would prevent other countries from nationalising British investments?
Britain’s initial response was economic warfare designed to strangle the Iranian economy and force a reversal of nationalisation. The Royal Navy blockaded Iranian ports to prevent oil exports, while British diplomats pressured other countries not to purchase Iranian oil or provide technical assistance to Iran’s nationalised oil industry.
The economic pressure was severe and effective. Iran’s oil revenues dropped dramatically as international oil companies refused to buy Iranian oil or provide the technical expertise necessary to operate the complex Abadan refinery. The British blockade was backed by legal action in international courts and threats of retaliation against any country or company that violated the embargo.
However, the economic pressure failed to achieve its primary objective. Instead of weakening Mosaddegh’s government, the British embargo made him more popular among Iranians, who saw it as proof that their country was fighting for its independence against imperial domination. Street demonstrations supported nationalisation while denouncing British imperialism. Even Iranians who suffered economically from the embargo often endorsed the principle of national control over natural resources.
The deepening crisis
As the oil crisis dragged on through 1951 and 1952, both sides hardened their positions. Mossadegh refused to compromise on the principle of Iranian control over Iranian oil, while Britain refused to accept any arrangement that would legitimise what it saw as the confiscation of British property.
The economic costs of the embargo mounted for both sides. Iran lost the oil revenues that had financed much of its government budget and development programs. Unemployment rose, particularly in the oil-producing regions, and the government was forced to implement austerity measures. However, Britain also suffered as it lost access to Iranian oil and was forced to find alternative sources at higher prices.
Politically, the crisis strengthened both Mosaddegh’s position in Iran and opposition to his government among foreign powers. Within Iran, Mosaddegh’s principled stance against foreign pressure made him a hero to many Iranians across class and regional lines. His National Front won significant victories in parliamentary elections, and he was able to use emergency powers to implement reforms and maintain order.
Internationally, however, Mosaddegh’s government was increasingly isolated. Britain’s diplomatic and economic pressure made it difficult for Iran to find markets for its oil or obtain the technical assistance necessary to operate its nationalised industry. More ominously, the British government began exploring more direct action to remove Mosaddegh from power.
The American factor
Initially, the United States had been somewhat sympathetic to Iranian nationalism and critical of British imperial practices. President Harry Truman’s administration understood Iranian frustrations and initially tried to mediate between Iran and Britain. Some American officials saw the oil dispute as an opportunity to break British monopoly control and gain access to Iranian oil markets for American companies.
However, American attitudes began to shift as the Cold War intensified and concerns grew about Soviet influence in Iran. The communist Tudeh Party was active in Iranian politics, and there were fears that continued instability might create opportunities for Soviet interference. Some American officials worried that Mosaddegh’s nationalism might ultimately benefit the Soviet Union.
The election of Dwight Eisenhower as president in November 1952 marked a crucial turning point. The new administration was more receptive to British arguments that Mosaddegh represented a threat to Western interests in the Middle East. Secretary of State John Foster Dulles and CIA Director Allen Dulles viewed the world through the lens of the Cold War. They were more willing to take covert action against governments they saw as insufficiently anti-communist.
As 1953 began, the stage was set for a confrontation that would determine not just the fate of Iranian oil but the future direction of Iranian politics and society. Mosaddegh’s government remained popular in Iran but faced growing international pressure and internal challenges. The British had failed to destroy the nationalist movement through economic warfare and were increasingly considering more direct action.
The stage is set for confrontation
By early 1953, the oil nationalisation crisis had evolved into something far more significant than a commercial dispute. For Iranians, Mosaddegh’s government represented the possibility of genuine independence and democratic governance free from foreign interference. For the British, Iranian nationalism posed a threat to the entire system of imperial control over Middle Eastern resources. For the Americans, Iran had become a Cold War battleground where the wrong outcome might benefit the Soviet Union.
The economic warfare had failed to bring down Mosaddegh’s government, but it had weakened Iran’s economy and created domestic pressures that foreign powers might exploit. The British were no longer content to wait for economic pressure to work—they were actively planning more direct action to remove a government they saw as a threat to their interests.
The confrontation between Iranian nationalism and Western imperial interests was reaching a climax. Everything that had defined modern Iranian history—the struggle for independence, the challenge of modernisation, the tension between democracy and stability, the question of who would control Iran’s natural resources—was about to be resolved in a dramatic showdown that would reshape not only Iran but the entire Middle East.
The stage was set for one of the most consequential covert operations of the 20th century. In our final article, we’ll explore how the CIA and British intelligence orchestrated the overthrow of Iran’s democratically elected government, examine the broader motives that drive Western interference in the Middle East, and analyse the long-term consequences of Operation Ajax—consequences that continue to shape Iranian politics and Western-Middle Eastern relations to this day.
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