‘Free market’ policies were pursued even before the Iran-Iraq war. The theocratic regime worked closely with the IMF and eventually all subsidies were abolished

A century of dependency

Foreign intervention did not come to an end with the 1979 revolution. No, as shown by Yassamine Mather, Iran’s Islamic rulers are more than willing to do the bidding of US-controlled international institutions

At the end of World War I the British empire was forced to assess the situation in the Middle East, given the dramatic changes in the international order: the fall of the German and Ottoman empires, the overthrow of the Russian tsar and the coming to power of the Bolsheviks had all played their part in destroying the balance of power in the region - especially in countries such as Iran, whose territory had been contested by British, Russian, German and Ottoman forces.

As late as 1919 the British colonial power had considered withdrawing from Iran. However, with the Qajar dynasty in decline, the country’s diplomats saw an opportunity through a coup, led by an Iranian officer of the Persian Cossack Brigade, Reza Khan. Only a year earlier, he had gained notoriety for his role in quashing a rebellion led by Mirza Koutchik Khan. This was part of an attempt to create an ‘independent socialist republic’ in Gilan province in northern Iran.

To understand British interests in Iran we have to go back to the early 1900s and the establishment of the Anglo-Persian company in 1909. According to William Fain, British strategy in the Middle East had two aims: “defend its position athwart the principal lines of communication and supply between Britain and British India; and then protect the newly discovered Persian oil, that was used to power the Royal Navy and further its war campaign, from falling into alien hands”1

Lord Curzon put it bluntly: “I should regard the concession of a port upon the Persian Gulf to Russia, by any power, as a deliberate insult to Great Britain and as a wanton rupture of the status quo, and as an international provocation to war.”2

In January 1921, the commander of the British forces in Iran, general Edmund ‘Tiny’ Ironside, promoted Reza Khan, who had been leading the Tabriz battalion, to head the entire brigade.

Later that year, the event known as the Persian coup of 1921 was directed by the British embassy in Tehran.3 On February 21 1921 a bloodless coup led to the coming to power of Sayyid Ziya al-Din Tabatabai, a pro-British political writer. Reza Khan, who by then had taken control of all military forces in Iran, was named minister of war and later prime minister under the rule of the last Qajar sovereign, Aḥmad Shah. Initially Reza Khan wanted to imitate Turkey’s Kemal Atatürk and declare himself a secular president, but in the end he decided to call himself ‘Shah’ and started a new dynasty under a made up name, ‘Pahlavi’ - the name of the language used in pre-Islamic Sasanian Persia.

The first country to recognise the new shah was Britain, and a number of historians have documented the close relationship between British officials and the new king.

Pahlavi and Nazi Germany

The next date to remember is 1933, the year of the oil agreement with Britain. Although supporters of the Pahlavi dynasty hail it as favourable to Iran, nothing could be further from the truth. According to the deal, the Anglo-Persian Oil Company - renamed in 1935 as the Anglo-Iranian Oil Company (AIOC) - was allowed to choose the area under its control, although this had to be 100,000 square miles (260,000 square kilometres) less than before, the company agreed to pay annual payments in lieu of Iranian income tax. These were for a minimum of £750,000 in exchange for exemption from import and custom duties, and the Iran government surrendered the right to annul the agreement. The deal in fact legitimised an extension of the D’Arcy concessions made in the early 1900s.

By the mid-1930s Reza Shah had signed a number of ‘development deals’ with Nazi Germany and there were hundreds of Germans in Iran busy setting up factories, building roads, railways and bridges. It seems that Adolf Hitler and Reza Shah Pahlavi had close ties - in 1936, the Hitler cabinet declared Iranians to be immune to the Nuremberg Laws, as they were considered to be “pure Aryans”. By 1939 the relationship had moved forward, as Germany donated to Iran 7,500 books, known collectively as the Germany Scientific Library, aimed at convincing Iranian readers of the kinship between “the National Socialist Reich and the Aryan culture of Iran”. In many pro-Nazi publications, lectures, speeches and ceremonies, parallels were drawn between Reza Shah and Hitler, and there was much praise for the charisma and virtue of the Führerprinzip.

During World War II, the Allies, led by Britain, were demanding the expulsion of German residents from Iran, but Reza Shah refused to comply. However, the Anglo-Soviet invasion of Iran took place in August 1941, with the declared aims of guaranteeing the security of supply lines to the USSR, securing Iranian oilfields and limiting German influence within Iran.

The navies of Britain and Australia attacked from the Persian Gulf in the south, while Commonwealth forces invaded by land and air via Iraq. The Soviet Union invaded from the north, occupying Iran’s northern provinces. Six days after the invasion, which was followed by the Allied occupation of southern Iran, the British divisions - also known as the Iraq Command - were renamed the ‘Persia and Iraq Force’ (Paiforce). There were around 200,000 Allied troops, backed up by aircraft, tanks and artillery.

Reza Shah was unceremoniously deposed and forced into exile. The British, having themselves brought him to power, now deposed him, as he was considered a threat to their interests. He had no choice but to abdicate, but, even when he was on the ship taking him to South Africa, he thought he was going to India for a short period of exile. He was replaced by his son, Mohammad Reza Shah, who - until his own exile in 1979 - always remained aware that he had been put in power by a foreign power.

1953 coup

In March 1951, legislation proposed by the nationalist government of Mohammad Mossadegh led to the nationalisation of the AIOC, reversing the 1933 deal made between the Iranian and British authorities. Mossadegh’s attempt to audit AIOC documents and thereby limit the company’s control of Iran’s oil reserves had been unsuccessful and the Iranian parliament voted for nationalisation.

Britain orchestrated a boycott of Iranian oil and used military force to seize control of the Abadan oil refinery - at the time one of the world’s largest. The UK’s post-war Labour prime minister, Clement Attlee, increased the economic boycott, and when the Tories won the 1951 general election the new premier, Winston Churchill, collaborated with the USA under president Dwight D Eisenhower in the overthrow of the elected government in Tehran.

According to Stephen Kinzer, in the book All the shah’s men,

Kermit Roosevelt quickly seized control of the Iranian press by buying them off with bribes and circulating anti-Mossadegh propaganda. He recruited allies among the Islamic clergy, and he convinced the shah that Mossadegh was a threat. The last step entailed a dramatic attempt to apprehend Mossadegh at his house in the middle of the night. But the coup failed. Mossadegh learned of it and fought back. The next morning, he announced victory over the radio.

On August 15 1953 Mossadegh arrested dozens of pro-shah military men. Many of the top brass, including Fazlollah Zahedi, one of the main pro-shah generals, was forced into hiding, and the shah himself fled the country.

However, Kermit Roosevelt (son of former US president Theodore and a senior figure in the CIA) did not give up, organising a second - successful - coup later that month in an operation code-named ‘Ajax’. On August 19, ‘rented’ crowds took to the streets, sponsored by the CIA - although it was only in 2013 that it admitted involvement.

The clergy too played an active role in supporting the coup.4 Some funding had been channelled via the pro-shah ayatollah, Seyyed Behbahani, who mobilised religious mobs. Ayatollah Abol-Ghasem Kashani - a former ally of Mossadegh, who by then had completely abandoned support for the nationalist prime minister in favour of the shah - also played a vital role. Mossadegh was deposed, spending the rest of his life under house arrest.

A month after the coup, in September 1953, a US army colonel working for the CIA was sent to Iran to help create the country’s secret service. Later senior CIA officers were sent to Iran and trained the first generation of agents in the shah’s notorious secret service, Savak. In the same decade the US helped Iran start its nuclear programme - yes, Tehran acquired its first nuclear reactor and nuclear fuel thanks to the US.


Like his father, the second Pahlavi shah, Mohammad Reza Pahlavi, was returned to power courtesy of a coup. However, by this time the US had replaced the UK as the world hegemon power and by the 1960s it was the US that was calling the shots, including in Iran.

President John F Kennedy encouraged the shah to embark on the ‘White Revolution’ - also called the ‘Shah and People Revolution’! It was the culmination of reforms orchestrated by the US as part of a global strategy to encourage capitalist developments in client states. The shah hoped it would remove the influence of landowners and gain support amongst peasants. However, while the most significant measure of the ‘revolution’ - land reforms - produced some independent farmers, in the absence of economic measures to support them, most peasants became landless labourers and were eventually forced to migrate to the shanty towns of major cities.

Other ‘reforms’, such as allowing women the vote, were meaningless in a country where the absolute ruler virtually admitted that the two ‘alternatives’ contesting elections were “‘yes’ and ‘of course’ parties”.

According to some historians, between 1969 and 1974 president Richard Nixon actively recruited the shah as an American puppet and proxy.5 No doubt the two men had close relations and Iran bought large quantities of US military hardware in the 1970s. By 1977 Jimmy Carter was US president and, despite his rhetoric about ‘human rights’, he maintained close relations with the Iranian monarch. Visiting Tehran in the first year of his presidency, Carter toasted the shah and described Iran as “an island of stability” in the Middle East.

By the time Carter began taking notice of the protests and demonstrations, it was too late. In post-mortems of the events of 1978 and 1979, political analysts have blamed the US security authorities for failing to recognise the extent of opposition to the shah. According to Gary Sick, who worked in the US National Security Council, there was an “astonishing lack of hard information” about events in Iran, particularly the opposition movement.

That was despite the close cooperation between Savak and the CIA. The US ambassador in Iran would regularly reassure Carter’s secretary of state, Cyrus Vance, that there was nothing to worry about. In reality both he and the security forces - obsessed by a cold war ideology that only considered the left as the enemy - first understated the strength of the religious movement and then, when it became clear that it was impossible to keep the shah in power, tried to ensure a smooth transfer of power to Ruhollah Khomeini and his allies in order to prevent the left benefiting from the revolutionary situation.

All this followed a bizarre intervention. Royalists and opponents of the Islamic Republic have peddled various conspiracy theories about general Robert Huyser’s secret mission of January 1979. It is certainly true that Huyser’s main task was to encourage the shah to leave the country and to stop a potential military coup by generals loyal to him.

Declassified US documents show that, 10 days after the shah’s departure from Iran in January 1979, Khomeini sent a message to Washington offering a deal: if Carter could use his influence on the military to clear the way for his takeover, Khomeini suggested, he would ‘calm the nation’ and stability could be restored. Both America’s interests and Iranian citizens would be protected.6

Khomeini’s note to the president was declassified in 2016, but it was only in 2019, on the 40th anniversary of the Islamic revolution, that comments and analysis of it became well known - shedding more light on the Carter administration’s secret negotiations immediately after the shah’s flight. While Huyser’s main task was to stop pro-shah generals from organising a military coup, he had in fact given the generals the green light for such a coup, if the left was in a position to take power. The secret deal demonstrates that the US administration was more fearful of the progressive forces than of the Islamists - particularly the working class, whose strikes had paralysed the country. In the true tradition of US foreign intervention, not least during the cold war, it was considered better to ally with the Islamists against such secular and leftwing forces.

The plan agreed between the Carter administration and Khomeini (via his secular advisors, including Sadegh Ghotbzadeh and Ebrahim Yazdi) was to organise a smooth transfer of power to Khomeini. What shattered those plans were the dramatic events of February 11-12, when the Iranian military declared itself neutral and effectively conceded power to Khomeini.

By the way, while a lot has been written about the events after the Iranian revolution, including the ‘student’ takeover of the US embassy in Tehran, what is rarely mentioned is the fact that the new Islamic state did its utmost to destroy historic CIA documents found in the embassy.


Most people are under the impression that US interventions in Iran ended in 1979. Nothing could be further from the truth,

As far as Iran’s new rulers were concerned, taking hostages in the US embassy (November 1979 to January 1981) was part of a plan to consolidate the power of the new religious state and divert attention from its growing repressiveness. The hostages were released following a secret deal with the Republican presidential candidate, Ronald Reagan, prior to his defeat of the incumbent Democratic president, Jimmy Carter, in November 1980.

This deal paved the way for another secret Iran-US agreement, known as Irangate, when US hostages taken by the pro-Iran Hezbollah in Lebanon were released as part of an elaborate deal. This was the ‘Iran-Contra affair’, when the US hostages were released in exchange for Israeli weapons, to help Iran fight its ‘anti-western’ war against Iraq. Iran paid for these weapons by depositing funds into Swiss bank accounts belonging to the Nicaraguan anti-Sandinista ‘contras’, as well as by shipping oil to Israel.

According to the Jaffe Institute for Strategic Studies at Tel Aviv University, Israel’s arms sales to Iran during this period totalled $500 million, including spare parts for US-made F-4 Phantom jets,7 and throughout 1981 and 1982 the Israelis reportedly set up Swiss bank accounts to handle the financial end of the deals. In addition to Israeli arms, according to the report of the US Congressional committee (November 1987) investigating the Iran-Contra affair, “the sale of US arms to Iran through Israel began in the summer of 1985, after receiving the approval of president Reagan”. In November 1985,

a second load of missiles was sold to Iran. The second sale provided the first funds that were diverted to the Nicaraguan Contras. To complete the diversion covertly, and without the knowledge of Congress ... a company called the Stanford Technology Trading Group International [was established], which was commonly known as The Enterprise. Israel transferred $1 million to an Enterprise-owned, Secord-Hakim Lake Resources Swiss bank account for the second arms shipment. This account had previously been used only for Nicaraguan Contra business.8

Senior Iranian clerics and state officials were directly involved. Khomeini is believed to have given his personal approval, while ayatollah Hashemi Rafsanjani and his immediate family were part of the intricate negotiations with the Reagan administration’s representatives, Oliver North and Robert Mcfarlane.

At the end of the day, Iran’s clerics were completely discredited - they were said to be ‘fighting imperialism’, yet they struck a deal that benefited the US, Israel and the rightwing Nicaraguan contras!

Neoliberal economics

In the first quarter of the 20th century, military intervention and coups had secured Britain’s continued economic exploitation of Iran. By the 1990s, as far as the US global hegemon was concerned, Iran had to be incorporated into the global neoliberal capitalist order. For all its rhetoric and political slogans against the ‘west’, Iran’s Islamic Republic became very much part and parcel of modern global capital.

On the country’s economy, the following paragraph from a report by the World Bank is a reasonable summary of the situation:

Iranian authorities have adopted a comprehensive strategy encompassing market-based reforms, as reflected in the government’s 20-year vision document and the sixth five-year development plan for the 2016-2021 period. The sixth five-year development plan is comprised of three pillars: namely, the development of a resilient economy, progress in science and technology, and the promotion of cultural excellence. On the economic front the development plan envisages an annual economic growth rate of 8% and reforms of state-owned enterprises, the financial and banking sector, and the allocation and management of oil revenues among the main priorities of the government during the five-year period.9

Here we should pay attention to two factors: privatisation and the maximisation of profit for the sake of ‘growth’ (plus the ending of welfare subsidies) - does it sound familiar?

The consequences are well known. The ‘free market’ policies that have dominated the country’s economy started after the Iran-Iraq war. The then president, Rafsanjani, was advised solely by neoliberal economists, and subsequent governments have worked closely with the International Monetary Fund to implement its Structural Adjustment Program, privatisation and the reduction (and eventual abolition) of all subsidies.

As Ismael Hosseinzadeh has written,

The Rouhani administration’s blind faith in the perceived magic of free enterprise explains why the administration lacks some badly-needed macroeconomic objectives, guidelines or policies. It also explains why the administration has no control over the nation’s money supply, its foreign exchange market, its financial system and institutions, its exports and imports, and the like. The hands-off economic doctrine, which is tantamount to shirking duty, or responsibility, in the face of mounting economic problems, is justified under the guise of the ‘sanctity’ of private property and the ‘magic’ of free enterprise. Neglect of the public-sector programmes, both social services and developmental projects, is reflected in a drastic decline in the share of national budget that is allocated to such services and projects - from 22% of the national budget in 1991 to the currently less-than 10%.10

No need to explain how all this has exacerbated the gap between the rich and the poor, creating a disastrous background during the ravages of the Covid pandemic. In other words, the effects of imperialist and pro-capitalist interventions in the century since 1921 have been more devastating on the Iranian people than those of all the military interventions and coups put together.

  1. WT Fain American ascendance and British retreat in the Persian Gulf region New York 2008, pp2-3. See also R Johnson British imperialism New York 2003, pp160, 163; M Manouchehr Morouri bar Siasat-e Khareji-e Iran-e Doran-e Pahlavi (‘A review of Iran foreign policy during the reign of Pahlavi’ [sic]), Tehran 1998, pp22-23.↩︎

  2. W Engdahl A century of war: Anglo-American oil politics and the new world order London 2004, p20.↩︎

  3. See C Ghani Iran and the rise of the Reza Shah: from Qajar collapse to Pahlavi power New York 2001, p147.↩︎

  4. See M Axworthy Revolutionary Iran : a history of the Islamic republic Oxford 2013, p48.↩︎

  5. James A Bill The eagle and the lion: the tragedy of American-Iranian relations Yale 1989.↩︎

  6. bbc.co.uk/news/world-us-canada-36431160.↩︎

  7. J Marshall, P Dale Scott, J Hunter The Iran–Contra connection: secret teams and covert operations in the Reagan era Montreal 1987, p171. The first sales included spare parts for US-made F-4 Phantom jets; a later deal in October 1980 included parts for US-made tanks.↩︎

  8. T Draper A very thin line: the Iran-Contra affairs New York 1991, p17.↩︎

  9. worldbank.org/en/country/iran/overview.↩︎

  10. counterpunch.org/2018/10/03/neoliberal-economics-the-plague-of-irans-economy.↩︎