Bill Totten's Weblog

Friday, September 16, 2005

Oil Addiction: The World in Peril - 24

by Pierre Chomat (Universal Publishers, 2004)

translated from the French by Pamela Gilbert-Snyder

Part III. The Power of America: Rooted in Dependency

Chapter 24. Iran, Top Tier, Bottom Tier

In 1969, the Shah of Iran crowned himself Shahinshah, or "King of Kings". Three years later, in 1971, he held a major celebration at Persepolis, formerly the Achaemenid capital of Parsa, the old Persia, in honor of the 2,500th anniversary of the founding of the Persian Empire and also the 2,500th anniversary of the death of King Cyrus the Great. His primary aim in organizing this event was to show the world that Persia was still alive and well and that Iran was more ancient than any other Middle Eastern or Western country. The festivities were intended to surpass in splendor those of the earlier processions of the satraps - the provincial rulers - when they made their offerings to the Persian King. During the ceremonies, the Shahinshah thanked the many representatives of foreign states who had come to honor him. He promised that modern Iran's development would exceed anything that the world had ever known.

In 1975, an activity that was closely related to Iran's petroleum industry took me to that country, where I was to live for the next three years.

While in Tehran, I soon realized that Iran was really two countries in one, or two-tiered, as if part of it were mounted on stilts. On the platform were the "haves". Down on the ground below, in the grit and the mud, were the "have-nots". The "haves" were connected somehow to the wealthy nations. The "have-nots" were connected only to each other; they were just able to gather a few crumbs as they tumbled down from above. There were also a few well-meaning individuals trying to enlarge the platform above so that one day all Iranians might live there. Although my presence in Iran was not related to any philanthropic enterprise, I, too, had come there hoping to "enlarge the platform". From the beginning, however, I was forced to realize that my chances of succeeding were slim to none.

The Iranians with whom my company was associated tried to warn me, in their way. One told me that it was not easy to do business there. It was his way of telling me that I needed to heed the local business customs. He explained, for example, how foreign imports were being handled by the ports. Large cargo generally entered the country through the port of Khorramshahr on the Shatt-el-Arab estuary near the Persian Gulf. The port was congested and boats sometimes had to wait at sea for up to eighteen months before gaining access to the docks. Several hundred ships usually were anchored in the Gulf, like a floating city. Each had to wait until those unloading their freight paid the customs duties. I learned later that these duties were actually payoffs to corrupt officials. It also took me a while to figure out that the more generous the freighter's captain, the shorter the wait. Scams abounded, resulting in long delays. And, thus, the port was congested. My colleague added, however, that the Shah, frustrated with all the graft and wanting to progress, had recendy hired a Korean port management company to clean up Khorramshahr under the protection of the army. The Koreans planned to unload all the boats still waiting at sea within three weeks. All this made me realize that Iran was different from the other countries in which I had worked. It would surely be a challenge.

In 1978, the Shah scrapped the modern Iranian calendar in favor of the ancient Persian one. In one day, Iran jumped from the year 1356 to the year 2508. Afterwards I could say that, having arrived in Iran in 1353, my family and I had spent 1,155 years in Persia - and still had not had time to learn all of its customs! On any calendar, however, the period during which I lived in Tehran was a time of absolute rule by His Imperial Highness Mohammed Reza Pahlavi. Backed by a powerful army and secret police that were among the world's most ruthless, the Shahinshah reigned over Iran with an iron fist, suffering no dissent. The common practice of denouncement was used to put any opponent of the regime quickly behind bars. The prisons were full, the interrogations horrifying, and returns home rare.

My house overlooked most of Tehran and was located at the foot of the Alborz Mountains, which rise to a height of over thirteen thousand feet above the capital. This part of the city has the best air quality. Lower down is the central business district. Lower still, even lower than the bazaar, ten million Tehranis live on top of one another in cramped contiguous dwellings amid uncontrolled pollution. In the 1970s there were no underground sewers anywhere in the city, high or low, and when it rained or the snow thawed, everything flowed downward through the streets, which were transformed into open sewers. The first time I saw this, the image of an Iran on stilts came immediately to my mind.

The business district was a grid of about ten broad avenues with a few ornate buildings covered in grey marble to show that the city had adopted some of the architectural concepts of the industrialized West. Innumerable orange "cooperative" taxis scuttled about picking up customers, who squeezed onto the dilapidated seats with other passengers. Traffic was extremely dense. The most battered, barely drivable jalopies unabashedly shared the road with the most luxurious cars from Europe. All of them dashed about the city with no thought to rules of traffic, especially when it came to red lights, which had been installed apparently just for show, no doubt in imitation of the West. From the business names displayed on the various buildings, it was easy to surmise that the country exported nothing but oil and rugs. The beautiful Persian rugs woven in villages far from Tehran were the masterworks of the true Iran. All of the other products on display in the outsized store front windows came from the West.

It is possible that the Shah actually believed for a few years that he would be able to develop his country industrially, especially after the spike in crude oil prices in 1973. But by 1975 it seemed as if almost nothing of any consequence had been accomplished. In the months following my arrival I realized that it was the Shah's lack of adequate funds that kept him from proceeding at anything faster than a snail's pace. The economic priority was to build facilities to keep hydrocarbons flowing. But the oil exported from the rich fields of Khuzestan benefited only Iran's top tier. The democratization of Iran, announced with such fanfare by the nation's monarch at Persepolis, was a mere political gesture. Those on the top tier and those on the bottom, everyone, knew that the talk about social change was just for show, like the traffic lights and the coronation of the Shahinshah.

My work required me to return to Paris rather frequently. On the plane I would often encounter French people, some of whom occupied high governmental positions, who spoke of the fabulous wealth Iran was earning from its oil. But in Iran I saw no concrete sign of development, apart from the oil industry. The University of Tehran was under-funded. Tehran's factories only assembled equipment designed and manufactured elsewhere. Raising the standard of living of bottom-tier Iranians just was not feasible, and all that it took to convince my fellow travelers were a few simple calculations.

Between 1975 and 1978 Iran exported approximately two billion barrels of oil per year at around $20 per barrel, yielding $40 billion in gross annual income. One third of this was reinvested in petroleum equipment, purchased by Iran mostly from the oil-importing nations; this first third, therefore, returned to the West. Another third was spent on national security, military equipment and the salaries of thousands of American advisors; thus, this second third also returned to its point of origin. Finally, after adjusting for amounts skimmed off by the Iranian gentry at various points along the way, only about $8 billion remained for the government to put toward modernization. Taking Iran's entire population into account, this came to only about $200 per Iranian per year, a trifling amount when one considered that it had to pay for schools, infrastructure, healthcare and every other social service. The term "modernization" would scarcely apply. The price of oil was too low to yield the country any real benefits beyond a few jobs for those who ran the petroleum facilities.

Thus, there was no solution for those on the bottom tier. The Shah's palace might as well have been Versailles; the people could do little more than sit and watch the regime's courtesans parading in and out. Oil was synonymous with foreign policy and, the secret police being everywhere, the people had no choice but to keep their mouths shut. The oil was sent away to make the countries of the Northern hemisphere richer; the people of Iran were being sent to the mosques to pray.

As paradoxical as it might seem, the oil that the Shah was counting on to bring about real social change was actually preventing him from achieving his goal. Iranian oil was too great a source of industrial power: the wealthy nations' futures depended on it. So, fifteen years after the creation of OPEC, although Iran was theoretically no longer under the thumb of the hydrocarbon importers' cartel, it still did not belong to itself, economically or politically. It belonged to the egosystems of the North.

In 1978, oil was the lifeblood of the companies that ruled the planet - and it remains so today! The West was prepared to do anything to secure its supply of hydrocarbons. Prime Minister Mossadeq had understood this perfectly. The outside world had clearly shown its lack of interest in Iran's democratization when it refused to support Mossadeq, and even forced him to leave the country in 1953. By the end of his reign in 1978, the Shah understood this, too, and knew, no doubt, that he was at the mercy of the wealthy nations. America, Europe and the other major customers showing up regularly at his petroleum ports could not have cared less about the development of Iranian society.

The industrialized nations showed about as much consideration for the people of Iran and the rest of the Middle East as the European immigrants had shown toward the Native Americans when they invaded their country and pushed them off their lands. These people simply did not matter! Although, in 1978, the President of the United States asked the Iranian monarch to sprinkle a little democracy around the land from time to time - without, of course, offering any means of helping him to do so - this was only to demonstrate the United States' good intentions with respect to Iran and enable it to continue laying claim to the democratic spirit and principles of the US Constitution. In reality, it did not bother the United States or Europe one bit that millions of Iranians had no access to education or even the most basic social amenities and were terrorized by a brutal secret police. Cheap oil, always available, was the only goal.

Worse yet, the United States had actually imposed the Shah's regime on Iran. In return for its continued support, the Shah had pledged allegiance to the West and could not tolerate domestic dissent. He could not even tolerate the teaching of philosophy or sociology at the universities because it might lead to the development of opposition parties. In the heart of America, as in Europe, few people knew what was really going on in Iran. The vast majority of them believed the Shah when he announced that his country was on the road to democratization.

The industrialized nations would not admit that they were engaged in an organized plunder of the natural resources of Iran and the Middle East in general, and that this practice had been going on since the beginning of the twentieth century. On the contrary, they continued to assert noble justifications for their actions, such as bringing "lasting democracy", "free enterprise" and "free trade between nations" to the people who needed them. Left out of this rosy picture was the fact that the so-called "free trade" of low-cost oil for high value-added industrial goods - perhaps it would be more accurate to say "high wage-added" - benefited only a small minority of the leaders in Iran and the other Gulf nations.

Iran's wealthy families realized that their country was being exploited mercilessly by foreigners and that no one could ensure its future, least of all the countries that were claiming falsely to already be doing so. Since they could not place their hopes in the Iran of tomorrow, they positioned themselves to profit from the bind the Shah was in. With no more scruples than the foreign oil companies, they opted for immediate gain. Their attachment to their country grew tenuous. Los Angeles, Paris, and London were not far-away cities to them: they were places for investment and returns reaped on the gigantic incomes that they received by dint of their privileged status. As their foreign holdings grew, the rich families became less Iranian and more Californian, French, Italian, German, and Swiss. Once they reached this stage, Iran was nothing more to them than a source of personal enrichment. By 1978, the pillaging of the nation's wealth was widespread. It extended to and was encouraged by Iran's elite.

The situation was endemic. Even Iranian entrepreneurs did not invest in their own country. As soon they signed a building contract - obtained, of course, by promising to share the profits with some unsavory intermediary - they hired foreign companies to provide the technology and paid their Iranian, Korean or Philippine workers paltry wages and then dispensed with them as soon as the job was done. Any profit made along the way was sent abroad, facilitated by the world's largest international banks, all of which had offices in Tehran. The wealthy entrepreneurs kept nothing on Iranian soil except their sumptuous villas, carpeted with several layers of silk rugs from Isfahan or Na'in, and their downtown offices in which they received foreign visitors. These large executive offices often featured a giant map of the world, on which Iran was prominently displayed. In a much more modest room next door, a secretary would labor away on voluminous files that would serve to demonstrate the company's know-how when it came time to strike the next deal.

This period in Iran reminded me of the California Gold Rush. Iranian gold was black, not yellow, but the fever, with all of its selfishness and irrationality, was there all the same. The major difference was that in Iran the "gold" did not provide any benefits to the country! Top-tier Tehran knew that its oil reserves would not last forever; it also knew that they were incredibly sought-after and could rapidly change hands, so they were in a hurry to take advantage. All was fair in this game, especially if it meant making a quick buck. The scams at the port of Khorramshahr were not unique. Anyone who wanted to buy a car, for example, had to go through a middleman or wait six months. The car he received, paid for with a good commission, was not always exactly what he had ordered. It might have been tinkered with to make it look new if it was not or to make it look like a more recent, more powerful or more expensive model. But the buyer had to accept the deal or walk.

This example may seem insignificant in the larger context of Iran's future, but it is emblematic of how projects worth billions of dollars had to be negotiated by foreign companies. When such a company bid on a building project, it had no way of knowing whether the Iranians who were advising it were really going to help it to win the contract or, instead, use the information in its bid to assist a competitor that they preferred. In Tehran I often felt like a racehorse made to run by unknown betters. I did not know who they were, but I imagined that the more costly the project, the higher up they were in the country's hierarchy. And winning the contract did not mean negotiations were over. In fulfilling a building contract, for example, a foreign company had to buy cement at prices many times higher than the official cost set by Iranian cement factories, even when thousands of tons of cement were involved. I could provide a long list of such instances of corruption, but it would not mean much; they were ubiquitous.

By the end of the 1970s, no one in Iran was willing to invest in its future, and the Shah remained unable to develop the country's industry. It was a nation exploited by foreigners, which is how the industrialized world wanted it. The West supported the Shah, accepting, de facto, SAVAK, Iran's secret police, whose sordid work went on. Any Iranian who dared utter the slightest word in favor of Iran having even the tiniest bit of independence from foreign influence was labeled antipatriotic and accused of being a communist. Such patriots were sent to the prisons of no-return.

And thus was the course of history altered in Iran, for the benefit of foreign powers.

Having experienced life in Iran from 1975 to 1978, I cannot help but draw a parallel between the transformation of Iran during that period and what the United States attempted to do in Iraq in 2003 and 2004.

Bill Totten


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