Iran's Oil Story: The Persian Empire, Coups – And Global Power Struggle
Iran’s oil possesses a history far older than the modern energy industry. According to the Journal of Petroleum Geology’s January 2024 edition, oil extraction practices were recorded during the Achaemenid Empire. Historical records from 1970 cite a man-made oil well dug in the ancient city of Susa around 500 BC during the reign of Darius I.
Greek historian Herodotus in the 5th century BC also documented oil production activities in the Ardericca region, a location believed to be near present-day Masjed Soleyman.
During that period, oil appeared as natural bitumen. Research by Rasoul Sorkhabi, summarised in the journal, indicates this material was used for building construction and ship coating to waterproof vessels. Oil in the form of earth seepage had been known to local populations for centuries before modern drilling technology developed in Europe.
As the 19th century drew to a close, attention to Persian oil increased. Advances in drilling technology led European companies to recognise that Persia held significant energy potential. Early efforts were made by Baron Julius de Reuter in the 1870s. Two oil exploration attempts he undertook produced no commercial findings.
New momentum emerged in 1901 when Shah Mozaffar od-Din of the Qajar Dynasty sold oil exploration rights to British businessman William Knox D’Arcy. The concession granted D’Arcy exploration rights for oil, gas and asphalt across nearly all of Persian territory for 60 years.
In return, the Persian government received cash payment plus a share of profits equivalent to 16 per cent of oil revenues.
Early exploration faced considerable obstacles. According to the same source, drilling between 1901 and 1905 proceeded without results. Extreme weather conditions, difficult terrain and limited expert personnel hampered operations. When capital nearly ran out, D’Arcy signed a financing agreement with Burmah Oil Company to keep the exploration project running.
A major breakthrough occurred on 26 May 1908. At approximately 16:00 local time, oil gushed from a drilling well at Masjed Soleyman, reaching approximately 50 feet above the rig. This discovery became the first commercial oil find in the Middle East and immediately attracted the attention of the British government.
One year after this discovery, the Anglo-Persian Oil Company was established in 1909. Production developed rapidly. According to the same source, oil exports began in 1912 and approximately 30 wells had become operational at Masjed Soleyman by 1914. During this period, the British government purchased a majority stake in the company and made Persian oil a strategic energy source for its naval fleet.
The intertwining of oil and geopolitics became evident from World War I onwards. Britain and Russia deployed troops in Persia to protect their energy interests. Oil became an important factor in military strategy. George Nathaniel Curzon even stated that victory in naval warfare heavily depended on oil supply.
Political tensions regarding oil continued throughout the 20th century. According to the Journal of Petroleum Geology, Iran’s modern oil industry period can be divided into six major phases: early exploration 1872–1900, the Anglo-Persian era 1901–1932, the Anglo-Iranian phase and nationalisation 1933–1953, the second Pahlavi period 1954–1978 coinciding with OPEC’s establishment, the Islamic Revolution and Iran-Iraq War phase 1979–1989, and the buyback contract era and American sanctions from 1990 onwards.
One of the largest conflict points occurred in 1951 when Prime Minister Mohammad Mosaddeq pushed for nationalisation of the oil industry, a step that triggered a political crisis culminating in the 1953 coup backed by US and British intelligence agencies. After that event, Iran’s oil production was divided amongst a consortium of Western companies with a substantial portion.
Iran’s oil story ultimately became a lengthy narrative about resources, power and economic sovereignty. Since the Masjed Soleyman discovery in 1908, more than 120 oil and gas fields have been found in Iran’s land territory and Persian Gulf waters. This industry opened a new era for Iran’s economy whilst simultaneously triggering political upheaval that continues to be felt today.