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In the mid-1940s Mohammad Mosaddeq, an Iranian statesman and a member of the parliament, emerged as the leader of the oil nationalization movement. This movement sought to transfer control over the oil industry from foreign-run companies to the Iranian government Mosaddeq consistently advocated three goals: to free Iran of foreign intervention, to ensure that the shah remained a democratic monarch and not a dictator, and to implement social reforms.
To forestall nationalization, the shah appointed military officer Ali Razmara as prime minister in 1950. This move increased the scale of demonstrations in favor of nationalization and against a government that increasingly was denounced as a puppet of foreign interests .
Razmara was assassinated in 1951 by a Muslim fanatic, and the more militant supporters of nationalization applauded his death. Sensing the popular mood, the parliament passed a bill nationalizing the AIOC , then took the unprecedented step of appointing Mosaddeq prime minister over the shah’s objections. In response to these events, Britain enforced a blockade on oil exports from Iran, a move that deprived Iran of foreign exchange.
Although Iran had not relied on oil revenues prior to 1951, Mosaddeq’s development budget anticipated this income; its absence severely hindered efforts to stimulate the economy and implement social reforms. Attempts to secure foreign financial assistance proved unsuccessful because most countries and international financial institutions feared offending Britain .
Mosaddeq, like many other Iranian political leaders, hoped the US would intervene to resolve the crisis. Initially, the US tried to mediate a compromise. But In early 1953, when a new administration came to power in the US, U.S. policy toward Iran began to change. The US now became sympathetic to British arguments that Mosaddeq’s government was causing instability that could be exploited by the USSR to expand its regional influence.
Mosaddeq advocated Iranian neutrality in the Cold War conflict, but neither side in the Cold war wanted to lose Iran. Consequently, the US decided to use CIA to help overthrow Mosaddeq. By this time, many conservative politicians in Iran, some senior military officers, and the shah were prepared to work with the CIA to bring down the Mosaddeq government.
The coup, carried out in August 1953, failed initially, and the shah was forced to flee the country. After several days of street fighting in Tehran, which were instigated by the CIA, army officers loyal to the shah gained the upper hand. Mosaddeq was arrested, and the shah returned in triumph.
The Iranian government restored relations with Britain in 1953 and concluded a new oil agreement the following year. Mossadegh had long sought to curb and, perhaps, to abolish the monarchy. In 1951, the Iran population was near 20 million, and more than 90% of them were illiterate religious fanatics. And more than 75% of Iranians lived in the rural areas.
Prior to 1953 Mohammad Reza Shah had been seemed destined to remain a constitutional monarch. Following the coup, however, he moved to consolidate power in his own hands. With the help of the military and later a secret police, the Savak, the shah created a centralized, authoritarian regime. He suppressed opposition by former National Front supporters and the Iranian Left, tightly controlled legislative elections, and appointed a succession of prime ministers loyal to him.