The story starts, Pre-WWI , when the Russian Czar made numerous treaties with Great Britain in an effort to divvy up the country now known as Iran. The original secret treaty was signed in 1907 and was called the "Convention of St Petersburg", which gave the Northern half of Persia to Russia and the Southern half to Britain, (which of course had all the oil fields). Persia's government was not even consulted. At that time there was not much of a government at all, and the British had little trouble maintaining control.
Anglo Persian began pumping oil in 1908 making Iran the first major area to have it's oil exploited by the Imperialists. Great Britain converted all it's ships to Oil and dominated WWI because their ships were so much faster and ranged further than the conventional coal fired ships of the day.
After the defeat of Germany in World War 1, Britain’s Lord Curzon declared that the Allies had “floated to victory upon a wave of oil.” (Everest, p. 31)
Anglo Persian eventually became British Petroleum and much of WWI was fought in Iran over Britain's claim to the oil fields they had established there.
BP became one of he world’s largest oil companies; it was founded solely on Middle Eastern oil. (Larry Everest, Oil, Power & Empire: Iraq and the U.S. Global Agenda, p. 30)
While promising independence to the Region's peoples, Britain, France and Russia were secretly negotiating to divide up the Middle East between them. This fact came to light when the Bolsheviks released all of the documents they found in the Czar's Foreign Ministry Archives, including the Treaty called the 1916 Sykes-Picot Agreement.
Once the Bolsheviks were in control in Russia, Britain launched a new offensive under the guise of fighting the spread of Communism, and in 1919, they imposed the Anglo-Persian Agreement, which gave them exclusive control of the government, including the transportation and communication, army and treasury. Beginning in 1921, the British supported a series of military coups, by Reza Khan, who eventually was established as Shah in 1926, operating as a Puppet of British Imperialism. This was the beginning of the Pahlavi Dynasty.
Enter the Good Old USA: Of course, sooner or later the United States had to become involved because of increased pressure applied by Standard Oil (now Exxon) and eventually a deal was worked out to share the spoils.
By 1928 the British were forced to give U.S. firms a cut of Iraqi oil, thanks to America’s rising global power and the leverage exerted by U.S. firms: Standard Oil (now Exxon) supplied half of Britain’s oil. Oil historian John Blair described the resulting “Red Line” agreement as “an outstanding example of a restricted combination for the control of a large portion of the world’s supply by a group of companies which together dominate the world market for this commodity.” (Everest, pp. 38-39)
Perhaps Dan would like to hear the same story from another perspective. At this point I will be quoting from The Encyclopedia Britannica . That source will probably bear a little more weight than the previous discourse. According to this source, the agreement included Afghanistan and Tibet.
Rise of Reza Khan
Until the beginning of World War I, Russia effectively ruled Iran, but, with the outbreak of hostilities, Russian troops withdrew from the north of the country, and Iranians convened the third Majles. Jubilation was short-lived, however, as the country quickly turned into a battlefield between British, German, Russian, and Turkish forces. The landed elite hoped to find in Germany a foil for the British and Russians, but change eventually was to come from the north.Following the Russian Bolshevik Revolution in 1917, the new Soviet government unilaterally canceled the tsarist concessions in Iran, an action that created tremendous goodwill toward the new Soviet Union and, after the Central Powers were defeated, left Britain the sole Great Power in Iran.
During the reign of Reza Shah Pahlavi, Oil concessions were first granted in 1901, during the Qājār period, and the first commercially exploitable petroleum deposits were found in 1908. Reza Shah renegotiated a number of these concessions, despite the ire these agreements raised among the Iranian people. The concessions were to remain a violent point of contention in Iran for decades to come.
Reza Shah’s need to expand trade, his fear of Soviet control over Iran’s overland routes to Europe, and his apprehension at renewed Soviet and continued British presence in Iran drove him to expand trade with Nazi Germany in the 1930s. His refusal to abandon what he considered to be obligations to numerous Germans in Iran served as a pretext for an Anglo-Soviet invasion of his country in 1941. Intent on ensuring the safe passage of U.S. war matérial to the Soviet Union through Iran, the Allies forced Reza Shah to abdicate, placing his young son Mohammad Reza Shah Pahlavi on the throne.
Petroleum revenues were to fuel Iran’s economy for the next quarter of a century. There was no further talk of nationalization, as the shah firmly squelched subsequent political dissent within Iran. In 1957, with the aid of U.S. and Israeli intelligence services, the shah’s government formed a special branch to monitor domestic dissidents. The shah’s secret police—the Organization of National Security and Information, Sāzmān-e Amniyyat va Ettelaʿāt-e Keshvār, known by the acronym SAVAK—developed into an omnipresent force within Iranian society and became a symbol of the fear by which the Pahlavi regime was to dominate Iran.
Unfortunately, this source apparently has little to say about the Revolution that installed the Ayatollah Khomeini, or the taking of the 66 American hostages. On April 1, 1991 after the Shah had died in Cairo, following overwhelming support in a national referendum, Khomeini declared Iran an Islamic republic. That sort of ended Western influence over the oil in Iran.