Great Britain Reza& Shah This page intentionally left blank Great Britain Reza& Shah The Plunder of Iran, 1921–1941 Mohammad Gholi Majd University Press of Florida Gainesville/Tallahassee/Tampa/Boca Raton Pensacola/Orlando/Miami/Jacksonville/Ft. Myers Copyright 2001 by Mohammad Gholi Majd Printed in the United States of America on acid-free paper All rights reserved 060504030201654321 Library of Congress Cataloging-in-Publication Data Majd, Mohammad Gholi, 1946– Great Britain and Reza Shah: the plunder of Iran, 1921–1941 / Mohammad Gholi Majd. p. cm. Includes bibliographical references and index. ISBN 0-8130-2111-1 (cloth : alk. paper) 1. Iran—Relations—Great Britain. 2. Great Britain—Relations—Iran. 3. Iran— History—Pahlavi dynasty, 1925–1979. 4. Reza Shah Pahlavi, Shah of Iran, 1878–1944. I. Title. DS274.2.G7 M35 2001 955.05'2—dc21 2001023565 The University Press of Florida is the scholarly publishing agency for the State University System of Florida, comprising Florida A&M University, Florida Atlantic University, Florida Gulf Coast University, Florida International University, Florida State University, University of Central Florida, University of Florida, University of North Florida, Univer- sity of South Florida, and University of West Florida. University Press of Florida 15 Northwest 15th Street Gainesville, FL 32611–2079 http://www.upf.com Dedicated to the memory of all the victims of the reign of terror and murder in Iran from 1921 to 1941 This page intentionally left blank List of Illustrations ix List of Tables xi Acknowledgments xiii 1. Introduction 1 2. The British Invasion and the Strangulation of Persia, 1918–1920 21 3. British Coups d’État: From Reza to Reza Shah Pahlavi, 1921–1925 61 4. Millspaugh and the American Financial Mission to Persia, 1922–1927 93 5. Reza Shah Pahlavi: A Study in Brutality and Greed 133 6. A Reign of Terror and Murder 165 7. The Massacre in Mashhad 209 8. The Reign of Terror and Murder Continues 221 9. Britain and Persian Oil, 1911–1951: Forty Years of Plunder 239 10. The Reserve Fund of the Nation and the Plunder of Iran’s Oil Revenues by Reza Shah, 1927–1941 267 11. The Purchase of Armaments, 1928–1941 285 12. The Diversion of Iran’s Oil Revenues and Reza Shah’s Foreign Bank Accounts 305 13. The Theft from Iran’s Crown Jewels 331 14. The Foreign Exchange Crisis and the Deteriorating Economy, 1928–1941 341 15. Iran in 1941 and the Downfall of Reza Shah 365 Notes 387 Bibliography 413 Index 415 This page intentionally left blank 2.1. Hassan Vossough, Vossough-ed-Dowleh, ca. 1930 36 3.1. Ahmad Shah, Mohammad Hassan Mirza, Qavam-es-Saltaneh, and Reza Khan, 1921 75 3.2. Reza Khan with military officers, ca. 1925 79 4.1. Arthur Chester Millspaugh, administrator general of the finances of Persia, ca. 1925 95 4.2. Reza Khan on sentry duty at a European legation before the coup d’état 108 4.3. Reza Khan and a newly acquired Rolls-Royce after the coup d’état 108 5.1. Charles Calmer Hart, American minister to Persia, 1930–33 143 5.2. Reza Shah Pahlavi 144 6.1. Abdol Hossein Teymourtache, ca. 1930 173 6.2. Solat-ed-Dowleh Qashqai and Nosrat-ed-Dowleh Firouz, 1923 187 6.3. Jaffar Qoli Bakhtiari, Sardar Assad, ca. 1930 193 8.1. Ali Akbar Davar, ca. 1930 224 8.2. Nosrat-ed-Dowleh Firouz, ca. 1915 228 8.3. Ayatollah Seyed Hassan Modarres and his son Baqer, 1922 231 10.1. Dreyfus’s 1941 report on oil revenues and the Reserve Fund of the Nation 268 12.1. Letter from Indiana National Bank to the State Department concerning Iranian army funds 306 12.2. Letter from J. Edgar Hoover to assistant secretary of state reporting the transfer of Iranian army funds from Indiana National Bank to Swiss National Bank 311 12.3. Report on “unused balance” of $508,000 allocated for arms purchases 312 12.4. Memorandum of conversation with Reza Afshar concerning the shah’s £20 mil- lion bank account in London 319 12.5. Villard’s 1959 report on the shah’s purchase of real estate in Switzerland and his meetings with Geneva bankers 322 12.6. Telegram from Dreyfus concerning the shah’s request to use the diplomatic pouch for a $1 million transfer to Guaranty Trust Company of New York 325 12.7. Letter from Guaranty Trust Company of New York to the State Department acknowledging the receipt of the shah’s application and deposit 327 12.8. Confirmation of the shah’s $1 million deposit at Guaranty Trust 328 12.9. Letter from Guaranty Trust requesting use of diplomatic pouch to conduct business with the shah after the closure of the Imperial Bank of Iran in 1952 329 12.10. Response of the State Department to the request by Guaranty Trust concerning use of diplomatic pouch “for forwarding mail” to the shah 330 13.1. The Peacock Throne of Persia 335 13.2. Taking Persian art treasures to London, 1930 337 13.3. Dispatch from the American embassy in London, “Report that Shah of Iran transferred Iranian crown jewels” 340 14.1. The Imperial Bank of Persia, Tehran, 1930 343 15.1. Mohammad Ali Foroughi, Zoka-ol-Molk, ca. 1930 379 15.2. Reza Khan, Shams Pahlavi, and Ali Reza Pahlavi, Johannesburg, 1944 384 This page intentionally left blank 4.1. Appropriations for army, police, and gendarmerie, 1925–1928 (in krans) 101 10.1. Selected items of expenditure, 1929–1930 budget (in krans) 273 10.2. Payments into and withdrawals from the London sterling funds 276 10.3. Nonmilitary appropriations from the London sterling funds, 1928–1941 283 11.1. Strength of the mechanized arm of the Iranian army, 1941 291 11.2. Strength of the Iranian army in northern Iran, July 1941 292 11.3. Composition of Iranian air force, 1934 298 11.4. Composition of Iranian air force, 1934 and June 15, 1941 302 14.1. Transfers into Iranian accounts in New York banks, January 2–June 26, 1941 363 14.2. Transfers from Iranian accounts in New York to Switzerland, January–June 1941 363 This page intentionally left blank I thank the staff of the National Archives and Records Administration (NARA) in College Park, Maryland, for their help and courtesy during the many days I spent there in 1999 and 2000. Dr. Milton Gustafson, senior specialist at NARA, helped in navigating the records of the Department of State pertaining to Iran. I am deeply grateful to Professor Hafez Farmayan for his comments on the earlier version of the manuscript, his excitement at the discovery of the records, his keen interest in the project, and his helpful suggestions. I also thank Chris Hofgren and Amy Gorelick, acqui- sitions editors at the University Press of Florida, for their interest in the book and for their professional and helpful approach. The task of assem- bling the photos again fell to my brother Mohammad Hossein Majd, and I thank him greatly. I am grateful to the Bureau of Cultural Heritage for permission to photograph and reproduce a portrait of Reza Shah on a tapestry located in Niavaran Palace. I thank the Institute for Iranian Con- temporary Historical Studies in Tehran for providing several of the pho- tographs reproduced in this book. Finally, I am vastly indebted to my family for help and understanding that made the completion of this book possible. The computer skills of my son, Ali, as usual rescued me at the appropriate time. This page intentionally left blank Introduction T and the defeat of the Ottoman forces in Mesopotamia and its conquest by the British in 1918 resulted in a de facto encirclement of Persia (as Iran was then known in the West) by Britain from the east, south, and west. Taking advantage of its predominance in the region, British forces invaded Iran from the east and the west. The main invasion took place in April 1918, and the entire country, with the exception of Azerbaijan province, was occupied by the British. The British military invasion and occupation of 1918 is a cardinal event in the history of Iran. For the next sixty years, Iran effectively lost its inde- pendence. For nearly twenty-five years (1918–42), Iran was completely controlled by Britain, and thereafter, and until the Islamic revolution of 1979, Iran fell under the domination of the United States. Despite its historical significance, the British invasion of 1918 has received relatively little attention in the literature. From the very begin- ning, the British maintained extraordinary secrecy about the invasion of Iran. The main British invasion force, the so-called Dunster Expeditionary Force, was nicknamed the hush-hush force because its very existence could not be openly discussed even in Baghdad, the location of British head- quarters. Evidently, this hush-hush approach has continued to this day. Little information on the subject is to be found in several relatively recent books on this period.1 In another study based on the British records, the British invasion force is portrayed as a relatively friendly force whose aim was to protect Persia from the “Bolshevik threat,”2 but little credence or even mention of such a threat to Persia is to be found in the American lega- tion’s political and military reports from Tehran. Having gained military control, the British set about deepening their political grip by engineering the downfall of the cabinet of Samsam-es- Saltaneh and the appointment of Hassan Vossough, Vossough-ed-Dowleh, as prime minister in August 1918. The Vossough government can best be described as a British-backed civilian dictatorship through which the British intended to bring about permanent control of Persia and its economic resources, especially its petroleum, and to direct Persia’s economic develop- ment in ways favorable to Britain.