The nationalization of oil supplies refers to the process of confiscation of oil production operations and their property, generally for the purpose of obtaining more revenue from oil for the governments of oil-producing countries. This process, which should not be confused with restrictions on crude oil exports, represents a significant turning point in the development of oil policy. Nationalization eliminates private business operations—in which private international companies control oil resources within oil-producing countries—and transfers them to the ownership of the governments of those countries. Once these countries become the sole owners of these resources, they have to decide how to maximize the net present value of their known stock of oil in the ground. Several key implications can be observed as a result of oil nationalization. "On the home front, national oil companies are often torn between national expectations that they should 'carry the flag' and their own ambitions for commercial success, which might mean a degree of emancipation from the confines of a national agenda." According to consulting firm PFC Energy, only 7% of the world's estimated oil and gas reserves are in countries that allow private international companies free rein. Roughly 65% are in the hands of state-owned companies such as Saudi Aramco, with the rest in countries such as Russia and Venezuela, where access by Western companies is difficult. The PFC study implies political groups unfavorable to capitalism in some countries tend to limit oil production increases in Mexico, Venezuela, Iran, Iraq, Kuwait and Russia. Saudi Arabia is also limiting capacity expansion, but because of a self-imposed cap, unlike the other countries.
History This nationalization (expropriation) of previously privately owned oil supplies where it has occurred, has been a gradual process. Before the discovery of oil, some Middle Eastern countries such as Iraq, Saudi Arabia, and Kuwait were all poor and underdeveloped. They were desert kingdoms that had few natural resources and were without adequate financial resources to maintain the state. Poor peasants made up a majority of the population. Kuwaiti historian Muhammad Rumaihi states, “The Gulf is not oil. The Gulf is its people and its land. So it was before the discovery of oil, and so it will remain when the oil disappears. Oil is no more than a historical phase in this part of the Arab world, and a rather short one at that.” At the end of the XIX century, Great Britain didn’t have access firsthand to the oil, and they depended on the USA, Russia or Mexico for itheirsupplies. Through the geologist and engineer William D’Arcy, Great Britain could secure oil rights of inspection in the lands of the Persian Shah Muzaffar al-Din. In 1901 D’Arcy obtained a concession of 500,000 square miles (almost 85% of modern-day Iran) for 60 years. It gave him the exclusive right of exploiting the oil for a payment to the government of 20,000 pounds sterling, 20,000 pounds in stocks and 16% of the earnings. In collaboration with the English Government, D’Arcy established the Anglo-Persian Oil Company (that later became Anglo-Iranian Oil, and then British Petroleum). In that time the procedure to continue in the countries where the deposit of oil were discovered, consisted in that a delegation interviewed with the king or shah who in general ignored what it was or for what reason the oil did serve, and then by means of a payment, usually in currencies of gold or silver or a small percentage was gotten the concession. These concessions were a permission to extract, to treat and to transport the crude. After World War II, AIOC (Anglo-Iranian Oil Company) and the Iranian government initially resisted nationalist pressure to revise AIOC’s concession terms still further in Iran’s favour. In 1951, the pro-western Prime Minister Ali Razmara was assassinated. The Iranian Parliament elected a nationalist, Mohammed Mossadeq, as Prime Minister. Months later, the parliament nationalized the oil industry and the Shah, Mohammad Pahlevi is pushed to the exile. The British government decided that the only way to regain its control of Iranian oil was to remove Mossadeq from office. For it, with the support of United States, they overthrew the Iranian government. The CIA and MI6 (Agency of external Intelligence of the United Kingdom) conspiracy became known by its codename operation Ajax. On August 19, 1953, Mossadeq was forced to leave office through a military coup. He was replaced by pro-Western general Fazlollah Zahedi. So, the AIOC became The British Petroleum Company in 1954, and resumed operations in Iran. However, it was not allowed to monopolise Iranian oil as before. It was limited to a new international consortium. On the other hand, the Shah Mohammad Reza Pahlevi recovered the throne and he becomes one of the big western allies in the region, he rules with iron hand supported by the United States military help and by a powerful police, the SAVAK. He suppresses the political parties and a politics of modernization of the country undertakes; he also undertakes agricultural reforms, nationalizes natural resources and extends the vote to the women. He also leans towards the laicism and towards the recognition of Israel.
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