3. The Big Payback

B

y the 1970s, oil- producing countries had grown tired of being

yoked to industrial powers in lopsided trade relations. Academic

thinking of the era accentuated the humiliation. The popular

“dependency theory” declared that producer countries had “surren-

dered” their primary resources to the rich North, which had captured

most of the value by converting raw inputs into finished goods. Rich

countries resold these goods back to the global South at inflated prices.

This cycle constituted a “dependency trap,” and the only way out was to

seize national resources and industrialize.

Few oil producers had the nerve to step up alone and launch an out-

right expropriation of American or British corporate assets, as Mexico

had done in 1938. Iran’s 1951 nationalization of the Anglo- Iranian Oil

Co.’s holdings offered a stark demonstration of the risks. Tehran’s take-

over resulted in a brutal UK- led clampdown that halted Iran’s oil exports,

undermined its economy, and led to events that brought down the

country’s budding democracy. Within two years, the resulting disarray

brought a CIA- backed coup that handed the shah, a Western- friendly

monarch, absolute power. After the 1953 coup, the new National Iranian

Oil Co. (NIOC) still technically owned the country’s oil sector. But NIOC

operated under a consortium of western IOCs that controlled the terms—

and the marketing— of Iranian oil.