IICHS - Institute for Iranian Contemporary Historical Studies

Mozaffar Shahedi

Establishment and activities of the Russian loan bank was granted by Nasseraddin Shah to a Tsarist Russian subject, Jacques Polyakov, (21st May 1890). The period of the grant was 75 years. After a few years of its activities, the Russian Loan Bank, was put directly under the Russian ministry of Finance. One of the common interests of the loan bank was investment in Iran oil pipelines. However, due to the success of the socialist revolution in Russia(October 1917), this opportunity was never met. The newly established revolutionary Soviet regime put an end to the Bank's activities in Iran.

Long before the establishment of the loan bank, oil was included among Russia’s exports to Iran. Russian oil production, at least from 1870 onwards was offered regularly in the Iranian market. The British were not seriously interested in investing in Iran's oil mines yet. But when in 1901, William Knox D’Arcy received from Mozaffaraddin Shah the concession of Iran’s oil extraction, production and exportation, the Russians felt the dangers of the British in Iran’s markets.

Until the turn of the century, Russian oil was imported to Iranian markets in all parts of the country. It was also exported to the neighboring countries, most important of which was India. So the Russian oil was exported to all Persian Gulf countries, Iran and India and even the far east. The only country which exported oil to the said countries was the United States which was very small in comparison to those of Russia.

To facilitate more oil exportation to the southern parts of Iran, the Persian Gulf, India and the Far East, the Tsarist Russia was planning more ambitious projects such as construction of oil pipelines through Iran to the Persian Gulf. The Russian oil experts predicted that if this project was viable, their rivals in the region will be faced with a crisis, moreover, it would have an annual income of millions of rubles.

The Russians in those years never showed any interest in investing in Iran's oil’s deposits, but the British got the oil concession through Imperial Bank and Reuter’s contract. Having Nicholas II’s consent, the Russian minister of finance, Witeh was thinking of a project to lay pipelines throughout Iran to the Persian Gulf, and coordinated his plans with the Russian foreign minister, Lamsdrov, and decided to concede the project to the Russian loan bank in Iran the general director of which was M. Grobe. The Russian minister to Tehran objected strongly to this and described it harmful both politically and economically.

However, Russian minister for finance, who eagerly followed the realization of this project, blamed the Russian minister to Tehran, and emphasized for the Russian foreign minister that there should be no hesitation in laying oil pipelines through Iran to the Persian Gulf.

Therefore, he advised that negotiations with the Iranian government to obtain concessions for the project should be started as soon as possible to reach a conclusion.

Grobe, the head of Russian bank was responsible to apply for the concession; the negotiations began in January 1902, and he got the consent of Aminossoltan for the grant of the concession. Meanwhile, the British objected to the Russian plan strongly. Grobe had agreed that if D’Arcy objected to the grant of concession, the Russian government would be responsible to explain for the concession.

Through their ambassador in St. Petersburg, Charles Scott, the British protested against the Russian oil pipeline concession. But the Russian government reminded the British ambassador in St. Petersburg that the concession is granted to a private company, and that the Russian government is not in a position to take any decisions regarding that.

However, the project did not develop as well as what the Russian Foreign Ministry and Ministry of Finance had predicted.

Despite the considerable efforts to carry out the project, the ministries of foreign affairs and finance of the project failed to see into it. The Russians concluded that the project would not succeed as they had predicted before, and it would face many economic and political problems. Thus, the foreign minister, Lamsdrov showed his unwillingness in his dispatches to the minister of finance. The Russians suspended the oil pipeline project and considered the payment of a large loan to Iran through their loan bank amounting to 10,000,000 rubles to increase their influence in Iran. But after the passage of so many years, northern Iran still remained the exclusive consumer of Russian oil.