Former British spy chief sought secret oil deal with Iran during energy crisis

A former head of the UK's MI6 intelligence service held a top secret meeting with the Shah of Iran in an attempt to secure a special oil deal at the height of the energy crisis triggered by an embargo by Arab states after the 1973 Arab-Israeli war, newly declassified documents reveal.

Sir Dick White was accompanied at the Tehran meeting by Sir Shapoor Reporter, an Iranian MI6 agent who played a prominent role in the coup, backed by US and British intelligence agencies, that had restored the Shah to the Peacock Throne two decades earlier.

Reporter and White met the Shah alone in his private residence at the start of the secret three-day mission on 10 December 1973.

Arab oil producers imposed an embargo in October 1973 to punish the West for siding with Israel in the war against an Arab coalition, leading to an oil crisis that shook the global economy.

The price of oil rocketed, which helped trigger a stock market crash, soaring inflation and high unemployment in the UK. Trade unions demanded higher wages to cope with rising prices that led to a confrontation with miners, and in December the government introduced "Three-Day Week" measures to limit energy consumption.

According to the files released on Thursday, at the Tehran meetings White "outlined the serious energy situation in which the UK now found itself as a result of the miners' overtime ban and other labour difficulties," which he said compounded the problems posed by the Arab oil embargo.

The meeting, which was known only to a handful of people in Whitehall, was proposed by Lord Rothschild, scion of the banking family, wartime MI5 officer and head of Edward Heath Conservative government's think-tank, the Central Policy Review Staff, documents at the National Archives reveal.

Rothschild came up with the idea of the meeting after he was approached by Reporter. The former MI6 agent suggested that Britain could obtain extra supplies of "Iranian crude in significant quantities".

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Reporter had played a key role in the joint MI6-CIA coup that toppled Mohammad Mosaddegh, the elected Iranian prime minister in 1953 and consolidated the rule of Shah Mohammad Reza Pahlavi.

MI6 and the CIA plotted the coup after Mosaddegh nationalised the Iranian oil industry in 1953. Rothschild, who described himself as an "old 'friend'" of the Shah, planned to head the secret mission to Tehran but fell ill.

In a secret note to cabinet secretary Sir John Hunt, Rothschild wrote: "I suggested to the Prime Minister that Sir Dick White, very well known to the Shah and on excellent terms with him, should replace me."

Rothschild added: "Sir Shapoor Reporter had clearly taken very considerable care to give the visit the best chance of success."

White headed MI6 from 1956 to 1968. He was the head of MI5, the UK's domestic intelligence agency, at the time of the Iranian coup but had a keen interest in Iran since serving in the Middle East during the Second World War.

Following the initial meeting between Reporter, White and the Shah, the British side in subsequent meetings consisted of White, Reporter, William Waldegrave, a member of Heath's policy unit in 10 Downing Street, and John Silcock, from the NM Rothschild and Sons bank.

Representatives of the Iranian National Oil Company (INOC) accompanied the Shah. Both sides agreed that the visit and the discussions "would be treated as being top secret", according to the documents.

The Shah was said to have "expressed sympathy for the UK's difficulties and was optimistic that the framework of good relations now existing between Iran and the UK would facilitate the arrangement of increased oil supplies to the UK from Iran".

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After what is described as three days of "intensive discussion", the outline of a deal was drawn up. Britain would "borrow" quantities of Iranian crude to be paid for later and Iran would take a part share in at least one British refinery.

Nothing came of it, partly, according to the documents, because the threat of worse oil shortages did not materialise, and partly because unknown to Rothschild, Peter Walker, trade and industry secretary in the Heath government, was engaged in separate talks with the Iranian state oil company, muddying the waters.

Walker was unaware of the White visit to Tehran, which only one member of the cabinet apart from Heath – the defence secretary, Lord Carrington – was told about.

The documents show that senior figures in the world of Britain's security and intelligence agencies were keen to milk the legacy of the support they had given the Shah, notably putting him back on the throne after a violent coup.

Britain's role in the Mosaddegh coup continues to feature prominently in modern Iranian history books dating to before the 1979 revolution that deposed the Shah and led to the establishing of the Islamic Republic.