One signature on a document in a Tehran palace—and half a century later, the entire Middle East was different. But between the signature and the outcome lay seven years in which it might all have come to nothing.
This story begins with people who would never have met without a chain of chance acquaintances. Antoine Kitabchi Khan, Persia’s general commissioner at the Paris World’s Fair, was looking for a foreign investor for Persia’s oil riches in 1900. He knew what many knew: in the country’s southwest, oil seeped to the surface on its own—black, greasy patches the local population had used for centuries. The problem was not finding signs of oil, but finding someone willing to stake a fortune on land with no roads, no ports, and no guarantees.
Kitabchi Khan approached Sir Henry Drummond Wolff—the former British minister to Tehran, a man with the right connections. Wolff, in turn, brought in William Knox D'Arcy—a colourful and, at first glance, unexpected figure. D'Arcy was not an oil man. He was a Queensland lawyer who had made a fortune from the Mount Morgan gold mines in Australia. By the start of the new century, he was living in London, spending money faster than it came in, and looking for another major venture. A gold prospector retrained as an oil speculator—there is the logic of a gambler accustomed to betting on geology.
What I find so compelling about this opening is how little strategic calculation it contains, and how much personal circumstance. A Persian official, a retired diplomat, and an Australian nouveau riche—a trio that set in motion a process that would define the century’s energy architecture. D'Arcy, by all accounts, saw Persian oil much as he had seen Australian gold: a chance at a huge payoff, if one was willing to take the risk.
On 28 May 1901, Shah Mozaffar ad-Din signed the concession. Its terms are worth examining closely—they explain both the logic of the era and the roots of conflicts that would explode half a century later.
D'Arcy received exclusive rights to explore for and extract oil for 60 years across virtually the entire country. The exceptions were five northern provinces—Azerbaijan, Gilan, Mazandaran, Astrabad, and Khorasan. The reason was geopolitical: these territories lay within the Russian Empire’s sphere of influence, and St Petersburg would not have tolerated British concessionaires on its borders. Persia at the start of the 20th century was squeezed between two empires, and even its right to dispose of its own mineral wealth was constrained by other people’s interests.
What did the shah receive? £20 000 in cash, £20 000 in shares in the future company, and 16% of annual net profits. At first glance—not nothing. On second glance, the phrase “net profits” gave the concessionaire enormous room to manipulate the books. Who determined the expenses? Who audited them? Who decided what portion of the revenue was “net”? The Persian government had neither the expertise nor the leverage to exercise control. Sixty years is enough time for generations, regimes, and ideas of justice to change. The concession was drafted the way such agreements were drafted across the colonial world: formally voluntary, in practice the product of an imbalance of power.
At the same time, it would be wrong to say D'Arcy was handed a gift. He assumed the entire financial risk of drilling in a country with no infrastructure, no skilled workforce, and no reliable connection to the outside world. Between surface oil seepages and a commercial field lies the same distance as between the glint of a gold fleck in a stream and a profitable mine. The concession was both a colonial grab and a financial gamble, and those two qualities did not contradict each other.
D'Arcy hired George Reynolds—an engineer with experience in the Dutch East Indies, a stubborn man with real technical skill. The first drilling began at Chia Surkh, in western Persia, where surface indications of oil seemed most promising.
Reality was brutal. Equipment was hauled by mule over mountain passes. Summer heat turned work into a test of endurance. Malaria and dysentery cut down the workers. Local tribes regarded the drilling with suspicion and sometimes with open hostility. Reynolds drilled, found traces of oil, but not what was needed: a steady commercial flow. Well after well brought disappointment. Money disappeared like water into sand—with the difference that water in the desert is at least needed where it falls.
By 1904, the project was balancing on the edge of a financial abyss. D'Arcy had already invested a substantial share of his fortune and could not continue alone. He tried to attract investors—without success. The oil business at the start of the 20th century was concentrated in America, Russia, and the Dutch East Indies; Persia looked like an exotic venture with dubious prospects. The City of London was not eager to finance drilling in the Zagros Mountains.
The legend of the “lucky discovery” usually skips one detail: between knowing that oil exists and extracting it commercially lie years of methodical, expensive, physically punishing work. Geology suggested a direction, but offered no guarantees. Reynolds drilled under conditions a modern engineer would consider unacceptable—without accurate maps of underground structures, without seismic surveys, using equipment that broke down in the heat and dust.
In 1905, D'Arcy found a partner—Burmah Oil Company, a Scottish firm producing oil in Burma. Burmah Oil agreed to fund continued exploration, but naturally not out of charity. In return, D'Arcy surrendered a substantial share of control over the project. In effect, he ceased to be the sole master of the concession and became a junior partner.
Burmah Oil had reasons of its own. Burma’s fields were limited, the company needed new sources of crude, and Persia—for all its risks—promised a scale incomparable to the Burmese wells. The British Admiralty, already beginning to consider converting the fleet from coal to oil, was interested too, though formal decisions were still a long way off. Threads stretched from a drilling rig in the Zagros Mountains to offices in Whitehall—still thin, but already visible.
Reynolds kept drilling. The team moved farther south, to Masjed Soleyman—a place where oil seepages were especially conspicuous. Working conditions did not get any easier. Reynolds clashed with Burmah Oil’s management, which demanded results and threatened to cut off funding. By the spring of 1908, the investors’ patience was running out. A telegram exists instructing Reynolds to halt drilling if no result came soon. Seven years of work, hundreds of thousands of pounds—and all of it might have ended with the project being liquidated.
On 26 May 1908, at 4 in the morning, the well at Masjed Soleyman struck oil. A powerful gusher shot up to a height that left no doubt: this was not seepage, not traces—this was a commercial field.
I think about what it must have been like—drilling in the wilderness for seven years, burying workers who died of disease, receiving telegrams threatening closure—and then, at four in the morning, seeing a black column burst from the earth. Reynolds, for all his reserve, must have felt something engineers usually have no words for.
The discovery at Masjed Soleyman became the Middle East’s first major oil field. But by itself, it settled nothing. Oil in the ground and oil on the market are two entirely different things. The field lay hundreds of kilometres from the coast, in mountainous country, with no roads, no port, no refining capacity. To turn a geological discovery into a working business, an entire industrial chain had to be built from scratch—in a country where that chain had never existed.
In 1909, the Anglo-Persian Oil Company (APOC) was established to manage the Persian oil assets. D'Arcy received compensation in the form of shares worth £895 000—a substantial sum, but nothing compared with what the company would become in the decades ahead. He became one of its directors, but real control passed to Burmah Oil and London financiers. The Queensland gold prospector had played his part—the part of a man willing to stake everything on a single card—and gave way to the corporate machine.
The company immediately faced a task no less difficult than finding the oil: getting it to the buyer. The site for a refinery was chosen as early as 1909—at Abadan, on an island at the mouth of the Shatt al-Arab, near the Persian Gulf; the plant came online in 1912. The Abadan refinery became one of the largest in the world—but building it in a marshy, malaria-ridden landscape of extreme temperatures was an engineering feat that deserves a story of its own. The pipeline from the fields to the refinery ran through mountains and plains—every kilometre of pipe meant solving dozens of logistical problems in a place with neither railways nor roads.
APOC remained unprofitable in its early years. There was oil, the refinery was being built, but the market remained a problem. The global oil market was controlled by Standard Oil and Royal Dutch Shell, and a new player from Persia could not expect a warm welcome. The company needed a large, reliable buyer—the kind that would not haggle over every barrel.
The buyer appeared—and it was not a merchant, but the state. In 1913, Winston Churchill, First Lord of the Admiralty, argued in Parliament for converting the Royal Navy from coal to liquid fuel. The arguments were military and technical: oil gave ships greater speed, longer range, and faster refuelling. An oil-fired ship could refuel at sea; a coal-fired vessel had to put into port and spend hours loading. In the naval arms race with Germany, that advantage could prove decisive.
But oil had one drawback that coal did not: Britain did not produce oil on its own territory. Coal lay beneath Wales and Yorkshire; its supply did not depend on foreign governments or sea routes. Switching to oil meant strategic dependence on external sources—and Churchill understood that perfectly well. His decision was typical of imperial thinking: if a resource lies beyond the metropole, control over it must be secured.
On 17 June 1914, the British Parliament approved a bill under which the government invested £2,2 million in APOC, receiving 51% of the shares, two directors with veto rights on the company’s board, and a twenty-year contract to supply fuel for the fleet. On 10 August 1914—six days after Britain entered the First World War—the act received royal assent. Put bluntly, the government nationalised an oil company without calling it nationalisation. APOC formally remained private, but the controlling stake belonged to the Crown, and strategic decisions were made with an eye to the Admiralty.
Only six years passed between the discovery of oil and state control over it. The market did not have time to determine the fate of Persian oil—the war did that.
The D'Arcy Concession—a document only a few pages long, signed in 1901—extended its consequences across the entire 20th century. The Anglo-Persian Oil Company changed its name to the Anglo-Iranian Oil Company, then became one of the predecessor companies of BP. By mid-century, the Abadan refinery had become the largest in the world. Persia—now Iran—discovered that the sixteen percent of net profits promised to the shah in 1901 looked less and less fair as oil revenues grew and Iran’s share remained modest.
One concession tied together into a single knot things usually studied separately: the geology of the Zagros sedimentary basins, the financial machinery of the City of London, the engineering challenges of pipeline construction, the British Empire’s doctrine of naval supremacy, and the question of who owns the natural resources of a sovereign state. Each of these threads ran in its own direction, but all were twisted together—and unravelling them without loss proved impossible.
D'Arcy died in 1917, having lived long enough to see his gamble become a strategic asset of empire, but not long enough to see that asset become the subject of one of the century’s defining geopolitical conflicts. Reynolds, who found the oil, had been dismissed from APOC even earlier—the company considered him too independent and too difficult to manage. Shah Mozaffar ad-Din, who signed the concession, died in 1907, a year before his signature began bringing in real money. Of the three principal figures—the investor, the engineer, and the monarch—not one received what he had hoped for, to the extent he had hoped for it. Yet the consequences of their actions were larger than any of them could have imagined, and by mid-century the question of Persian oil had ceased to be a commercial one—it had become a question of whether a country has the right to dispose of its own mineral wealth.