The Reuter Concession (1872)

The Reuter Concession was an agreement signed on 25 July 1872 by which Naser al-Din Shah granted Baron Julius de Reuter, the British founder of the Reuters news agency, exclusive rights over Iran’s railways, mines, forests, irrigation and customs for decades to come. It caused an outcry at home and alarm in Russia, was cancelled in late 1873, and became the first great symbol of the danger of selling the country’s resources to foreigners.

Why the shah wanted it

By 1871 Naser al-Din Shah had a new chief minister, Mirza Hosayn Khan Moshir al-Dowleh, later called Sepahsalar, who had spent years as ambassador in Istanbul and admired the Ottoman reforms. He believed Iran needed railways, roads and modern industry, and that the state had neither the money nor the expertise to build them. The country had just been through the great famine of 1870–1872, and the treasury was weak.

The solution Sepahsalar and the shah chose was to bring in a single foreign capitalist who would take on the whole task in return for monopolies and a share of profits. A British investor was also expected to draw Britain into defending Iran against Russian pressure. Mirza Malkam Khan, a reformer and diplomat with many contacts in London (see Mirza Malkam Khan and early reformers), helped arrange the deal, and later accounts say he and other officials received large payments.

What Reuter was given

The terms were extraordinary even by the standards of the age. Reuter received:

• the exclusive right for 70 years to build and run railways and tramways throughout Iran, starting with a line from the Caspian Sea to the Persian Gulf;
• exclusive rights to work all mines except gold, silver and precious stones;
• a monopoly over state forests and uncultivated land;
• the exclusive right to build canals, qanats and all kinds of irrigation works;
• the farm of all Iran’s customs for 25 years from 1874, paying the government a fixed sum and later 60 per cent of net revenue;
• first refusal on a national bank and on future projects such as roads, telegraphs, mills and factories.

In return the government was to receive 20 per cent of railway profits and 15 per cent of profits from the other enterprises. Reuter deposited a security of £40,000, to be lost if work did not begin within fifteen months. Lord Curzon, writing in 1892, called it the “most complete and extraordinary surrender” of a kingdom’s industrial resources into foreign hands.

The storm against it

Opposition came from several directions at once.

At court and among the clergy

Many courtiers disliked Sepahsalar’s reforms and his control of government, and they used the concession against him. The opposition was led by figures around the shah’s favourite wife, Anis al-Dowleh, and by princes and officials who had lost influence. The leading Tehran cleric, Hajj Molla Ali Kani, wrote to the shah warning that foreigners would gain control over Muslim lands and people.

From Russia

The Russian government saw the concession as a British takeover of Iran’s economy and protested strongly. Russia had no intention of allowing a British-controlled railway to run from the Caspian to the Persian Gulf.

From London

Reuter had hoped for British government backing, but the Foreign Office kept its distance. It did not want to guarantee a private venture that might lead to conflict with Russia, and investors in London were cautious.

Cancellation in 1873

In the spring of 1873 the shah set out on his first journey to Europe, with Sepahsalar at his side. In London Reuter pressed for support, but little came of it. While the shah was abroad, his opponents in Tehran organised. When the royal party landed at Anzali on the Caspian in September 1873, the shah found the court and clergy united against his minister, and he dismissed Sepahsalar at Rasht before returning to the capital.

Later that year the government declared the concession void, on the grounds that Reuter had not started work on the railway within the agreed time. Reuter’s agents had in fact begun some preparatory work near Rasht. The £40,000 deposit was kept. Reuter protested for years and asked the British government to support his claims.

The long sequel

The affair did not end in 1873. Reuter’s claims were finally settled in 1889, when, with British support, he received a new concession to found the Imperial Bank of Persia. The bank, registered in London, gained the right to issue Iran’s banknotes and some mining rights, and it became one of the main channels of British influence until it was turned into the British Bank of Iran and the Middle East in the twentieth century.

For Iranians the Reuter episode set a pattern. Concessions became the main way the Qajar state raised money from abroad, and each one brought protest. The most important of them, the tobacco monopoly of 1890, led to the first successful national movement against the crown, the Tobacco Protest. Later the oil concession of 1901, described in the D’Arcy concession, would shape Iran’s twentieth century.

How historians judge it

Older nationalist histories present the concession as a sale of the country by a corrupt court. More recent work, such as that of Abbas Amanat and of Guity Nashat, who studied Sepahsalar’s reforms, sees a reforming minister who believed that a single large foreign enterprise could jump-start development, and who misjudged the reaction at home, in Russia and in Britain. Most agree that the concession was both too sweeping to succeed and politically fatal to the reform programme of the 1870s. The page on Naser al-Din Shah places it in the wider reign.