Mohammad Reza Shah succeeded to the throne in a country occupied by foreign powers, crippled by wartime inflation, and politically fragmented. Paradoxically, however, the war and occupation had brought a greater degree of economic activity, freedom of the press, and political openness than had been possible under Reza Shah. Many political parties were formed in this period, including the pro-British National Will and the pro-Soviet Tūdeh (“Masses”) parties. These, along with a fledgling trade union movement, challenged the power of the young shah, who did not wield the absolute authority of his father. At the same time, the abdication of Reza Shah had strengthened conservative clerical factions, which had chafed under that leader’s program of secularization.

Following the war, a loose coalition of nationalists, clerics, and noncommunist left-wing parties, known as the National Front, coalesced under Mohammad Mosaddegh, a career politician and lawyer who wished to reduce the powers of the monarchy and the clergy in Iran. Most important, the National Front, angered by years of foreign exploitation, wanted to regain control of Iran’s natural resources, and, when Mosaddegh became prime minister in 1951, he immediately nationalized the country’s oil industry. Britain, the main benefactor of Iranian oil concessions, imposed an economic embargo on Iran and pressed the International Court of Justice to consider the matter. The court, however, decided not to intervene, thereby tacitly lending its support to Iran.

Despite this apparent success, Mosaddegh was under both domestic and international pressure. British leaders Winston Churchill and Anthony Eden pushed for a joint U.S.-British coup to oust Mosaddegh, and the election of Pres. Dwight D. Eisenhower in the United States in November 1952 bolstered those inside the U.S. Central Intelligence Agency (CIA) who wished to support such an action.

Within Iran, Mosaddegh’s social democratic policies, as well as the growth of the communist Tūdeh Party, weakened the always-tenuous support of his few allies among Iran’s religious class, whose ability to generate public support was important to Mosaddegh’s government. In August 1953, following a round of political skirmishing, Mosaddegh’s quarrels with the shah came to a head, and the Iranian monarch fled the country. Almost immediately, despite still-strong public support, the Mosaddegh government buckled during a coup funded by the CIA. Within a week of his departure, Mohammad Reza Shah returned to Iran and appointed a new prime minister.

Nationalization under Mosaddegh had failed, and after 1954 a Western multinational consortium led by British Petroleum accelerated Iranian oil development. The National Iranian Oil Company (NIOC) embarked on a thorough expansion of its oil-production capacities. NIOC also formed a petrochemical subsidiary and concluded agreements, mainly on the basis of equal shares, with several international companies for oil exploitation outside the area of the consortium’s operations.

Petroleum revenues were to fuel Iran’s economy for the next quarter of a century. There was no further talk of nationalization, as the shah firmly squelched subsequent political dissent within Iran. In 1957, with the aid of U.S. and Israeli intelligence services, the shah’s government formed a special branch to monitor domestic dissidents. The shah’s secret police—the Organization of National Security and Information, Sāzmān-e Amniyyat va Ettelaʿāt-e Keshvār, known by the acronym SAVAK—developed into an omnipresent force within Iranian society and became a symbol of the fear by which the Pahlavi regime was to dominate Iran.