1. THE FINANCIAL AND IMPERIAL ORIGINS
A coherent historical analysis tracing how decisions made by European imperial powers during World War I - shaped by overlapping diplomatic commitments and the strategic imperatives of oil and finance - constructed the foundations of the modern Middle East.
The narrative connects the McMahon Hussein Correspondence, the Sykes Picot Agreement, and the Balfour Declaration with a parallel architecture of oil concessions and transnational capital, illuminating how contradictory promises, secret treaties, and corporate cartels configured borders, states, and conflicts that still reverberate today.
2. THE PRE WAR CHESSBOARD - DECLINING OTTOMANS AND RISING IMPERIAL AMBITIONS
For six centuries, the Ottoman Empire governed the lands that would become Iraq, Syria, Lebanon, and Palestine, evolving from a 17th century global power into a 19th century polity weakened by administrative corruption, military defeats (first to Russia, then to rising European powers), and economic stagnation rooted in a failure to industrialize.
The Ottoman Empire - sultans, dynasties and legacies
European colonial pressure intensified.
• France took Algeria in 1830 and Tunisia in 1881 and eyed Syria.
• Britain controlled Egypt and administered the Suez Canal while building profitable networks across the Persian Gulf.
• Russia pushed toward Constantinople and the Black Sea Straits.
• Italy moved into Libya.
• Germany advanced economic reach via the Berlin – Baghdad railway.
Oil - long known regionally as bitumen and pitch - gained strategic urgency in the early 20th century.
In 1901, William Knox Darcy secured from the Shah of Persia a 60 year exclusive prospecting concession for £20,000 cash, equal company shares, and 16% of future profits.
After years of barren drilling, a 50 foot gusher erupted at Majid Suleiman at 4 a.m. on May 26, 1908, birthing the Anglo Persian Oil Company (APOC).
Birth of the Anglo Persian Oil Company (APOC) at Majid Suleiman, 1908
In 1911, Winston Churchill, First Lord of the Admiralty, concluded Britain’s naval supremacy could not rest on coal alone.
The Royal Navy ran entirely on coal, but oil powered ships promised:
• greater speed
• greater manoeuvrability
• greater range
Britain possessed almost no domestic oil and relied on imports from dominant players: American Standard Oil and Royal Dutch Shell.
In 1913, Churchill told Parliament Britain must control oil at its source.
Two months before World War I, the British government purchased a 51% controlling stake in APOC, a decision that received royal assent less than a week before war began and declared a strategic intent that would steer British foreign policy for decades.
Mesopotamian oil - especially in Mosul, Baghdad, and Basra - was already attracting investors and states.
Calouste Gulbenkian, a shrewd Armenian broker, had described immense deposits beneath Ottoman soil as early as 1892 and spent his career securing personal percentages of complex deals.
By 1912, the Turkish Petroleum Company (TPC) formed.
• Anglo Persian held 47.5%
• Royal Dutch Shell 22.5%
• Deutsche Bank 25%
• Gulbenkian personally 5%
On June 28, 1914, the Ottoman Grand Vizier promised a concession for oil in Baghdad and Mosul to TPC.
Four days later, Archduke Franz Ferdinand was assassinated, war ensued, and the Ottoman Empire joined Germany – resetting the entire landscape.
3. A WEB OF DECEIT - BRITAIN’S THREE CONTRADICTORY PROMISES
Before victory or even consultation with local populations, Britain and France were already partitioning the Middle East.
The under told dimension is financial.
The diplomatic promises mapped onto strategic calculations about oil, capital, and wartime necessity.
In 1916 Britain sought allies with religious authority, local knowledge, and mobilisation capacity against the Ottomans.
It then issued multiple contradictory promises over the same territories.
First – the Arabs.
Beginning in July 1915, Sir Henry McMahon, Britain’s High Commissioner in Egypt, entered secret correspondence with Hussein bin Ali, Sharif of Mecca – the most respected Islamic authority in Arabia.
Britain needed the Arab Revolt to counter the Ottoman Sultan’s jihad.
Across ten letters (July 1915 – March 1916), McMahon effectively promised Arab independence over a vast territory encompassing most of the Arabian Peninsula, Syria, Palestine, and Mesopotamia.
Hussein read the exchange as a genuine commitment and launched the Arab Revolt in June 1916.
His son Faisal led forces alongside T.E. Lawrence.
They captured Aqaba, sabotaged railways, ambushed convoys, and eventually entered Damascus near the end of the war believing they were stepping into the promised independent Arab state.
Thousands died believing in those letters.
Second – Sykes Picot.
Negotiations began in November 1915 between Sir Mark Sykes and François Georges Picot.
On May 16, 1916, while Arab fighters were already in the field, the secret Sykes Picot Agreement was ratified.
It allocated Syria and Lebanon to France, Iraq and Palestine to Britain, and left other territories as nominally independent but effectively controlled zones.
Sykes famously described drawing a line from the “E” in Acre to the last “K” in Kirkuk.
That line sliced through communities, trade routes, tribal lands, and family networks.
Third – Balfour.
On November 2, 1917, Foreign Secretary Arthur James Balfour wrote a 67 word letter to Lord Lionel Walter Rothschild.
The letter declared that Britain favoured the establishment in Palestine of a national home for the Jewish people.
Britain had now made three promises to three constituencies about overlapping lands – simultaneously.
Britain's three parallel promises
4. THE FINANCIAL ARCHITECTURE - ROTHSCHILDS, ZIONISM AND GEOPOLITICS
The Balfour letter’s addressee – Lord Lionel Walter Rothschild – reflects the Rothschild family’s long standing relationship with Palestine.
The Rothschild banking dynasty had dominated European private finance for more than a century.
Nathan Rothschild built the British branch’s influence.
Family networks financed governments, infrastructure, and extractive industries including Royal Dutch Shell and Rio Tinto.
Baron Edmund James de Rothschild, of the French branch, moved beyond banking.
Following pogroms in Russia during the 1880s and the growth of Zionist thought, he began financing Jewish settlements in Ottoman Palestine.
Beginning in 1882 he supported settlements such as:
• Rishon Lezion
• Petah Tikva
• Zikron Yaakov
• Rosh Pina
• Metula
He financed:
• houses
• roads
• wineries
• irrigation systems
• agricultural training
Over roughly fifty years he spent an estimated six million dollars of personal wealth building agricultural and industrial infrastructure.
By 1918 Rothschild linked holdings covered roughly one twentieth of Palestine’s fertile land.
In 1924 these investments were organised into the Palestine Jewish Colonization Association (PICA).
PICA acquired over 125,000 acres and helped establish more than forty settlements while developing electric power, potash extraction, cement production and the basis of an independent economy.
Place names such as Rothschild Boulevard in Tel Aviv and towns like Zichron Yaakov, Binyamina and Pardes Hanna still reflect this history.
The British government also believed support for Zionism could mobilise Jewish financial networks and political support – particularly in the United States – during the difficult later years of the war.
Thus diplomacy, finance and military strategy were closely intertwined.
The Balfour declaration, 1917
5. THE POST WAR SETTLEMENT - BORDERS AND OIL
After the Ottoman collapse, the Allied powers formalised their plans.
In 1918 British forces entered Mosul - three days after the armistice with Germany - securing the most promising oil territory.
This move ignored the earlier Sykes Picot arrangement.
The Sykes-Picot Agreement, 1916
At the San Remo Conference in April 1920 the powers formalised mandates and oil interests.
France ceded Mosul to Britain’s Iraqi mandate in exchange for a 25% share in the oil company that would exploit the region.
Territory and oil concessions were negotiated simultaneously.
American companies protested exclusion.
After prolonged pressure they were admitted into the renamed Iraq Petroleum Company.
Ownership became:
• Anglo Persian – 23.75%
• Royal Dutch Shell – 23.75%
• Compagnie Française des Pétroles – 23.75%
• American consortium – 23.75%
• Gulbenkian – 5%
The Red Line Agreement prevented partners from developing oil independently within the former Ottoman lands.
The Redline agreement, 1928
The boundary of the agreement was literally drawn with a red crayon around the Ottoman Empire.
Production levels could even be restricted to maintain global oil prices.
Ordinary populations were unaware their natural resources were being managed through a hidden cartel.
6. PERSIA TO IRAN – FROM CONSTITUTIONAL REVOLUTION TO THE ISLAMIC REPUBLIC (1906–2026)
While the modern Middle East was being carved up between Britain and France after the First World War, Persia – later Iran – followed a different but equally decisive trajectory.
Instead of becoming a formal mandate, Iran became the battleground between national sovereignty, foreign oil interests, and great power geopolitics.
The story runs through four turning points: 1906, 1953, 1979, and the present confrontation of the 2020s.
6.1 THE CONSTITUTIONAL REVOLUTION – PERSIA’S FIRST MODERN REVOLUTION (1906)
Iran entered the twentieth century already struggling with foreign influence.
The ruling Qajar dynasty had granted sweeping concessions to foreign companies and governments, particularly Britain and Russia.
Economic hardship, corruption, and resentment against foreign domination produced a remarkable political movement.
In 1906, merchants, clerics, and intellectuals forced the Shah to accept a constitution and a national parliament (Majlis).
The goal was to limit royal authority and defend national sovereignty.
It was one of the first constitutional revolutions in the Middle East.
Yet the new system faced immediate pressure from outside powers.
In 1907, Britain and Russia signed a convention dividing Persia into northern and southern spheres of influence, effectively undermining the new constitutional government.
Iran had achieved political awakening – but not independence.
- Constitutional Revolution – a political movement seeking to limit royal power by establishing a constitution and parliament.
6.2 OIL AND NATIONALISM – MOSSADEGH AND THE 1953 COUP
Oil transformed Iran’s political destiny.
Since the 1908 discovery of petroleum, Britain had dominated Iranian oil through the Anglo Iranian Oil Company (later BP).
Many Iranians believed their country was receiving only a small share of its own wealth.
In 1951, nationalist leader Mohammad Mosaddegh became prime minister.
His government nationalised the oil industry in order to reclaim Iranian sovereignty.
Britain responded with an international oil embargo.
In 1953, Britain and the United States organised a covert operation – Operation Ajax – to overthrow Mosaddegh.
The coup removed Iran’s elected government and restored the Shah, Mohammad Reza Pahlavi, to power.
The monarchy then ruled with strong Western support for the next twenty six years.
For many Iranians this event became the defining symbol of foreign interference in their politics.
- Operation Ajax – the 1953 CIA and MI6 backed coup that overthrew Iran’s elected prime minister Mohammad Mosaddegh.
6.3 THE PAHLAVI MONARCHY – MODERNISATION AND AUTHORITARIAN RULE
After the coup the Shah launched an ambitious programme of rapid modernisation.
This included the White Revolution, a series of reforms intended to transform Iranian society.
These reforms included:
• land redistribution
• industrial expansion
• education programmes
• women’s suffrage
But the political system remained authoritarian.
Opposition parties were suppressed.
The secret police organisation SAVAK became notorious for repression.
Meanwhile Western influence remained highly visible.
Iran became one of Washington’s key regional allies during the Cold War.
For many Iranians the system came to represent modernisation without political freedom and independence.
6.4 THE ISLAMIC REVOLUTION – THE SYSTEM COLLAPSES (1979)
By the late 1970s opposition to the Shah united a wide range of forces:
• religious leaders
• nationalists
• students
• left wing movements
Mass protests escalated during 1978.
In February 1979, the monarchy collapsed and Ayatollah Ruhollah Khomeini returned from exile to lead the revolution.
Iran became the Islamic Republic of Iran, replacing the monarchy with a political system combining clerical authority and republican institutions.
The revolution dramatically changed Iran’s relations with the West.
Later that year Iranian students seized the U.S. embassy in Tehran, triggering the hostage crisis and the breakdown of diplomatic relations.
- Islamic Republic – a political system combining religious authority with republican political institutions.
6.5 FOUR DECADES OF CONFRONTATION (1979–2025)
Since the revolution Iran has existed in a tense relationship with Western powers.
Several key events shaped this period:
• the Iran–Iraq War (1980–1988)
• decades of economic sanctions
• disputes over Iran’s nuclear programme
• regional proxy conflicts involving groups aligned with Tehran
Diplomatic efforts have occasionally reduced tensions.
The most significant was the 2015 nuclear agreement (JCPOA).
However the agreement collapsed after the United States withdrew in 2018, reimposing sanctions.
Since then relations have deteriorated again.
Regional conflicts involving Israel, Lebanon, Gaza, Syria and Yemen increasingly intersect with the confrontation between Iran and Western allies.
- Sanctions – economic restrictions imposed by states to pressure another country’s government.
6.6 IRAN AND THE NEW REGIONAL STRUGGLE (2025–2026)
By the mid 2020s Iran has become a central actor in the strategic balance of West Asia.
It is simultaneously:
• a regional military power
• a centre of ideological resistance to Western influence
• a target of sanctions and strategic pressure
Tensions escalated again during 2025–2026, with Israeli and American military actions and Iranian retaliation raising fears of wider war across the region.
From Tehran’s perspective the struggle is part of a long historical arc beginning with the foreign interventions of the early twentieth century.
From Washington and its allies’ perspective Iran represents a disruptive regional challenger.
Thus the conflict that began with oil concessions and imperial rivalry more than a century ago continues to shape the geopolitics of the present.
6.7 THE PERSIAN PARALLEL
Seen alongside the history of the Arab Middle East, Iran represents a parallel story rather than a separate one.
In both cases the decisive forces were:
• foreign oil interests
• great power rivalry
• local nationalist movements
• political systems struggling between modernisation and sovereignty
But while the Arab world was shaped by colonial mandates, Iran’s trajectory was shaped by covert intervention and revolution.
The result is the geopolitical landscape visible today.
- National sovereignty – the principle that a state should control its own political and economic decisions without external domination.
1906 - Constitutional Revolution11953 - CIA / MI6 coup
1979- Islamic Revolution
2025 / 2026 - Iran at the centre of a new regional war
7. A CENTURY OF CONSEQUENCES - THE ENDURING LEGACY
The secret agreements became public after the Russian Revolution.
In November 1917 the Bolsheviks published the text of Sykes Picot.
Arab leaders discovered Britain had promised their lands to other powers.
T.E. Lawrence later wrote that he felt he had been a fraud, promising freedom while knowing the agreements.
The McMahon Hussein correspondence remained secret until 1939.
Meanwhile the mandates reshaped the region.
Syria and Lebanon were divided under French control.
Iraq was created from three Ottoman provinces – Mosul, Baghdad and Basra.
Kurds promised autonomy under the Treaty of Sèvres saw it disappear in the Treaty of Lausanne.
Britain installed Faisal as king of Iraq in 1921 under a constitution designed to preserve British influence.
Palestine became the site of accelerating Jewish immigration and Arab resistance.
The Arab Revolt of 1936 – 1939 was crushed by British forces.
In 1948, Israel appeared on the map for the first time, despite its not honouring the terms of recognition required by the United Nations. Rhere followed the displacement of roughly 700,000 Palestinians - the Nakba (the catastrophe).
Refugee communities continue to exist across Lebanon, Jordan and Syria today.
8. CONCLUSION - CAPITAL AND CONFLICT
The years 1915 to 1922 reveal a powerful relationship between financial capital and geopolitical decisions.
The men drawing borders were not only diplomats.
They were linked to systems of finance, oil concessions and strategic trade routes.
Arabs were promised independence to mobilise wartime support.
Zionism gained backing partly from conviction and partly from strategic and financial considerations.
Borders were drawn according to strategic corridors and oil concessions rather than local social realities.
The people living in these territories were rarely consulted.
The lines drawn during those years became the borders of states, armies and identities.
History continues to operate through institutions, borders and unresolved promises.
Lines drawn in 1916 continue to shape political tensions today.
The Middle East seen in current headlines was constructed in those negotiations - by those men - for those interests.
The conflicts are not simply ancient rivalries.
They are the consequences of decisions taken deliberately during the collapse of an empire.
