The 1979 Cancellation of Contracts with U.S. Oil Companies

Name: The 1979 Cancellation of Contracts with U.S. Oil Companies
Start: 1979-11-15
Location: Unspecified

The Historic Decision of 1979

Overview of the Iran-U.S. Relations

In the backdrop of the Iranian Revolution, Iran made a significant shift in its foreign policy in 1979. The new Iranian government, driven by a desire to reclaim national sovereignty and reduce Western influence, decided to cancel all existing contracts with U.S. oil companies. This marked a watershed moment in the relationship between Iran and the United States.

The Reasons Behind the Cancellation

After the overthrow of the Shah of Iran, who was supported by the West, particularly the United States, the revolutionary leaders sought to sever ties with foreign corporations that they perceived as exploiting the nation's resources. The decision reflected the desire for economic independence and was rooted in a broader nationalist and anti-imperialist sentiment.

The Impact of the Cancellation on Global Oil Markets

Immediate Effects on Oil Supply

The abrupt cancellation of contracts had profound implications on the global oil market. The disconnection from one of the world's major oil producers led to a significant increase in oil prices, as panic set in regarding supply shortages. This ripple effect was felt worldwide.

The Long-term Repercussions for U.S.-Iran Relations

The cancellation signaled the beginning of a prolonged period of hostility that would define U.S.-Iran relations for decades to come. The severing of economic ties emboldened both sides' stances and fueled the narrative of distrust that persists to this day.

Fun Fact

The Upheaval in Oil Prices

As a consequence of the cancellation, during the late 1970s, oil prices soared from around $13 per barrel to $39 per barrel by 1980, illustrating how geopolitical events can dramatically influence economic conditions globally.