In 1925, after years of civil war, turmoil, and foreign intervention, the geographic dynasty known as
Persia became unified under the rule of Reza Pahlavi, who performed a
coup d'état against the
Qajar dynasty (1789–1925) which presided over a divided and isolated Persia. He later crowned himself as Reza Shah that same year. In 1935, Reza Shah asked foreign delegates to use
Iran, the historical name of the country that was also used by its indigenous people, in formal correspondence. Reza Shah commenced an ambitious program of economic, cultural, and military modernization. Reza Shah's regime established schools, built
infrastructure, modernized cities, and expanded transportation networks. The Shah pursued a foreign policy of
neutrality, but depended on Western financing in order to finance his ambitious modernization projects. The British began to accuse Iran of supporting
Nazism and of being pro-German. Iran assumed great strategic importance to the British government, which feared that the
Abadan Refinery (of the UK-owned
Anglo-Iranian Oil Company) might fall into German hands. Refining eight million tons of oil in 1940, the refinery made a crucial contribution to the
Allied war effort. Relations between Britain and Iran had been strained since 1931 when the Shah unilaterally cancelled the
D'Arcy Concession – a 1901 agreement that had given the Anglo-Iranian Oil Company the exclusive right to prospect for Iranian oil for 60 years, with Iran receiving 16 percent of the net profit. Led by the Shah, the Iranian imperial government accused the Company of undercutting its share of the profit by clandestinely reinvesting new capital into subsidiary companies, and thus excluding a significant sum from the annual capital gain calculation. Though the Shah promptly renegotiated a second concession with the Anglo-Iranian Company – with terms that better protected the Iranians' stake – the diplomatic conflict created an impression that the Shah was hostile to British oil interests. In a major strategic analysis in the
New York Times on a Sunday following Barbarossa, the famous international correspondent
C. L. Sulzberger stated, in reference to the
Operation Orient, "It is considered virtually a certainty by military experts that if the Reich succeeds...an attack on
Egypt will be launched. Should the Germans...occupy the
Caucasus and then push on to Iran and the Persian Gulf they will then outflank the British Middle Eastern positions by a wide sweep and perhaps by Autumn begin to make trouble in Iraq." With the
Wehrmacht steadily advancing through the Soviet Union, the Persian Corridor formed by the
Trans-Iranian Railway offered one of the easiest ways to supply the Soviets with
Lend-Lease goods sent by sea from the then technically neutral
United States. British and Soviet planners recognized the importance of that railway and sought to control it. As increasing
U-boat attacks and winter ice made
convoys to
Arkhangelsk (which commenced in August 1941) dangerous, the railway seemed an increasingly attractive strategic route. The two Allied nations applied pressure on Iran and on the Shah, which led to increased tensions and to anti-British rallies in
Tehran. The British described the protests as "pro-German". In July and August, the Shah refused demands from the British for the expulsion of German residents from Iran (mostly workers and diplomats). A British embassy report, dated 1940, estimated that there were almost 1,000 German nationals in Iran. According to Iran's ''
Ettela'at'' newspaper, there were 690 German nationals in Iran (out of a total of 4,630 foreigners, including 2,590 British). Joan Beaumont estimates that "probably no more than 3,000 Germans actually lived in Iran, but they were believed to have a disproportionate influence because of their employment in strategic government industries and in Iran's transport and communications network." == Invasion ==