An American with Iran Against the Russian Empire: William Morgan Shuster

Long before Iranian revolutionaries named America the “Great Satan” in 1979, another Iranian revolutionary government looked to America for help in its struggle to secure its independence. In 1911, the government of Persia – as outsiders then knew Iran – invited William Morgan Shuster, an American lawyer and civil servant, to become the country’s treasurer general. Shuster arrived at a pivotal moment in Iran’s history, just as a fragile new democracy was struggling to survive. Only five years earlier, Iranians had carried out a “constitutional revolution,” forcing the reigning monarch, Mozzafer ad-Din Shah, to accept a constitution and a parliament, or majles. Supporters of the new government counted on the majles to end the corruption of successive monarchs who had exploited Iran’s resources for personal gain, and allowed Russia and Britain to dominate the country’s economy.

But the constitutional movement had powerful enemies. In January1907, Mozzafer ad-Din died, and his son Muhammad Ali, a friend of Russia, became shah. Russia opposed the constitutional movement and jealously guarded its influence in northern Iran. In 1908, after surviving an assassination attempt, Muhammad Ali’s Russian-backed forces besieged the majles, arresting and executing prominent constitutionalists. The following year, constitutional forces deposed Mohammad Ali and sent him into exile. But by then, Iran was almost bankrupt. Europeans and corrupt local elites conspired to drain the national purse, even as Russia sought to undermine the government. To secure control of Iran, the government needed to root out corruption and centralize its tax system. That was Shuster’s mission.

This series of articles is based on Shuster’s 1912 memoir, The Strangling of Persia.

Part II: Alone Against the Russians

In June 1911, Iran’s parliament passed its Financial Law, which made William Morgan Shuster treasurer general of Persia. Shuster became responsible for all taxation and payments by the Persian government, and badly rattled much of the “European colony” in Tehran, which, along with wealthy Persian elites, had grown used to profiting from an inexperienced government with a disorganized treasury. Shuster began his job by challenging an atmosphere of corruption whereby -- to cite just a few examples -- an idle Italian “general” lived at the expense of the government, a Russian official charged way over the odds on a large shipment of second-hand rifles for the army, and even Iran’s acting minister for war, Amir Azam, sought to double-bill for his troops’ payment.

“The Europeans were enmeshed in corruption in Iran,” says Ali Ansari of the University of St. Andrews. “Shuster, this strait-laced banker, had to try and find his way through it. The more upstanding Iranians he found among the constitutionalists were with him, but the task of untangling this almighty mess was certainly not something he could do on his own.”

Iran, meanwhile, was in as much turmoil as its finances, and the constitutionalists needed a disinterested outsider to act as a central authority. The government did not control the whole country. Supporters of the recently deposed pro-Russian despot, Muhammad Ali Shah -- including the ex-shah’s brothers Shuau’s-Saltana and Salaru’d Dawla – were at war with the constitutional government. When Shuster arrived, they were enlisting Kurdish and Turkmen tribesmen from Iran’s restive border regions to fight as anti-government mercenaries. In this unstable atmosphere, Shuster went into Wild West mode. He proposed that the majles put a bounty on the heads of Muhammad Ali and his revanchist brothers, “dead or alive.” He also established an armed “treasury gendarmerie” to demonstrate the central government’s authority and extract taxes by force if necessary. He quickly made enemies.

“Support for him was not unanimous,” says Abbas Amanat of Yale University. “Here was an American with a vision of creating a centralized, powerful tax-collecting administration that would enable the central government to bring law and order to a country that was then known as ‘the Guarded Domains of Persia.’” Meanwhile, he says, members of the old aristocracy, although ostensibly acquiescing to the new order, were infiltrating the constitutional government with selfish aims, such as protecting revenues from their landed estates.

To head his gendarmerie, Shuster wanted the Persian government to hire Major C. B. Stokes, a learned, Persian-speaking British Empire hand. But when Shuster tried to arrange Stokes’ employment, he quickly learned who held the real power in Iran. Under a convention signed in 1907, Britain and Russia had agreed, against the wishes or acknowledgement of the Persian government, to divide the country into “spheres of influence” in the north and south. When the Russian legation learned that Shuster planned to hire Stokes, it objected to the prospect of a former British official carrying out Persian government duties in “its” northern sector. Britain, which had initially agreed to let Stokes work for Shuster, had to back down to avoid a diplomatic quarrel.

The “Stokes Incident,” as Shuster later called it, set the tone for the cynical great power politics he was to witness throughout his time in Iran. Russia, he soon realized, was doing all it could to lay the groundwork for a return to the pre-constitutional status quo. Britain, which had initially lent some support to the constitutional movement, had its growing rivalry with Imperial Germany to think of, and needed to maintain good relations with Russia at all costs. As an employee of the Persian government, Shuster refused to acknowledge Russian and British “spheres of influence,” and sought to defend Iran’s sovereignty in the face of Russian hostility, British caution, and the threat of a coup d’état from abroad.

“Shuster had illusions about what he was walking into,” says Evan Siegel, translator of Ahmad Kasravi’s History of the Iranian Constitutional Revolution. “Behind this financial mess was a geopolitical problem, which he wasn’t in a position to do much about.” Whereas when Shuster was in the Philippines he was working in an American colony with full powers, In Iran, he was up against powerful adversaries. “His project was perfectly honorable but unrealistic.” Siegel says.

Officially, Russia was obliged under another agreement, the Anglo-Russian protocol of 1909, to supervise Muhammad Ali’s exile in Odessa and prevent him from acting against the constitutional government. But in the summer of 1911, Russia turned a blind eye as Muhammad Ali journeyed through Russian territory from the Black Sea to the Caspian under the pseudonym “Khalil,” bearing with him a consignment of weapons in boxes labeled “mineral water” -- and landed on Iranian territory. When Shuster attended a dinner with the British minister Sir George Barclay and the Russian minister Stanislow Poklewski-Koziell, the latter asked him “whether I would not be willing to remain under Muhammad Ali, when he was restored to power.” Shuster was appalled at the notion that he might serve “under a cruel and vicious monster who would be the slave of the St. Petersburg Cabinet.”

Russia Takes Offence

Any action Shuster took against the assets of the old regime excited Russian opposition. When the majles ordered the seizure of six Tehran estates belonging to the ex-Shah’s brothers, and Shuster sent the treasury gendarmerie to occupy them, his forces ran into trouble. At the grand property of the Shah’s brother Shuau’s-Saltana, a group of “Persian Cossacks” -- a force acting as Russian consular officers -- turned up and drove them away at gunpoint. Further seizures (including a successful return to the property of Shuau’s-Saltana) met a campaign of Russian obstruction and legal caviling, throughout which, Shuster wrote, Russian officials seemed keen to provoke “some action which could be perceived as an insult to the Russian Government.”

“Shuster came to do something more than what was expected from him,” Amanat says. “I don't think even those who invited him to become head of the treasury expected him to become so intrusive or forceful. But he took his job very seriously. There was inevitable resistance on the side of the Russians, but also from the Iranian aristocracy, who felt that that kind of tax collection he intended was a direct challenge to their control over their large estates.” Nor was the Russian legation his only critic. “Some of the Persian journalists at the time criticised Shuster for not realising that the presence of the two big powers in Iran was a fact of life that had to be accommodated,” Amanat says. “Shuster was precisely the wrong person for that purpose.”

As Shuster’s quarrel with Russia unfolded, his hopes in Iran began to crumble. He lamented the loss of Stokes, and what he saw as Russian obstruction in his efforts to arrange a £4,000,000 loan from a London investment bank, Messrs. Seligman Bros., for “permanent improvements and revenue producing expenditures.” Approached by the Reuters News Agency and the Times of London for comment that October, he lamented, “the final refusal of Russia to withdraw from her unwarranted attempt to coerce the Persian government in the case of Major Stokes and the complete acquiescence of England in the coercion plainly showed that there was no genuine friendly feeling on the part of those two Governments towards the financial progress and the general progress of Persia.”

Far from assuring the Persian government of its friendly feelings, Russia had begun landing troops in Baku and the northern Iranian port of Enzeli. Then, in November, it issued the Persian government an ultimatum: Withdraw the treasury gendarmes from the property of Shuau’s-Saltana and allow the Persian Cossacks to return, and apologize for the “insult” to Russia’s consular officers, or its troops would move in to secure Russian interests. When the government sought Shuster’s advice, he remarked that, “if the [Persian] Cabinet was going to stand at all on the rights of Persia this seemed a very strong case for them.” But when the government, terrified of a Russian invasion, consulted British Secretary for Foreign Affairs Sir Edward Grey, he recommended an apology. Iran was on its own.

“In retrospect, Shuster meant well, but he managed to make things a good deal worse,” Siegel says. “He didn’t have to power he needed, and he created an international incident. But what were his options? Something had to be done to shake Iran up, or it would have continued to decay.”

The Persian government swallowed its pride and took Grey’s advice, along with his assurances that doing so would appease Russian anger and end the affair.  Wuthuqu’d-Dawla, the minister for foreign affairs, apologized to Russia. In return, Russia surprised the government with a new ultimatum: dismiss Shuster, promise to obtain Russian and British consent for the employment of foreign subjects in the future, and pay an “indemnity” to cover the dispatch of Russian troops from the Caucasus. For the constitutional government, there was no question of accepting such a humiliation, but, since they could not fight Russia, and settled on “passive opposition.” Iranians endured “days and nights of doubt” as they awaited Russia’s blow. On December 24, supporters of Muhammad Ali Shah, backed by a contingent of tribal mercenaries, occupied the majles and shut it down. Iran’s parliamentary experiment was over. It was, Shuster wrote, “a sordid end to a gallant struggle.”

Also in this Series: 

Part I: Iran's American Friend: William Morgan Shuster

Part III: The American Witness to Iran's Shattered Hopes: William Morgan Shuster