In the second half of the nineteenth century this rivalry became a furious economic competition between Great Britain and Russia in Iran. Great Britain’s economic interests had increased in India as well as in Iran. By the latter part of the century the Industrial Revolution had stocked British warehouses with a surplus of manfactured goods. Sale abroad was possible, but competition with industrial states, especially those with high tariffs like the United States and Germany, was stiff. It was easier in British colonies, including India, where Great Britain could manipulate the tariff and control the currency. This additional imperial interest in India increased the value of Iran to Great Britain. Iran also became more important economically in British policy because “indifference to Persia might mean the sacrifice of a trade that already feeds hundreds of thousands of our [British] citizens in this country and in India. A friendly attention to Persia will mean so much more employment for British ships, for British labour, and for British spindles.’
By the latter part of the nineteenth century Russia’s economic interest in Iran had also increased. Russia, unlike Great Britain, was not bursting with surplus capital and manfactured goods, but its meager development put it far ahead of Iran, which still had a medieval economy. Russia’s search for markets led it to Iran: The impetus which he [M. W itte, Russia’s Minister of Finance] had given to the development of Russian industry by intensified methods of protection made it absolutely necessary for him to find new markets for the products of Russian industry. The severe crisis through which Russia was passing as a consequence of overproduction under artificial conditions only served to stimulate his activity. In Persia he discovered a market in which the advantage of geographical proximity goes far to counterbalance the disadvantage at which such a hothouse growth as Russian industry is apt to find itself placed when in competition with the industry of other countries, and especially with British industry. If to geographical proximity he could superadd other advantages, he might well hope to turn the scales so completely in favor of Russian industry as to drive its competitors altogether out of the field. That its chief competitor happens here to be British industry, and that commercial rivalry therefore runs on the same lines as political rivalry, is merely an incident which no doubt adds zest to the game.
Iran’s economic foreign policy was mainly an answer to the significant change of emphasis in the Anglo-Russian rivalry. The frantic economic activities of Näsir al-Din Shah and his son could only in part be attributed to their interest in remedying the over-all economic backwardness of the country. Their overriding objective was to find access to new sources of funds for dynastic survival as well as royal pleasure and comfort. A new internal development significantly influenced the new economic policy. This development owed its origin to the appearance of an unexpected personality on the Iranian political scene. During the early rule of Näsir al-Dïn Shah when “ruin and revolution appeared to be imminent'.
Mîrzâ Taqi Khân, the Amir Nizam, or Amir Kabir as he is generally known in Iran, held the post of Prime Minister for a short time. Apart from the internal reforms that this "really extraordinary person, who was far in advance of his age and country," introduced into the Iranian administration, army, and education, he was the originator of the policy of "equilibrium." Since 1800 the Shahs had thrown their lot first with one power and then another by making alliances and waging wars, but the Amîr Nizâm introduced the concept of equilibrium in combating Anglo-Russian rivalry. He consistently opposed European pressures.
If he pertinaciously withstood, for instance, the efforts of Russia to replace Bahman Mirza in Azerbaijan, he was equally obstinate in refusing to admit the intercession of England in favour of the Asset ed-Douleh and his family in Khorasan ; and so thoroughly, indeed, did he observe this impartiality of political conduct, that when obliged by circumstances to yield in one direction, he at once sought to redress the balance by a corresponding concession in the other.
The significant and lasting impact of "equilibrium" on the foreign policy of Iran will be discussed in later chapters. At first, however, the policy, which was formulated initially to protect the interests of Iran, in the hands of the inexperienced Shahs actually militated against those interests. The weak country found it nearly impossible to implement the policy of equilibrium in a positive manner, that is, in such a way as to deny the rival powers or their subjects their demands for economic concessions or excessive commercial and other privileges. Instead, the application of the concept of equilibrium to the economic sphere resulted in the granting of all sorts of economic concessions to both rival powers.