At the outset of the Qajar dynasty, the Persian economy displayed the characteristics of a traditional economy disintegrating under the stress of political anarchy.




At the outset of the Qajar dynasty, the Persian economy displayed the characteristics of a traditional economy disintegrating under the stress of political anarchy. Several decades of external invasions, internal strife, and endemic lawlessness, exacerbated by the decline of transcontinental trade routes, had brought widespread decay and decline, if not near complete exhaustion, to the economy.

Early Qajar Persia appeared to most western travelers as an underpopulated country with a large nomadic population. In the absence of comprehensive censuses or any other reliable sources, accurate population figures are impossible to determine. However, an estimate of 6 million people is offered by John Malcolm (II, pp. 518-19) for the early 1800s, with half of the population thought to have been nomadic. A significant demographic feature of the time is that foreign observers widely concurred that the country’s population had in fact declined during the previous few centuries and that it was below its level during the Safavid era. This impression was reinforced by images of deserted villages and abandoned agricultural land, including those in fertile areas (Hambly, p. 70; Issawi, 1971, pp. 26-27).

In terms of the basic economic structure, Persia depicted the key features of a backward economy: the predominance of land-related and agricultural activities in the nation’s livelihood; primitive and limited road and infrastructure networks; a low degree of urbanization, despite a somewhat favorable rate compared with pre-industrial Europe (Issawi, 1971, p. 26); and limited, although increasing, internal and external trade.

Three sets of issues have been highlighted as factors that accentuated the disruption of economic life during dynastic upheavals and perpetuated economic backwardness in general: the absence of an administrative elite or tradition that could help oversee the process of change and development; “the strains that were placed on the country’s irrigation system when there occurred a reduction in the cultivating population of certain areas (through forcible conscription or flight into other areas)”; and finally, the underrealization of the agricultural potential that emanated from the survival of pastoral nomadism over large parts of the country (Hambly, p. 71; Abrahamian, pp. 14-16).

The above picture of stagnation and decline notwithstanding, there were already in Persia indications of economic vigor which, in a comparative sense at least, distinguished her from much of the rest of the region. Local industry and crafts are good examples in this respect. Persia still had a strong base of indigenous craftsmanship and manufacturing techniques, which, at that time, were prized among her neighbors. Although larger industries were still absent—and with some exceptions did not appear for much of the Qajar period—the myriad of small-scale local crafts and artisanat did form a strong local manufacturing base, which not only served the needs of the domestic market, but also those of certain foreign markets (as in the case of the export of textiles to the Caucasus and Central Asia until the late 19th century (Issawi, 1971, pp. 300-01).

Commercial activity and economic prosperity seemed to be returning to Persia in the early part of the 19th century, partly due to growing relative internal stability under Fatḥ-ʿAlī Shah (r. 1212-50/1797-1834) and partly due to flourishing trade with Russia and British India. Trade with Russia in particular was on the increase, encompassing a wide variety of goods with the balance clearly in favor of Persia. Trade with India was organized by Arab and Indian merchants and by the East India Company through the southern port of Būšehr—possibly the country’s best organized trade at this time (Hambly, p. 74). However, over half of Persia’s trade in the early 19th century still consisted of transactions with Afghanistan and the Ottoman empire. Further, the varied composition of the merchandise trade indicated the survival of the artisan and manufacturing base mentioned above, despite its downward trend since the Safavid period. The principal manufacturing centers of the period were Isfahan, Yazd, Shiraz, Kāšān, Hamadān, and Rašt, with Isfahan still the chief manufacturing city (Hambly, pp. 80-81).

Thus, although Persia’s economic structure was weak and fractured at the beginning of the Qajar dynasty and commercial and manufacturing activities still followed a traditional pattern, there appeared the beginnings of a new process of change that increasingly brought the country into contact with the rest of the world, described by Charles Issawi (1982, p.1) as a process of “impact and reaction” or “challenge and response” in the broader context of the Middle Eastern interaction with the West. Gathering pace during the rest of the 19th century, this process was to become an important mechanism of change in a traditional society such as Persia.

However, while Western economies took a more explicit interest in the rest of the Middle East (notably the Ottoman empire), their preoccupation with Persia tended to be indirect and principally of a defensive character, i.e., resulting from imperial rivalries between Russia and Britain or safeguarding economic and strategic access to colonies (as in the case of India for Britain). This is why, whereas in the rest of the region as a whole, change and integration were spearheaded by growing tradecombined with a more active presence of European capital and large-scale settlements of European immigrants, the latter two were largely insignificant in the Persian context. Even trade, although the most important of the three factors cited, played a relatively modest role in Persia’s process of economic change and certainly does not command as much importance as has been ascribed to it (Seyf, 1982, pp. 533-36; Entner, pp. 10, 24).

Persia’s foreign commerce and external trade evolved in the broader framework, and exhibited the main features of what has been dubbed the “imperialism of free trade” during the 19th century (Issawi, 1982, p. 19). According to this thesis, imperial powers took measures that promoted “free” trade with colonies and other areas of interest to them mainly by encouraging imports into and discouraging exports from them. The area was thus targeted for European manufactured goods but given little protection for its own markets. This policy was adopted with vigor in Persia, with the aim of turning her, along with much of the Middle East, into one of the lowest duty areas in the world. The consequences of this policy deserve some attention.

In Persia, Russia took the lead through the treaties of Golestān and Torkamānčāy in 1813 and 1828, respectively, which imposed uniform duties of 5 percent on the country’s imports and exports. The impact of these two treaties on Persia’s evolving trade and commercial position has been disputed. One point of view has emphasized the unequal nature of the arrangements secured by Russia under these treaties (apud Navai, p. 54). Taking exception to this position, Entner (pp. 7-11) has cautioned against a priori generalizations that portray trade with Russia as rising steadily after the Torkamānčāy treaty. The evolution of trade with Russia was not sustained, nor did it proceed at a uniform pace, in the years after the 1830s. In fact, it was not until much later—after the 1870s, when Russian industrialization began to take off significantly—that a substantial upturn in Russo-Persian trade occurred with the balance turning against Persia. Further, the adoption of similar tariff structures by other Western countries eroded any unique trade advantages that Russia derived from commerce with Persia after the Torkamānčāy treaty.

The British trading and commercial interests in Persia were, by contrast, reflected in the latter’s expanding southern trade with India. Earlier in the century this trade was largely based on the activities of The East India Company, which exercised official monopoly over India’s foreign trade. In this period, however, southern trade consisted mainly of transit in that British goods, mainly woolens and hardware, were imported into Shiraz via Būšehr. The bulk of these goods were, in fact, destined for northern towns, notably Tabrīz, and local consumption in the south was limited. Trade in the opposite direction consisted of raw silk and silk fabrics exported to India or even to Britain (Olson, p. 149). The rise of Britain’s cotton textile industry increasingly affected the volume and nature of this trade into the 19th century. With some fluctuations, notably during the American Civil War when trade rose sharply, European imports grew steadily in the middle part of the century, quadrupling between 1825 and 1870 (Olson, p. 150). British cotton fabrics increasingly offered a cheap alternative to local silk, as well as to the British woolen textile exports, and acquired an important status in the composition of British exports into the area. This new pattern of trade was to have important implications for both agriculture and local industry in Persia (see below).

The development of foreign trade was facilitated by several important advances in the transport system throughout the century. The opening of the Suez Canal (1869) probably was the most significant of these transformations revolutionizing Persia’s southern trade. For the first time, it became cheaper to ship goods from Britain to northern Persia via the Suez Canal and Būšehr than it was to ship them from Britain to Tabrīz via Trebizond. Further, the development of navigation on the Kārūn river in the late 1880s facilitated trade with India. Russian trade, too, benefited from a number of major road and rail improvements on either side of the borders. Chief among these were steamship navigation on the Caspian Sea in the 1860s, construction of the Transcaspian railway in the mid-1880s, rail links through the Caucasus to Tbilisi in the late 1860s and early 1870s, and construction of a number of paved roads. Such roads were built between Julfa and Tabrīz, Anzalī and Tehran, and between Ashkhabad and Qūčān in the latter part of the century (Issawi, 1971, pp. 157, 164-65; Entner, pp. 17, 22, 49-51).

Persia’s total trade of imports and exports quadrupled between 1860 and 1914, setting a new record for the 19th century. This increase followed a doubling of trade in nominal terms in the first half of the century (Issawi, 1971, pp. 130-31). Although Persia’s growth rate, in comparative terms, lagged behind that of other Middle Eastern regions in the same period, it was nevertheless a significant development, with equally significant impacts on, and consequences for, the structure of production and distribution systems in Persia. The changing structure of Persian trade in general, and of trade with Russia and Britain in particular, toward the end of the century perhaps best indicated the type and extent of structural transformation the country was experiencing.

Reflecting the pattern of imperial rivalry well-established by that time, Persian trade had come to be almost totally dominated by transactions with Russia and Britain. During the latter decades of the Qajar rule, about 80 percent of imports to and exports from Persia either originated in these two countries or were destined for them. Russia took the lion’s share with as much as some 60-70 percent of the total trade bill (Entner, p. 64). Imports were dominated by manufactured textiles, which together with tea and sugar made up over 70 percent of the total import bill (see Table 3 in COMMERCE vi). Likewise, with the exception of carpets, exports consisted of raw agricultural products, such as cotton, dried fruits, cereals, etc. (see Table 4 in COMMERCE vi). This pattern was even more marked in the case of trade with Russia. While in 1844 more than 70 percent of Persia’s exports consisted of handicrafts, by 1910 this share, excluding carpets, had dropped to virtually nil (Karshenas, p. 48).

The changing pattern and structure of trade, in turn, indicated important underlying structural transformations in the Persian economy. A notable feature of this period was the decline and disintegration of the indigenous crafts provoked by Persia’s increasing exposure to foreign imports. The loss of tariff autonomy as a consequence of the free trade regime mentioned above, combined with important technological advances in Western production techniques, brought significant economic disadvantages to local industry throughout the century. All accounts seem to confirm the damaging consequences of European manufactured imports that increasingly penetrated Persian markets after the 1830s and 1840s. As mentioned before, British cotton textile manufactures seemed to surpass traditional Persian cotton and silk fabrics in several ways, ranging from lower prices to superior style and greater variety of patterns (Issawi, 1971, pp. 258-61).

By the late 19th century, hardly a craft had not been damaged or had not suffered because of a change in taste or because of unequal competition with cheaper European imports, not to mention the competition faced in foreign markets (Floor, pp. 7-9). Although some processing industries did benefit from the growth of exports (e.g., workshops processing leather, opium, henna, and silk), the overall repercussions were seen in an extensive manufacturing decline, adversely affecting the prospects for the industrialization of the country for years to come.

One important exception was the carpet industry, which flourished in the last quarter of the century. There were a number of reasons for this expansion, most notably the growing popularity of Persian carpets in the West, particularly after the World Trade Fair of 1873 in Vienna. The absence of adequate banking and financial infrastructure and facilities, forcing foreign traders increasingly to use their transaction proceeds to buy Persian commodities in great demand, also helped promote this particular export industry. The depreciation of the qerān (see below) was another contributory factor. Reflecting sustained industrial growth, there were, by the end of the Qajar period, some 65,000 weavers employed in making carpets compared to merely 1,000 around 1860 (Floor, pp. 10, 13). Thus, carpets increasingly constituted an important part of Persia’s exports, with their share rising from 4 to 12 percent of the total between the 1880s and World War I (see Table 3 in COMMERCE vi). However, the growth of the carpet industry should be seen in the wider context of the Persian industrial structure. Despite the fact that carpet manufacturing workshops were seen in the closing decades of the 19th century (e.g., in Tabrīz in 1898-99 with 1500 workers, and also in the Solṭānābād district; Issawi, 1971, p. 298, 304-05), Persian industry remained small-scale and traditional, with large, and more modern industries generally conspicuous by their absence. In fact, by the beginning of the 20th century, the latter accounted for a total employment of only some 850 workers. Even by Middle Eastern standards, Persia remained backward in this respect (Floor, p. 32; Ašraf, pp. 98-99; Issawi, 1971, pp. 298-99; a short description of factory enterprises in Persia in the second half of the 19th century and the problems they faced is given in Issawi, 1971, pp. 305-10).

Changes in the Persian economy were perhaps nowhere as well typified as in the transformation of the country’s agrarian sector toward the latter part of the Qajar period. The process of structural transformation and change that went with the increasing integration of Persia’s economy into the international system saw also the beginnings of the commercialization of agriculture. Although the pace of this process should not be exaggerated, the changes it brought about were significant in terms of both evolving tenurial relations and agricultural organization in the coming years.

To some extent this trend had been evident with the rise of the southern trade with British India, which had encouraged and expanded the production of cash crops, notably opium (see AFYŪN). A high value, low bulk commodity with very modest investment requirements, opium was a major beneficiary of the expanding markets in, and growing commercial transactions with, India. This trend was aided by a number of conjunctural factors, such as the sharp fall in the international price of cotton after the American Civil War and developments in India and China, resulting in a reduction in the supply of opium at a time of increasing demand. As a result, opium production increased sevenfold between the late 1850s and 1870, by which time opium had also been established as a major export crop (Olson, pp. 153-55; Gilbar, pp. 324-27; Issawi, 1971, p. 136; Seyf, 1984, p. 246; see also Table 4 in COMMERCE vi).

Other crops, too, were increasingly exposed to the logic of market forces, albeit in varying degrees and with different tempos. Rice (mainly cultivated in the north) and cotton (cropped in the north and center) are examples of such crops. Although rice production was principally absorbed in the domestic market, it increasingly benefited from growing trade with Russia. Cotton, by contrast, was encouraged explicitly by Russia, and was established as a major export crop principally for her markets (Gilbar, p. 354; Issawi, 1971, p. 246; Nowshirvani, p. 572).

The impact of the free trade regime on the tenurial relations in Persia also deserves attention. As in western Europe of a century or so earlier, the growing commercialization of agriculture and increasing development of export crops in Persia tended to increase the economic attractions of landholdings (Pavlovitch, p. 618; Issawi, 1971, p. 208). Two additional factors accentuated private interests in landed property: The weakening of the political power of the Qajar state, which led increasingly to the de facto conversion of toyūls into private property, and the fiscal crisis of the state, resulting in the sales of the ḵāleṣa lands (Lambton, Landlord and Peasant, pp. 143, 152-53). The resulting tendency was the concentration of land into large private holdings. But unlike England, where a new capitalist farming class was formed, and France, where the ranks of the peasant proprietors were strengthened, expanding trade outlets for agricultural products in Persia swelled the ranks of the landowning class and boosted landowners’ quest for income and authority. Rather resembling what has been termed the East European “feudal reaction,” this new process subjected Persian peasants to growing exactions and fiscal burdens, weakening gradually their traditional common rights and communal privileges (Lambton, Landlord and Peasants, pp. 143-44; Pavlovitch, p. 620; Hakimian, 1985, p. 452). All in all, the new relations resulting from a more market-oriented production structure have been considered responsible for worsening the peasantry’s situation in Persia (Keddie, pp. 4-8), as generally borne out by the outcries and reactions of the peasantry at the end of the century. Although major peasant rebellions were remarkably absent, a barrage of complaints sent to the Shah, frequent sit-ins in the sanctuaries, and mass village desertions, sometimes to the Russian territory, colored the scene in rural Persia in this period.

Not all those analyzing Persia’s economic history, however, subscribe to this thesis of the decline of the peasants’ conditions. Skepticism arises partly from the empirical basis of such assertions, mainly consisting of Western travelers’ and observers’ accounts of rural Persia. Other, more substantive, objections include those related to the production and trade of opium. Detailed figures provided by L. H. Rabino seem to indicate an increase in the incomes of almost all classes dealing with opium, e.g., peasants, landowners, merchants, and workers (Gilbar, pp. 338-39). But perhaps even more forcefully, Gilbar has articulated five reasons why an increase in the real income of the settled rural population has to be considered credible against the popular orthodoxy: evidence of more diversified peasant consumption patterns; increased consumption of both locally- and foreign-produced goods; increased cumulative savings that acted as a safety net against shortages and other hardships; no particular evidence of increased peasant indebtedness; and finally, growing descriptive accounts of such improvements, e.g., by Sir Percy Sykes and Sir Thomas Edward Gordon (Gilbar, pp. 363-64; Nowshirvani, p. 553).

Although the question of the peasants’ standard of living will no doubt continue to remain contentious, there is greater unanimity on the regional variation that marked living standards in different parts of the country. In general, poverty was far more pervasive and standards were much lower in the south (Bakhash, p. 265). The north was relatively better off, with the incidence of hunger and starvation there considered to be much rarer (Issawi, 1971, pp. 224-26).

A general picture of Persia’s population and demographic evolution in the latter part of the 19th century can also shed light on the country’s economic and social structures. Except for a few partial censuses in Tehran (Najm-al-Dawla, pp. 348-93), Isfahan (Mīrzā Ḥosayn Khan, pp. 65 ff.), Shiraz (Fasāʾī, ed. Rastgār, II, p. 910), and a few other cities, a general census was never carried out in Qajar Persia (see CENSUS). Thus, it is very difficult, if not impossible, to arrive at accurate population estimates. It is, nevertheless, possible to piece together various estimates that indicate the size of population during different periods. Allowing for inconsistencies and inaccuracies in disparate sources and estimates arrived at by guesswork, it has been suggested that the population of the country grew at somewhere between 0.5 percent and 1 percent in the period 1873-1910 (Gilbar, 1976, p. 133). Thus, taking into account the impact of the great famines of the early 1870s, an estimated total of about 10 million Persians at the turn of the century implies a population size that was no more than what it had been half a century before. The average growth rate also conceals important regional variations. For instance, certain cities and urban areas, despite their still very limited overall share in the total population of the country, experienced considerable expansion; e.g., Tehran’s population grew at some 8.6 percent per annum in the period 1873-1908 to reach a quarter of a million inhabitants (Gilbar, 1976, pp. 144-46).

Given large nomadic populations, internal population movements were not uncommon in Persia (Balfour, p. 22). By the second half of the 19th century, however, there were also increasing, although still limited, indications of movement among the sedentary population. Movement occurred in a number of ways: for example, on a permanent basis in quest of food or better economic opporunities (Gilbar, 1976, p. 152), or seasonally among the farming populations of the northern province of Gīlān (Hakimian, 1985, p. 444), and to a more limited extent in the opium-cultivating areas of southern and central Persia (Wilson, p. 189). A notable migratory movement at this time was the emigration of Persian peasants and artisans to southern regions of the Russian empire, which gathered pace with Russia’s rapid economic growth in the last two decades of the 19th century (see DIASPORA v). By World War I, possibly as many as half a million people in total had emigrated to Russia (Hakimian, 1985, pp. 445-47; Belova [p. 114, tr., p. 56] estimates the total number of migrants, legal and illegal, for 1905 to have been no less than 300,000; Entner, p. 60, gives annual figures for legal migration between 1900 and 1913). Although these movements were to a certain extent brought about by economic depression, unemployment, and hardship among the disaffected peasants and craftsmen in Persia, the main impetus came from the massive industrial drive that swept the Russian empire at large and the border regions in particular (Hakimian, 1985, pp. 443-57). Labor migration was thus part of the wider process of economic integration that turned Persia gradually into the “rural hinterland,” which supplied resources to the “industrial center” in Russia (Entner, pp. 39-41, 70; Hakimian, 1985, p. 455).

The late Qajar years were beset by a sharp depreciation of the country’s currency, rising prices, and a wider and growing fiscal crisis of the state. The declining value of the qerān resulted from several circumstances: an unfavorable balance of trade and the falling world price of silver, not to mention tampering with the silver content of coins by Hājj Moḥammad-Ḥasan Amīn-al-Żarb, the farmer of the mint (Bakhash, p. 271). By 1914 the Persian currency was only one-fifth of what it had been worth in 1800 (Issawi, 1971, pp. 335, 343-45).

The fiscal crisis was brought about by an inadequate, ineffective, and inefficient fiscal administration; astronomical costs of maintaining state bureaucracies, the army, and the royal court; and outright corruption and decay deeply rooted in both the central and provincial governments and their various departments. The governmental response was a growing resort to foreign loans and concessions, combined with such domestic measures as the sale of crown lands and of provincial government offices, as well as the farming out of important state departments. The external measures accentuated the government’s problems in the longer term and proved unpopular with the public, while internal measures exacerbated the situation by increasing the number of independent decision-making domains and, via greater insecurity of office, increasing tax pressure on peasants (Bakhash, p. 264).

By the end of the 19th century, therefore, the economy of Persia had undergone important economic and social transformations. An important, although by no means exclusive, impetus for these changes had come from the country’s growing integration into, if not subjection to, the outside world, principally the Russian and British imperial powers. Although their interests in Persia had been largely protective and guarded, rather than open, their influence was powerful enough to act as a catalyst bringing about changes and transformations in the country. These were the circumstances that laid the foundations of the 20th-century economy of Persia.


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(Hassan Hakimian)

Originally Published: December 15, 1997

Last Updated: December 8, 2011

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