Following the invasion of the allied forces in September 1941, chaos and crisis characterized the Iranian socio-political life for more than a decade. The “issue of oil” emerged in such an environment. First a round of negotiation began in order to “regain the right of the people to Southern oil”. The initial demand of the Iranian government was to acquire more benefits; at the same time, however, outside the government, another approach was being formed, in which a political understanding of the oil issue was predominant with a less materialist understanding of the stakes. As a result, the oil issue could be seen as either economic or political; two discourses, though both were more or less inspired by anti-colonialist discourses of the time, emerged and each sought hegemony. This article seeks to reveal the way in which discursive struggle emerged and the way in which a shift to the political discourse made significant political changes possible. Its main argument is that the discursive conflict in a society, where national identity was a matter of contest, led to a fundamental change in the representation of the issue and, in the course of time, even the identities of the political actors evolved. It was when this discursive conflict led to the hegemony of the political understanding of the oil issue that Razmara’s administration became delegitimized and the national movement for oil nationalization acquired legitimacy.