The financial power of the Revolutionary Guards (original) (raw)

The extent of the Revolutionary Guards' control over the Iranian economy is ­apparent as soon as you enter the country. They run the main international airport, and the manner in which they acquired it was a bruising demonstration of the way big business is now done in Iran.

The contract for managing Imam Khomeini airport, south of Tehran, was given to a Turkish-Austrian consortium in 2004, but on 8 May, the day it was supposed to open, guardsmen took it over, blocking the runways with their vehicles, and closing it down. Inbound flights had to be hastily diverted.

The Islamic Revolutionary Guard Corps (IRGC) declared that the involvement of foreigners posed a security risk because of an alleged link to Israel, but it was clear that the foreign consortium's biggest mistake was to try to cut the IRGC out of its business model.

Ever since, excluding the guards has been exceedingly difficult, if not impossible, from Iran's economy.

The corps, which was born as a ­volunteer militia in the heat of the 1979 revolution, is now unrecognisable from those early beginnings. It has grown into a behemoth which dominates both Iran's official and black economies. It is impossible to gauge its market share, but western estimates range from a third to nearly two-thirds of Iran's GDP – amounting to tens of billions of dollars.

But the Iranian economy has changed the Revolutionary Guards as much, if not more than, they have changed it.

"The IRGC is really a corporation. It is a business conglomerate with guns," said Ali Ansari, an Iran expert at St Andrews University. It was misleading to call Iran a military dictatorship, he said. "This is not a military junta. I see it as a collection of business and religious interests. I don't think they have the cohesion to move as one unit."

Through holding companies, front companies, and "charitable foundations" the IRGC is a big player in the construction business, oil and gas, import-export, and telecommunications. Its company subcontracts work to foreign firms, and its subsidiaries bid for contracts abroad. The IRGC's control over a string of jetties along the Gulf coast, as well as terminals in Iranian airports, allows it to move commodities in and out without paying any duty.

"If you want to get things to and from Iran without paying excise duty, they are the people to go to," said Meir Javedanfar, an Iranian-Israeli analyst. "No big businessman in Iran is truly independent of them or the government."

Mohsen Sazegara, an exiled Iranian dissident who helped found the IRGC, calls it now "a very strange and unique organisation", comparing it to the Soviet-era KGB for its extensive intelligence wing. "It's also like a huge investment company with a complex of business empires and trading companies, while also being a de facto foreign ministry through the Qods force, which controls relations with countries in the region. They are involved in smuggling drugs and alcohol. I know of no other institution like the Revolutionary Guards."

The spread of the IRGC's domain into the economy began in earnest in the early 1990s, under the country's president, Akbar Hashemi Rafsanjani. He is still a political player, a business mogul and the corps' greatest rival, but in the aftermath of the Iran-Iraq war, encouraging the IRGC to get involved in construction was a way of rebuilding the country and funding the corps.

Ansari said: "This all started with Rafsanjani saying: go and make money, and they went and did this and thought, this is easy. They started off taking commissions and ended up taking over whole factories. The economic buyout has been going on for years."

The IRGC operate in part through Iran's bonyads, ostensibly charitable foundations that operate as huge holding companies. Under the shah they were a way of channelling wealth to favoured courtiers. After the revolution they were vehicles for self-enrichment by the ayatollahs. Now, in a reflection of the regime's continuing evolution, the IGRC is the dominant force, particularly through Bonyad e-Mostazafan, the Foundation of the Oppressed.

However, arguably the most powerful IRGC body today is Khatam al-Anbiya, which started life as the HQ of the corps' construction arm but is now a giant holding firm with control of more than 812 registered companies inside or outside Iran, and the recipient of 1,700 government contracts. Last week, the US treasury froze the assets of its head, General Rostam Qasemi, and four subsidiary companies.

With the active support of Mahmoud Ahmadinejad, the country's president, who has handed Khatam al-Anbiya a succession of huge no-bid contracts, its economic influence has ballooned exponentially over the past few years into just about every aspect of economic life.

Its security credentials have allowed it to corner the market for tunnelling contracts, underground rail systems, and the nuclear and missile programme. But it was also awarded a 1.3bncontracttobuildanaturalgaspipelinerunningnearly560milesfromBushehrprovincetoSistan−Baluchestan.Thatfootholdintheenergysectorhasbeenconsolidatedbya1.3bn contract to build a natural gas pipeline running nearly 560 miles from Bushehr province to Sistan-Baluchestan. That foothold in the energy sector has been consolidated by a 1.3bncontracttobuildanaturalgaspipelinerunningnearly560milesfromBushehrprovincetoSistan−Baluchestan.Thatfootholdintheenergysectorhasbeenconsolidatedbya2.5bn contract to build infrastructure in the South Pars oil field.

It is impossible to judge the full extent of the IGRC's control because the process of privatisation, officially required under article 44 of Iran's constitution, has been used to obfuscate the question of ownership. Many of the beneficiaries are not formally owned by the IGRC but are believed to be controlled by the corps through personal links with their owners and managers.

Last September, Etemad-e Mobin, a consortium reported to have extensive links to the IGRC, bought a 51% share in Iran's telecommunications business, minutes after it was privatised. At $5bn it was hailed as Iran's biggest ever business deal, and, in an echo of the airport takeover, the main competitor was disqualified at the last moment for "security" reasons.

In December, the head of the consortium and the driving force behind the deal, Majid Soleimanipour, and his wife, were found dead in their Tehran home. Reportedly they died after inhaling toxic gas, leaked from a pipe. But where all business is political, and all big business is seen through the prism of national security, the official account was treated with scepticism by the public.

The telecoms deal has deepened the IRGC's near-monopolistic hold on the economy while at the same time giving it potential access to every phone ­conversation in the country.

"Using their whole economic base, they are expanding control over areas of what they see as the 'soft war', like the telecommunications field, to confront the threat they see," said Mark Fowler, a former CIA Iran specialist now working for the US consultancy Booz Allen Hamilton.

The main motive for the sanctions of the US and its allies is to drive a wedge between the IRGC and the Iranian people. Hillary Clinton's claim that Iran is heading to military dictatorship was probably intended to throw a spotlight on the gulf. But analysts say the reach of the guards (known to Iranians by the Farsi word Pasdaran) and the murky nature of corporate ownership will make it very hard to know where to aim that wedge. "It's the country of the Pasdaran," said Jamshid Assadi, an Iranian economist in Dijon, France. "Everybody knows it and nobody even tries to hide it."