Iran: The High Cost of the IRGC's Economic Might

How the Revolutionary Guards got into the economy—and what they're taking out of it.

One of the most controversial and challenging problems in Iran is the economic might of the Islamic Revolution Guard Corps (IRGC). After Ayatollah Ruhollah Khomeini passed away in June 1989, Ayatollah Ali Khamenei was appointed the Supreme Leader and Akbar Hashemi Rafsanjani was elected the President. To rebuild the country, the two men decided to use the IRGC’s considerable experience in road and bridge building and other activities that it had undertaken during the eight-year war with Iraq. Thus, they allowed the IRGC to enter the economic domain.

At the same time, many senior commanders of the IRGC believed that, due to the war, the control of the national economy had been turned over to a new corrupt class of people and, thus, they needed to enter the economic arena in order to cleanse it. Thus, Khatam al Anbia Reconstruction Center was founded in 1992 as an engineering and development center. Cleric Ali Saeedi, Khamenei’s hardline representative to the IRGC, told the reformist Shargh newspaper in July 2006 that, “The goal of setting up Khatam al Anbia was to utilize the heavy machinery and equipment that had been utilized by the IRGC during the war, which could be used after the war in reconstructing the country.”

Privatization

After the 1979 Revolution, Iran’s oil-driven economy fell under tighter control of the government. But, Rafsanjani’s two-term presidency (1989-1997) was the era in which the government’s economic policy underwent drastic changes. Rafsanjani initiated liberalization of the economy and its privatization. Those who advocated control of the national economy by the government accused him of being “controlled” by the [policies of the] World Bank and International Monetary Fund. But the fact is that privatization during that era was based on nepotism, and many large government assets were “sold” at below-market prices and backed by bank loans to the khodis—the insiders.

In April 2010 then president Mahmoud Ahmadinejad said, “Privatization began in 1993, and the assets that were sold [during the Rafsanjani administration] were worth about $7.5 billion. But, during my administration [beginning in 2005] the total worth of the government’s assets that we have sold to the private sector has been $50 billion, and it has been done through Tehran’s stock market.”

A major problem in Iran’s privatization has been selling the government’s assets to the military institutions. On November 5, 2013, Eshagh Jahangiri, President Hassan Rouhani’s Principal Vice President [Iran has eight Vice Presidents] said, “In order to implement Article 44 of the Constitution [that emphasizes privatization] and to shrink the size of the government, we have sold government’s assets worth a total of $80 billion,” but, “Only 17 percent of this has been turned over to the true private sector. The rest has gone to quasi-governmental organs.” Rouhani’s Minister of Economy, Ali Tabibnia, said on the same day, “At most 17 percent of the privatization has been in the true sense of the word. The rest of the public assets have been sold to institutions that are not considered as belonging to the private sector.”

Creating a class of pro-regime supporters

One needs to understand the reason for the joint order of Khamenei and Rafsanjani that gave the military the permission to begin its economic activities. In March 2011 Brigadier General Mohammad Reza Yazdi, deputy IRGC commander for legal and parliamentary affairs said, “All the economic activities of the Sepaah [the IRGC] are based on the Supreme Leader’s order….”

Rafsanjani’s and Khamenei’s goal was to create a new social class or stratum to systematically share part of the government’s oil income and exclusive rights to many economic activities, and which would in turn support the regime in a national crisis. This was done mainly through “privatization”, by “selling”—practically giving things away—to the new elite social class various state-controlled companies, lands in major urban centers, exclusive rights for mining and for importing from Iran’s major commercial partners, etc. Most of the assets were “sold” to military/security-controlled organs, and to the foundations and corporations that are controlled by the Abode of the Supreme Leader, or beit-e rahbari as it is called in Iran.

The economic activities of the IRGC

Since the beginning of the summer of 2006, less than a year into Ahmadinejad’s first term as president, Khatam Al Anbia has carried out at least 1,220 industrial and mining projects (the true number is not known). Some of the main projects are as-follows:

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