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:

The development and expansion of the irrigation network for 8,800 hectares of agricultural land in the oil province of Khuzestan in southwest Iran; construction of four large oil storage tanks in Khark Island (Iran’s main oil terminal) in the Persian Gulf; construction of a large natural-gas pipeline from the town of Asalouyeh in the Bushehr province by the Persian Gulf to Sistan and Baluchestan province in southeast Iran, on the border with Pakistan, worth $1.3 billion, and another natural gas pipeline to northwest Iran worth $2.5 billion; completion of the Tehran subway in a joint venture with the Foundation of the Oppressed and Disabled—or Mostazafan Bonyad, in Farsi—and the Ministry of Oil, worth a total of $2.5 billion, etc. At the same time, the Payaam airport in Karaj, a town 40 km west of Tehran, has been controlled by the IRGC for years. In March 2005, Ali Younesi, Minister of Intelligence in the Khatami administration, said that during 2004, goods and commodities worth at least $20 million were smuggled into the country through that airport without any custom officials present.

The IRGC controls tens of illegal jetties in southern Iran by the Persian Gulf. This provoked a strong protest, not only by Mehdi Karroubi, the then speaker of the Majles (parliament) in 2004, but also by Ahmadinejad who, on July 3, 2011, sarcastically referred to the IRGC personnel involved in smuggling as “our own smuggling brothers.” Most recently, on November 8, 2013, Arsalan Fathipour, head of the Majles commission on economic affairs, declared that “$15-20 billion worth of goods are smuggled into the country annually.” It is not clear how much of this is controlled by the IRGC, but most experts believe a sizeable fraction of smuggling is done by the IRGC-linked groups.

During the Khatami administration (1997-2005), the IRGC was involved in an embarrassing controversy. In the ceremonies for the opening of Tehran’s new international airport, called Imam Khomeini International Airport, two aircraft of the IRGC prevented a civilian airliner from landing at the airport. The reason given was that the security of the airport had been contracted to a Turkish company. The IRGC command objected to this and wanted to control the security at the airport. Lieutenant Brigadier General Yadollah Javani of the IRGC said, “This action [taking the control of the security at the airport] has neutralized the West’s conspiracies against us, and at the same time the IRGC, instead of a foreign corporation, is helping the country.”

IRGC banking activities

The IRGC’s banking activities are done through Mehr-e Eghtesad Bank, which has also provoked strong protests. Saeedi, Khamenei’s representative to the IRGC, responded to the protests by saying that the IRGC gets involved only in that part of the economy in which the private sector cannot compete, because it lacks the necessary resources, adding, “That the IRGC has replaced German and French companies to carry out some projects is because it wants to protect the Revolution and the state and, thus, such economic activities [by the IRGC] are justifiable.” Mehr-e Eghtesad Bank is the holding company for many other major corporations in Iran, mostly in the construction field. Just one such company, Mehr-e Eghtesad Investment Corporation of Iranians, is worth close to $2 billion.

Ahmadinejad as the IRGC’s blessing angel

The Ahmadinejad era witnessed deep involvement of the IRGC in the economy. His goal was to create a cadre of mid-level IRGC officers that own a large number of companies, and that will be loyal to him. Some examples:

In July 2007, Khatami Al Anbia received a contract from the government, worth $342 million, to develop the Chah Bahar seaport on the Oman Sea in Sistan and Baluchestan province.

In the largest trade in the history of the Tehran stock market, the IRGC bought 51 percent of the shares of Iran Communication Corporation (ICC), worth $8 billion, in October 2009. This provoked strong protests, since at least one private company had been forced to withdraw its bid, and several reports had indicated that it had been forced to do so under threat. The Majles formed a special commission to look into the matter. The commission reported not only the discovery of hundreds of legal problems with the transaction, but also declared that “since 90 percent of the ICC capital belongs to the people through the deposits that they had over the years with the ICC, the entire transaction is illegal.” The commission’s report declared the transaction as “stealing people’s private properties.”

In February 2010, Ahmadinejad asked the IRGC “to prepare itself to enter the oil and natural gas domains.” Three weeks later, the press reported that the government had awarded several major no-bid oil projects to Khatam Al Anbia worth $850 million.

In May 2010 the press reported that Khatam-olanbia had received several other large oil and oil refinery projects worth $10 billion, including development of three of the twenty-eight phases of development of the giant South Pars gas field in the Persian Gulf, the largest natural-gas field in the world; development and expansion of the Ilam oil refinery in western Iran; and development of some large oil fields. The newspaper Donya-e Eghtesad reported at that time that, overall, Khatam Al Anbia had received oil-related projected worth a total of $15 billion.

In February 2011, the Minister of Oil and former head of Khatam Al Anbia, Brigadier General Rostam Ghasemi, announced that a large petrochemical project worth $500 million had been awarded to Khatam Al Anbia.

In April 2012, Khatami Al Anbia began the construction of a large water canal to transfer water from the Caspian Sea in the north to the central desert. In return, the government transferred to the IRGC the ownership of a large portion of the shares of Iran’s petrochemical company.

In August 2013, phases fifteen and sixteen of South Pars gas field began operating. They had been developed by the IRGC. Its spokesman, general Ramazan Sharif, said “unlike what the counter-revolutionaries try to plant in people’s minds that the IRGC’s economic activities are intended to control the national economy,” the IRGC “only participates in such activities to develop the country, to contribute to national security and interests, and to help the country’s independence” from foreign powers.

As mentioned earlier, the IRGC has carried a very large number of projects in the country; see here, here, here, here, here, here, here, here, here, and here, for example. They range anywhere from building roads, railroads, bridges, water tunnels, canals and dams, to mining, oil and gas projects, and agriculture.

Another controversial issue is the amount of land that is controlled by the IRGC. In January 2013, Brigadier General Yazdi said, “A lot of land was turned over to the IRGC by the regular armed forces and the National Natural Resources Organization. These lands did not have deeds, and thus many have claimed their ownership. We have warned the judiciary many times that some people are trying to take over public lands, and we have tried to preserve the Sepaah’s [IRGC’s] dignity and people’s rights. Thus, a government organ that has successfully protected the public’s rights and assets has been” the IRGC.

The IRGC’s share of the national economy

Another dispute is over the IRGC’s share of the national economy, and Iran’s gross domestic product. There is no consensus on the issue.

In December 2010, Brigadier General Ghasemi, then head of Khatam Al Anbia, said that the IRGC is involved with “less than 4 percent” of all the development projects.

Brigadier General Sayyed Mohammad Hejazi, deputy chief of staff of the armed forces, said in December 2010 that, “The share of the IRGC in all of the government’s projects is no more than 2-3 percent. Anyone that takes a look at the annual budget and studies the section on the income and expenses will find out which projects are being carried out by the Sepaah, how much it must pay to the treasury and how much it must receive. This is not classified information; anyone can study it.”

In December 2012, Brigadier General Abolghasem Mozaffari, the then-head of Khatam Al Anbia, said that the IRGC receives 8 percent of the total development budget of the nation of about $1.1 billion, and that, “Khatam Al Anbia receives 5 percent of the total budget given to the private corporations.” He also mentioned some of the projects that are currently being carried out by Khatam Al Anbia: nine projects for constructing a 3,500 km pipeline for transporting oil and natural gas; twelve projects for transferring water from dams and storage areas to towns and villages; six projects for building tunnels to transfer water; a 160 km railroad; fifteen projects to build a 2,185 km-long railroad between cities; ten projects for constructing 1,500 km freeways; twenty-one small and large dams with a water capacity of 3 billion cubic meters, and many other projects.

In January 2013, Brigadier General Yazdi said, “About 45,000 people work directly with Khatam Al Anbia, of whom 2,000 are Sepaah personnel. Five thousand contractors and 150,000 people also work with Khatam-olanbia.”

In June Brigadier General Ebadollah Abdollahi, the current head of Khatam Al Anbia, said that “we have completed over 2500 projects over the past two decades.” He added that Khatam Al Anbia is not working for profit. “We must pay 150,000 people. If there is any profit, we pay our workers and also buy new equipment. We are carrying out 12,000 projects to uproot poverty, and we pay for them from the profit.”

The Consequences of the IRGC’s economic activities

The military’s involvement in Iran’s national economy has had several consequences. The first one is corruption. Consider the following three examples:

The aforementioned Mehr-e Eghtesad Investment Corporation of Iranians acts as a stockbroker for the IRGC in the Tehran stock market. In July 2009, it bought a mine in the province of Zanjan northwest of Tehran for $60 million, whereas experts evaluated its value at more than $200 million. The deal was annulled by the government, and the IRGC was strongly criticized for it.

Last February, Brigadier General Hossein Daghighi was fired from his post as the chief executive officer of SATA (the Farsi acronym for Social Security Organization of the Armed Forces). He was known as “the king of the petrochemical market” and accused of corruption.

On November 6, conservative Majles deputy Ahmad Tavakkoli, who is also an economist, once again protested the “sale” of the ICC to the IRGC, saying the “’stake meat’ of communication was given to the IRGC in the name of privatization, and eliminated an important source of income for the government and the ministry of communication technology. We [a group of Majles deputies] have protested this and are pursuing it.”

The second consequence of its role is the IRGC acting as a “middleman.” Brigadier General Abdollahi, head of Khatam Al Anbia, has said that “more than 70 percent of Khatami Al Anbia’s projects are being done by the private sector.” This implies that the IRGC uses its position to receive large projects and then acts as middleman to receive a large profit and have others carry out the projects.

The third consequence is violating the laws, as Khatam Al Anbia has received almost all of its projects in a no-bid process and without any competitor.

The fourth consequence is Khatam Al Anbia’s refusal to pay any taxes. On November 9, 2013 economist Hossein Raghfar said “most government institutions [that are active in the economy] do not pay any taxes. They have killed the competition, have created exclusive trusts, go around the laws, have access to the banks’ resources, and if there is any foreign currency available, they receive it [first],” adding, “Some of them have their own banks and financial institutions. They do not follow the Central Bank’s regulations. Given the economic sanctions and the weakness of the private sector, the share of such institutions in the national economy has increased, which is dangerous.”

Another consequence is that since the institutions that are directly controlled by the Supreme Leader, including the IRGC, cannot be investigated by any other organ of the government, they do not have to answer to anyone other than the Supreme Leader himself.

But the most important consequence is the massive accumulation of political power by the IRGC. Its military power created its economic might, and the two combined bestowed upon it immense political clout.

Leave the economy

IRGC’s deep involvement in the economy has provoked protests from all quarters, forcing the Islamic Republic’s leaders to react.

Tavakkoli said in August that he was opposed to the “sale” of ICC to the IRGC, but could not prevent it. He added that he sees “no problem in using the military in the development projects, but, taking control of the markets by the IRGC means that their military power has extended to economic sector, which brings political power; but this is against the democratic process. Ahmadinejad expanded the IRGC’s influence and economic activities to all domains. The IRGC used it to expand its power. Thus, the private sector will not be strengthened. The military should not be involved with the market. But, now that they are in the market, it is not easy to force them out. They compete with the private sector in an unfair and unequal competition, and have so much power that they easily win most of the projects.”

In August 2013 Major General Hassan Firoozabadi, armed forces chief of staff, said that the military’s goal in getting involved with the economy is helping the government, not making money, and if the government does not need the military, it will stop its economic activities.

It appears that President Rouhani also wants to force the IRGC to retreat from politics and the economy. He wants to give them some large but specific projects, and not allow them to be involved with all aspects of the economy.

In June 2013 Khamenei told the high command of the IRGC that protecting the revolution does not mean protecting the economic and political domains, hence expressing his displeasure with the IRGC’s involvement in both politics and the economy. He told them explicitly that they should not get involved with politics.

The IRGC and the nuclear accord with the P5+1

Given the economic and military power of the IRGC, it cannot be neutral with regards to the nuclear agreement between Iran and the P5+1—the five permanent members of the United Nations Security Council plus Germany—that was signed on Sunday November 24. Most of the IRGC senior officers support the accord. Ali Akbar Salehi, the head of Atomic Energy Organization of Iran, also said that Iran’s Supreme National Security Council (SNSC) has approved the accord. The secretary-general of Iran’s Supreme National Security Council’s (SNSC’s), Rear Admiral Ali Shamkhani; General Firoozabadi; and the IRGC chief, Major General Mohammad Ali Jafari, have all supported the accord. As the commander-in-chief of the armed forces, Khamenei has also supported the accord. The IRGC senior officers have been presenting the Geneva Accord as a “great victory” that was achieved as a result resisting the United States. They, and Khamenei, claim that Iran’s right to enriching uranium was recognized by the accord, whereas the language of the Geneva accord is subject to different interpretations.

If the Western powers deliver their part of the bargain and eventually lift all nuclear-related sanctions in return for Iran living up to its commitments, the IRGC will continue to support the agreements. It appears that both Khamenei and the IRGC high command have decided to support nuclear agreements with the P5+1, provided that Iran’s rights within the Nuclear Non-Proliferation Treaty (NPT) will be respected.

A way out

It is clear that the IRGC’s activities, and the organization’s resulting political power, are not healthy for Iran’s future. Thus, there is a strong desire within Iran’s political factions to force the IRGC out of the economic arena and, by extension, politics. However, wishing to expel the IRGC from the economic arena is one thing; being able to actually do so is a completely different matter—but it can be achieved based on national consensus and the following ideas:

First, all the economic corporations of the military should be transformed to publicly traded companies.

Second, no executive of such corporations should be a military man.

Third, the shares of such companies should be traded freely in the stock market.

Fourth, all the revenues should be deposited in the national treasury.

Fifth, the government should guarantee that it will significantly increase the military budget over a period of time—say, ten years—so that the military will do its main task: defending the nation.

Sixth, since a significant portion of the assets of the military has been obtained through illegitimate means, in accordance with Article 49 of Iran’s Constitution, they should be returned to their true owners, or to the national treasury.

Akbar Ganji is an Iranian investigative journalist and dissident. He was imprisoned in Tehran from 2000 to 2006, and his writings are currently banned in Iran.