Analysis

U.S. Sanctions May Cripple Iran, but It's Not Why Billions of Dollars Keep Vanishing

A special anti-corruption court has tried more than 270 suspects, but that’s just a drop in the bucket compared to the extent of the problem

A young worker takes a break on his cart at the old main bazaar in Tehran, Iran, Sunday, June 23, 2019
Ebrahim Noroozi,AP

The Iranian minister of health and medical education, Saeed Namaki, has a big problem with Twitter. In an interview with the Iranian Labor News Agency, he claimed that his opponents pay $4,000 for each tweet critical of him and the Health Ministry. Even his relatives have become a target for his opponents, he alleged, for no other reason than that he had begun to address corruption inside his ministry.

According to Namaki, more than $1.3 billion earmarked for the import of medical equipment has “disappeared” and no one knows who is at fault. The minister alleges that there is an entire network of smugglers and others engaged in the theft of government funds and the price of corruption in the medical sector as a whole is about $2.3 billion and has forced Iran to import equipment that it could manufacture itself.

Since the imposition of American sanctions on Iran, the fight against corruption has been a mainstay of the policy of “economic resistance” declared by the country’s supreme leader, Ali Khamenei. Among those who have been prosecuted for corruption on a huge scale are senior executives at Sarmeyeh Bank. The bank’s CEO was sentenced to 20 years in prison and other senior officials have been handed long prison terms, as the special court for economic corruption established by Khamenei continues to hear evidence of fascinating corruption cases.

Millions in bribes

One case involves a bribe of millions of dollars paid to the chief of staff of the former speaker of the Iranian parliament, Ali Akbar Natek-Nouri, a radically conservative figure. The case demonstrates the close ties between big money and government in Iran. The report isn’t new, but the extent of the graft, which had previously been reported as allegations, has now been publicly revealed and legally established.

Another affair involves the disappearance of $3.5 billion from an Education Ministry employee savings fund that pays thousands of teachers and other employees their pensions. In that case too it’s unclear who got their hands on the money, but it led to a major cut in monthly pension payments. The amounts involved can explain the huge scope of the financial cushion that permits the Iranian government to continue to function despite the heavy sanctions on the country.

The opposition website Radio Farda, which operates from outside of Iran, recently reported news of an appointment by Qasem Soleimani, the commander of the Revolutionary Guards Al Quds Force, at a huge cartel that he runs. According to the report, Soleimani appointed his aide as chairman of the Headquarters for Reconstruction of the Holy Shrines in Iraq, an agency established on the advice of Khamenei in 2003 to renovate and maintain Shi’ite holy places in Iran, Iraq and Syria. The agency’s official budget is $120 million, but that’s just a portion of the funding at its disposal, which Soleimani uses to finance the military and political operations of the Quds Force, to expand its influence in Iraq and Syria.

The head of the agency for the past 15 years was Soleimani’s friend and adviser Hassan Polarak, who in 2009 founded a huge business conglomerate that includes automobile manufacturing and the importing of vehicle replacement parts, cosmetics and poultry feed. It was later sold to the Yas Holding Group, which is owned by the Revolutionary Guards.

Rohani vs. the Revolutionary Guards

The Revolutionary Guards’ control over most of Iran’s economic sectors has led to bitter conflict between the country’s president, Hassan Rohani, and the commanders of the guards, whom Rohani has accused of severely damaging the Iranian economy and the prospect for economic reform that he had planned to carry out. But when the president tried to enlist Khamenei’s in his battle against the monopolies and affiliated businesses of the Revolutionary Guards, he hit a brick wall.

He realized that Khamenei himself, along with hundreds of employees in his bureau, own and administer secret funds estimated as worth at least $200 billion, and which compete with the Revolutionary Guards’ businesses. The special anti-corruption court might be able to boast that it has tried more than 270 suspects in corruption cases, but that’s just a drop in the bucket when it comes to a scourge that has placed Iran among the ranks of the world’s most corrupt countries.

Last year the Iranian parliament’s research center published a comprehensive, 345-page study of all the research about corruption that has been published in Iran over the past 30 years. It surveyed and classified about 300 of the studies. According to the report, more than 60 percent of all the studies were published during the term of former President Mahmoud Ahmadinejad, who was in office from 2005 to 2013, a period considered the most corrupt period in the recent history of Iran. But the term of office of Rohani has also seen a large number of such studies.

Why such corruption?

The research shows a number of key reasons for the prevalence of corruption. These include the power of the monopolies, the structure of political power, government inefficiency, lack of political freedom and the failure of oversight and acceptance of responsibility. The research, which does not include test cases or allegations directed at the country’s leaders or senior officials, shows the serious implications of corruption on society and religious values. The report calls for greater transparency, a breakup of the big monopolies and the implementation of legislative reform and close oversight of decision-making.

We shouldn’t hold our breaths until the report’s recommendations are implemented, but the very fact that such research was carried out by parliament, and that a court was established to hear cases of economic corruption is at least an indication that the regime has not been ignoring public discourse. It shows that the country’s leadership understands the need, at least rhetorically, to fight corruption in order to quell protest and particularly to enlist the public in standing strong against the sanctions.