News : Economy
- Published: Saturday, 24 November 2018
By Edward Carney
Earlier in November, Iranian Foreign Minister Javad Zarif made public remarks that acknowledged the prevalence of corruption and graft among government officials and highly-connected businesses in the Islamic Republic. Although Zarif declined to identify any organizations by name, he told the Khabar Online news agency that “a lot of people are benefiting” from the “reality” of money laundering, and that this had resulted in the misappropriation of “thousands of billions” of rials.
These remarks came at a time when Iran’s national currency is suffering from chronic devaluation. At the same time, the country is struggling to retain access to much of the foreign business it had enjoyed in the first two years following implementation of the 2015 Iran nuclear deal, or Joint Comprehensive Plan of Action.
Many international companies, particularly those based in Western nations, have fled the Iranian market since US President Donald Trump announced his government’s withdrawal from the JCPOA in May. The decision to comply in advance with returning US sanctions was presumably made easier by the fact that Tehran never adopted the requirements outlined by the Paris-based Financial Action Task Force regarding mitigation of money-laundering risks in international transactions.
Zarif’s comments on Iranian money laundering included criticism of its beneficiaries for supposedly blocking multiple recent attempts to establish compliance with the FATF standards. “I don't aim to pin this to any certain organisation, but those places that do launder thousands of billions are certainly financially capable of spending a few hundred billion on propaganda and psychological operations in the country,” he said according to Agence France Presse.
Regardless of personal benefit, Iranian hardliners tend to publicly oppose anti-money laundering measures on the basis of their potential to disrupt Tehran’s support of militant groups throughout the region, including Lebanese Hezbollah. Zarif himself is ostensibly a major player in the “moderate” or “reformist” faction of Iranian politics headed by President Hassan Rouhani, but their administration has been widely condemned by political dissidents and Iran’s foreign adversaries for failing to take any actual measures to cut down on terrorist financing or support human rights.
In view of that condemnation, questions arise about the significance of Zarif’s recent comments. But although those comments have not been backed up by recognizable political initiatives, they did generate immediate backlash from other members of the Iranian socio-political establishment. According to AFP, Sadegh Larijani, the head of the Iranian judiciary, declared that “officials are expected not to make two-sided statements that could be misused by the enemy,” at a time when Iran is facing escalating sanctions pressure from the United States.
IranWire also reported upon the backlash, noting for instance that Javad Karimi Ghoddousi, a conservative lawmaker from Mashhad, had branded Zarif a “counter-revolutionary” and insisted that he “must be prosecuted by security agencies and especially by the secretariat of the Supreme National Security Council for making statements against national security.”
Such remarks reflect the notion that Zarif threatens to undermine confidence in the Iranian financial system at a very sensitive time. But the IranWire report also points to criticism that could be adopted both by hardliners and by dissidents who view both factions of mainstream Iranian politics as doing similar harm to the nation’s population. Hossein Shariatmadari, the head of the hardline daily newspaper Kayhan was quoted as saying that if Zarif knew the identities of money-launderers and failed to identify them, he would be committing “treason against the people and the regime and collaboration with the money launderers.”
Of course, the reference to “treason against the regime” suggests that the regime itself is not a beneficiary of money-laundering and other financial crimes. But a great many Iranian officials, including Supreme Leader Ali Khamenei, are closely affiliated with the Iranian Revolutionary Guard Corps, which has been credited with controlling more than half of the total Iranian gross domestic product, by way of money laundering, black market economies, and sometimes-clandestine ownership of major Iranian companies throughout the so-called private sector.
With this in mind, figures like Shariatmadari can be said to be covering for regime officials with a faulty presumption of innocence, while Zarif covers for those same individuals and institutions by his refusal to identify them, despite the acknowledgment of guilt. In this sense, the political conflict over allegations of money laundering can be seen as another example of two factions of Iranian politics attempting to deflect blame onto each other, even as they mutually defend the structure of the theocratic regime.
The perceived need to assign blame is presumably connected to the widespread recognition of a worsening financial crisis, which has given rise to numerous labor strikes and anti-government protests over the past year. In one of the latest examples of this phenomenon, the Center for Human Rights in Iran reported on Monday that workers at the National Steel Industrial Group had recently held five days of demonstrations, demanding two months of back pay. The same report noted that approximately 1,000 workers from the Haft Tapeh sugarcane company had been demanding four months’ back pay.
These are only two examples of a nationwide movement that began in earnest at the end of 2017 with a nationwide uprising during which expressions of economic grievance morphed into chants of “death to the dictator” and other explicit calls for regime change. The regime has struggled to get subsequent protests under control, and the relatively limited effectiveness of direct repression has seemingly led mainstream political factions to employ competing tactics of propaganda in an effort to inspire more confidence in the economic situation and more specifically in the government’s capability for managing it.
Whereas Zarif’s remarks imply – albeit without details of an actual plan – that the Rouhani administration is working on rooting out economic corruption, his hardline critics generally insist that there is no problem within the system, other than disunity.
Naturally, though, to restore even the appearance of unity, Iranian authorities would need to find greater success in tamping down public protests. Accordingly, repression has remained rampant in response to the steel and sugar workers’ strikes and numerous other demonstrations. Last Sunday, Iran Human Rights Monitor reported that several protesters had been imprisoned in connection with the actions at Haft Tapeh, which continued nonetheless. In fact, the report indicated that the movement was “gaining momentum,” having entered its 14th consecutive day with participants demanding the release of detained protesters as well as attention to their demands.
The conflict between government authorities and protesters continued through the past week, with Voice of America News reporting that five activists had been charged with national security crimes. Activists and attorneys quickly stepped forward to defend the arrested – a fact that seemingly prompted the regime to briefly back down before reversing course.
When approached by a lawyer seeking to represent the defendants, authorities initially stated that they would be released on bond to await trial, but then announced that they would remain in custody throughout an investigation of indeterminate length.
The authorities also barred the lawyer from formally representing the detainees, in keeping with the unlawful practice of limiting prisoners to a short list of government-approved attorneys in cases of supposed national security crimes.
In recent days, arbitrary arrests and summons have become prominent news in other areas of Iranian life, as well. On Wednesday, the Center for Human Rights in Iran reported upon at least 13 arrests, 30 summons, and 50 telephone threats by regime authorities following a second round of protests by teacher-activists.
Similar arrests had of course been reported during the previous strike one month earlier. Yet protest organizers issued a statement demanding the release of those detainees and reiterating the demand for reforms and sustainable wages. The statement also declared, “We believe that the teachers’ demands are practical and lawful and we declare that if the present trend continues, the protests will continue at all costs in the coming months.”
The nature of those demands and the underlying perceptions of the Iranian system were detailed by IranWire on Thursday. It quoted Rasoul Bodaghi, a member of the Teachers’ Association of Iran and a former political prisoner, as saying that education in the Islamic Republic had become a common source of graft, with student meals, exam fees, and other costs being “a source of revenue for the government’s budget.”
Despite high costs for parents and children, teachers are routinely paid poverty-level wages and revenue is not channeled back into educational institutions but evidently contributes to the regime’s spending on ideologically-motivated projects such as interventions into Syria and Yemen.
Bodaghi’s account of the Iranian education system undermines the arguments being offered to the public by both Foreign Minister Zarif and his detractors. In the first place, it highlights a logical area of government reform that has been ignored by so-called moderate authorities. And in the second place, it suggests that financial corruption is deeply ingrained into the fabric of Iranian institutions, where it cannot easily be attributed to isolated individuals and groups who do not represent the ruling system itself.