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New Evidence Emerges of Rampant Corruption in Iran’s Oil and Export Markets

New Evidence Emerges of Rampant Corruption in Iran’s Oil and Export Markets

By Edward Carney

On Tuesday, IranWire published an article that attached a dramatic figure to the closely-related issues of Iran’s escalating economic crisis and the corruption of entities in both the country’s government and its private sector. The article indicated that as much as 30 billion dollars in revenue might have been moved out of the country over just a one-year period, as wealthy individuals and participants in a “corruption mafia” sought to consolidate their own control over capital despite the adverse impact on a beleaguered civilian population.

In a previous report, IranWire also pointed out that the proportion of that population living in “absolute poverty” had substantially risen during the same period, and was projected to continue doing so. This trend has been exacerbated by a rise in the rate of inflation to 52 percent. The report examined some of the specific effects of inflation upon household prices and concluded that the future trajectory of such indicators is difficult to determine. But according to IranWire, “even if the [monthly] rate of inflation is relatively tame [in the year ahead], the [overall] inflation rate will still be one of the highest in Iranian history.”

Amidst this ongoing crisis, Iranian officials have been hesitant to even admit that foreign pressures have had a meaningful impact on the economic prospects for the country and its people. Supreme Leader Ali Khamenei, for instance, has promoted policies to develop a “resistance economy” and has insisted that domestic development will be sufficient to compensate for US-led efforts to reduce overall Iranian exports and bring oil exports “to zero.”

In May of 2018, President Donald Trump withdrew the United States from the 2015 Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action. This set the stage for the re-imposition of sanctions that had been suspended under that agreement. This took place in two phases, one in August and one in November. Initially, the eight leading importers of Iranian oil were provided with limited waivers for sanctions on this resource, but the Trump administration unexpectedly declined to renew those waivers before their expiration in May.

This decision was closely accompanied by the decision to designate the Islamic Revolutionary Guard Corps as a foreign terrorist organization, and to sanction it accordingly. These and other contributions to the administration’s “maximum pressure” strategy have gradually convinced some Iranian officials to acknowledge the challenge that the economy faces. EA Worldview indicated that First Vice President Eshaq Jahangiri said as much on Monday, in the context of remarks explaining that the regime would dip into Iran’s National Development Fund for the purpose of creating employment.

This announcement comes as a surprise to some observers, considering that regime authorities have explicitly declined to draw upon the NDF for the benefit of the general public in the recent past. Khamenei himself refused a request from the office of President Hassan Rouhani concerning the use of those funds to assist in the recovery of vast areas affected by massive floods in March and April. As a result of this and the underlying deficiencies in the government’s response to the disaster, many individuals and communities took it upon themselves to initiate their own relief effort. Yet in some cases, violent clashes emerged from these efforts, as citizens and the IRGC pursued different priorities.

Adding insult to injury, the IRGC itself has drawn upon the NDF even when flood-damaged communities could not. EA Worldview pointed out that the supreme leader has rarely been averse to authorizing the use of that fund for military expenditures beyond Iran’s borders, or for the operation of state media outlets. Still, in declining to use the NDF for the relief effort, Khamenei emphasized its declared purpose of standing in reserve as a source of support for long-term projects.

Tehran had optimistically projected that the NDF would grow by six billion dollars between 2019 and 2020. But now the government has withdrawn one billion dollars, with no immediate plans to recover it, simply in the interest of staving off a worse economic crisis. EA Worldview noted that 60 percent of Iran’s official oil exports have been cut in just over a year, and Jahangiri consequently acknowledged the potential for greater “budgetary pressures” in the future resulting from US sanctions.

Of course, the regime’s vice president made no reference to the role of government corruption and money-laundering in contributing to this trend. Yet this was one obvious takeaway from the IranWire report concerning the disappearance of tens of billions of dollars. And it is a point that has been loudly emphasized by Iranian exiles and political dissidents. On Tuesday, the Center for Human Rights in Iran featured an interview with Iranian-American businessman Khosrow Semnani in which he stated that rampant corruption in the Iranian oil industry has led to hundreds of billions, or possibly trillions of dollars being lost to the Iranian people and channeled into unknown, government-affiliated hands.

Semnani specifically alleges that during the Ahmadinejad presidency, from 2005 to 2013, at least 304 billion dollars in oil revenue went missing. Referring to a comprehensive report that he has published on this topic, Semnani went on to say that with just one billion dollars, approximately 167,000 new jobs could be created in Iran. While this speaks to the potential impact of the government’s withdrawal from the NDF, it also raises additional questions about the adverse economic impact of the government’s corrupt actions in previous months and years.

What’s more, Semnani argues that such corruption is an intrinsic part of Iran’s current ruling system. “If the corruption went away, the system would not be able to survive,” he said, arguing that the money generated by corrupt financial activity has been necessary to sustain an unpopular theocratic regime virtually since the time of the 1979 revolution. Semnani repeated the same line about the regime’s abysmal record on human rights and said that the two trends work very much in tandem. “The dollars from oil revenues are used to essentially prevent Iranians from being able to ask for their human rights,” he added.

In addition to highlighting the effects of corrupt practices among Iranian officials and their allies in the private sector, such observations serve to undercut some of the latest efforts by regime authorities to deny the figures cited by IranWire and other outlets. While IranWire detailed the mechanisms by which the repatriation of income from foreign oil sales are generally tracked, it also quoted Mohammad Reza Modavedi, the head of Iran’s Trade Promotion Organization, as saying that he believed the “missing” 30 billion dollars had simply “been returned… through other channels.”

In response to the question of what evidence exists for this claim, Modavedi pointed to the country’s “active production lines” and asked how export good could continue to be produced “if there has been capital flight.” To this, one might respond with a similar question: “If Iranians are receiving the full value of the goods they produce for export, then why are so many regime-affiliated companies in the Islamic Republic routinely withholding pay from their workers?”

In recent years, there have been countless reports of worker strikes and widespread protests focused on preventable features of the economic crisis, and specifically on the non-payment of weeks or even months of back pay. As just one example, the Haft Tapeh sugarcane factory became the site of nearly a month of demonstrations in late 2018. And far from addressing these grievances by drawing upon export revenues that had only just begun to be impacted by re-imposed US sanctions, the regime and the factory’s leadership responded with violent repression, arresting and re-arresting activist leaders and pro-labor journalists both during the protests and months after they had concluded.

Such incidents suggest a troubling answer to Modavedi’s efforts to defend against allegations of corruption by pointing to ongoing labor activity. That is, they suggest that many Iranians continue to live their daily lives in the presence of the dual abuses of government theft and authoritarian repression because, faced with both these pressures at once, they simply have no other option.

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