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What is the Cause of Poverty and Unemployment in Iran: International Sanctions or Governmental Corruption?

Hassan Rouhani’s administration claims that the root of poverty and unemployment in Iran are the international sanctions. The regime asserts that removing these sanctions and giving back the frozen assets of Iran will heal the economy. But are these sanctions really the reason why Iran’s economy is performing so poorly?

Crisis in Iran

On April 27th, Rouhani’s deputy in women and family’s affairs Shaheen Dokht Molaverdi spoke to the state-run news agency of Mehr:

“The unemployment rate of 15-24 year old women in Iran is 46%. According to the 2012 census, 12.1% of Iranian women are responsible for earning a living for their families while 82% of them are unemployed that can have many consequences and cause social damages.”

On October 25th, 2013, Adel Azar, head of the Statistic Center of Iran, told the Mehr news agency:

“The unemployment rate for the youth is twice that of the general unemployment rate, this number means that we are in the crisis zone regarding the unemployment rate.”

About the dimensions of poverty: According to standards announced by the regime, monthly income of less than 180,000 Toman (about $600) for every family of five people is considered under the poverty line, and the absolute poverty line for a family with five persons is 400,000 Toman every month.  

On March 6th, 2014, the state-run news agency of Fars (affiliated with the IRGC) reported that Mussalreza Servati, member of the mullahs’ parliament Plan and Budget Committee, said:

“In Iran, 15 million people live under the poverty line. This is about 20% of the population, which is a significant number. This is in a situation where 7 million of the people under the poverty line do not benefit from the services of any support institutions and no services are offered to them.”

According to Iranian resistance sources from inside the country, the real figure for poverty and unemployment in Iran is much higher. The true figure is closer to 10 million unemployed and 50 million under the poverty line.  

Poverty and its consequences affect more than just the middle-aged and youth adults. Child labor and trafficking have become a serious issue. According to a report of the official news agency of Fars, Mohammad Taghi Hosseini, the deputy of Ministry of Labour, said in the convention of children rights on March 9th, 2014:

“Unfortunately, the issue of buying and selling children is one of the current problems of this society. Some of these children are sold as soon as they are born in the hospital, and when they are about three years old they come to the streets. And a number of them come to the streets when they are 6-14 years of age due to the poverty of their families. Such issues do exist in the country although purchase and sale of the children in Iran is not official and there is no official place for it.

These children are given to others due to the poverty of their families and they even accept to sell their children with very low price. Most women who sell their children do not know what destiny their children after the sale.”

 Corruption and Plunder, Part and Parcel of Mullahs’ Regime Economic Structure

This disastrous situation is in a country where in the last eight years the government has received $700 billion in oil income.

A while ago, news on the embezzlement of Babak Zanjani and the extent of government assistance he received was published. Zanjani was one of the merchants close to the Iranian government and according to the report of the AFP he created a hidden network of oil and gold deals, and through the Turkish “Halk Bank” (Bank of People) he laundered huge amounts of money for Iran; he also made several big investments in Turkey. Zanjani had close relationship with a large number of politicians and representatives of the regime’s parliament.

On April 27th, 2014, the state-run website of Etedaal, in addition to expressing that Zanjani was just a sample, wrote in a report:

“There are ten others like Babak Zanjani in the oil industry. It seems that Babak Zanjani is just one of the billion dollar debtors to the Petroleum Ministry and as one of the senior officials of Petroleum Ministry said, after going through the figures and numbers it was discovered that Babak Zanjani is one of the ten persons to incur over one billion dollars in debt to the Petroleum Ministry, and they are yet to be seriously punished.”  

The chair of the Constitutional Article 90 Committee of Iranian parliament (this committee has the task of investigating complaints against the executive, legislative and judicial branches) said:

“In 2013-2014, about 4,000 cases of violation, embezzlement and theft have been referred to this committee. The most important cases placed on the agenda of this committee involved import of luxury cars; violation, bribery and fixing of soccer games; usurping lands; monopolies; and smuggling. We are pursuing these cases.

But in the final days of the year the report of the Constitutional Article 90 Committee about import of luxury cars (with currency rates allocated to the import of medicine) was read out in parliament’s open session, but names of important figures were not disclosed. This issue was raised in the committee, but it was inappropriate to mention the names but these persons exist and among them there are persons affiliated with the Iranian government.”

Mahmoud Bahmani, head of the regime’s Central Bank in Ahmadinejad’s term, disclosed in a press interview in August 2013 that the regime’s factions are importing huge amounts of cars and luxury products to the country under the cover of importing medicine and essential products.

Based on the currency policies of the regime, the import of medicine and essential products is made with the price of 1,226 Toman for every dollar (governmental price of currency). This is while the price of currency in the free market is 3,000-3,200 Toman. Regime’s factions actually embezzle in every dollar near 2,000 Toman with this trick, and they misuse their governmental connections by importing cars and luxury products with the exchange rate of currency for medicine and essential products.

Bahmani, speaking with the state-run news agency of Tasnim, said that they received governmental currency for importing 83 ships carrying medicine and essential products, but “only 8 ships carried medicine and essential products, 75 others were luxury products.”

During the last days of his tenure, Bahmani disclosed that the regime’s factions put pressure on the Central Bank under the pretext of shortage of medicine and the crisis. Immediately, they allocated currency at the official exchange rate to import the goods on these ships. But what was on most of these ships was not medicine, but instead cars and luxury items, thus the importers of these products that are all from regime’s own factions embezzled huge amounts from the Central Bank.

On January 25th, 2014, Eghtesad Online website wrote about removing the sanctions:

“Removing the sanctions has no influence on the prices. After removing the sanctions we expect a decrease in prices, although automotive producers and economy experts are not hopeful about it. By removing the sanctions nothing big would happen, the prices would still remain high, because removing sanctions does not solve the economic problems of car producers.”

The Economic Structure of Mullahs’ Regime   

A large section of Iran’s economy involves an empire controlled by Supreme Leader Khamenei. In this hidden empire, there is this huge foundation of “Setad Ejrai Emam”. In a report about this foundation, the Reuters news agency estimated the value of its assets at $95 billion. Reuters disclosed on January 22nd, 2014, one of the main winners of reducing sanctions under the interim nuclear agreement in November 2013 was the Setad Ejrai Emam.

Another part of this empire is the “Bonyad Mostazafan”, which includes hundreds of oil, production, trade, construction and financial investment companies and tens of mines. This is considered the biggest economic giant in the Middle East.

The foundation of “Astan Qods Razavi” in the religious city of Mashhad, eastern Iran, possesses hundreds of hotels, trade and production companies, and gardens and wide agricultural land is another part of the financial and economic multipart dominated by Khamenei.

Another part of this governmental multipart is the economic activities of the IRGC, which has a share in the budget of the government. But its extensive economic activities (in oil deal and in companies for construction, production, trade and banking) are independent from the government and are not a part of annual budget.

About 50% of non-oil imports and 60% of non-oil exports are controlled by the IRGC. The foundations and economic activity of the IRGC are totally under the hegemony of Khamenei. Therefore, they are exempt from paying taxes and tariffs for the import of products and are not included in any inspections or auditing.

As the Saham News website  wrote on January 27, 2014:
“Camp Khatamolanbia affiliated with IRGC benefiting from tens of executive groups and subsidiary companies has currently completed 1,836 projects in specialty fields such as dams, irrigation and drainage networks, living and office buildings, road and buildings, tunnel and underground structures, port and sea structures, oil-gas and petro chemistry facilities, reservoirs and purification center, metal structures, transportation, transmission lines (oil, gas, water and sewage), structures and vessels, mine and agriculture; and is carrying out 228 other projects. The construction camp Khatamolanbia is currently considered as the biggest contractor in Iran.”    

This big asset financially supports the policy of “exporting the revolution” and provides parts of the expenses of the Qods Force, the Hezbollah of Lebanon, and particularly the astronomical expenses of supporting the regime of Bashar Assad in Syria. This includes the dispatch of forces from Iran, Iraq and Lebanon; sending weapons and ammunition via Iraq (through land or air), and sponsoring other fundamentalist and terrorists groups in Arabic and Islamic countries.

Export of Terrorism and Fundamentalism

On February 21, 2014, the Reuters news agency wrote about the dimensions of financial assistance of Iran to Syria:
“The Shiite Iran has until now assisted Assad billions dollars in war which has turned to a sectarian proxy war with Sunni Arab countries.”

The US weekly of New Yorker wrote about the dimensions of financial assistance of Iran to Syria in an article by Dikster Filkins  on September 30, 2013:
“Despite the sanctions that the US has imposed on Iran to prevent it to spread the nuclear weapon, the attempts of Iran to save Asssad regime is unlimited. Among the numerous measures it has done is a $7 billion loan that it has offered to strengthen the Syrian economy. A Middle East security official said, I do not think that the Iranians calculate this issue with dollar. They consider losing Assad as their existential threat.”  

The Arabic newspaper of Asharq Al-Awsat wrote about the dimensions of assistance of Iran to Syria in its number on August 2, 2011:
“The ambassador of Iran in Baghdad Hassan Danaifar transferred an oral message from Iran’s Supreme Leader Ali Khamenei and General Qassem Soleimani, the commander of Qods force to each of the leaders of Iraqi National Coalition that included the necessity of delivering financial assistance of about $10 billion to the Syrian President. This request that came as an order was agreed by Maliki as Iraqi Prime Minister.”

According to a report by the Radio France website (RFI) on June 22nd, 2013, and according to a report published by the accredited media and financial Information Institute of Bloomberg, Adib Mialeh, head of Central Bank of Assad’s regime has announced that Iran provided a credit equivalent to one billion dollars to Syria to prevent the downfall of the value of Syria’s money in exchange with foreign currencies.

Iran also provides a significant amount of the consumption oil of Syria. In addition to economic, financial, and construction assistance, the military assistance of Islamic Republic to Syria has multiplied during 2013. The Assad regime actually continues the current civil war using the unlimited assistance from Iran.

In 2010, the US newspaper New York Times reported that in Afghanistan, $700,000 in cash was discovered in the hand bag of Omar Davoodzi, Chief of Staff of Afghanistan’s President Hamed Karzai. In this report, it was said that the cash was from the government of Iran and was paid as bribe to Karzai’s Chief of Staff and these payments reach millions dollars every year.

The government officials of Afghanistan announced in a dialogue with New York Times that the amount of cash payments of Iran to a “secret fund” in Afghanistan is millions dollars, and they claimed that this source is used for buying some of the parliament members, heads of tribes, and even for payment to some of Taliban groups.

Ghazi Hamed, deputy of foreign affairs of Hamas government, gave an interview with the UK news paper Daily Telegraph about Hamas. He confirmed “the military cooperation” with Islamic Republic and receiving financial assistance from Iran since 2006. Hamed announced that these assistances amount to $300 million annually.

The cash assistance of the Islamic Republic to Hezbollah of Lebanon is much wider than the assistance to Hamas and other political military groups. This assistance is made in wide financial assistance and regular military aid for Hassan Nasrollah, who overtly considers himself a follower of Khamenei.

On October 8, 2013, the French newspaper of Figaro wrote in an article by Delphin Minui from Beirut quoting from an internal source of 14 March movement:
“Nasrollah cannot say no to a country that gave him $30 billion during 30 years.”
Of course, the reality is beyond this. The informed Lebanese sources say that after the 33-day war in 2006 the Iranian regime granted a total amount of $14 billion to Hezbollah to rebuild the destructions in Lebanon. 

Another one, the amount of assistance from Iranian government to Hezbollah of Lebanon was announced at $400 million, and it was said that the payment of this amount is made through the Saderat Bank of Beirut and the Islamic Republic embassy in the capital of Lebanon.  

Conclusion

Iran having dire economic problems, despite its huge wealth, broad underground resources, and vast oil fields, show the problem is structural and relates to the entirety of the regime, particularly the Velayat-e faqih system and its institutions with the IRGC.

The problem in the first step is that the government ruling Iran spends the assets of the Iranian people on building the nuclear weapon and its ensuing consequences; on the export of terrorism and fundamentalism, particularly to Syria, Lebanon and Iraq; and on the internal suppression, rather than improving the lives of the many impoverished Iranians.

And then we have the unbounded thefts, embezzlements and plunder (a very small fraction of which surfaces in the regime’s infightings) that consume even more money that should be spend on the Iranian people.

As an Iranian teacher said: “Whether Ahmadinejad or Rouhani is in office, with or without sanctions, the many Iranians living in poverty have to struggle to stay alive. Nobody does anything for us.”

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