APRL.19 – Iran’s top military unit, the Islamic Revolutionary Guards Corps (IRGC), has become the country’s most powerful economic actor, experts say. Its financial interests now span banking, construction, oil and gas projects, car manufacturing, real estate, education and even laser eye surgery.
In a move aimed at diminishing the Corps’s power, the U.S. State Department has designated the IRGC as a terrorist organization — as part of President Donald Trump’s Maximum Pressure Campaign against Iran. The IRGC reciprocated by designating the U.S.’s CENTCOM military force as a terrorist organization, and ratified a bill to that effect on Monday.
Analysts are divided as to whether this latest round of U.S. sanctions will have an effect on the IRGC’s business activities.
“Sanctions have hurt Iran badly, but not at the point where Iran will throw the towel in, not even close,” said Alex Vatanka, a Senior Fellow at the Middle East Institute and the Jamestown Foundation in Washington D.C. who specializes in Iranian domestic and regional policies, in an interview with Kayhan Life.
“The reality is that the IRGC is in possession of the guns and a formidable system of oppression,” Mr. Vatanka added, “so they can deal with unrest and I don’t think anything on that front is going to change.”
“The IRGC is a predatory force which looks after itself at the expense of Iran’s economy,” he said.
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Other analysts, on the other hand, said the designation would have a significant effect on the IRGC’s financial activities.
Dr. Majid Rafizadeh, an expert on Iran and U.S. foreign policy and president of the International American Council in Washington D.C., told Arab News on April 11 that designating the IRGC as a terrorist organization will “put an unprecedented level of economic and geopolitical pressure on Iran’s theocratic establishment.”
The IRGC became involved in Iran’s economy after the Iran-Iraq war, a move that was sanctioned by then Supreme Leader Ayatollah Ruhollah Khomeini. Its economic activities got a further boost from the late President Ali Akbar Hashemi Rafsanjani, who saw a business opportunity in keeping financial projects within state bodies and creating additional revenue streams.
The Corps conducts its economic activities through two central bodies: the IRGC Cooperation Foundation, in tandem with the IRGCS Basij Cooperation Foundation; and the Khatam ol-Anbia Construction Base. A 2017 assessment by Mike Pompeo, who was then the director of the Central Intelligence Agency and is now the U.S. Secretary of State, estimated that companies affiliated to the IRGC controlled up to 20 percent of Iran’s economy.
Other estimates cited by the Los Angeles Times value the IRGC’s economic empire at $12 billion. A further $7.4 billion was received by the IRGC in Iran’s 2017-2018 budget, representing a 24 percent increase from the previous year.
The IRGC’s increasing involvement in Iran’s economic affairs led President Hassan Rouhani in 2017 to call the phenomenon “an armed government” that remained unchallenged. However, the IRGC’s stranglehold on Iran’s economy may not be tolerated for much longer by government officials, according to some analysts.
“In the wake of this new designation, there is a lot of rhetorical support for the IRGC, for example members of parliament choosing to wear the IRGC uniform in public, but I don’t think that will last long,” Vatanka explained.
“The IRGC playing such a big role in the economy is unhealthy, because it creates the perfect conditions for corruption, and chokes innovation. It also puts political ambitions above genuine economic proposals. No good can come from the IRGC operating inside the economy in this way.”
As the Corps does not share information publicly about the details of its investments, the full extent of its economic activity remains unclear. One estimate places the IRGC’s illicit business deals alone at a total equivalent to around 36 percent of Iran’s gross domestic product, according to the findings of a 2018 conference at the Islamic Azad University’s Isfahan campus in Iran.
Those deals, typically carried out inside Iran’s shadow economy, center around smuggling, kickbacks, no-bid contracts, and the accumulation of wealth by senior IRGC officials, according to a study by the RAND corporation, a nonprofit research center based in California.
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The IRGC has also been accused of engaging in global drug trafficking, which analysts say allows the government to source large amounts of foreign currency. An August 2018 report in the Saudi-owned newspaper Al Arabiya said the IRGC and Hezbollah had set up cocaine rings stretching to South America, and were generating significant profits in hard currency that could help fund the IRGC’s activities.
A February report by Foreign Policy, meanwhile, outlined Iran-backed Hezbollah’s ongoing relationship with Latin America in the areas of militia training and drug trafficking. Direct flights from Tehran to Venezuela’s capital Caracas are now being discussed by officials, Reuters reported this month. The flights will be made by Mahan Air, a private Iranian airline. The U.S. placed sanctions on Mahan Air in 2011, claiming that the company provided support to the IRGC.
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Billions of dollars in illegal loans given to countries sympathetic to Iran during President Mahmoud Ahmadinejad’s term in office may also have been actioned by the IRGC. These loans, granted without parliament’s permission, were revealed in a 2010 article by the Peyke Iran news outlet. Article 80 of the Iranian Constitution bans loans and grants made to recipients outside the Iranian government without parliamentary sign-off.
The Corps’ financial interests are now so tangled up in Iran’s economy that isolating them has become an extremely difficult task, Vatanka noted.
“This could become a legal nightmare: where does IRGC activity begin and end? The IRGC is everywhere, millions of Iranians have served in the IRGC within the conscription service, so what do we mean exactly by the IRGC?” he asked.
“What to watch out for perhaps, is a point at which you get enough anger inside Iran — which is what Trump’s Maximum Pressure Campaign wants to achieve — so that a revolution takes place,” he noted. “In the meantime, U.S. rivals like China and Russia will continue to do everything they can to keep the regime in power, as it serves their geopolitical interests. These countries will keep buying oil and engaging with Iran.”
