Bonyads: Black Holes and Persian Empires
Large parts of the Iranian economy are dominated by bloated quasi-state enterprises known as bonyads. They existed for many years before the revolution and became wealthy when Ayatollah Khomeini seized the royal family's fortune. He required that these assets be kept separate from state properties. After the revolution, the enormous assets of the shah and his cronies were given to the bonyads to care for the indigent. The bonyads took ownership and management of the Hyatt, Hilton, Sheraton, and Intercontinental hotels. Twenty-six years later, one British guest described the conditions. “I stayed at the old Hyatt . . . where barely a cent has been spent since the revolution. Very little works properly, from television to the internet to hot water to lifts.”
These wide-ranging foundations control billions of assets. They ostensibly provide for the needy and are rooted in an Islamic tradition of charity. After the revolution, the bonyads' mission, scope, and wealth expanded from religious charities into financially immense, unregulated, and secretive enterprises that enrich regime loyalists, primarily, but not exclusively, the Guards. This control over the economy confers political power on the Guards, even though they are legally barred from entering politics. The 1990s were the era of the bonyads' economic dominance.
Some Iranians, in addition to the well-connected and the Guards, have benefited from bonyad operations. Bonyads provide the impoverished and lower-middle class with a pathway to higher status and living standards. Some employees are trained in skills that help pull them out of poverty. They are employed in building roads, railroads, bridges, water tunnels, canals, and dams; in oil and gas projects; in agriculture; and in countless other projects. Today, bonyads dispense aid to the poor, in addition to acquiring and distributing wealth to the Guards. About twelve to fifteen bonyads control at least a quarter of the economy. Most bonyads are unprofitable and unproductive enterprises.
The operations and business models of bonyads are highly opaque due to corruption and mismanagement. One financial analyst snickered, “Who knows how they function? They are like a black hole.” Like nonprofit organizations, bonyads are tax-exempt charitable entities. Senior personnel are adept at shifting funds among entities to evade U.S. sanctions and channel them to terrorist operations. Today, bonyads account for approximately 30 percent of Iran’s GDP.
Leading Bonyads
There are hundreds of bonyads with varying levels of financial holdings, employment, and geographic reach. Some have specialized purposes. The bonyad in which the Guards have the most equity is the Guards Cooperative Foundation. The Iranian charitable foundation, Bonyad-e Shahid (the Martyr’s Foundation), supports families of soldiers killed in action, the country’s martyrs, the war-disabled, and combatants. The largest bonyad is Bonyad-e Mostazafan va Janbazan, which helps the penniless and severely wounded from the Iran-Iraq War. For years, it was deliberately overstaffed with those who would not be competitive for employment elsewhere. Its initial purpose was not to create capital or profit. Rather, it existed largely to give a sense of purpose to the injured and to provide health care for them. However, it gradually expanded its influence and activities into other sectors of society, and, according to some reports, since 1991 it has invested in energy, business, and agricultural activities in the Middle East and Africa. Bonyad-e Mostazafan funds Hezbollah and operates in Europe and Asia, with substantial new investments in Pakistan, Bangladesh, and the former southern Soviet republics.
Another bonyad, Astan Quds Razavi, was founded in the sixteenth century to maintain the shrine of a religious leader. Today, it controls mines, an oil company, an insurance firm, and cultural, scientific, educational, and social foundations operating nationally and internationally. By its own estimate, it controls 41 percent of the land in Mashhad, Iran’s second-most populous city. Many bonyads have been sanctioned by the U.S. Treasury for their ties to the Guards. U.S. Secretary of the Treasury Steven Mnuchin explained that “the international community must understand that business entanglements with the Bonyad Taavon Basij network and IRGC front companies have real-world humanitarian consequences and help fuel the Iranian regime’s violent ambitions across the Middle East.”
