The Poor, the Rich, and the Guards
Legions of beggars roam the streets of Iran. Drug-addicted, destitute, and homeless Iranians live under bridges and in the fields. A December 2017 photo series of indigents and drug addicts subsisting in a graveyard near Tehran shocked the consciences of Iranians and highlighted the gap in national wealth. Some people live in open graves and fight over blankets, food, and narcotics. They also live in fear of being harmed or removed.
One related, “Other people bother us or throw rocks at us. . . . Aren’t we human beings?” Some Iranians are suffering from privation, while others flaunt their wealth. Sports cars roar through the streets of Tehran, past old, crowded buses and lines of pedestrians. Preening adolescents stroll next to beggars. An Iranian journalist commented that “wealthy young Iranians act like a new aristocratic class unaware of the sources of their wealth.” At the core of this aristocratic cadre are men and families of the Guards.
Early Distributions of Wealth
After the revolution, Iran’s clerical leaders expropriated the shah’s fortune and established or expanded foundations to aid the poor. Soon, Iran’s new leaders began to enrich themselves. As in the Russian Revolution and the Nazis’ rise to power, Iranian leaders confiscated the assets of their enemies. Lenin and Hitler justified their seizures of wealth by appealing to social justice. So did Khomeini, who nationalized many private-sector companies.
In the early 1920s, the victorious Bolsheviks eliminated wealth disparities by eliminating the wealthy. Many of the rich were shot as enemies of the state or driven abroad. Some in the middle class who became communists were nonetheless killed on suspicion of bourgeois sympathies. The more dedicated Party loyalists could live well by the impoverished standards of the Soviet Union.
In Nazi Germany, living conditions for most Germans first spiked and then plummeted as the war’s fortunes turned after 1942. The regime oversaw numerous parastatals, such as the Hermann Göring Werke, and large private corporate conglomerates, such as the I. G. Farben chemical combines. Some of the Nazi Party elite lived in mansions adorned with the booty of conquered nations.
As in the Soviet Union and Nazi Germany, there was much plunder to be redistributed in the early years of Iran’s revolution. Both the Soviet Union and Nazi Germany forcibly redistributed wealth. Lenin confiscated goods from wealthy Russians, and the Germans looted conquered nations to raise living standards in Germany and fund vast public programs. Similarly, from the beginning of the Islamic Republic, the state sector absorbed most large-scale industries, major minerals, banking, insurance, power generation, dams, and large-scale irrigation networks, radio and television outlets, post, telegraph, and telephone services, aviation, shipping, and roads.
At the same time, the Revolutionary Islamic Courts confiscated the assets and charitable foundations of antirevolutionaries. Clerics could steer business in a preferred direction by issuing a religious edict (fatwa). As one Western journalist explained, “If he (Ayatollah Khomeini) chooses to fatwa Coke and Pepsi out of Iran, what might look like a religious ruling could actually be about something quite different.”
The New Grandees
The period of the most significant change in economic policy occurred during the second of Rafsanjani’s presidencies and the first term of Ahmadinejad. Both leaders liberalized parts of the economy through privatization. Some Iranians welcomed the promise of opportunity this policy entailed. Others accused the Monetary Fund. However, most Iranians were ultimately disappointed by the results because privatization was characterized by nepotism. As in the Soviet Union at its end, many substantial government assets were sold to insiders. In Iran, the Guards were given greater economic opportunities than ever before.
The Guards first moved into the construction sector and were quickly awarded projects worth billions of dollars. By the mid-1990s, many Guards served as businesspeople representing the service's interests. The Guards justified their preferential treatment by underscoring their need to protect the Revolution. As one Western bank director explained, the Guards replaced foreign companies with domestic ones to protect the country's revolutionary spirit. During the Iran-Iraq War, Guard leaders became involved in foreign trade.
This trade expanded significantly under Ahmadinejad's leadership to evade sanctions. His presidency saw the expansion of the Guards’ influence, as he appointed Guards to the most critical developmental and industrial projects and public works posts from 2005 through 2013. During this period, the Guards were awarded some $25 billion in contracts in the oil and gas sectors. The president enriched himself and the Guards by expanding the patronage system. He ballooned the ranks of mid-level and senior Guards who were stakeholders in companies he controlled.
For example, in October 2009, the Guards bought 51 percent of the shares in Iran Communication Corporation, which was estimated to be worth $8 billion. In February 2010, Ahmadinejad announced that the Guards would further expand their role in the exploitation, refining, and distribution of natural gas. Though the Guards profited from Ahmadinejad’s intervention, the economy suffered from market distortions. He appointed marginally educated and often incompetent Guards and Basij members to key management and government positions, as well as to senior positions in public enterprises. He also pressured banks to provide preferential loans to the Guards and Basij. Ahmadinejad distributed national wealth to bolster his domestic power and prestige. He traveled to many poorer towns, where he was greeted as a hero and lavished the townsmen with developmental projects.
Ahmadinejad’s generosity to his constituents produced enduring economic inefficiencies that persist. These preferential gifts also distorted the economy by making the Guards middlemen in market transactions and by promoting no-bid contracts for the Guards. The Guards purchased large enterprises at artificially low prices. For example, the Guards-controlled Mehr-e Eghtesad Investment Corporation purchased a mine estimated at $200 million for $60 million in 2009. Furthermore, charitable enterprises controlled by the Guards are exempt from taxation.
The Guards’ two major economic arms are the Cooperation Foundation, affiliated with the Basij, and the Khatam al-Anbia Construction Headquarters (KAA), which has far-reaching influence over ministries and state institutions. According to the U.S. Department of the Treasury, the Cooperation Foundation employs shell companies to “mask Basij ownership and control over a variety of multibillion-dollar business interests in Iran’s automotive, mining, metals, and banking industries.”
An often-cited example of the Guards’ economic control is Gharargah Sazandegi-ye Khatam al-Anbiya (Ghorb), one of Iran’s largest companies, which employs approximately 40,000 people. In 2007, the U.S. Treasury Department designated Ghorb a terrorist-related enterprise because of its links to the Guards and its role in supporting nuclear proliferation and terrorism. Its chief executive officer is usually a high-ranking Guards officer.
