Dialing For Dollars In Iran

Courtesy of The New York Times, an interesting look at a special type of investment in Iran, namely the Islamic Revolutionary Guards Corps’ recent takeover of a majority share in the nation’s telecommunications monopoly. As the article notes:

“…The nearly $8 billion acquisition by a company affiliated with the elite force has amplified concerns in Iran over what some call the rise of a pseudogovernment, prompting members of Parliament to begin an investigation into the deal.

“It’s not just a matter of the Guards dominating the economy, but of controlling the state,” said Alireza Nader, an expert on Iran and co-author of a comprehensive RAND Corporation report on the Revolutionary Guards.

The Guards was created as an elite military force at the founding of the Islamic republic, but its broad mandate — to protect the revolution — has allowed it to reach far beyond its military capacity and evolve into the nation’s most powerful political and economic force.

Its ability to enhance its status even further since the election has important implications for the future of Iran’s domestic politics, decisions on its nuclear program and prospects for long-term relations with the West, said Iranian analysts inside and outside of the country. Increasingly, it is the interests of the Guards and its allies that are driving the nation’s policies, and those interests have often been defined by isolation from the West.

“I think they really see themselves comfortable in a situation where they are isolated and in control,” said Michael Axworthy, a lecturer in Middle Eastern and Iranian history at the University of Exeter in England.

But as its role expands deep into society, the Guards also finds itself forced to balance its ideological inclinations with the practical aspects of protecting its own interests, the analysts said. For example, Iran has refrained from criticizing China, an important trade partner, over its crackdown on Uighurs, a Muslim minority.

And with inflation over 20 percent and manufacturing in serious decline, the Guards and its allies have appeared ready to take steps to head off new sanctions over the nation’s nuclear program. The Guards oversees the nuclear and missile program, and the recently revealed enrichment plant near Qum is built into a mountain on a Guards base.

“A lot of it is about ideology, but a lot of it is about money, too,” Mr. Nader said.

The election in June set off a wave of protests and national discontent, with many charging that the president, Mahmoud Ahmadinejad, stole the election from his main reform opponent, Mir Hussein Moussavi. That conflict and the ensuing state crackdown accelerated a reordering of Iran’s political landscape that began with Mr. Ahmadinejad’s election four years ago. The old guard revolutionaries, like former President Ali Akbar Hashemi Rafsanjani, the reformers and the clergy have been largely shoved aside. The mainline conservatives have been divided.

But the Guards and its allies, including the president, have been emboldened and remain firmly in control. There have been some student protests since universities reopened, and small street scuffles, but nothing like the huge protests that rocked the nation right after the election.

“In a strategic sense, I don’t think Iran is in a fundamentally different place than it was before elections, not in the way it approaches negotiations or the way it looks at its foreign policy,” said Flynt Leverett, director of the Iran project at the New America Foundation and a professor of international affairs at Pennsylvania State University.

Since the protests, senior Guards officials and former officials have been moved into many important government positions. There is now talk that the Guards’ leadership is considering transforming the Basij militia, a volunteer force under its command, into a professional, full-time force. Another tool for extending the Guards’ reach at home has been privatization, initially intended as a means to improve the economy but criticized more recently as a shell game.

The takeover of Iran’s telecommunications system followed a familiar pattern. A private firm, initially approved by Iran’s Privatization Organization, was excluded as an eligible bidder because of a “security condition” one day before shares were put on sale. Mobin Trust Consortium, affiliated with the Guards, then won the bidding.

Until this case, the most striking instance of the Guards’ muscling into a business involved management of the Imam Khomeini Airport. In May 2004 the Guards shut down the airport and evicted the Turkish company that had the contract to run it. The Guards then put its own firm in place. The Guards also appears to have defied an edict by Supreme Leader Ayatollah Ali Khamenei to privatize its many holdings, which run from laser eye clinics and car dealerships to control of oil and gas fields, according to the RAND report.

Despite this and other instances of apparent defiance, Iranian analysts said that the supreme leader remained close to and was supported by the Revolutionary Guards, and that he had maintained control in part by frequently changing commanders. The ayatollah sided publicly with Mr. Ahmadinejad in the political crisis, damaging his standing as a fair arbiter, and so he has relied more on security services, primarily the Guards, to preserve his authority.

Parliament’s decision to look into the telecommunications deal is its second inquiry into a privatization transaction. The first involved three companies affiliated with the Basij militia. In August they simultaneously bid to control the largest lead and zinc mine in the Middle East, in Iran’s Zanjan Province. The final sale price was less than $2 billion, one-third of the $6 billion the government had said the mine was worth two years earlier.

During the investigation, auditors found evidence that the three sister companies colluded to ensure the lowest possible price, according to Iranian newspaper reports.

Some analysts argue that the Guards, with a firm control of major sectors of the economy, has little interest in opening relations with the West, because integration with the global economy could bring in competition and require a degree of transparency the force is not comfortable with.

“They profit by a situation in which there are sanctions and shortages and in which the people can’t get what they want, and they are able to control a fairly small stream of what the people want at an inflated price,” Mr. Axworthy said. “I don’t think the Revolutionary Guard is very likely to put pressure on the Iranian regime to open politically in order to open economically.”

But there is also a sentiment that says the Guards Corps may become more pragmatic when it comes to the rest of the world.

“The I.R.G.C. can’t be both a revolutionary and militant organization, bent on destroying the world and exporting the revolution, and at the same time a big domestic capitalist agency with its finger in a bunch of pies,” said a sociologist in Iran who spoke on the condition of anonymity for fear of retribution. “Being the latter moves one towards conservatism and pragmatism, not radicalism.”

This entry was posted on Friday, October 9th, 2009 at 9:55 am and is filed under Iran.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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