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Privatization Under U.S. Sanctions: The Islamic Revolutionary Guard Corps’ Path to Power in Iran

Amidst the increasing tensions in Persian Gulf, the Iranian Supreme Leader Ayatollah Khamenei ordered Iran’s elite Revolutionary Guards to develop “modern and updated” weapons domestically. In a stirring speech in October, Khamenei advised high-ranking members of the Islamic Revolutionary Guardian Corps (IRGC) to “go after all defensive, operational and intelligence technology” needed to prepare for “significant events,” an indirect hint at potential armed conflict. Tensions have increased in the Gulf since May 2018, when President Trump withdrew from the Joint Comprehensive Plan Of Action, or the Iran nuclear deal and re-imposed  “crippling economic sanctions” on Iran. In April, Trump designated IRGC as “a foreign terrorist organization” in order to curb the organization’s increasing international influence, especially in Iraq and Syria. Although latest sanctions have severely and directly targeted the backbones of Islamic Republic, the alliance between Khamenei and IRGC has continuously become more powerful. United States under Trump’s administration have misconstrued IRGC to be an Islamist “terrorist organization” while in reality it is a corporate power which advances its economic interests through military conquest. United States “maximum pressure” approach and re-imposition of harsh sanctions has only empowered the Islamic Revolutionary Guardian Corps (IRGC) to advance its economic monopoly and unchecked political power in Iran, while undermining Iranian people’s quest for democracy.

Islamic Revolutionary Guard Corps, commonly known as “Sepah,” was founded  in order to protect the Islamic Republican political system when the Islamic Republic ascended to power in 1979. The IRGC’s function is distinct from the Iranian military, which defends the borders and maintains order within the country. Ayatollah Khamenei, Iran’s newly-selected Supreme Leader,  halted the merging of these two separate military apparati upon his appointment in 1989, asserting that they serve as the “two strong wings” of Iran’s military might. With the approval of Ayatollah Khamenei, the Islamic Revolutionary Guard Corps have breached into almost every political and economic sphere of the Iranian state with no mechanism of accountability or transparency regulating its conduct over the last thirty years.

The steadfast alliance between Ayatollah Khamenei and the elite Revolutionary Guards protects against the Iranian people’s resentments with the regime. With Ayatollah Khamenei’s “green light,” the IRGC has developed an advanced intelligence agency commissioned to suppress any political movement against the regime. IRGC’s role in creating a “martial law” environment for activists and free press, as well as its undermining of Rouhani’s domestic and economic policy, weakens the administration as people’s sole democratic refuge.

The burgeoning power of the Revolutionary Guards has won them economic independence from the state. Starting in 2005, the Iranian economy underwent a process of mass-privatization, undertaken through the sell or transfer of the State assets. This development allowed a series of interconnected cover companies, indirectly owned by the Revolutionary Guards, to monopolize the Iranian economy since sanctions had prevented foreign companies to compete in the Iranian market. According to the former Deputy of the Ministry of Industry, Mohsen Safai, “120 such economic entities…control in total around 50 percent of Iran’s gross domestic product.” This conglomerate of “quasi-governmental” cover companies indirectly owned by IRGC serves as an economic engine for Ayatollah Khamenei to purchase the loyalty of the military commanders and other political actors. This arrangement also gives the IRGC ample independence from the influence of  Hassan Rouhani, the democratically-elected President of Iran.

The conflict of interest between Rouhani’s administration and IRGC is not confined to Iran’s borders. The IRGC has undertaken an increasing number of infrastructure projects in post-conflict Syria and Iraq. The Royal Institute of International Affairs reports that, “since 2013, Iran has provided Syria with three lines of credit for the import of fuel and other commodities, with a cumulative value of over $6.6 billion” in which IRGC plays a major role. The IRGC’s military expansion creates new investment opportunities for the “pseudo-private” sector abroad, and ultimately stretches the unofficial borders of Iran’s regional hegemony. This union of the military might, political influence, and economic interest under IRGC militarizes Iran’s international policy, and endangers the Iranian people’s quest for a better relationship with the world.

Trump’s heedless withdrawal from the nuclear deal and his subsequent re-imposition of sanctions signified his miscalculation of the power dynamics in Iran. Trump viewed Rouhani’s administration and the IRGC’s military influence as a single, unified force, when in reality, they function with a great extent of independence from one another. The “maximum pressure” of sanctions on Iran’s shoulders did not bring the entire system down; it only dealt the Iranian working and middle class a mighty blow. Just the shock of Trump’s withdrawal from nuclear deal sent Iran’s currency into an abyss. Iran’s GDP growth rate fell to -3% in 2018, which caused its currency to lose more than 300% of its value on the  dollar. Inflation soared to 39.9% in 2018, doubling and tripling the price of foodstuffs like bread, fruit, and eggs, as well as clothes and staples. The economic restraints that were supposed to reign in Iran’s “malign behavior” only emptied Iranian people’s pockets. Αlong with their money, the people have lost their patience as well as their sense of political purpose.

The economic isolation that followed the sanctions empowered IRGC. As a consequence of the sanctions, companies like Lukoil, Total and Reliance deserted Iran’s oil and gas infrastructure and refinery projects. This has allowed Gharargah Khatam-Al-Anbia, IRGC’s official corporate arm, to take over this crucial artery of Iran’s economy . The Islamic Revolutionary Guard Corps should no longer be seen as a violent military apparatus supporting international terrorism; rather, the IRGC should be viewed as a coroporate power that possesses a military and plays a crucial role in survival of the Iran’s regime. United States sanctions against Iran, as a whole, has proven futile, if not counter-productive, in taming IRGC’s aggressive behavior.

With Trump trampling on Rouhani’s golden baby––the nuclear deal––and an economy decaying under sanctions, the Iranian electorate has lost its hope in Rouhani as their democratically-elected agent, and even in democracy itself. Lacking popular support from the electorate and having lost control of the economy to IRGC, any Iranian President becomes a puppet in the hands of an Iranian leader, the only remaining source of political legitimacy in Iranian political structure. Rouhani has succumbed to the same political bankruptcy. In this convoluted state of political deadlock in Iran, Rouhani has no power.

In this light, President Trump and the United States should entirely revise their understanding of Iran’s political system and its policy outcomes. “Maximum pressure” does not miraculously change Iran’s foreign policy, but Iranian people’s democratic demand does! Sanctions harm the Iranian people and help the Islamic Revolutionary Guards Corps (IRGC) to secretly accumulate wealth through its dependent corporations. This increase in capital inflates their desire for the resources of the neighboring countries and augments their domestic political power. This militant klepto-capitalist organization, undermines the efforts of the Iranian civil society for democratic reform, and attempts to expand Iran’s regional dominance in the Middle East. Under sanctions, economic downfall, and political impasse, Ayatollah Khamenei’s hard-line Anti-Americanism outpowers Rouhani’s liberal and diplomatic approach.

If President Trump wants a concrete diplomatic win, he must restore the Iranian people’s trust in democracy and diplomatic negotiations and encourage their hope for economic prosperity. Lifting the sanctions at this intense moment not only relieves the Iranian people, but also incentivizes the Iranian president to restart negotiations with  the United States. This response to popular demand would defy the Iranian Supreme Leader and Revolutionary Guards. Without lifting the sanctions, Ayatollah Khamenei and the loyal militant elite will curb any effort for further negotiation and supress Iranian people’s hope for freedom and democracy.

Photo: Image via Aslan Media (Flickr)