Revolutionary Iranian Corruption - Financial Transparency Coalition

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Nearly 5 years ago the international community, led by the United States, imposed the first in a line of increasingly harsh economic sanctions on Iran in the hopes of ending the country’s nuclear ambitions. Despite some signs of success, consensus on the effectiveness of the sanctions remains elusive. However, what is becoming clear is that sanctions are contributing to an explosion of corruption and funneling billions of dollars to Iran’s fastest growing group of kleptocrats: the Iranian Revolutionary Guard Corps.

The Iranian Revolutionary Guard Corps, or IRGC, is like an amalgam of the Iranian CIA, Marines, Mafia and Fortune 500. Controlling hundreds of shell corporations, billions in assets, and an ideologically aligned army, the IRGC has blossomed into an economic and political behemoth under sanctions.

Taking advantage of their vast alumni network and influence, the Revolutionary Guard has arranged no-bid contracts to develop everything from the oil and pipeline projects abandoned by foreign corporations to automotive parts, farming, and telecommunications. Consequently, it’s estimated that the IRGC may control as much as 1/3 of the Iranian economy.

Although the Revolutionary Guard officially claims that profits go into the treasury, there are no public records and no parliamentary oversight of the IRGC or its front companies. A 2010 report from Global Financial Integrity estimates that between 2006 and 2008, when the first round of sanctions were put into place, the amount of money illicitly taken out of the Iran per year nearly tripled, from $4.3 billion to $12.8 billion. The question is not whether corruption is growing, but by how much.

Much of this increase may be tied to Iran’s growing black market, created largely in response to sanctions. The Revolutionary Guard has used its economic power and immunity to meet demand, and is believed to control virtually the entire $12 billion a year Iranian smuggling industry. Illegal imports include everything from weapons and electronics to water purifiers, blankets, and fruit. As a result, the IRGC has developed a vast network of smugglers and front companies, expanding their insidious network of corruption and power in Iran.

The U.S. has responded by specifically targeting the IRGC’s income. The Treasury is attempting to root out individual subsidiaries, imposing sanctions on specific front companies that represent the IRGC, while watchdog groups have encouraged individual businesses to end their business interactions with Iran. Governments and banking institutions have blacklisted Iranian banking requests, trying to prevent Iranian financial mischief abroad.

This is necessary – illicit financial flows are an essential part of terrorist financing. The current international financial architecture has too many holes, leaving inadequate oversight of the world’s shadow financial system and allowing countries like Iran to fund radical organizations. It is essential that the international community tighten regulatory oversight and increase transparency in offshore financial centers, tax havens, and even developed country banks.

The future of Iran remains a looming question mark on the international agenda. In the meantime, the failure of either the Iranian government or the international community to successfully curb the power of the Iranian Revolutionary Guard is entrenching a very powerful and very corrupt regime in a sea of failing states facing democratic revolutions. Tackling this crooked vanguard of gangsters, thugs, and cronies will be a crucial part of the struggle to create a stable, democratic Iran. If we lose this fight, we may see Iran eventually reintegrated into the global system, but with the albatross of endemic corruption firmly around its neck.