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Iran needs a more comprehensive strategy against economic ‘crimes’

November 23, 2018 at 3:47 pm

Iran’s Supreme Leader Ayatollah Ali Khamanei delivers a speech during his meeting with families of martyr’s in Tehran, Iran on January 2, 2018 [Iranian Leader’s Press Office / Handout / Anadolu Agency]

The execution of a man dubbed the “Sultan of Coins” and his accomplice has brought Iran’s fight against economic crimes and corruption into sharp relief. Vahid Mazloumin had been involved in the gold coins trade for three decades and on the face of it his execution reflects a steely resolve by the Iranian judiciary to crack down on economic saboteurs.

The executions follow on the heels of the establishment of “special courts” by the judiciary to try economic and financial crimes. The Iranian leader Ayatollah Seyed Ali Khamenei had given his approval to these measures back in the summer.

The call to set up special courts – characterised by a fast-track approach to justice and the imposition of severe sentences – came amid significant turmoil in the Iranian economy, particularly in the foreign currency and gold coin sectors.

But in the aftermath of the executions, questions are being raised about the integrity of the justice meted out against accused “economic” criminals. At a more practical level, there is doubt as to whether the special courts will target the “kingpins” of corruption in Iran. The fear is they are going after corrupt elements who lack adequate political protection.

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More broadly, there are serious doubts as to whether these courts will have a positive impact on the fight against corruption in the long term. Absent a root and branch approach to this issue – and one whose central focus isn’t retribution directed at a few individuals – it is doubtful that Iran can contain corruption and the associated economic and political malaise.

Selective justice?

The issue of corruption – and the seemingly perennial struggle against it – is a highly emotive one in Iran. It is a subject bound up with ideology and emotional readings of history, which not only further complicates the issue but arguably acts as a barrier against a true breakthrough.

The Iranian revolution of 1979 was in part framed as a struggle against corruption inasmuch as the Pahlavi monarchy was widely dismissed as morally decadent and financially corrupt. The revolution was in part characterised as an uprising by the “Mostazaffin” (dispossessed) and by extension it took direct aim at the players perched at the apex of the economy.

Iranians take part during a state-organised rally against anti-government protests in the country, in Qom, Iran on January 3, 2017 [Stringer / Anadolu Agency]

Iranians take part during a state-organised rally against anti-government protests in the country, in Qom, Iran on January 3, 2017 [Stringer / Anadolu Agency]

But 40 years on the revolution has apparently failed to sufficiently restructure the economy so as to entrench accountability and transparency. Whilst Iran has made great strides in addressing some of the old class-based socio-economic imbalances, including tackling acute poverty and almost eradicating illiteracy, nevertheless large swathes of the economy remain largely unaccountable, not only to public opinion, but even to the government.

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The belief that the revolution has not only not gone far enough in restructuring the economy, but in fact it has in some cases reproduced the old inequalities albeit in new forms, is one that has gained ground in the Islamic Republic.

Former Revolutionary Guards commander, and failed serial presidential contender, Mohsen Rezai, has often pointed to this issue. More importantly, former president Mahmoud Ahmadinejad, has often been critical of insider corruption and has made specific accusations against highly-placed individuals within the system, notably the Larijani brothers who sit at the apex of two branches of the government.

In early 2013 Ahmadinejad caused a stir when he accused the brother of the speaker of parliament, Ali Larijani, of using his status to obtain unfair economic advantage, thereby implicating the entire Larijani family in corruption. The former president’s focus on insider corruption resonates with large sections of public opinion which has come to believe that the judiciary metes out selective justice, thereby wittingly or unwittingly sparing the major sources of corruption in the country.

Former Iranian president Mahmoud Ahmadinejad in Iran, during the Iranian elections on 14 April 2017

Former Iranian president Mahmoud Ahmadinejad in Iran, during the Iranian elections on 14 April 2017

Structural defects

The Iranian leader Ayatollah Khamenei periodically calls for a war on corruption, but his vision of a fairer and more just society has gone unmet primarily because the institutional makeup of the Iranian economy is subversive to a genuine fight against corruption.

Large sections of the economy operate in the grey and black zones and are effectively free of government oversight. Some, like the post-revolutionary Bonyads (Foundations) -, notably the Mostazafan (Dispossessed) Foundation, enjoy tax-exempt status and are effectively unaccountable, at least to the government and public opinion.

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There is also the issue of the large religious-charitable organisations, notably the Astane Qods Razavi, responsible for managing the Imam Reza shrine in Mashhad, which are also largely untaxed despite operating multiple lucrative businesses. An institution with a 200-year standing the Astane Qods Razavi dominates the local economy by employing tens of thousands of people and generating annual revenues to the tune of $15 billion.

The establishment of special courts to tackle economic crimes is a recognition by the judiciary that it needs to address growing public concern about economic volatility. There is also the geopolitical dimension, notably the re-imposition of tough US sanctions, which threaten to intensify Iran’s economic crisis.

Historically sanctions have tended to deepen corruption in Iran’s economy as they empower unaccountable and shadowy economic players. Indeed, one reason as to why the Iranian economy is so fragmented, and divided into official and unofficial parts, is because the country has had to innovate new economic models to either circumvent sanctions or failing that to mitigate their effect.

More innovation will be required if Iran is to withstand the Trump administration’s economic warfare. Whilst hanging a few egregious economic actors may be good for morale in the short term, they do not constitute an effective fight against corruption in the long term.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.