Issues & Insights

Unbridled Corruption is the Cause of Widespread Poverty in Iran

Iranian Supreme Leader Ali Khamenei. Photo: Hossein Zohrevand, Tasnim News Agency. licensed under the Creative Commons Attribution 4.0 International license (https://creativecommons.org/licenses/by/4.0/deed.en).

The astronomical amounts of endemic state embezzlement and corruption in Iran have led to the takeover of the economy by mafia-style factions that have led the economy to the brink of complete collapse. Numbers no longer have the capacity to express the embezzlements that have taken place. The corruption in government agencies, banks, and an array of affiliated companies throughout the last decade has become so widespread that it has adversely impacted the entire Iranian economy.

An economist, who claims to have worked hard to elect Hassan Rouhani as president, offered a new indicator for Iran’s corruption. “Imagine we have so many banknotes that when placed side by side equal to the length of the earth’s circumference,” he said. The title “Banknote Belt Around the Earth” is abbreviated as KAD in Farsi.

The volume of corruption in Iran’s privatization of various industries after the eight-year Iran-Iraq war in the 1980s is equivalent to 1,440 KAD. The parliamentary bill “Public-Private Partnership,” now quietly being passed, creates “corruption capacity” equivalent to 15,600 trillion rials. That is more than four times the total corruption in 30 years of post-war privatization.

Farshad Momeni, a professor of economics at Allameh Tabatabai University, has said: “The mafia has increasingly taken over Iran’s political economy since the end of the war until today.”

Emphasizing that all governments over the past 30 years have played a role in deepening these mafia-style arrangements, he noted that people, especially the lower classes and manufacturers, are paying the actual price for this trend.

Sanctions and the COVID-19 pandemic have shown how the mafia circles control the economy. The Iranian regime constantly tries to blame the unparalleled poverty and misery of the Iranian people on U.S. sanctions. Despite what they say, the regime’s own corruption has turned a country with the world’s second-largest gas reserves and fourth-largest oil reserves into a struggling economy on the verge of collapse. Up to 80% of Iran’s population now lives below the poverty line.

Iran’s manufacturing has been devastated, and imports have been on the rise due to the regime’s policies. The volume of imports increased from $16 billion in 1984 to $90 billion in 1990.

The profits from these imports go mainly to the Islamic Revolutionary Guard Corps (IRGC), which controls more than half of Iran’s economy and the country’s major ports and points of entry. But the IRGC is unwilling to give up these vast profits and continues to destroy domestic production capacity by importing goods from China and other nations, thereby killing jobs and leading more people into poverty and misery.

In 1997 and 1998, according to the Central Bank, $180 billion worth of goods were exported from Iran, but it is not clear how the profits were invested back into the country. According to various studies, had these earnings been appropriately invested into Iran’s economy, essential goods and products could have been supplied for three years, worth up to $35 billion.

The so-called “privatization” of state-owned enterprises started in the 1990s and accelerated during the Mahmoud Ahmadinejad presidency, resulting in the auctioning of state companies to the IRGC and a growing empire controlled by the Supreme Leader Ali Khamenei.

The state Auditor now reports up to 68% of corruption occurred in some of these privatization deals. During 29 years of privatization through different governments (from the beginning of 1970 to the end of 1998), 900 projects, companies, and state-owned enterprises transferred to the “private” sector, with a total present value of 7,200,000 billion rials.

The 1997 Court of Audit report provided some examples of corruption in privatizations and put the lowest percentage of corruption at 52%. During the entire privatization period of 30 years, since the Iran-Iraq war, at least 374% of national assets (estimated at their present value) have gone into the pockets of corrupt officials, namely the IRGC and institutions affiliated with Khamenei’s office.

The signing of the nuclear deal in 2015 unfroze more than $150 billion in frozen Iranian funds, and the Iranian regime sold at least two million barrels of oil per day until the US withdrew from the agreement. Despite this financial windfall, the roots of 2017 and 2019 widespread uprisings in Iran were poverty, inflation, and rampant unemployment.

The state-run Sharq daily quoted Majid Sajjad Panah, a university professor, on April 13, as saying, “In the past 11 years on average Iran had $120bn revenues from oil and non-oil exports. Only 38% has been spent on imports. The question is where all has this money gone?”

With its belligerent policies and the creation of various militia groups throughout the Middle East, Iran’s ruling theocracy has squandered the country’s wealth while destroying its manufacturing resources and infrastructure. This has led to extreme poverty in one of the wealthiest countries in the world.

Tehran and its foreign lobbies claim that sanctions cause the current poverty and misery for the Iranian people. That is not the case. Forty years of the regime’s plunder and institutionalized corruption have taken a toll on the Iranian economy, explaining why the people called for the regime’s overthrow during the recent nationwide uprisings.

Abbas Davari, (abbasdavri95), is chairman of the Labor Committee of the Paris-based National Council of Resistance of Iran (NCRI). Before the 1979 revolution, Mr. Davari was the founder of the tailors’ syndicate in Tabriz, northwest Iran. He was sentenced to six years in prison by the Shah’s regime for his political activities.

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