Iran's Economy Suffers from State-Backed Mafia, Not Sanctions

In Iran, President Hassan Rouhani and allies attribute the country’s economic dilemmas to sanctions. However, economists and experts believe that Rouhani and his faction are misleading society, and most of the financial problems are not related to sanctions but rooted in the corrupt and flawed system.

In this respect, there are numerous instances of officials’ mind-blowing corruption cases and multi-billion embezzlements. At the same time, all parts of the ruling system are involved in systematic corruption, and the counter-corruption departments are themselves the source of fraud and looting.

Fight Against Corruption in Iran’s Judiciary or Khamenei’s Successor?

In other words, rent-seeking, bribes, corruption, and smuggling have grown in Iran as an inherent outcome for Iran’s sick economy. While productive industries do not run the country’s financial system, attributing problems to foreign reasons is a joke. Therefore, today Iran suffers from the lack of healthy production relationships before any sanction or restriction imposed by “Great Satan”—the term Iranian authorities use to describe the United States.

“The economy’s main problem is lying and incriminating others to divert public opinion from bitter truths that imposed by the government. As a routine, the U.S. is announced as the country’s dilemmas while the government’s functions have originated these dilemmas. The [problems] have no tie with [U.S.] sanctions,” said economist Hossein Raghfar in an interview with Resalat daily on October 14.

“Instead, the government has destroyed the country’s economy, and the source of problems is inside the country. Domestic mafia gives a wrong address for resolving economic problems,” he added.

Raghfar also explained how the rulers’ mismanagement and failed policies destroyed Iran’s production capacities and made the country dependent on imports. “In six years, from 2005 to 2011, the imports’ value reached from $16 billion per year to $90 billion, and the country became more dependent and consumerist by importing saddle to the toothpick,” he said.

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“If [the government] controlled fake demands and did not deposit foreign exchange resources to the pocket of those who took it out of the country, the sanctions would not become effective. However, officials are not willing for this [control] to happen,” Raghfar added.

“During 2018 and 2019, according to the Central Bank of Iran (CBI) statistics, the country earned $180 billion through exports. However, it is unclear where these foreign exchanges were used? According to studies, the government could provide [the people’s] essential and production goods up to $35 billion. Moreover, it could ensure the country’s foreign exchange fund for three years,” he said.

Therefore, Iran’s financial structure faces fundamental obstacles, which have been rooted in the institutionalized corruption in all of the governing system’s sectors. As a result of these structural problems, Iran’s national production faces an unprecedented recession, and it has been stopped in many parts.

A massive amount of smuggling and hoarding of essential commodities is a flagrant illustration of systematic corruption and non-transparency in production activities.

“Today, we witness the country confronts serious challenges. We see wherever the public supervision has been weakened, security and military supervision and traditional confrontations could not resolve the country’s main issues and challenges such as combating corruption and rent-seeking,” ILNA news agency quoted Mahmoud Mirlouhi, member of Tehran City Council, on November 17.

This is while the security and military apparatuses are among the most corrupt organs. For instance, under the former judiciary chief Sadegh Amoli Larijani, Iranian media outlets revealed that the judiciary chief has 60 private bank accounts. Larijani later declared that the Supreme Leader Ali Khamenei had issued a decree in this context during the tenure of his predecessor Mahmoud Hashemi Shahroudi.

Also, the corruption cases of Akbar Tabari, former executive director of the judiciary during Larijani and Shahroudi’s tenure, have shocked the people by this magnitude of cheating and abuse of power. On the other hand, the IRGC controls hundreds of official and unofficial ports wharves and has specific customs.

The Systematic Corruption in Iran’s Judiciary

The current judiciary chief Ebrahim Raisi was the head of Astan-e Quds Razavi conglomerate that almost possesses Mashhad, Iran’s second metropolitan and thousands of hectares of residential and farm estates across the country, as well as hundreds of factories and workplaces.

Notably, Astan-e Quds is one of the pillars of Khamenei’s $200-billion economic empire. According to the Astan-e Quds statute, the Supreme Leader appoints its head, and he only reports to the Supreme Leader. The institution benefits from tax exemption and facilitates Tehran’s illicit transactions under the pretense of endowments and donations.

“Annoying class differences, poverty, corruption, discrimination, insufficiencies in the administrative system, intermediation, and brokerage, which have unfortunately done by children or appointees of directors and officials, indicate our failure in implementing justice and a fair rule,” Hossein Hagh-Verdi told Radio Farhang on November 17.

In fact, while Khamenei and the institutions owned by his office have monopolized 80 percent of the national production, corruption expands crazily. Iranian authorities neither can nor will spend national resources for the sake of people due to the state’s flawed structure.

Unbridled poverty and the rising poverty line are the flipside of systematic corruption, destruction of national production, and rent-seeking growth. However, the sole solution for these painful dilemmas is political changes and establishing a transparent government based on the rule of law. In recent years, the Iranian people, time and again, demonstrated their desire to achieve such a government in nationwide protests.

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