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IRAN: Revolutionary Guards Tighten Economic Hold

Omid Memarian

BERKELEY, California, Dec 29 2009 (IPS) - News that Iran’s Revolutionary Guard Corps is withdrawing a billion dollars from the country’s Foreign Reserve Fund in order to complete Phases 15 and 16 of the gigantic South Pars gas project has generated concern among Iranian analysts, who believe the move reveals the military organisation’s excessive power over Iran’s economy.

In view of looming sanctions from the United States and the United Nations Security Council over Iran’s nuclear programme, the IRGC’s control over the country’s sensitive oil, and gas and nuclear industries could provoke a serious crisis, they warn.

Last week, Rostam Ghassemi, the commander of Khatam-ol-Anbia Construction Complex, which is the contractor for the two South Pars fields, told Mehr News Agency that in order to remedy the “financial difficulties” facing these phases, the IRGC is planning to withdraw a billion dollars from Iran’s Foreign Reserve Fund.

“Progress problems for Phases 15 and 16 were caused by the National Iranian Oil Company’s tardy provision of financial resources needed by the project,” he said. “The Economic Council [headed by President Mahmoud Ahmadinejad] has approved the withdrawal and the administrative process for it is currently underway at the Central Bank.”

The IRGC’s Khatam-ol-Anbia Construction Base, considered the most important financial unit of the Guards and currently the largest contractor of government projects in Iran, was established in 1990 with the agreement of Iran’s Supreme Leader. Over the past four years, the entity has been the contractor for 1,500 of the country’s most important government projects.

A branch of the Iranian military, the IRGC has built up a sprawling business empire since the 1979 Revolution, with annual revenues estimated at some 12 billion dollars and investments in sectors ranging from oil, gas and petrochemicals to cars, bridges and roads. It also controls the paramilitary Basij militia.

“The ruling political class, the IRGC, needs to control and monitor Iran’s financial resources in order to continue its political hold,” Mashallah Shamsolvaezin, a prominent Iranian journalist, told IPS in a telephone interview from Tehran.

“Ahmadinejad sees absolutely no need to obtain permission from anyone, but such interference in the economy will work against him,” he added.

In 2006, the Khatam-ol-Anbia Construction Base took on the National Gas Company’s 90-kilometre Asalouyeh-Iranshahr pipeline project in Iran’s Sistan and Baluchistan provinces, a contract worth 1.3 billion dollars.

Another large project the Oil Ministry awarded to IRGC is the South Pars Gas Field Development Project’s Phases 15 and 16. At 2.97 billion dollars, the contracts were awarded to Khatam-ol-Anbia Base two years ago, bypassing the tender process. However, the IRGC firm was unable to finish the project in time.

Jamshid Asadi, an economics professor at the American University in Paris, said that the latest action by IRGC culminates its aggressive efforts to monopolise key state projects over the last six years.

“Unfortunately, this is not the beginning. IRGC’s strong presence in Iran’s economy, its efforts to replace the private sector, and its lack of supervision by the Parliament or other oversight units is in fact completing the political coup d’etat which began with Ahmadinejad’s election [in 2005],” he said.

In early 2005, towards the end of President Mohammad Khatami’s second term, through a military takeover at the airport, the IRGC revoked the Imam Khomeini International Airport’s tender, which had been partially awarded to a consortium of Turkish and Austrian companies.

In another case, when Turkcell won the international tender for a cell phone network operation license, the Parliament and the cabinet were put under pressure to revoke the tender.

“A billion-dollar withdrawal which could not be granted without Mahmoud Ahmadinejad’s influence and direct order has been seen as the IRGC’s technical incompetence to fulfill its obligations and reliance on the government’s support,” a former member of parliament told IPS on the condition of anonymity.

The Khatam-ol-Anbia Construction Base has also been linked to Iran’s nuclear activities and is currently under sanctions by the European Union and the United States.

“The economic dominance of the IRGC over gigantic gas and oil projects has made Iran’s economy extremely vulnerable towards new round of sanctions on the country’s financial institutions and oil industry,” the source said.

Assadi told IPS, “This process is illegal. The Economics Council was one of the economic units which were stripped of their powers during Mr. Ahmadinejad’s term and even under its previous power, it had no autonomy over whether or not funds were withdrawn against the Foreign Reserve Fund.”

“It falls within the Parliament’s authorities to approve the government’s proposed budget and if the Economics Council approves such a thing, it has overstepped its authorities and duties,” he added.

Dr. Sadegh Zibakalam, a political analyst in Tehran, told IPS, “In response to objections that Ahmadinejad has repeatedly withdrawn funds from the Forex Reserve Fund, he has said that he has not taken even one dollar without the Parliament’s approval.”

“IRGC’s withdrawal from the Forex Reserve Fund contradicts Ahmadinejad’s statements,” he noted. “Iran’s Foreign Reserve Fund’s Board of Trustees were removed from office by Ahmadinejad himself and it seems that he is solely responsible for the Fund.”

“Considering that IRGC’s companies and their related companies are mentioned in the sanctions [against Iran adopted by the U.N. Security Council], there is a danger that the IRGC’s presence in Iran’s large national oil projects might cause other oil and gas companies from Malaysia to China and Western countries to be pressured not to cooperate with Iran; this could face the Iranian oil and gas industries with serious threats,” added Zibakalam.

During the period of relative press freedom in Iran between 1998 and 2005, the IRGC’s companies were repeatedly accused by independent Iranian media of sidestepping customs rules and regulations, and importing goods and equipment through unofficial entry points. During the Khatami era, reformist newspapers exposed the existence of 60 illegal ports in southern Iran.

Other reports by Iranian officials suggested that nearly one-third of the country’s imports are made through illegal markets, the underground economy, and illegal ports.

According to a report the IRGC provided to Iranian Parliament’s Budget Committee, Khatam-ol-Anbia Base owns 812 registered companies inside and outside Iran.

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