Corruption and Mismanagement Index

Ahmadinejad's Administration

Corruption and mismanagement in Iran significantly worsened during the presidency of Mahmoud Ahmadinejad, despite the fact that he came to power on a populist, anti-corruption platform. In Ahmadinejad’s first year as president in 2005, for example, Transparency International ranked Iran at 88th among 159 countries in its annual corruption index. In 2012, the situation worsened considerably, with Transparency International ranking Iran as one of the most corrupt countries worldwide, with a ranking of 133 among 176 nations.

Mahmoud Ahmadinejad and his administration presided over unprecedented corruption scandals. In 2009, a state audit found that the Iranian Oil Ministry failed to deposit $1.05 billion into state accounts related to surplus oil revenues. In 2011, the biggest financial scandal in Iran’s history was uncovered in which $2.6 billion was embezzled from the country’s leading banks.

Parliament Speaker Ali Larijani was the leading critic of Ahmadinejad and his administration’s policies. In one swipe at Ahmadinejad, Larijani blamed government mismanagement for 80% of Iran’s economic troubles, particularly “the maladroit application of the plan to suppress subsidies.” In fact, Ahmadinejad’s loose monetary policy, subsidy cuts, and populist cash-handouts helped precipitate the ongoing currency crisis and inflationary spiral. In response to these broadsides, Ahmadinejad accused Larijani and his family of financial corruption, a charge that he continues to make in the current political climate. Nonetheless, even Supreme Leader Ayatollah Ali Khamenei acknowledged that while the sanctions may cause problems, “mismanagement may even increase these problems.”

Manufacturing a Healthcare Crisis in the Ahmadinejad Presidency

Iran also faced a healthcare crisis due to government mismanagement and corruption. In November 2012, Hosseinali Shahriari, the head of parliament’s health committee, said that “the government is playing with our people’s health and is not assigning the approved finances.” Iran’s then minister of health, Marzieh Vahid Dastjerdi, reported that of the $2.5 billion earmarked in Iran’s annual budget to import medicine and medical supplies, only $600 million had been delivered by Iran’s central bank this year. She further protested, “I have heard that luxury cars have been imported with subsidized dollars but I don't know what happened to the dollars that were supposed to be allocated for importing medicine.” This dissent was too much for the Iranian regime to tolerate, since it contradicted the regime narrative that the West was to blame. As a result, Ahmadinejad fired Dastjerdi in late December 2012. She was the only female minister in the government’s cabinet.

Criticism came from the business community as well. According to Reuters, “A source inside a government pharmacy in Tehran said that low stocks of vital drugs were being exacerbated by ‘strategic stockpiling’. Of 20 units of medication, two were available to the public and the rest ‘reserved’ for those who have influence or good connections.”

To counter these charges, the Iranian regime and its state media apparatus fabricated stories blaming the sanctions for civilian deaths. In the most prominent case of such manipulation, Iranian officials declared the death of 15-year-old hemophiliac Manouchehr Esmaili-Liousi as the first civilian death directly linked to the sanctions. According to the government’s account, the teenager died due to a shortage of drugs to treat his condition. In reality, Manouchehr fell and cut himself while hiking in the mountains. By the time he had reached the hospital two hours later, he had lost too much blood to be saved. The Times of London highlighted that “the campaign over Manouchehr's death underscored the eagerness in Tehran to blame sanctions for the crisis, shifting attention away from the toxic combination of mismanagement and corruption in the government.”

Where medical shortages did exist, the Islamic Revolutionary Guard Corps (IRGC) exacerbated the problem and profited from it. Instead of properly applying the government subsidized exchanged rate to imports of food and medicine, the IRGC exploited it to purchase luxury goods. The Times of London reported that “regime officials continue to enjoy world-class healthcare while choking off medical funding to ordinary citizens. Surplus drugs from Revolutionary Guard hospitals are dumped on the black market, where they are sold to health groups and civilians at three times the price.”

The Iranian government had the power to end this crisis, but instead made it worse to weaken the resolve of the international community to robustly implement sanctions. Through its oil exports, Iran had billions of dollars in local-currency accounts in Turkey and Asian countries, which could be used to buy medical supplies of local or Western-manufacture for the Iranian people. Instead, the regime exploited the welfare of its citizens in order to protect its illicit nuclear program.

In the words of a U.S. Treasury Department spokesman at the time, “It has been the longstanding policy of the United States not to target Iranian imports of humanitarian items, such as food, medicine and medical devices. If there is in fact a shortage of some medicines in Iran, it is due to choices made by the Iranian government, not the US government.” Instead of allocating hard currency to needed medical supplies, it “is being allocated by the government to other purposes, whether it is supporting the Assad regime [in Syria], supporting terrorism or supporting the nuclear program.”

Ahmadinejad’s Post-Presidency

Ahmadinejad’s scandals continued to plague him even after he left office. His first vice president, Mohammad Reza Rahimi, was sentenced to five years in prison for “acquiring wealth through illicit methods” in 2015. Sentencing of his vice president for executive affairs, Mohammad Baghaei, soon followed in December 2017, when Baghaei announced he had been sentenced to 63 years in prison for financial malfeasance. Additionally, the former chairman of Sarmayeh Bank, Parviz Kazemi, who was labor minister during the Ahmadinejad administration, was sentenced to 20 years in prison after a corruption investigation. That’s not to mention Ahmadinejad himself being convicted on seven counts, including misuse of state funds totaling $2 billion dollars, by the Supreme Audit Court.

Rouhani’s Administration

Hassan Rouhani took office in 2013 warning that corruption was “endangering” the Islamic Revolution and that money once “given under the table now is being given on the table.” He also sounded the alarm on the perils of monopolies in Iran—a subtle rebuke to the power and primacy of the IRGC in the economy.  

Analysts have given Rouhani mixed marks on his anti-corruption campaign. Scholars such as Bijan Khajehpour have highlighted the establishment of “provincial offices to fight administrative corruption on bureaucratic levels” as well as the issuing of an anti-smuggling decree in 2014. At the same time, according to the Financial Times, the Rouhani administration announced its intention to close credit institutions affiliated with the IRGC, increase oversight on the banking system, crack down on expropriation of land by elites and make powerful foundations which received tax exemptions in the past pay their fair share—particularly Astan-e Qods, one of Iran’s wealthiest religious foundations.

But Rouhani and his allies ran into a wall of opposition. For instance, militant cleric Ayatollah Ahmad Khatami quipped that “corruption will not be eradicated by just holding conferences.” The head of the Basij volunteer forces at the time also retorted “[u]nlike what some politicians say, the Basij and the Revolutionary Guard need to be present on all grounds including the “defensive economy.” It is only this way corruption can be eradicated.”

Rouhani has persisted in making corruption a central issue in his second term. In November 2017 after earthquakes destroyed housing units in Sarpol-e Zahab, Rouhani complained “[i]t’s clear there has been corruption in construction contracts.” Rouhani’s chief of staff, Mahmoud Vaezi, alleged in 2019 that $1.12 billion in hard currency allocated for importing medicines and essential goods had disappeared.

Yet Rouhani’s government has also stood accused of self-dealing. In 2016, the New York Times reported on bombshell allegations in Iranian media concerning inflated bonuses and salaries for executives of state-controlled companies on Rouhani’s watch. These figures were much higher than the legal limit of $2,353 per month for government employees. Other allegations included $50,000 bonuses for executives at the government-controlled Central Insurance Company and the head of the state-owned Tejarat Bank, named to his post under Rouhani, receiving $208,115 over 21 months and a zero-interest loan of $289,000. That’s not to mention the Supreme Audit Court’s revelation in 2020 that $4.8 billion, which was allocated for imports, was missing from the budget. In effect, billions of dollars had been distributed to importers, but no goods were imported.

In addition, Rouhani’s inner-circle also stood accused of corruption. Sadegh Larijani, the head of Iran’s judiciary, accused Rouhani publicly of receiving embezzled state funds from Babak Zanjani, the point man in assisting the Islamic Republic with evading the pre-nuclear deal sanctions. Rouhani’s First Vice President Eshaq Jahangiri as well as his own brother, Hossein Fereydoun, were also targeted with nepotism and cronyism charges. In 2019, Fereydoun was sentenced to an unspecified jail term on corruption charges. The families of cabinet ministers have also been implicated in separate cases—with one example being Hadi Razavi, the son-in-law of Rouhani’s minister of labor, who used state funds to pay for luxury automobiles and vacations. Iran’s judiciary has also recently opened a probe into budget irregularities within the Rouhani administration.

As the protests over the state of the economy have continued, Iran’s business ranking history during Rouhani’s tenure speaks volumes: according to World Bank data, the Islamic Republic’s ease of doing business ranking stands at 127 out of 190 economies from around the world.

Manufacturing a Healthcare Crisis in the Rouhani Administration

To combat medicine shortages, the Rouhani administration continued the failed Ahmadinejad policy of providing foreign currency at subsidized exchange rates to medicine importers. Approximately $9 billion of the $44 billion allocated to the program went to pharmaceutical companies. According to authorities, this program would result in an influx of foreign drugs and ease the shortages; however, when put into practice, it enriched well-connected individuals.

A pharmaceutical company manager explained that his company applied for the subsidized foreign currency on multiple occasions, but never received any; while at the same time “a handful of new pharmaceutical companies were established whose directors were relatives or associates of people in power. Those firms made millions of dollars.”

In July 2019, the health minister reported that ministry employees had been arrested for corruption associated with the import of medicine and medical equipment. Days later, a letter written by then President Rouhani’s chief of staff, Mahmoud Vaezi, revealed that 130 million euros used to subsidize foreign currency for medicine imports disappeared. Individuals or companies that received the cheap foreign currency often did not import medicine, but rather sold the currency for a profit, or sold the medicine that they did import at high prices.

A second adverse consequence of this program was identified in a comprehensive report on corruption in Iran’s pharmaceutical industry written by the Presidential Center for Strategic Studies: the cheap import of medicine undercut domestic drug manufacturers unless they had political connections.

Another dimension of corruption in Iran’s pharmaceutical industry is that regime regulatory agencies tend not to monitor companies and pharmacies connected to the establishment, thus allowing these entities to engage in corrupt practices, like price gouging and drug trafficking, which yield massive profits. In a six-month period between 2019 and 2020, a total of $100 million dollars-worth of drugs were smuggled from Iran into neighboring countries.

As noted above, Iranian political leaders frequently blame sanctions for medicine shortages in their country, but upon closer examination, corruption in the pharmaceutical industry emerges as the main culprit. State-funded, tax-exempt bonyads have taken over formerly private, successful pharmaceutical firms, diminishing competition and causing prices (and profits) to rise.

The Supreme Leader banned the import of western COVID-19 vaccines in an effort to encourage domestic production to the benefit of Iranian companies—often companies with links to the Barkat Pharmaceutical Group, a SETAD subsidiary. This take-over is another instance in which the Supreme Leader and regime loyalists have consolidated control over the economy.

Raisi’s Administration

President Ebrahim Raisi appointed numerous officials formerly implicated in corruption to his administration. Vice President Mohammad Mokhber, for example, was head of the corrupt Execution of Khomeini’s Order (EIKO), a bonyad known as Setad Ejraiye Farmane Hazrate Emam (SETAD) in Persian (discussed below). Minister of Roads and Urban Development Rostam Ghassemi is believed to have been involved in the Babak Zanjani embezzlement case, wherein regime insiders stole billions of dollars-worth of oil revenue. Then oil minister, Ghassemi “gave permission to Zanjani to sell oil, and… remained mum about the issue,” said Farideh Farhi, an Iran scholar. President Raisi himself led a corrupt institution, Astan Quds Razavi (AQR), for years before the Supreme Leader appointed him chief justice in 2019, and was a trustee of SETAD. He allegedly diverted funds from AQR to his 2017 presidential campaign, and used an AQR-owned newspaper to amplify his political message.

There have been numerous instances of nepotism in the administration. A classified letter written by Raisi’s Minister of Petroleum Javad Oji leaked, detailing his orders to the ministry’s human resource department to hire Nafiseh Sangdovini, the daughter of Ramazan Sangdovini, a parliamentary deputy close to Raisi. Minister of Health Bahram Einollahi appointed his son-in-law as an advisor though he had no expertise in the area. Labor Minister Hojjatullah Abdul Maleki appointed his wife’s brother as an advisor. A Fars Province MP, Moslem Salehi, said that “according to surveys, more than 50 percent of [Raisi’s] appointments lack acceptable logic and explanation… [and] executive experience.”

On November 14, 2021, 35 lawmakers urged the president to stop nepotism and allow for meritocracy, but the calls landed on deaf ears, with Interior Minister Ahmad Vahidi responding that “some want to disturb the public opinion by spreading rumors and lies.” On November 16, Raisi responded in saying that “the nomination is based on competence and merit. Camaraderie, family, and media pressure do not affect my choice.”

Yet, over twenty high-ranking officials are relatives of Raisi, his wife, or other top government officials. Moreover, Mahmoud Ahmadi-Bighash, the former governor of Khorasan Province, gave a speech on the parliament floor claiming “all happenings and appointments” in the government required approval by President Raisi’s son-in-law, Meghdad Nili.

Since the beginning of March 2021, about three months prior to Raisi taking office, embezzlement cases increased 333 percent in terms of the total amount of money embezzled, said Mohammad Reza Moghimi, the head of the Economic Security Police.

The Metropol Building Collapse

The four-year-old Metropol building in Abadan, Iran collapsed on May 23, 2022, killing over 41 people and injuring many others. The building’s collapse inflamed popular grievances against the regime that were already running high given economic disparities, inflation, poverty, and a recent decision made by the Raisi administration to cut back on bread subsidies.

Protesters took to the street to demonstrate against corruption and mismanagement, as they accused well-connected individuals of bypassing industry regulations and endangering people’s lives. Some of them chanted “Khamenei is a murderer,” and other anti-regime slogans. They were met with regime security forces, while the IRGC refused to provide the necessary cargo planes for the transport of supplies to the site of the collapsed building.

The head of Iran’s Construction Engineering Organization, Hamzeh Shakib, said that on multiple occasions his organization pointed out flaws in the proposal to build new floors, but the Abadan municipality, which had the authority to stop the construction, ignored the warnings, and allowed the construction to get underway illegally. Abadan municipality approved the addition and did not inform the Construction Engineering Organization of the permit, which was issued sometime after the lead engineer in the Construction Engineering Organization was fired when he refused to sign a permit for the addition.

The current governor of Khuzestan province, Sadegh Khalilian, said “the building was erected on the foundation of corruption and unhealthy relations.” 13 people, including three former mayors, have been arrested in connection with the building’s collapse.

The Suspects

Initially, it was reported that Hossein Abdolbaghi, the builder and owner of the Metropol Towers, was arrested, but the prosecutor general of Khuzestan province, Sadegh Jafari-Chegeni, told the judiciary’s news agency that he was killed in the collapse of the towers. Thus, suspicions and rumors emerged. Some say that he left the building before it collapsed, and his influential connections helped him evacuate Iran to avoid investigation for his alleged crimes. An audio tape revealed that a coroner worker resisted pressure to issue a death certificate for an unidentified body in his name.

Ali Shamkhani, a former IRGC admiral and the current secretary of Iran’s Supreme National Security Council, and his nephew, Moud Shamkhani, may have been involved in the efforts to circumvent the authorities that called into question the safety of the building and denied requests to build additional floors. Ali Shamkhani is believed to have been involved in Abdolbaghi Holding’s management, and closely connected to corrupt construction projects involving the IRGC. Shamkhani also sits on the board of Arvand Free Trade Zone, which reportedly issued the Metropol building permit.

Moud Shamkhani, who Ali Shamkhani appointed as his representative at the Arvand Free Trade Zone, was deputy director of the Abadan branch at the time the permit was issued. He allegedly lobbied for Abdolbaghi to get approval from city and provincial authorities for building projects.

In addition to Ali and Moud Shamkhani, Iranian citizens suspect former Khuzestan Governor Gholamreza Shariati, former Abadan Mayor Hossein Hamidpur, former Expediency Council Secretary Mohsen Rezaei, head of the Arvand Free Trade Zone Esmail Zamani, Deputy Governor-General of Khuzestan Province Mahmoud Shirazi, and IRGC commander Mohammad Forouzandeh Behbahani were involved in the Metropol project given their close ties to Abdolbaghi.

Reports indicate that current Deputy Governor-General of Khuzestan Province Mahmoud Shirazi authorized construction of the Metropol despite safety concerns. Abdolbaghi allegedly offered to make Shirazi his partner in a major construction project in Karaj in exchange for the Metropol building permit.

Shariati and Hamidpur stand accused of providing land and funds to Abdolbaghi. Even Vice President Mohammad Mokhber might have been involved, as he sat on the board of the Arvand Free Trade Zone in Abadan, where Abdolbaghi had been accused of financial corruption.

The IRGC’s Khatam al-Anbiya Construction Headquarters, in addition to the regime’s Free Trade Organization, the Khuzestan province governor’s office, and the Abadan municipality, all provided real estate to Abdolbaghi and his holding company, some of which was confiscated from ordinary people. Although the precise terms of the land deals have not come to light, Abdolbaghi’s rapid take-over of the real estate industry in Khuzestan province raises red flags. He managed several government-funded construction projects on some of the most valuable land in Khuzestan, including a hospital and prison.

Iranian Vice President Mohammad Mokhber called for an investigation into Abdolbaghi’s other construction projects, alleging “extensive corruption” between the owner, contractor, and regulatory bodies on the Metropol project, and citing the possibility of other regulatory breaches and danger to the public. The officials involved, though, may never be investigated or prosecuted given their rank within the Iranian establishment. The Iranian judiciary already appears to have exculpated former Governor Shariati.

The IRGC and other government agencies supported Abdolbaghi Holding, not only on the Metropol project, but others in the Khuzestan province. The Metropol collapse has thus become a symbol not only of corruption in the way that regulations were circumvented under pressure from high-ranking officials, but also the cronyism that allows companies to acquire excessive wealth.

The Metropol collapse is not the first of its kind and will probably not be the last. Nine years ago, a building constructed by Abdolbaghi Holding collapsed, and no one was held accountable. In 2017, a high-rise building in Tehran (owned by the Mostazafan Foundation) caught fire and collapsed after safety issues had been ignored. Subsequently, the Iranian Construction Engineers League carried out an investigation into the safety of buildings across Iran, and identified 170 unsafe buildings. The head of the Iranian fire department identified 33,000 insecure buildings.

The Judiciary

Speaker of Parliament Mohammad Bagher Ghalibaf

A former IRGC officer and mayor of Tehran, Parliament Speaker Mohammad Bagher Ghalibaf is a “household name” in many corruption cases in the Islamic Republic, yet he continues to avoid prosecution, some say because he is a close relative to Supreme Leader Ali Khamenei. His proximity to multiple corruption cases was particularly pronounced during his tenure as mayor of Tehran (2005-2017).

It is widely believed that then Mayor Ghalibaf gave a total of 71,397 square meters of land to his wife’s charity, the Imam Reza Charity, apart from a separate $100 million dollars. Moreover, a classified report by the State Audit Organization showed up to $500 million dollars-worth of property had been sold at a discount or given to close associates of Ghalibaf while he was mayor. At least 200 government-owned properties in Tehran were sold at a 50 percent discount to Ghalibaf’s associates. The publisher of the documents, Yashar Soltani, was arrested.

Ghalibaf allegedly bribed a former member of parliament, Abolfazl Mousavi, to the tune of 650 billion rials ($22 million dollars) to prevent an investigation into the multi-million dollar property fraud case, but whether he will be tried for fraud or bribery remains in doubt.

Former MP Mousavi was arrested in connection with the 22 million dollar bribe from Tehran municipality. Ghalibaf’s deputy, Issa Sharifi, was arrested in September 2017 in the fraud case, charged by a military prosecutor as having engaged in $22 million dollars-worth of corruption (well short of the $5 billion dollars alleged by the newly-installed city council), and in 2021 sentenced to 20 years in prison and fined for corruption. According to the lawsuit against Sharifi, financial irregularities totaling 13 trillion rials ($440 million dollars) occurred under the former mayor’s watch.

The former mayor is also known to have mismanaged a massive budget in building flashy highways, malls, and residential towers on IRGC land, instead of much-needed transportation infrastructure between northern Tehran and the southern reaches of the city. In 2017, the Tehran City Council said that a huge amount of money was spent on the Sadr Expressway without adequate research into the project, and thus it failed to ameliorate the traffic congestion on roads running east to west of Tehran. In fact, urban experts say that the infrastructure project, which costed up to $2.5 billion dollars, made traffic worse. Ghalibaf’s investments in the artificial Chitgar Lake in northwestern Tehran resulted in environmental degradation, because the trees in the area were deprived of the underground irrigation system whose water was illegally diverted to the lake.

In April 2022, photographs taken of the parliament speaker carrying excess luggage, including carriages, baby clothing, and accessories, on his return trip from Turkey, circulated the internet, prompting calls for him to resign. As many Iranians are suffering due to a weak domestic economy, these images are damning, especially because he claims to be a champion of the poor and once rebuked a politician for doing the exact same thing in Italy. Khabar Online, a conservative Iranian news outlet, blasted Ghalibaf, saying that his “lies and hypocrisy… have devasted Iranian politics and power.”

The IRGC: A Corrupt Conglomerate

Bonyads