While many Iranians are languishing under a mismanaged and floundering economy, the Iranian regime has attempted to shift the blame for its citizens’ distress to sanctions implemented by the international community, and further demonize the West in the eyes of its population. The reality, however, is that economy of Iran has long been plagued by the regime’s endemic corruption, economic mismanagement and reckless foreign policy.
In the words of Iran expert Karim Sadjadpour, “The economic well-being of the Iranian people has never been a top-tier priority of the Iranian regime. The colossal domestic and foreign-policy mismanagement during the Ahmadinejad era has been a far greater contributor to Iran's economic malaise than sanctions.”Ahmadinejad's Administration
Corruption and mismanagement in Iran has 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. Today, Transparency International ranks Iran as one of the most corrupt countries worldwide, with a ranking of 133 among 176 nations in its updated 2012 study.
Mahmoud Ahmadinejad and his administration have presided over unprecedented corruption scandals. 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. 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.
The Blame GameWhile “Iranians are in large part blaming the government's massive economic mismanagement” for the country’s poor economic performance, severe currency devaluation, and rampant inflation, Iranian politicians have been pointing the finger at each other.
Parliament Speaker Ali Larijani has been 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 have helped precipitate the ongoing currency crisis and inflationary spiral. In response to these broadsides, Ahmadinejad has accused Larijani and his politically-connected family of financial corruption. Nonetheless, even Supreme Leader Ayatollah Ali Khamenei has acknowledged that while the sanctions may cause problems, “mismanagement may even increase these problems.”
The Islamic Revolutionary Guard Corps (IRGC), empowered under Ahmadinejad, is at the forefront of corruption in Iran today. Designed to safeguard the Islamic Revolution and maintain an ideologically austere ethos, the IRGC has become increasingly corrupt and materialistic. According to Professor Ali Ansari, “The guards have long been involved in business, but under Ahmadinejad they have moved from being beneficiaries to taking a controlling share. This has made many of the more senior officers rich.”
The IRGC now owns billions in assets and controls hundreds of shell corporations. The organization is commonly awarded no-bid contracts without independent oversight in Iran’s lucrative energy sector and across the economy. The IRGC claims that its profits then go into the national treasury, but there are no public records to verify this.
Wealth also comes for the IRGC’s immense smuggling operations. The IRGC has leveraged its economic and political influence to corner Iran’s $12 billion smuggling industry by illegally importing vast quantities of goods through IRGC-controlled jetties and airport terminals that operate outside the jurisdiction of Iranian customs authorities.
As a result of the IRGC’s financial penetration, it is estimated that IRGC control of the economy “range[s] from a third to nearly two-thirds of Iran's GDP – amounting to tens of billions of dollars.” The IRGC is estimated to own at least half of Iran’s government-owned companies and control 68 percent of Iran’s total exports. With this newfound wealth, the IRGC has been importing expensive luxury cars.
Manufacturing a Healthcare Crisis
Iran is also facing 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 U.S. and EU were to blame. As a result, Ahmadinejad fired Dastjerdi in late December 2012. She was the only female minister in the government’s cabinet.
Criticism has come 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.” Additionally, “Some importers also complain they can no longer access the government's subsidized dollar rate because some medicines have been taken off the priority list.” As a result, many businesses have closed down.
To counter these charges, the Iranian regime and its state media apparatus have 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 instructed 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 do exist, the IRGC is exacerbating the problem and profiting from it. Instead of properly applying the government subsidized exchanged rate to imports of food and medicine, the IRGC is exploiting it to purchase luxury goods. The Times of London reports 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 clearly has the power to end this crisis, but is instead exacerbating it to weaken the resolve of the international community to robustly implement sanctions. Through its oil exports, Iran has 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 is exploiting the welfare of its citizens in order to protect its illicit nuclear program.
In the words of a U.S. Treasury Department spokesman, “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.”
Bureaucratic mismanagement and infighting further illustrates the terrible incompetence and lack of coordination that plagues the Iranian regime today. In July 2013, it was disclosed that "four million tons of food and medicines are stranded in Iranian customs because of disagreements between the central bank and the Commerce Ministry over access to a preferential currency exchange rate for importers of essential goods." According to head of the Export Chamber of Commerce Assadollah Asgarolladi, most of the goods currently tied up in customs "are perishable, and a heavy cost is paid to keep them refrigerated." Asgarolladi added that Iran could expect to face food shortages in the coming months if a quick resolution is not found. Unfortunately, the Iranian people are paying the price for the regime's bureaucratic squabbling and incompetence.