Iran’s silent coup

MEED looks at the growing role of the Revolutionary Guards in Iran’s economy. Published in MEED, 23 September 2011

The appointment of Rostam Qassemi as Oil Minister in August is the clearest sign yet of the growing power and influence of the Iranian Revolutionary Guards Corps (IRGC). Before taking the job, Qassemi had been commander of Khatam ol-Anbia Construction Base, also known as Ghorb, the Guards’ most important business arm and the leading engineering and construction group in the country. He, and by extension the Revolutionary Guards, now controls Iran’s most important ministry too.

“The appointment of former officers in key economic positions within the government is an indication of the growing power of the Revolutionary Guards,” says one Iranian political analyst. “This appointment [of Qassemi] tells you how influential they are becoming.”

The power the organisation has managed to accumulate has led some observers to describe it as a “state within a state”. From its beginnings in May 1979 as a body set up to protect the revolution from opponents, it has now extended its influence into almost all areas of economic and political life.

Islamic Revolutionary Guards taking control

“It is not only a military organisation, but also functions as a police force, an intelligence agency, a political party, an economic corporation and a major actor in the field of culture and organised religion,” says Ali Alfoneh, resident fellow at the American Enterprise Institute and a leading analyst of the organisation. “The Revolutionary Guards is seizing control of all branches of government. The appointment of Qassemi as oil minister is the latest example of it seizing control over a vital industry.”

At its heart, the Islamic Revolutionary Guards remains a military organisation. It is led by Mohammad Ali Jafari and comes under the command of the Defence and Armed Forces Logistics Ministry, alongside the regular army. It has around 120,000 personnel, divided among ground, air and sea forces. It also has several important units, including the elite Al-Quds force and the Basij Resistance Force.

This does not give the full picture, however. The organisation also exerts considerable influence through former members that now hold senior political posts or run major businesses or charitable foundations known as bonyads. “The Revolutionary Guards promotes the careers of its former members, but demands loyalty and favours in return,” says Alfoneh.

Its influence has been steadily growing as the range of its activities has expanded in recent years. The Revolutionary Guards is now active in everything from the country’s nuclear programme to laser eye surgery, banking and universities. It is also said to be involved in smuggling goods in and out of the country.

Much of this is a long way from the original purpose of the force, but there is little effective opposition to it within the country. And while international concern has been growing about Iran’s nuclear ambitions, sanctions have, if anything, strengthened the hand of the Revolutionary Guards. Qassemi himself has urged Khatam al-Anbia to play a greater role in the economy, taking the place of international oil companies, which have left as a result of sanctions.

“Khatam al-Anbia should become the replacement for big foreign companies,” he said on 7 August, in comments reported by the local Fars news agency, which is itself linked to the Revolutionary Guards. The precise scale of Khatam al-Anbia’s operations is not known, but its website lists projects in the oil, gas and petrochemicals sectors, along with mining, ports, tunnels and dams. The value of these projects is thought to reach into the tens of billions of dollars.

Major contracts awarded

Earlier this year, for example, it signed two gas development deals covering the Halgan and Sefid Baghoon fields with the Iranian Oil Ministry worth an estimated $1bn. As with many other major contracts, the deal was awarded without a tender being released.

It has also been involved in a number of projects on the South Pars oil field, although it has not always been one-way traffic. Last year, Khatam al-Anbia pulled out of work on phases 15 and 16 at South Pars, as a result of the international sanctions.

Despite such setbacks, the firm has built up such a scale and momentum that there are now few other businesses the government can turn to when awarding major engineering contracts. “In some of these enormous infrastructure projects, where you don’t have international competition because of sanctions, they are the only ones big enough, that have the machinery, the capital, that can actually bid,” says Kaveh Ehsani, assistant professor at DePaul University in Chicago and a former associate director of the Jomhur Institute of Social Research in Iran.

“The Revolutionary Guards has also gained from the privatisation programme being pursued by the government of President Mahmoud Ahmadinejad, who is also a former member of the force. When a 51 per cent stake in the Telecommunication Company of Iran (TCI) was sold by the government in 2009, for example, it was a consortium affiliated to the Revolutionary Guards that bought the shares for $7.8bn.

The companies it buys can benefit from government contracts thereafter. Iran Marine Industries Company (Sadra), which specialises in building ships and floating oil rigs, was privatised in 2003, but initially struggled to win new work. As local investment firm Turquoise Partners noted in April 2010, however, “the transfer of its management control last year from Melli Bank to a subsidiary of the Revolutionary Guards has proven beneficial to the company. Sadra has managed to secure a series of contracts worth $7bn in the South Pars oil field. In addition, interest on its bank loans of $300m and other debts will be frozen for one year”.

Such deals may undermine the point of privatisation, but they also increase the power the Guards has in the Iranian economy.

“Some of the companies that have been privatised have been purchased by the economic arms of the Revolutionary Guards, which are semi-government organisations yet it is still considered privatisation,” says Nader Habibi, professor of Middle East Economics at Brandeis University in the US.

The power of the Revolutionary Guards is not going entirely unchallenged. When parliament was asked to approve Qassemi’s appointment as oil minister, 216 MPs voted in favour, but 22 voted against and 7 abstained. Among those against the nomination was Ali Motahari, a prominent conservative MP, who has said people should not become ministers while still a member of the Revolutionary Guards. He added that it should remain a military organisation and stay out of politics and business.

There is also thought to be an urban-rural divide in support for the Revolutionary Guards and its volunteer militia force, the Basij. “In some of the rural poorer areas of Iran, the Revolutionary Guards could be seen more favourably, because they’re more conservative and because you can join the Basij and learn a skill, they offer vocational training, they do these public works projects,” says Frederic Wehrey, senior policy analyst at US think-tank the Rand Corporation and co-author of the 2009 study, The Rise of the Pasdaran. “In the urban areas, the Guards are the jack-booted thugs that crack down on people, the shock troops of the revolution.”

The increasing political role of the Revolutionary Guards has seen the organisation get involved in disputes between members of the elite in Iran. Most recently, it came down strongly on the side of Supreme Leader Ali Khamanei in his dispute with Ahmadinejad over the position of Heydar Moslehi, minister of intelligence.

Future tensions within the Revolutionary Guards

The Revolutionary Guards is itself open to internal tensions and the growth of the organisation could exacerbate these in the future.

“It’s not necessarily a monolithic entity politically. Each of the Iranian political factions and views are represented in the Guards,” says Wehrey. “The real challenge will come from within. Any time a military organisation expands into such a broad swathe of roles, especially in business, it does something to the character of that organisation. It creates tensions between those who are devoted to profit and those who are devoted to competence on the battlefield.”

In the immediate future, however, there seem few limits to the potential for the force to accumulate more power. The key upcoming opportunities include parliamentary elections in March 2012 and presidential elections in June 2013. At that point Ahmadinejad will have to step aside, having served the two terms allowed by the constitution.

Among the potential candidates to succeed him are parliamentary speaker Ali Larijani, the mayor of Tehran Mohammad-Baqer Qalibaf, and Qassem Suleimani, the Al-Quds force chief – all three are current or former members of the Revolutionary Guards.

An even bigger test will be when it comes to finding a successor to the Supreme Leader Ayatollah Sayed Ali Hoseyni Khamenei. At that point, it will become clear to what extent the Revolutionary Guards controls the country or the country controls the Guards.

“I see three scenarios concerning the selection of the Supreme Leader,” says Alfoneh. “One, the Revolutionary Guards will appoint its candidate; two, a leadership council replaces the office of the supreme leader; and three, the Revolutionary Guards abolishes the office of the supreme leader. I see the first scenario as the most likely.”