Iranian Regime, Not Private Business, Benefitting From Post-Nuclear Deal Sanctions Relief

Hardliner-backed companies ink billions in deals

Ayatollah Khamenei / AP
Ayatollah Khamenei / AP

The flurry of business deals Iran has struck with European companies since sanctions on its economy were lifted as part of the Iran nuclear deal have helped the Islamic Republic's state-backed conglomerates rather than its private sector economy, according to a New York Times article published Friday.

The deals Iran has agreed to so far have exclusively benefitted Iranian entities with links to state organizations, like the Revolutionary Guard Corps (IRGC). These entities control important industrial and commercial sectors of the country's economy.

Iran's private sector and broader population have not received the benefits of sanctions relief, despite the financial windfall of $50 billion to $150 billion that was released to Iran after the Jan. 16 implementation of the nuclear deal it struck with the United States and five other world powers.

This uneven distribution has some commentators and analysts questioning the Obama administration's hope that the post-nuclear deal sanctions relief would be spent to strengthen Iran’s economy and empower moderate forces that could alter the regime’s rigid, anti-Western ideology.

The New York Times article details how the international deals Iran has inked over the past few weeks have involved state-backed industries. For example, Iran Air, the country’s national airline, bought more than 100 planes from Airbus for an estimated $25 billion to $50 billion. The Iranian Mines and Mining Industries Development and Renovation Organization, a major state-owned entity, struck a $2 billion deal with an Italian company. Iran struck a number of deals with European companies during President Hassan Rouhani’s recent trip to the continent.

Smaller private businesses, however, have had great difficulty profiting from Tehran's reintegration into the global economy. These business owners are not gaining access to credit at home or abroad, in part because of the sanctions still in place on Iran because of its support for terrorism and human rights violations. Some of these sanctions are imposed unilaterally by the U.S. Their presence, and the possibility that the nuclear deal could fall through, has caused some businesses to avoid investing in the Islamic Republic.

Bahman Esghi, the secretary general of the Tehran Chamber of Commerce, was quoted in the Times lamenting how the Iranian government has outgrown its competitors. Esghi said that while private sector would receive some benefit from sanctions relief, the government would be the overwhelming beneficiary. Other businessmen in the article expressed frustration that the government was doing little to help smaller businesses secure credit.

President Rouhani said this week he hopes Iran’s economy will grow eight percent this year, but some experts believe it will only grow by about two or three percent at best, in large part because of the drop in global oil prices.

Critics of the Iran nuclear deal have argued that much of the money from sanctions relief will end up in the hands of regime hardliners because of how the Iranian economy is structured. They point to how the Iranian Revolutionary Guard Corps, the military body charged with safeguarding and expanding Iran's Islamic ideology, reportedly controls an estimated 30 percent of the economy, including some of the country's largest companies, which means many more contractors and subcontractors fall under the group's purview.

The Obama administration considers Rouhani a reformer and pragmatist within the Iranian regime, and some in the West have expressed hope that economic benefits from sanctions relief would strengthen Rouhani's camp going into Iran’s Feb. 26 parliamentary elections.

Iranian authorities, however, have disqualified most of the reform candidates from running for parliament and the Assembly of Experts, the body charged with appointing the country's next supreme leader.

The body with the power to disqualify candidates, the Guardian Council, consists of 12 members who are all directly or indirectly appointed by the current supreme leader, Ayatollah Ali Khamenei, who is considered a hardliner along with the IRGC.