THE BLOG

Iran: Rouhani Fights the Revolutionary Guards, Not Corruption

01/09/2014 01:06 EST | Updated 03/11/2014 05:59 EDT

Just before leaving office, the Iranian press confronted president Mahmoud Ahmadinejad with a Transparency International report declaring Iran "the second most corrupt country in the world." As the outraged journalists demanded to know who was to blame, Ahmadinejad indignantly burst out: "You ingrates! Do you know how much we had to bribe them not be on top of the list?"

There is always some truth in political jokes like the one above, and sometimes it's difficult to distinguish between joke and reality. Iran ranked 144th out of 175 on Transparency International's 2013 Corruption Perception Index. This is not a joke: Iran shared the position with Cameroon, Central African Republic, Nigeria, Papua New Guinea and Ukraine.

Islamic Republic authorities are not unfamiliar with the findings of the report. Mohammad Shariatmadari, vice president for executive affairs, commenting the report said on January 8th: "For the time being, only 31 very poor, or countries engaged in civil war, have a higher ranking than Iran when it comes to economic corruption." Shariatmadari also said "no serious work has been done" under Ahmadinejad to alleviate the problem, but promised president Hassan Rouhani's "government of prudence and hope" intends to engage in an "earnest fight" against corruption.

The Judiciary has indeed started a few high profile cases since Rouhani took over the presidency: Ahmadinejad was summoned to the court to explain disappearance of $3 billion worth of public funds -- a call the former president has hitherto ignored -- and Babak Morteza Zanjani, multibillionaire charged with stealing €2 billion worth of Iran's oil revenue, was arrested on December 30th. Zanjani's name also came up in the Turkish corruption scandal involving cabinet ministers involved in helping -- in return for considerable bribe -- Zanjani bypass the international sanctions regime against Iran.

It is no wonder why Rouhani is trying to expose the corruption of his predecessor, and the Turkish scandal is conventionally explained as an intra-Islamist struggle for power between prime minister Recep Tayyip Erdogan and followers of the U.S.-based preacher Fethullah Gulen. But why would Rouhani and the Islamic Republic Judiciary prosecute Zanjani who after all helped Iran bypass the international sanctions regime?

As in Turkey, the answer can be found in factionalism among the ruling elites of the regime.

Forty three years old Zanjani, owner of the UAE-based Sorinet Group, Qesh Airlines and Rah-Ahan Sorinet soccer team among other things, served his military service in the Islamic Revolutionary Guards Corps (IRGC) in the 1990s.

Towards the end of his service he was ordered to serve as chauffeur of Mohsen Nourbakhsh, then Central Bank governor. A sensitive position he could not have gained without the helping hand of his masters in the Revolutionary Guards. As Zanjani's military service came to an end, Nourbakhsh tasked him to inject foreign currency into the market. Every singe day, Zanjani would physically sell $17 million CDN in cash to exchange bureaus in Tehran in order to stabilize the foreign currency market!

Zanjani admits that he was handsomely rewarded for his services to the Central Bank, but his fortunes changed as Nourbakhsh passed away in 2003. At this point Zanjani claims he began exporting sheep hides to Turkey, which proved just as lucrative, which seems highly implausible.

Fortuna smiled once again at Zanjani as Ahmadinejad -- also a veteran of the Revolutionary Guards -- entered office in 2005. In his preparations against predictable sanctions against Iran's oil exports, Ahmadinejad breached the monopoly of the National Iranian Oil Company's (NIOC) on exporting Iran's crude oil. Twenty per cent of Iran's crude was to be exported by semi-governmental organizations such as the Foundation of the Oppressed, but also by the private sector actors, which in reality meant front companies of the IRGC with the likes of Zanjani as straw men.

Zanjani proudly says that his companies served the purpose of circumventing the sanctions regime against Iran, and considers himself a national hero. The Rouhani government disagrees, and Zanjani is currently under arrest charged with stealing €2 billion worth of Iran's oil revenue.

Zanjani may or may not be a thief, and his arrest has little to do with the Rouhani government's declared "jihad" against corruption. Ever since coming to power, Rouhani has purged his cabinet and provincial administration of IRGC officers. Simultaneously, Rouhani is trying to press the IRGC out of the economy, and Zanjani is under arrest as the latest hostage in the struggle for power between Rouhani and the Revolutionary Guards.

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