December 15, 2016
Iran’s Revolutionary Guard faces a new enemy: the gradual opening of the country’s economy after the nuclear deal with world powers.
Though better known for its hard-line fervor as an elite force created to defend Iran’s cleric-led system, the Guard holds vast business interests both public and hidden across the Islamic Republic. In times of international sanctions, the organization won massive no-bid government contracts and expanded its influence.
But comments made by one Guard general about a new ship deal worth $650 million betray the worry felt in the organization over potential competition, analysts say. It also offers a possible secondary motive for its detention of dual nationals on purported espionage charges and its confrontations with the West: keeping its share of Iran’s market of 80 million people.
“They are worried about competition internally,” said Alireza Nader, an analyst at the RAND Corporation who long has studied the Guard. “They want to make sure for any given deal, they get a part of it.”
Last Friday, the Islamic Republic of Iran Shipping Lines Co. signed a deal with South Korea’s Hyundai Heavy Industries for 10 container ships. It marked the first deal with a foreign shipbuilder since the nuclear accord that limited Iran’s enrichment of uranium in exchange for the lifting of some international sanctions.
For the state-owned shipping company, the $650 million deal is essential as much of its fleet is so aged that it cannot be insured. For Hyundai, it meant a foot in the door for potential future deals as the shipper plans to spend $2.5 billion in total to revamp its fleet.
Not everyone, however, was happy.
“At a time when we are faced with the problem of youth unemployment in our country, unfortunately, we have heard that the contract to build 10 ships has been signed with South Korea and I hope it is not true and it has not been signed yet,” Guard Gen. Ebadollah Abdollahi said Sunday. “Is it a lack of respect for our domestic capabilities? If it is true, we request the president cancels this deal.”
While President Hassan Rouhani’s administration backs the ship deal, Abdollahi’s comments reflect the dual roles of the Revolutionary Guard.
The Guard formed out of Iran’s 1979 Islamic Revolution as a force meant to protect its Shiite-cleric-overseen government. It operated parallel to the country’s regular armed forces, growing in prominence and power during the country’s long and ruinous war with Iraq in the 1980s.
In the war’s aftermath, authorities allowed the Guard to expand into private enterprise.
Today, it runs a massive construction company called Khatam al-Anbia, with 135,000 employees handling civil development, the oil industry and defense issues. Guard firms build roads, man ports, run telecommunication networks and even conduct laser eye surgery.
The exact scope of all its business holdings remains unclear, though analysts say they are sizeable. The Washington-based Foundation for Defense of Democracies, which has been critical of the nuclear deal, suggests the Guard controls “between 20 and 40 percent of the economy” of Iran through significant influence in at least 229 companies.
Among the Guard’s firms is the Iran Marine Industrial Co., a ship building and repair company. The company, also known by the acronym SADRA, lost out on the contract, likely spurring Abdollahi’s comments.
Hyundai Heavy Industries spokesman Kim Moon-joo declined to comment Tuesday whether the company was aware of Abdollahi’s comments. Kim also declined to say whether the company had any concerns about taking business from a Guard-aligned company.
Part of the Guard’s worry may stem from the oversized role it took on in Iran’s economy during sanctions, said Afshon Ostovar, an assistant professor at the Naval Postgraduate School in the United States who recently published book on the Guard.
“The door is open to doing deals with the West and they don’t want those doors to be floodgates,” Ostovar said. “They want them to be a tiny little window where very discrete, deliberate transactions happen but not just sort of a gold rush for both the West and for Iranians trying to make a buck.”
“That’s what makes them more nervous than anything else: losing control,” Ostovar added.
Maintaining that control for the Guard has included detaining a series of dual nationals since the nuclear pact, causing concern among international businesses hoping for contracts with Tehran. It continues to confront U.S. Navy ships and aircraft traveling through the Persian Gulf, even as Chicago-based Boeing Co. has signed a $16.6 billion to sell aircraft to Iran.
For Rouhani, who likely will run for re-election in May, showing economic benefits from the nuclear deal remains key as its effects largely haven’t trickled down to the average Iranian. He also has backed the Guard’s military missions abroad to Syria and Iraq.
Meanwhile, at the back of everyone’s mind is the health of Iran’s aging Supreme Leader Ayatollah Ali Khamenei, a major benefactor of the Guard who relies on its support.
“The Guard wants to make sure the country doesn’t change,” Nader said. “I think their approach now is not to allow any sort of change, even small change. They worry small change can lead to very big demands.”