The Pandemic Depression
The Global Economy Will Never Be the Same
Iran has a military-industrial complex problem. The complex is a hulking guild that stands in the way of any Iranian attempt toward policy moderation. Its visible head is the Islamic Revolution Guards Corps (IRGC), the armed guardians of the Islamist regime since 1979. As a phenomenon, however, it comes in different shapes and affects every aspect of life in Iran.
Since coming to power in 2013, the moderate President Hassan Rouhani has cautiously pushed back against the military-industrial complex but has otherwise primarily engaged in overtures to co-opt the IRGC leadership for his vision for the future. Rouhani’s pitch, which he defines as a “win-win” formula, is simple: The IRGC bosses should accept change and, in return, they will not be excluded from post-sanction economic opportunities. But IRGC generals remain wary of both Rouhani and his vision for Iran’s future. And they have proven time and again that they are willing to take on the president and his team if they feel threatened.
To the outside world, the IRGC’s undermining of the elected Rouhani government is readily discernable. From its periodic war games and firing off missiles as a show of strength, to the IRGC intelligence arm’s willfully arresting Iranian dual nationals to embarrass the president, the corps barely hides its intention to expose the limits of Rouhani’s power.
Meanwhile, much of Iran’s hardline media, which is in the hands of the IRGC, constantly reruns veiled remarks that Rouhani and his team are nofoozi or infiltrators bent on transforming the revolutionary character of the state from within. The lines for this spiteful battle were drawn shortly after Rouhani ascended to the presidency in 2013 and urged the IRGC generals to stay out of politics and economics.
A fuming head of the IRGC, Mohammad Ali Jafari, soon countered that some inside the regime “do not show their true faces,” a jab raising questions about Rouhani’s allegiance to the Islamic Republic. Rouhani, a man who has been part and parcel of the regime since 1979, hit back at the IRGC’s Achilles’ heel and said that the IRGC’s “launching missiles and staging military exercises to scare off the other side is not good deterrence.” For good measure, Rouhani stressed that he had the support of Supreme Leader Ayatollah Khamenei, the commander in chief (and ultimate benefactor) of the hawkish generals.
And Rouhani did. At least that was the case until the July 2015 nuclear deal between Iran and world powers. Only the IRGC, Khamenei maintains, has the weight to make sure that the agreement the Rouhani team signed—and which Khamenei grudgingly accepted as inevitable to avoid an economic meltdown—does not end up becoming the beginning of a long list of demands from the United States.
When, this summer, Ayatollah Ali Akbar Hashemi Rafsanjani, an influential former president and the Rouhani government’s favored pilot balloon, spoke against Iran’s further militarization and hailed Germany and Japan as one-time militaristic powers that had successfully shifted energies to economic development, IRGC chiefs saw red. Rafsanjani was lambasted as naive for comparing an ascending Islamic Republic to defeated powers of yesteryear. This is a sentiment echoed by Khamenei each time Iranian moderates have urged for a more dovish foreign policy posture.
Khamenei’s reverence toward the IRGC is entirely self-serving. Back during the Iran-Iraq War (1980–1988), when Khamenei himself occupied the presidency and was more of a moderate figure, he was not a close ally of the corps. In fact, examples exist of IRGC commanders denying him visiting rights to the battlefront because of his politics. But since Khamenei became supreme leader in 1989, his strategy has been to pit the elected presidents against the unelected IRGC generals to keep his place as the regime’s central kingpin. In his 26 years at the helm, elevating the role of the IRGC has been Khamenei’s most far-reaching political gamble—one that has seemingly paid off. Today his grip on power depends on it, even though critics point out the unfettered powers he has bestowed on the IRGC has turned it into much more than just the armed guardian of the regime. The IRGC’s economic interests are easiest to identify. Since the end of the Iran-Iraq war, the corps has moved from concentrating on road, dam, and other construction projects to such diverse sectors as telecommunications, aviation, shipping, and oil and gas. Its political influence is far harder to pinpoint, but it is clear that the IRGC generals seek to play the role of gatekeeper to Iranian politics. It does not always prevail, but that does not stop the IRGC bosses from trying.
The uncoupling of Khamenei and the IRGC remains a herculean test for the Rouhani team, one he has approached gingerly. In the realm of foreign policy, when Foreign Minister Javad Zarif took over, he brought his own inner circle but kept one notable figure from the Mahmoud Ahmadinejad administration. That figure was Hossein Amir-Abdollahian, the deputy foreign minister for Arab and African Affairs. The decision had nothing to do with Ahmadinejad.
Zarif kept Abdollahian in the job to placate the IRGC; the minister had always been considered the lookout of the generals at the foreign ministry. Abdollahian, an Arabic speaker and former ambassador to Bahrain, is particularly close to Qassem Suleimani, the head of the IRGC’s external branch, the Quds Force. It was only after the signing of the nuclear agreement that Zarif set out to consolidate his control at the Foreign Ministry. In June 2016, Abdollahian was removed. This came at a time when there were hopes that Zarif and U.S. Secretary of State John Kerry might be able to build on the nuclear agreement by cooperating on regional crises such as those in Syria and Yemen, where the IRGC has led Iranian efforts. The IRGC-controlled media protested and called Zarif’s reshuffle a concession to the United States and to Arab states of the Persian Gulf.
Abdollahian was swiftly made a special adviser to Ali Larijani, the speaker of the Iranian parliament and a Khamenei loyalist. The doggedness by the IRGC-Khamenei axis to keep Abdolahian on the scene is a good example of the steep climb Zarif faces as he seeks to reshape Iranian foreign policy. In Zarif’s stormy appearance before the parliament on October 2, pro-IRGC deputies questioned his dismissal of Abdollahian while they jeered at his overall performance, intimidating Zarif into saying that he is proud to be “close to [my brothers] Qassem Soleimani and [Hezbollah leader] Hassan Nasrallah.” The public reprimand, and Zarif’s handling of it, vividly displays the disjointed nature of the foreign policy-making process in Tehran.
The tests for the Rouhani team are no less daunting in the realm of the economy, in which the IRGC’s vested interests are deep. Here, Zarif’s equivalent is Oil Minister Bijan Zangeneh. Since returning to the oil ministry in 2013, the veteran oil tsar has pushed for the launch of the Iran Petroleum Contract (IPC), a new contracting model that aims to entice foreign oil and gas companies to invest in Iran.
The IRGC and its allies in the parliament and in the business community have pushed back, oftentimes attacking the IPC as unconstitutional and tantamount to succumbing to foreign investors’ demands. They fear that the Western-centric Rouhani government will divert projects away from local energy firms, many of whom are tied to the IRGC.
As with his boss, Rouhani, Zangeneh has opted to look for ways to soften the opposition from the hardliners. Khatam-al Anbia, the IRGC-controlled conglomerate, has been shortlisted as one of only eight Iranian firms that can team up with foreign energy companies as part of IPC contracts. In early October, the first IPC license was granted to a company under Setad, a conglomerate controlled by the Office of the Supreme Leader.
When possible, the Rouhani team appears to prefer co-optation to overcome opposition from interest groups tied to hardliners such as those in the IRGC. Ongoing efforts to accommodate to the extent possible IRGC-tied interests as part of the government’s energy sector overhaul offer a telling case. Other times the Rouhani team simply does not have much room to maneuver. A good recent example involves Tehran’s relationship with the Financial Action Task Force (FATF), an intergovernmental body tasked with countering money laundering. The IRGC led the effort to paint the FATF as a U.S.-controlled, Paris-based organization that strives to meddle in Iran’s financial transactions with the outside world to weaken Iran’s ties to groups that Tehran labels part of the resistance movement, such as Lebanon’s Hezbollah.” From the perspective of the IRGC, abiding by the rules of the FATF put its operations at risk, but Rouhani thus far has been able to argue that there is no alternative but to fulfill FATF requirements if Tehran is to rehabilitate its international economic reputation. In the face of entrenched IRGC interests, however, Rouhani’s power of persuasion is far from settled.
As Rouhani’s first term in office is nearing its end, the Rouhani government’s formula has at best been only a mixed success. The moderate president and his principal lieutenants such as Zarif and Zangeneh have not won policy arguments due to their political weight or persuasiveness but by virtue of compromising and whenever possible co-opting the political and economic interests of the hardliners—particularly those from the IRGC. It has proven to be a thorny process, and it will continue to be thorny should Rouhani win a second term in 2017. For Rouhani, the 2015 nuclear deal with the outside world was not an end in itself. It was a platform to be built on as part of broader attempt to make Iran into a more mainstream country. However, a huge question remains as to how far the IRGC generals will be willing to travel with the man who likes to call himself the “Diplomat Sheikh.”