Tensions between President Rouhani and Iran’s powerful Revolutionary Guards have further escalated, with one of the president’s key advisors warning that the administration was keeping a close eye on the Guards and its overarching economic interests — a comment that met with a swift reply from General Mohammad Ali Jafari, the top commander of the Revolutionary Guards (IRGC).

Tweeting on June 23, Hesamodin Ashna, President Rouhani’s media advisor, said: “The High National Security Council shall continue to discuss…the limits, the means and the consequences of economic activities by the armed forces.”

Restricting and controlling the Guards’ interference in Iran’s economy has long been a focus for Rouhani, who raised the issue during May’s election debates. 

Ashna's Twitter comment highlights one of the most crucial elements in the ongoing fight between President Hassan Rouhani and General Mohammad Ali Jafari, the top commander of the Revolutionary Guards (IRGC). Over the last four years the two have come head to head on all manner of issues  — the nuclear agreement, national security, Iran’s missile program, culture, and so on — but now the battle over the economy has firmly occupied center stage.

Rouhani himself has put the issue succinctly. “Part of the economy was controlled by a gun-less government but now we have delivered it to a government with guns,” he said on June 23 in a speech [Persian link] about the process of privatization under Article 44 of the constitution, and the corruption that had ensued. 

Privatization began in 2005, when Supreme Leader Ayatollah Khamenei issued policy directives based on Article 44, initiating the move away from a largely state-run economy. The late Akbar Hashemi Rafsanjani, who was at the time chairman of the Expediency Council, resolutely supported this embrace of macroeconomic policies.

In practice, however, it was the government of Mahmoud Ahmadinejad (2005-2013) that had the job of interpreting and implementing the policy. The big winners were what Rouhani has branded the “privpub” sector, a private-public hybrid. The beneficiaries were mostly entities affiliated with the Revolutionary Guards, the Executive Headquarters of Imam's Directive, which was set up when new authorities confiscated thousands of properties and companies after the 1979 Islamic Revolution and is controlled by the Supreme Leader, charitable organization the Imam Khomeini Relief Foundation, and Astan Quds Razavi, the biggest religious endowment in Iran, which is run by Rouhani’s main rival in May’s presidential election, Ebrahim Raeesi. 

To be more exact, the real winners of the push toward privatization were economic and business entities under the control of the Office of the Supreme Leader. Thus, the end result was that an important part of the Iranian economy was taken out of government control and handed to institutions under the control of the Supreme Leader.

We Have Missiles, Too!

“They might present us as the gun owners,” said General Jafari on June 27 in response to Rouhani’s criticisms [Persian link]. “But, let alone the guns, we also own enemy-crushing missiles…We believe that a government without guns will be humiliated by its enemies and will have to surrender eventually.”

Referring to Rouhani as “the gentleman,” Jafari said the president could not have it both ways. He accused him of delegating the “hardest job with minimal gain to the Guards,” boasting about the work they’ve done, and said he then had the gall to “talk unjustly about the Guards” while the administration still owed the IRGC large sums of money for the projects that they had carried out. 

In May 2016, General Ebadollah Abdollahi, the commander of the IRGC’s subsidiary Khatam-al Anbiya Construction Headquarters, announced that the government owes the Revolutionary Guards over $7 billion. The company is one of the biggest contractors in Iran and, according to First Vice President Eshagh Jahangiri [Persian link], between March 20 and December 20, 2016, the government paid the company close to $39 billion for ongoing projects. Taking the two sums together, in 2016 the company implemented projects costing at least $46 billion.

But Khatam-al Anbiya Construction Headquarters is not the only Revolutionary Guards-led entity with direct involvement in Iran’s economy. The IRGC controls several other financial institutions and businesses, although there are no estimates of how much they are worth, how big the volume of their business is or how much the government owes them.

However, the most important point is how these figures affect the Iranian economy — a question that has been raised consistently for years. “Our military was brought into the marketplace with fanfare and now you cannot push them out so easily,” said former parliamentarian Ahmad Tavakoli in an interview in August 2013 [Persian link]. “The regime [the Supreme Leader] must make a clear decision about the presence of the military in the economy.” Tavakoli warned that the economic power of the military would turn into political power. He offered three suggestions for dealing with the issue: “Redefine their share, ban them from activities in the financial market and, if you give them projects to do, don’t treat them as contractors.”

If it’s true that the High National Security Council is indeed discussing the Revolutionary Guards’ role in Iran’s economy, then these are the very issues it is currently discussing. The IRGC is now more a business than a military institution, but it has guns, missiles and artillery — it will not surrender easily. The message from General Jafari to President Rouhani is loud and clear. 

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