The armed forces in Iran entered the country’s economic sphere after the end of the Iran-Iraq war, with the assent of Ali Khamenei. Since then the military has gained considerable wealth and an array of private companies; by owning weapons, it has become a mafia in its own right in the Islamic Republic.
The commercial activities of Iran’s military institutions are not made public knowledge. Nor is the annual turnover of entities owned by the Islamic Revolutionary Guard Corps (IRGC), the army or the Ministry of Defense.
The quarterly journal of Strategic Defense Studies, however, has recently shed some light on the problems this has created. Its most recent issue featured a study entitled Strategies for Preventing and Combating Economic Corruption in the Armed Forces, which directly addressed corruption in Iran’s military bodies, particularly the Ministry of Defense.
The secrecy of Iran’s military institutions has long been thought to be a contributing factor to corruption. Multiple Iranian laws ban the dissemination of information about the armed forces, and commanders and managers have often wielded the statute book when pressed on their financial activities.
Some individuals in the military own dozens of companies, large and small, in various domains. Benefitting from subsidies, many such entities have gone on to eliminate their commercial competitors, claim tax exemption and access new financial resources with ease. Their immunity from supervision in turn allows for cronyism, conflicts of interest and financial malpractice.
These issues, in turn, inhibit the well-informed and fair handling of economic misconduct in Iran, which has blighted the country during some of its worst years of sanctions-induced hardship and will slow any recovery in years to come.
The institutions tasked with fighting corruption have shown little will or capability to address violations of the law by Iran’s military institutions. There is almost no open data on this subject, nor on the number of corruption-related cases filed against members of the military in Iran’s special courts.
The most recent issue of Iranian journal Strategic Defense Studies, however, included a report entitled Strategies for Preventing and Combating Economic Corruption in the Armed Forces. This study directly addressed the roots of present-day corruption in Iran’s military institutions, particularly the Ministry of Defense.
The report made use of relatively significant, almost reliable data, which in itself is something of a rarity. Its two stated objectives were "investigating the prevention and reduction of disorders, indiscipline, and conditions leading to economic corruption", and "strengthening and developing the fight against financial and economic violations and crimes in the armed forces".
The research focuses on businesses owned by the Ministry of Defence from 2012 to 2019, and draws on interviews with 45 senior officials from this body and the Armed Forces as well as the Office for Policy and Strategic Monitoring.
The Ministry previously operated in the economic field through such entities as Etka, the Cooperative Foundation, and other companies. Then, after the Social Security Organization of Armed Forces (SATA) Investment Company was formed, it acquired a 51 percent-share in Ghadir Investment Company: a public joint stock company created in 1991 to manage or restructure Iranian firms on behalf of shareholders. SATA’s new control over the futures of often state-owned entities gave the ministry an enormous new share of economic soft power.
After these changes, the financial turnover of the Ministry and its subsidiaries soared and with it, corruption increased. The report found numerous documented instances of "negligence and wasting public funds", "embezzlement", "bribery" and "collusion in transactions".
The two most serious issues faced by the Ministry of Defence in combatting corruption today, the authors asserted, were "the lack of a strong and centralized independent body for the comprehensive and complete supervision of economic activities" and "vague and extensive statutes of some companies".
Other aggravating factors included the "weakness of competency of some managers", "non-competitive activities and monopoly on projects", "weakness in managers’ proper supervision of employees" and "weakness in the rules and regulations over auditing and financial supervision”.
The study also denounced the presence of “informal groups” in the Ministry of Defense's economic activities, as well as the excessively lengthy process of investigating alleged economic crimes by the Armed Forces Judiciary. Part of this, it suggested, was the absence of comprehensive definitions of different types of economic crime in Iranian law.
Some of the 45 interviewees also called for improved transparency by the Ministry of Defense on its economic activities, and for senior managers in the Ministry to deal with any violations with “force and urgency”.
Corruption in the Ministry of Defense has been aggravated by a wide variety of factors. An earlier investigation into the Ministry’s inspection unit in 2010 found that drug use by employees, embezzlement, violent incidents and forged documents had hampered the department’s ability to carry out its role effectively.