Iran’s National Development Fund has recently become Ayatollah Khamenei's personal bank. Although under the law, he has no role in the fund, it is the Supreme Leader who decides how much of the fund's resources will be spent, for what purpose, and at what time.
The fund’s statute does not mention the Supreme Leader of the Islamic Republic of Iran once. The section of Iran’s constitution that refers to the fund does not name the leader, and when the fund is referred to within the law regarding permanent provisions for the country's development plans, his name and title do not appear there either. The law of the fifth and sixth development plans and other laws do not mention any legal role for Ayatollah Khamenei when it comes to the management of the fund.
However, the absence of any legal role for the leader has not been enough to prevent his interference — and Ayatollah Khamenei has directly and obviously interfered in the management of the National Development Fund’s affairs on a repeated basis.
The Islamic Republic’s highest official has essentially taken charge of the fund, which is tasked with providing resources for the country’s development, including making foreign exchange reserves accessible if necessary. However, neither the government or the parliament has provided a definition for the term "development," or for what constitutes a “rainy day” situation whereby it would be necessary to free up funds. Instead, the leader decides these matters — an individual who appears to limit the concept of “development” to military enhancement, and to inflating powerful, wealthy, irresponsible institutions. For him, a devastating flood, an earthquake, a deadly pandemic, or the deaths of innocent people in Iran and across the region do not constitute situations that require urgent action and funds. However, the assassination of Ghasem Soleimani, commander of the Revolutionary Guards’ Quds Force, certainly fell within this category.
Cautious and Conservative When it Suits Him
On April 7, Ayatollah Khamenei finally agreed to withdraw $1 billion from the National Development Fund to deal with the coronavirus outbreak. Eleven days before, the government appealed to the Supreme Leader to use the Development Fund to manage the crisis, saying that its resources were needed to cover the costs of "the needs of the Ministry of Health" as well as "helping the Unemployment Insurance Fund."
In March, parliament’s Health Committee held a special meeting to discuss the cost of coronavirus, during which it reached the decision to appeal to the leader for National Development Fund assistance via the Speaker of the Parliament, Ali Larijani.
However, it took weeks for the Supreme Leader to give permission for the funds to be released. Yet this type of delay is not unprecedented for Ayatollah Khamenei. A year ago, while Iran was in the throes of a devastating flood, the Iranian leader took eight days to reject a request to withdraw funds from the National Development Fund to cover flood damage, which had been put forth in a letter by President Rouhani.
Bypassing Parliament to Approve Orders
In recent years, billions of dollars from the National Development Fund have been used for a variety of projects, most of which were approved by the parliament as part of budget decisions for its development plan, the laws for which are approved by both parliament and the Guardian Council. More and more, though, there has been discussion of the “leadership’s permission” when discussing these budgets and projects, and particularly for projects that fall outside the scope of the development plan, so the approval by other bodies has been ceremonial rather than necessary. The release of the funds seems now to be entirely at the leader’s discretion.
In last year's budget, the "permission of the leadership" allowed the government to withdraw $3.69 billion from the fund's resources as foreign exchange facilities. Of this amount, $2 billion was used for the military to "strengthen its defense capabilities," and $150 million was allocated to the Islamic Republic of Iran Broadcasting (IRIB) to spend on "quantitative and qualitative development of programs, animations, documentaries, films and series."
On January 7, 2020, after review by and permission from Ayatollah Khamenei, and in response to the killing of Commander Ghasem Soleimani, the first triple-emergency bill in the history of the Iranian parliament became law — an unprecedented bill of $217 million for the National Development to "strengthen the Revolutionary Guards’ Quds Force." Last year's budget had allocated $1.63 billion to strengthen defense capabilities. The year before that (2018-2019], $1.3 billion was allocated for the same purpose.
It is Ayatollah Khamenei who guided this funding and determined the amounts, and the process was relatively straightforward. But sometimes, his role in these matters has been less obvious. On occasion, he has taken unorthodox decisions and made his involvement less transparent, such as in cases where he has halted parliament’s review of budgets or related bills.
National Development, From the Revolutionary Guards to Al-Mustafa International University
Iran’s National Development Fund has not traditionally been linked to the Supreme Leader, however much he likes to see it as his domain. In fact, it has been used over the years for other political and financial gains, and he has had little to do with its operations, though he has helped facilitate others’ misuse of the fund — including former president Mahmoud Ahmadinejad's waste of 30 percent of the fund’s foreign exchange reserves on rolling out the Mehr Reza Fund. He is willing to tap into the National Development Fund to support Iran’s military, religious and propaganda institutions, and happy to disrupt the legal process of parliamentary budget approval to divert oil revenues to military, religious, and propaganda institutions via the fund.
During the approval period for the 2020 budget, in an unprecedented move, Ayatollah Khamenei handed the budget back to parliament so that it could carry out "structural amendments.” This was apparently a bid to reduce the budget of the National Development Fund, but in the end, he agreed to release 40,000 billion tomans [$2.75 billion], of which 20,000 billion tomans [$1.37 billion] went directly to the armed forces; about 4,260 billion tomans [$294 million] from the remaining 20,000 billion tomans [$1.37 billion] was allocated to military and security forces, and 315 billion tomans [$22 million] was allocated to religious and propaganda institutions, including 30 billion tomans [$2 million] for the Islamic Propaganda Organization and 27 billion tomans [$1.8 million] for the Al-Mostafa International University.
In the current climate, the coronavirus crisis is a key funding concern for all governments around the world, and most are working hard to free up reserves and untapped resources.
But the situation in Iran is more critical than in many countries. Even without the coronavirus outbreak, financing the salaries and benefits of employees and retired people is a major challenge for a government that is unable to sell oil. Tax revenues cannot address the country’s severe economic downturn, already hampered by rife inflation, sanctions and years of mismanagement, and now made worse by an almost total shutdown because of the pandemic. Public bonds and all other economic avenues have dried up, and Iran’s foreign relations offer no opportunities for financial deals, whether above or below board.
Meanwhile, according to Hassan Rouhani, the coronavirus crisis has absorbed a quarter of all available resources. In such a situation, the National Development Fund is the last and only source for to help manage the crisis, and a path must be cleared so that the necessary political, legislative and parliamentary procedures are followed to make sure this happens. A new law is required. But in Iran, the key to resolving this complex matter is in the hands of a person who views the National Development Fund and its foreign exchange reserve account as a way to bankroll the country’s military might and propaganda output, and to facilitate the political games that have characterized the Islamic Republic since its inception.