|(The author of this article was murdered in Russia 2 years ago. Some say it
was a Chechen hit, others say that it was a contract killing ordered by a
Russian businessmen incensed by his exposures of their wealth and power.)
Paul Klebnikov, 07.21.03
A LOOMING NUCLEAR threat to the rest of the world, Iran is robbing its own
people of prosperity. But the men at the top are getting extremely rich.
It's rumble time in Tehran. At dozens of intersections in the capital of
Iran thousands of students are protesting on a recent Friday around
midnight, as they do nearly every night, chanting pro-democracy slogans and
lighting bonfires on street corners. Residents of the surrounding
middle-class neighborhoods converge in their cars, honking their horns in
Suddenly there's thunder in the air. A gang of 30 motorcyclists,
brandishing iron bars and clubs, roars through the stalled traffic. They
glare at the drivers, yell threats, thump cars. Burly and bearded, the
bikers yank two men from their auto and pummel them. Most protesters
scatter. Uniformed policemen watch impassively as the thugs beat the last
These bikers are part of the Hezbollah militia, recruited mostly from the
countryside. Iran's ruling mullahs roll them out whenever they need to
intimidate their opponents. The Islamic Republic is a strange dictatorship.
As it moves to repress growing opposition to clerical rule, the regime
relies not on soldiers or uniformed police (many of whom sympathize with
the protesters) but on the bullies of Hezbollah and the equally thuggish
Revolutionary Guards. The powers that be claim to derive legitimacy from
Allah but remain on top with gangsterlike methods of intimidation, violence
Who controls today's Iran? Certainly not Mohammad Khatami, the
twice-elected moderate president, or the reformist parliament. Not even the
Supreme Leader Ayatollah Ali Khamenei--a stridently anti-American but
unremarkable cleric plucked from the religious ranks 14 years ago to fill
the shoes of his giant predecessor, Ayatollah Khomeini--is fully in
control. The real power is a handful of clerics and their associates who
call the shots behind the curtain and have gotten very rich in the process.
The economy bears more than a little resemblance to the crony capitalism
that sprouted from the wreck of the Soviet Union. The 1979 revolution
expropriated the assets of foreign investors and the nation's wealthiest
families; oil had long been nationalized, but the mullahs seized virtually
everything else of value--banks, hotels, car and chemical companies, makers
of drugs and consumer goods. What distinguishes Iran is that many of these
assets were given to Islamic charitable foundations, controlled by the
clerics. According to businessmen and former foundation executives, the
charities now serve as slush funds for the mullahs and their supporters.
Iran has other lethal secrets besides its nuclear program, now the subject
of prying international eyes. Dozens of interviews with businessmen,
merchants, economists and former ministers and other top government
officials reveal a picture of a dictatorship run by a shadow government
that--the U.S. State Department suspects--finances terrorist groups abroad
through a shadow foreign policy. Its economy is dominated by shadow
business empires and its power is protected by a shadow army of enforcers.
Ironically, the man most adept at manipulating this hidden power structure
is one of Iran's best-known characters--Ali Akbar Hashemi Rafsanjani, who
has been named an ayatollah, or religious leader. He was the speaker of
parliament and Khomeini's right-hand man in the 1980s, president of Iran
from 1989 to 1997 and is now chairman of the powerful Expediency Council,
which resolves disputes between the clerical establishment and parliament.
Rafsanjani has more or less run the Islamic Republic for the past 24 years.
He played it smart, aligning himself in the 1960s with factions led by
Ayatollah Khomeini, then becoming the go-to guy after the revolution. A
hard-liner ideologically, Rafsanjani nonetheless has a pragmatic streak. He
convinced Khomeini to end the Iran-Iraq war and broke Iran's international
isolation by establishing trade relations with the Soviet Union, China,
Saudi Arabia and the United Arab Emirates. In the 1990s he restarted Iran's
He is also the father of Iran's "privatization" program. During his
presidency the stock market was revived, some government companies were
sold to insiders, foreign trade was liberalized and the oil sector was
opened up to private companies. Most of the good properties and contracts,
say dissident members of Iran's Chamber of Commerce, ended up in the hands
of mullahs, their associates and, not least, Rafsanjani's family, who rose
from modest origins as pistachio farmers. "They were not rich people, so
they worked hard and always tried to help their relatives get ahead,"
remembers Reza, a historian who declines to use his last name and who
studied with one of Rafsanjani's brothers at Tehran University in the early
1970s. "When they were in university, two brothers earned money on the side
tutoring theological students and preparing their exam papers."
The 1979 revolution transformed the Rafsanjani clan into commercial pashas.
One brother headed the country's largest copper mine; another took control
of the state-owned TV network; a brother-in-law became governor of Kerman
province, while a cousin runs an outfit that dominates Iran's $400 million
pistachio export business; a nephew and one of Rafsanjani's sons took key
positions in the Ministry of Oil; another son heads the Tehran Metro
construction project (an estimated $700 million spent so far). Today,
operating through various foundations and front companies, the family is
also believed to control one of Iran's biggest oil engineering companies, a
plant assembling Daewoo automobiles, and Iran's best private airline
(though the Rafsanjanis insist they do not own these assets).
None of this sits well with the populace, whose per capita income is $1,800
a year. The gossip on the street, going well beyond the observable facts,
has the Rafsanjanis stashing billions of dollars in bank accounts in
Switzerland and Luxembourg; controlling huge swaths of waterfront in Iran's
free economic zones on the Persian Gulf; and owning whole vacation resorts
on the idyllic beaches of Dubai, Goa and Thailand.
But not much of the criticism makes its way into print. One journalist who
dared to investigate Rafsanjani's secret dealings and his alleged role in
extrajudicial killings of dissidents is now languishing in jail. He's
lucky. Iranian politics can be deadly. Five years ago Tehran was rocked by
murders of journalists and anticorruption activists; some were beheaded,
Some of the family's wealth is out there for all to see. Rafsanjani's
youngest son, Yaser, owns a 30-acre horse farm in the superfashionable
Lavasan neighborhood of north Tehran, where land goes for over $4 million
an acre. Just where did Yaser get his money? A Belgian-educated
businessman, he runs a large export-import firm that includes baby food,
bottled water and industrial machinery.
Until a few years ago the simplest way to get rich quick was through
foreign-currency trades. Easy, if you could get greenbacks at the
subsidized import rate of 1,750 rials to the dollar and resell them at the
market rate of 8,000 to the dollar. You needed only the right connections
for an import license. "I estimate that, over a period of ten years, Iran
lost $3 billion to $5 billion annually from this kind of exchange-rate
fraud," says Saeed Laylaz, an economist, now with Iran's biggest carmaker.
"And the lion's share of that went to about 50 families."
One of the families benefiting from the foreign trade system was the
Asgaroladis, an old Jewish clan of bazaar traders, who converted to Islam
several generations ago. Asadollah Asgaroladi exports pistachios, cumin,
dried fruit, shrimp and caviar, and imports sugar and home appliances; his
fortune is estimated by Iranian bankers to be some $400 million. Asgaroladi
had a little help from his older brother, Habibollah, who, as minister of
commerce in the 1980s, was in charge of distributing lucrative
foreign-trade licenses. (He was also a counterparty to commodities trader
and then-fugitive Marc Rich, who helped Iran bypass U.S.-backed sanctions.)
The other side of Iran's economy belongs to the Islamic foundations, which
account for 10% to 20% of the nation's GDP--$115 billion last year. Known
as bonyads, the best-known of these outfits were established from seized
property and enterprises by order of Ayatollah Khomeini in the first weeks
of his regime. Their mission was to redistribute to the impoverished masses
the "illegitimate" wealth accumulated before the revolution by "apostates"
and "blood-sucking capitalists." And, for a decade or so, the foundations
shelled out money to build low-income housing and health clinics. But since
Khomeini's death in 1989 they have increasingly forsaken their social
welfare functions for straightforward commercial activities.
Until recently they were exempt from taxes, import duties and most
government regulation. They had access to subsidized foreign currency and
low-interest loans from state-owned banks. And they were not accountable to
the Central Bank, the Ministry of Finance or any other government
institution. Formally, they are under the jurisdiction of the Supreme
Leader; effectively, they operate without any oversight, answerable only to
According to Shiite Muslim tradition, devout businessmen are expected to
donate 20% of profits to their local mosques, which use the money to help
the poor. By contrast, many bonyads seem like rackets, extorting money from
entrepreneurs. Besides the biggest national outfits, almost every Iranian
town has its own bonyad, affiliated with local mullahs. "Many small
businessmen complain that as soon as you start to make some money, the
leading mullah will come to you and ask for a contribution to his local
charity," says an opposition economist, who declines to give his name. "If
you refuse, you will be accused of not being a good Muslim. Some witnesses
will turn up to testify that they heard you insult the Prophet Mohammad,
and you will be thrown in jail."
Other charities resemble multinational conglomerates. The Mostazafan &
Jambazan Foundation (Foundation for the Oppressed and War Invalids) is the
second-largest commercial enterprise in the country, behind the state-owned
National Iranian Oil Co. Until recently it was run by a man named Mohsen
Rafiqdoost. The son of a vegetable-and-fruit merchant at the Tehran bazaar,
Rafiqdoost got his big break in 1979, when he was chosen to drive Ayatollah
Khomeini from the airport after his triumphal return from exile in Paris.
Khomeini made him Minister of the Revolutionary Guards to quash internal
dissent and smuggle in weapons for the Iran-Iraq war. In 1989, when
Rafsanjani became president, Rafiqdoost gained control of the Mostazafan
Foundation, which employs up to 400,000 workers and has assets that in all
probability exceed $10 billion.
Theoretically the Mostazafan Foundation is a social welfare organization.
By 1996 it began taking government funds to cover welfare disbursements;
soon it plans to spin off its social responsibilities altogether, leaving
behind a purely commercial conglomerate owned by--whom? That is not clear.
Why does this foundation exist? "I don't know--ask Mr. Rafiqdoost," says
Abbas Maleki, a foreign policy adviser to Ayatollah Rafsanjani.
A picture emerges from one Iranian businessman who used to handle the
foreign trade deals for one of the big foundations. Organizations like the
Mostazafan serve as giant cash boxes, he says, to pay off supporters of the
mullahs, whether they're thousands of peasants bused in to attend religious
demonstrations in Tehran or Hezbollah thugs who beat up students. And, not
least, the foundations serve as cash cows for their managers.
"It usually works like this," explains this businessman. "Some foreigner
comes in, proposes a deal to the foundation head. The big boss says: 'Fine.
I agree. Work out the details with my administrator.' So the foreigner goes
to see the administrator, who tells him: 'You know that we have two
economies here--official and unofficial. You have to be part of the
unofficial economy if you want to be successful. So, you have to deposit
the following amount into the following bank account abroad and then the
deal will go forward.'"
Today Rafiqdoost heads up the Noor Foundation, which owns apartment blocks
and makes an estimated $200 million importing pharmaceuticals, sugar and
construction materials. He is quick to downplay his personal wealth. "I am
just a normal person, with normal wealth," he says. Then, striking a
Napoleonic pose, he adds: "But if Islam is threatened, I will become big
Implication: He has access to a secret reservoir of money that can be
tapped when the need arises. That may have been what Ayatollah Rafsanjani
had in mind when he declared recently that the Islamic Republic needed to
keep large funds in reserve. But who is to determine when Islam is in danger?
As minister of the Revolutionary Guards in the 1980s, Rafiqdoost played a
key role in sponsoring Hezbollah in Lebanon--which kidnapped foreigners,
hijacked airplanes, set off car bombs, trafficked in heroin and pioneered
the use of suicide bombers. According to Gregory Sullivan, spokesman for
the Near Eastern Affairs Bureau at the U.S. State Department, the
foundations are the perfect vehicles to carry out Iran's shadow foreign
policy. Whenever suspicion of complicity in a terrorist incident turns to
Iran, the Tehran government has denied involvement. State Department
officials suspect that such operations may be sponsored by one of the
foundations and semiautonomous units of the Revolutionary Guards.
Iran's foundations are a law unto themselves. The largest "charity" (at
least in terms of real estate holdings) is the centuries-old Razavi
Foundation, charged with caring for Iran's most revered shrine--the tomb of
Reza, the Eighth Shiite Imam, in the northern city of Mashhad. It is run by
one of Iran's leading hard-line mullahs, Ayatollah Vaez-Tabasi, who prefers
to stay out of the public eye but emerges occasionally to urge death to
apostates and other opponents of the clerical regime.
The Razavi Foundation owns vast tracts of urban real estate all across
Iran, as well as hotels, factories, farms and quarries. Its assets are
impossible to value with any precision, since the foundation has never
released an inventory of its holdings, but Iranian economists speak of a
net asset value of $15 billion or more. The foundation also receives
generous contributions from the millions of pilgrims who visit the Mashhad
shrine each year.
What happens to annual revenues estimated in the hundreds of
millions--perhaps billions--of dollars? Not all of it goes to cover the
maintenance costs of mosques, cemeteries, religious schools and libraries.
Over the past decade the foundation has bought new businesses and
properties, established investment banks (together with investors from
Saudi Arabia and the United Arab Emirates) and financed big foreign trade
The driving force behind the commercialization of the Razavi Foundation is
Ayatollah Tabasi's son, Naser, who was put in charge of the Sarakhs Free
Trade Zone, on the border with the former Soviet republic of Turkmenistan.
In the 1990s the foundation poured hundreds of millions of dollars into
this project, funding a rail link between Iran and Turkmenistan, new
highways, an international airport, a hotel and office buildings.
Then it all went wrong. In July 2001 Naser Tabasi was dismissed as director
of the Free Trade Zone. Two months later he was arrested and charged with
fraud in connection with a Dubai-based company called Al-Makasib. The
details remain murky, but four months ago the General Court of Tehran
Iran's most distinguished senior clerics are disgusted by the mullahcrats.
Ayatollah Taheri, Friday prayer leader of the city of Isfahan, resigned in
protest earlier this year. "When I hear that some of the privileged progeny
and special people, some of whom even don cloaks and turbans, are competing
amongst themselves to amass the most wealth," he said, "I am drenched with
the sweat of shame."
Meanwhile the clerical elite has mismanaged the nation into senseless
poverty. With 9% of the world's oil and 15% of its natural gas, Iran should
be a very rich country. It has a young, educated population and a long
tradition of international commerce. But per capita income today is 7%
below what it was before the revolution. Iranian economists estimate
capital flight (to Dubai and other safe havens) at up to $3 billion a year.
No wonder so many students turn to the streets in protest. The dictatorship
has been robbing them of their future.