Tuesday, March 29, 2016
Another Achilles Heel for Iran
The best positive scores for countries on Transparency International’s corruption index are 97 for Denmark, 91 for New Zealand, and 87 for Sweden. The United States fares an embarrassing but not terrible 74. You’d think that a nation with a strict religious government, where Islamic law is strictly enforced and the country is itself led by Ayatollahs would be clean and corruption free, but Iran gets a horrific 27 on that Transparency index (really bad). Even most African and Latin American nations do better.
Many within Iran blame the sanctions, which made imports prohibitively expensive and out of reach for virtually all government officials. The black market flourished, and religious prelates were clearly among those with their hands out. For Iran’s industrial giants, they were completely unable to build and operate major plants without importing major technology and specialized equipment from overseas. Religious leaders joined Revolutionary Guards and other government officials, willing to turn a blind eye to dealing with the enemy, for a price… a hefty price. Lots of money changed hands.
Now, with the sanctions fading, Iran’s leadership is trying to figure out how to get one of the most corrupt countries on earth on to a straight and narrow path. Iran offers miscreants convicted of corruption nasty prison sentences and even the death penalty.
The March 19 New York Times explains the conundrum: “The pastry shop, tucked away in an affluent west Tehran neighborhood and selling Disney-themed cakes and party hats, is not particularly notable except for one thing: It is owned and operated by Iran’s powerful Ministry of Petroleum.
“The shop — along with luxury cars, an airline and dozens of other pricey assets — was seized by the government from Babak Zanjani, a 43-year-old billionaire businessman who for over a decade was a major figure in Iran’s sanctions-busting network and this month received a death sentence for his dealings.
“Mr. Zanjani’s arrest in 2013, after President Hassan Rouhani came to power, was portrayed as a symbolic break with the high levels of corruption that defined the years under the presidency of Mahmoud Ahmadinejad, from 2005 to 2013. His conviction, by a lower court, was an attempt to show the Iranian public that, with the lifting of sanctions in January, the days of the sanctions-skirting middlemen are over.
“Reconnecting Iran to the world economy is a top priority for President Rouhani. But to fully reconnect, Iran needs to dismantle the network of thousands of intermediaries that was devised to get around the sanctions. The problem, economists and insiders say, is that enough sanctions remain in place that the Iranian economy still cannot function without the network.
“The government has taken some steps. The Ministry of Petroleum is working on a new, more competitive model for its oil contracts, and the Parliament signed a bill to fight money laundering, an important step toward more financial transparency.
“But there is only so much it can do. Regular financial transactions continue to be nearly impossible because the United States has designated the Islamic Republic a “state sponsor of terrorism,” stemming from its support for the Lebanese Hezbollah movement. International banks doing business with Iran can face up to a billion dollars in penalties if they violate regulations.
“‘The financial hegemony of the United States is so influential that European banks are scared to work with us,’ said Saeed Laylaz, an economist close to the Rouhani government. ‘We also don’t have enough dollars in foreign bank accounts, no international credit, so obviously some former sanction breakers continue to have an intermediary role.’
“Iran has another reason to not dismantle the network too hastily. The middlemen it funneled money to for purchases around the world are sitting on billions of unspent dollars. Getting that money back is proving to be extremely difficult, experts say, and will only get harder if the network is dismantled. One financial consultant who requested anonymity because of his dealings with Iranian banks said the problem was exacerbated by a lack of record keeping.
“Mr. Laylaz estimates that between 5,000 and 10,000 people worked in the network, handling deals worth between $300 billion and $400 billion over the past decade… ‘At least 10 percent was taken for commissions,’ he said, adding that that number did not include the money still controlled by those in the network, given to them by banks and even government institutions to do business.
“The chances that the government will ever see that money again are slim, Mr. Laylaz said. ‘There are no traces of this money, the people involved have disappeared, heads of institutions have changed,’ he said.” Before we going scoring our own backs with whips at the evil sanctions we imposed – that worked, apparently – it is really important to remember that Iran has a very long legacy that supports a culture of corruption. Thus, when it sought to do “work-arounds,” fell back, hard, on traditional habits.
Indeed, while the United States is number 16 on the Transparency International corruption list (one being the least corrupt), Iran is number 130 (out of 168 countries), and that is nothing short of terrible. How did those countries that we helped “liberate” do on the scale? Worse. Iraq chimes in at 161, and Afghanistan is near the very bottom at 166. Perhaps Iran will clean up, but it has dug itself into a really deep corruption hole.
I’m Peter Dekom, and sometimes those who scream religious purity the loudest have the vilest violation of morals and ethics to explain.