The economic empire behind Iran’s supreme leader

Part One: A Reuters investigation details a key to the supreme leader’s power: a little-known organization created to help the poor that morphed into a business juggernaut worth tens of billions of dollars.

The 82-year-old Iranian woman keeps the documents that upended her life in an old suitcase near her bed. She removes them carefully and peers at the tiny Persian script.

There’s the court order authorizing the takeover of her children’s three Tehran apartments in a multi-story building the family had owned for years. There’s the letter announcing the sale of one of the units. And there’s the notice demanding she pay rent on her own apartment on the top floor.

Pari Vahdat-e-Hagh ultimately lost her property. It was taken by an organization that is controlled by the most powerful man in Iran: Supreme Leader Ayatollah Ali Khamenei. She now lives alone in a cramped, three-room apartment in Europe, thousands of miles from Tehran.

The Persian name of the organization that hounded her for years is “Setad Ejraiye Farmane Hazrate Emam” – Headquarters for Executing the Order of the Imam. The name refers to an edict signed by the Islamic Republic’s first leader, Ayatollah Ruhollah Khomeini, shortly before his death in 1989. His order spawned a new entity to manage and sell properties abandoned in the chaotic years after the 1979 Islamic Revolution.

Setad has become one of the most powerful organizations in Iran, though many Iranians, and the wider world, know very little about it. In the past six years, it has morphed into a business juggernaut that now holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.

The organization’s total worth is difficult to pinpoint because of the secrecy of its accounts. But Setad’s holdings of real estate, corporate stakes and other assets total about $95 billion, Reuters has calculated. That estimate is based on an analysis of statements by Setad officials, data from the Tehran Stock Exchange and company websites, and information from the U.S. Treasury Department.

Just one person controls that economic empire – Khamenei. As Iran’s top cleric, he has the final say on all governmental matters. His purview includes his nation’s controversial nuclear program, which was the subject of intense negotiations between Iranian and international diplomats in Geneva that ended Sunday without an agreement. It is Khamenei who will set Iran’s course in the nuclear talks and other recent efforts by the new president, Hassan Rouhani, to improve relations with Washington.

The supreme leader’s acolytes praise his spartan lifestyle, and point to his modest wardrobe and a threadbare carpet in his Tehran home. Reuters found no evidence that Khamenei is tapping Setad to enrich himself.

But Setad has empowered him. Through Setad, Khamenei has at his disposal financial resources whose value rivals the holdings of the shah, the Western-backed monarch who was overthrown in 1979. [Continue reading…]

Part Two: Even as Setad was gaining ever-greater control over the Iranian economy in recent years, the Western powers knew of the organization and its connection to the supreme leader – the one man with the power to halt Tehran’s uranium-enrichment program. But they moved cautiously, and Setad largely escaped foreign pressure.

In July 2010, the European Union included Mohammad Mokhber, president of Setad, in a list of individuals and entities it was sanctioning for alleged involvement in “nuclear or ballistic missiles activities.” Two years later, it removed him from the list.

In June, the U.S. Treasury Department added Setad and 37 companies it “oversees” to its list of sanctioned entities. Khamenei wasn’t named in the announcement, but a Treasury official later told a Senate committee that Setad is controlled by the supreme leader’s office.

Asked why Khamenei himself wasn’t targeted, U.S. officials told Reuters they did not want to play into the hands of Iranian officials who maintain that Washington’s ultimate goal in pressuring Iran with sanctions is to topple the government.

“Regime change is not our policy,” said one U.S. official. “But putting pressure on this regime certainly is.”

By the time Setad felt the pressure, it was already a giant. [Continue reading…]

Part Three: Mohammad Reza Pahlavi [the Shah of Iran], the former king, inherited his fortune from his father, who enriched himself in the first half of the 20th century by expropriating vast amounts of land from his subjects. In October 2010, Khamenei invoked that memory in a speech.

“Our people were living under the pressure of corrupt, tyrannical and greedy governments for many years,” Khamenei told officials in the clerical city of Qom, according to an English-language transcript on his official website. The shah’s father “grabbed the ownership of any developed piece of land in all parts of the country…. They accumulated wealth. They accumulated property. They accumulated jewelry for themselves.”

The Islamic Revolution promised Iranians a new era of justice, governed strictly in accordance with sharia, Islamic law. Khomeini outlined a “Velayat-e Faqih,” or Guardianship of the Jurist – a government ruled by a cleric who spurns personal wealth, values the law above all else and rigorously submits himself to it.

“Islamic government … is not a tyranny, where the head of state can deal arbitrarily with the property and lives of the people, making use of them as he wills,” Khomeini wrote in a 1970 book.

Iranian attorneys who have battled Setad say the governments under Khamenei’s watch have not lived up to those ideals. Instead, they allege, the government makes aggressive use of the law to take property from citizens – in particular, Article 49 of the Iranian constitution, which provides for seizing illicit assets from criminals.

“It is a very powerful tool,” said Mohammad Nayyeri, a Britain-based lawyer who worked on several property confiscation cases involving Setad before leaving Iran in 2010. “It opens the door to corruption. There is no limitation. The private ownership and private life of people are not respected.”

Setad has emerged as a mainstay for Khamenei. It provides an independent source of revenue to finance his rule even as years of sanctions imposed by the West have squeezed Iran’s economy hard. The story of how he used the law to build up Setad is central to understanding how he has managed in some ways to gain even more power than his predecessor. [Continue reading…]

Print Friendly, PDF & Email