Iran's Revolutionary Guard is notorious in the West as the troublemaking arm of the Islamic Republic, accused of supporting Hizballah and other militant groups, destabilizing the Iraqi government, and nurturing a covert nuclear weapons program. Inside Iran itself, however, the image of the Guards is more that of an economic powerhouse, with more influence and assets than even the Tehran bazaar, the institution whose cash has traditionally helped drive the country's politics.
To conservative supporters, the Guard's economic clout is neither new nor troublesome. Iran's constitution authorizes the military to play a peacetime economic role, and with the extensive engineering resources it amassed during the eight-year war with Iraq, it is only fitting, the thinking goes, for the Guard to run a vast financial empire reputedly worth billions of dollars. But to reformists, the Guard is to blame for the poor performance of Iran's economy, as well as its tattered relations with the international community. "There are elements within the IRGC [the acronym for the Islamic Revolutionary Guard Corps] that operate like a private mafia and benefit from Iran's isolated status," says Karim Sadjadpour of the Carnegie Endowment for International Peace. "That's why they do their very best to torpedo efforts to improve Iran's relations with the West."
The expanding economic influence of the Guard helps explain Washington's reported plan to name them a "specially designated global terrorist" organization. The designation would would enable the Bush Administration to press European corporations and banks to curb business activities in Iran, so as not to run afoul of U.S. banking regulations. Though European allies have been reluctant to accede to Washington's demands for sanctions, the limited measures adopted thus far have, nonetheless, made a dent in the Iranian economy, affecting both imports and domestic manufacturing, according to Iranian businessmen and analysts.
The IRGC's economic activities have expanded most significantly in the past five to six years. Originally created in 1979 as a parallel military to prevent the traditional armed forces from mounting a coup against the new regime, the Guard developed its assets and engineering capability during the Iran-Iraq War, growing into a 150,000-strong force that defended the country's borders with selflessness and revolutionary zeal.
After the war, the IRGC's resources were directed toward reconstruction activities, partly as a way of absorbing the energies of the tens of thousands of ideologically committed veterans returning from the front, preventing any disruptive political activism. Because the Guard reports to Supreme Leader Ayatullah Ali Khamenei, the bulk of its activities are not subject to parliamentary oversight. This free hand, along with their mandate to patrol the country's borders, has helped members engage in widespread smuggling, according to Iranian analysts. Some of the goods that are smuggled in, such as alcohol, do little harm to the formal economy, as they are illegal and produced domestically only on a small, illicit scale. More problematic is the large-scale smuggling of more ordinary goods, which enter the country without tariffs, flooding the market with cheaper versions of products produced at considerably higher cost by domestic manufacturers, spurring resentment among domestic industrialists.
Since around 2000, the IRGC's hand has extended into new and far more lucrative sectors of the economy. Most significantly, it has been awarded billions of dollars in contracts in the oil, gas and petrochemical industries, as well as major infrastructure projects. The government awards some of the no-bid contracts directly to the Guard's engineering arm, Khatam Al-Anbia. Other times, the link is more indirect: "Sometimes you see newly established firms, indirectly owned by IRGC members, receiving the contracts," says a director of a major engineering firm on condition of anonymity.
Today, many of the firms that would once have been awarded government contracts are working as subcontractors to Guard-owned enterprises. In 2006 alone, Khatam Al-Anbia received a $2.09 billion contract to develop phases of a natural gas field known as South Pars, as well as a $1.2 billion contract to build a line of the Tehran metro, and a $1.3 billion contract to build a pipeline linking Iran to Pakistan.
The wealth accrued by high-ranking members of the IRGC by such contracts has raised concerns within the Iranian establishment, chiefly because it threatens to provoke the resentment of the organization's young, working-class rank and file. In 2001, three-quarters of Guard members voted for moderate President Mohammad Khatami, suggesting its majority have more in common with ordinary Iranians chafing under a poor economy, than with the hard-line newly rich leadership clique. In working-class districts of south Tehran, the discrepancy is visible among members of the Basij, a voluntary paramilitary organization that overlaps with the IRGC's membership. The sons of some elite IRGC commanders carry the latest mobile phones, attend top universities, and are as Internet savvy as teenagers in the West. The foot soldiers of the Basij, in contrast, often cobble together work as motorcycle messengers in the smoggy avenues around the Tehran bazaar, earning close to nothing.
Some analysts say the growing activities of the IRGC's engineering arm reflect an effort by the government of President Mahmoud Ahmadinejad to extend the economic privileges within the Guard's lower ranks. "That the President owed his election to Basij support naturally supported this trend," says Farideh Farhi, an Iran expert and professor at the University of Hawaii.