Teaching Comparative Government and Politics

Friday, November 15, 2013

Super Bonyad

In Iran, the bonyads are officially charitable trusts. They were created to take possession of the property "abandoned" by Iranians who left the country because of the overthrow of the Shah. The bonyads were to use their confiscated wealth to support those in need, especially those who suffered because of the Iran-Iraq war. Today, the bonyads may control 20% of the Iranian economy outside the oil industry. They are officially run by clerics who rely on technocrats for management. The bonyads pay no taxes and do not have to publicly account for their activities.

In 1989, after that initial round of property seizures, the original supreme leader, Khomeini, created Setad Ejraiye Farmane Hazrate Emam – Headquarters for Executing the Order of the Imam. It was to continue the "work" of the bonyads under the office of the Supreme Leader.

Reuters news agency is in the process of publishing a three-part investigation of Setad… and the first report offers some insights into the governing of Iran. Look for the subsequent reports.

Khamenei controls massive financial empire built on property seizures

The Persian name of the organization… 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…

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…

Just one person controls that economic empire – Khamenei…

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.

A six-month Reuters investigation has found that Setad built its empire on the systematic seizure of thousands of properties belonging to ordinary Iranians: members of religious minorities… as well as Shi'ite Muslims, business people and Iranians living abroad…

Khamenei's grip on Iran's politics and its military forces has been apparent for years. The investigation into Setad shows that there is a third dimension to his power: economic might. The revenue stream generated by Setad helps explain why Khamenei has not only held on for 24 years but also in some ways has more control than even his revered predecessor. Setad gives him the financial means to operate independently of parliament and the national budget, insulating him from Iran's messy factional infighting…

Under Khamenei's control, Setad began acquiring property for itself, and kept much of the funds rather than simply redistributing them. With those revenues, the organization also helps to fund the ultimate seat of power in Iran, the Beite Rahbar, or Leader's House… To run the country today, Khamenei employs about 500 people in his administrative offices, many recruited from the military and security services.

A complete picture of Setad's spending and income isn't possible. Its books are off limits even to Iran's legislative branch…

Reuters has put together the fullest account yet of the organization's holdings. They include a giant property portfolio and an investment unit worth tens of billions of dollars…