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Bolstering the Regime Through Sanctions

The Wall Street Journalreports on how the IRGC is filling the void created by the loss of foreign investment that has resulted from the Trump administration’s economic war:

As the newly installed chief of Khatam al-Anbiya Construction Base, the engineering arm of the Islamic Revolutionary Guard Corps, the country’s ideologically rooted military unit, Mr. Mohammed is seeking to cushion the impact from an unprecedented array of U.S. sanctions. The 50-year-old chief executive made his name courting Iranian consumers through swanky malls, restaurants and golf resorts for another Revolutionary Guard firm. Now he is trying to mobilize Khatam, the crown jewel of the Guard’s $28 billion business empire, to help stabilize a teetering economy and plug gaps in projects left by skittish foreign investors.

“The sanctions are an opportunity for us,” Mr. Mohammed said in a rare interview in Tehran. “We have managed to fill the void left by foreign companies.”

Sanctions have been suffocating the civilian population, but they have strengthened regime loyalists within Iran as they take over a larger share of the shrinking economy. It is one of the many absurdities of Trump’s Iran policy that an economic war that is supposed to undermine the regime has actually bolstered it. U.S. policy has made the Iranian government stronger at home as the government’s domestic opponents are impoverished and starved by sanctions.

We have seen in other reports how the IRGC has taken advantage of the economic war to make money through smuggling. Recently, Narges Bajoghli explained how the IRGC has also positioned itself to exploit the “maximum pressure” campaign to rally the population to the government’s side through appeals to nationalism. Here we see how the damage done by sanctions gives the IRGC an opening to expand its economic power inside Iran as outside investment has dried up:

Mr. Mohammed sees the Guard working with private companies to rescue Iran’s distressed economy as foreign investors pull back: “Like prayer beads,” he said, “where the beads are private companies and we are the string holding them together.”

In a twist, Washington’s efforts to isolate the Islamic Republic have undermined President Hassan Rouhani’s own push to curb the Guard’s power inside Iran. Since taking office in 2013, Mr. Rouhani’s administration encouraged foreign and domestic investors to expand in the transport and oil industry, where the Guard has stakes. But when the U.S. pulled out of the nuclear deal and reimposed sanctions, foreign investors left and Iran’s private sector suffered, leaving an opening for the Guard to expand its economic footprint.

The article describes this as a “twist,” but it is a fairly straightforward and predictable result of the sanctions. The IRGC took advantage of the pre-JCPOA sanctions regime, so it should come as no surprise that they are also benefiting under the current one. Given the IRGC’s already substantial stake in the Iranian economy, they have been well-positioned to increase their power as the sanctions wreak havoc on the overall economy. The result is an Iran with more economic power concentrated in the hands of regime hard-liners than there was before.

One of the reporters that wrote the article summed things up this way earlier this week:

about the author

Daniel Larison is a senior editor at TAC, where he also keeps a solo blog. He has been published in the New York Times Book Review, Dallas Morning News, World Politics Review, Politico Magazine, Orthodox Life, Front Porch Republic, The American Scene, and Culture11, and was a columnist for The Week. He holds a PhD in history from the University of Chicago, and resides in Lancaster, PA. Follow him on Twitter.

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