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The Pseudo-Parliament of Iran's Private Sector

by HAMID FAROKHNIA in Tehran

23 Feb 2011 01:39Comments
1_8912060664_L600.jpg[ analysis ] In the most important election to take place in Iran since the controversial June 2009 presidential contest, the leadership of the influential Iran Chamber of Commerce, Industry, and the Mines (ICCIM) and its Tehran affiliate, TCCIM, will be decided today by a nationwide poll of eligible chamber members. At issue is control over important levers of economic and political policy and a chance to redirect financial flows to favored sectors and industries. In addition, the outcome is expected to impact the political alignments among the various contending factions. Finally, the end result will shed light on the relative weight of the state and its emergent allied groups in the political economy.

Indicating the significance of today's poll, particularly for the Tehran chamber, elections will be broadcast live online from 8 a.m. to 6 p.m.

Seven separate candidate lists have been published representing various economic and business interests that range from powerful bazaar-based merchant groups to semi-state-owned concerns to nominally privatized monopolies to Revolutionary Guard-affiliated business entities, euphemistically called the "pseudo-state sector." (In fairness, one list does belong to the country's genuine private sector.)

While the bewildering interplay of economic, political, and factional interests make the job of predicting the election results an unenviable exercise in clairvoyance, insiders expect the following as a likely scenario: 10 to 15 seats (out of a total 60) may go to the actual private sector list; the old-line Traditionalists' grip will be further eroded; and the emergent "pseudo-state sector" will grab several key positions. It is a guessing game which two candidates will take the two top posts -- that is, the heads of the Iran and Tehran chambers. The 2007 ICCIM election is considered a watershed event for the organization. A close look at that contest helps clarify the politics behind this year's vote.

The Traditionalists' Last Stand

For 27 unbroken years -- up until the 2007 vote -- the Chamber of Commerce had been the exclusive preserve of the bazaar-based merchants belonging to the Motalefe Eslami. ICCIM Chairman Ali Naghi Khamoushi symbolized the stranglehold of Motalefe over the organization and what passed for Iran's private sector. Chamber elections were marked by threats, intimidation, gerrymandering, and illegal disqualifications.

In his years as ICCIM chairman, Khamoushi used all manner of strong-arm tactics to retain control over the organization. His king-making status became known when he revealed, in a pre-election statement, that the ICCIM had used its influence to push the government to reestablish ties with Mubarak's Egypt, Saudi Arabia, and Great Britain. The ICCIM also lobbied for the release of captured British sailors through joint British-Iranian commercial outfits controlled by Khamoushi.

This extraordinary power was based on the unique economic and social status that ICCIM came to occupy. For example, in 2007, an estimated US$67 billion in goods and services passed through the hands of the ICCIM's just over 3,200 members. In addition, by law, its chairman or one of his deputies can sit on and/or vote for several key financial and economic bodies, including the then-extant Money and Credit Bureau, the Stock Market Council, the Imports Council, and the Center Against Smuggling of Goods and Foreign Exchange.

In addition, once a week, Khamoushi would travel to the holy city of Mashhad to attend high-level meetings with religious leaders. Finally, through membership in the central committee of Motalefeh, Iran's sole national party, Khamoushi was able to exert enormous influence on the course of political and economic developments. For instance, parliament often invited him for consultation on particular bills since one of the parliamentary leaders happened to be a close associate.

Yet, these extraordinary powers and prerogatives amounted to very little when it came to assisting independent entrepreneurship in Iran. To give but one example, the administration of President Mahmoud Ahmadinejad has lifted or made wild adjustments to tariffs on several import items, but the ICCIM failed to come out in defense of independent, local producers. Wild fluctuations in tax and interest rates wreaked havoc with the private sector but the ICCIM did not so much as make a token protest to the government.

A cozy relationship

According to various experts, rather than being an indication of ineptitude or dereliction of duty, these shortcomings were in fact deliberate policy choices.

Khamoushi's tenure began right after the revolution through a special edict issued by the late Ayatollah Ruhollah Khomeini, who appointed him and six other Motalefeh leaders to the leadership of the ICCIM. Khomeini also gave custodianship of most expropriated properties -- amounting to several billion dollars -- to the Motalefeh. This was partly dictated by the exigencies of wartime and partly a payback for years of service to the ayatollah's cause. In the difficult years of anti-monarchical struggle, the secretive Motalefeh Eslami (Islamic Coaltion Society) had invariably provided crucial funding and a steady stream of cadres for the ayatollah's crusade against the Shah.

Virtually all Motalefeh militants hailed from the bazaar. The symbiotic ties between the two social groups -- the clergy and the influential bazaar merchants -- had historic antecedents. They had always constituted the two most important pillars of conservatism in Iranian society. Accordingly, after the revolution, economic policy was adjusted to reflect the composition of the new elite.

It is in this context that the ICCIM's first era should be judged, as the group was specifically created to serve the interest of the state by rewarding the supporters of the pro-revolution interest groups. It was no surprise that Khamoushi and his deputies always fought for preferential import licenses, for access to interest-free or cheap credit for their friends, or guaranteed market share for favored groups. Formerly head of the Mostazafin Foundation, he is still the chairman of three large textile companies owned by two religious centers and the CEO of Iran's Investments Company. He was long known to be ruthless in defending his turf and warding off potential intruders.

In the end, several factors worked toward his demise. First, after the accession of reformists, transparency forced a new approach to certain aspects of economic activity. What emerged was a new and younger crop of activists and entrepreneurs from the Revolutionary Guards and other institutions who gradually entered the scene clamoring for change in the distribution of resources.

Another factor was the long-term interests of the state, which forced the Supreme Leader, Ayatollah Ali Khamenei, on February 19, 2007, to demand changes in the country's economic policy.

Finally, Khamoushi's own hubris worked against him. The first crack in the monolithic power of the Motalefeh in the chamber appeared in 2003 when the reformist government of the president Mohammad Khatami forced Khamoushi to allow independent candidates from the private sector to compete in the ICCIM election.

A maverick businessman, Mohammad Reza Behzadian, won the chairmanship of the Tehran CCIM. Khamoushi staged a mini-coup against Behzadian and his friends by cutting off funds to their organization and changing the bylaws in favor of the national organization, which he chaired. He then waited until the departure of reformists from power in 2005 to have his sympathizers in the Oversight Committee oust Behzadian on a technicality. His replacement was a member of the country's high-powered National Security Council -- that handpicked replacement, Mohammad Nahavandian, is the man who has now ousted Khamoushi himself.

This was not a forgone conclusion. Khamoushi seemed to have overplayed his hand. As the elections for Tehran and provinces approached on February 21, 2007, Khamoushi had the Oversight Board disqualify all of his rivals including former National Security Council member Mohammad Nahavandian, who had the apparent support of the Ahmadinejad government, as well as all of the prominent independents and reformist candidates headed by Behzadian, who had had his earlier disqualification rescinded by a judge.

Nahavandian was no small fish. He was a trained economist with the requisite revolutionary pedigree. He had been a deputy trade minister and a special advisor to Ali Larijani, the former nuclear negotiator, who was then close to Khameini. At the time, Nahavandian was in good rapport with both the Ahmadinejad administration and former president Akbar Hashemi Rafsanjani. Furthermore, his membership in the National Security Council gave him an unrivaled base from which to maneuver.

A judicial court overruled the disqualifications and returned all the dismissed candidates to the election process. In the ensuing election, the independents took most of the seats, and Behzadian won the greatest number of votes. The drama unfolded further as Behzadian's credentials were again dismissed on a technicality, this time with no higher court intervening.

The final fight for the leadership of the ICCIM saw three candidates preparing for a showdown: Nahavandian, representing the government; Khamoushi representing the traditionalist clergy-bazaar nexus; and former presidential candidate Mohsen Mehralizadeh, represnting the independents. A secret agreement between the government and the independents led to the withdrawal of Mehralizadeh at the eleventh hour. The competition was tight and the outcome entirely uncertain. Of the 305 votes cast, Khamoushi lost by a mere 27. Observers noted wryly that had Khamoushi allowed Behzadian to run, the split independent-government vote would have enabled Khamoushi to win with little difficulty. While most of the business community and its supporters exhaled a collective sigh of relief over Khamoushi's ouster, few were rightly willing to predict a golden age of capitalist renewal for Iran. Khamoushi cronies retained the majorities in both the national and Tehran chambers, as well as many of the provincial ones. But the economy was undergoing significant transformations. For one thing, according to the new privatization law -- known as Article 44 -- huge chunks of the public sector became accessible to new economic entrants.

Hamid Farokhnia is a staff writer at Iran Labor Report and covers the capital for Tehran Bureau.

Copyright © 2011 Tehran Bureau

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