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Reading RAND in Tehran


26 Oct 2009 13:1123 Comments

File_25384_56257.jpgDid anyone actually read this thing?

[ analysis ]
After two postponements and much controversy, a 50% plus one share of the state-owned Iranian Telecommunications Company was sold via Tehran's Stock Exchange on September 27, 2009. Three different consortiums had been approved by the Privatization Council to bid on the shares. The winning bidder was to pay 20% of the block of shares immediately in cash, and the remaining 80% would be paid to the government in installments over eight years along with interest -- a very sweet deal. A day before the trade occurred, one of the three consortiums, "Pishgaman-e Kavir-e Yazd," was barred from participating on grounds of "lack of security qualifications." This left the "Mehr-e Eqtesad" and "E'temad-e Mobin" consortiums as the remaining two bidders, with the latter group successfully taking the bid. The shares, bought for the amount of $7.9 billion, made E'temad-e Mobin the majority shareholder in the largest listed company on Iran's Stock Exchange.

Protest immediately erupted in Iranian media over the question of alleged links between the E'temad-e Mobin consortium and the Iranian Revolutionary Guards Corps (IRGC). Modarres Khiabani (no relation), director of E'temad-e Mobin, told reporters after the sale, "the purchase of the Iran Telecom shares was not by IRGC sources, and this consortium has no connection with this organ and its own financial resources have been guaranteed by other areas." Speaker of the Parliament and former IRGC member Ali Larijani agreed, denying that the IRGC was involved in the deal. Instead, he said, confirming everyone's suspicions, that "IRGC cooperatives" were involved with the consortium. Reformist newspapers such as Aftab-e Yazd and Mardom Salari howled that this was a breach of the spirit of Article 44 of the Constitution, which had been amended in order to allow for privatization of state companies to the private sector. The conservative newspaper Jomhuri-ye Eslami, which frequently criticizes President Ahmadinejad for perceived incompetence, lamented the sale as one more defeat for the Iranian private sector. Javan, on the other hand, robustly defended the sale, arguing that a consortium consisting of "non-governmental organizations" -- organizations that may be affiliated with government activities but are officially independent and autonomous -- is perfectly eligible under the current language of Article 44 to take part in the transfer of state-owned assets. Furthermore, it pointed out that the process of privatization across the world has often included retirement pension funds, social welfare organizations, and many non-profit investment consortiums. The editorial line of Javan, to no surprise, is closely associated with IRGC views.

The overall result was a vigorous debate over how to interpret and shape the gradual process of privatization in Iran, and Parliament has promised to investigate the deal as well as look into a revision of Article 44's text. Yet this debate should not surprise followers of Iran's economy, as I wrote in a previous article for Tehran Bureau. What alarmed many, though, was the fact that the sale symbolized an increased role of the IRGC (also known in Iran as Pasdaran or Sepah) in the economy to go along with its increased role in Iran's politics. The trickle of news about this development in English-speaking media, in such grey institutions as the New York Times and TIME magazine, all point to a single source as overwhelming proof of this menacing and chilling development: the 2009 RAND report The Rise of the Pasdaran.

There is a (definitely apocryphal) story that, in the 1950s, the RAND Corporation predicted there would be five computers in the year 2000. A more accurate and less humorous story about RAND is that they were responsible for applying game theory to US-Soviet relations during the Cold War, and thus came up with the soul-crushing idea of mutually assured destruction as a rational foreign policy. Since the end of the Evil Empire, RAND has branched out into various research fields -- of course the obligatory work on terrorism and the "rogue" regimes of the day, but that's to pay the bills for skyrocketing DC office real estate prices. To its credit, RAND also put out a very damning report on the futility of the US' "War on Drugs" which was rapidly ignored by the recent Bush administration. So they have a maverick streak.

After reading the report on the IRGC, I seriously wondered if the big time journalists who cited it in their reportage were handed the same RAND document as me (if those journalists are reading this, check and make sure your copy has 129 pages like mine). When they wrote their articles, the IRGC was portrayed as "mafia-like," "isolationist," "firebrand," "radical," "monolithic," and that it was running the Islamic Republic of Iran behind everyone's back. Throw in a couple of quotes from Iranian dissidents in the West, and the article heads to the presses, nicely confirming what everyone already suspected about the somehow cynical yet irrational elites of Iran. The NYT piece ended up "below the fold" on page one, always a good sign that the editors think the article will buttress the wispy common sense of US policy makers.

Permit me a few lines of your time to just quote some of the main findings of this RAND report:

* ...the IRGC's power is ultimately circumscribed by the system of checks and balances inherent in the Iranian political system, as well as factional disputes that both surround and permeate the institution and its network of veterans.

* The commercialization of the IRGC has the potential to broaden the circle of its popular support by co-opting existing financial elites into its constellation of subsidiary companies and subcontractors. Similarly, through the socialization and recruitment of rural and lower-class populations into the Basij -- frequently accompanied by technical job training, scholarships, and other financial benefits -- the IRGC offers the promise of societal mobility to those who would otherwise be denied it.

* Instead of acting as a unified factional force itself, the IRGC can be better conceived as an institution over which the various ideological factions may compete for control and influence. This is consistent with the broader processes at work in the Islamic Republic of Iran.

* ... other security organs are staffed by ex-IRGC officers. Yet it does not follow automatically that these individuals continue to act in lockstep with the corporate interests of the IRGC -- office-holding tends to generate its own specific set of imperatives and priorities that can challenge or even completely offset the powerful social bonds created by shared war experiences or military indoctrination. ...the ascent of IRGC leaders to civilian office may not be as deleterious as many have thought, as it appears that it can lead to moderating the more extreme ideological and corporatist views of at least some IRGC veterans.

And, lastly, the opening paragraph of its conclusion:

* Rather than framing the IRGC as a purely military organization marked by mafia-type economic tendencies and a homogeneous ideological outlook, this monograph has surveyed its broad-ranging roles in Iranian society and its emerging internal divisions. Our analysis underscores that the twin poles of commonly held assumptions about the IRGC are both incorrect. The IRGC is neither a corrupt gang nor is it a firebrand revolutionary vanguard with the aim of exporting Iran's revolution across the region. Rather, its vested and increasing interests in the country's economy make it an increasingly conservative force rather than a radical one.

The ironic postscript to this report is that RAND is specifically writing this for the US Department of Defense as a strategic document. It is not a scholarly investigation to understand how Iran actually works, but is explicitly written as an instrument for US foreign policy. Yet its findings are completely ignored, even by the journalists who cite it!

This cuts deeper than simply an easy potshot at globetrotting journalists. For its entire existence, the Islamic Republic of Iran has been portrayed by the US as devoid of internal politics, and eagerly affirmed as such by the most vocal segments of Iran's diaspora (both left and right). Predictably, this results in slackjawed surprise whenever Iran upends the common wisdom, as it often does. Then a scramble ensues to "understand" Iran, mostly through the usual binaries, and ends up vindicating the preexisting assumptions. This repeats every four years or so. Even with the recent election crisis and the largest demonstrations since 1979, which represented significant shifts in Iran's politics, one cannot dismiss the last 30 years of Iranian history while trying to fathom the present.

Of course, this is not to say that IRGC's creeping involvement in the economy is entirely benevolent. All one needs to do is listen to opposition politicians in Iran to hear the other side of the debate. But first one must realize there exists a debate, one that has historical roots, and that it can be comprehended.

The IRGC puts forth a very reasonable argument for its presence in the economy: middle-income countries cannot generate a private sector that can handle major infrastructure and development projects, and therefore the IRGC must help to contract out these projects using its expertise and manpower in order to achieve Iran's development goals. This is exactly what the Shah said when he was asked about state direction in the economy during the 1960s, and can also be found in any development economics textbook. Private sectors in middle-income countries mostly engage in speculation and commercial trade. If you want to see the main results of Iran's private sector over the last twenty years, look at Tehran's skyline.

The opposition to this position, which is quite fierce and split among many different political factions, argues that by engaging in these economic activities (as well as the more nefarious smuggling operations the IRGC is rumored to have -- but these remain rumors even in the RAND report), government and quasi-government intervention in the economy "crowds out" the private sector from investing productively. Government-linked firms have not only the economic scale to outcompete any newcomer to the Iranian market, but they also possess the political connections to get easier loans, faster licenses, and bend the ear of the government to keep their monopoly positions.

This is a complex debate, and is made trickier since the positions are embedded within the political aspirations of the Islamic Republic's factions. Thus, Mousavi and Karroubi scorned the telecom deal in a recent public meeting, but this needs to be read as a political move, especially from two gentlemen who were instrumental in the nationalization of the Iranian economy after the 1979 Revolution.

The RAND report makes some useful comparisons to Pakistan and China, two countries that also have histories of military intervention in the economy. One could add Turkey, Indonesia, Brazil, Chile, and Egypt, to name a few. These are the kinds of comparisons that are necessary in order to understand Iran, no matter where one's politics lie, since they allow us to see the possible long-term outcomes of Iran's social and political patterns. If one's only strategy is to screech incessantly about totalitarianism and expect this to generate results, well, you're probably not reading this by now anyway.

One should add one more country for comparison. Iran spends between 2 to 3% of its GDP on the military. US spending on its military hovers around 4% of its (much larger) GDP. Like Iran, the US has its own weapons industry, defense contractors, think tanks, teeth-gnashing generals, and flag waving politicians. As a result, the US economy is extremely dependent on the military and its affiliated consortiums. Indeed, small arms exports, weapon information systems, and various boondoggles associated with "securing the homeland" are some of the few growth markets in the US right now, aside from Goldman Sachs. Imagine a major politician in the US opposing this kind of quasi-governmental nexus, even though it is so rife with backroom deals that it makes Third World corruption look like a little league game. I hope I am not the only one who can see the irony in a RAND corporation report on a possibly nascent Iranian military-industrial complex. The RAND corporation, by the way, though it gets most of its funding from the US Defense Department, and does most of its work for the US Defense Department, considers itself a non-governmental organization.

Many in Iran are genuinely worried that an increased military role in the economy would damage prospects for future democratic reform. But maybe they are overreacting. Perhaps, here in Iran, we could learn something from the citizens of the United States, including the Iranians who live there. So, please tell us: What has it been like living in a bona fide militarized economy for the past fifty years?

Copyright © 2009 Tehran Bureau

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Try Roger Stern's paper, Oil and the Iranian Revolution. It was written a few years ago but the Dems took notice of it.


Anonymous / October 26, 2009 7:12 PM

"Iran spends between 2 to 3% of its GDP on the military"

Is this figure before or after the 30 billion dollars "lost" from Ahmadinejad-era oil revenues?

Amir / October 26, 2009 8:05 PM

Yes I did, sorry I didn't comment, but I found it very informative! :(

Tricia Neda Sutherland / October 26, 2009 10:37 PM

Khiabani, you're boxing in the dark. What journalists cited this report? Are you talking about a couple wire reporters. Get real, dude. You're full of it.

Phil R / October 26, 2009 10:55 PM

@ Phil

He's right, based on most descriptions of the IRGC, I always believed them to be a "mega-corporation/ parallel army" that is doing a takeover (political & economical) of the IRI.

The journalist cited is NYT's Michal Slackman

I havent read the report, but I wonder if RAND took the missing $30b into account - popular wisdom has it that IRGC has deep ties to Iran's so-called "oil mafia"

Amir / October 27, 2009 1:09 AM

Tehran Bureau, this piece qualifies as a more balanced approach to editorial content. Thank you for publishing it.

I would just add that many Iran analysts and journalists haven't even bothered to cite the RAND report, such as Reza Aslan and Karim Sadjadpour, in their blanket condemnations of the IRGC. (How would the vast majority of Americans react to a high-profile journalist or analyst's absolute condemnation of the Pentagon, DOD and Marine Corps- simply on the basis of being a military industrial complex? They'd be dismissed as an anti-American radical kook!)

Khiabani's conclusion is both humorous and appropriate.

Please, let's hear more perspectives from Khiabani in Tehran, and a little less opinion pieces from dissidents in exile. Aim to get the balance right.

Pirouz / October 27, 2009 2:31 AM

Gentlemen, the $30 billion dollar accusation needs to be explained. You contend the IRGC has pocketed it. Well, what have they done with it? It sure doesn't appear to be spent on modern weapons procurement. They're still using existing stocks of T-55s, T-72s, Su-25s, AK-47's etc. The ballistic missile program? Maybe, but $30 billion would provide a lot more than even the highest of credible Western estimates. Is it being pocketed by the IRGC elite? Doesn't appear that Najjar, Safavi, Jafari, Vahidi and company are lapping it up in a life of luxury. Heck, they don't even wear service dress uniforms.

So maybe the IRGC hasn't pocketed the $30 billion you're talking about? Or if it has, maybe its just been diverted back into the country? An element of grand strategy, perhaps?

Well? It's your contention. An elaboration would be appreciated.

Pirouz / October 27, 2009 5:33 AM

Pirouz, you crack me up.
But I agree with you for the most part.
Why don't you send a request to Mr. Seyed Mohammad Marandi to write something?
It seems he loves to talk.
You could then ask Tehran Bureau if they would be willing to run it. Or publish it on your blog if they don't.
I think he's the only pro-government spokesperson who knows decent English.

Pedestrian / October 27, 2009 5:53 AM

Answer to last question - Quite honestly 'nasty' except they do keep the economy going and you can just about do anything except actively work to 'overthrow' the system apart from a few mavericks who are tolerated for they are no real threat to the system. Most of the public are too preoccupied with parochial and economic issues or making and spending money. 85% of the Iranian electorate turned out whereas only 50 odd % voted for Obama and there is where the possibility of change lies. Change is inevitable, the only question is when, how and what.

rezvan / October 27, 2009 3:15 PM

Answer to last question - Quite honestly 'nasty' except they do keep the economy going and you can just about do anything except actively work to 'overthrow' the system apart from a few mavericks who are tolerated for they are no real threat to the system. Most of the public are too preoccupied with parochial and economic issues or making and spending money. 85% of the Iranian electorate turned out whereas only 50 odd % voted for Obama and there is where the possibility of change lies. Change is inevitable, the only question is when, how and what.

rezvan / October 27, 2009 3:16 PM

Rezvan - "Quite honestly 'nasty' except they do keep the economy going". Do they keep the trains running on time as well?

Michael Ricks / October 27, 2009 5:39 PM

Well Ped, as you know from my comments on your fine blog, I really don't qualify as an Iranian "conservative". Besides, I did vote green in the last election.

But yes, I think you've an excellent suggestion. Tehran Bureau could publish something from Seyed Mohammad Marandi. He was interviewed on CNN. Let's hear what he has to say.

The idea is encouraged discussion. And to keep an open mind. The vast majority of us are, after all, many thousands of miles away from where the action is taking place. Getting as many divergent views as possible is the best way of figuring all this out.

Pirouz / October 27, 2009 9:20 PM

Whatever happened to the $18.5b in cash and gold that was said to have been transferred from Iran to Turkey in October 2008? As soon as the news leaked in August 2009, both Turkish and Iranian officials dismissed the claims. But, Senol Ozel, Mr. Safarian-Nasab’s Turkish lawyer, insisted that his client wants to withdraw his investment from Turkey and wants his money back. I wonder where the money came from...!?


Iman / October 28, 2009 12:33 PM

pirouz is an iri apologist - ignore him

Agha Irani / October 28, 2009 1:06 PM

Piruz - it seems you live in exile yourself, because if you have even briefly visited Tehran these past four years, you'd see the luxury and wealth that Sepah top dogs flount publicly - or at least their children do, driving off from their Elahieh penthouses in flashy BMWs. Dont tell me that missing 30 billion didnt line the pockets of a good many of this sudden new caste of 'overnight millionaires.'

Amir / October 29, 2009 5:05 AM

Comparisons between Iran and places like the United States where eventually every decision must be ratified by Congress is ludicrous. Rand organization, whatever its association with Pentagon (if at all), is one among a dozen other "think tanks" that produces reports to be debated and specifically to help policy makers (Government and Congress) to do a better job.

From its inception IRGC has successfully managed to control much of the military industry. They have always had China (not other countries the author mentions) as a model to follow. The problem with IRGC is that they appear and insist their mission as godly, inspired by divinity. If they bring God into equation to simply appeal to the religious and if the Islamic regime lasts long enough they may similarly succeed as the children of Chinese Generals have done. But I fear the ideologies are so different that no comparison with China is any good either. In China, other Chinese, not just the children of the Generals or top Communist functionaries are in the game. Every talented Chinese from within or without China is given enough opportunity (and none are required to declare allegiance to Communism) to succeed; not so in the case of Iran. In fact most of the talented Iranians are barred because they don't subscribe to their hypocrisy.

When I finished reading the article; it was difficult to know where exactly the writer stood and what his point was. Like Mullah writers, he can claim anything and be on the side of any argument. To tell you the truth it is so much like the Holy Books, you can argue any way you want; for peace, for war, for kindness, for harshness and other opposites.

Anonymous / October 29, 2009 5:14 AM

Amir-jan, so you have acquaintances in the IRGC? Tell me, specifically what are the ranks and divisions of these IRGC whose children drive around in BMW's and live in the comfort of Elahieh penthouses? Do you know them personally? I'm genuinely interested to know. I really am.

Anonymous, I think a case could be made that Iran is actually loosely following the Israeli model, pre '67, where self-sufficiency in arms production was deemed a priority. Of course, subsequent Zionist successes in corralling US ME foreign policy rendered this effort almost completely unnecessary, and now Israel has become a focused arms exporter. You'll excuse Iran for being twenty to thirty years behind in the game.

Also, are you actually telling me young anti-communist Chinese are given equal opportunities in China? Or that a talented outspoken anti-American person is readily provided opportunities in the USA? Or are you saying that it's okay to be anti-American in the US as long as you're quiet about it? Or somehow neutral? What exactly are you trying to say?

BTW: At my California university job, I was formally REQUIRED to state and sign an oath of allegiance. So you see, you'll find some form of allegiance issues everywhere you look.

Pirouz / October 29, 2009 8:49 AM

Wh is Mr. Khiabani? Official spokesperson for the IRI? Who did Rand corporation consulted when producing this report? Mr. Khiabani,,,eh? LOL

sdf / October 31, 2009 9:20 PM

I had heard that the regime was going to take the struggle to the blogosphere. Forget about any comparisons with any other regime in any other country in any other time. Question? What is the IRGC? It is a paramilitary,economic, security force ultimately directed by the Supreme leader ('the godfather') whose methods are coercive,violent(at times)and in the end not very businesslike ( not business as most of the world would recognise it ). The closest parrallels are not with the Chinese Red Army ( since Iran seems to have a regular army with a fairly low profile) but with two historical entities that have had a devastating impact the KGB and the Sicilian Mafia.
They are not a halfwayhouse to a buoyant,varied, thriving economy. The "Velvet Revolution" in Czechslovakia was aimed at Soviet KGB repression of the terrorised citizenship.
It was an IRGC wag who first introduced that famous adjective "Velvet". They want the rough not the smooth. In terms of killing power or numbers of victims they will never match the KGB and their gulags but they are evolving in a similiar way. They also resemble the Burmese military junta. Why not build a new capital well away from Tehran and sod the people? IRGC stragetists playing regional Texas hold'em don't have an ace in the hole.They only have a gun to their own peoples heads.Drop your gun ,they bravely cry to the world or the baby gets it . Thats their game.

d pirooz / November 1, 2009 12:05 PM

Thanks a lot Mr Khibani... This indeed a very smart article of yours picturing a diverse viewpoints and coming out with such a balanced viewpoint ...

"If one's only strategy is to screech incessantly about totalitarianism and expect this to generate results, well, you're probably not reading this by now anyway". that is to the point... because as i have been keeping close eye to the english-speaking media, and the tendancies of the allagedly IRGC role in the economy, the Howkish punits were talking about "totalitarianism", Militry-industrial complex' the role of IRGC in the Iranian Economy...without even asking and analysing the reasons behind this..

The second Paragraph that i would like to request futher analsis from Khaibani is this "Thus, Mousavi and Karroubi scorned the telecom deal in a recent public meeting, but this needs to be read as a political move, especially from two gentlemen who were instrumental in the nationalization of the Iranian economy after the 1979 Revolution".

this doesnt make sense as far as hap-hazard foreign-policy struggles to find its way to engage iran is hijacked by the powerfull Loppy(AIPAC) that controls Militry-Media-Politics-economy-think thanks-Complex .. Make non- sense... Even Mohamed Sahimi- who assumes the intellectual voice of the EXILES stopped his yawning to "Allahu Akbar"...

finally, i am well up to date with the Privatization process now days in Iran, but as an "informed writer could you say more on the Trends of Nationalization in post-79 revolution.


abdikadir / November 2, 2009 9:18 PM


This article could have been much improved if the author actually understood Rand's relationship to its sponsors in the Department of Defense. Further, you cannot separate Rand's products from its authors--the researchers that write and edit reports such as that discussed above. Thus, one cannot draw an easy connection between Rand's various past studies with its study on the Pasdaran (unless the authors of the latter also worked on those earlier reports). Institutional inertia certainly exists, but it did not produce the Pasdaran study. Finally, I found this sentence particularly rich: "Of course, this is not to say that IRGC's creeping involvement in the economy is entirely benevolent." The Rand study has a number of problems; however, this article nearly misses them all.

Zamin / December 11, 2009 7:43 PM

havents read yet.!!!

Anonymous / May 4, 2010 11:59 PM

very interesting - what is this worldwide fascination with selling off government assets.
they did it here in Cairns Australia too Our electrivcity suppliers were sold and now cost twice as much for the average consumer

Marty Cairns / August 24, 2010 1:25 PM