Of all the sanctions to be lifted in last week’s Iran nuclear agreement, few are more significant than those against a shadowy $100-billion network of foundations belonging to the Islamic Republic’s supreme leader, Ali Khamenei. The U.S. delisting of the Headquarters for the Execution of Imam Khomeini’s Order – also known as EIKO or Setad – will pump tens of billions of dollars into the supreme leader’s personal coffers, helping him secure his grip on the Iranian people, and bolstering Iran’s ability to promote its agenda abroad.
EIKO’s name refers to an edict issued by Khamenei’s predecessor, Ruhollah Khomeini, shortly before his death in 1989, to manage and sell all property abandoned in the chaotic period following the 1979 Islamic Revolution. From that original mandate, the network has grown into a vast business conglomerate – everything from agriculture to leisure resorts, parking lots and residential complexes – but one that remains unknown to many Iran watchers and even most Iranians.
The U.S. Treasury designated EIKO and 37 subsidiaries in June 2013, noting that its purpose is “to generate and control massive, off-the-books investments, shielded from the view of the Iranian people and international regulators.” A Reuters investigation that year confirmed that assessment, putting the network’s real-estate portfolio at about $52 billion, its holdings in publicly traded companies at $3.4 billion, and its overall worth at $95 billion.
Under the terms of the nuclear agreement, the United States is now set to de-list all the companies controlled by the supreme leader that Treasury designated in 2013. These include Rey Investment Company (the $40-billion investment arm of a religious trust) , Parsian Bank and Karafarin Bank (publicly traded banks worth $900 million and $830 million respectively) and Tadbir Group, EIKO’s investment arm on the Tehran Stock Exchange.
In designating EIKO and its subsidiaries, Treasury relied on Executive Order 13599, which targeted Iranian government-owned assets over their deceptive financial practices and the risk they pose to the integrity of the international financial system. The nuclear deal stipulates the delisting of any entities not tied to Tehran’s record of terrorism, human-rights abuses or other proscribed illicit behavior. As long as the supreme leader uses shadowy, off-the-book financial assets to exert political influence, the risk that EIKO poses to the international financial system will remain undiminished.
According to the agreement, the U.S. will still restrict U.S. persons from engaging in business and financial transactions with EIKO and its subsidiaries. Non-U.S. persons, however, will face no such limits. This is fortuitous for EIKO. It has assets in Europe, including a German factory with advanced dual-use machinery that Iran needs for the indigenous production of centrifuges. The lifting of U.S. sanctions against EIKO and its subsidiaries further means that the supreme leader’s foundations may invest in European securities, among others, and benefit from normal commercial relations with foreign companies wishing to invest in Iran from around the world.
The nuclear deal’s architects have repeatedly voiced their hope that the agreement bolsters liberals and moderates in the Islamic Republic. By enriching EIKO, the agreement appears poised to grant a handsome bonus to the supreme leader himself.
APPENDIX: EIKO-Controlled Companies to be Delisted in Iran Nuclear Deal