October 4, 2016 | Monograph

How the Nuclear Deal Enriches Iran’s Revolutionary Guard Corps

FDD Press

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During the first week of September, Iranian speedboats twice harassed U.S. Navy ships in international waters near the Strait of Hormuz. Those boats belonged to the Islamic Revolutionary Guard Corps (IRGC). In the same week, news emerged that the IRGC had arrested another dual Iranian-American national during a family visit to the country. The commander of the IRGC’s Quds Force, meanwhile, was in Aleppo, in the company of Iraqi Shiite militias currently engaged in the siege of Syria’s second-largest city. Indeed, only a few days earlier, the IRGC announced the formation of a Shiite liberation army composed of Shiite militias that Iran has been nurturing across Mesopotamia and the Levant. That did not stop France’s mobile phone giant, Orange, from beginning talks with Iran’s largest mobile phone operator, Mobile Telecommunication Company of Iran (MCI), over acquiring a stake in the Iranian company. The IRGC controls MCI through a 50-percent-plus-one stake in its parent company, the Telecommunication Company of Iran (TCI).

In short, whether its internal security, foreign adventures, or large corporate ventures, the IRGC plays an outsized role in Iran’s internal power structure. Established in 1979 to consolidate the Islamic revolution and fight its enemies, the IRGC has evolved over the years into a full-fledged conventional army, conducting and directing terrorist activity abroad. The Guard has also become a political power broker, an economic conglomerate, and an agency in charge of nuclear and ballistic-missile proliferation.

The interaction among military, economic, and political power is critical in understanding the centrality of the IRGC to Iran’s current system. The Guard exploits its influence and capabilities in one realm to increase its presence in another. Its growing economic clout is both an end in itself and a tool to advance its other agendas. Thus, IRGC revenues from economic activities yield the necessary resources and political leverage to place its members in positions of power. Conversely, the Guard’s political power serves the economic enterprises it owns, and both its political and economic weight in turn advance its military projects.

The IRGC’s wealth serves three important goals. First, it generates revenue to finance the IRGC’s military activities – including the nuclear and ballistic missile programs at home and sponsorship of terrorism abroad. Second, it offers the Guard a network of companies, enterprises, banks, offices, holdings, and joint ventures that can execute the regime’s procurement efforts for advanced weaponry and sensitive technology. Third, it generates personal affluence, which the Guard can translate into political influence. Indeed, the Guard’s growing political and economic influence enables it to bank on public companies’ willingness to lend their services – both at home and abroad – to aid the Guard’s efforts to procure forbidden technologies and raw materials, and to finance their purchases through middlemen in foreign markets.

Although the summer 2015 Joint Comprehensive Plan of Action (JCPOA) lifted significant sanctions on Iran, the risks for foreign investors – risks of exposure to money laundering, corruption, and terror finance or of inadvertently partnering with a still-sanctioned entity – have only increased. The Revolutionary Guard lies at the heart of these risks. The IRGC launders money from its “legitimate” businesses to fund its illicit activities; it finances terrorist groups across the world; and it enriches itself at the expense of the Iranian people through corruption and kleptocracy. It is for this reason, among others, that Transparency International ranks Iran 130 out of 168 counties on its corruption perception index, and the Basel Institute on Governance ranked Iran as worst in the world with regard to risks from money laundering and terrorism financing.

This report demonstrates the Revolutionary Guard’s pervasive influence in the Iranian economy and provides an accounting of the IRGC’s nefarious activities. Without a sober understanding of how the IRGC will exploit economic dividends generated by the JCPOA, policymakers and the private sector cannot establish appropriate counter-measures to prevent the enrichment of the most dangerous elements of the Iranian regime.