September 4, 2015 | Policy Brief

Nuclear Deal is a Boon to the IRGC

The nuclear agreement signed by Iran and world powers in July will benefit Iran’s Islamic Revolutionary Guard Corps (IRGC) in three primary ways.

First, the deal lifts sectoral bans on economic activities in which the IRGC has significant clout. For example, removing sanctions on the automotive industry (which has already enjoyed temporary relief since the November 2013 interim deal) will benefit Bahman Group, Iran’s third-largest vehicle producer, as well as the Iran Tractor Manufacturing Company – both of them are owned by the IRGC through subsidiaries. Tehran will also be able to resume its zinc exports – a monopoly of Iran’s Zinc Mines Development Company, which is owned by the IRGC through the Guard’s Basij Cooperative Foundation.

Second, the agreement releases state funds for infrastructure projects that IRGC companies will win, given their dominance in the construction sector and ability to influence the outcome of public tenders. Of particular note is telecoms, which the IRGC controls through the Iran Telecommunication Company and its subsidiary Hamrahe Avval. Banking sanctions have thus far made it difficult for either company to access foreign investment and technology. With sanctions now set to be lifted, external funds and expertise could soon be on the way.

Finally, the deal diminishes the likelihood of future designations on IRGC companies that have so far escaped U.S. and EU sanctions. Most IRGC-owned companies have eluded designation because U.S. authorities could not definitively link them to the Guard or because IRGC ownership was lower than the 50% threshold necessary to prove effective control of a company. Such companies will now be able to forge business relations with Western counterparts and access the global banking system to conduct financial transactions. Because the deal stipulates that imposing new Western sanctions is grounds for an Iranian walk-out, it is unlikely that the U.S. or the EU will designate any of these IRGC-owned entities.

The deal’s proponents have said they hope it empowers Iranian moderates to lead the country toward a more productive path with the world. Instead, the Guard’s clout in Iran’s economy means it will be the very forces of hardline revolutionary ideology that are likely to benefit most.

Emanuele Ottolenghi is a Senior Fellow at Foundation of Defense of Democracies, where Saeed Ghasseminejad is an Associate Fellow. Follow them on Twitter @eottolenghi and @SGhasseminejad