Former Parliamentarian on the Not-So-Hidden Cost of the Sanctions Regime: Corruption

While Supreme Leader Ayatollah Ali Khamenei insists that there is no systemic corruption in Iran, regime officials openly talk of corruption, which, in their view, is intimately linked to Tehran’s efforts to avoid international sanctions.  

• March 5: Economist and former Member of Parliament Gholamreza Tajgardoun, in an interview with Etemad daily, explained how Iran’s attempts to bypass the international sanctions regime reduce the country’s oil revenue and cause corruption: “Let’s assume you are … contracted by the government to build a freeway or electrify the Tehran-Mashhad railway for $1 billion. Then, the government suddenly says, ‘We don’t have the money, so we will give you oil,’ the world market value of which is 30% of the contract … Now, does the contractor know how to sell oil? No, but there are certain groups that know. One such group is the National Iranian Oil Company, but it itself is busy selling 1 million barrels of oil per day. But there are also other groups apart from the National Iranian Oil Company. They are professionals. What their connections are is none of our business, but they know what they are doing. These groups tell you: ‘I will sell your oil in Venezuela. The official rate is $80 per barrel, but I can only sell it for $70,’ which means you lose $10 per barrel. Next, these groups tell you: ‘I can’t easily find insurance for my shipment,’ meaning a further reduction in your profits. In the end, they ask you: ‘Do you want money or products? If I bring you money, there are such and such risks, but if I bring you products, the risks are lower.’ You decide to import products instead of getting cash, and you can, for example, say you want meat from Brazil, to which the group will say: ‘I can bring you Brazilian meat at $10 per kilogram.’ But in reality, the price is $8 per kilogram. Then there is the question of where to get the ships to bring the meat to Iran and the like. In the end, you suddenly see that you are selling $80 per barrel oil at $50 per barrel. The $30 lost does not reach the contractor; it is taken by those special groups … This is what we mean by the hidden costs of the sanctions regime. Everyone is aware of this.” Pressed by an Etemad journalist on why the Islamic Republic accepts and even legalizes such practices, Tajgardoun explained: “The problem is systemic. I was a member of parliament when we passed the law,” referencing the Parliament’s move authorizing government agencies to seek sources of finance independent of the national budget. “Back then, the law was meant to serve a specific, one-time purpose, but it has since become generalized. The trigger was the Defense Ministry, which the government couldn’t pay. The Defense Ministry’s 10 to 50 petrochemical plants had produced arms, which were delivered to the armed forces … but the Cabinet couldn’t pay what it owed to the Defense Ministry. Now that the government couldn’t pay the Defense Ministry, the ministry demanded to be paid in food, which it could export … This model didn’t entail big losses … and the military sector, which is criticized by many, is actually healthier than other sectors … We are not accepting the FATF and the Joint Comprehensive Plan of Action,” referencing the Financial Action Task Force, a global money laundering and terrorist financing watchdog, and the 2015 nuclear deal, “and here we are.” 

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