Kleptocracy, Repression, and the Iranian Regime // March 27
by Ariane Gottlieb and Aidan McGahey, International Forum for Democratic Studies
On March 8, the world celebrated International Women’s Day, in honor of those fighting for women’s rights. March also marked the sixth month since Masha Amini’s death in Iran, after she was detained by the country’s morality police for allegedly violating hijab regulations. This tragedy sparked a wave of protests denouncing gender inequality, corruption, and oppression. Yet, in their cries for “Woman, Life, Freedom,” protesters must confront a regime and security apparatus reliant upon a brutal strategy of cracking down on dissent and, ultimately, an expansive kleptocratic architecture.
In Iran, hundreds of billions of dollars have likely been lost to kleptocracy, while 17 percent of the population reportedly lives in poverty. The country’s Supreme Leader, Ayatollah Ali Khamenei, is at the helm of an opaque, untaxed conglomerate believed to be worth about $200 billion and comprised of hundreds of companies, prominent energy and agricultural organizations, and a massive real estate portfolio. While kleptocrats often use their ill-gotten gains to fund lavish lifestyles, Khamenei seemingly uses his wealth to bolster his own rule.
Transnational kleptocracy is inextricably linked to Iran’s repressive security apparatus. Kleptocracy undergirds the IRGC, a powerful political, economic, and military force in the country. IRGC-linked entities dominate key sectors. The organization secures contracts and funding through collusion and purchased political influence, and it does not disclose the total revenue from its vast economic holdings. These funds are then used to covertly influence Iran’s political and economic policy. Furthermore, the IRGC is a key facilitator of money laundering, smuggling, and drug trafficking. These ill-gotten gains are used to support influence and terrorist operations abroad and perpetuate protracted regional conflicts; beneficiaries include the IRGC’s Quds force as well as Hezbollah and the Houthi.
Tehran has developed a covert financial network to help circumvent international sanctions. Iranian business entities and banks rely upon overseas front companies, transaction clearinghouses, and other entities to facilitate illicit foreign trade with an estimated value of tens of billions of dollars per year. In addition, these exchanges help procure foreign currency that the heavily sanctioned regime lacks. By relying upon business entities registered in third party settings such as the United Arab Emirates, China, and others, Iranian entities are able to access banks in the U.S. and Europe. In blunting the impact of sanctions, these transactions grant Iranian authorities some leeway to resist U.S. efforts to reenter the 2015 Nuclear Deal and fulfill other international commitments.
Tehran uses its expertise to support another kleptocratic power: Russia. According to recent reports, meetings between Russian and Iranian officials likely helped lay the groundwork for collaboration on sanctions subversion. Tehran and Moscow are also developing a trade corridor linking Russia to India and the Persian Gulf, likely helping both countries further evade sanctions. The notion of Tehran and Moscow supporting one another is part of an alarming trend of authoritarian cooperation, or “Autocracy Inc,” as Anne Applebaum explained at NED’s 2022 Lipset Lecture. By collaborating on economic, military, and intelligence fronts, Tehran is not only enriching itself, but enabling Putin to mitigate the impact of sanctions and continue Russia’s campaign of violence in Ukraine. As a network of deals between Venezuela’s Maduro regime and Iranian state-owned companies and proxies shows, this trend is also apparent beyond Russia.
Democratic governments have already taken steps to sanction Iranian state-linked business entities and the IRGC and its affiliates—including its smuggling and money laundering networks. Democracies must double down on legislation penalizing entities engaging in illicit activities, such as financing terror or enabling Russia to circumvent sanctions. Policymakers in democracies must also address loopholes that allow sanctioned individuals or organizations to launder their wealth via third party countries. Outside of the kleptocracy space, advocates for democracy and human rights in Iran must mainstream counter-kleptocracy mechanisms into their work. A comprehensive, multisectoral response to entrenched kleptocratic structures is a necessary prerequisite to democratization in Iran—heeding the protestors’ call of “Woman, Life, Freedom.”