Raking in fortunes

It is workers who have been hit the most, writes Yassamine Mather, while those close to the regime have benefited enormously

Mehdi Khalaji: doing very nicely, thank you very much

We all remember Hillary Clinton’s promise of “targeted sanctions” against Iran’s Islamic republic. They were deployed to ‘moderate’ the Shia government’s regional policies, as well as its internal human rights record. Of course, anyone with any knowledge of the regime in Tehran would have told the then secretary of state how futile such policies were.

We knew that, given the existing political and economic structures in Iran, sanctions would enrich those in power, while creating misery, through food and medical shortages, for the majority. Yet none of us could have predicted the extent to which those associated with the government of the populist, Mahmoud Ahmadinejad (the supporter of the poor and disinherited!), were benefiting from sanctions – profiting to the tune of millions of dollars.

Last week in a trial in Tehran we got a glimpse of what had occurred under the ‘targeted’, ‘smart’ sanctions of the Obama era. The latest government drive to root out corruption – concentrating on events that occurred under the previous government, not the current one – has revealed a scandal which, according to the Iranian judiciary, involved the theft of some $7.4 billion.

The case involves 14 executives and board members of Iran’s Petrochemical Commercial Company (PCC), going back to the last years of the second term of Ahmadinejad’s presidency (2010-13). Most of the suspects are in custody in Iran, while three who now reside abroad and are being tried in absentia.

The charges read out in court involve “disrupting Iran’s economic system” by profiteering from the multi-tiered exchange rate. According to a senior judiciary official, who addressed the hearing on March 7, “Despite numerous letters [from] the minister of oil … to the defendants that the foreign currency proceeds must be paid in full … the defendants did not pay any attention … and seized a portion of the foreign currency.”

In other words, they were involved in circumventing sanctions when selling petrochemical products and in the process they embezzled a percentage of the profits. A spokesman for Iran’s prosecutor general explained on March 9:

The suspects converted the foreign currency into Iranian currency before returning it to the government, making a profit in the process. They kept some of the foreign currency, allegedly selling it for up to three times the official rate on the black market.

Of course, this case is not unique. We already know of a similar one – that of billionaire businessman Babak Zanjani, who is currently in prison awaiting execution.

All this is a familiar story. The immediate effect of sanctions is a dramatic fall in the rate of exchange and Iran’s currency continues to fall, as new sanctions are imposed. The current administration under president Hassan Rowhani relies on the export of oil and petrochemical products and often the deals negotiated open the way to uncontrolled black-marketeering.

As with most other industries, Iran’s petrochemical companies have been privatised and inevitably those close to various factions of the Iranian religious state have benefited. Managers are often nominated by the president and his cabinet, and also involve influential MPs in the majles (Iranian parliament), as well as the Revolutionary Guards militia.

The case of the Iranian PCC is getting widespread attention, mainly because of the sordid tale of one of those being tried in absentia – you couldn’t make it up. The controversial figure involved is Marjan Sheikholeslami Aleagha, who is currently in the United States. She was apparently a supporter of ‘reformists’ in the regime, but switched to support for Ahmadinejad, once he was in power. She now lives in the US and is married to Mehdi Khalaji, a ‘senior researcher’ in the Washington Institute for Near East Policy (WINEP). The institute is by all accounts a rightwing, pro-war, pro-sanctions set-up – it was established in 1985 by, amongst others, Martin Indyk, an Australian-trained academic and former deputy director of research for the American Israel Public Affairs Committee. According to an article by David Ottoway, published in 1989, “Indyk described the think tank as friendly to Israel, but doing credible research on the Middle East in a realistic and balanced way.”1

In December 2003, professor Rashid Alkhalidi, director of Columbia University’s Middle East Institute, criticised WINEP in an interview with Al Jazeera, claiming it represents “the fiercest of the enemies of the Arabs and the Muslims”, and described it as the “most important Zionist propaganda tool in the United States”.2

As for Khalaji, Iranians know him as one of the most ardent advocates of sanctions! In recent months he has promoted ‘discussions’ with the pretender to the Iranian throne, Reza Pahlavi. In a number of BBC Persian TV debates, where he was promoting sanctions, I have argued against his position. And now, of course, Farsi social media is inundated with comments about his political stance and his wife’s role in the current scandal.

According to documents presented to last week’s court hearing, Marjan Sheikholeslami transferred proceeds from sales of Iranian petrochemical products to the accounts of her trading companies in Turkey, profiting by a cool $9 million.3

Another individual facing corruption charges is Reza Hamzelou, who was managing director of the Iranian PCC in 2010-11. It is now alleged that in the autumn of 2011, as new economic sanctions went into effect, he was given a new role: to bypass them by selling petrochemicals on the black market.

By the time all this was happening, I had already written extensively on the consequences of the US’s ‘targeted’ sanctions. According to the theocratic government’s own statistics, by 2009 one third of the state assets had been privatised (value: $37 billion, out of $110 billion), and 78% of such privatisation occurred under Ahmadinejad, who was following the International Monetary Fund’s model for ‘structural adjustment’. In many ways, this dismantling of the public sector resembles what happened in Russia and other east European states in the 1990s, when vast sections of the economy were turned over to oligarchs at bargain-basement prices. In Iran it was the Revolutionary Guards Corps of Iran (RGCI) and its subsidiaries, followed by individuals associated with pro-Ahmadinejad factions of the regime, who benefited from relentless privatisation. In this period tens of billions of dollars in state assets were handed out to the RGCI in secret deals. The sanctions were supposed to be ‘targeted’ at the Revolutionary Guards, close associates of the supreme leader and senior clerics, but, because these people own everything, they were the least affected.

Of course, it would be a complete mistake to believe that anything has changed in Iran. Now that the country faces a new wave of sanctions imposed by the Trump administration, it would be foolish to think that with the departure of Ahmadinejad the economy is more transparent or that those associated with the Rowhani government are not involved in sanctions-busting, the black market and dodgy currency deals. As before, the ones who are suffering from sanctions are mainly the workers – for instance, those who have lost their jobs, as companies incapable of importing basic raw materials go bust; those who have not been paid their wages for months; civil servants who have suffered pay cuts; patients who cannot get the medicine they need or receive treatment in hospitals where basic surgical equipment cannot be repaired.

Next time someone tells me about corruption in Iran, I will remind them that the money made from it manages to find its way out of the country. So how come western banks and financial institutions – which in the two years since Trump’s presidency began have, in order to avoid US-imposed penalties, blocked the accounts of thousands of Iranian law-abiding citizens in their searching for ‘money laundering’ – have failed to detect millions in dirty money sent from Iran to Canada and the US?

Next time anyone advocates sanctions against Iran, they should be reminded of a certain Mehdi Khalaji – he also advocates US sanctions, while his wife has been raking in millions as a direct result of them.


First published in the Weekly Worker


  1. Washington Post March 24 1989.

  2. www.aljazeera.net/programs/fromwashington/2005/1/10.

  3. This and other court details translated from Tasnim News: www.tasnimnews.com/fa/news/1397/12/16/1963593.

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