- The Washington Times - Wednesday, September 13, 2000

TEHRAN Iran's economy is controlled by hidden, powerful merchants allied by marriage to powerful senior clergy, much as Italian merchant princes ran the city states of Florence and Venice in alliance with powerful clerics 500 years ago.
A few dozen Islamic foundations called "bunyads" run hundreds of factories and farms many seized from the late shah and his supporters after the monarchy was overthrown in 1979 pay no taxes, and prop up the conservative Islamic revolutionary power centers.
"Ninety percent of the most modern industries are controlled by the bunyads televisions, electronics, refrigerators," said economics professor Ali Rashid, a former vice president of the Central Bank of Iran.
"It's like a medieval domain. The bunyads pay no tax.
"Iran is controlled by a new ruling class a 'nomenklatura' like the former regime in the Soviet Union."
One of the largest of the bunyads the Foundation for the Disabled and Oppressed estimated its stock value in 1996 at $10 billion, according to analyst Wilfried Buchta, a former German journalist and author of the study "Who Rules Iran?" published this spring by the Washington Institute for Near East Policy and the Konrad Adenauer Foundation.

Bunyad spreads tentacles

Another foundation the Imam Reza Foundation based in Mashhad is more than 1,000 years old and runs the Shrine of the Eighth Imam, Iran's holiest site.
Since the Islamic revolution, it has spread its tentacles throughout Khorasan province, and owns 90 percent of the arable land, worth more than $20 billion, according to Mr. Buchta.
The Imam Reza bunyad also runs 56 companies, including factories, Iran's only Coca-Cola plant and two universities. It is the province's largest employer.
The leader of the Imam Reza Foundation since 1979 is Hojatoleslam Abbas Vaez Tabassi, whose daughter is married to the son of Iran's supreme religious leader, Ayatollah Ali Khamenei.
Mr. Vaez Tabassi's son, Naser who is active in opening trade to Central Asia is married to a daughter of the Ayatollah Khamenei, who appoints the heads of the foundations.
Naser Tabassi's role in the huge Mashhad-based bunyad includes "the procurement of the most modern weapons and nuclear technology," Mr. Buchta wrote.

Formerly ran charities

Bunyads have long been a tradition in Iran, running charities or religious shrines, such as the Shrine of the Eighth Imam in Mashhad near the Afghan border.
But they sprang into new economic prominence after the Islamic revolution in 1979, when properties of the ousted Shah Mohammad Reza Pahlavi and those close to him were seized by the government and handed to the foundations.
"The foundations enjoy unlimited access to state funds … and do business outside the country in an uncontrolled manner," according to Mr. Buchta.
The bunyads are headed by clergy or influential people appointed by the Ayatollah Khamenei. These officials are often related by marriage or kinship to the merchants of the business network known as the bazaar, which controls retail, wholesale, import, export and commodity markets.
The head of another powerful bunyad was the former driver of the Ayatollah Ruhollah Khomeini, who inspired the Islamic revolution.
"All wealth and resources in the country are controlled by irresponsible people not accountable to government institutions," said Ali Rashidi, who formerly taught at Strayer College in Washington and at Northern Virginia Community College.

"Bazaaris run the show"

"With the bazaaris behind and the clergy in front, they grabbed the government and threw out those who made the revolution," he said in an interview.
"They appointed people who are not qualified, and therefore the system suffers from low performance, waste, misallocation of resources and a low rate of economic growth.
"Since the revolution, people with influence grabbed the factories, businesses and land. About 35 percent of the total productive resources are at their disposal. Another 40 [percent] to 45 percent are at the hands of the government. Together, they control 80 percent of the economy.
"The bazaaris control everything. They run the show," Mr. Rashidi continued. "The bazaaris control the Ministry of Commerce and the bunyads."
He said there are 123 bunyads.
The 1979 revolution was carried out by secular intellectuals as well as religious Iranians organized behind the Ayatollah Khomeini against the authoritarian, U.S.-installed shah. But power soon devolved to the merchants of the bazaars and hard-line clerics.
"The bazaaris pay no taxes, conduct trade with no records, control the black market, the money market and smuggling," said Mr. Rashidi, who has a doctorate in economics from the University of Pennsylvania's Wharton School, and was barred by a panel of clerics from running for parliament.

Oil money spoken for

"The factories and the bunyads are run by the sons of the bazaaris who have the power to grant credit. Bazaaris buy up production of factories and farms and store it, releasing it gradually at higher and higher prices. It's a monopoly situation, not free enterprise.
"The government controls 90 percent of the foreign exchange, which is allocated by the central bank," Mr. Rashidi said.
"Oil production is 3.6 million barrels a day, of which 1.3 million are consumed inside Iran and the rest is exported. Oil income this year is predicted to increase from early estimates of $16 billion to about $21 billion due to the oil-price hike."
But the money is already spoken for. About $9 billion goes for imports of basic necessities, such as wheat, rice and sugar; $3 billion to $4 billion is spent on arms and munitions; another $2 billion goes to imports of raw materials and machine parts. The surplus oil income goes to pay about $6 billion toward Iran's foreign debts.
Thus, the portion of Iran's oil income that is spent internally sloshes around between the bunyads and the bazaar, rather than "trickling down" to ordinary Iranians.

Wealth amid poverty

The country presents a curious picture to outsiders. While wages are low, so are commodity prices and the biggest bank note has a face value of 10,000 real, worth about $1.20.
In Tehran, a city of 12 million, new apartment and office blocks crawl across the tan, dusty landscape rising toward the mountains on the north. This construction, and the proliferation of fancy shops in the northern part of the city, are fueled by oil money.
But many of Iran's 60 million people are without hope of amassing enough money to buy an apartment or house or start their own family or business.
Senior officials like the Ayatollah Khamenei and former President Ali Akbar Hashemi Rafsanjani say they intended to fix the economy, recognizing it is the primary concern of millions.
But according to analysts and observers, they are unwilling to make the bunyads pay taxes or to regulate them.
The economic stalemate mirrors the political stalemate between reformers elected by an overwhelming majority in February elections and the hard-liners who control the economy, judiciary, security forces and what some call the real government of Iran.

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