Iran's supreme leader has a business empire — the US must sanction it

Iran's supreme leader has a business empire — the US must sanction it
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Earlier this month, the Trump administration ended a decade-long debate in Washington by using the Treasury Department’s anti-terrorism authorities to sanction the entirety of Iran’s Islamic Revolutionary Guard Corps (IRGC).

But that will not be sufficient if the administration is serious about combatting Tehran on every front. There remains an equally nefarious actor that has built fortunes by exploiting the Iranian people and reports not to the IRGC, but directly to Supreme Leader Ali Khamenei. Fortunately, Washington has the necessary tools — created by the Global Magnitsky Act — to expose and punish this entity for the corrupt actor it is.

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Headquarters for the Execution of Imam Khomeini’s Order – popularly known as EIKO or Setad (the Persian word for headquarters) – is a massive holding company that has become one of the Islamic Republic’s most infamous economic forces. Established by Iran’s first Supreme Leader, Ayatollah Ruhollah Khomeini, in the late 1980s, EIKO was charged with functioning as a semiphilanthropic organization, using confiscated assets to fund charitable ventures in revolutionary Iran.

But EIKO went off the rails. Today, EIKO has become a vehicle for Khamenei to receive huge sums of money without any oversight, solidifying his grip on the country’s byzantine power structure atop which he sits.

According to a groundbreaking 2013 Reuters report, EIKO is worth an estimated $95 billion dollars and “holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.” EIKO has also amassed a vast real-estate portfolio through what Reuters has described as, “the systematic seizure of thousands of properties belonging to ordinary Iranians.” This real estate empire constitutes the bulk of EIKO’s net worth, standing at an estimated $52 billion dollars, Reuters found.

In other words, EIKO is a corrupt government-linked business entity that preys on the Iranian people and, when needed, forces the hand of the (already ailing) Iranian judiciary to get its way.

Pursuant to Executive Order 13599, EIKO was designated by the U.S. in 2013 for supporting sanctions busting and “generating revenue for the Iranian leadership.” But the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal inexplicably removed EIKO – and several of its subsidiaries and front companies – from the Treasury Department’s Specially Designated Nationals (SDN) list, paving the way for it to ink numerous foreign deals.

To be clear, due to previous U.S. sanctions, U.S. persons may still not trade with EIKO or its affiliates, despite those entities no longer falling under U.S. secondary sanctions. But foreign businesses can, and already have been, signing agreements with EIKO and its subsidiaries. In fact, foundations controlled by Khamenei have been among the main beneficiaries of the JCPOA within Iran.

But for an agreement billed as “nuclear only,” providing sanctions relief and delisting front companies subordinate to Iran’s Supreme Leader not active in the nuclear domain makes zero sense. It makes even less sense to rhetorically commit to “confronting Iran’s destabilizing activities,” as the previous administration did, while helping Khamenei – the man authorizing those activities – amass additional wealth and influence.

Already, the French telecom giant Orange has been in talks with Iran’s Mobile Telecom Company (MTCI), which is jointly owned by the IRGC and EIKO, to acquire shares of MTCI. And according to a separate 2017 Reuters investigation one year into the nuclear deal’s implementation, companies controlled by EIKO inked at least five contracts with foreign firms. One of these contracts – a $10 billion deal – was with two South Korean firms to build an oil refinery in Iran.

Moreover, EIKO is cashing in on a sanctions free oil sector. Due to the JCPOA, Iran’s oil exports doubled from 1.1 million barrels/day (mbpd) in 2013/14 to 2.4 mbpd in 2016/17. In October 2016, the Iranian oil ministry announced a $2.2 billion contract with the EIKO-owned Persian Oil and Gas Company to grow the output of select Iranian oilfields. Point, EIKO.

Whatever the fate of the JCPOA, it remains in the national security interest of the U.S. to prevent the worst of the worst actors in Iran from getting their hands on additional capital with which to finance their foreign aggression and domestic repression. To some, that might mean relisting EIKO and all its subsidiaries under the exact same authorities as before – either daring the regime to blink or somehow managing to negotiate an exclusion clause for EIKO given its non-nuclear status. But there is a middle ground between these positions.

Since nothing in the JCPOA prohibits the U.S. from targeting Iran’s lingering non-nuclear threats – be they ballistic missile, terrorism and regional instability, human rights, and/or illicit finance – Washington can designate entities along all these grounds and remain a party to the accord as long as it doesn’t bring back nuclear sanctions. But sanctioning EIKO, which received relief under the JCPOA, is an exception to this rule since a) it isn’t being targeted with nuclear sanctions, and b) more importantly, given its non-nuclear status it should never have been delisted in the first place.

Specifically, the vector of pressure available to the U.S. is the Global Magnitsky Human Rights Accountability Act.

Building on a 2012 piece of legislation honoring a Russian whistleblower, this expanded law contains asset freeze and visa ban authorities that can be used by the U.S. president against any foreign individual or entity that engage in acts of corruption or repression. As noted in the U.S. Federal Register, “The global reach of this authority, combined with a judicious selection of individuals and entities, will send a powerful signal that the United States continues to seek an end to impunity with respect to human rights violations and corruption.”

But it will also send a message to European and Asian banks and businesses: that they must be wary of more than just the IRGC when doing business with the Islamic Republic. And if they choose to engage in commerce with EIKO, they would be choosing Tehran’s equivalent of a Putin-regime crony to do business with.

Should the Trump administration be sincere in its desire to support the Iranian people and expose and impede those who have systematically exploited them, then it should make a high-profile determination to target EIKO using Global Magnitsky authorities. By doing so, the administration could show that U.S. foreign and security policy need not be divorced from America’s values.

Behnam Ben Taleblu is a senior Iran analyst at Foundation for Defense of Democracies (FDD), where Saeed Ghasseminejad is a research fellow.