United States Institute of Peace

The Iran Primer

Latest on the Race: Furor at First Debate

      At the first presidential debate on May 31, Iran’s eight candidates spent more time arguing over the quiz show format than debating each other. Tensions erupted when the moderator asked yes-or-no and multiple choice questions. “I’m not answering these questions,” said Mohammad Reza Aref (left). “I answered test questions 40 or 50 years ago.” Hassan Rouhani scolded the moderator, warning that the public also probably found the format “offensive.” The television station should have consulted with each candidate’s staff beforehand, said the cleric. Mohsen Rezai complained that the program did not allow candidates to engage directly with each another. Saeed Jalili and Gholam Ali Haddad-Adel refused to answer the questions. The moderator gave up after question eight, reportedly leaving 16 questions unasked.

      The debate— nearly four hours on the economy —had other unique aspects, including set-up. Candidates appeared caught off guard when asked to react to a series of pictures. One photo of a patient after surgery led to discussion about Iran’s health care system—and the need for various improvements. Shown a picture of cars stuck in traffic, candidates argued over how much carbon monoxide contributed to pollution. The moderator also showed pictures of a cargo ship, tractors in a field, an empty mine, a clock and a bazaar. 
 
      In another part of the debate, the moderator posed a random question to each candidate and gave him three minutes to answer from behind a podium. The other seven candidates then had two minutes to respond from their seats.
 
 
            This is only the second time the regime has allowed candidates to live debates on national television before a presidential election. The first debate in 2009 sparked fiery exchanges—resulting in a change of format for the 2013 vote. President Mahmoud Ahmadinejad’s tense arguments with two reformist challengers also generated greater public interest.
            The second presidential debate, slated for June 5, will focus on cultural and other domestic issues. The final debate on June 7 will be on foreign policy.
            For a flavor of the debate, the following video clip, with subtitles in English, shows Rouhani’s argument with the moderator.
 

 

US Sanctions Iran Leadership

           On June 4, the United States sanctioned a major network of front companies for hiding assets on behalf of Iranian leaders. The Treasury targeted The Execution of Imam Khomeini’s Order and 37 ostensibly private businesses under it. Many are front companies involved in real estate, construction, banking, and other sectors of Iran’s economy. “While the Iranian government’s leadership works to hide billions of dollars in corporate profits earned at the expense of the Iranian people, Treasury will continue exposing and acting against the regime’s attempts to evade our sanctions and escape international isolation,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. The Obama administration has implemented four rounds of sanctions in the past week alone. The following are excerpts from the press release, including a link to the full text at the end.

           The Execution of Imam Khomeini’s Order (EIKO), through two main subsidiaries, oversees a labyrinth of 37 ostensibly private businesses, many of which are front companies.  The purpose of this network is to generate and control massive, off-the-books investments, shielded from the view of the Iranian people and international regulators.  EIKO and its subsidiaries – one that manages and controls EIKO’s international front companies, and another that manages billions of dollars in investments – work on behalf of the Iranian Government and operate in various sectors of the Iranian economy and around the world, generating billions of dollars in profits for the Iranian regime each year…
           EIKO has made tens of billions of dollars in profit for the Iranian regime each year through the exploitation of favorable loan rates from Iranian banks and the sale and management of real estate holdings, including selling property donated to EIKO.  EIKO has also confiscated properties in Iran that were owned by Iranians not living in Iran full-time.  In addition to generating revenue for the Iranian leadership, EIKO has been tasked with assisting the Iranian Government’s circumvention of U.S. and international sanctions.  Because of this unique mission, EIKO has received all of the funding it needs to facilitate transactions through its access to the Iranian leadership. The following companies are all part of this elaborate scheme: 
 
Tosee Eqtesad Ayandehsazan Company (TEACO)
           In June 2010, Tosee Eqtesad Ayandehsazan Company (TEACO) was created as part of the Iranian strategy to circumvent U.S. and international sanctions.  EIKO uses TEACO as the primary mechanism to transact, manage, and control all of the international companies under EIKO’s control.  To maintain the appearance of being a private company, TEACO is ostensibly owned by private Iranian businessmen and investors; however TEACO’s board members were all chosen by EIKO.  TEACO acts on behalf of EIKO.  As of September 2011, EIKO negotiated business deals using TEACO subsidiaries.  For example, EIKO used an Iranian subsidiary of TEACO to negotiate a deal with a European company to build a factory in Iran.  In these business deals, the TEACO subsidiary directly negotiated with the foreign company.  If the foreign company did not move forward with the deal due to sanctions issues, the TEACO subsidiary would have TEACO take over the negotiations, rather than EIKO, because TEACO was less visibly connected to the Government of Iran...
 
Tadbir Economic Development Company (Tadbir Group)
           Tadbir Group, an investment company subordinate to EIKO, manages billions of dollars in investments, including on behalf of Iranian leadership figures.  Tadbir Group is one of the main holding companies belonging to EIKO.  Its subsidiaries include Tadbir Investment Company, Modaber (Tadbir Industrial Holding Company), Tadbir Construction Development Company and Tadbir Energy Development Group.  The Tadbir Group has used its subsidiaries to make significant investments in the Iranian economy, including an investment of over $100 million in Amin Investment Bank, and controls the Pardis Investment Company and Mellat Insurance Company in Iran.
 
Rey Investment Company
           As of late December 2010, Rey Investment Company was worth approximately $40 billion. Rey Investment Company was formerly run by Ayatollah Mohammad Mohammadi Reyshahri, who previously served as the Iranian Minister of Intelligence and Security.  Rey Investment Company collected and invested donations obtained from Iranian Shi’a shrines.  However, amidst allegations of mismanagement and embezzlement of shrine donations from the company, the Iranian Government cut off its funding to the point of nearly bankrupting the company.  In mid-to-late 2010, Reyshahri was removed and control of Rey Investment Company was transferred to EIKO and its director.  EIKO subsequently appointed a new Managing Director of Rey Investment Company.
 
Reyco GmbH
           Reyco was a German subsidiary of Rey Investment Company, although there were no public ties between Reyco and Rey Investment Company, TEACO, or the Iranian Government.  Reyco owned MCS Engineering and MCS International.  Reyco had the appearance of being a purely German company to circumvent sanctions restricting an Iranian Government-controlled entity’s ability to do business in Europe.  Reyco was eventually transferred to the control of TEACO from Rey Investment Company, and TEACO planned to use Reyco to purchase a bank for Iran in Germany.
 
MCS International GmbH (Mannesman Cylinder Systems)
           Reyco subsidiary MCS International is a German company ostensibly owned by German nationals or Iranian expatriates with dual Iranian-European citizenship to conceal its ties to the Iranian Government, EIKO, TEACO, and Rey Investment Company.  MCS International was audited by TEACO in October 2010 and determined to be in poor financial standing.  However, EIKO management rescued MCS International from bankruptcy and insisted on keeping the company open because it viewed MCS International as key to facilitating business in Europe.  EIKO management viewed MCS International as being too important to EIKO’s international plans to allow it to go bankrupt and believed that it would be easier to rescue MCS International from bankruptcy than to create or acquire new foreign companies on behalf of EIKO due to U.S. and international sanctions.  EIKO subsequently ordered that responsibility for MCS International be transferred from EIKO-controlled TEACO to Iranian businessmen, who were sent to oversee the company.  Following this transfer, the two individuals owned the shares for MCS International, but answered directly to EIKO...
           U.S. persons are generally prohibited from engaging in any transactions with the entities listed today, and any assets those entities may have subject to U.S. jurisdiction are frozen.
 
 

Supreme Leader Blasts Foreign Plots in Vote

      On June 4, Supreme Leader Ayatollah Ali Khamenei charged that foreign powers are plotting to discourage Iranians from voting in the upcoming presidential election. Tehran’s enemies also want to cause “sedition” after the poll “just like what they did” after the disputed 2009 election, Khamenei claimed in a televised speech. He spoke to thousands at a ceremony marking the 24th anniversary of the passing of Ayatollah Ruhollah Khomeini, founder of the Islamic Republic. Khamenei also encouraged Iranians to vote in large numbers on June 14 to show their confidence in the political system. He warned candidates against “making impossible promises” and giving concessions to the West. The following are excerpts from Khamenei’s official Twitter account and a variety of press reports.

Presidential Election
            Iran’s enemies “wish for either a low turnout in the election or sedition to emerge after the poll…The enemies are seeking to portray the election as a threat to the Islamic establishment whereas the vote is in fact a great opportunity.”
            “Candidates shouldn’t make impossible promises. Speak in a way that if next year at this time you listen to a recording of yourself or people do, you won’t be ashamed. Make promises that you can deliver on so that afterwards you don’t say that they didn’t let me do this or didn’t let me do that.”
            “A vote for any of these eight candidates is a vote for the Islamic Republic and a vote of confidence in the system and our electoral process.”
            Some candidates “have the wrong analysis that by giving concessions to enemies, their anger towards Iran will be reduced. This is a mistake... In practice [they] prefer the enemies' interests to our national ones."
            “Those who assume there is a silent majority opposed to the Islamic Republic's system have forgotten that a huge number of people have been pouring into the streets on February 11th each year [the anniversary of the 1979 revolution], chanting the ˈDown with USAˈ slogan every year."
           “Where in the world are presidential candidates, from well known figures to unknown figures, given equal time on national television? In America and capitalist countries, if you are not the candidate of the two or three [major] political parties, or if the wealthy or powerful or Zionist networks don’t support you, under no conditions do you have the ability to advertise.”
 
Economy
            “Yes, we have economic problems, yes we have inflation, but God willing the person who comes can provide a solution to these problems. This is the wish of the Iranian people.”
            “If we can shore up the economy, the enemy will be left defenseless in confronting the Iranian nation.”
 
Ayatollah Khomeini’s Legacy and Iran’s Progress
            “Imam [Khomeini]’s principles… are the very principles that turned the backward dependent Iranian nation into a pioneering, dignified and independent nation.”
            “Imam Khomeini had faith in three [things] that gave him determination; courage, endurance and faith in God, people and himself.”
            “Iranians have been successful in every field during the last 30 years… Imam Khomeini taught Iranians that ‘We can.’”
 
 

 

Rand Report on Iran Election

            In a new Rand report, Alireza Nader examines the implications of the election, including Supreme Leader Ayatollah Ali Khamenei's objectives, the regime's electoral strategy, the competing factions and personalities, and the potential implications for the United States, especially concerning Iran's nuclear program. Among the key findings ofIran's 2013 Presidential Election: Its Meaning and Implications”:

• Ayatollah Khamenei is concerned with the election's legitimacy, but his goal above all else is to ensure a stable election that produces a president loyal to him personally.
• The only serious potential challenge to Khamenei, Rafsanjani, has been removed from the field of candidates, and this could help Khamenei further consolidate his power.
• The election could theoretically lead to a limited reduction of tensions between Iran and the international community, but Khamenei's monopolization of power will likely decrease Iran's flexibility on the nuclear program, depending on U.S. and Israeli policies.
• No matter who is elected president, the Islamic Republic is likely to continue its evolution into an authoritarian political system dominated by Khamenei and the Revolutionary Guards.
 

 

US Sanctions Iran Currency

      On June 3, the United States imposed sanctions for the first time on Iran’s currency, the rial. Foreign financial institutions may now face penalties if they “knowingly conduct or facilitate significant transactions” involving the rial― which has already lost half its value since January 2012. The executive order’s objective is to render the currency unusable outside of Iran, a senior administration official said during a conference call. Iran conducts very little trade in the rial. So the measure may also be aimed at further depreciating its value and making Iranians feel more uneasy about holding their own currency. The executive order also authorizes new penalties on Iran’s automotive industry. And it allows the sanctioning of any individuals who help Iranians and others previously blacklisted by the Treasury.

      The Obama administration has now implemented nine sets of sanctions on Iran. An official said that the timing of the latest measure was not tied to the June 14 presidential election. So the timing may have more to do with pressuring Iran ahead of nuclear negotiations expected to resume after the election hiatus. The following is the complete text of the White House press statement, including links to the executive order and the president’s message to Congress.
 
            Today the President approved a new Executive Order (E.O.) to further tighten U.S. sanctions on Iran and isolate the Iranian government for its continued failure to meet its international obligations.  
            This new action targets Iran’s currency, the rial, by authorizing the imposition of sanctions on foreign financial institutions that knowingly conduct or facilitate significant transactions for the purchase or sale of the Iranian rial, or that maintain significant accounts outside Iran denominated in the Iranian rial.  While the rial has lost half of its value since the beginning of 2012 as a result of our comprehensive sanctions, this is the first time that trade in the rial has been targeted directly for sanctions.
            Taking aim at a major revenue generator for Iran, the E.O. authorizes the imposition of new sanctions against those who knowingly engage in significant financial or other transactions for the sale, supply, or transfer to Iran of significant goods or services used in connection with Iran’s automotive sector, building on the sectoral sanctions in the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) that target Iran’s shipping, shipbuilding, and energy sectors. 
            Further increasing the pressure on the Iranian government, the E.O. authorizes the imposition of additional sanctions on persons who provide material support to Iranian persons and certain other persons designated pursuant to Iran sanctions authorities that are included on the list of Specially Designated Nationals and Blocked Persons (SDN List) maintained by the Department of the Treasury. 
            The E.O. also implements and builds upon certain sanctions set forth in the IFCA, signed into law by the President on January 2, 2013, as a part of the National Defense Authorization Act for Fiscal Year 2013. 
            Pursuant to today’s action, the following activities will be subject to sanctions:
The Iranian Rial:  The significant transactions for the purchase, sale of, or holding of significant funds or accounts outside Iran denominated in the Iranian rial. 
 
Iran’s Automotive Sector:  The sale, supply, or transfer to Iran of significant goods or services used in connection with the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles, as well as original equipment manufacturing and after-market parts manufacturing relating to such vehicles. 
 
Material Support to the Government of Iran:  Providing material support to Iranian persons and certain other persons designated pursuant to Iran sanctions authorities that are included on the SDN List (in each case other than certain Iranian depository institutions).  This provision includes an exception for certain Iranian depository institutions and certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey.
 
            The steps taken today are part of President Obama’s commitment to prevent Iran from acquiring a nuclear weapon, by raising the cost of Iran’s defiance of the international community.  Even as we intensify our pressure on the Iranian government, we hold the door open to a diplomatic solution that allows Iran to rejoin the community of nations if they meet their obligations.  However, Iran must understand that time is not unlimited.  If the Iranian government continues down its current path, there should be no doubt that the United States and our partners will continue to impose increasing consequences.
 

 

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