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Iran hard-liners skirt sanctions

Merchants linked to the Revolutionary Guard are using front companies and third parties to do business. Some are even profiting directly from the sanctions.

August 23, 2010|By Borzou Daragahi and Ramin Mostaghim, Los Angeles Times
  • The Grand Bazaar in Tehran. Some merchants have used their business and financial connections with China to circumvent international sanctions, an official at a trade association says.
The Grand Bazaar in Tehran. Some merchants have used their business and… (Vahid Salemi / Associated…)

Reporting from Beirut and Tehran — Tightened international sanctions meant to punish Iran for its nuclear program may be strengthening the country's hard-line elite, as blacklisted firms linked to the powerful Revolutionary Guard manage to circumvent and even profit from the embargo.

Businesspeople, officials and analysts inside and outside the Islamic Republic describe the sanctions as taking a toll on the economy and ordinary citizens, increasing the cost of everything from the production of medicine to the manufacture of baguettes.

But they also say key businesses and government operations controlled by the Revolutionary Guard have found ways to skirt the sanctions, which ban trade with state-run firms connected to the nuclear program, by enlisting private-sector firms as fronts.

Although the Obama administration contends that sanctions are damaging Iran's economy, supreme leader Ayatollah Ali Khamenei has described the restrictions as a potential opportunity for the government of President Mahmoud Ahmadinejad.

"Fortunately, officials have adopted very strong and appropriate policies," he said in a speech broadcast on state television last week. "Hopefully, the decision by the officials is to turn sanctions into opportunities. In fact, the situation needs to be turned into an opportunity."

Businesspeople say that the situation means consumers are paying skyrocketing prices for housing, food and transportation, and that independent merchants are losing ground to those inside the political establishment.

Meanwhile, in Tehran's sprawling Grand Bazaar, well-connected conservative merchants linked to the Islamic Coalition Party, which is close to Khamenei, have used their business and financial connections with China to ignore sanctions, said Kamran Vakil, an official at the Iranian Union of Mineral Products Manufacturers and Exporters, a private-sector trade association.

For importers and exporters, the 2,500-member Iran-China Chamber of Commerce and Industries has become more important than Iran's Central Bank, Vakil said.

"The sanctions have played into the hands of the most hard-line and fanatic in the bazaar and the traditional rightists," he said.

Merchants described a number of ways the Revolutionary Guard circumvents sanctions. The manager of a company that imports and exports printing equipment said he was contacted in July by a blacklisted Revolutionary Guard-affiliated firm that wanted him to sell old machinery and help it buy new equipment from a company in Venezuela — all at a modest profit for the businessman, who said he was considering the deal.

Government-affiliated firms are also seeking to establish offices in Iraqi Kurdistan, Persian Gulf states and Venezuela, trade experts and businesspeople say.

Through offshore offices, they sell products to Iran, thwarting sanctions by attaching fake addresses in Afghanistan, Turkmenistan or other Central Asian countries. Additional costs are passed on to the buyer, said Vakil and other Iranian businesspeople.

Well-connected companies are even finding ways to profit directly from the sanctions. Businesspeople say a sanctions-breaking industry is emerging, with firms specializing in helping others overcome the restrictions for a price. When one channel is blocked, managers seek others.

"Until three months ago, we could get out money, in return for exporting chemicals, from a Turkmenistan bank," said a manager at a company that exports chemicals and imports equipment for renewable energy who has employed a consulting firm to help him circumvent sanctions. He spoke on condition of anonymity. "But recently, even a $20,000 transaction was blocked. So we're looking for another way."

Over the last two decades, Iran's dogmatic and anti-Western hard-liners — including a circle of Iran- Iraq war veterans and members of the Revolutionary Guard — have emerged as the dominant players in economic and political life, with control over the country's borders and international trade.

Critics of sanctions say there is no evidence that the U.S.-led effort has forced the hard-liners to change their position on the country's nuclear program, decrease their support for allied militant groups fighting Israel or soften their crackdown on the nation's pro-democratic opposition forces.

"The Iranian people are like cannon fodder caught between the barrage of two enemies: the West and the government of President Mahmoud Ahmadinejad," Mohammad-Reza Behzadian, a former lawmaker who is now a supporter of the country's opposition movement, told The Times.

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