One of the primary risks that international companies face with respect to activities in the Iranian market is that of working with companies that are directly or indirectly linked to the Islamic Revolutionary Guard Corps (IRGC) – the military entity that is subject to US and EU sanctions.

The network of Revolutionary Guard companies is active across various sectors, but reports about the extent of IRGC economic participation have been exaggerated. Some have claimed that the military organisation controls some 80% of the economy.

The Iranian Constitution classifies economic activity into public, private, and cooperatives. As a result of flawed privatisation processes over the past three decades, however, the ownership of top government enterprises has been transferred to the semi-state sector, including the Revolutionary Guard network.

The sector referred to as semi-state includes religious, revolutionary, and military foundations as well as social security and pension funds, and has grown to become the largest constituent part of the economy. Many cooperatives belong to this semi-state segment.

How the Islamic Revolutionary Guard Corps grew

In the late 1980s, as part of post-war development, then president Hashemi Rafsanjani (1989-1997) asked the IRGC to engage in economic activity beyond its military tasks in order to put its vast capacities at the service of reconstruction. Key political stakeholders welcomed this process.

IRGC-affiliated companies then began to push their way into government projects during the presidency of Mohammad Khatami (1997–2005). The most visible cases of friction were the cancellation of the Turkcell mobile licence in 2004 and also the cancellation of the Imam Khomeini International Airport security contract with the Turkish company TAV in 2005.

Revolutionary Guard principals have justified the expansion of their economic activities throughout the past two decades by claiming that the organisation enters fields that are too challenging for the private sector… [Article continues]

This is part of an article taken from our monthly Iran Strategic Focus publication. If you wish learn more about this topic or discuss the paper with us then please contact us.