Commentary Magazine


Khamenei Stays A Step Ahead of the West

Critics of the administration’s nuclear deal with Iran, and proponents of sanctions more generally, have been making a simple argument: any substantial sanctions relief will be difficult to undo if Iran doesn’t comply with the terms of the deal. That means Iran gets a cash infusion with no risk, and a foot in the door of sanctions relief could be enough to throw it wide open, considering the overall lack of appetite in the West for the sanctions regime.

Critics cannot prove what the administration will do after this deal runs its initial course. But they can demonstrate that the other part–the financial windfall Iran’s leaders stand to gain right away–is already taking place. That’s the upshot of yesterday’s Reuters piece on Ayatollah Ali Khamenei’s financial empire and how the nuclear deal is already paying off for him. But first, it’s necessary to refer to the background of this story, which was exposed by Reuters in November.

Khamenei, Reuters revealed, controls an “economic empire” under the organization Setad. Reuters estimated the holdings of the company to be worth nearly $100 billion, but the combination of how Setad makes its money and what that organization enables Khamenei to accomplish are the more important details:

But Setad has empowered him. Through Setad, Khamenei has at his disposal financial resources whose value rivals the holdings of the shah, the Western-backed monarch who was overthrown in 1979.

How Setad came into those assets also mirrors how the deposed monarchy obtained much of its fortune – by confiscating real estate. A six-month Reuters investigation has found that Setad built its empire on the systematic seizure of thousands of properties belonging to ordinary Iranians: members of religious minorities like Vahdat-e-Hagh, who is Baha’i, as well as Shi’ite Muslims, business people and Iranians living abroad.

Setad has amassed a giant portfolio of real estate by claiming in Iranian courts, sometimes falsely, that the properties are abandoned. The organization now holds a court-ordered monopoly on taking property in the name of the supreme leader, and regularly sells the seized properties at auction or seeks to extract payments from the original owners.

The supreme leader also oversaw the creation of a body of legal rulings and executive orders that enabled and safeguarded Setad’s asset acquisitions. “No supervisory organization can question its property,” said Naghi Mahmoudi, an Iranian lawyer who left Iran in 2010 and now lives in Germany.

Land, resources, legal power, money–Setad gave Khamenei unparalleled access to it in Iran. Setad invests, as would be expected, in Iran’s energy industry. The Treasury Department wasn’t fooled, and specifically targeted Setad and dozens of companies it is believed to oversee as part of an attempt to close off financial escape hatches that enabled the Iranian leadership to get around sanctions.

Now, as Reuters reports, some of those escape hatches have been reopened:

Khamenei controls a massive business empire known as Setad that has invested in Iran’s petrochemical industry, which is now permitted to resume exports. Under a six-month deal between Iran and world powers, Tehran has promised to scale back its nuclear development program in exchange for the suspension of certain economic sanctions, including curbs on the export of petrochemicals.

On Monday, the day the suspension of the restrictions took effect, the U.S. Treasury Department published a list of 14 Iranian petrochemical companies that previously had been sanctioned but are now permitted to do business abroad. The list includes three firms that the department said last year are controlled by Setad – Ghaed Bassir Petrochemical Products Co, Marjan Petrochemical Co and Sadaf Petrochemical Assaluyeh Co.

The Treasury Department responded to this latest report by saying Iran’s leaders won’t gain much from petrochemical exports during the next six months, probably not more than $1 billion. But that’s not nothing, and it also misses the point of the story: the Iranian leadership appears to be a step ahead of its Western counterparts on this score. And who knows what they’ll be able to work out given six months’ time.

And it’s what makes press briefings like today’s from Jay Carney so troubling. As the Washington Examiner reports, Carney was asked about the latest comments from the Iranian foreign minister that they “did not agree to dismantle anything.” Carney called it “spin.” Perhaps, but that means, according to Carney, the Iranians are lying about their obligations. So what makes this administration think Iran’s government can be trusted to fulfill obligations it says don’t exist? Meanwhile, as the two sides argue in public over what they actually agreed to, the sanctions relief remains in place.

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