Before long though, Caspian stopped allowing withdrawals. After three months, it stopped paying interest. Finally, in May, it shut its doors for good — becoming one of the largest in a long series of failures of Iranian financial institutions in recent years.
.. The outpouring of anger was directed not only at President Hassan Rouhani, who won re-election promising to revitalize the economy, but also the country’s supreme leader, Ayatollah Ali Khamenei.
.. The cascade of defaults, economists say, was not just the result of risky banking practices, but also a case study in official corruption — a major reason Iranians found their losses so infuriating. Adding to their outrage, Iranian officials made a series of statements blaming the victims for not being more careful with their money.
.. Many of the institutions, including those that merged in 2016 to form Caspian, were allowed to gamble with deposits or run Ponzi schemes with impunity for years, in part because they were owned by well-connected elites:
- religious foundations, the
- Islamic Revolutionary Guards Corps or
- other semiofficial investment funds
in the Iranian state.
.. as many as hundreds of thousands of people lost money because of the collapsing financial institutions. Iranians have a term for the growing class of victims: “property losers,” or “mal-baakhtegan” in Persian.
.. regulators have quietly steered many of the companies into mergers with larger banks to try to absorb their losses, but that has created a worsening problem of bad loans and overvalued assets throughout the banking system.
.. Economists say that as many as 40 percent of the loans carried on the books of Iranian banks may be delinquent.
.. Even Iran’s supreme leader, Mr. Khamenei, has acknowledged responsibility for the growing number of victims of “problematic financial institutions.”
“These appeals must be dealt with and heard out,” he said this month. “I myself am responsible; all of us must follow this approach.”
.. The corruption underlying the bank failures has long been an open secret
.. The loans totaled $1.9 billion, and almost all appeared to be held by well-known insiders.
.. Among them was Hossein Hedayati, a business tycoon and former member of the Revolutionary Guards, whose swift rise was so conspicuous that websites speculated about the sources of his sudden wealth. The document released by the lawmaker showed that Mr. Hedayati owed $285 million, and in a television program discussing the loan, another lawmaker, Mohammad Hassannejad, accused Mr. Hedayati of using a series of front companies to swing the loans and hide his role.
Mr. Hedayati dialed in to the program, sputtering with rage; he denied borrowing from Sarmayeh and threated to “sue everyone,” but has yet to follow through on the threat.
.. Clerics controlled religious foundations, called bonyads, that acquired commercial businesses. The largest of these, under the supreme leader, now makes up “15 to 20 percent” of the Iranian economy
.. All the semiofficial holding companies have major advantages over private businesses in favorable access to capital, tax exemptions and political connections.
.. But under a conservative president, Mahmoud Ahmadinejad, who came to power in 2005, semiofficial bodies controlled by clerics, the Revolutionary Guards or their allies dominated the newly private financial sector.
.. the Revolutionary Guards controlled at least two, while the army, the police, the municipality of Tehran and a giant religious foundation close to the Guards controlled the others.
.. the largest were usually run by individuals close to the same ruling elite
.. They say that made it almost impossible for even the best-intentioned regulators to police the banks.
.. The outsize returns promised by the banks and financial institutions lured capital that might better have gone to more productive uses
.. leaks about the high salaries of executives at state-run companies
.. The government has since tried to block the use of Telegram in Iran
Coreligionists in Kleptocracy
What Russia and Iran have in common is someday their people will say ‘enough.’
.. Vladimir Putin must get a clammy feeling from the logic of Iranians taking to the streets against a corrupt government conducting costly adventures in places like Syria.
.. The average Iranian in the street doesn’t think the benefits of the nuclear deal failed to materialize. He thinks they were hijacked and hoarded by regime cronies.
.. Widely reported was the Obama administration’s shipment of $1.7 billion in untraceable cash, via cargo plane, directly to Iran’s leaders. Of 110 international business deals touted in the Iranian press as the fruit of sanctions relief, a Reuters accounting showed that 90 went to companies controlled by Supreme Leader Ayatollah Ali Khamenei or other top officials.
.. the average Russian has seen his real income continue to shrink, no end to sanctions
.. Nor can the Kremlin shield him from the growing phenomenon of internet-based reporting on the absurd luxuries enjoyed by such regime favorites as Rosneft Chairman Igor Sechin and Prime Minister Dmitry Medvedev, much less the astonishing offshore wealth of Mr. Putin’s personal “friend,” the cellist Sergei Roldugin.
.. In both countries, normal, patriotic feeling has clearly begun leaching away from leaders whose defining quality is hypocrisy.
.. Under current leadership, 100% of everything is gobbled up in the corrupt power rivalries and overseas adventures of the leadership class (e.g., the Syrian war).
.. Nobody predicted the Arab Spring, the Ukrainian revolution that overthrew his ally Viktor Yanukovych, or the roadside execution of Gadhafi, an omen that Mr. Putin reportedly dwells on.
.. He was angry at Hillary Clinton for what he considers her efforts to foment a coup against him personally.
.. What the U.S. has over such countries is stable institutions in which to contain unpredictable events and forces.
Behind Iran’s protests, anger over lost life savings and tightfisted budgets
The unnamed woman is one of countless Iranians who say their savings have been wiped out by the collapse of fraudulent businesses and unlicensed credit institutions in recent years. Economists are now pointing to the abrupt closure of these poorly regulated institutions as laying the foundation for the unrest that struck Iran starting in late December.
.. “Banks are shutting down without any kind of notice, and it’s creating a huge political and economic backlash at a local level,” said Suzanne Maloney, senior fellow on Middle East policy at the Brookings Institution.
.. it seems to have tapped into a deep sense of alienation and frustration, that people aren’t just demonstrating for better working conditions or pay, but insisting on wholesale rejection of the system itself.”
.. the average budget of Iranian households declined by 15 percent from 2007 — when the U.N. Security Council adopted some of its toughest sanctions on Iran — to 2016.
.. Iranian President Hassan Rouhani, a relative moderate who was reelected to a second term in May, has carried out a program of fiscal austerity. It has brought down inflation but hurt job growth
.. Rouhani has also imposed what Salehi-Isfahani called “regressive policies,” such as raising energy prices while shrinking cash transfers that the poor use to pay for essential items.
.. Other new policies have favored businesses and the middle class, whose members predominantly reside in the capital, Tehran
.. Iran has seen a “divergence in living standards (measured by per capita expenditures) between Tehran on one side and the rest of the country on the other
.. The budget envisioned steep cuts for cash subsidies to the poor, while increasing fees for things like vehicle registration and traveling abroad.
.. Rouhani’s budget was also notable because it was the first time the government made public the funds allocated to Iran’s wealthy religious foundations — as well as its powerful military and paramilitary forces.
.. The disclosure of an $8 billion budget for the Revolutionary Guard Corps, Iran’s most influential security body, prompted sharp criticism from protesters who objected to government spending on Iranian involvement in regional wars, including in Iraq and Syria.
.. Religious foundations, many of which are tax exempt, also got a boost in the new budget, including, for example, a 20 percent increase for representatives of the supreme leader, Ayatollah Ali Khamenei, posted at Iran’s universities.
.. Rouhani sold the nuclear deal to Iranians as crucial for reviving the ailing economy. Iranians have been disappointed that growth has not been faster, including 74 percent who said in July that there had been no economic improvement as a result of the deal
Finding the Way Forward on Iran
the question of what Iran is. This isn’t just about whether it’s a dictatorship. What kind of dictatorship? To get the answer right is to know what kind of pressure can change its behavior or break its back.
The conventional wisdom is that it’s a dictatorship with democratic characteristics, and that it’s riven between hard-liners who want to make it more repressive and militant and reformists who want to make it less. Western policy, according to this analysis, should do what it can to encourage and reward the latter at the expense of the former.
But the analysis fails to explain why, for instance,
- the number of executions in Iran rose under the ostensibly reformist leadership of President Hassan Rouhani.
- It doesn’t account for Foreign Minister Mohammad Javad Zarif laying a wreath in honor of Imad Mugniyeh, the Hezbollah terrorist responsible for killing hundreds of Americans. And it doesn’t explain
- Tehran’s hyperaggressive foreign policy in the wake of the 2015 nuclear deal, which was supposed to inaugurate its opening to the rest of the world.
A better way of describing Iran’s dictatorship is as a kleptotheocracy, driven by impulses that are by turns doctrinal and venal.
.. Note how quickly the provincial protesters turned their sights on the supreme leader: Maybe it’s because they know better than most how thoroughly he’s fleecing them.
.. a supposedly charitable foundation controlled by Khamenei, known as Setad, had assets worth an estimated $95 billion.
.. “Setad built its empire on the systematic seizure of thousands of properties belonging to ordinary Iranians
.. the Islamic Revolutionary Guards Corps, estimated to controlanother 15 percent of the Iranian economy.
.. But it also means that the kleptotheocracy is uniquely vulnerable to charges of hypocrisy.
.. All Islamist movements take the concept of justice (as opposed to freedom) as their organizing political concept, and all of them ignore it at their peril.
.. Ken Weinstein of the Hudson Institute has argued that the U.S. government “should release details on the billions in stolen assets” held by the I.R.G.C. and the supreme leader. That — and making sure ordinary Iranians learn about them, one scandalous disclosure at a time — is the right idea.
.. put Setad, along with its scores of front companies and subsidiaries, under U.S. sanctions for corruption. The Obama administration did such a thing in 2013, only to reverse course as part of the nuclear deal.