ON APRIL 25, the United States and Europe adopted new punitive measures against Iran. While European foreign ministers imposed a complete arms embargo and a more extensive travel ban against Tehran's leadership, the United States sanctioned fourteen people, companies, and agencies which buy and sell Iranian weapons.
These latest measures targeting Iran may impact the country's economy by raising already high levels of political and commercial risk, thus forcing many European and Asian corporations and banks to cease their operations there. But, the sanctions will also have an unintended effect: as Europe and Asia forgo commercial opportunities, Tehran will turn to its hardline military elite, the Islamic Revolutionary Guard Corps (IRGC), to fulfill its commercial and infrastructural needs. In the process, the IRGC will fill its coffers with billions of dollars, and further export its brand of terror.
There is precedent. The first sign of the IRGC's nationalist economic ambitions came in 2004, when Guard forces shut down Tehran's Imam Khomeini airport rather than allow a Turkish-led consortium to run airport operations. However, it took President Mahmoud Ahmadinejad's June 2005 election to the presidency to set the IRGC on the road to big business.
Within a year of Ahmadinejad's victory, Khatam-ol-Anbia (Ghorb), the engineering wing of the IRGC, was awarded contracts without competitive bidding, violating tender formalities established by the Iranian parliament. Among these deals was a $1.3 billion contract, issued by the National Iranian Gas Company, to construct Iran's seventh gas pipeline. The pipeline will run from the Persian Gulf to the Pakistani border.
Created in 1990 after the Iran-Iraq war, Ghorb's purpose was to employ out-of-work soldiers. Today, Ghorb, which is not dissimilar to the Army Corps of Engineers, oversees nearly one-third of the IRGC's personnel, no less than 40,000 people. For comparison's sake, consider that the American engineering giant Bechtel employs roughly the same number of people worldwide.
Ghorb hit the jackpot in June 2006, securing three more deals: Pars Oil and Gas Company, a subsidiary of the state-owned National Iranian Oil Company, awarded a $2.3 billion contract to develop Phases 15-16 of Iran's South Par development--the world's second largest gas field. This is the same field that has attracted international oil giants such as France's Total, Italy's Eni, Royal Dutch Shell, Malaysia's Petronas, and Spain's Repsol.
In July 2006, despite concerns over project financing--European and Asian banks have become less inclined to finance Iranian projects because of heightened political risk--Tehran Urban & Suburban Railway Company gave Ghorb a $1.2 billion contract to build the seventh line of Tehran's metro system and a $350 million civil engineering contract for the fourth line. Ghorb itself financed the seventh line, while China's Noringo underwrote the fourth and provided equipment for its construction.
The organization's foray into the lucrative world of government contracting bodes ill for the Iranian people and for stability in the broader Middle East. IRGC money is fungible: flush with over $5 billion cash, the Corps will further augment the Basij, the paramilitary force responsible for regime protection. The money will also cement Iran's sponsorship of terrorist organizations like Hezbollah and Hamas and grease the flow of sophisticated weaponry to these terror groups.
Inside Iraq, serial numbers on weapons and explosives used by a number of insurgent groups point to the Qods (Jerusalem) Force, the IRGC's foreign arm. Some American intelligence officials believe Qods has financed and armed Shiite militias. The Iraqi Ministry of Defense has accused Qods of supporting insurgent cleric Moktada al-Sadr with $80 million in funding and resources.
IRGC commanders will also continue to bankroll and provide arms specifically for Hezbollah and Hamas terrorist operations. The Corps, for instance, provided radar-guided rockets used by Hezbollah during last summer's war against Israel. Last October, Hamas Interior Minister Said Siyam inked an agreement with the IRGC to transform Hamas' military wing into an adjunct IRGC force. The cost of the training was $60 million--and the IRGC paid the bill.
The regime in Tehran is being squeezed by foreign banks and companies that are increasingly reluctant to shoulder the risk of business with Iran. But while access to foreign financing is shrinking, a growing portion of what remains a large commercial market is going to the hardest of the hardliners.
Omeed Jafari is a research associate in foreign and defense policy studies at the American Enterprise Institute in Washington, D.C.
