Double Think:

In 1979, Ayatollah Ruhollah Khomeini and his followers overthrew Iran’s Western-backed monarchy in favor of a system of “social justice” and Islamic governance. This year, as millions of households struggle against increasingly oppressive economic problems, many Iranians are asking themselves what happened. With major banks facing bankruptcy, and inflation at its highest since the 1980s, the country’s leaders have blamed U.S. sanctions and a few isolated cases of corruption. But the real economic threat to the Islamic Republic lies at the heart of the system itself.

Khomeini’s republic is ailing because the institutions it created to uphold principles of Islamic justice are in fact predatory capitalist conglomerates. Its founding father set up these organizations, or bonyads, to perform religious, military and charitable activities on behalf of the state. In Khomeini’s distrust of the Western-inspired governmental bodies inherited from the previous regime, he allowed the bonyads to operate in financial obscurity. Today, Iran’s largest bonyads operate as an unchecked economic power that paralyzes enterprise and allows public funds to flow out of the country and into private pockets.

This lack of checks and balances appears messy at first. However, a scrupulous examination of the bonyads and their assets reveals an intentionally designed system that benefits a chosen circle of individuals, making it difficult to determine where bonyads end and the government begins. The largest bonyads are managed by leading clerics, politicians and generals, while members of the Islamic Revolutionary Guards Corps (IRGC) sit on the boards of important bonyad-run companies in nearly all economic sectors.

Though government-funded, bonyads are completely independent of state oversight. They evade taxes and refuse to publish financial reports. One such case is Mostazafan Foundation (MF), a bonyad with nearly $1 billion in annual exports to several continents. Even its director, Mohammad Saeedikia, has admitted to state-run media outlets that he lacks documentation on the total volume of MF’s wealth. Indeed, the only institution with any formal oversight of the bonyads’ operations is the office of the supreme leader, Ali Khamenei, whose role in Iran’s economic activities is frequently overlooked. Yet he presides over a system that appears willfully unregulated.

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