Cartoon by Yaakov Kirschen

Iranian anger at elite corruption grows as sanctions bite

The Financial Times: Iran’s currency crisis has left ordinary citizens enduring soaring living costs, but prosecutors allege that corrupt business people have turned it into a moneymaking opportunity.

In one case the name of a dead person was used to import 10,500 mobile phones using foreign currency issued at Iran’s favourable official rate. In another an unskilled worker thought to be someone else’s pawn managed to buy 38,000 gold coins from the central bank at below-market rates.

Both examples are likely to be aired by Tehran’s state prosecutors when dozens of businessmen go on trial for “economic disruption”. The first cases began on Sunday when three mobile phone importers appeared in court. The hearings are the first in about two decades to be given high-profile broadcast slots on state television. Their prominence reflects the regime’s desire to show it is tackling graft as public anger grows over what many Iranians believe is endemic corruption among their leaders and the business elite.

The businessmen, who are yet to be identified publicly, are accused of exploiting a slide in the rial and a shortage of foreign currency via scams that involved foreign exchange trades and the import of cars and mobile phones.

President Hassan Rouhani, a pragmatist, made rooting out graft one of his main pledges when he campaigned for re-election last year. Analysts say he has made some headway, even attempting to tackle corruption within the business empire controlled by the Revolutionary Guards, a powerful force in the regime’s hardline camp.

But after President Donald Trump in May withdrew from the nuclear deal Iran signed with world powers and reimposed sanctions on the Islamic Republic, the new squeeze on financing sources led to a profusion of more corruption cases.

Many Iranians fear politically connected businessmen have taken advantage of the crisis to enrich themselves.

Public discontent this month spurred a grassroots anti-corruption campaign on social media that increased scrutiny on the lives of the children of the ruling elite, who many suspect of using their privileged positions to accumulate vast wealth.

The “#Where is your child?” campaign received prompt responses from Mohammad Javad Zarif, the foreign minister and other senior officials, a clear sign that some of the country’s politicians are increasingly aware of the growing fury among Iranians.

Some Iranians, however, say the wider impact of the trials is likely to be limited because corruption is so pervasive. “No part of the ruling system has been immune from corruption, which has contaminated all sectors, from the judiciary to the parliament and the government,” says Hossein Raghfar, an economist. “Fighting corruption cannot succeed under the current circumstances, but public anger is putting unavoidable pressure on policymakers to deal with it.”

Many of the recent graft cases involve alleged scams related to government measures to restrict the allocation of foreign currency and stabilise the rial. This has meant importers must apply to the central bank to access euros if they want to import goods, with sectors such as food and pharmaceuticals supposed to be prioritised.

The central bank has sought to maintain the rial exchange rate at 42,000 to the dollar, while in the open market the currency has plummeted by about 60 per cent this year. That has meant importers receiving euros at the official exchange rate can make huge profits selling imported goods at the informal rate in the domestic market.

The central bank also sold billions of dollars of gold coins in a bid to curb prices that spiked as Iranians panic-bought the precious metal. It was a contentious decision that analysts say partly explained the sacking of the bank’s governor last month.

The government’s measures have done little to ease the daily struggles of ordinary Iranians. Instead, economic grievances have fused with corruption complaints to fuel a wave of street protests across Iran over the past eight months, many of which have taken on an anti-regime tone.

For some Iranians, the scandals have strengthened a perception that sanctions are hurting ordinary people but not the elite. “Officials say the sanctions have no impact on the economy. They don’t feel the impact because their children live abroad and their salaries are astronomical,” said Ahad, a worker at a glass factory outside Tehran. “Our life is not even about the basics any longer. But theirs is luxurious.”

Ayatollah Ali Khamenei, the supreme leader, who is desperate for the regime to display a united front as US pressure intensifies, has in recent speeches called on the judiciary to address corruption. But the concerns about graft have been exacerbated as rival factions within the regime have used corruption allegations to attack each other.

“It seems that the power struggle is so tense that even fighting with corruption is designed to eliminate each other,” says one reformist analyst.