Iran Has Secured Hard Currency For Essential Imports - Official

The group of experts who compiled and supervised the report say that measures such as size of government, legal system and property rights, sound money, freedom to trade internationally and regulations were considered in deciding the rankings. The data used was from 2019, but the report was published last month. The report is issued every five years, with the previous one published in 2015.

“The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property,” Fraser Institute said.

Iran ranked at the very bottom of the scale in freedom to own foreign currency bank accounts, and most notably in freedom of foreigners to invest and even travel to Iran. This has been detrimental to Iran’s economy especially in its oil and gas sectors, where infusion of new capital and technologies are sorely needed. Iranian officials have said that more than $50 billion is needed immediately to upgrade decaying infrastructure.

While the Iranian government has been blaming international sanctions in early 2010s and US sanctions since 2018 for its economic problems, the report sheds light on the need to reform legal, banking and other regulations by the government to boost investments and productivity.

Data in the report show that Iran has a closed economic system with a big government sector and huge subsidies that limit the government’s ability to invest. What is not well reflected in the data is the size of state ownership, since Iran presents most of its large industries and companies as privately held, while they are in fact hybrid entities controlled by the government and owned by powerful insiders and state banks or “charities”.

The data in the report also show a high degree of “military interference in rule of law and politics,” over the years. In fact, the Islamic Revolutionary Guard Corps (IRGC) is one the largest business conglomerates in the country, stifling competition and any chance of foreign investments.

In the section about ‘Freedom to trade internationally’, Iran received low scores in tariff rates and the gap between official and black market currency exchange rates.

The regulatory landscape also received low marks, with credit market regulation, including interest rate controls, and labor laws hitting low scores.

An overall observation shows little change in economic freedom since the last report was issued in 2015. The bottom ten countries in the study were: Central African Republic, Democratic Republic of Congo, Syria, Republic of Congo, Iran, Zimbabwe, Algeria, Libya, Sudan, and Venezuela.

Around seven percent of world cryptocurrency mining by powerful computers that use a lot of electricity is estimated to be taking place in Iran. The world’s cheapest electricity rates in the country encourage to lucrative business, in some cases with the involvement of some Chinese entities.

Iran experienced renewed electricity shortages in June when temperatures rose and air-conditioning units were turned on. The controversial practice of cryptocurrency mining was banned for three months, although tens of thousands of illegal, underground computers continued to work.

Electricity shortages are again expected in the winter, as Iran is chronically short of power generation due mainly to lack of investments in the sector. A severe drought in 2021 has further reduced power generation as most dams are more than half empty.

Although some officials have said that crypto mining only uses 300 megawatts of power, others have warned that usage is much higher and it can threaten to power grid.

Local media have been reporting that even in some government offices illegal crypto machines have been operating. The director of Tehran’s stock exchange Wednesday announced his resignation after cryptocurrency mining machines were uncovered at the offices of the organization.

This follows speculation for some months that a reported agreement over using Iranian money frozen in Korean banks to buy humanitarian goods might be extended to cover Korean-made home appliances, which dropped out of the Iranian market when the United States introduced stringent banking sanctions in 2018.

The letter, signed by Khamenei office chief Mohammad Mohammadi Golpaygani September 6, cited a call from Iranian manufacturers that Korean home appliances be kept out.

Khamenei's ban could also be a means to pressure South Korea to address the issue of Iran's frozen funds. On Thursday, two days after the ban was made public, Iran's foreign minister Hossein Amir-Abdollahian held a phone talk with his Korean counterpart Chung Eui-yong and urged him to redouble efforts to address the issue.

Raisi conveyed the leader’s office instruction to the relevant ministers − for the economy, and for industries, mines and trade − September 8. Official news agencies Tuesday published the two communications.

The value of Iran's home appliances market has been estimated at between 4.5 to 6 billion dollars. Aside from problems with US sanctions, Iran has for several years not issued import permits for home-appliances if comparable items are made at home.

Khamenei's letter referred only to "two South Korean companies" but meant LG and Samsung, who ceased trade with Iran after the US introduced in 2018 financial sanctions threatening third parties in 2018, despite Iran’s warning it would be difficult for them to return once US sanctions ended. The Korean firms had previously established an important market, including the assembly in Iran by Iranian companies of a variety of goods including air conditioners, and TV and audio sets.

In February media reported the US Treasury was in talks with South Korea to allow the transfer of some of Iran's funds frozen by Korean banks to Switzerland for humanitarian purchases. In July the South Korean Finance Ministry said an agreement had been reached.

Some Iranian media claimed the agreement also allowed frozen funds to be used to buy products from LG and Samsung to send to Iran. This was denied by an official of Iran's Home Appliances Industries Association, Abbas Hashemi, on September 6 in an interview with the Iranian Students News Agency (ISNA), when he insisted Tehran rather than Washington should decide how to use the frozen money.

"The matter is not too complicated,” Mohammad-Reza Bagheri, a hardliner activist tweeted Thursday. “South Korea wanted to pay its debt with home appliances, conquer our markets and paralyze our industries…the Supreme Leader has opposed it."

Others on social media took a different view, posting in support of importing Korean products by claiming they were better than others on the market, or that not importing South Korean products benefits Chinese companies. Goldiran and Sam Service, the two Iranian companies that assembled LG and Samsung products for over two decades, now work with Chinese producers.

"Khamenei's ban on South Korean home appliances is more backing Chinese than Iranian domestic production because currently [Iranian companies] only assemble Chinese parts in Iran. Nothing is being produced," one of the many tweets against the ban said.

This follows speculation for some months that a reported agreement over using Iranian money frozen in Korean banks to buy humanitarian goods might be extended to cover Korean-made home appliances, which dropped out of the Iranian market when the United States introduced stringent banking sanctions in 2018.

The letter, signed by Khamenei office chief Mohammad Mohammadi Golpaygani September 6, cited a call from Iranian manufacturers that Korean home appliances be kept out.

Khamenei's ban could also be a means to pressure South Korea to address the issue of Iran's frozen funds. On Thursday, two days after the ban was made public, Iran's foreign minister Hossein Amir-Abdollahian held a phone talk with his Korean counterpart Chung Eui-yong and urged him to redouble efforts to address the issue.

Raisi conveyed the leader’s office instruction to the relevant ministers − for the economy, and for industries, mines and trade − September 8. Official news agencies Tuesday published the two communications.

The value of Iran's home appliances market has been estimated at between 4.5 to 6 billion dollars. Aside from problems with US sanctions, Iran has for several years not issued import permits for home-appliances if comparable items are made at home.

Khamenei's letter referred only to "two South Korean companies" but meant LG and Samsung, who ceased trade with Iran after the US introduced in 2018 financial sanctions threatening third parties in 2018, despite Iran’s warning it would be difficult for them to return once US sanctions ended. The Korean firms had previously established an important market, including the assembly in Iran by Iranian companies of a variety of goods including air conditioners, and TV and audio sets.

In February media reported the US Treasury was in talks with South Korea to allow the transfer of some of Iran's funds frozen by Korean banks to Switzerland for humanitarian purchases. In July the South Korean Finance Ministry said an agreement had been reached.

Some Iranian media claimed the agreement also allowed frozen funds to be used to buy products from LG and Samsung to send to Iran. This was denied by an official of Iran's Home Appliances Industries Association, Abbas Hashemi, on September 6 in an interview with the Iranian Students News Agency (ISNA), when he insisted Tehran rather than Washington should decide how to use the frozen money.

"The matter is not too complicated,” Mohammad-Reza Bagheri, a hardliner activist tweeted Thursday. “South Korea wanted to pay its debt with home appliances, conquer our markets and paralyze our industries…the Supreme Leader has opposed it."

Others on social media took a different view, posting in support of importing Korean products by claiming they were better than others on the market, or that not importing South Korean products benefits Chinese companies. Goldiran and Sam Service, the two Iranian companies that assembled LG and Samsung products for over two decades, now work with Chinese producers.

"Khamenei's ban on South Korean home appliances is more backing Chinese than Iranian domestic production because currently [Iranian companies] only assemble Chinese parts in Iran. Nothing is being produced," one of the many tweets against the ban said.

Hashemi was appointed earlier this month by President Ebrahim Raisi (Raeesi), putting him for the first time in charge of a financial powerhouse, with millions under its care. Raisi has also handed him a potential political base with a chance to develop closer ties across the military, including the IRGC’s extraterritorial, dark-arts Quds (Qods) Force.

Before serving as the head of the martyrs foundation, Ghazizadeh was the deputy speaker of the Majles, the Islamic Republic’s parliament. He is a former member of the Paidary Front, an ultra-hardline political organization founded by disciples and supporters of Mohammad Taghi Mesbah Yazdi, a militant cleric even by the Islamic Republic’s standards. Ghazizadeh also ran in Iran’s 2021 presidential elections and came in fourth. He comes from a prominent insider family: a brother and a cousin serve in the Majles and another cousin is a former health minister.

In 1980 then-Supreme Leader Ruhollah Khomeini established the foundation to aid the families of those who had fallen in the revolution. As the Iran-Iraq war began, the foundation added the families of war dead to its portfolio. In 2004 providing service to veterans was added to its responsibilities. Like many other institutions in the Islamic Republic, the foundation’s leadership consists of two primary officials: the supreme leader’s representative and the head of the foundation. Iran’s president appoints the head in consultation with the supreme leader, effectively intertwining the two roles.

Since martyrdom is the cornerstone of Shiism, martyrs, veterans, and their families are of immense political importance. The foundation has been the vehicle for keeping the families of martyrs aligned politically: it rewards regime-supporters with financial benefits and employment and education opportunities. The refractory lose these benefits and more.

While Iran’s national budget provides it with funding, the foundation also has a vast business empire and operates abroad. It thus has prodigious financial resources to advance its agenda. One of the key business entities it controls is Kowsar Economic Organization, which owns 43 firms, some of which are holdings or investing companies, with extensive interests in a wide range of industries. The Shahed Investment Company is another major economic arm of the organization that is publicly traded and heavily involved in the real estate and construction sectors. The foundation also owns Dey Bank, which the United States sanctioned in 2018. These three entities closely work together and have intertwined ownershipstructures and operations.

The foundation extends services to martyrs and veterans from other countries, too. Last year, the foundation’s chief announced that it covers members of the Fatemiyoun brigades, the Shiite Afghan brigade of the Quds Force, which has been fighting alongside the IRGC in Syria. The Lebanese Hezbollah has its own martyrs foundation, founded in 1982, which is, according to the U.S. Treasury, a branch of Iran’s martyrs foundation. The Iranian foundation and its officials regularly meet with representatives of Hezbollah and provide technical and financial support. Similarly, in Yemen, the Iranian foundation has created a branch to help the Shiite Houthis, according to some reports.

The Iranian organization also supports families of Palestinian terrorists through the Palestinian Martyrs Foundation, founded in 1993 as a branch of the Lebanese foundation. The Iranian mothership’s relations with its foreign proxies are quite similar to the Quds Force’s relationship with its foreign proxies — that is, the foundation provides financial, training, and technical support to loyal local elements, who then run the day-to-day operations of the affiliated organizations.

The United States first sanctioned the Iranian foundation and its Lebanese branch in 2007. Over the years, this organization and its front companies managed to raise funds in the United States and transfer it to Hezbollah. In 2020 Treasury designated a network of firms and individuals related to the Lebanese foundation. However, Washington has not sanctioned the Iranian Martyrs Foundation’s business network even though Tehran uses it to finance terrorism by guaranteeing lifelong financial support for jihadists, terrorists, and their families.

That omission warrants correction: Washington should sanction Ghazizadeh and the rest of the foundation’s leadership. The Kowsar Economic Organization, Shahed Company, and their subsidiaries and controlled firms should also not escape punishment.

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD). Follow Saeed on Twitter @SGhasseminejad. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.

The opinions expressed by the author are not necessarily the views of Iran International