The Islamic Revolutionary Guard Corps (IRGC) has extended its influence into vast economic sectors, controlling everything from construction to agriculture, often bypassing formal regulations and generating revenue through black-market activities. These economic practices enable the regime to bolster its legitimacy, support the military, and suppress opposition, all while maintaining control over vital resources such as food and water.
Background: Autocracies and control over the economy According to Freedom House, Iran is considered to be a "not free" country, where the ultimate power rests in the hands of the country's supreme leader, Ayatollah Mojtaba Khamenei, and the unelected institutions under his control. The United States Department of State defines Iran as a theocracy governed by an autocratic regime.
An autocrat exerts control over the populace through the military, police, and secret services, yet cannot wield the same level of influence over these forces themselves. To preserve his life and regime, a dictator must secure the loyalty of the military and security forces, as the majority of successful coups are not the result of spontaneous popular uprisings but are instead led by high-ranking officers. To preempt a coup that could cost him and his family their lives, dictators suppress dissent, outlaw political competition, heavily restrict freedom of expression, and ban all criticism of the government. However, repression can act as a double-edged sword. On the one hand, it instills fear in the populace, making it more challenging to organize subversive movements; on the other, it obscures the truth about the dictator's actual support among the people. Even the dictator's closest advisors often hesitate to relay unpleasant truths, leaving the ruler in an insulated bubble.
Given this mutual signaling problem between the dictator and his subjects, the dictator garners the support and loyalty of the state's power centers—especially the military and police—by granting them generous benefits. In a dictatorship, those controlling these power centers typically receive benefits that far exceed their economic contribution, while others receive less than they contribute. For instance, senior officials in the Soviet Union enjoyed spacious homes and a lifestyle beyond the reach of ordinary citizens. In Nazi Germany, Hitler—who arrived in Germany as a destitute vagrant from Austria—amassed a considerable personal fortune and used state funds as if they were his own. He also granted estates and properties to military personnel and high-ranking officials within Germany's power structure. Additionally, Hitler secured the loyalty of German industrialists by controlling government contracts. Between January and March 1933, companies with strong connections to the Nazi Party saw their profits rise 5%–8% more than similar companies lacking such connections.
In Egypt, a similar system is in place, where the military functions not only as an armed force but as an economic empire, owning factories, schools, residential buildings, and more. Similar patterns are observed across other African countries. Hodler and Raschky (2014) noted that in such regimes, investments in education and healthcare are often directed towards regions inhabited by the ruler's tribe or ethnically close populations. Similarly, Franck and Rainer (2012) found that African leaders in sub-Saharan countries tend to improve health and education outcomes primarily within their ethnic groups.
As Machiavelli observed in his book The Prince, a wise ruler not only secures the loyalty of power centers but also seeks to win the support of the people. One common strategy among dictators for achieving this is through a personality cult. For example, in his book Hitler's Willing Executioners: Ordinary Germans and the Holocaust Daniel Goldhagen writes that Hitler was able to neutralize internal opposition despite having a relatively small paid secret police force, relying instead on informal informants who reported dissenters out of admiration for him in his early years. Moreover, dictators often gain popularity the longer they remain in power.
The IRGC Economic Apparatus In Iran, the Islamic Revolutionary Guard Corps (IRGC) has developed from a purely military entity into a vast business conglomerate, controlling numerous sectors within the Iranian economy. The RAND report, "The Rise of the Pasdaran", and the Janes report detail this transformation, illustrating how the IRGC has become a dominant economic and political player within Iran. The report attributes the IRGC's rise to a combination of informal social networks, state-sanctioned monopolistic practices, and its exploitation of Iran's geopolitical and economic circumstances. The IRGC has capitalized on various post-revolutionary factors, including wartime reconstruction, to expand its business activities across sectors such as oil, construction, engineering, manufacturing, and agriculture. This expansion not only secures significant revenue but also serves to build a loyal base among Iran's poorer, rural population.
Origins and Institutional Growth The IRGC's move into economic ventures began shortly after the Iran-Iraq War when Supreme Leader Ayatollah Khamenei formalized a hierarchical structure that paved the way for privileges and economic perks for the country leadership. The IRGC's expansion accelerated during the 1990s under President Rafsanjani, who pushed for government institutions to engage in economic activities to improve the state budget. By the late 1990s, the IRGC's commercial interests were firmly established, and grew rapidly, especially during Mahmoud Ahmadinejad's presidency (2005–2013). Ahmadinejad's government granted numerous no-bid contracts to IRGC-linked companies, particularly in critical sectors like oil extraction and pipeline construction, effectively creating a protected monopoly for the organization.
Foundations and Bonyads Integral to the IRGC's economic reach are Iran's bonyads, or parastatal foundations, that manage vast resources and assets. While not directly managed by the IRGC, major bonyads such as the Bonyad Mostazafan and the Bonyad Shahid maintain close ties with the organization. The Bonyad Mostazafan, for example, controls extensive resources in agriculture, tourism, and industry, while the Bonyad Shahid (Foundation of Martyrs and Veterans Affairs) primarily supports families of war veterans and martyrs, aligning itself with IRGC interests. Through these bonyads, the IRGC maintains influence over many sectors of Iran's economy, solidifying its power and securing revenue streams that often bypass public oversight and accountability. The IRGC's connection to these charitable foundations helps it sustain public legitimacy by presenting itself as an institution committed to social welfare and economic development.
Khatam al-Anbiya and Public Works A crucial pillar of the IRGC's economic operations is the Khatam al-Anbiya Construction Headquarters. This organization, established to manage reconstruction projects after the war, has since become Iran's largest engineering and development contractor. Khatam al-Anbiya, with its vast resources and thousands of employees, controls significant infrastructure projects, including the construction of pipelines, roads, dams, and urban transportation networks. Its largest projects are often awarded by the state without competitive bidding, allowing it to maintain a monopoly over critical infrastructure and energy projects. For instance, Khatam al-Anbiya was awarded a $1.3 billion no-bid contract to build a gas pipeline from Asaluyeh to Iranshahr and several billion-dollar contracts for work in the Pars South oil field. These projects not only provide lucrative financial returns for the IRGC but also reinforce its social influence by generating employment in rural areas and aligning its operations with broader development goals. The Basij, a volunteer militia under the IRGC, supports many of these projects, enhancing the IRGC's reputation as a champion of rural economic growth. By investing in rural areas, the IRGC secures grassroots support, using development projects as a means of integrating local populations into its patronage networks.
Black Market and Illicit Operations In addition to formal economic activities, the IRGC is widely believed to control a vast black market economy. Accusations from reformist political figures, such as Mehdi Karrubi, claim that the IRGC operates numerous unofficial ports, or "invisible jetties," where it facilitates the import and export of contraband. Allegedly, these illegal networks allow the IRGC to smuggle banned items—such as alcohol and narcotics—and to make substantial profits on untaxed goods. Some estimates suggest that these black-market activities may contribute billions to the IRGC's annual revenue. Despite the lack of concrete evidence, the IRGC's access to unmonitored borders and coastal facilities provides the necessary infrastructure for such activities. These operations feed into the IRGC's shadow economy, offering an avenue for unofficial revenue that supports not only the personal wealth of its leaders but also military initiatives and strategic goals, including its nuclear research and support for regional allies.
Public Perception and Socio-Political Influence The IRGC's dominance over Iran's economy and its extensive patronage networks have, thus far, shielded it from widespread public scrutiny. Many Iranians remain unaware of the extent of the IRGC's control over the economy, partly due to the organization's secretive handling of its business affairs. By monopolizing the economy, the IRGC has managed to maintain some public support, particularly among lower-income and rural populations who benefit from its development projects. However, resentment among traditional business elites and private contractors is growing, especially when these groups are sidelined by the IRGC's monopoly on lucrative government contracts. Some business owners complain that they cannot compete with IRGC-affiliated firms that enjoy advantages such as access to conscript labor, military equipment, and state funds. The IRGC has increasingly justified its economic dominance by citing the Iranian constitution, which allows military entities to engage in economic activities during peacetime. IRGC officials often claim that their business ventures benefit ordinary Iranians, emphasizing the lower cost of IRGC services and their efficiency in delivering public projects. Nevertheless, the IRGC's vast business empire and monopolistic practices have sparked criticism and concerns about its unchecked power, especially as it shifts closer to a political counterforce within the state. For instance, the IRGC's interference in the management of the Imam Khomeini Airport, when it forced out a Turkish contractor to take control of operations, highlights its willingness to leverage economic power for political gain.
The IRGC and US sanction As sanctions restrict Iran's access to international markets, the IRGC, with its extensive control over smuggling networks and black-market operations, is poised to dominate the economy further. This consolidation of economic power enhances the IRGC's influence within Iran, undermining the sanctions' intended effect of weakening the regime.
The IRGC and Syria