Identifier
Created
Classification
Origin
09RPODUBAI302
2009-07-27 14:20:00
SECRET
Iran RPO Dubai
Cable title:
IRAN: WHAT'S GOOD FOR THE IRGC IS GOOD FOR IRAN
how-toVZCZCXRO7253 RR RUEHBC RUEHDE RUEHKUK RUEHTRO DE RUEHDIR #0302/01 2081420 ZNY SSSSS ZZH R 271420Z JUL 09 FM RPO DUBAI TO RUEHC/SECSTATE WASHDC 0463 INFO RUEAIIA/CIA WASHDC RHEHAAA/NSC WASHINGTON DC RUEIDN/DNI WASHINGTON DC RUCNIRA/IRAN COLLECTIVE RUEKJCS/SECDEF WASHINGTON DC RUEHDIR/RPO DUBAI 0464
S E C R E T SECTION 01 OF 02 RPO DUBAI 000302
SIPDIS
STATE PLEASE PASS TO TREASURY S. VINOGRAD
E.O. 12958: DECL: 7/27/2019
TAGS: PGOV PREL ECON EFIN EIND EINV ETRD IR
SUBJECT: IRAN: WHAT'S GOOD FOR THE IRGC IS GOOD FOR IRAN
DUBAI 00000302 001.2 OF 002
CLASSIFIED BY: Timothy Richardson, Acting Director, Iran
Regional Presence Office, Department of State.
REASON: 1.4 (b),(d)
S E C R E T SECTION 01 OF 02 RPO DUBAI 000302
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STATE PLEASE PASS TO TREASURY S. VINOGRAD
E.O. 12958: DECL: 7/27/2019
TAGS: PGOV PREL ECON EFIN EIND EINV ETRD IR
SUBJECT: IRAN: WHAT'S GOOD FOR THE IRGC IS GOOD FOR IRAN
DUBAI 00000302 001.2 OF 002
CLASSIFIED BY: Timothy Richardson, Acting Director, Iran
Regional Presence Office, Department of State.
REASON: 1.4 (b),(d)
1. (C) Summary: Iranian businessmen who have experience with
Iran's Islamic Revolutionary Guard Corps's (IRGC) economic
activities maintained that its involvement is increasing
economic inefficiencies and discouraging the private sector.
They lamented that without a strong challenger and President
Ahmadinejad's pledge to redistribute wealth and create jobs, in
part by ceding projects to the IRGC, its growing economic
dominance will not abate. Our contacts believed that IRGC
companies are unassailable and were adamant that Ahmadinejad has
created a new patronage network that challenges the clergy. End
Summary.
THE IRGC STEPS IN
--------------
2. (S) An Iranian general manager of a company that sells oil
field development software to Iranian companies recently related
to IRPO the troubles his friends have faced from the IRGC. All
the more surprising in this case was that they were generally
respected because of their well-known persecution under the Shah
and they were well connected. After the Revolution, the friends
obtained jobs at an Iranian oil company but later started their
own construction company, eventually leveraging their
pre-revolutionary history to obtain the patronage of an
ayatollah in Qom, whom he did not name. The company has received
many contracts from this ayatollah, including the USD 600
million expansion of the Fatemeh Shrine in Qom. During
Ahmadinejad's presidency, however, the IRGC has taken over at
least two of their projects, including the shrine and a 16 km
tunnel. After building 8km, the company was told by government
officials that the IRGC would finish.
3. (C) Upon complaining to the President's Office about these
interventions, the executives were told that the IRGC was given
these projects to gain practical experience and improve their
technical skills. Additionally, the practice was creating jobs
and improving Iran's domestic capabilities. Asked how ceding
projects to the Revolutionary Guard helps employment, the
software executive claimed that the IRGC brings in friends,
family, and people from local villages for some of its projects.
(Note: Former Khatam-ol Anbia Deputy Director Abdolreza
Abedzadeh in a 2006 interview stated that only 10 percent of
Khatam's labor is from IRGC ranks. Khatam is reportedly the
IRGC's largest construction conglomerate.) Our contacts, one of
whom is involved in South Pars gas field, claim that the IRGC
functions more as a general contractor and farms out portions of
different projects that in some cases previously were done by
one company.
EXCUSING INEFFICIENCY
--------------
4. (C) Iranian businessmen think that by delaying project
completion, raising government costs, and forcing out the
private sector, the IRGC is doing more harm to the economy than
good. A subcontractor to one of Khatam's projects told an IRPO
contact that the organization's inefficiency and poor management
consistently increased the costs and delayed project completion.
The same contact told IRPO that in twice the amount of time it
took his friends to complete 8 km of the water tunnel, the IRGC
still has not finished the final half of the project. The
government, however, does not appear to see this as a detriment.
Akbar Torkan, former Deputy Minister of Petroleum and Chief
Executive at Petropars and Pars Oil and Gas Company, who in June
was fired for questioning the government's statistics on the oil
sector, noted last year that when an Iranian contractor takes
longer to complete a project, it is dismissed as part of his
developing expertise.
5. (C) Our business contacts observe that although private and
even public companies are better managed and have more skilled
and efficient work forces and practices than the IRGC, sanctions
are hindering the private sector's competitive advantage by
DUBAI 00000302 002.2 OF 002
raising their operating costs and making them less competitive.
An Iranian trader based in Dubai noted that he increasingly has
to do business with IRGC-affiliated companies as the private
sector is diminishing and that this has forced him to suppress
his prices.
6. (C) Our contacts' anecdotes promote a perception that the
IRGC is unassailable. A general manager of an oil engineering
firm last month told IRPO that Iranians think that the IRGC gets
any job it wants. He claimed that this was born out in Khatam's
investment in the Iran Marine Industrial Company (SADRA),whose
share price tripled after the 51 percent purchase this spring.
The businessman asserts that this proves that there is a view
that Khatam at least enjoys near immune status from the
government. (Note: In March 2005, a consortium consisting of
Khatam, SADRA and Norway's Aker Kvaerner won a bid for South
Pars phases 15 and 16, but the Norwegian firm pulled out in May
2005. The phases subsequently went to SADRA and Khatam, despite
objections from several Majles members who wanted to re-tender
the project.) Likewise, the Qom ayatollah overseeing the
Fatemeh Shrine project viewed the IRGC's interference as a
usurpation of his authority, but he told the software
executive's friends that he could not push back against the
IRGC.
COMMENT
--------------
7. (C) Ahmadinejad's populist-statist economic policies aim to
redistribute wealth and the balance of power on economic
decisionmaking. The anecdotes shared by IRPO contacts suggest
the government believes the cession of projects to the IRGC is a
means of accomplishing these goals and could explain why
Ahmadinejad is so unapologetic in this regard, and why he can
claim that giving the IRGC a bigger economic role is good for
developing Iran's labor force. This almost patronage-like
network is in effect shifting a portion of the economic balance
of power and has contributed to some clerics' tensions with the
government. The Qom ayatollah's inability to reverse the
decision to shift projects under his patronage to the IRGC
underscores the clergy's apparent reticence in challenging the
IRGC and could indicate the potency of IRGC influence.
RICHARDSON
SIPDIS
STATE PLEASE PASS TO TREASURY S. VINOGRAD
E.O. 12958: DECL: 7/27/2019
TAGS: PGOV PREL ECON EFIN EIND EINV ETRD IR
SUBJECT: IRAN: WHAT'S GOOD FOR THE IRGC IS GOOD FOR IRAN
DUBAI 00000302 001.2 OF 002
CLASSIFIED BY: Timothy Richardson, Acting Director, Iran
Regional Presence Office, Department of State.
REASON: 1.4 (b),(d)
1. (C) Summary: Iranian businessmen who have experience with
Iran's Islamic Revolutionary Guard Corps's (IRGC) economic
activities maintained that its involvement is increasing
economic inefficiencies and discouraging the private sector.
They lamented that without a strong challenger and President
Ahmadinejad's pledge to redistribute wealth and create jobs, in
part by ceding projects to the IRGC, its growing economic
dominance will not abate. Our contacts believed that IRGC
companies are unassailable and were adamant that Ahmadinejad has
created a new patronage network that challenges the clergy. End
Summary.
THE IRGC STEPS IN
--------------
2. (S) An Iranian general manager of a company that sells oil
field development software to Iranian companies recently related
to IRPO the troubles his friends have faced from the IRGC. All
the more surprising in this case was that they were generally
respected because of their well-known persecution under the Shah
and they were well connected. After the Revolution, the friends
obtained jobs at an Iranian oil company but later started their
own construction company, eventually leveraging their
pre-revolutionary history to obtain the patronage of an
ayatollah in Qom, whom he did not name. The company has received
many contracts from this ayatollah, including the USD 600
million expansion of the Fatemeh Shrine in Qom. During
Ahmadinejad's presidency, however, the IRGC has taken over at
least two of their projects, including the shrine and a 16 km
tunnel. After building 8km, the company was told by government
officials that the IRGC would finish.
3. (C) Upon complaining to the President's Office about these
interventions, the executives were told that the IRGC was given
these projects to gain practical experience and improve their
technical skills. Additionally, the practice was creating jobs
and improving Iran's domestic capabilities. Asked how ceding
projects to the Revolutionary Guard helps employment, the
software executive claimed that the IRGC brings in friends,
family, and people from local villages for some of its projects.
(Note: Former Khatam-ol Anbia Deputy Director Abdolreza
Abedzadeh in a 2006 interview stated that only 10 percent of
Khatam's labor is from IRGC ranks. Khatam is reportedly the
IRGC's largest construction conglomerate.) Our contacts, one of
whom is involved in South Pars gas field, claim that the IRGC
functions more as a general contractor and farms out portions of
different projects that in some cases previously were done by
one company.
EXCUSING INEFFICIENCY
--------------
4. (C) Iranian businessmen think that by delaying project
completion, raising government costs, and forcing out the
private sector, the IRGC is doing more harm to the economy than
good. A subcontractor to one of Khatam's projects told an IRPO
contact that the organization's inefficiency and poor management
consistently increased the costs and delayed project completion.
The same contact told IRPO that in twice the amount of time it
took his friends to complete 8 km of the water tunnel, the IRGC
still has not finished the final half of the project. The
government, however, does not appear to see this as a detriment.
Akbar Torkan, former Deputy Minister of Petroleum and Chief
Executive at Petropars and Pars Oil and Gas Company, who in June
was fired for questioning the government's statistics on the oil
sector, noted last year that when an Iranian contractor takes
longer to complete a project, it is dismissed as part of his
developing expertise.
5. (C) Our business contacts observe that although private and
even public companies are better managed and have more skilled
and efficient work forces and practices than the IRGC, sanctions
are hindering the private sector's competitive advantage by
DUBAI 00000302 002.2 OF 002
raising their operating costs and making them less competitive.
An Iranian trader based in Dubai noted that he increasingly has
to do business with IRGC-affiliated companies as the private
sector is diminishing and that this has forced him to suppress
his prices.
6. (C) Our contacts' anecdotes promote a perception that the
IRGC is unassailable. A general manager of an oil engineering
firm last month told IRPO that Iranians think that the IRGC gets
any job it wants. He claimed that this was born out in Khatam's
investment in the Iran Marine Industrial Company (SADRA),whose
share price tripled after the 51 percent purchase this spring.
The businessman asserts that this proves that there is a view
that Khatam at least enjoys near immune status from the
government. (Note: In March 2005, a consortium consisting of
Khatam, SADRA and Norway's Aker Kvaerner won a bid for South
Pars phases 15 and 16, but the Norwegian firm pulled out in May
2005. The phases subsequently went to SADRA and Khatam, despite
objections from several Majles members who wanted to re-tender
the project.) Likewise, the Qom ayatollah overseeing the
Fatemeh Shrine project viewed the IRGC's interference as a
usurpation of his authority, but he told the software
executive's friends that he could not push back against the
IRGC.
COMMENT
--------------
7. (C) Ahmadinejad's populist-statist economic policies aim to
redistribute wealth and the balance of power on economic
decisionmaking. The anecdotes shared by IRPO contacts suggest
the government believes the cession of projects to the IRGC is a
means of accomplishing these goals and could explain why
Ahmadinejad is so unapologetic in this regard, and why he can
claim that giving the IRGC a bigger economic role is good for
developing Iran's labor force. This almost patronage-like
network is in effect shifting a portion of the economic balance
of power and has contributed to some clerics' tensions with the
government. The Qom ayatollah's inability to reverse the
decision to shift projects under his patronage to the IRGC
underscores the clergy's apparent reticence in challenging the
IRGC and could indicate the potency of IRGC influence.
RICHARDSON