Divesting business assets of Iran’s military vital to saving economy says Rouhani

Divesting business assets of Iran’s military vital to saving economy says Rouhani
The Revolutionary Guard may be eager to parade its military hardware, but it's not so eager to parade its huge business holdings across the Iranian economy.
By bne IntelliNews February 7, 2018

Iranian President Hassan Rouhani has backed the announced plan to order Iran’s Islamic Revolutionary Guard Corps (IRGC) and other branches of the military to sell off business holdings and commercial assets irrelevant to their main role. The move, he said on February 6, would help save the country’s economy.

The armed forces, as well as the largest state pension fund and other branches of the government, must withdraw from all their commercial holdings including energy assets, Rouhani said at a Tehran press conference. The IRGC essentially runs a financial empire with holdings in the country's construction, energy, banking, insurance and telecommunications industries, among others. There are no reliable estimates of what share of Iranian GDP can be attributed to this economic powerhouse but analysts usually place it somewhere between one and two-thirds of national output.

The Iranian government and ruling clerical establishment are under heightened pressure to boost Iran’s economy since economic hardship sparked a wave of unrest that shook the Islamic Republic for several days around the turn of the year. As the demonstrations spread across the nation, other issues came to the fore and there were some instances of crowds calling for the removal of Rouhani and Supreme Leader Ali Khamenei.

“Not only the Social Security Organisation but all government sectors, including banks, must divest their business holdings, and that is the only way to rescue Iran’s economy,” Rouhani said. “Officials of the government, non-government institutions and the armed forces and others—everyone must divest their commercial businesses.”

Ordinary Iranians frustrated
Ordinary Iranians are frustrated that Rouhani’s administration, now in its fifth year since being re-elected in May last year, has not managed to significantly drive up their living standards since the nuclear deal that relieved the country of crippling economic sanctions took effect slightly over two years ago. The US Trump administration’s refusal in the past year to accept the deal in its current form has been a severe setback for Iran because Washington has retained some unilateral sanctions that greatly restrict Iran’s access to the world financial system and unnerve potential traders and investors who fear that doing business with the Iranians might expose them to American complications or penalties further down the road.

Iran, which under the nuclear accord agreed to measures that bar its way to the development of a nuclear weapon, has been able to re-enter the international crude oil market thanks to the multilateral agreement—fully supported by all the major power signatories except the US—but there has been no marked lift-off in the country’s non-oil economy.

Rouhani also said at the press call that the government needs to cut its dependence on crude as a source of revenue and push up contributions from taxes.

In further comments, Rouhani said the nuclear deal cannot be re-negotiated as demanded by US President Donald Trump. Trump has told major European Union member states including France, Germany and the UK as well as Congress that they must work with him to change the agreement to his satisfaction or he will withdraw the US from it. Such a move would likely lead to the unravelling of the whole deal. The deal was signed by Trump’s predecessor Barack Obama.

“A mistake made by Mr Trump is that he thinks the nuclear agreement is an agreement with the [US] Democratic Party,” Rouhani said. “The nuclear agreement is with the American government regardless of which party is on top. The accord is stable and the US remains bound to it.”

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