Corruption in Iran: A strategic instrument for the Islamic Republic regime

In the last decade, news about widespread corruption in Iran’s government has become part of everyday life for Iranians, either revealed by independent journalists or periodically leaked by rival interest groups within the government. The non-governmental organization Transparency International’s Corruption Perceptions Index (CPI), which quantifies the perceived levels of public-sector corruption in countries around the world, ranked Iran 78th (out of 133) in 2003; but by 2010, it dropped precipitously to 154th place (out of 178), corresponding with an increase in Iran’s petroleum income during this time period. Currently, the country stands at number 149. In response, Ayatollah Ali Khamenei, the supreme leader of the Islamic Republic, has repeatedly insisted that while corruption exists and should be fought, it is occasional rather than systemic. But in reality, corruption in Iran is strategic and a key element of the current political order. It serves as an instrument of national strategy and an essential component of governance within the Islamic Republic. 

Monarchical contract: Patronage as a means of control

Historically, Iran’s monarchs traded loyalty for privilege: They used their control over the main resources of the country, especially irrigation water, to distribute power and wealth among those loyal to them via a system of feudal gifts (in Farsi, toyul). This system was officially abolished after the Constitution Revolution (1905-11), during which the Iranian monarchy lost its exclusive prerogative over the wealth of the country. However, due to the failure of the constitutional state following the revolution, power and wealth soon became concentrated in the hands of the monarchs once more. And with the emergence of the petroleum industry in the first half of the 20th century, Iranian monarchs had significantly more resources to build their own supporting class.

After the Islamic Revolution in 1979, a theocratic ideological layer was added to this structure by Ayatollah Ruhollah Khomeini. From its very beginning, the Islamic Republic of Iran considered publicly owned property and assets of the country as “anfâl,” which is defined, according to the official website of Iran’s supreme leader, as “those under the control of the Prophet and his holy successors and, in the absence of them [until the reappearance of Imam al-Zaman, the hidden 12th imam], Vali-e Faghih [the leader of the Islamic Republic].” This latter definition makes it difficult to even define corruption, as it is at the discretion of the supreme leader to determine the allocation of all resources of society.

Pseudo-privatization and the rise of the semi-public sector

In this context, Khamenei, Khomeini’s successor, assumed leadership. After the Iran-Iraq war, in the early 1990s, he and then-President Akbar Hashemi Rafsanjani decided to shift toward economic liberalization. However, they viewed an independent, genuinely “private” sector as a threat to their rule. Consequently, Khamenei and Rafsanjani opted to encourage their own partisans, including military members, intelligence officers, and conservative merchants in Tehran’s traditional bazaar, to engage in private investment. (When doing so, they were aware and perhaps apprehensive of the fact that Perestroika, Mikhail Gorbachev’s economic reforms, played an important role in the events that led to the dissolution of the Soviet Union in 1991). Later, in December 2005, Khamenei announced his interpretation of the economic principles of Iran’s constitution, according to which the Iranian economy should be oriented toward more liberalization and privatization.

What happened in practice, however, far from shifting to a market-based economy, was the emergence of a semi-public sector that assumed the main role in corruption in subsequent decades. The semi-public sector, which encompasses 120 major economic organizations — e.g., the holding Execution of Imam Khomeini’s Order (in Farsi, Setâd-e Ejrây-ye Farmân-e Emâm), which has diversified its operations from the oil industry to include the production of COVID-19 vaccines — under the control of the supreme leader. Since this portion of the economy is not public, it is not subject to parliamentary oversight; but neither is it private, as it lacks the main features of a truly private sector, such as transparency, competition, or innovation. The organizations in question are exempt from taxation and are not subject to conventional auditing by the president or parliament through the General Inspection Office or the Supreme Audit Court of Iran. While privatization efforts are meant, in principle, to enhance transparency, in the context described above, the exemption from oversight and independent auditing led to opacity and increased corruption within the Iranian economy.

Double standards: Fighting corruption while using it

The government’s reaction to this widespread corruption was twofold: On the one hand, the regime, under the ultimate influence of Supreme Leader Khamenei, continued to bestow privileges on its loyal partisans and gave them a sort of immunity against accusations of corruption from opposition figures and journalists. At the same time, this has allowed regime loyalists to use anti-corruption propaganda as a weapon to suppress and marginalize the revisionist figures inside the circles of power. In recent decades, many prominent conservative figures have been accused of corruption, yet almost none of these accusations have led to prosecutions. Mohammad Bagher Ghalibaf, a former military officer who served as the mayor of Tehran from 2005 to 2017 and as speaker of parliament since 2020, has faced repeated charges of corruption on multiple occasions. In 2017, he was accused of leveraging his political power and relationship with Khamenei to cover up the around $2.6 billion believed to have been embezzled from Yas Holding, a front company for the Islamic Revolutionary Guard Corps (IRGC). Simultaneously, official reports of corruption in real estate, leaked by an independent journalist, revealed that during Ghalibaf’s tenure, the Tehran Municipality allocated properties at “astronomical prices,” with a 50% discount to some of the mayor’s supporters. In April 2022, news about the luxurious lifestyle and expensive trips of Ghalibaf’s family went viral. Despite the significant media attention, he was never summoned to court. Moreover, the journalist who leaked the “astronomical real estate” case was arrested and spent several months under interrogation in solitary confinement. The same reporter leaked new documents in February 2024 related to Kazem Seddighi, the radical Friday Prayer leader in Tehran, revealing his involvement in an alleged land grab. Seddighi later admitted that individuals associated with him had illegally seized a valuable garden in a prestigious part of Tehran and transferred its ownership to his name, purportedly without his knowledge. However, subsequent leaked documents showed that he personally signed the document. He never faced trial for criminal corruption — presumably given his close proximity to the core of power in the Islamic Republic.

On the other hand, the regime, for decades, has weaponized anti-corruption efforts against the liberal and revisionist wings of the government. For example, in 1995, conservatives close to the supreme leader used entrepreneur Fazel Khodadad’s trial for “sabotaging the country’s economic system” to put pressure on the socio-economic policies of the revisionist president, Akbar Hashemi Rafsanjani. They intensified these attacks when Mohammad Khatami’s reformist government was elected in 1997. The most famous case is the corruption trial of Gholamhossein Karbaschi, the mayor of Tehran from 1990 until 1998, who supported President Khatami and the reformist movement against the conservatives. The judge was Gholam Hossein Mohseni-Ejei, the current chief justice. Karbaschi’s trial was broadcast on Iranian national television. He himself has claimed that the trial and his subsequent imprisonment were the political cost for his defense of the reformist movement.

Two decades on, this use of anti-corruption propaganda has persisted. For example, in 2019, during Hassan Rouhani’s tenure as the leader of a revisionist and relatively moderate presidency, his brother was sentenced to prison. Simultaneously, the judiciary system initiated legal proceedings against the brother of Eshaq Jahangiri, Rouhani’s vice president. The disparate treatment of corruption cases between conservatives and revisionists within the government was perceived by the public as an attempt to exploit anti-corruption efforts against Rouhani’s administration and especially his relatively moderate foreign policy agenda.

Politics of corruption

It is worth noting that while Khomeini, as the leader of the revolution, relied on his charismatic leadership of the Muslim masses, Khamenei, his successor, lacked this support and, consequently, became more and more dependent on the elite that he “fed” by granting them privileges. However, there are reasons to doubt the sustainability of the constitutive deal: For one, in the last 10 years or so, the government lost its access to petrodollars, mostly as a result of the United States’ sanctions. The supreme leader now needed to “choose” whom he wanted to grant patronage and privileges to because it is not possible to feed all of them anymore. This has intensified the competition among the supporters of the Islamic Republic. In the absence of the free-flowing petroleum revenues of the 2000s, the government has decided to “privatize” what is left of public properties through a governmental initiative called “revitalization” (in Farsi, movalled-sazi).

Interestingly, the committee in charge of revitalization has officially been granted immunity from prosecution. The government’s attempts to neutralize US sanctions have similarly led to reduced transparency, including increased covert trade with China — whether as part of or independent of the Iranian-Chinese 25-Year Cooperation Program, signed in 2021. This development potentially introduces a new source of corruption.

Meanwhile, there seems to be an inherent contradiction between the government’s propaganda, which emphasizes Islamic values such as altruism, asceticism, and frugality, and the constant pervasive fraud and exploitation at the core of the regime. This contradiction has severely narrowed the regime’s support base as well as the already-limited popularity of Islamic Republic officials and politicians. This can be seen in the decrease in the conservative former Tehran mayor, Ghalibaf’s, share of the vote in the recent election of the Islamic Consultative Assembly (Majles-e Showrā-ye Eslāmī) to fewer than 10% of eligible voters; similarly, in the election of the Assembly of Experts for Leadership (Majles-e Khobregân-e Rahbari), former Iranian Chief Justice Sadegh Larijani ranked fifth out of five candidates in his own hometown. It is also worth noting that Mohammed Mokhber, who is now the acting president after the sudden death of President Ebrahim Raisi earlier this month, is also tainted with corruption charges.

Corruption, far from being accidental or occasional, is embedded in the fabric of Iran’s political order. The pseudo-privatization that has been underway since 2005, for instance, has become a strategic tool of governance in a rentier state, just as overall systemic corruption serves Iran’s authoritarianism. Yet the future of this order is unclear and may face new challenges in the coming years. A possible power vacuum after Khamanei’s death or an inability of the regime to continue to distribute privileges to targeted elites in an acceptable form could contribute to the system breaking down under its own weight. It remains to be seen whether the regime ultimately tries to address these looming challenges through real reforms or by continuing to double down on the socio-economically damaging status quo.

Ali Afshari is an Iranian political analyst and pro-democracy activist. He is a former student leader and member of the Central Committee of the Office for Consolidation of Unity, the main and largest student organization in Iranian universities during the reformist era.

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