As in Egypt and Pakistan, the economy in Iran is controlled by the military elite - in this case, Iran's Islamic Revolutionary Guard Corps (IRGC), which is the linchpin of Khamenei's regime. The IRGC maintains control of the apparatuses of the Islamic Revolutionary regime militarily, and controls Iran's economy. For a very partial list of the IRGC's financial assets, see The Wall Street Journal, May 19, 2016. This control of the economy gives the IRGC political power, even though it is not an elected political body, and even though it was prohibited from engaging in political activity by order of the founder of the regime of the Islamic Revolution, Ayatollah Ruhollah Khomeini.
The IRGC is included in the U.S. Treasury Department's list of "Iranian Entities and Individuals" under sanction "for proliferation activities and support for terrorism." Therefore, any Western economic engagement with Iran comes up against the obstacle of connections, whether direct or indirect, with the IRGC - thus stopping Western banks and other institutions from engaging economically with Iran.
Khamenei himself, who recognized the gravity of this situation following the July 2015 JCPOA agreement, has demanded that the agreement not be viewed as a solution to Iran's economic woes, because he realizes that reintegrating Iran into the global economy would require structural changes inside Iran and primarily stripping the IRGC of its control of the economy . Therefore, Khamenei is pushing for economic development that does not rely on West-related economic cooperation and investment, but rather is based on what he calls "the resistance economy," Which means keeping the IRGC in control of the country's economy.
Iran's ideological camp sees the economic approach of Rohani's government as betraying the Islamic Revolution. It also views supporters of the JCPOA as U.S. agents working to dismantle the foundations of the regime, including its main revolutionary apparatus, the IRGC.
For more on the struggle between the two camps over the role and status of the IRGC, see MEMRI Inquiry and Analysis No. 1097, in Appendix to this document.
Pragmatic camp leader Hashemi Rafsanjani, who represents the free private sector in Iran's economy, has, along with President Rohani, been demanding for years that Iran's private sector be made central to the country's economy, and that economic reforms be based on it. Rafanjani and Rohani are asking that Iran be allowed to reap the benefits of the JCPOA in the form of foreign investments in Iran freely, and therefore seek to at least transform the IRGC into a transparent and taxable body that does not enjoy preferential status and does not have any monopoly on any sector of the economy.
At a January 4, 2015 conference titled "Iran's Economy," Rohani said: "Our economy is more political than purely financial, and every time that this or that organization [meaning the IRGC] is demanded to pay taxes, they raise hell. But this government does not fear [them] and continues its work. The economy cannot advance [when the IRGC maintains a] monopoly. The economy must be rescued from the [IRGC] monopoly and made competitive. All apparatuses must transparently declare their economic activity, and the entire people must be aware of these facts and figures. How can we progress economically when there is corruption? We must fight the corruption."
The ongoing conflict between the two camps over the form of Iran's economy is in fact an existential political battle for control of the country.
The implementation of the above demands would push the IRGC out of the political arena, and would hand the pragmatic camp another victory vis-a-vis the ideological camp.
In a May 16, 2016 article on the Atlantic Council website, Barbara Slavin, acting director of the Future of Iran Initiative at the Atlantic Council's South Asia Center, clarified the Western demands that "Iran must clean up its banking sector, push the IRGC out of the economy, and stop funding groups that are on the U.S. State Department's list of terrorist organizations." In face of these demands which are meant to help the pragmatic camp and fundamentally transform Iran, Slavin proposed a number of ways in which the U.S. administration could circumvent these demands, there by supporting the ideological camp and maintaining the rule of the supreme leader khamenei and his camp.
U.S. Secretary of State John Kerry too attempted, in talks with European banks, to persuade them to circumvent the American demands and American law, but was unsuccessful.
*A. Savyon is Director of MEMRI's Iran Media Project; Y. Carmon is President of MEMRI.
APPENDIX: MEMRI Inquiry and Analysis No. 1097: The Power Struggle Between Khamenei And His Camp And Rafsanjani And His Camp - Part X.1: In Clash Over The IRGC's Role, Rohani Says Armed Forces Must Not Interfere In Politics, IRGC Commander Ja'fari Says IRGC Stands Fast Against Those Who Aspire To Spark Fitna
By: Y. Mansharof, E. Kharrazi, Y. Lahat and A. Savyon*
On Iran's Army Day, April 18, 2014, Iranian President Hassan Rohani launched an attack on Iran's Islamic Revolutionary Guards Corps (IRGC), calling on it to stay out of politics. His speech triggered responses from senior IRGC commanders and officials who emphasized the importance of the IRGC and discussed its place in Iranian society and the Islamic regime. They also stated that the IRGC was needed to stand against all those who seek to spark fitna, i.e. popular unrest.
This paper is the first in a series discussing the escalation of the power struggle between the two political camps in Iran.
The following are the main points of Rohani's speech and of the responses to it by the IRGC.
Rohani In Army Day Speech: The Armed Forces Must Not Interfere In Politics
In his speech for Iran's Army Day, April 18, 2014, Iranian President Hassan Rohani challenged both Iran's Islamic Revolutionary Guards Corps (IRGC) and Iranian Supreme Leader Ali Khamenei. He called on the IRGC to adhere to Ayatollah Ruhollah Khomeini's "Political and Divine Testament" and to stay out of politics, and implicitly criticized Khamenei for allowing the IRGC to become involved in politics and for having made them into a political force with economic clout in addition to a military force.
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In addition to challenging the IRGC and Supreme Leader Ali Khamenei, Rohani hinted that the IRGC should not be involved in the suppression of any civil uprising or revolution in Iran.
Continuing the tradition of his political mentor Hashemi Rafsanjani, Rohani stressed that the regime's strength emanates first and foremost from the people's votes - that is, the democratic value of the people's sovereignty supersedes both the Rule of the Jurisprudent and military power.
In response to the IRGC's claim that it is the defender of the regime and the anchor of stability in the region, Rohani stressed that it is the Iranian Army that plays these roles. He said: "The Iranian army [i.e. as opposed to the IRGC] has always shown that it implements the testament of the Imam [Khomeini], who ordered 'the armed forces not to interfere in politics.' The army forces [as opposed to the IRGC] are fully aware of political issues, and they should have such awareness. But they will never interfere in political advocacy and in political games. The army [as opposed to the IRGC] has never demanded a role in the nation and in the government elected by the people."
Rohani clarified to the IRGC how it should be acting: "It is Iran's armed forces that [must] always stand alongside the people, as the popular armed forces are defending the security of the state in the path that the people want... In the 30-odd years since the revolution [Iran] has never had a military government... The transfer of power in the country has always taken place without rage or violence, and in a lawful manner... The army is strong and disciplined in all areas..."
Rohani did not stop at criticizing the status of the IRGC, but went on to underline that the elements that are today waging the struggle against the superpowers in the international arena and defending the interests of Iran are "the diplomatic forces and the officers in the peace arena," who he said are "conducting the political struggle via negotiations with the superpowers" - not the IRGC. Rohani also raised the issue of corruption in the IRGC, comparing it unfavorably with the army, which he said is "disciplined in all areas"; "in financial matters," he said, "the army records the expenditure of every riyal."
IRGC Officials Respond To Rohani: Standing Fast Against Those Seeking To Spark Fitna (i.e. Popular Unrest) Is An IRGC Duty
President Rohani's statements were perceived by IRGC officials as an attempt to undermine their status. IRGC commander Mohammad Ali Ja'fari and other prominent officers responded by emphasizing that the IRGC had been established to defend the regime and its religious principles from domestic threats. They clarified that this is why it had a duty to act against any government that deviates from the values of the regime and against any attempt by the enemies of the regime, within or without, to change it by means of a velvet revolution. They also stressed that the IRGC had always stood alongside and supported the people, in contrast to Rohani's attempt to depict it as acting against the people.
IRGC Commander: "The [IRGC's] Mission And Duty Is To Preserve The Revolution And The Regime Of The Islamic Republic On All Fronts"
A few days after Rohani's speech, at a press conference, IRGC commander Mohammad Ali Ja'fari gave a comprehensive defense speech addressing all aspects of IRGC activity and attacking the pragmatic Rafsanjani-Rohani camp. Ja'fari said that all over the world, revolutions collapse after a decade or two, but that in Iran the Islamic Revolution was entering its 36th year thanks to "the revolutionary institution of the Islamic Revolutionary Guards, [established] to preserve and advance the Islamic Revolution and the Islamic regime. The [IRGC's] mission and duty is to preserve the revolution and the regime of the Islamic Republic on all fronts." He said that "several circles" had in the past sown doubt regarding the need for the IRGC, but that Leader Khamenei had fought them: "As we have seen, in 1999 [hinting at the suppression of extensive student unrest in Tehran] the Leader [Khamenei] came out strongly against this sowing of doubt, and emphasized the need for the continuing existence of the IRGC, for the continuation and advancement of the regime. Today too, the IRGC is standing against the attacks and the persistent opposition by the enemies of the revolution and of the regime, and it is by virtue of its activity that the achievements of the revolution are being preserved."
Explaining the deep connection between the IRGC and the people, which he said President Rohani was trying to undermine, he noted: "The raison d'etre of the IRGC is supporting the people and being connected to the people... and if we list two or three special traits and characteristics of the IRGC, without a doubt one of them will be its connection to the people... The philosophy of the way in which the IRGC connects to the people is that the Islamic Revolution is meaningless without the people, and without the desires, the support, and the belief of the people. Accordingly, when the Islamic Revolution is so closely identified with the people and with its support and backing, how can the IRGC stand against the people? It is paradoxical to depict the IRGC as not connected to the people. All the IRGC's missions are linked to the people, and the IRGC cannot carry out its significant role without the people..."
He continued, "The IRGC has always cooperated with the governments [of Iran] with the aim of helping achieve security and wellbeing. The aim of the Islamic Revolution was to preserve the beliefs and values of the people while serving the people." Ja'fari claimed that Rohani and his government see these values as opposed to their own, and felt threatened by them, and said: "Several governments [hinting at Rohani's] may see some of the values and beliefs [of the regime] as contrary to their own, while they themselves aspire to achieve only political goals [such as nuclear negotiations with the U.S.]. In such a situation, the IRGC is entitled to warn about this, and to play a significant role, as one tasked with the mission of preserving the values and culture [of the revolution]."
Setting out the IRGC's economic role, he said: "Our complaint was that in light of Leader [Khamenei's] emphasis on [the need to focus] our gaze inward, on our own domestic capabilities, for the sake of our struggle in the economic war waged against us by our enemies, the tremendous potential and capability of the IRGC and the Basij can be utilized. This capability of the IRGC and the Basij dates back to when the people and the government were organized into these institutions, and the Basij, with over 20 million members, has great potential to assist the [Rohani] government in the framework of the economic resistance [as set out by Khamenei]. However, the IRGC and the Basij will launch activity and assist the government only if the government asks them to and supports them... [and the government] has not yet utilized the great capability of the IRGC and the Basij..."
Ja'fari stressed that it was Rafsanjani's government that had welcomed the reconstruction operations carried out by the IRGC following the Iran-Iraq war (1980-88), which were essential at that time, and stated that Iran's national economy still owed a debt to the IRGC. He added that it had been a mistake to say that these reconstruction operations were interference in the economic sector to the point of competing with the private sector, saying: "Most unfortunately, a question arose in the enemy media about why the IRGC was entering the economic arena, and, unconsciously, several circles within [the regime] accepted as fact that the IRGC had indeed entered the economic arena. This statement is wrong; the IRGC did not enter the economic arena but entered the arenas connected to [post-war] reconstruction.
"About 20 years after the Iran-Iraq war, and in light of the fact that the infrastructure in the country was backwards even prior to the revolution, and because of the damage to it during the war - and in light of the IRGC's tremendous engineering capabilities - the IRGC entered the reconstruction arena based on its mission, in a move welcomed by the [Rafsanjani] government of the time. Today, the IRGC still has this tremendous capability for reconstruction. Had the IRGC not entered into the arena in this area [20 years ago], we would never have this [degree of] infrastructure relying on domestic capability. In the arena of reconstruction, the IRGC is actually the friend of the private sector, not its rival, and the rival of foreign companies."
Ja'fari expanded on the subject of the IRGC's missions and activity outside Iran supporting oppressed peoples across the world: "The general axis and the main essence of the Islamic Revolution is resistance to the power[-seeking] order [i.e. of the U.S. and the West] and to the new world order established by that same power[-seeking] order. Accordingly, the mission of the IRGC outside Iran is to support the oppressed peoples in the world, particularly the Palestinian people. Today, in light of the Syria issue and the power[-seeking] order's investment in the struggle against the line of this advance front of the resistance, the IRGC must play a significant role. When the nation and the country want to stand fast against the power[-seeking] order, and against the U.S. as the leader of this order, and against the Zionist regime as the representative of the U.S. in the region, we support them via cyber means and ideologically..."
Khamenei's Representative In The IRGC: "Can A Middle Path Be Chosen And Moderation Be Implemented Between Monotheism And Idol Worship?"
Khamenei's representative in the IRGC, Ali Saeedi, also responded to Rohani's speech, saying: "Can the IRGC remain indifferent in light of the [waves] tossing the revolution, when its mission is to defend the revolution and the regime?" He noted that Rohani first needed to recognize and confirm the principles of the revolution and then identify and act against deviation: "The strategy of the enemies is to topple the Islamic regime. The threats and the methods used in this effort by the front of the arrogance [i.e. the U.S. and the West] are extremely diverse... as we saw in 2009 in Iran [following the June presidential election]. Steadfastness against those who sought to spark fitna [i.e. popular unrest] in the name of the Imam [Khomeini] was one of the duties of the IRGC.
"Therefore, the IRGC must always be perceived as a regime institution; it must be flexible so that it can change in accordance with changing circumstances. [The IRGC] must be popular and must be in direct connection with the people. It must also be able to be inflexible, as well as semi-inflexible, and [even] gentle. The IRGC must be capable of adapting swiftly to circumstances as soon as there is a change in [the nature] of the threats [against the regime]..."
Saeedi also disputed the claims of the Rafsanjani camp, saying: "The meaning of moderation [i.e. the motto of the Rafsanjani camp] is very broad, and the [proper] question is, where is moderation good and where is it not useful? Can a middle path be chosen and moderation be implemented between monotheism and idol worship? Between apostasy and belief? Between truth and falsehood? Between God and Satan? That is, can we ever say 'moderate idol worship' or 'moderate apostasy?'"
Saeedi expanded further on this point in a May 2, 2014 Friday sermon in Isfahan: "The job of the IRGC on the level of the revolution and the struggle against deviant streams is undeniable. [Today,] 35 years since the Islamic Revolution, we are still hearing people make statements that are unexpected, because they are not compatible with the framework set out by the Prophet of Islam [Muhammad, vis-à-vis the nature of the desired regime]... The Imam Khomeini said, 'If the IRGC did not exist, the state would also not exist.' Throughout my 32 years in the IRGC, I have come to learn [the truth] of this sentence, every single moment. We must instill this religious discourse and identify the streams that deviate [from it]...
"Since the beginning of the revolution, we have seen [the deviant] discourse of Bani Sadr, the [deviant] discourse of the reforms, the [deviant] discourse of Kargozaran [Rafsanjani's party] and others... We must identify this discourse [also] within the IRGC."
IRGC Ground Forces Commander: "When It Comes To Issues Connected With The Revolution And With The Destiny Of The People, The IRGC Has Always Had And Always Will Have An Opinion"
IRGC Ground Forces commander Mahmoud Pakpour responded immediately to Rohani's speech, saying: "If 'being political' [Rohani's accusation against the IRGC] means a political commitment, political alertness, and being in the first line of the struggle against the enemies of the revolution and the Islamic regime - then the IRGC is 100% political[!] But being political in the sense of partisan is a red line for the IRGC.
"The IRGC has never turned itself [as Rohani accused] into a political [camp] of a personality or of a political stream, and it is only natural that the IRGC would have reservations about those who distance themselves from the line of the Imam [Khomeini] and the Leader [Khamenei] and from the revolutionary identity [of Iran]. When it comes to issues connected with the revolution and with the destiny of the people, the IRGC has always had and always will have an opinion..."
Khamenei's Representative In Tehran IRGC Forces: "The IRGC Will Not Permit Harm To Come To The Islamic Revolution"
The same day, Khamenei's representative in the IRGC unit of Tehran, Abd Al-Ali Govahi, noted: "[In contrast to Rohani's accusations], everything the IRGC has done was supported by the people... The IRGC will not permit harm to come to the Islamic revolution, and therefore [its enemies] want to destroy it, and to make it passive by means of their threats against it. However, they do not know that the entire Iranian people is defending the revolution and that the more the enemy threatens, the more the IRGC will step up its presence on all the fronts."
Assembly Of Experts Member: "The IRGC Was Established To Always Preserve The Revolution From Warped Visions And From Deviations"
In a May 31, 2014 interview with the Basij website Razavi.basij.ir, Assembly of Experts member 'Alam Al-Hoda said: "The IRGC is the guarantor of the regime and of the revolution. The IRGC was established to always preserve the revolution from warped visions and from deviations. Every time the various forces carry out a deviation and seek to topple the regime, the IRGC can act as its guard. The IRGC, as an institution dedicated to its main mission of guarding the values of the revolution, must be the guard of the revolution in the face of the danger and threat on the part of reactionary [circles] - just as it preserved the regime from the [foreign] enemies. If anyone takes a stand against Khamenei, the IRGC must defend [Khamenei], but the [IRGC's] enforcement of the [people's] obedience to Khamenei must be accompanied by enthusiasm on the part of the people entering the arena [i.e. taking to the streets]. The IRGC stands in the first rank of the supporters of Khamenei..."
* Y. Mansharof, E. Kharrazi, and Y. Lahat are Research Fellows at MEMRI.
 Wsj.com/articles/irans-government-and-revolutionary-guards-battle-for-control-of-economy-1463584510, May 19, 2016.
 2001-2009.state.gov/r/pa/prs/ps/2007/oct/94193.htm, October 25, 2007.
 Fars (Iran), January 4, 2015.
 State.gov/secretary/remarks/2016/04/256536.htm, April 23, 2016; State.gov/secretary/remarks/2016/05/257116.htm, May 12, 2016. See also article by Stuart Levey, chief legal officer of HSBC Holdings, and former undersecretary for terrorism and financial intelligence at the U.S. Treasury Department (2004-11), "Kerry's Peculiar Message About Iran For European Banks Why is Washington pushing banks like mine to do what is still illegal for American banks?"," Wsj.com/articles/kerrys-peculiar-message-about-iran-for-european-banks-1463093348, May 12, 2016.
 See MEMRI Inquiry & Analysis No. 1094, The Power Struggle Between Khamenei And His Camp And Rafsanjani And His Camp - Part X: The Political And Media Confrontation Escalates Into Reciprocal Threats, May 27, 2014.
 Dolat.ir, April 18, 2014.
 Tasnimnews.com, April 21, 2014.
 Farsnews, April 28, 2014.
 Tasnimnews, May 2, 2014.
 Tasnimnews, April 19, 2014.
 Tasnimnews, April 19, 2014.