Smugglers for the State

By Dehghanpisheh, Babak | Newsweek, July 19, 2010 | Go to article overview

Smugglers for the State


Dehghanpisheh, Babak, Newsweek


Byline: Babak Dehghanpisheh

Sanctions can't touch the Revolutionary Guards' black-market empire.

The grizzled Iranian skipper strides barefoot along his wooden ship's bulwarks, taking inventory of his cargo. There are crates of blankets and canned pineapple slices, Chinese tires, even a stack of water-purification machines waiting to be loaded, all bound for the Iranian port of Bandar Genaveh, roughly 500 miles away near the north end of the Gulf. His dhow is hauling other goods, too, but they're best kept out of sight, whether they're taxed or forbidden under Iranian law or banned under U.N. sanctions. The skipper doesn't worry either way. "We can take almost anything to Iran," he says with a grin. Cell phones and other electronics are his most profitable contraband these days, he adds. What happens if the Revolutionary Guards catch him? "They charge a 'fee,' " he says--about $3,000 or $4,000--but they won't confiscate his goods. They just want their cut.

He's hardly an isolated case: dozens of wooden ships like his are bobbing in Dubai Creek's waters, just across the Gulf from Iran. Thanks to the dwindling traffic of big container ships from Dubai to the Islamic Republic, business is booming for the Iranian skipper and a whole fleet of smugglers like him--as well as for the group that dominates Iran's black market: the Islamic Revolutionary Guard Corps. The latest U.N. sanctions were designed to punish the Revolutionary Guards for running Tehran's covert nuclear program. But the trouble with sanctions is that they squeeze out legitimate businesses and leave the field wide open for the IRGC, which has spent decades mastering the art of sanctions-busting. "You're using pinpoint sanctions against the very entity that's best positioned to evade those sanctions," says Matthew Levitt, a counterterrorism expert at the Washington Institute for Near East Policy. An Iranian businessman in Dubai, asking not to be named because of the subject's sensitivity, puts it succinctly: "You're enriching the people the sanctions are trying to target."

The size of Iran's smuggling industry has been estimated at $12abillion a year, and the IRGC is believed to control much, if not all, of it. The charge is impossible to confirm, of course, but only the Revolutionary Guards have the resources to run such a massive operation--and the influence to keep it from being shut down. Analysts say the organization has the structure of a mafia network, with dozens of seemingly legitimate front businesses that mask illicit enterprises or serve as money laundries. "[They're] extremely creative [with] front organizations, which they'll open and shut regularly," says Levitt. The IRGC's business operations began more than 20 years ago, at the end of the Iran-Iraq War. Fearful of potential unrest among newly unemployed young men flooding back from the front lines, then president Ali Akbar Hashemi Rafsanjani approved a plan for the IRGC to open companies and bid on government contracts.

The IRGC's involvement in smuggling began about the same time, when Rafsanjani established free-trade areas in Kish and Qeshm, two islands across the Gulf from Dubai. On paper, the islands' duty-free goods were tightly controlled; to thwart profiteers, a national ID was required for each purchase. But the IRGC gamed the system using a list of its members' ID numbers to import scarce household appliances and resell them on the black market. The IRGC had its own private jetties, recalls Mohsen Sazegara, one of the group's founders, who now lives in exile in Virginia: "I saw the Qeshm one personally. The Customs officer wouldn't dare go near them. …

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