A theory about Iran

When protests erupted in Iran at the end of December, the initial cause seemed obvious. The price of basic food staples like eggs and poultry rose by almost 40% in a matter of days, and data from Iran’s central bank showed a general rise of the inflation rate throughout the country.

And yet, even at the time, there was something inadequate about this explanation. The protesters were everyday civilians, not students or political activists – and they had not risked their lives to protest in 2012 or 2013, when economic conditions were far worse. If the price of a carton of eggs rises temporarily from $3 to $4.20, it is hardly welcome, but it is also not the type of thing that leads to revolution.

After the protests broke out, there were two even more befuddling anomalies. First, the protests were not put down, at least not at first. It took the security forces three days to crack down in earnest. Second, the Iranian government went out of its way to support the right of the protesters to express their discontent. President Hassan Rouhani himself said that the Iranian people were free to criticise their government, though he and government news outlets differentiated between what were described as “legitimate grievances” and rioters who were trying to co-opt the protests for their own politically subversive motives.

This line of thinking leads to an irresistible inference – namely, that the protesters who first took to the streets were not afraid of a crackdown. Our initial interpretation of the protests assumed economic conditions had become so bad and domestic frustration so acute that dissatisfaction with the government overrode the protesters’ fear – neither of which seems accurate in hindsight. This leads to another possible interpretation: that the initial protesters did not think they were going to be harmed. They had no fear because they had nothing to fear. Their protests had been unofficially sanctioned for a discrete political purpose, and they knew to go back home before the crackdown began. were forcibly ended, Rafsanjani’s son said Rouhani had ordered a formal review of the circumstances around Rafsanjani’s death. A few days later, a freelance Iranian Kurdish journalist based in the U.S. released footage of a supposedly secret session in which Ayatollah Ali Khamenei was anointed supreme leader. In the video, Rafsanjani plays a key role in shepherding Khamenei’s confirmation.

The source of the sudden spike in interest around Rafsanjani remains something of a mystery. But what isn’t a mystery is that in the years leading up to his death, Rafsanjani ran afoul of both hard-liners within the Iranian political establishment and the IRGC.

Ostensibly, this was because Rafsanjani supported the deal with the United States on curbing Iran’s nuclear programme, but the fault lines go much deeper. Rafsanjani represented the views of an Iranian political faction that continues to believe a reduction of state control over the Iranian economy is in Iran’s best interests. That necessarily means curtailing the IRGC’s now wide-ranging powers, as well as reinterpreting some of the basic principles of the revolution, which included state control over most national industries.

Rafsanjani, however, is just a political totem. Far more important is the Rouhani administration’s attempt to realise some of Rafsanjani’s political goals – namely, the privatisation of the economy. This is an old story in Iran. The 1979 constitution was reinterpreted in 2006 to allow for privatisation of state-owned companies to reduce corruption and increase profits.

On the surface, privatisation occurred. According to an Iranian parliamentary commission, during President Mahmoud Ahmadinejad’s first term, from 2005-2009, control of more than 300 companies worth more than $70 bln was transferred to the private sector. However, the commission also noted that just 13.5 % of those companies actually went to the private sector. Much of the rest went to organisations like the IRGC.

As a result, the IRGC is now estimated to control as much as 60 % of the Iranian economy. This is untenable for the government because it means, in effect, that the IRGC has amassed too much power.

Rouhani’s first priority was to close the nuclear deal with the U.S. and open the country back up to foreign capital. But the next and more dangerous priority has been to retake control of the economy from the IRGC. The process began in June 2016, when Khamenei replaced the chairman of the Armed Forces General Staff with an IRGC general. At the time, the move was seen as evidence that the IRGC was asserting even greater control over the affairs of state, but events in recent months indicate the opposite.

Reports began to circulate that the Rouhani administration was engaging in a quiet crackdown on some of the IRGC’s businesses interests. A September 2017 article in the Financial Times, citing an Iranian government official, said that some IRGC members had been arrested and others were being forced to transfer ownership of various holding companies back to the state. In a speech in November, Rouhani stated some of his intentions, noting that he had the support of the supreme leader in this regard, but the target of his remarks was implied, not explicit. (It should be noted that in 2007, Khamenei himself said that following the government’s privatisation policies should be seen as a “form of jihad,” indicating his general support.)

Then, on January 21, Iranian Defense Minister Amir Hatami dropped the pretense. In an interview with an Iranian newspaper, he said that the IRGC and the Iranian army would divest themselves of any economic activities irrelevant to their military duties, and that the new chairman of the Armed Forces General Staff would be overseeing this process. The move was not done without some compensation – Khamenei reportedly approved the allocation of $2.5 bln of the country’s National Development Fund for defense spending, perhaps to placate potential IRGC and Iranian army objections to divestment. But the overall trend is clear: the Iranian government is attempting to bring the IRGC and other potentially self-interested fifth columns in the Iranian political system to heel.

So far, the lack of resistance to Rouhani’s moves is striking. If Rouhani and his supporters fail, they may face a