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THE RISE OF THE SUBCONTRACTOR STATE: POLITICS OF PSEUDO-PRIVATIZATION IN THE ISLAMIC REPUBLIC OF IRAN

Published online by Cambridge University Press:  05 March 2013

Abstract

Since 2009, analyses of Iran have stressed the centralizing takeover of the country's economy by a single state institution, the Islamic Revolutionary Guards Corps. At the same time, however, Iran's factionalized political elite uniformly advocate for rapid privatization of state-owned enterprises. Underneath this puzzling contradiction is a complex shift of economic ownership away from the state toward a variety of parastatal organizations including banks, cooperatives, pension funds, foundations, and military-linked contractors. The result is not a praetorian monolith but a subcontractor state. This article draws on interviews conducted in Iran during 2009 and 2010, primary data from parliamentary and governmental reports, and secondary sources to show how intraelite conflict and nonelite claims have structured the process of privatization. Framed comparatively with privatization outcomes in other middle-income countries, Iran's subcontractor state can be seen as a consequence of the way in which politics and society shaped the form of capitalism that has taken root in the Islamic Republic.

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Copyright © Cambridge University Press 2013

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References

NOTES

Author's note: My thanks to Ben Scully, Dan Pasciuti, Şahan Karataşlı, Farideh Farhi, and Ali Reza Eshraghi for comments and suggestions on this article. The research was assisted by a fellowship from the International Dissertation Research Fellowship Program of the Social Science Research Council, with funds provided by the Andrew W. Mellon Foundation.

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32 Maydari, Ahmad, “Sharayit-i Siyasi va Sakhtar-i Malikiyat dar Sih Dahih-yi Akhir dar Iran,” Guftugu 56 (2010): 2947Google Scholar; interviews by author, Tehran, fall 2009.

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34 See, for example, Barnamih 365 (1998): 8–15.

35 Ahmadi-Amui, Iqtisad, 272.

36 Interview of Maydari by author, Tehran, spring 2010; also see Maydari, “Sharayit.”

37 Regulatory laxity in housing and land is satirized in Dariush Mihrjui's 1986 film Ijarih-nishinha.

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40 This paragraph draws from interviews with private sector consultants, Tehran, fall 2009 and spring 2010; also Maydari, “Sharayit.”

41 In 2010, preparing for privatization itself, Iran Khudraw reportedly sold off its remaining shares in Parsiyan to the IRGC Cooperative Foundation.

42 Maydari, “Sharayit,” 39.

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45 Dunya-yi Iqtisad, 27 June 2010.

46 Maydari, “Sharayit.”

47 Justice Share bylaws are on the Iranian Privatization Organization's website, http://www.ipo.ir

48 Ibid., additional details from Maydari, “Sharayit.”

49 The Economist, 12 July 2001. Petropars was sold in 2009 to a consortium of investors including Mashhad's wealthy Imam Riza religious foundation. Jam-i Jam, 28 April 2009.

50 Iʾtimad, 28 September 2009.

51 Iʾtimad, 7 October 2009; IRIN Channel 2, 29 November 2009.

52 Iʾtimad, 4 July 2009, emphasis added.

53 Alif, 27 September 2009.

54 Iʾtimad, 25 November 2009.

55 Khurasan, 26 December 2010. Fuladgar's Article 44 reports were obtained from http://www.asl44.mefa.gov.ir (accessed 1 March 2012).

56 Dunya-yi Iqtisad, 27 June 2010.

57 Ayinih-i Bazrasi 61 (2012): 6–7.

58 While yet unpublished, Boroujerdi's findings are summarized at http://pomed.org/blog/2010/03/pomed-notes-analyzing-the-political-elite-of-the-islamic-republic-of-iran.html (accessed 1 June 2011). On the provincial origins of 1979's new class, see Ehsani, Kaveh, “The Urban Provincial Periphery in Iran: Revolution and War in Ramhormoz,” in Contemporary Iran: Economy, Society, Politics, ed. Gheissari, Ali (Oxford: Oxford University Press, 2009), 3876.Google Scholar

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65 Sharq, 4 April 2012.

66 World Bank, Pension System, 35. Most Iranians are unaware of the role of the SSO in the economy, even while millions of them benefit from SSO monthly checks and health insurance coverage.

67 Iʾtimad, 7 January 2010.

68 BBC Persian, 8 June 2011.

69 See Fazio, Hugo and Riesco, Manuel, “The Chilean Pension Fund Associations,” New Left Review I/223 (1997): 90100Google Scholar; Jung, Chang Lyul and Walker, Alan, “The Impact of Neo-liberalism on South Korea's Public Pension: A Political Economy of Pension Reform,” Social Policy & Administration 43 (2009): 425–44.CrossRefGoogle Scholar

70 The National, 19 October 2010; Bloomberg News, 14 February 2012.

71 Blackburn, “New Collectivism,” 25.

72 Iʾtimad, 18 July 2009; Khabar Online, 26 May 2011.

73 Iran, 30 October 2011; Khabar Online, 21 March 2011.

74 Maydari, “Sharayit.”

75 Sharq, 29 November 2010.

76 Dunya-yi Iqtisad, 23 July 2011. Justice Share officials claim that the program's goal is to make sure these companies become profitable in the long run, which is why relatively few dividends have been distributed over the period of 2006 to 2012. Yet in most cases, provincial investment cooperatives still hold less than 50 percent of companies’ total shares. See Dunya-yi Iqtisad, 6 August 2012.

77 Hoffman, David, The Oligarchs: Wealth and Power in the New Russia (New York: PublicAffairs, 2002), 196.Google Scholar

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79 See Wehrey, Frederic, Green, Jerrold, Nichiporuk, Brian, Nader, Alireza, Hansell, Lydia, Nafisi, Rasool, and Bohandy, S. R., The Rise of the Pasdaran: Assessing the Domestic Roles of Iran's Islamic Revolutionary Guards Corps (Santa Monica, Calif.: The RAND Corporation, 2009)Google Scholar; and Thaler, David, Nader, Alireza, Chubin, Shahram, Green, Jerrold, Lynch, Charlotte, and Wehrey, Frederic, Mullahs, Guards, and Bonyads: An Exploration of Iranian Leadership Dynamics (Santa Monica, Calif.: The RAND Corporation, 2010).CrossRefGoogle Scholar These mostly rely on anecdotes but, if read thoroughly, illustrate that the IRGC is hardly the singular economic actor that is often claimed.

80 Hourcade, Bernard, “The Rise to Power of Iran's ‘Guardians of the Revolution,’Middle East Policy 16 (2009): 5863.CrossRefGoogle Scholar

81 Daily Report, Near East & South Asia, FBIS-NES-93–103, 1 June 1993, 59.

82 See the analysis of military contractors in International Crisis Group, Iran: Ahmadi-nejad's Tumultuous Presidency (2007).

83 During Ahmadinejad's tenure, Parviz Fattah went from minister of energy to deputy commander of Khatam al-Anbiya and head of the IRGC Cooperative Foundation, while Rustam Qasimi inversely went from the top post in Khatam al-Anbiya to become minister of petroleum.

84 ISNA, 13 December 2011.

85 Conceptually, large bunyādhā are a form of what Ben Ross Schneider calls “diversified business groups” common to middle-income countries. See Schneider, , “A Comparative Political Economy of Diversified Business Groups, or How States Organize Big Business,” Review of International Political Economy 16 (2009): 178201.CrossRefGoogle Scholar

86 Verdery, Katherine, What Was Socialism, and What Comes Next? (Princeton, N.J.: Princeton University Press, 1996), 212–13.Google Scholar

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89 On Turkish SOE privatization, see Güran, Mehmet, “The Political Economy of Privatization in Turkey: An Evaluation,” in The Political Economy of Regulation in Turkey, ed. Çetin, Tamer and Oğuz, Fuat (New York: Springer, 2011), 2350.CrossRefGoogle Scholar On how the Justice and Development Party constructed a neoliberal “capitalism from without,” see Tuğal, Cihan, Passive Revolution: Absorbing the Islamic Challenge to Capitalism (Palo Alto, Calif.: Stanford University Press, 2009).Google Scholar

90 Bellin, Eva, Stalled Democracy: Capital, Labor, and the Paradox of State-Sponsored Development (Ithaca, N.Y.: Cornell University Press, 2002)Google Scholar; and Moore, Pete, Doing Business in the Middle East: Politics and Economic Crisis in Jordan and Kuwait (Cambridge: Cambridge University Press, 2004).CrossRefGoogle Scholar

91 John Sfakianiakis, “The Whales of the Nile: Networks, Businessmen, and Bureaucrats during the Era of Privatization in Egypt,” in Heydemann, Networks of Privilege, 77–100, 79.

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