Leadership: One Iranian Secret Weapon That Really Works

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December 18, 2013: As United States intensified its efforts to uncover and halt Iranian evasion of trade and financial sanctions during the last decade and this has uncovered some very interesting details of how the religious dictatorship in Iran maintains control of the country. One of the major tools used by the clerics is a huge pool of wealth (nearly $100 billion worth) controlled by the senior cleric (Ali Khamenei) and a staff of 500 officials. Called Setad (for short), it is technically a charity and does do some charitable work. But mainly Setad exists to keep the clerical dictatorship in power and exercise enormous control over the population and the economy. About half of Setad assets are real estate and most of the rest is stock, giving the clerics considerable direct control over much of the economy via ownership of shares in major companies.

While Setad began, in the 1980s, by obtaining the property of the deposed Shah and other aristocrats and their allies, this was augmented by continuing seizure of property from “enemies of Iran.” The clerics controlled the police and courts and this made it nearly impossible to resist Setad if it came after your property. While most Setad assets are in Iran, there are billions of dollars’ worth of assets (mainly real estate) around the world, including the United States.

Most of these overseas Setad properties conceal their true owners. For example, in September, 2013 an American court affirmed that Setad had, since the 1980s, been concealing its 40 percent ownership of a 36 story skyscraper in New York City. The building at 650 5th Avenue was built in 1978 for a charitable trust (the Pahlavi Foundation) funded and controlled by the Shah (king) of Iran. The Shah was overthrown in 1979, and his many overseas assets were taken over by the new Iranian government and then Setad. Iranian clerics took over that post-Shah government in the 1980s and declared war on the West. Because of this the new Islamic Iranian government was sanctioned for supporting terrorism (and in the last decade for developing nuclear weapons). Despite the decades of sanctions the Iranians managed to get lots of those overseas Pahlavi Foundation assets transferred to Setad and efforts were made to successfully conceal who the real owners were. This was done to cope with new American laws in 1995 that made Islamic Republic of Iran ownership of the Shah’s assets illegal. But many of those asserts were still controlled by the Setad. Thus for over two decades the income from those assets (including $5 million a year from the 5th Avenue skyscraper) was spent to quietly support Setad. As more of these assets are revealed in the United States they will be sold off by the U.S. government and the proceeds given to those who have already won court judgments against Iran (for terrorist attack losses or for property inside Iran stolen by the Islamic Republic of Iran).

Setad has some downsides. For one thing the management of Setad is corrupt. Even the clerics running Setad who are true believers and clean will feel obliged to get kin jobs in Setad and that usually leads to all manner of shady dealings. Also, the Setad custom of using the police and courts to “persuade” people to surrender their property or otherwise make donations is often abused. All this gives Setad and the senior clerics that control it a reputation for corruption. Beyond the corruption Setad backing gives inefficient Setad controlled companies an unfair advantage in the marketplace. Because Setad is so huge this bad influence lowers the overall efficiency of the Iranian economy and many Iranians have noticed this and do not like it. But so far Setad has proved untouchable, more so inside Iran than overseas.

 

 


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