A “mafia state,” as characterized by Carnegie Endowment for International Peace Distinguished Fellow Moisés Naím, occurs when “government officials enrich themselves… while exploiting the money muscle, political influence, and global connections of criminal syndicates to cement and expand their own power.” Naím asserts that mafia state government officials “work together” with criminals through “legal business conglomerates with close ties to top leaders,” “become integral players in criminal enterprises,” and make the “defense and promotion of those enterprises’ businesses… official priorities.” In today’s Islamic Republic of Iran, the Islamic Revolutionary Guards Corps (IRGC) has transformed from a paramilitary fighting force into a mafia entity exerting complete control over Iranian social, political, and economic life, across both legal and illicit spheres. The IRGC’s criminality, in the eyes of both external observers and the Iranian government, is now a virtually unchallenged force in Iranian society, as groups ranging from governmental officials and the business elite to the rural working class are “bought into” an IRGC ecosystem of rent provisions to supporters and denials to dissidents. Its control over Iranian industry, ranging from agriculture to infrastructure and medical services, provides unlimited spending and surveillance authority. Many observers believe that the IRGC has become the most powerful ruling authority in the country, displacing the clerical class that drove the 1979 Islamic Revolution and remains its public face. Despite its complete control, many Iranians remain unaware of the true extent of IRGC involvement in the economy. The IRGC’s position as a collective éminence grise, however, did not emerge without a concerted effort from ruling authorities to augment its power.

The Presidency of Mahmoud Ahmadinejad (2005–2013) represented a fundamental shift in the economic authority of Iran’s Islamic Revolutionary Guard relative to civil society and government enterprise. This paper will analyze the telecommunications industry as a case study of this shift, examining the regulatory, political, and economic activities that enabled the 2009 IRGC takeover of Iran’s largest telecommunications provider, the Telecommunications Company of Iran (TCI). TCI operates Iran’s largest mobile carrier, Hamrahe Aval, and provides internet services to individual consumers, households, and businesses alike. Economic policy shifts and regulatory manipulation undertaken by Ahmadinejad appointees and other state institutions before and during the TCI privatization process directly enabled the IRGC to establish a mafia state of economic control, repression of dissent, and black-market dominance in contemporary Iran.

Privatization Before and Under Ahmadinejad

Ahmadinejad’s administration brought important changes to Iranian society across social, political, and economic fronts, but many of these changes occurred in the context of an already rapidly developing Iranian economy. In the Iranian Constitution of 1979, Article 44 prescribes large-scale state ownership of industries, including foreign trade, major minerals, banking, insurance, power, dams, and (most relevant to this paper) telecommunications, which encompasses radio, television, telegraph, and telephone. Kevan Harris, a historian and sociologist at the University of California, Los Angeles, characterizes the Islamic Republic’s initial attitude toward state-owned enterprises as a matter of political expediency. Harris asserts that the language inclusion was an attempt by the clergy to co-opt the support of Marxist and leftist elements who may otherwise have supported a secular government. He outlines this as “a move to bolster the left-leaning credentials of the Khomeini-led state” in the face of a “formidable (leftist) social base that competed with Khomeini loyalists” for popular support. As such, there existed no strong institutional opposition within the clerical class to the limited existence of private enterprise from the beginnings of the Islamic Republic. The demands of the Iran-Iraq War created space for these private firms to grow; soon, they employed majorities of the Iranian workforce in “agriculture, services, and small-scale manufacturing” in competition with state-owned enterprises already present in these fields. Thus, an increasing number of Iran’s ruling elites began viewing competition with state-owned enterprises as instrumental for economic growth and innovation. Following the death of Khomeini (who, along with ousted Prime Minister Mir-Hossein Mousavi, was widely viewed as the leader of the state-interventionist populist contingent within the government), the successive administrations of Hashemi Rafsanjani and Mohammad Khatami began comprehensive privatization initiatives.

Alongside these changes in the wake of the Iran-Iraq War, the IRGC also began establishing a foothold within the domestic industry. Before the Iran-Iraq War, the IRGC competed with other paramilitary groups for influence and authority across different sectors of the Islamic Republic, including defense and private industry. IRGC leadership viewed the war as a “mechanism to consolidate their internal position and marginalize the regular forces politically.” After the war’s conclusion, the IRGC participated heavily in Iran’s reconstruction, as the Rafsanjani administration leveraged Khatam al-Anbiya, an IRGC-owned construction and infrastructure conglomerate, to rebuild damaged state infrastructure, including highways, pipelines, and oil and gas fields. These projects, ranging from public works to private industry developments, augmented the IRGC’s economic clout; today, the IRGC plays a role in several industries and commercial services, including pipeline construction, automobile manufacturing, laser eye surgery, and many black market and smuggling enterprises.

When Ahmadinejad was first appointed Mayor of Tehran by hardline opponents of the reformist Khatami in 2003, he appointed many of his former IRGC comrades to citywide positions. Ahmadinejad had previously served as an officer in the IRGC and trained Basij militia; these Iran-Iraq War era credentials subsequently “paved the way” for successive political appointments. Baryam Sinkaya, a professor of international relations at Yildirim Beyazit University (Ankara, Turkey), interprets this as a symbiotic relationship: for Ahmadinejad, the support of the IRGC shored up weaknesses such as his low profile outside of Tehran and lack of elite support due to his populist political style; for the IRGC, it would provide a means to “secure its steadily increasing political autonomy and cloud and ensure its material interests.” After his Presidential victory in 2005, Ahmadinejad brought on many of his former IRGC compatriots as government ministers (by July 2011, this number had risen to twelve ministers with some level of IRGC background out of a total of twenty-one). Indeed, as Sinkaya notes, the IRGC functioned “as a human resources base” for Ahmadinejad’s administration.

In addition to his support from the IRGC, Ahmadinejad’s electoral strategy hinged upon a populist campaign lamenting income inequality and a growing urban-rural economic divide. He was opposed to privatization efforts undertaken by his predecessors, Rafsanjani and Khatami, as he viewed them to be more beneficial to select groups of business elites and government insiders than to the working poor. However, Ahmadinejad’s opposition was to the way in which privatization had been conducted, believing that it could instead be leveraged to benefit the disaffected strands of society he aimed to serve and saw as his political base: namely, the rural working poor, the families of war martyrs, and his fellow IRGC and Basij compatriots. As such, he immediately appealed for Khamenei to “modify the privatization program to make it more equitable, and to prevent corruption in the sale of public assets,” which Khamenei promptly agreed to. Ahmadinejad thus introduced the “justice shares” program as a manifestation of his efforts to reach the working poor. This program was set to distribute 40 percent of shares in Iran’s privatized SOEs to his lower-income constituencies, including families of war martyrs, war veterans, and former and current Basiji.

Ahmadinejad had also aimed to allot a further 40 percent of shares for direct stock market sale; these shares were largely acquired by government-adjacent enterprises or investors with strong government ties, such as the Bonyad Mostazafan, a supposed charitable foundation operated by the Iranian government with strong ties to Iran’s ruling elite and the IRGC. In fact, by December of 2010, only 13.5 percent of shares in divested SOEs had gone to the “pure” private sector, according to Harris’s analysis. Throughout the privatization process, Ahmadinejad’s government has been accused by Iranian parliamentary officials and outside regulators of unduly elevating the IRGC as an economic entity by promoting asset sales to the IRGC and Basij.

Telecommunications Regulatory Overhaul Under Ahmadinejad

Before and during Ahmadinejad’s Presidency, the Iranian Majlis legislated several regulatory reforms that enabled maximal IRGC control over the telecommunications industry in Iran. Article 44 of the Iranian Constitution stipulated that the telecommunications industry would operate as a pure state-owned enterprise. Between 2003 and 2010, this provision was reinterpreted by successive laws to propagate privatization and the subsequent operation of the telecommunications industry by IRGC affiliates.

Despite the almost consistent principlist, conservative control over the Majlis throughout the Ahmadinejad Presidency, the parliament and Ahmadinejad held a contentious relationship, especially during Ahmadinejad’s second term. However, evidence suggests the two groups often converged on matters relating to augmenting IRGC influence within Iran’s political and economic spheres. The Brookings Institute asserts that within the 8th Majlis (elected in 2008, during Ahmadinejad’s second term), 27.5 percent of elected parliamentarians were IRGC veterans, and the “elections themselves were overseen by Alireza Afshar (as Deputy Interior Minister)… a former IRGC commander.” Ali Larijani, the Speaker of the Islamic Consultative Assembly between 2008 and 2020 (overlapping with Ahmadinejad’s tenure and the privatization process), was himself a retired Brigadier General in the IRGC. The Wilson Center further notes that the increase in IRGC presence in the Majlis has occurred simultaneously with a reduction in clerical presence. All but the first of the laws mentioned below were passed under the largely conservative seventh and eighth parliaments.

The structuring of the Communications Ministry permitted Ahmadinejad’s political appointees to directly intervene on behalf of the IRGC in bidding processes on the sale of privatized telecommunications assets. In 2003, during Khatami’s second term in office, the Majlis established the Ministry of Communications as a replacement for the already-existing Ministry of Posts, Telegraphs, and Telephones to “regulate, manage, and control the country’s frequency space” and establish “criteria for optimal use” over radio, television, and internet communications. This law was passed under the 6th Majlis, which was uniquely dominated by reformist MPs, a faction not typically seen as cooperative with IRGC interests. However, the implementation of this law under Ahmadinejad may have enabled its use to augment IRGC influence in telecommunications. For the first time, this law allowed non-governmental entities to participate in the operations of “non-maternal” or periphery telecommunications networks connecting the country to “(prevent) losses to society and (achieve) economic growth and development.” Most importantly, this law regulated the issuance of broadcast licenses; specifically, Article 5e required telecommunications operators to receive licenses from the Communications Ministry to function within the country.

Furthermore, the Communications Ministry was charged with formulating dispute resolution criteria and “determining documents acceptable to judicial courts in disputes about communications and information technology.” This structure inherently placed significant power in a politically-appointed ministry; not only could political appointees directly intervene in purchasing agreements and the bidding process, but they could also intervene in telecommunications-related judicial disputes and determine what constitutes legally-valid evidence in those matters. This structuring becomes especially important when considering any dispute resolution processes surrounding the TCI bidding process; an Ahmadinejad-appointed Ministry of Communications was directly responsible for license issuance and evidentiary provision in any judicial dispute resolution process.

Toward the end of Ahmadinejad’s first term in June 2008, the Majlis passed the “Law on Implementation of General Policies of Principle (44) of the Constitution” (referring to Article 44 mentioned earlier). This law established that non-governmental and private sectors could be involved in the “investment, management, and ownership” of non-mother telecommunications networks, and that the government would have to “cede 80 percent of the total value of shares” in this industry to the “private, cooperative, and non-governmental sectors.” In line with Ahmadinejad’s focus on his working-class, rural voting constituency, the law specifically sets aside 40 percent of the shares for sale to “two low income deciles, with villagers and tribal people having the priority;” these groups would have the ability to purchase the shares at a 50 percent discount “due to be repaid on a ten year installment.” This law formalized the basis for Ahmadinejad’s implementation of the justice shares program, and provided the requisite legal justification for telecommunications industry privatization (although, as Harris notes, other groups, including “carpet weavers, Qurʾanic scholars, young addicts in treatment, construction workers without labor contracts, and bus and taxi drivers” were added, reflecting Ahmadinejad’s populist bent and use of government largess to build political support).

Pertinent to the TCI acquisition, this law establishes the Iranian Privatization Organization (also referred to as the “Ceding Organization” or IPO) as the entity that will “market the transferable firms (those being privatized).” Per Article 21, part a, the IPO was empowered to determine the “price or sale of the first package of shares of any company, size of share package, method of election of strategic customers, and applicant for purchase of controlled and management share” based upon “expert studies on a proposal by the Ceding Organization.” This ceding organization also had the authority to unilaterally (per Article 25) change sale conditions (including sale price, extension or reduction of period in an installment-based sale). Importantly, this Ceding Organization (per Article 39) was comprised almost entirely of political, rather than bureaucratic appointees, with all voting members being political appointees of the IRGC-friendly Ahmadinejad government and Majlis (encompassing the Minister of Economic Affairs and Finance, Minister of Justice, and two parliamentary deputies selected by the Islamic Consultative Assembly). As will be established later, the Ahmadinejad government may have utilized these structures to unilaterally grant control of the telecommunications industry to IRGC supporters and affiliates.

Finally, in 2009, the Majlis passed the “Computer Crimes Law,” which established a role for private sector entities in telecommunications law enforcement. Article 14L punishes those who publish or trade “obscene content” on the internet with a prison sentence ranging from 91 days to 2 years, or a fine ranging from 5 to 40 million rials, including a notable exception for those also accused of being a “corrupter on Earth,” which could warrant the death penalty. Most importantly, Article 21 specifies that access service providers must filter criminal content, with any refusal to do so leading to dissolution of the private entity. While this language (at face value) indicates that private actors must follow government directives on proper internet use, implying subordination, this law also places an immense onus on these private sector actors to unilaterally enforce such laws and identify offenders. When seen in the context of IRGC involvement in illicit internet activities, as will be discussed later, this suggests that laws such as these may empower the IRGC to selectively enforce and abide by internet usage laws when self-expedient.

Anticompetitive Practices in the Privatization of TCI

The privatization of the Telecommunications Company of Iran, also referred to by the Iranian name of its flagship mobile carrier provider, Hamrahe Aval, occurred in 2009 and granted an IRGC-affiliated consortium control over Iran’s largest telecommunications operator. In the aftermath of the reinterpretation of Article 44, the Iranian government was required to divest from Hamrahe Aval, which presently holds 57 percent of the mobile phone service provider market. At the time of the privatization, TCI’s dominance was of even greater magnitude in mobile networks, as its largest contemporary competitor, Irancell, had only introduced mobile services in 2007. Therefore, any acquisition of TCI would accord the new parent company unprecedented authority over the Iranian telecommunications market.

In 2008, per the Article 44 reinterpretation directive issued by the Iranian parliament (driven by Ahmadinejad’s approach to privatization) and the Supreme Leader, the Ahmadinejad administration restructured TCI as a joint-stock company and sold five percent of shares as an initial “test the waters” public offering. Notably, an Iranian parliamentary report found that the sale of shares of the company “as a private joint stock company” occurred two months before TCI had undergone the official joint-stock company restructuring process mandated by the Iranian Constitution. Following a successful limited sale, the Iranian Privatization Organization began accepting bids from consortia to purchase a 50+1 percent share in the newly restructured company.

In 2009, before the closing of the bidding process, two main consortia were in the running to purchase a majority stake in Hamrahe Aval: Etemad-e-Mobin Development Consortium and Pishgaman Kavir Yazd. Each consortium represented distinct collectives of investors. Etemad-e-Mobin Consortium consisted of three companies: Toseh Etemad, Shahryar Mahestan, and Mobin Iran Electronic Expansion (a telecommunications company). The former two companies hold strong ties to the IRGC, while the latter is directly connected to the Execution of Imam Khomeini’s order (Setad), a sovereign wealth fund that represents the investment interests of the Supreme Leader. Before the conclusion of the bidding process, a noted Iranian Reformist newspaper, Donya e Eqtesad, documented the connections between each member company of Etemad-e-Mobin to the Islamic Revolutionary Guards. The paper notes that as of 2007, “the composition of the board of directors” of Tose Etemad was “mainly appointed by representatives of the subsidiaries of the Revolutionary Guard Foundation.” Similarly, based upon publicly available documents, Shahryar Mahestan’s main owner (as of 2007) was also identified as the Revolutionary Guards Cooperative Foundation.

Finally, Mobin Iran Electronic Expansion’s board was entirely composed of “representatives of Tadbir Investment Company, which is elected from the subsidiaries of the Executive Headquarters of the Imam’s Order.” Two IRGC-connected individuals, Masoud Mehrdadi (characterized by Ghasseminejad as “IRGC’s economic mastermind”) and Mohammad Reza Modares Khiabani, were seated on the boards of Etemad-e-Mobin companies. Despite these clear connections being reported upon by both Iranian media and external scholarly analyses, Ahmadinejad’s appointees denied any element of “IRGC” control over Etemad-e-Mobin. Mohammad Soleimani, who served as Ahmadinejad’s Minister of Communications at the time of the privatization, asserted in 2013 that “the discussion of the IRGC’s management of the telecommunications company is a lie,” with his justification being that the CEO of the consortium came from the Setad-affiliated company. He additionally went as far as to characterize the IRGC Cooperative Foundation as “not (belonging) to the IRGC,” despite obvious suggestions to the contrary.

In contrast, Pishgaman Kavir Yazd, also referred to as the Desert Yazd Corporation by the Majlis, held clear origins in the private sector. Established in 1997, Desert Yazd received support from three investment firms and twelve cooperatives. Ghasseminejad characterizes its founding team as consisting entirely of “retired telecoms professionals”; Yazd had clear origins in the private sector rather than as a state-adjacent entity. Ghasseminejad also establishes that the Yazd consortium contracted with the TCI for a previous VOIP integration project in Iran in 2008. As such, he characterizes the company (before this bidding process) as “(enjoying) the approval of security bodies.” Donya-e-Eqtesad separately notes that the Yazd consortium held 202 billion toman in registered capital at the time of the auction (which corresponds to roughly 200 million USD in 2009); in contrast, an analysis by Oxford Analytica, a global strategic consulting firm, found that Etemad-e-Mobin’s registered capital was six million USD, a much lower figure that raised concerns about Etemad-e-Mobin’s ability to raise sufficient funds for an initial down payment.

With the auction set for September 27, 2009, both Etemad-e-Mobin and Pishgaman Kavir Yazd had submitted their bids before the IPO for consideration. However, an Iranian parliamentary investigation asserts that the day before the official auction (after all bids had been submitted), the Yazd consortium was removed from the auction due to “ineligibility.” Ghasseminejad writes that disqualification occurred because of a disinformation campaign undertaken jointly by Iranian officials and the IRGC, while an ISNA report asserts that “review groups” (presumably, the IPO, which was dominated by Ahmadinejad appointees and conservative members of parliament) disqualified the Yazd consortium due to its failure of a “security qualification review.” As established earlier, the Yazd consortium did hold security approval in Iran as recently as 2008 (per Ghasseminejad’s analysis), which raises questions regarding this rationale’s veracity.

Nonetheless, owing to the disqualification of the Yazd consortium, an additional bidder needed to enter the process to “legalize the auction outside the legal period.” By the 2008 reinterpretation of Article 44 discussed earlier, any bidding process under privatization needed to be competitive, and a single-bid process was legally unacceptable. As such, the Mehr Eqtesad Consortium, an investment group alleged to have shared “common members” with Etemad-e-Mobin Consortium by a 2010 Majlis investigation, was permitted to enter the process immediately before the beginning of the auction on September 27, 2009.

Mehr Eqtesad shares many ties with the Etemad-e-Mobin Consortium and the Basij paramilitary force (an IRGC subdivision); as such, public critics and parliamentary investigators have identified its presence as a ploy to circumvent Iranian law and public scrutiny surrounding competition in the TCI bidding process. A Donya-e-Eqtesad article dated June 18, 2009 (three months before the auction) discusses Mehr Eqtesad as a potential participant in the bidding process, with its CEO, Issa Rezaei, quoted as asserting that Mehr Eqtesad had a strong interest in participating in the auction, but “due to some considerations,” they didn’t yet have a plan to participate; he also asserts that Mehr Eqtesad was “offered to become a member of one of the consortiums present.” These comments foreshadow the later involvement of Mehr Eqtesad in the bidding process, and considering the “common members” finding by the Majlis, it may be a reasonable assumption that the offer Mehr Eqtesad received came from Etemad-e-Mobin. This claim is based purely upon conjecture.

However, more clearly defined are Mehr Eqtesad’s ties to the Basij, which indirectly connect the entity to the IRGC (considering that the Basij is itself a subordinate branch of the IRGC). A 2018 U.S. Department of the Treasury analysis found numerous ties between Mehr Eqtesad and the Basij. The investment consortium “Mehr Eqtesad Iranian Investment Company” is itself a subsidiary of a larger entity, the Mehr Eqtesad Bank, which is controlled by Bonyad Taavon Basij (Basij Cooperative Foundation), the investment arm of the Basij paramilitary force (the investment consortium itself “acts as an intermediary for the economic entrenchment of the Basij”). Thus, given the long-standing and official relationship between the Basij and IRGC, Mehr Eqtesad’s direct ties to the Basij, and Etemad-e-Mobin’s direct ties to the IRGC, there is clear evidence to suggest incentive overlap, if not outright direct cooperation, between these two investment consortia.

By September 27, 2009, the day of the auction, Mehr Eqtesad and Etemad-e-Mobin were the sole approved participants. Oxford Analytica (via Forbes) notes that the total sale and “bidding war” portion took only half an hour, with the share price increasing by less than one cent. Because stark price escalations in auctioning generally characterize competitive bidding processes, the brevity of the process and immobility of the final sale price undermine any notion of legitimate competition between Mehr Eqtesad and Etemad-e-Mobin. Despite these occurrences, Iranian Government sources, including the IPO Website, describe this bidding process as competitive.

Etemad-e-Mobin’s glide path to receiving the contract is emblematic of the Ahmadinejad administration’s history of ensuring functionally no-bid contracts for IRGC affiliates. Frederic Wehrey, a scholar of Middle Eastern affairs at the Carnegie Endowment for International Peace, asserts that the IRGC was offered no-bid contracts like these repeatedly, “especially in the areas of oil and gas extraction, pipeline construction, and large-scale infrastructure development.” Therefore, given the empowerment of political appointees on the IPO’s board to adjudicate bids, Ahmadinejad appointees were instrumental in enabling the IRGC’s preferential treatment during the privatization process. Actions like these, however, did not escape political scrutiny.

Prompted by numerous allegations surrounding mismanagement of TCI (with regard to pricing, contracting, and infrastructure development projects), the Iranian Majlis launched an investigation into the entity in 2008, before the privatization process had begun. By the delivery of the final report in December of 2010, the scope of the investigation shifted to include allegations of impropriety in the bidding process. In the report, the Majlis investigatory panel found that Mehr Eqtesad was brought in as a late entrant to stage a competitive bidding process, when in fact, the awarding of the contract to Etemad-e-Mobin was predetermined. The report asserted that the block auction was non-competitively held “to transfer shares to a specific group that is mostly under the management of public institutions,” which presumably refers to the IRGC. In a related jarring assertion, the report notes an abrupt shift in equipment purchasing patterns by TCI. Before 2006, 94 percent of equipment purchases made by TCI occurred through public tenders (referring to an open bidding process); however, after 2006 (which corresponds to the first full year of the Ahmadinejad Presidency), over 75 percent of equipment purchases occurred through “private tenders and exclusivity,” totaling roughly 135 billion toman. Thus, the Majlis asserted that favoritism pervaded many regulatory activities, dictating TCI’s operations.

The report concludes by quoting the then-Islamic Consultative Assembly Speaker Ali Larijani, who asserted that “the Presidium of the Parliament will send the report to the judiciary and other relevant authorities based on the violations that have occurred.” However, as of a 2016 report in Fararu, a private news agency in Iran, there has been no reported activity by the judiciary on this investigation since its completion in 2010. Despite parliamentary scrutiny and public outrage over the no-bid contract, as well as discoveries supporting a pattern of deceptive behavior by state institutions during the Ahmadinejad administration, investigatory bodies failed to act in a corrective manner.

An IRGC Mafia State

IRGC control over Iranian telecommunications systems, as represented in the specific case study of the TCI privatization, enables this “mafia-like” entity to take hold over Iranian civil, governmental, and economic society by buying support of distinct societal classes (and withholding rents from detractors and “out-groups”), quashing popular dissent through totalitarian surveillance, and profiting from authoritarian control by participating in criminal activity within a self-created internet “black market.”

Economic Rents

The 2010 parliamentary report alleges that the privatization process failed to protect the rights of the millions of Iranians who subscribed to TCI’s services. As written in the report, “since more than 90 percent of the investment in (TCI) comes from public donations, rather than a definitive assignment of public rights, handing over the company to the private sector has fundamental drawbacks in the loss of people’s rights.” Essentially, the privatization process infringed on the rights of long-term subscribers, who, under the previous state-owned system, were partial owners as taxpayers. Under Ahmadinejad’s Presidency, the privatization process was marred by efforts to redistribute assets to ideological supporters and state-adjacent actors like the Basij and IRGC; the government utilized tools such as the previously mentioned “justice shares” program and bidding processes to achieve this goal.

Both the “justice shares” program and awarding of privatized assets to the IRGC, as demonstrated by the telecommunications example, are emblematic of a “political caste system” in Iran that coerces support for the IRGC “mafia state” by rewarding supporters and punishing detractors. The Basij Resistance Force, a fully merged IRGC subdivision since 2007, is specifically designed “for popular mobilization and indoctrination” purposes. The justice shares program, as implemented under Ahmadinejad, accorded shares in privatized companies (such as TCI) to specific groups. For the Basiji, this favoritism extends even further. Wehrey notes that Basij membership in Iranian society “is often a prerequisite for societal benefits, such as loans and scholarships.” Wehrey also quotes Iranian Basij members who assert that “the only reason [they] stay in the Basij is for money” even though they and “many of [their] friends are unhappy with the government.” To benefit from many Ahmadinejad-era economic activities, including telecommunications privatization, membership in the Basij, IRGC, or one of his aforementioned voting constituencies (rural, working class, religiously conservative) was required.

Kevan Harris notes that a “Central Board of Justice Share Distribution” drove this disbursement process, with members consisting of the “President…several key ministers…the head of the Martyrs and Veterans Affairs Foundation, the commander of Basij forces, and the head of the Imam Khomeini Relief Committee.” As previously outlined, each one of these groups holds an incentive to reward its supporters with economic rents. Therefore, the structure of the justice shares program rewarded IRGC, Basij, and Ahmadinejad’s supporters at lower and mid-tier societal prongs with access to economic rents (via privatization processes).

Separately, Ahmadinejad-era privatization funneled similar rents to upper-class IRGC-supporting members of the Iranian business community. The no-bid privatization process fits cleanly into Wehrey’s characterization of the IRGC’s involvement in the Iranian business sector; he writes that the IRGC has “harnessed the informal social networks that had developed among veterans and former officials.” Indeed, considering the relevant bodies involved in the approval and investigation of the TCI acquisition (the Majlis, Ahmadinejad’s cabinet, and indirectly, Ahmadinejad), an “informal network” of former IRGC veterans, affiliates, and supporters allowed the IRGC to take control of an important economic sector while escaping regulatory scrutiny. Beyond the uppermost levels of the Iranian government, the IRGC’s influence in lesser government bureaucracies may have created an overly favorable environment for Etemad-e-Mobin. The 2010 parliamentary investigation found that TCI was likely sold based on an undervaluation of its assets at the time of the auction, asserting that “the last valuation of assets was carried out in 2006… in 2008, despite the sharp increase in prices, especially in the land and building sectors, no revaluation was carried out.” It thus seems a logical assumption that any undervaluation (possibly undertaken by lower-level budgetary officials rather than a cabinet minister or Majlis member) would have benefited a cash-strapped Etemad-e-Mobin as it navigated the bidding process. As a result, IRGC affiliates at the uppermost echelons of society (e.g., Etemad-e-Mobin) utilized these “social networks” to access key economic rents.

Internet Surveillance

After the 2009 privatization process, IRGC control over the TCI has allowed it to exert unprecedented control over the private data of Iranian netizens; this enables the IRGC to play a direct role in the repression of regime and IRGC critics. Mohammad Nourizad, a former prominent conservative Iranian journalist turned political dissident, asserted in 2009 (in the aftermath of election-related protests) that “getting access to telecommunications management… means control over the country’s entire telecommunications system, including landline telephones, mobiles, text messages, the internet, and any other stuff linked to telecommunications. After that, it’s a piece of cake … to trace people.” Indeed, the IRGC, according to the U.S. Department of the Treasury and other organizations, played a critical role in the violent suppression of protests and mistreatment of detainees in the aftermath of the Green Movement protests. Article 21 of the Computer Crimes Law placed an immense onus on privatized companies like TCI for internet monitoring. Compounded by the fact that Iranian authorities allegedly surveilled the text messages and phone calls of activists during the 2009 protests (likely relying upon the IRGC-controlled TCI for relevant data), it is clear that control over the telecommunications industry has strengthened the ability of the IRGC to suppress dissent toward itself and the regime.

During and following Ahmadinejad’s Presidency, the IRGC has leveraged its control of TCI to solicit surveillance technologies from foreign sources. A 2012 Reuters report documents Chinese technology giant Huawei’s engagement with TCI as it prepared to introduce MobinNet, the first “nationwide wireless broadband provider” in Iran, in 2010. Huawei offered to sell TCI a “lawful interception solution” that would track “real-time… communication traffic between subscribers,” as well as a “deep packet inspection” system that would potentially enable TCI to “read and analyze ‘packets’ of data that travel across the Internet.” Reports indicate that before MobinNet’s 2010 launch, TCI had indeed acquired one such system. The initial overture by Huawei was made in April 2009, five months before the sale of TCI to the IRGC; however, any deployment of this technology under IRGC ownership accorded it unfettered access to the internet activity of millions of Iranians. Therefore, by leveraging foreign technology to suppress dissent and create a digitalized surveillance state (while maintaining monopolized control over the telecommunications ecosystem), TCI’s privatization completes the final step in creating a mafia state: generating a black market for circumvention that provides yet another opportunity for surveillance and profiteering by the IRGC and Islamic Republic.

Potential VPN Black Market Profiteering

After the TCI privatization, the IRGC’s complete control over telecommunications has incentivized the participation of itself and its affiliates in the illicit VPN economy of Iran. After the 2009 Green Movement protests, in which grassroots Iranian protestors leveraged platforms such as Facebook and Twitter to organize large-scale “street-rallies” in opposition to Ahmadinejad, the Iranian government ramped up its internet censorship initiatives. Aside from banning use of the aforementioned platforms on government-sanctioned internet channels, Supreme Leader Khamenei established the Supreme Council of Cyberspace in 2012 to “monitor Iranian citizens’ online behaviour and restrict their digital freedoms.” The SCC’s end goal of establishing a China-esque “great firewall” (termed the “National Information Network” or NIN) would isolate Iranians from global internet access and confine their internet activity to government-approved websites. In light of increasing censorship, 81 percent of Iranians now utilize VPNs to circumvent internet censorship laws in the country, per a 2024 survey by the Iranian Parliamentary Research Center. Many scholars, including political scientist Shahram Akbarzadeh of Deakin University (Australia), assert that the Iranian government and its affiliates have participated in this VPN market by creating counterfeit VPNs to deny Iranians opportunities to “circumvent harsh restrictions,” “steal their information,” and “track internet use and traffic,” all while garnering large-scale profits.

While direct evidence tying the IRGC specifically to illicit VPN sales remains scant, participation in the VPN economy would fit into its larger legacy of partaking in “black market” activities in Iran. Akbarzadeh writes that the IRGC “mainly operates secretly in the cyber sphere” by “monitoring online interactions” to act against dissent. However, Wehrey writes that the IRGC is known to control a “black market shadow economy of companies,” which itself is emblematic of a larger pattern of participation in “illicit smuggling networks, kickbacks, no-bid contracts, and (wealth accumulation) that remains largely unseen… under the veil of economic populism.” This pattern of behavior may very well extend to the VPN market. Indeed, Ahmadinejad, who himself admitted to VPN use in 2022, asserted that “those engaged in content censorship are often the very same people that market and provide VPN services.” Given the IRGC’s established role in content censorship, this claim may indirectly confirm its involvement in the illicit VPN economy. Whether done directly by the IRGC or other state security entities, the IRGC’s pervasiveness in all aspects of Iran’s government makes it a near certainty that an IRGC affiliate has profited from VPN sales in the country. In true mafia fashion, the IRGC profits from the beginning, middle, and end of both suppressive and criminal activities in Iran.

Conclusion

The economic policy of the Ahmadinejad administration, driven by the legacy of its officials’ ties to the Islamic Revolutionary Guard, its provision of economic rents to supporters, and the weakness of oversight bodies meant to ensure free-market fairness, enabled the IRGC to take functional control over Iran’s telecommunications industry by 2010. Thus began a cycle of self-enrichment, under which a monopolistic IRGC can unilaterally provide or deny economic rents to dissidents and supporters, repress opponents of its activities through digital surveillance, and engage in an illicit market stemming from their selective enforcement of state laws. The TCI takeover is one example of a larger economic ecosystem enabled by Ahmadinejad-era privatization, in which the “defender of the Islamic Revolution” now exerts virtually unmatched control over legal activities in banking, petroleum, and infrastructure, while partaking in black market economies created largely by its own role as an enforcer of Islamic Republic laws and regulations.

By all accounts, the IRGC holds paramount authority over political, military, and economic life in Iran, and with the ascension of Supreme Leader Mojtaba Khamenei, who is known to be “deeply ingrained” in IRGC networks, its rise may appear unstoppable. However, the TCI saga may yield a surprisingly different conclusion. Wehrey views the IRGC as not a “monolithic military force” but as a “domestic actor with its own internal divisions and factions.” Despite the large IRGC representation in the Majlis, many parliamentarians chose to participate in the 2010 report criticizing TCI’s privatization. More broadly, Harris notes that IRGC veterans in the Majlis were among the strident critics of state-tied pension fund involvement in the acquisition of privatized shares.

In 2026, despite the IRGC’s best efforts to repress opposition through its control of the internet and industry, the Islamic Republic now faces its gravest popular threat, which, ironically, has stemmed in large part from the IRGC’s mismanagement of economic institutions. This begs the question: will the IRGC relax its controls to address public outrage and economic discontent? Or will it abscond from its protection of the Islamic Republic for its own self-preservation? Given its official mandate in ensuring the survival of the Islamic Republic, it remains to be seen whether, in the face of the unprecedented challenge, internal fissures on matters like these will manifest and lead to meaningful change.

Photo Credit: Arash Khamooshi/Polaris for The New York Times