Is the Tehran stock exchange a tool of the Revolutionary Guards?


A trader speaks with a stock market official beneath the electronic board at the Tehran stock exchange September 15, 2010.

Article Highlights

  • Increasingly, the IRGC’s activities play out on the floor of the Tehran Stock Exchange.

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  • Privatization of state industries and subsidy reforms: IRCG has been front and center in both.

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To many in the West, the Islamic Revolutionary Guard Corps (IRGC) is chiefly a military organization, but to Iranians the IRGC’s footprint is as much economic. The IRGC rose to military prominence during the Iran-Iraq War (1980-1988). The organization faced a conundrum when, contrary to its counsel, revolutionary leader Ayatollah Ruhollah Khomeini accepted the 1988 ceasefire which ended the war: either it could demobilize and lose its entitlements, or it could find a new way to maintain its privileges. It chose the latter, and today has come to dominate the Iranian economy, controlling, by some estimates, up to 40 percent of Iran’s gross domestic product. Most heavy industries, construction, pipelines, and electronic manufacturing are controlled by Khatam al-Anbia, the IRGC’s economic wing. (1) Increasingly, the IRGC’s activities play out not only on the streets of cities like Tehran, Ahvaz, and Mashhad, but also on the floor of the Tehran Stock Exchange.

While Iranian President Mahmoud Ahmadinejad is best known in the West for his Holocaust denial, threatening rhetoric, and bombast, within Iran his signature issues have been economic: privatization of state industries and subsidy reforms. Not surprisingly, the IRCG has been front and center in both.

On the surface, both privatization and subsidy elimination make financial sense. Even before sanctions Iran’s economy had been lackluster at best, beset both by high inflation and high unemployment. The private sector might out-compete state-owned enterprises and spark job growth. Eliminating subsidies would, in theory, end a multibillion dollar drain on government reserves and reduce distortions in the market.

Ahmadinejad’s reforms, however, were less than met the eye. While his signature effort to reduce gasoline subsidies met with initial success, he did not have the political will to stand up to key constituencies such as the IRGC and paramilitary Basij when they protested that they should retain their privileges to purchase cheap gasoline and other goods.

The Tehran Stock Exchange has been at the center of Ahmadinejad’s privatization schemes. When the Iranian government privatizes state-owned industries, it issues shares through the Exchange. The Exchange was founded in 1967, and operated until the 1979 Islamic Revolution. Ayatollah Ruhollah Khomeini’s categorization of stock exchanges as interest-bearing and gambling and therefore un-Islamic led to a halt in its activities, but his death and the accession to the presidency of the more pragmatic Hojjat ol-Islam Ali Akbar Hashemi Rafsanjani led to a resurgence of the exchange. The reference in the article selected to the Exchange’s sixth anniversary refers to the date when, under terms of the Security Markets Law, the Tehran Stock Exchange went public. (2) The IRGC may be the ideological guardians of Khomeini’s views but, when it comes to making money, they can be quite pragmatic.

The excerpted interview with Hassan Ghalibaf-Asl, the manager recently re-elected to lead the Exchange for a third two-year term, (3) describes the Tehran Stock Exchange’s recent success. At first glance, it does seem a rare bright spot in the Iranian economy. In 2010 the Tehran Stock Exchange ranked as the top performing bourse in Europe, Africa, and the Middle East. (4) Between 2008 and 2011, according to Ghalibaf-Asl, the value of shares listed on the exchange almost tripled, increasing from $39.81 billion to about $108.4 billion. (5) More recently, against the backdrop of sanctions and currency depreciation, the stock market has again boomed. The Iranian press reported that between August and October the Tehran Stock Exchange gained 28 percent. (6)

There may be more to the Tehran Stock Exchange than meets the eye, however, and it may not be ordinary Iranians who are utilizing the market and profiting from their investments Most Iranians are distrustful of state organizations; few, for example, will trust their money to Iranian banks. Many instead purchase gold or, if they can afford to, real estate. There have been no stories in the Iranian press, on Iranian blogs, or anecdotally from those with family inside Iran about Iranians who have struck it rich on Iran’s stock market.

Khatam al-Anbia (Seal of the Prophets) is replete with cash and often purchases companies privatized with initial public offerings on the Tehran Stock Exchange. This came to a head in September 2009 with the privatization of the Telecommunications Company of Iran at $7.8 billion, the largest-ever deal in the Tehran stock market. (7) The two top bidders were both affiliated with the Revolutionary Guard; the stock exchange disqualified Pishgaman-e Kavir, the only private bidder, shortly before the offering. (8) As an Ahmadinejad appointee at the Tehran Stock Exchange and elsewhere, Qalibaf-Asl may facilitate such maneuvers. At the very least, the Tehran Stock Exchange enables the IRGC to launder money from its lucrative smuggling activities.

Such maneuvers also enable the regime to avoid United Nations and U.S. sanctions on its nuclear trade. In the sanctions-busting equivalent of Three-Card Monte, Khatam al-Anbia or IRGC-affiliated banks can purchase companies on the Tehran Stock Exchange and then shift operations from companies designated by international entities to those new companies faster than the international community can designate the new company.

(1) For a useful overview of the IRGC’s economic wing, see: Ali Alfoneh, “How Intertwined are the Revolutionary Guards in Iran’s Economy,” AEI Middle East Outlook, October 22, 2007.

(2) “Bors-e Avaraq-e Behadar-e Tehran dar cheh Tarikhi tasis shodeh ast?” [“On What Date Was the Tehran Stock Exchange Founded?”] under “Porsesh-ha-ye Rayej” [“Frequently Asked Questions”], Tehran Stock Exchange website, (Accessed December 9, 2012).

(3) “Dr. Hassan Ghalibaf Asl has been re-elected as the CEO of Tehran Stock Exchange,” Mondovisione (London), October 6, 2012.

(4) F. Milad, “Tehran Stock Exchange main index hits new record,” Trend News Agency (Baku), December 2, 2012.

(5) “Iran Stock Official Says Market’s Value ‘Very Far’ From International Standards,” Tehran Vision of the Islamic Republic of Iran Network 5, Tehran Provincial TV in Persian 1138 GMT 11 Jan 12. Translation provided by the Open Source Center.

(6) “In Iran, Stocks Are a Haven As Economy Hits the Skids ,” Wall Street Journal, October 30, 2012.

(7) “Iran’s Biggest Ever Bourse Deal,” Mehr News Agency (Tehran), September 27, 2009.

(8) “‘Disputed sale’ of Iranian telecommunication shares to a semi-public company,” Mardom-Salari (Tehran), September 28, 2009

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