In Iran, clerics' wealth draws ire

Two years ago, Hossein Yazdi was looking forward to a quiet retirement. Now he's back at work as one of Tehran's countless unofficial taxi drivers, trying to supplement a monthly pension of $65.

"[Two pounds] of meat costs $5 these days; most weeks my wife and I go without," he says. "If things carry on like this, people like us will soon be dying of starvation."

Daily conversation here turns with alarming speed to the daily struggle to make ends meet. But what makes such talk baffling is that most economists consider the country to be relatively well managed.

"Iran has huge resources of oil and gas, and the rise in oil prices since 1999 from $10 a barrel to over $26 today has given the economy an immense boost," says Yves Cadilhon, head of the French economic mission in Tehran.

So what are many Iranians complaining about? A powerful group of clerics and merchants who, critics say, have a stranglehold on the economy.

For Saeed Laylaz, an assistant manager at Iran's largest car manufacturer and a supporter of moderate President Muhammad Khatami, the gripes are an effect of political reforms. "People are no longer afraid to speak out: they're not getting angrier, just more vocal," he says.

Jahangir Amuzegar, who was Iran's finance minister in the 1970s, disagrees. "It's the envy factor," he says. "I doubt anybody is getting poorer, but the trouble is that a tiny minority is getting richer very quickly."

That is a bitter pill to swallow given that "covenant of the meek," or social justice, was a favorite catchphrase of the leaders of Iran's 1979 revolution. But it's made far worse by the fact that the principal beneficiaries of wealth redistribution have been the regime clerics and their closest allies.

Among the main bastions of clerical control are the bonyad, immense foundations built up after 1979 from wealth confiscated from Mohammed Reza Pahlavi, Iran's last shah. Ostensibly "charitable" organizations, they frequently use their wealth - up to 35 percent of the economy, according to analysts - for questionable purposes. In 1997, for instance, one senior cleric and bonyad boss announced his institution was offering $2.5 million for the assassination of novelist Salman Rushdie.

Another bonyad based in the holy city of Mashhad, in northeastern Iran, has used donations from as many as 8 million pilgrims a year to buy up 90 percent of the arable land in the surrounding region. Controlled since 1979 by arch-conservative Ayatollah Abbas Vaez-Tabazi - whose son and daughter are married to two of supreme leader Ayatollah Ali Khamenei's children - the foundation also owns universities and a Coca-Cola factory.

Backed by President Khatami, Iran's reform-minded parliament recently scrapped laws exempting the foundations from paying tax. Most observers doubt anything will change. Bonyad bosses, they say, can always fall back on privileged relations with Iran's banks, almost all state owned. "Credit is rationed," explains Mr. Amuzegar, "and it's rarely private business that gets it."

"I've never even bothered trying to get a bank loan," says Ataollah Khazali, owner of a small smelting works outside Tehran. "Perhaps the private banks will be better for people like me, but they're very new and few people trust them."

For now, cash-starved businessmen like Mr. Khazali are obliged to turn for credit to members of the country's bazaari class, strongly pro-regime merchants who double as money lenders.

"Iran lacks liquidity; we do our best to remedy that," one bazaari says. One method, he explains, is the systematic backdating of checks. "Strictly speaking it's illegal, but it enables us to play with money that isn't ours."

This bazaari is a small player, specializing only in copper goods. Others are far more powerful, and with political attachments. The current head of the influential pro-bazaari Coalition of Islamic Associations, Habibollah Asgar-Ouladi, was commerce minister in the 1980s, a position he used to procure lucrative foreign trade contracts for his brother. The family is now estimated to be worth $400 million.

Neither brother is renowned for his reformist sentiments. When Khatami broke his customary cautious reserve to warn against the rise of "religious fascism" in December 1998, Mr. Habibollah publicly reminded him he was "president of the whole nation and not just one group which insults and violates the holy values of the revolution."

"These bazaari are like a mafia, obeying no laws," says one clothes manufacturer, who buys all his fabric from them. "If one of them decides to boycott a company, they all do."

"Fortunately the younger generation is slightly more moderate," adds opposition economist Ali Rashidi.

With Iran's chronic unemployment - officially 12.5 percent but probably closer to 20 percent - exacerbated by the arrival on the job market of 1980s baby boomers, analysts insist only a radical reworking of Iran's crony capitalism can stave off a crisis.

"The regime knows it has no choice but to liberalize," argues Mr. Laylaz. "They may use anti-Western rhetoric as their political trump card, but they can only save themselves by opening up."

But Amuzegar is more pessimistic. "It's not Islamic ideology that's holding the system up; it's the clerics' and bazaaris' hold on the economy," he says. "As long as they survive, so will the system."