via Lobe Log

Benoit Faucon reports for Dow Jones News Service on measures that the Iranian Revolutionary Guard Corps — which is subject to US sanctions under the Treasury Department’s “Designated IRGC Affiliates and Designated Iran-Linked Financial Institutions” list — has taken to tighten its economic control in Iran:

The withdrawal of Western companies from the country is also opening up new opportunities for the business interests of the politically powerful Guards in areas as diverse and oil tanker construction and road building. This raises questions over whether economic sanctions will apply enough pressure on the Iranian regime to force concessions on the country’s nuclear program. One Iranian businessman told Dow Jones Newswires of how Western sanctions have forced him into the arms of the Revolutionary Guard, enriching the organization in the process.

After Swiss companies stopped selling the businessman fuel because of the sanctions, the trader found alternate supplies in neighboring Iraq. The new trade route required new permits, so to get a customs clearance only valid for month, the businessman said he had to drop by the office of an intelligence operative in the force with $70,000 in cash.

It is unclear if the guard kept the money for himself or paid it to the force.

In addition to profiting from the reshaping of established trade routes, the Revolution Guard has also seen sanctions give a competitive advantage to some parts of its diverse of business interests.

Another consequence of the sanctions for the fuel importer was that banks were unwilling to handle his foreign currency transactions. To get around this restriction, he said he had to fork over 3% of the value of a $1.4 million deal to black market foreign-exchange traders.

The Revolutionary Guards have no such problem. The force has access to foreign currency rates and free customs clearance, according to a former revolutionary guard and businessmen who works with them.

“For them, the currency exchange rate is the official one,” which is much cheaper than the black market rate private businessmen must rely on, the former guard says.

And as the country’s main security agency, “they are advantaged for clearance” on imports which normally cost 10% to 50% of the goods value, he said.

When the fuel importer paid the Guards $70,000 for customs clearance, it went directly to a member of the corps’ intelligence division, which was created specifically to monitor the risk of mass dissent after post-elections protests in 2009.

The US denies that sanctions are strengthening the IRGC:

David Cohen, undersecretary of the U.S. Treasury for terrorism and financial intelligence, said the Guards’ expanded economic power is the result only of government support, not of the sanctions.

“Our sanctions are clearly focused on trying to impede the [Guards'] effort to take over important parts of the Iranian economy,” he said.