The “maximum pressure” campaign may not have compelled the Iranian leadership to abandon its terrorism and nuclear and ballistic missile work yet, but it has bitten into Iran’s economy. The Iranian economy is in recession, and the value of the Iranian rial continues to plummet. Sanctions on the Islamic Revolutionary Guard Corps have hit the Iranian economy especially hard given the role the Guard plays in the economy.
The Guard rose to prominence during the 1980-1988 Iran-Iraq War. When revolutionary leader Ayatollah Ali Khamenei finally accepted a cease-fire, the Guard did not want simply to return to the barracks for fear that it would lose its privileged position. Instead, it decided to enter the civilian sector and built an independent financial base. Today, without moral equivalent, the Guard’s Khatam al Anbiya [Seal of the Prophets] Construction Base is akin to taking the Army Corp of Engineers and merging it with Bechtel, Halliburton, KBR, Exxon-Mobil, Northrop Grumman, Boeing, Dell, and Walmart — one huge entity that dominates most industrial, electronics, and manufacturing sectors.
Simply put, Khatam al Anbiya controls up to 40% of the Iranian economy and provides the bulk of the Guard’s budget. By sanctioning the Guard, the Trump administration effectively made liable for the Guard’s terrorism any non-Iranian firm partnered with any entity owned or operated by the Guard. The French automobile manufacturer Peugeot, for example, largely ended its partnership with Guard-linked firms in order to comply with sanctions and reduce its liabilities.
There is an assumption among many in Washington that despite Iran’s dire economic predicament, it continues to underwrite Shiite militias in Iraq. The list of Shiite militias that act as Iranian proxies is long, although the most prominent are the Badr Corps, Kata’ib Hezbollah, and Asa’ib Ahl al Haq. These are distinct from the Popular Mobilization Forces (Hashd al Shaabi), which arose in response to Grand Ayatollah Ali Sistani’s call to defend Iraq from the Islamic State. Many of the Iranian-backed Shiite militias predate Sistani’s call and, frankly, insult Sistani by cloaking their authority in his later fatwa.
During a recent trip to Iraq, however, many Iraqi officials have said the direction of subsidy has now reversed. Instead of Iran subsidizing its militias in Iraq, the Iranian-backed Shiite militias are now using the businesses they have established in Iraq to subsidize Iran and the Guard. In effect, groups such as the Badr Corps, Kata’ib Hezbollah, and Asa’ib Ahl al Haq are in some cases bribing and otherwise corrupting the political process to win contracts and in other cases simply using military coercion to get what they want. They then hijack U.S. and international aid and Iraqi resources and divert them to Iran. Many Iraqis complain about militia looting, but the greater problem may be not what happens in disputed territories but rather on a macro-level.
More than a decade ago, the United States sanctioned Kata’ib Hezbollah as a terrorist entity and more recently did the same thing with Asa’ib Ahl al Haq. The problem now, however, is not simply their violations of human rights or the investments that might pass through the international banking system. Rather, it is the direct enabling of the Guard outside normal financial mechanisms. It is a tough problem set, but if the U.S. is going to stop Iranian colonialism in Iraq as well as Iranian support for terrorism abroad, it may be time to both recalibrate and expand sanctions on Iraqi militias doing Iran’s bidding.
Michael Rubin (@Mrubin1971) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a resident scholar at the American Enterprise Institute and a former Pentagon official.
