"Far from being the harbinger of a more transparent and law-abiding Iran, the Zanjani trial is just an attempt to settle scores"
Last month, an Iranian court sentenced to death Iranian tycoon Babak Zanjani and two of his associates, including British-Iranian dual national Mehdi Shams. Zanjani stands accused of embezzling nearly $3 billion of oil revenues through a complex sanctions evasion scheme that helped Iran’s oil ministry circumvent a Western-imposed oil embargo. Zanjani also helped Tehran money launder revenues and repatriate them. The regime in Tehran has been banking on this high-profile trial to convey President Hassan Rouhani’s message of change both at home and abroad.
The Rouhani presidency built its public support on a promise to lift sanctions and improve the economy. A key part of that promise involved targeting systemic corruption. Presenting Zanjani as a profiteering schemer who took advantage of Iran’s economic duress to plunder its dwindling profits for his own personal greed and that of his associates would signal a resolve to stamp out corruption in the public sector. In fact, the opposite is true. The Zanjani saga actually shows that Iran remains a corrupt, capricious, arbitrary and opaque regime, where business remains at the mercy of rapacious state rackets.
During the sanctions regime, Tehran relied on hundreds, if not thousands, of small and large sanctions evasion operations. They all took a big cut of the deals they handled and were expected to do so, given the risks involved. Based on media reports, Zanjani may have helped repatriate as much as $17 billion of Iranian oil revenues and was linked, in December 2013, to a gas-for-gold money-laundering scheme that reportedly handled gold worth €87 billion on Iran’s behalf. Skimming $2.8 billion from those sums does not appear extraordinary after all. Zanjani is being singled out for a show trial, but everyone else has eluded Iran’s rough justice until now.
Reports also indicate that the death sentence is more than anything else a case of robust arm-twisting. Multiple sources suggest that Zanjani was expected to cough up the money he supposedly owed the government in exchange for a lenient verdict. He was generally expected to pay once sanctions were lifted against him as a result of the nuclear deal. When payments did not materialise, the judiciary handed down its harsh verdict, against which Zanjani can now appeal. Whether he hangs from a crane or languishes in a jail ultimately depends less on the finer points of law discussed in court and more on the speed by which he can pay his debts. Sources suggest that Zanjani hoped to negotiate his way out of jail by paying some upfront and helping recoup the rest of the money afterwards. But his claims that he cannot access the money are hard to believe.
A lot remains unexplained about this case. The European Union imposed sanctions on Zanjani in December 2012 but he was not prosecuted by the Iranian authorities until late 2013. He thus had ample time to hide his assets and transfer them to trustees who agreed to front on his behalf. The big question is whether these assets can still be leveraged.
In Turkey, the man accused of helping Zanjani transfer gold to Iran, Reza Zarrab, has always proclaimed his innocence, but in the week Zanjani was sentenced to death he put his properties in Istanbul up for sale while his wife filed for divorce. Zanjani’s London associate, Mehdi Shams, chose to face trial in Iran, leaving behind a posh office in Mayfair and an elegant home in Surrey, rather than be a fugitive. This willingness to face such consequences quietly attests to Iran’s dark powers of persuasion.
All this mysterious jockeying over a patrimony reportedly worth almost $14 billion suggests that some of those entrusted with Zanjani’s money kept it for themselves. It also feeds into the impression that Zanjani’s verdict is not so much an anti-corruption campaign as a politically-motivated extortion racket orchestrated against inconvenient adversaries.
Zanjani’s indictment echoes the Bank Melli embezzlement case of 2011, involving a fraud worth $2.6 billion, which also led to three death sentences. The then head of the judiciary, Mostafa Pourmohammadi, is today the justice minister in Rouhani’s cabinet, and in both cases those prosecuted for corruption were close to or served during the tenure of Iran’s previous president, Mahmoud Ahmadinejad. It is hard to escape the conclusion that, far from being the harbinger of a more transparent and law-abiding Iran, the Zanjani trial is just an attempt to settle scores that will change little about the way business is done in Tehran.
It remains to be seen what Zanjani’s fate will be. Whatever happens to him will not mark an improvement in Iran’s corrupt practices or in the arbitrary nature of its justice system and the exercise of state power. Businesses exploring partnerships with its regime should therefore beware. What glitters today may turn to dust tomorrow.