Who’s afraid of Babak Zanjani?

EMANUELE OTTOLENGHI - SAEED GHASSEMINEJA

The corruption scandal which has engulfed the ruling Justice and Development Party (AKP) of Prime Minister Recep Tayyp Erdoğan has everyone focused on the clash between Mr. Erdoğan and the exiled Turkish cleric, Fethullah Gülen, a former ally turned rival of the prime minister, and his followers, who are reportedly numerous in the judiciary and law-enforcement agencies.

This is both worthy and intriguing, but it obscures another clash that is unfolding in parallel, across the border from Turkey, which may have contributed to the Turkish political mayhem now engulfing Ankara and its rulers.

Say what you wish about the Gülen-Erdoğan saga – the intrigue has to do with Iran as much as it does with Turkey.

The man at the center of this scandal, Reza Zarrab, is an Iranian-Turkish dual national who has admitted to being a middleman for billionaire Iranian business tycoon and sanction buster Babak Morteza Zanjani. Corruption in Turkey served to grease financial activities on Iran’s behalf.

And Zanjani – the intense focus of corruption probes inside Iran – has just been arrested in Tehran, after a protracted public campaign against him that began soon after the election of the new Iranian president, Hassan Rouhani, last June.

The untold story then is this: Zanjani is a casualty of the still largely underreported struggle between Rouhani’s coalition of Intelligence Ministry officials, clerics, the Islamic revolution’s old guard and repented reformists on the one hand and Iran’s Revolutionary Guards (IRGC) on the other.

Zanjani is the chairman of the Sorinet Group, a holding company with business interests that include a large cosmetics’ company in Turkey, an airline in Tajikistan and one in Iran, a bank in Malaysia, construction projects in Iran, and a sleuth of other companies across the globe. He is also under European and U.S. sanctions for helping the Iranian regime skirt the oil embargo. He reportedly helped Tehran sell 17.5 billion euros’ worth of oil and process payments through offshore banking in Malaysia.
Though in a rare interview last April Zanjani rejected all allegations about sanctions busting, in an early October 2013 New York Times extensive profile by Thomas Erdbrink, Zanjani admitted to his role of evading sanctions on behalf of the regime. Zanjani even prided himself for being “an economic Basiji” and helping Tehran weather international economic pressure.

That is hardly surprising, given his links to Iran’s Revolutionary Guards. When the United States and the European Union sanctioned the Iranian energy sector as a means to deter Iran’s illicit nuclear program, Zanjani reportedly acted on behalf of the former oil minister and IRGC commander, Rostam Qasemi, to elude the embargo through various financial schemes. Zanjani is also reportedly close to Hamid Fallah Heravi, a former member of Iran’s security services and vice chairman at Sorinet’s Qeshm Development Holding. Heravi also sat on the board of a subsidiary of U.S.-sanctioned Ghadir Investment, an investment company controlled by U.S.-sanctioned Bank Saderat and various holding companies owned by Iran’s military, including the IRGC.

That Gülen is behind the assault on Erdoğan is plausible. But this does not preclude Rouhani from playing a role in this drama. To gain the upper hand against his rivals, Rouhani has forged a narrative of blaming the disarray of Iran’s economy on the corruption and mismanagement of his predecessors.

His new oil minister, Bijan Zangeneh, attacked the IRGC and accused them of bribery and incompetence during his confirmation hearings. Much in the same vein, Iranian authorities have accused Zanjani of having failed to return over $2 billion to the state coffers. His exposure in the Turkish scandal has now given them the pretext to arrest him.

Zanjani’s demise, therefore, is ascribable to the mafia wars over state revenue, which routinely engage Iran’s ruling elites. Swindlers and profiteers too close to the previous administration are being pushed over and replaced by swindlers and profiteers loyal to the new administration.

Zanjani’s role in the Turkish corruption scandals may have earned him the privilege of being the first Iranian sanctions’ buster to see Evin prison. But this should not be seen as an indication that Tehran is prepared to root out corruption. As the fight goes on, more will join Zanjani in Iran’s dungeons, while the systematic plunder of state resources by Iran’s ruling classes will continue unabated.

*Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies; Saeed Ghasseminejad is a Ph.D. candidate in finance at City University of New York.