Audit reports on Iran’s government budgets – intended to study spending and expose corruption – are usually good reads. In these reports one can find clues to the government’s financial secrets and its violations of the budgets passed by parliament. But compared to past audit reports, what was presented to parliament on the morning of April 14 had few or no precedents.

The budget for March 2018 to March 2019, two years ago, was also unique in its own way. The year began with the withdrawal of the United States from the nuclear agreement. And the budget for the following year, corresponding with March 2019 to March 2020, had seen an economic downturn become a full-fledged crisis. These were two miserably dark years – with organized corruption casting a long shadow over every part of Iran’s economy and politics.

But what was presented by Adel Azar, President of Iran’s Supreme Audit Court, was nothing like the measures taken in the past two years. [Persian PDF] And the budget audit report can provide us with a small measure of clarity on what has been going on behind the scenes in recent years.

A word of warning: the government’s audit report is defective. It does not make any mention of financial corruption in agencies that operate under the supervision of the Supreme Leader, the Revolutionary Guards, the military and the security establishment. But it does at least reveal something of corruption within the government; from illegal salaries and payments to the fate of dollars sold at the (cheap) official price of 4,200 tomans, privatizations, cash subsidies, sweetheart deals between the government and private contractors, and so on.

In this series of reports, IranWire tries to follow the leads provided by the Supreme Audit Court’s audit report.

Plundered Dollars

US$4,820,744,740: This is the amount of dollars that the government sold at the official subsidized price of 4,200 tomans per dollar to “real and legal entities” for the purpose of importing essential goods – which these entities did not do.

In 2018, the open market price of the US dollar fluctuated around 13,500 tomans and has since increased to nearly 15,600 tomans. If one can buy dollars at the official exchange rate and sell them at open market prices, then it is a given that this person will pocket an impressive amount of money in the process.

How much is US$5 billion worth in Iran?

Five billion dollars is not a negligible amount of money anywhere in the world, especially not in Iran with its severe shortage of foreign currency. At the official price of 4,200 tomans, US$5 billion translates into more than 20 trillion tomans and 75 trillion tomans if we calculate based on the open market exchange rate.

To put this amount in perspective, it is enough to point out that it almost equals the $5 billion loan that Iran has requested from the International Monetary Fund (IMF) to help it cope with the coronavirus epidemic. Iran has been struggling hard to secure this loan even as the administration of US President Donald Trump administration has opposed it. In fact, if anybody in Iran could get back the these missing dollars, Iran would not need a loan from the IMF, which has been blocked by the US government.

But, the question is, what happened to this almost US$5 billion that we are talking about? Was it devoured by the same “real and legal entities” that it was sold to?

The answer is a resounding yes. According to the audit report by the Supreme Audit Court, as of December 12, 2019, nine months after the Iranian calendar year of 1397, these billions of dollars were not used to import any goods into Iran.

But the “currency corruption” is not limited to this. There is another US$2.706 billion of currency that was sold to businesses for importing essential goods but, instead, was used to import “dental floss, dolls and toys, mattresses, kitchen utensils, bodybuilding equipment, light bulbs, jars, cat and dog food, ice cream sticks, detergents, fabrics,” and so on.

If we add these two numbers together, the volume of corruption surpasses US$7.5 billion, or a full quarter of government currency earmarked for imports in 1397.

Who pocketed this money?

1. The Big Fish:

According to the audit report, of the 37 “real and legal entities” that in 1397 purchased more than US$100 million in currency at the official exchange rate of 4,200 tomans, 32 received a total of US$1.2 billion, but imported no goods.

The report makes no mention of the names of these entities. But a search in the currency buyers’ list of the Central Bank gives us some idea. The data published by the Central Bank does not provide us with an accurate list of currency buyers; but the total amount of the currency sold to real and legal entities up to May 1, 2019 is available. If we ignore inconsistencies and errors in monthly sums and possible errors in conversions between dollars and other currencies, we would see that the list contains the names of 36 companies each of which received more than US$100 million, for a total of US$9.4 billion, at the exchange rate of 4,200 tomans per US dollar.

In total, during this period government gave 10,048 companies dollars at the official price. But these 36 companies received a full one-third of the total amount. Furthermore, the report by the Supreme Audit Court shows that the fate of 12 percent of the currency provided to these companies remains unknown and that 32 of these 36 companies were players in this scandal.

Familiar names appear on this list, from big automakers, to the Haft-Tappeh Sugarcane Agro-Industry Company that has been at the center of labor unrest in Iran in the past two years because of its financial difficulties as a result of mismanagement and corruption.

We can also see the names of four companies that belong to the wealthy Modallel family. According to a report [Persian link] by the newspaper Shargh, of the top 10 companies on the list, four belong to this family: Mahidasht Kermanshah Agricultural Industrial and Vegetable Oil Complex, Ava Tejarat Saba Trading Co., Kalhor Daneh Jonoub Co., and Kermanshah Daneh Co. Based on the audit report, at least one company belonging to this group has received dollars at the government’s preferential official price but has not imported anything.

Nevertheless, there are no reports of legal action against any members of this family. Last year there were reports that a family connection exists between Modallel family and Grand Ayatollah Naser Makarem Shirazi, a hardliner and influential religious leader who was accused in July 2018 by the US Secretary of State Mike Pompeo of making more than US$100 million for himself in the illicit trade of sugar. Both Shirazi’s office and Modallel family have denied these reports. But the rumors persist.

2. The Average Fish:

In 1398, according to the Supreme Audit Court’s report, 48 companies were each sold between US$50 to US$100 million in foreign currency at the official price. Of these companies, 31 had received a total of US$852 million, yet failed use the funds to import any essential goods.

Also receiving hard currency at government exchange rate were 385 “real and legal entities,” of which 212 received more than US$1.2 billion, but they neither imported any goods nor returned the currency.

These numbers show that, in the corrupt financial swamp of Iran, the average fish have also played their own part in pocketing money that belongs to the public treasury.

3. The Small Fish:

The small fish have also not been denied their share of this cornucopia. The Central Bank’s data show that 95 percent of currency buyers have each received less than US$5 million for importing goods. More than 9,500 real or legal entities fall into this category and their share of the official-price foreign currency amounts to around US$9 billion.

According to the Supreme Audit Court’s report, of over US$4.8 billion that remains unaccounted for, more than US$3.2 billion was absorbed by the big and the average fish; but there remains more than US$1.5 billion that went to individuals and smaller companies, which received less than US$10 billion in currency. This shows that this group, too, have pocketed 15 percent of the dollars that they have received. In other words, they neither imported anything nor they returned the funds.

Related Coverage:

Is Iran’s National Development Reserve Khamenei’s Own Private Bank?, 9 April 2020

How Corruption is Gnawing Iran from Within, 14 November 2019

Iranian Parliament Review of 30 Years of Corruption in Iran, 26 July 2019

Iran’s Corruption Leaks: Shadowy Corrupt Clerics and Sex Scandals, 6 July 2019