The Israeli and US flags trampled under foot at a shrine in the north of Tehran © Reuters

“For years I have put my life at risk for God and this country,” Babak Zanjani, dressed in blue striped prison uniform, told a Tehran court on October 31. “I have been imprisoned for two years under difficult conditions in a small room which is like a toilet.”

Iran’s most notorious billionaire, who has claimed he has more than 60 companies inside and outside Iran, stands accused of corruption, fraud and forging documents. In his defence, Zanjani claims he served his country by helping its authorities manoeuvre around EU and US oil and banking sanctions introduced in 2012 “when Iran could not sell one barrel of crude nor could transfer one US dollar”. In response, Iran’s oil ministry claims it is owed more than €2.7bn for oil exports, which Zanjani says were frozen by sanctions.

But the Zanjani saga signifies more than just a tit-for-tat between the state and a colourful businessman. The case is a microcosm of contemporary attitudes towards wealth in Iran’s closed society — wealth that is associated, as great fortunes usually are, with political patronage rather than individual entrepreneurship.

Following the 1979 revolution, Islamic rulers denounced capitalism and advocated an economy based on an amalgamation of Islamist and socialist ideology. But in practice, they created a class of oligarchs, nominally operating in the private sector, linked to and dependent on the survival of the regime.

The state will not let the private sector become too rich, instead keeping it at about 20 per cent of the economy, which many argue is to prevent the independent business community from attempting to influence politics.

“We have fallen into an oil trap since 1974, which has increasingly put the economy under state control and keeps creating new rich classes who are linked to oil rents and political power,” says Mousa Ghaninejad, an economist at Iran’s state-run Petroleum University of Technology. “Iran’s rich are not entrepreneurs and none of them are known in the world.”

Former Iran president Mahmoud Ahmadi-Nejad © Eyevine

Perversely, Iran’s economy was shaken by the oil bonanza produced under Mahmoud Ahmadi-Nejad, the populist president in power between 2005 and 2013. The state received $650bn in oil income, yet little trace of that money can be found in the form of new infrastructure in Iran today, economists say. Transparency International, the anti-corruption watchdog, has described Iran as one of the world’s most corrupt countries.

Indeed, despite having described itself as “the cleanest government ever”, billions of dollars of oil revenues went missing under the last administration.

Zanjani, some say, is being made a scapegoat by the centrist government of Hassan Rouhani, which has seized on the case as an example of a supposed crackdown on corruption. The government has ramped up its efforts to attract foreign investment significantly since the landmark deal with world powers this July to limit Iran’s nuclear activities.

Zanjani’s case also serves as a distraction from other, possibly bigger, examples of corruption that could be embarrassing for the Islamic regime and potentially destabilising at a time when youth unemployment has hit 25 per cent and inflation stands at 14 per cent.

President Rouhani faces a tough battle against corruption — one that is not being helped by endemic political infighting. Analysts note that powerful hardliners in the elite Revolutionary Guard, parliament and judiciary are infuriated that their sanctions-dodging, and therefore very lucrative, business interests are being undermined by the nuclear agreement.

Faced with 50,000 pages of indictment, brought into the courtroom in a supermarket trolley, Zanjani has denied being a front for any government involvement. But he had admitted previously that he was “number one” in Khatam-ul-Anbia, the construction arm of the Revolutionary Guard, in securing credit. The Guard runs an opaque business empire alongside its military organisation, as do other religious and revolutionary foundations.

Yet to many ordinary Iranians, the story seems very familiar. To them, Zanjani is just one of many little-known oligarchs who act as a front for powerful individuals and groups. Indeed, his refusal to disclose the names of any partners or the whereabouts of the allegedly stolen money alongside the existence of bountiful overseas assets fuels suspicions that he still enjoys powerful backing in political and military circles.

Zanjani began his working life as an entrepreneur exporting sheep skins to Turkey from where, in turn, he imported shampoo, non-alcoholic beer, coffee and olive oil. His business grew quickly in Iran and Turkey, and he founded a credit institution in the United Arab Emirates and a bank in Georgia, and bought part of Malaysia-based First Islamic Investment Bank. In an interview two years ago with Aseman, a now-defunct Iranian reformist weekly magazine, Zanjani put his personal wealth at $10bn.

A currency trader holds a large bundle of rial banknotes outside a bazaar in this arranged photograph in Tehran, Iran, on Saturday, Aug. 22, 2015
A currency trader with rial banknotes outside a Tehran bazaar © Bloomberg

Yet the level of his wealth was starting to attract the wrong sort of attention in austere Iran. “Whenever the rich grow too big and arouse public sensitivity, the regime uses their weak points and knocks them down,” says one analyst. “Zanjani showed off too much.”

Wealth can equal theft in Iran. The many Porsches and Maseratis seen on Tehran’s roads driven by people in their 20s lead many to question where the national wealth has gone.

Bijan Namdar Zangeneh, Iran’s veteran oil minister and whistleblower who has vowed not to retreat until he has obtained “the people’s money”, insists Zanjani has partners. When the Financial Times asked the minister why he had not disclosed the names of these supposed accomplices, he said the government was already in “enough trouble by naming Zanjani” — a clear indication of the influence of the suspected partners.

Yet Zanjani’s lawyer, Rasoul Koohpayehzadeh, denies any connections between his client and any politicians: “My client is a genius in international trade and banking and was not supported by any political group,” he says. “If he had not been in jail over the past two years, he would have made much more than the $2bn [he owes].”

The disputed money is in the world’s banking system, the lawyer adds, and can only be transferred once sanctions are lifted. In court, Zanjani himself has claimed he has €22bn in cash.

No one knows how many billionaires there are in Iran. There is no known record of wealth and there are many ways to evade the inefficient taxation system. But many observers are amazed at the lavish lifestyle of little-known businessmen.

“Astronomical sums are held by people no one has heard of and you don’t know the source of their money,” says a senior private-sector trader.

A former bodyguard of an ex-president has put aside $300m to bring a famous Swiss jewellery brand to Iran, says one senior businessman familiar with the case. He adds that another entrepreneur, who travels frequently around the world and has operations in the US and elsewhere, is unknown even among top business circles. “He has 150 watches, each of which is worth more than $100,000. I only recently realised that he owns two high rises in Tehran with 300 apartments, each with an average 200 sq m of space. This alone makes him a billionaire.”

Skyrocketing property prices over the past few decades have created many dollar millionaires. One 67-year-old in the northwestern city of Tabriz inherited land many decades ago that has risen in value so much that she has become a billionaire, according to a family friend. Again, this is a woman without a public profile. “She is someone Iranians have never heard of and may never hear of in their lifetime,” the friend says.

A committed gambler, she is said to have 49 gaming tables in the basement of her mansion in Tabriz and has hosted an average of 50 guests every evening for the past 15 years — except last year, when she moved to the US for her daughter’s cancer treatment. “Last year, in the middle of sanctions, we transferred $30m to the US after her big losses in casinos,” the family friend adds.

Tens of these “unknown billionaires” live in Tabriz and other larger cities such as Mashhad and Isfahan, analysts say, and do not admit their wealth in order to avoid attention from the public — and the tax authorities.

During his trial, Zanjani indicated there were other businessmen, richer than himself, who enjoy immunity from the state.

He has wondered, for example, why the name of one individual who owed the oil ministry $5bn was not disclosed. The oil minister replied that the money was in a safe place.

Whether this defence and self-promotion can help Zanjani escape the death sentence, which was handed out last year to Mah-Afarid Khosravi, a businessman linked to a $2.8bn fraud case, remains to be seen.

“For my co-operation [with the oil ministry], my companies faced sanctions,” Zanjani told the court defiantly. “I am an economic genius… execution doesn’t scare me. I have served this country.”

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