When the European Court of Justice decided on January 29 to remove Iran’s Bank
Mellat from the European Union’s sanctions list, its judges no doubt thought
their judgment was a triumph of the rule of law over arbitrary state power. The
EU had slapped sanctions on Bank Mellat because it claimed the government of
Iran owned the financial institution and used it to facilitate proliferation
activities. But the bank, opined the court, has now been privatized, and can no
longer be considered an arm of the Iranian regime.
A week later, the
court ruled again against the EU in a similar case brought by Bank Saderat – the
bank’s ownership had shifted from public to private since the EU designated it,
the court noted, and therefore the reasons for its designation were no longer
The EU is adamant that these entities continue to aid and abet
their government’s brazen and illicit efforts to procure nuclear and ballistic
missile technology. So is the US government. The judges beg to differ. So, who’s
right? The court overruled the EU because, claims the court, the EU failed to
meet the desired burden of proof when it comes to Iran’s control over the
Ironically, the court did so on the flimsiest of evidence –
because Iran’s privatizations are phony.
Evidence shows that the Islamic
Republic of Iran maintains significant control over the shareholding structure
of these two banks – either through shareholders it controls, or through
individuals who, while formally independent, are in fact close to the
The government’s divestment of its assets then is in effect a
controlled distribution of public-owned companies to government loyalists and
government subsidiary companies.
According to Bank Mellat’s latest
official report, published in July 2012, government ownership is down to 20
percent. Though technically speaking, this is not a controlling stake, it makes
Iran’s government the largest shareholder – an influence reflected in the fact
that the government’s representative on the board, Mr. Ali Khorsandian, is the
Yet, beyond its direct 20% share, the Islamic
Republic controls Bank Mellat indirectly through other shareholders.
second largest shareholder is Iran’s Social Security Organization, which is
directly controlled by the government.
The SSO owns 16.54%, either
directly or through Saba Tamin Investment, which is an SSO subsidiary. The
Social Security Organization also has significant connections to Iran’s
Revolutionary Guards – the managing director of SSO, Rahmatollah Hafezi, the
head of its board, Behrouz Barati and the deputy of Planning and Economy Nejat
Amini all are Revolutionary Guards veterans.
3.96% is owned by Iran’s
Privatization Organization, another government entity. 2.11% is owned by Atieh
Saba Investment, a company owned by Iran’s Civil Servants’ Pension Fund, another
entity directly controlled by Iran’s government through the Ministry of Welfare
and Social Security. Finally, Iran’s Oil Pension Fund, also directly controlled
by the government, owns another 1.53% of Mellat Bank.
shares amount to 44.14% of the bank under the control of Iran’s government,
either directly or indirectly through government subsidiaries. It falls short of
the 50% plus one figure that defines a controlling stake – but then, another 30%
of Mellat Bank belongs to provincial investment companies. In theory, these
provincial companies are transit points in the privatization process. In
practice they are still controlled by Iran’s government.
considers that the remaining 30% is owned by small investors who rarely come to
annual assemblies, it is obvious why any notion of privatization is
Bank Saderat’s privatization is no different. According to
its most recent official report, published in December 2012, and the latest
information available on the Tehran Stock Exchange website, the Islamic Republic
of Iran owns 22.75% of Saderat’s shares. Iran’s Privatization Organization owns
another 4.16%, and the Oil Pension Fund controls another 2.5%. All in all, 30%
of Bank Saderat is controlled by Iran’s government or by entities controlled by
the government. These in turn are the same entities owning Mellat.
percent of Saderat is in the property of Sina investment, a holding owned by the
Foundation of the Oppressed, a tax exempt government controlled entity close to
the Supreme Leader and chaired by a senior officer of Iran’s Revolutionary
Another 5% was purchased in October 2012 by a consortium composed
of Kharazmi Investment, the IRGC-controlled Bahman Group and an unnamed private
investor. Though Kharazmi is a private company traded on the Tehran Stock
Exchange, its chairman, Mehdi Karbasian, has a longstanding direct involvement
in government companies.
His resume reads like a sanctions list – at one
point he was board member of UN sanctioned IRISL; a board member of US- and
EU-sanctioned NITC; chairs the US sanctioned Parsian Bank; and, most importantly
perhaps, vice-chairman on Kharazmi’s board as representative of Sepehr Energy
Co., a recently formed private energy company controlled by...
Saderat! Finally, provincial investment companies own another 40
In short, these privatizations were a scam – the government sold
or transferred shares to government entities and public enterprises it owns or
controls, and to government loyalists it can trust to serve its interests.
Iran’s regime has used its privatization laws to obfuscate its ongoing
connection to designated Iranian entities in order to circumvent sanctions –
with the result of bamboozling European judges and, in the process, undermining
the EU sanctions regime aimed at peacefully preventing Iran from going
nuclear.Emanuele Ottolenghi is a Senior Fellow at the Foundation for
Defense of Democracies; Saeed Ghasseminejad is a PhD Candidate at Baruch College
in New York.
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