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from public to private since the EU designated it, the court noted, and therefore the reasons for its designation were no longer valid.Emanuele Ottolenghi is a Senior Fellow at the Foundation for Defense of Democracies; Saeed Ghasseminejad is a PhD Candidate at Baruch College in New York.The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 banks.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 regime.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 bank’s vice-chairman.Yet, beyond its direct 20% share, the Islamic Republic controls Bank Mellat indirectly through other shareholders.The 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.Combined, these 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.When one 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 fictitious.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.Five 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 Guards.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...Bank Saderat! Finally, provincial investment companies own another 40 percent.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.