One of Iran’s biggest cash cows, the Mobarakeh Steel Company, has been rocked by the release of a lengthy parliamentary probe alleging $3 billion in corruption linked to the government of former President Hassan Rouhani.
Since the Iranian Parliamentary Inquiry Commission presented its scathing allegations on August 18 after a three-year investigation, the Iranian stock exchange has suspended trading in Mobarakeh shares and hard-line President Ebrahim Raisi has called for the dismissal of company employees implicated in the report.
The allegations have sent shockwaves to upper echelons of power in Iran, which for years has pledged to fight endemic corruption as it suffers from an economic crisis that has sparked public unrest.
In the attack on the Mobarakeh Steel Company near the city of Mobarakeh in the central province of Isfahan, investigators are targeting Iran’s largest steelmaker and producer of about 1 percent of the country’s gross domestic product. The report’s release also comes at a time when there are high hopes that the revival of the 2015 nuclear deal between Iran and world powers could end the harsh export sanctions imposed on the steel giant and other major industrialists.
The reading of the 300-page investigation contained a string of bombshells, many of which implicated the government of Rouhani, a relatively dovish leader who held office from 2013 to 2021.
Based on more than 3,000 documents and 1,200 files, the report alleges that senior officials in Rouhani’s government have received illegal payouts and intervened in awarding government contracts to the company, and that huge sums of money have been paid to branches of Iran’s military, the regional police in the Isfahan Province, and leader of Friday prayers.
The report also alleges that among the 90 violations uncovered were illegal rent payments, payments to consultants who never provided services, illegal stock deals involving subsidiaries, and the signing of a bloated contract with an unnamed and unqualified Chinese company affiliated with the Construction of a company was commissioned steel rolling platform.
The investigative committee also accused Mobarakeh of making mysterious payments to the state broadcaster Islamic Republic of Iran Broadcasting (IRIB) and disseminating information on social media and other channels that “created an atmosphere against the parliament’s investigation”.
The hard-liner-dominated parliament voted overwhelmingly to refer the findings to the judiciary.
On August 22, Gholamhossein Mohseni, the chief of justice, quick action promised. Because such allegations “create a negative mentality” in public, the next step in possible criminal prosecution must be approached with “extreme precision and speed”.
As of August 23, the judiciary had not received the results of the probe, which Mobarakeh had recently welcomed as a way to streamline its operations. Parliament officials told Iranian media that suspects may be prevented from leaving the country and questioned in an independent investigation.
Raisi, who lost to Rouhani in the 2017 presidential election and succeeded the two-year president after taking office in August 2021, wasted little time publicly calling for heads to roll.
Thanking the Industry, Mines and Commerce Ministry for implementing “management changes” at the steel giant in the year since he took office, Raisi said on August 21 that “all those responsible for the violations identified at Mobarakeh Steel should be fired and charged. “
“The government is increasing transparency and control over state-owned companies and is committed to investigating any cases of corruption,” he added.
The Mobarakeh Steel Company is a “semi-state” company, with shares held largely by government agencies and various private and public joint-stock companies. It employs about 350,000 people and its management is appointed by the government.
The alleged corruption amounts to about a third of the company’s estimated $10 billion in value. Trading in shares of Mobarakeh Steel Company was suspended on August 20 by the Tehran Stock Exchange, which will not resume trading until the company’s financial situation is clearer.
Deplorable corruption record
Iran has a pathetic track record when it comes to corruption, being ranked 150th out of 180 countries in the latest by Transparency International Corruption Perceptions Index which constitutes bribery of the public sector.
Ehsan Mehrabi, a Berlin-based journalist who previously covered Iran’s parliament, told RFE/RL’s Radio Farda that corruption in Iran has become a “systemic phenomenon” and that the Mobarakeh trials highlight the weakness of the judicial system could.
“The difference with this case is that there is a legal structure,” Mehrabi said. “They will say that they were allowed to give these bribes and the money was not spent on personal matters but on state institutions.”
Mehrabi explained that the parliamentary inquiry, which began at the beginning of Rouhani’s second term, could be viewed as a political matter. He also pointed out that Raisi was himself a former head of the judiciary and may have been able to profit from the alleged corruption.
Supreme Leader Ayatollah Ali Khamenei has publicly acknowledged his country’s corruption problems and recently urged the judiciary to stamp out bribery.
“The issue of fighting corruption should be taken seriously,” he told law officials at a meeting in June. “In the judiciary, in the executive branch and elsewhere, there are some structures that naturally create corruption. These structures must be dismantled.”
Past governments and presidential candidates have touted their efforts to fight corruption, and it has become a trend for new governments to blame their predecessors for bribery and the country’s economic woes.
Former President Mahmoud Ahmadinejad, who as a candidate accused “corrupt officials” and private “looters”, was himself accused of leading a corrupt government after leaving office after two terms.
Rouhani began economic reforms after taking office in 2013. He cited ending government corruption as a way to overhaul the country’s subsidy program, which has been crucial for Iranians who have been hit hard by an economic and unemployment crisis caused in part by international sanctions over concerns surrounding the nuclear program from Tehran.
Rouhani also sought ways to lift international sanctions, many of which were lifted after Tehran and world powers signed a landmark deal in 2015 that curbed Iran’s sensitive nuclear activities in exchange for rolling back many of the crippling economic sanctions.
In 2018, the United States unilaterally withdrew from the deal, reinstated sanctions and imposed new, tougher penalties on metal exports, Iran’s largest non-petroleum-related source of export earnings.
The Mobarakeh Steel Company, which is accused of being used as a source of revenue for an alleged Iran-based terrorist network, was among companies blacklisted by the US government in 2018 and subsequently faced additional sanctions.
While months of negotiations between world powers and Tehran appear on the verge of reviving the stalled nuclear deal, Iran’s faltering economy could get a major boost. Even then, economists said endemic corruption and mismanagement were likely to hamper Iran’s economic recovery.
Despite sanctions against Mobarakeh, Iran has touted the company’s growth as an exporter. But the country has suffered shutdowns due to power shortages and low supplies of domestic steel earmarked for export, and cracks in the steel industry at large began to appear after Russia’s all-out invasion of Ukraine in February.
In May, the World Steel Association estimated that Iran’s steel production fell 18 percent month-on-month and nearly another 11 percent in June.
The drop was largely attributed to Russia’s efforts in the Iranian media Boost sales for its steel due to international sanctions imposed after the invasion of Ukraine.
In July, steel production in Iran was the 10th largest producer in the world increased by 34 percent over the previous month.
The stock market plummeted on August 22 following the suspension of Mobarakeh steel trading on the Tehran Stock Exchange, one of four in Iran.