Smuggling & Dirty Money on Iranian Economy
Smuggling in Iran is organized and smart, and cannot be easily
resolved because it has been there for many years and it
has not been challenged in the right way.
The constant shift in trade policies along with the application of misguided
currency policies has led to an increase in smuggling and even a reversal of
the path to change. In the current situation, smuggling has expanded to such
a degree that is taken for granted and, apart from the sector of energy
carriers that are always smuggled out of the country it has spread to many
commodities ranging from flour and pharmaceuticals to livestock and saffron.
Unfortunately, our approach vis-à-vis the international community is not an
approach to help achieve economic development and growth, which would
eliminate these problems.
In fact, instead of negotiating with the world we have practically quarreled
with them over the years. Only during the negotiations on Iran’s Nuclear
Deal (Joint Comprehensive Plan of Action - JCPOA) or during former president
Mohammad Khatami’s ‘Dialogue of Civilizations’ our foreign policy was such
that served our interests and our economic situation also improved.
For the rest of the years, unfortunately, the use of fiery tongue of
politics in relation to most of the major players in the world economy
ranging from the United States and the whole of the West to the Persian Gulf
states, and sometimes even states from the Middle East and Southeast Asia,
have made them reluctant to work with Iran. Generally, the world’s common
outlook about Iran is that Tehran is not cooperative and therefore the
leverage of the global economy cannot be put aside against the country.
The potentials of interaction with the global economy is important because
in the age of globalization of the economy, we can use the said instruments
as a powerful lever to lift the national economy from the ground. Well, we
are currently in a revolutionary situation, and given the circumstances
attitudes are associated with suspicion and pessimism, and hasty, successive
and varied decisions lead to persistent frustration in the society. Such an
approach, naturally, cannot bring about growth, stability and tranquility
for the country, and instead presents a sick economy one of the natural
consequences of which is smuggling.
On the other hand, smuggling in Iran is organized and smart, and cannot be
easily resolved because it has been there for many years and it has not been
challenged in the right way. Of course, there are several general factors
involved in its expansion. First, the government’s foreign exchange policy
that has apparently been imposed on the Central Bank of Iran is the starting
point for the crisis. Although criticisms of this decision are widespread,
until now, the monetary policymaker insists on supply of US dollar at 42,000
rials (for one dollar) to importers of basic goods, which is, of course, due
to government insistence.
The reason why this policy is involved in the spread of the smuggling
phenomenon is the considerable disparity that has been created at the cost
of basic commodities in the open market at their own expense after receiving
US dollar for 42,000 rials and giving the importer a rent-based windfall. Of
course, this is not the only issue that has prepared the ground for taking
advantage of the government’s policies to gain windfall profits in Iran’s
Secondly, the mandatory policy of controlling prices in the market, which
leads to a drop in the price of goods to a level below the balance of supply
and demand, and is to the disadvantage of the producer supports the first
case and is another reason that boosts the temptation of smuggling and
intermediation by changing hands and taking goods even to the other side of
Reverse trafficking is a natural consequence of the implementation of these
two methods, which is ripe nowadays in the Iranian economy and has brought
export of imported basic goods even to the other side of the Persian Gulf.
At the same time, the ban on import of 1,400 items of goods all of a sudden
and without prior notice and time table is another important factor. Given
the high demand for many of the said items in the market, such as foreign
cars, the motivation for domestic agents to move to smuggling is further
Corruption is the brother of smuggling. In any country where there is
abundant corruption the law and regulations are easily bypassed and lack of
transparency in the system will make the mechanism easier. Unfortunately,
smugglers today are more professional than ever, and with regard to their
organization, the expansion of facilities, their knowledge of the system and
their relationships, they are well aware of the ways of bribing officers. By
disrupting the control means, they succeed in abusing and engage in import
or export of prohibited goods
Of course, part of the problem is related to breaking the taboo of
corruption among some government officers and observers, which has
obstructed the mechanism of preventing corruption and bribery in bypassing
the law and smuggling takes place easier than ever. In a clear example, the
existence of 40%-60% import cost, for example, in car imports sector, has
led to factors in profit making from smuggling because of the organization
of smuggling. The politician must understand that the justification for
imports with the high tariff is eliminated, and this disrupts the economy.
Money laundering is one of the things that has a direct impact on smuggling:
Whether money laundering as the cost of moving goods across borders or the
proceeds from smuggling as dirty money, both have a widespread impact on the
spread of corruption in the country. While accelerating and facilitating
smuggling, money laundering has turned into a lucrative and productive
business for some groups. Lack of transparency alongside this issue will
lead to continued trafficking and smuggling as a weed that feeds at lower
points of the meadow that has less oxygen for growing flowers and plants.
Unfortunately, in the context of the sanctions, transparency shrinks, and
when the banking relationships with foreign governments and actors are
reduced or eliminated, corruption spreads.
If we had a banking relationship with other countries and the funds were
transferred to foreign parties through the bank, trafficking would be more
difficult and could be detected thanks to the transparency of financial
transactions. Now, a situation has arisen that even for the official import
and export of goods, we must use a currency exchange that does not at all
have the transparency of the banking transaction.
Even when large amounts of money are circulating in the domestic accounts of
individuals and are not of a largely sustainable nature, the traffickers’
concern for financial transactions diminishes and this grows spontaneously.
Fortunately, in the last few months, the implemented mechanisms and
directives have improved the space outlined here, but still low transparency
and high money laundering are associated with mass trafficking in Iran.