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Wall Street Journal: Inside Iran’s Holy Money Machine

By Andrew Higgins
Monday 14 April 2008

[Bigger than the Vatican, awash in cash. How a shrine built a business empire and wields power.]

(For an enlarged image of the Shrine of Imam Reza, click at:

Mashhad, Iran — The Shrine of Imam Reza, a sumptuous parade of mosques, minarets and marble courtyards, is vaster than Vatican City. It draws more Muslim pilgrims than even Mecca, birthplace of the Prophet Muhammad in Saudi Arabia.

Each year, more than 12 million Iranians, Iraqis and other Shiite Muslims journey to the shrine here in northeast Iran to pay homage to Imam Reza, a revered ninth-century martyr. All come to pray before his tomb — and many to stuff bank notes in a gold-and-silver cage that protects his ancient bones.

The shrine has for centuries intermingled faith and money, collecting donations of cash, land, jewelry and works of art from the devout. Today, it is not only Iran’s most sacred religious site but also, by some reckonings, the Islamic republic’s biggest and richest business empire.

Companies in its corporate portfolio make everything from city buses to pizza strudels to growth hormones for caviar-producing sturgeon. At the same time, it operates an Islamic-studies center and boasts a huge collection of Qurans. No-smoking signs at its sanctuary read, "This is the flight zone of angels. Don’t pollute it with smoke."

"We are an Islamic conglomerate," says Mehdi Azizian, business adviser and brother-in-law of Ayatollah Abbas Vaez-Tabasi, the shrine’s 73-year-old chief. "We don’t expect anyone to understand everything we do, because it is so big."

The dual role of the Imam Reza Shrine helps explain how the power of Iran’s aging clerical elite endures, nearly three decades after the 1979 Islamic Revolution. "Money is power, and the mullahs . . . dominate some important parts of the Iranian economy," says Thierry Coville, a French expert on Iran’s economy and author of a recent book on Iran.

The Imam Reza Shrine is part of a cluster of bonyads, nominally charitable foundations with huge holdings acquired through generations of donations or confiscated after the revolution. They publish no accounts and, in most cases, answer only to Iran’s supreme leader, Ayatollah Ali Khamenei.

This status gives bonyads an independent authority outside Iran’s formal state bureaucracy and checks the power of elected officials, whether Western-minded reformers or populist zealots like the current president, Mahmoud Ahmadinejad.

While Westerners often picture internal battles in Iran as pitting orthodox Muslims against secular-oriented liberals, some of the most significant conflicts pivot around cash, not ideology. Mr. Ahmadinejad has favored the Islamic Revolutionary Guard Corps, a paramilitary force with business interests that sometimes compete with the shrine foundations.

The Imam Reza Shrine, known in Farsi as Astan-e Quds-e Razavi, or the Holy Gateway of Reza, owns mines, textile factories, a bus factory, a pharmaceutical plant, an engineering company, a bakery, a sugar refinery, dairy farms, cattle and camel ranches, orchards and dozens of other properties. It owns around three-quarters of the land in Mashhad, Iran’s second-biggest city, and vast tracts elsewhere. It has laid water pipes in Lebanon, built a bridge between Iraq and Syria, and sought road-building contracts in Algeria.

"We are involved in every industry," says Mr. Azizian, 53, an energetic civil engineer who headed the shrine’s business side for years and now oversees its massive reconstruction program. In defiance of Iran’s establishment dress code, which frowns on foreign styles, he has a taste for blue jeans, striped shirts and well-cut business suits. Driving through Mashhad recently in his Nissan Explorer, he asked a visitor about the Dow Jones Industrial Average and pitched the shrine as a reliable partner for foreign investors.

An Iranian business newspaper, Sarmayeh, last year ranked the Imam Reza Shrine Foundation as the biggest of Iran’s bonyads. The paper said the foundation’s business ventures account for 7.1% of Iran’s gross domestic product, which was $188.5 billion in the latest fiscal year, according to the International Monetary Fund. Iranian and foreign economists consider this figure much too high. They add that bonyads have trouble managing their diverse interests efficiently and sometimes hang onto poor performers to protect jobs and political influence. All agree, however, that the shrine is a serious power in the land.

Saeed Laylaz, a prominent economist who studied in Mashhad, compares Iran’s situation to that of medieval Europe, where the wealth of the Roman Catholic Church and its claim to speak for God allowed popes and cardinals to rival and often eclipse kings. "Religion and economics are always together everywhere," says Mr. Laylaz. Without cash, he says, clerics "just become mystics."

According to a 1996 report by the official Iran Statistical Center, all but a handful of Iran’s 79,000 mosques, shrines and other religious institutions have endowments, which usually include land. This matches the pattern in premodern Europe, where churches and monasteries had big property portfolios — before leaders such as England’s Henry VIII grabbed them. The Shrine of Imam Reza is by far the largest landowner in Iran apart from the state, economists say.

Mashhad’s biggest hotels, and many of its factories and farms, sit on shrine land and pay rent to the bonyad. A free-trade zone along Iran’s border with Turkmenistan is on shrine land and is served by an airport built by the shrine’s construction division. Mohammad Noory, the British-educated head of the shrine’s overseas development unit, estimates that the shrine has title to around a quarter of all the private land in Iran.

It isn’t just wealth that makes the shrine so potent. Also critical is its independence from government supervision. Neither parliamentary nor state auditors review the shrine’s books. The shrine’s overseer, the supreme leader Ayatollah Khamenei, is himself from Mashhad.

The mix of power centers in Iran has confounded U.S. efforts to decipher Tehran’s intentions. U.S. officials have struggled, for example, to figure out whether the Tehran leadership has sanctioned the supply of Iranian weapons used by Shiite militias in Iraq. Iran has shrouded its nuclear program, too, in a mist of confusion, saying it wants to negotiate with the international community one day and then stalking away in high dudgeon the next.

The Mashhad shrine’s ambiguous relationship to state power was highlighted after the war in Lebanon last year, during which Israel waged a failed campaign to destroy the Shiite militia Hezbollah. After the conflict, scores of millions of dollars appeared mysteriously to fund home reconstruction and relief work by Hezbollah. In an interview in Beirut last year, Hezbollah’s senior financial adviser, Hussein al-Shami, said the Imam Reza Shrine provided the cash.

Mr. Azizian denies this and says Hezbollah and other Shiite groups merely want to cloak themselves in the sanctity of Imam Reza. The shrine, he says, funds charity and development projects inside Iran. These include lavish reconstruction work at the Imam Reza Shrine that last year alone ate up more than $30 million. Another recipient is Mashhad’s Reza Hospital, a state-of-the-art facility that cost $100 million and is equipped with scanners and other equipment from, among others, General Electric Co. and Siemens AG of Germany.

The shrine’s leader, Ayatollah Vaez-Tabasi, is one of Iran’s most influential clerics. He has been quoted as calling for "perpetual holy war" and describing American singer Michael Jackson as an envoy of Satan. But Mr. Azizian, whose sister is married to the ayatollah, says that Mr. Vaez-Tabasi, while "very religious," is open to new ideas and the outside world. The ayatollah has a Web site that features sophisticated graphics and a video re-enactment of his time in jail under the shah. He declined to be interviewed.

Over the years, Iran’s state bureaucracy has tried to assert its authority over bonyads and other power centers, but made only fitful headway. "The fundamental aspect is this: Nobody can bully the Shrine of Imam Reza," says Mr. Azizian.

Tension between political and religious authority goes back to the early days of Islam and the mysterious death in 818 of Imam Reza, the shrine’s namesake and a descendant of the Prophet Muhammad. Shiites believe he was fed poisonous grapes by the then-leader of the Muslim world, who was Sunni. Imam Reza was buried in Sanabad, then a small village, which became known as Mashhad, "place of martyrdom."

In the 16th century, Iran’s Safavid Dynasty adopted Shiite Islam as a state creed, sharply boosting the status and wealth of Mashhad. Safavid rulers sought to centralize control of religious endowments but conceded the independence of the powerful shrine in Mashhad.

The 20th century brought grave challenges to the clergy’s autonomy. Reza Pahlavi, a former soldier who was the shah of Iran from 1925 until 1941, was a largely secular modernizer. In 1935, worshippers in Mashhad protested a dress code that demanded Western-style brimmed hats, which hampered praying. A riot broke out and troops opened fire. Some accounts say the head of the Imam Reza Shrine was executed.

In 1953, the shah’s son, Mohammad Reza Pahlavi, took power after an American-orchestrated coup and set about uprooting clerical authority. The state began supervising religious endowments and appointed a general as custodian of the Imam Reza Shrine.

At the time, Mr. Vaez-Tabasi, the cleric now running the shrine, was a young religious student. The son of a respected cleric, he began delivering antigovernment speeches and was imprisoned five times. He became good friends with another dissident, Mr. Khamenei, now supreme leader. When the shah was overthrown in 1979, revolutionary leader Ayatollah Ruhollah Khomeini immediately appointed Mr. Vaez-Tabasi chief custodian of the Imam Reza Shrine, restoring clerical authority over the site and its holdings.

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The Islamic government expropriated the assets of the shah and his supporters and turned the riches over to new Islamic bonyads. The biggest of these was Bonyad Mostazafan, or the Oppressed Foundation, which took charge of welfare work and became a massive corporation. Among assets grabbed by Mostazafan were the bottling plant of Pepsi’s Iranian partner, Tehran’s then-Hilton hotel and a sprawling sports club in Dubai. A group calling itself the Mostazafan Foundation of New York took control of a Manhattan office tower built in the 1970s by the deposed shah. (The New York foundation, which later changed its name, is still majority owner of the Fifth Avenue tower but denies any ties to Tehran.)

Alarmed by the power of bonyads was Iran’s first postrevolution president, Abdolhassan Banisadr, who now lives in exile near Paris. He says he complained to Ayatollah Khomeini in 1980 about rampant corruption in the bonyads, which were exempted from taxes, and urged that they be brought under formal government control. The regime never undertook a serious housecleaning, he says. Speaking recently at his ramshackle villa in Versailles, he says the free rein given to bonyads allowed "the mullahs to set up a parallel state." Islam as a galvanizing force "finished a long time ago," he says. "Now it is all about money." Mr. Azizian in Mashhad dismisses Mr. Banisadr as a has-been and a traitor.

Iran’s 1980-88 war with Iraq gave a big boost to the bonyads, pushing them into the front line of relief and reconstruction work. Companies owned by Imam Reza Shrine helped rebuild towns destroyed by Iraq and provided food to Iranian forces.

Following the death of Ayatollah Khomeini in 1989, however, pressure slowly began to build for more control over the bonyads. After the election as president of the relatively liberal Mohammad Khatami in 1997, Parliament passed a law stipulating that foundations were under the "supervision of the president and the auspices of the supreme leader." The brother of the head of the Oppressed Foundation was convicted of embezzlement.

The Imam Reza Shrine also came under attack. Some media began to publish allegations of corruption against Ayatollah Vaez-Tabasi’s oldest son, Nasser, who was running a shrine-controlled free-trade zone near Turkmenistan. Accusations against him ranged from crooked energy deals to embezzlement involving a Dubai trading company. An investigation fizzled.

Mr. Azizian, Nasser’s uncle, dismisses the corruption claims as an attempt by radical secularists to undermine Ayatollah Vaez-Tabasi, the clerical establishment and the Islamic republic itself. "If you attack the toe, you attack the whole body," he says.

The shrine, meanwhile, flexed its own muscle. It took legal action to assert a claim to contested land in wealthy districts of Tehran. Mr. Azizian says the shrine didn’t intend to seize properties but merely to remind Tehran residents that "you are living on Imam Reza’s land."

Shortly before the end of President Khatami’s second term in 2005 and the election of Mr. Ahmadinejad, Parliament finally ordered that foundations start paying at least some taxes. But several religious bonyads were exempted, including the Imam Reza Shrine.

How much the shrine makes a year from its ventures is unclear. Mr. Azizian says the figure is at least $50 million, but there are no public consolidated accounts. Iranian scholars several years ago estimated the shrine’s total annual budget at around $2 billion. Much of its income comes from rent on land willed to the shrine in centuries past. Land donations have declined but pilgrims still leave bank notes at the imam’s tomb.

"We believe that whatever we have is from Imam Reza," says Gholamali Azimi, a 28-year-old medical-center worker who donates his spare time to help the shrine with crowd control. "Giving something back is the least I can do," he says. The shrine says it has a waiting list of 20,000 people eager to work as volunteer ushers, sweepers and guards on the premises.

Iran’s current president, Mr. Ahmadinejad, is more in tune with the conservative outlook of many clerics than his predecessor. But he, too, has clashed with the religious establishment.

Last year, a senior adviser to Mr. Ahmadinejad scoffed at the Imam Reza Shrine’s involvement in "skyscraper building and auto manufacturing" and said such activities should be left to others. Mr. Ahmadinejad’s hard-line government has favored the economic interests of its own supporters outside the clerical elite. A big beneficiary: the Revolutionary Guard Corps. Business units of the paramilitary force have won contracts to run the new Tehran airport, develop gas fields and handle big civil-engineering projects — an area in which the Imam Reza Shrine also competes.

Mr. Azizian, who has worked for the shrine since joining its finance department in 1983, says he’s not worried. Political leaders come and go but all, including Mr. Ahmadinejad, are "the servant of Imam Reza and . . . must obey the imam," he says. The shrine is now looking to expand abroad and is keen on finding foreign investors for joint ventures. "Let’s go to Dubai and create a company, to Canada, to Singapore, even to Afghanistan. We are ready," he says, noting that the shrine’s status offers potential investors "100% protection."

In Mashhad, the shrine is working to set up a new cement factory to take advantage of a construction boom. Its bakery, Reza Bread Co., has installed new German equipment to produce fruit and pizza strudels, mainly for export. It gets its yeast from Reza Yeast Co., its sugar from Reza Sugar Co. and its apples and other fruit from shrine-owned orchards. A big customer is the Reza Hospital.

Shrine-owned companies, says the bakery’s managing director, Ghasemiyan Moghadam, pay market prices for each others’ goods but "work together like the organs of a body." Ownership by the shrine, he says, also eases labor relations. "When you are working for Imam Reza, why would you ever strike?" he asks. The bakery made a $1.2 million profit last year, he says.

Down the road at the Samen pharmaceutical factory, the shrine has just boosted its ownership stake to 70% from 40% after buying out the share of a state holding company. Because of the shuffle, explains general manager Saeed Ahmed Kakhki, the plant now has to pay taxes on only 30% of its profit. Working for Imam Reza is "an honor," says Mr. Kakhki, who has a black spot on his forehead from banging his head while praying.

Not all the businesses are doing so well. The shrine recently sold its stake in a troubled trucking company, and its big bus-making plant in Tehran has a reputation for inefficiency. But, says Mr. Azizian, the shrine’s commercial future is secure.

"When we have Imam Reza we don’t have fear," he says. "We feel very protected. We have God." mod=home_we_banner_left

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