The Political Economy of the IRGC’s involvement in the Iranian Oil and Gas Industry: a Critical Analysis

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The Political Economy of the IRGC’s involvement in

the Iranian Oil and Gas Industry:

A Critical Analysis

MSc Political Science (Political Economy)

Thesis Research Project: The Political Economy of Energy

University of Amsterdam, Graduate School of Social Sciences

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th

_{June 2020}

Author: Hamed Saidi

(1806679)

Supervisor: Dr. M. P. (Mehdi) Amineh

Second reader: Dr. S. (Said) Rezaeiejan

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Abstract

The prominence involvement of the Islamic Revolutionary Guard Corps (IRGC) in the Iranian economy, especially in the oil and gas industry, has drawn particular attention in the political as well as academic sphere. This thesis examines the economic and political factors involved in the presence of the IRGC in the energy sector relating to the historical development of the Iranian political economy in the post-revolutionary period. Specifically, the purpose is to map how the transformation of the political structure of the Islamic Republic, the execution of the neoliberal economic policies in the energy sector, and the rivalry among political factions together generate a condition under which the IRGC as a military institution has become a powerful domestic player in, among others, the oil and gas industry. Underneath this triangulation complex is the shift of the Islamic Republic from state corporatism into the neo-mercantilist developmentalist state by which the state pursued a top-down strategy of economic liberalization and, simultaneously, maintain its control over the economy. The state involved the IRGC as one of the most well-organized and reliable instruments to have strict control over the reshaping of the national economy at which the IRGC operates as the long-arm of the state in this process. At the political level, political factions within the Islamic Republic played as a mediator factor in the augmenting/diminution of this involvement in each presidential term.

Applying neo-Gramscian approach and process-tracing method, the thesis inquires into evidence to illuminate the causal mechanisms among changing the structure of the state, the impact of the economic liberalization, and the role of political factions from the 1979 Revolution until nowadays, which caused the enter of the military entity in the economy. The study concludes by debating the understanding of the role of military forces in the economy, not as an isolated entity from the entire structure of the political-economic system, but rather in relation to the interaction between different forces within non-hegemonic societies in the Global South by focusing on the particular historical structure.

Keywords: The Islamic Republic of Iran, neo-mercantilist developmentalist state, economic

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Acknowledgments

Conducting this research coincided with the outbreak of the pandemic COVID-19-crisis, which had pros and cons for my circumstance. On the one hand, the world was facing a deep crisis, and of course, it continues yet, that it has paralyzed even the most advanced capitalist countries and has taken several hundred thousand lives so far, which requires a different world. On the other hand, although I worried about the situation around me and had to stay in quarantine, I took care of my health very well and used, however, this period to invest my energy and time entirely to write this thesis.

As well, it was for me an instructive and successful period in which I received constructive and challenged feedback from my supervisor dr. Mehdi Amineh. I would like to thank him for his genuine commitment and guidance. Although we had sometimes hard discussions about the content of the thesis and other issues, it has ended always with the reciprocal understanding of the disagreement. Also, my second reader, dr. Said Rezaeiejan, deserves my thanks for taking the time to read and review my thesis. I am happy and satisfied with my contribution to explaining and illuminating the complexity of social phenomena to make the way easier toward the improvement of human being life. With the completion of this thesis, the door of this study period has finally closed behind me and a new door giving access to a challenging, yet enthusiastic perspective has opened in place.

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Maps

Map I. Middle East & South Caspian Oil & Gas Map

Source: IOGN (2020).

Map II. Iran’s oil and gas fields and infrastructure map

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9 Map III. Iran’s petroleum industry map

Source: IOGN (2020).

Map IV. Iran’s Natural Gas Map

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List of Figures and Tables

Figure 1.1 Causal mechanisms behind the evolution of the IRGC from a military institution into a dominant player in the economy, especially in the oil and gas industry.

Figure 1.2 Tracing causal mechanisms.

Figure 1.3 Causal mechanisms that caused the evolution of the IRGC as a military institution into a dominant contractor in the oil and gas industry.

Figure 2.1 Total Iranian external debt between 1993 and 2017.

Figure 2.2 Divested value and number of State-Owned Enterprises' share during Presidential terms,1991-2019.

Figure 2.3 The Divested value of State-Owned Enterprises' share, 1991-2019.

Figure 2.4. The comparative value of the transfer of shares of state-owned companies before and after the notification of the general policies of Article 44 of the Constitution.

Figure 3.1 World proved crude oil reserves.

Figure 3.2 The Iranian oil production, export, and consumption during 1973-2017.

Figure 3.3 Iran's gas production, consumption, and export during 1978-2017.

Figure 3.4 Share of oil in total Iranian government’s revenues and total export value during

1979-2017 .

Figure 3.5 Share of the total export of Iran and petroleum export during 1979-2017.

Figure 3.6 Total FDI in Iran, including Buy-Back in oil and gas sectors during 1997-2017.

Figure 4.1 The awarded contracts to the IRGC’s affiliated companies in the area of oil, gas, and petrochemical (I) per each presidential term and (2) per sub-eras (1996-2019).

Figure 4.2 The value and ratio of awarded contracts to the IRGC's associated companies in the oil, gas, and petrochemical field in each presidential term between 2000 and 2019).

Figure 4.3 The annual value of awarded contracts to the IRGC's associated companies in the oil, gas, and petrochemical area between 2000 and 2019.

Table 2.1 The nature of buyers, value, and share of the transferred state-owned enterprises, 2001-2014.

Table 3.1 NIOC's subsidiaries in the Iranian energy industry.

Table 4.1 The awarded contracts to the IRGC’s affiliated companies in the area of oil, gas, and

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List of Abbreviations

BP: British Petroleum

CBI: Central Bank of Iran

DW: Deutsche Welle

E&P: Exploration and Production

EIA: Energy Information Administration

FDI: Foreign Direct Investment

FY: Fiscal Year

ICANA: Islamic Consultative Assembly News Agency

ILNA: Iranian Labour News Agency

IMF: International Monetary Fund

IOC: International Oil Companies

IOEC: Iranian Offshore Engineering and Construction Company

IPO: The Iranian Privatization Organization

IPRC: Islamic Parliament Research Center

IR: The Islamic Republic

IRGC: The Islamic Revolutionary Guards Corps

MoP: Ministry of Petroleum

NICO: Naftiran Intertrade Company

NIGC: The National Iranian Gas Company

NIOC: National Iranian Oil Company

NIOOC: National Iranian Offshore Oil company

NIORDC: The National Iranian Oil Refining and Distribution Company

NPC: The National Petrochemical Company

OIEC: Oil Industries Engineering and Construction

OPEC: Organization of the Petroleum Exporting Countries

PE: The political economy

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12 PEDC: Petroleum Engineering and Development Company

POGC: Pars Oil and Gas Company

SOEs: The State-Owned Enterprises

Tcf: Trillion cubic feet

TcM: Trillion cubic meters

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I: RESEARCH DESIGN

1.1.

Introduction

Soon after the victory of Mahmoud Ahmadinejad, as a former cadre of the Islamic Revolutionary Guards Corps (IRGC), in the presidential election in June 2005, a $3 billion contract for the development of phases 15 and 16 of South Pars Gas Field was awarded to Khatam al-Anbia in 2006 (Fars News Agency, 2007). Parallel to the international sanctions, many other no-bid billion-dollar contracts were given to Khatam al-Anbia (Donya-e Eqtesad, 2010a). The prominence economic activities of the IRGC have gradually reinforced by which Khatam al-Anbia as the IRGC’s affiliated company has become one of the dominant domestic contractors in the oil and gas industry. With the introduction of it as one of the competent Iranian companies in the field of exploration and production (E&P) in 2016 by Bijan Zanganeh, the Iranian Minister of Petroleum (MoP), Khatam Al-Anbia was named as one of Iran's future oil giants (ISNA, 2016). The prominence involvement of the IRGC in the economy, especially in the oil and gas industry, accompanied by the various internal and external reactions in the political and academic area. At the internal level, Akbar Turkan, the Senior Advisor to President Hassan Rouhani, said that Khatam al-Anbia is "very strong" and the government is not able to compete with its unreliable and breach of contract in the implementation of projects (DW, 2014). Moreover, at the level of international affairs, the United States imposed sanctions against involved Iranian companies “for providing financial support to Khatam al-Anbia”. The U.S. Treasury Department announced in its statement that recently the Iranian MoP awarded Khatam al-Anbia, the IRGC’s economic arm, ten projects in the oil and petrochemical industry worth about $22 billion (US. DT, 2019). Simultaneously with these developments, several questions have raised to illuminate and understand the significant presence of the IRGC in various social, political, and economic spheres, particularly in the oil and gas industry as the main source of government revenues.

This issue took attention within the academic sphere to figure out and perceive the increasing involvement and position of the IRGC in Iranian socio-political and economic fields. As a result, several studies describe the multilayered function and activities of the IRGC in the post-revolution period (Alfoneh, 2007; Alfoneh, 2010; Wehrey et.al., 2009; Ostovar, 2009; Hourcade, 2009; Safshekan & Sabet, 2010; Hen-Tov & Gonzalez, 2011; Rizvi, 2012; Forozan, 2013; Sinkaya, 2016; Coville, 2017). Although some of these scholars describe the IRGC’s activities in the energy sector limitedly, there is a clear academic gap in a comprehensive and systematic investigation in the IRGC’s involvement in the Iranian oil and gas industry and analyzing its engagement in relation with a broader context of the political and economic structure of Islamic Republic. The description of the multilayered character of the IRGC provides solely what we observe as an outcome, which does not explain the main factors behind these developments to understand the dynamism of the socio-political and economic structure of the system. Dynamism contains here continuous changing and the interrelation between the action of various forces within a society, such as state, market, social classes, political groups, elites, military,

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socio-political, and economic institutions, which cause various social outcomes. The forces as units of analysis are not isolated from the entire system, but all of the unites interrelated and shapes certain outcomes. To sum up, social phenomena should be explained as manifestations of various forces within a society.

Socio-politically relevant, given the fact that energy resources – particularly oil and gas - are located in the Middle East and the Caspian region, and the competition between energy consumers increased dramatically, it is of great importance to analyze the powerful actors at the national scale in resource-rich countries. Since the 1970s, as result of using the term ‘rentier state’ by Mahdavi (1970), “the relationship between oil and politics in the developing countries has been explored by mainly political scientists who have focused on the mediating role of oil revenues” (Jafari, 2019, 25). The term ‘rentier state’ has been applied to explain the relationship between oil revenues and the form of state in the developing countries by which the state becomes autonomy in financing from the society and social classes. So, it critically matters to explain which factors play a significant role in the IRGC’s involvement in energy resources within the broader context of the nature of the Islamic Republic which is a rentier-state. The issue of oil and the role of the state in controlling natural resources and its relationship with the society cannot be understood, I contend, without reveal links between the form of the state and the dominant political economy of Iran as a capitalist society.

The political economy (PE) refers here to analyze the formation of each particular society at the macro-system level, which is the reciprocal relationship between state, market, and community in a certain society and at a historical juncture (Stilwell, 2012, 13). That means that the interaction among the triangulation of (I) the form of the state (a liberal state or an authoritarian/centralized state), (II) arrangement of the economy, and (III) the class structure of society together generates certain outcomes. This perspective helps us to understand the political and economic formation and permanent alteration of a particular society that shapes and constrain our options and helps to reveal the forces that change the context within a certain mode of production. The mode of production includes the force of production (the productive technology of society) and the social relations of production (social arrangement by the pattern or configuration of social classes engaged in the production process) (Hunt & Lautzenheiser, 2011, 4; Cox, 1988, 12). When we speak of production, it “is not only a particular production. Rather, it is always a certain social body, a social subject, which is active in a greater or sparser totality of branches of production” (Marx, 1993 [1857], 18). From the view of critical theory, the contemporary capitalist political economy as a particular mode of production is generally characterized by four sets of arrangements: “market-oriented commodity production; private ownership of the means of production; a large segment of the population that can not exist unless it sells it labor power in the market; and individualistic, acquisitive, maximizing behavior by most individuals within the economic system” (Hunt & Lautzenheiser, 2011, 4). However, the pattern of the historical development of capitalism in all countries worldwide is not the same. However, in developing countries

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in the Global South, such as Iran, the structure of the state and the market is different compared to the advanced capitalist countries. “In centralized state-society complexes, civil society, based on social classes and forces, especially a business [... is] underdeveloped, or too weak to act independently of state power” (Amineh & Guang, 2018, 11). Then, it is of significant matter to illustrate how the political economy of the Islamic Republic works and what has happened that IRGC has gained access to the oil and gas industry. This thesis provides an understanding of the function of the IRGC within a resource-rich country, analyzing the reciprocal relationship among the state and society, and the necessity of the IRGC for the Islamic Republic and the political factions to have strict control over the recourses as well as economic development. The findings, analysis, and critical approach of this thesis contribute to illuminate the mutual relations between the involved forces within the structure of the political economy of the Islamic Republic.

Hence, the main objective of this thesis is to analyze the political-economic mechanisms/factors behind the IRGC’s involvement in the oil and gas industry considering the broader context of the dynamics of Iran’s political economy. To achieve this objective, this thesis attempts, in the first step, to provide a picture of the structure of the Iranian political economy in the post-revolutionary era from a helicopter view, which helps to understand the main factors behind the IRGC’s involvement in the economy, especially the oil and gas industry. Next, it aims to describe the size and scope of the IRGC’s involvement in this industry as the spinal cord of Iran’s economy. Subsequently, it will be focused on analyzing the evolution of the IRGC over time into a determinant economic actor in the energy sector. This development must be considered as an outcome of a set of causes, which are political and economic factors. The causal mechanisms behind this metamorphosis are determinant for understanding the key role of the IRGC as a military institution in Iran’s energy resources. So, this thesis poses one core question:

Why Iran’s Islamic Revolutionary Guards Corps (IRGC) has become a dominant actor in the Iranian oil and gas industry?

In light of that the objective of my thesis, the main question is an explanatory question which attempts to investigate the political-economic mechanisms behind the prominence of the IRGC’s involvement. When we speak of mechanism, it contains a set of factors or a component of a system that plays a determinant role in producing a certain outcome. In other words, mechanism is “a set of hypotheses that could be the explanation for some social phenomenon (Hedstroem & Swedberg, 1998, 25). In our case, the outcome is the involvement of the IRGC in the economy. To answer adequately the main question, several sub-questions are formulated:

1) What are the political-economic mechanisms involved in the IRGC’s involvement in the economy?

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2) What is the position of the oil and gas industry in Iran’s political economy and which factors led to the IRGC’s involvement in this industry?

3) To what extent the IRGC has become a central player in the Iranian oil and gas industry? To understand the political-economic mechanisms behind the increasing engagement of the IRGC in Iran’s oil and gas industry, it will be focused on the post-revolutionary period, from 1979 until 2019. Focusing on this timeframe is in light of the fact that the IRGC was established in the direct aftermath of the Iranian Revolution in 1979 to defend and consolidate the Islamic Republic of Iran. The IRGC has gradually, parallel to political-economic transformations, become a leading actor in the Iranian economy, especially in the oil and gas industry. Analyzing the patterns behind the IRGC’s economic power requires an investigation into the historical development of this military organization during the last four decades. Nevertheless, this historical process will be divided into two timeframes. First, the rise of the IRGC will be shorty demonstrated during 1979-1989. Then, it will be analyzed which political-economic change during 1989-2019 led to the IRGC’s shift into a central economic actor.

1.2.

Literature Review

The literature on the position and function of military forces in the Iranian political and economic fields, particularly the role of the IRGC in the post-revolutionary era, discusses mainly in relation to the structure of the political system. The increasing involvement of the IRGC in the economy led to a consensus among some scholars who mainly analyze from a political perspective by the framework of the militarization of the economy. Alfoneh (2007) pointed out that the clergy and the IRGC are two complementary centers of power in the Islamic Republic. He argues that although the official and original duty of IRGC was to “safeguard the revolution,” but it has gradually become a dominant actor in Iranian politics, which lead to its infiltration in “all spheres of life in Iran.” That has been “transforming Iran into a military dictatorship” (idem, p.16). Alfoneh does not explain the relationship between the IRGC’s evolution and the structure of the Iranian political economy.

Forozan (2013) applies the theory of ‘civil-military relations’ and ‘institutional’ studies to analyze power relations in post-revolutionary Iran. This analysis focused on the rise to power of the IRGC in post-Khomeini Iran (since 1989), particularly after the victory of Ahmadinejad in the presidential election in 2005 that led to the reinforcement of the IRGC’s presence in the oil and gas industry. He used the concept of praetorianism to explain the weakness of political institutions of countries (like Iran) compared to those of its military entities. Forozan argues that this issue is a condition that creates fertile ground for the military’s takeover of the political system. Applying the concept of the ‘garrison state’, he pointed out that the increasing power of the IRGC from a military entity to a leading political and economic player is a consequence of, among others, domestic political tension within the context of Iran’s factionalized political process. In addition, the scope of the IRGC’s expansion into political and economic sphere “was the outgrowth of its responses to internal crisis and perceived external threats

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in the context of Iran’s ongoing elite struggle for power” (Forozan, 2013, 1). Although he exerted the term ‘factionalism’ as a factor to explain the IRGC’s involvement in the economy, it contains a statist view in the sense of interrelations of political and economic forces, and the necessity of historical development as a consequence of internal dynamism of capitalist development in Iran. Factionalization of the political system may influence the involvement of some interest groups and/or military institutions in the socio-political and economic fields, but a dynamic explanation - which considers the reciprocal impact of all involved factors - required linking between the political system and the structure of the economy. Therefore, Forozan’s work does not help the reader adequately to understand the political-economic mechanisms involved in this development.

Some scholars applied the term ‘militarization of economy’ to explain the increasing presence of the IRGC in the economy. From this approach, Alfoneh (22010) attempted to demonstrate how the IRGC has benefited from the privatization of the state-owned enterprises (SOE) during Ahmadinejad’s presidency. According to hem, purchasing the SOEs by the IRGC and its subsidiary companies, among other the Khatam al-Anbia Construction Headquarter, “show the militarization rather than the privatization of Iran’s economy” (p.1). Furthermore, Safshekan and Sabet (2015) analyze the prominence of the IRGC in the economic and the political arena, especially related to the Ahmadinejad administration, as “obvious examples of the militarization of a hitherto civilian and clerical government” (p.553). Following, the Iranian political structure has been analyzed as a “praetorian” state whereby the increasing involvement of the IRGC’s companies in the economy was interpreted as transformation of the political system “from its unique clerical model toward a type of military dictatorship to the centralization of the economy” (Hen-Tov & Gonzalez, 2011, 45).

In contrast to this analysis and viewpoint, Harris (2013) states that the involvement of the IRGC in the economy has to be seen as a “subcontractor state”, not as a “praetorian monolith” (p.45). That means that the alteration of the Iranian political economy since 1989 into the implementation of the neoliberal economic policies by all political factions can better explain the prominence engagement of parastatal and military entities in the economy. As he points out, the substantial presence of the IRGC “needs to be situated within a larger analytical field” (idem, p.46). In relation to the broader context of the political economy of Iran, “[t]he economic prominence of the IRGC and parastatal organizations is not a sign of their militaristic takeover of the state.” Rather, it is the outcome of the historical socio-political and economic development of the Islamic Republic. In addition to economic mechanisms, the role of political factions in this process has to be considered as “political infighting between elites who use economic policy as a battleground for factional struggles.” Harris argues correctly that “the rise of the subcontractor state, [...] should not be confused with the logic of militarism. Instead, the subcontractor state is an outcome of the way in which politics and society shaped the form of capitalism that has taken root in the Islamic Republic” (idem, p. 46-47).

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Hence, it is important to illuminate the necessity of the IRGC for the certain ruling class and interest groups within the political economy of the Islamic Republic. Regarding the structure of political-economic character of some Middle Eastern states, among others Iran, Dorraj (2017) and Ehteshami and Murphy (1996) applied the concept of populism and corporatism to explain how populist regimes came in power, utilized a corporatist strategy to govern, and how they have transformed over time. This perspective considers the state as an organic authoritarian institution above the society in order to unify the socio-political community, to achieve the common needs of the whole society by the central role of the state (Klaren & Bossert, 1986, 27). Moreover, Schimtter (1979) defines state corporatism as a form of authoritarian practice of the state into the society, which results in the creation of dominated and dependent interest organizations. Generally, corporatist states are militarily strong, oppressors, and interventionists in economic and social life as well as in inter-group interest mediation (Dorraj, 2017). This approach does not, however, explain the dynamism of the transformation of state corporatism to a new form, and what is the role of military forces in the newly established system. The understanding of the origin of the IRGC in the wake of Iran’s Revolution in 1979 and its evolution into a multilayered actor in Iran’s economy requires (a) understanding the dynamics of the political economy of the Islamic Republic over time, and (b) the economical and political factors that caused the involvement of the IRGC and other parastatal entities in the economy.

On the historical development of capitalism in Iran since the 1979 Revolution, the study of Behdad (2000), from populism to economic liberalism: the Iranian predicament, sheds light on the evolution of the post-revolutionary economic crisis and divides this period into three phases: (I) revolutionary disruptions (1978-80), (II) Islamic populism (1981-1989), and (III) liberalism of the post-Khomeini era (since 1989). Moreover, Nomani and Behdad (2006) divided the post-revolutionary Iran into two periods: the first period (1979-1989) was accompanied by the rise of revolutionary uprisings, disruption of the process of capital accumulation and capitalist relations of production, and the implementation of populist state-oriented policies. The second period started with the death of Khomeini in 1989. This is a period in which the orientation of the Islamic Republic and its policies shifted towards economic reconstruction and the revival and consolidation of capitalist economic relations and institutions (p. 26-27). Behdad (2000) underlines and demonstrates that after a decade of economic liberalization, the conglomerate network of parastatal and military foundations and “their affiliated enterprises have benefited from special privileges and have reaped extremely attractive profits over the years.” (p.12). Despite the rapid implementation of economic liberalization since 1989, among others the privatization policies, the state, and its affiliated entities were still the dominant players in the economic field.

Consequently, this study focuses on the main political-economic factors involved in the increasing role of the IRGC in the oil and gas industry in the context of the political economy in post-revolutionary Iran. To achieve that, the Critical Theory (neo-Gramscian approach of Robert W. Cox) will be applied, which provides a suitable view to understanding the complexities of the Iranian political and economic

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structure during a set of historical processes. Although the neo-Gramscian approach is known as a theory of International Relations, its departing point is, however, analyzing the involved factors on the national scale. Therefore, the critical theory of Cox will be employed as a theoretical model to understand the complexities of the case.

1.3.

Theoretical framework

The establishment of the IRGC and its evolution is the outcome of various objective socio-political and economic conditions in a historical process. With departing from this viewpoint, ‘historical materialism’ as one of the main dimensions of critical theory offers us a dynamic and historical approach to explore and understand the necessity and function of the IRGC within the Islamic Republic. Historical materialism contains, in Gramsci’s thinking, that the reciprocal relationship between production relation and ethnopolitical sphere shape a state-society complex as constituent entities of an entire socio-economic formation and for exploring the particular historical forms taken by these complex (Cox, 1981, 134). Hence, the involvement the IRGC in the economy has to be considered as the outcome of two historical structures in the Iranian post-revolutionary period in which the structure of the state-society complex, which is the relation between the political power structure, the structure of the market, and the structure of social classes generated several conditions under which the expansion of the IRGC’s function has become a necessity for the survival of the ruling political-economic structure. This process is divided into two eras to examine and analyze the evolvement of the IRGC: (1) The establishment of state corporatism in which the IRGC was a suppression instrument of eliminating social conflicts and consolidate the Islamic Republic (1979-1989), and the transformation of the regime toward (2) a particular form of the neo-mercantilist developmentalist state (since 1989) that attempted to reshape the economy by the implementation of economic liberalization through a top-down strategy. These two successive historical structures have to be identified by a set of features and involved forces.

Referring to Cox (1981), within each historical structure interact three categories of forces: (a) Material capabilities which include technological and organizational capabilities, and in their accumulated forms as natural resources, (b) ideas, and (c) institutions (economic, political, and military institutions, a means of stabilizing and perpetuating a particular order, and reflect the power relations prevailing at their point of origin) (p.135). To understand which political and economic factors lead to establishing the IRGC as a military institution and its evolution into an influential economic actor, it will be looked at the composition of forces and interactions of the categories within each historical structure.

The method of historical structure and its features is applied to three levels of analysis: (1) the social forces (involved social movements, social classes and strata, political groups, the degree of socio-economic development, and organizations of the production process); (2) forms of state (the structure of the political power, as liberal and autocratic states); and (3) world order (the dominant economic and

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political power in a certain historical time. These levels are not separate from each other, but they interrelated. It means that, for instance, changes in the organization of the production process generate new social forces which, in turn, bring about changes in the structure of the state (Cox, 1981, 136).

Based on this preliminary discussion, two forms of historical structure will be described whereby the IRGC founded as a result of the emerging of state corporatism and has been evolved to a leading economic actor as the consequence of emerging the neo-mercantilist developmentalist state.

1.3.1. State corporatism and the role of military forces

State corporatism is the main concept to elucidate the structure of the political economy of the Islamic Republic in the first period of post-revolutionary order (1979-1989). Corporatism is a concept by which the dynamism (continuous activity/change and interrelation of actors/forces) of a certain form of state-society is analyzed. The most dynamic and multidimensional definition of state corporatism has been developed by Robbert W. Cox. With departing from Cox’s viewpoint, at the level of social forces, state corporatism is the outcome of a social crisis of hegemony in a certain society. “Under state corporatism, the [newly established] state imposes authoritatively upon industry and organization of formal representation for employers and workers intended to maintain order, to regulate working conditions, to promote social harmony, and to eliminate conflict” (Cox, 1989, 80-81). So, state corporatism is, in the sense of Gramsci’s description, a product of non-hegemonic societies, which means that in a historical moment in which the conflict between antagonistic social forces outbreak and no dominant class has been able to achieve hegemony, a “passive revolution” is a response to this social crisis.

Passive revolution is a condition where the ruling bourgeois class is unable to maintain its control over all other social classes, and the new progressive social class (workers) as a counter-hegemonic force are not capable of achieving their own hegemony over the society. Therefore, passive revolution is “an attempt to introduce aspects of revolutionary change while maintaining a balance of social forces in which those favoring restoration of the old order remains firmly entrenched.” (Cox, 1983, 166). In other words, it is a “revolution” without a “revolution”. In this process, the leading group takes over the power and gains control over the state’s apparatus and mainly employs coercion in seeking to reform the economy in some extend, while the older mode of production remains largely, which manifested in a form of state repression and strong intervention in the economy (Roberts, 2015, 1666). Hence, these conditions induced “a ‘molecular’ social transformation which takes place as it were beneath the surface of society, in situations where the progressive class cannot advance openly (Gramsci, 1971, 194).

Using these suitable concepts helps us to explain the emergence of the IRGC in the direct aftermath of the establishing of the Islamic Republic as the outcome of a non-hegemonic society whereby neither then-establishing capitalist class nor revolutionary working-class could achieve their hegemony over the Iranian society. In the context of this circumstance, Rohullah Khomeini, as the man of destiny and as leader of the populist forces of Political Islam emerged and imposed itself as the solution of the social

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crisis. The IRGC stemmed from, and vitally necessary for establishing the corporatist state to “freeze conflict without resolving the issue between the antagonistic social forces” (idem, p.192). In short, the emergence of the IRGC has to be analyzed in the context the state corporatism in Iran, which is the outcome of the passive revolution in 1979.

Nevertheless, the state corporatism in the Middle East struggles with various challenges during its existence. At the level of social forces, the national economic forces, as material capabilities, do not “contain sufficient effective demand to become a dynamic force and the existence of an excess supply of labor given no incentive to stimulate greater efficiency on the part of investors”. At the level of the state’s form, “the power holders in the state apparatus [are not able, due to the lack of hegemonic ideas and institutions] to mobilize society so that it will produce a surplus under state auspices” (Cox, 1989, 231). In the context of Iran’s political economy, these factors led to the political and economic impasse of state corporatism. However, it does not mean that state corporatism would be disappeared as a result of these challenges. State corporatism has, rather, led to its metamorphosis to a new form as the neo-mercantilist developmentalist state to adapt and adjust some economic and (to some extend) political reforms in response to the requirement of capitalist development, and, consequently, capital accumulation and regime survival. The development and establishing of state power during a certain timeframe allow the political elite to take various initiatives from above to induce economic reforms, which leads to the transformation of the political economy into a new stage of its life. This historical process did not change the social structure of capital accumulation fundamentally. The new structure has been changed by the new form of the state (Cox, 1989, 266). Within the new hierarchical arrangement, the military institutions are involved with economic development. The concept of ‘the neo-mercantilist developmentalist state’ is used to identify the new stadium of the Islamic Republic.

1.3.2. The neo-mercantilist developmentalist state

Using the neo-mercantilist developmentalist state provides us to understand the structure of the political economy of Iran in the second period of the post-revolutionary order (since 1989). In the first place, the neo-mercantilist developmentalist state “seeks to gain control over its instruments necessary to shape the national economy, and in second place, it is developmentalist because it wants to use these instruments to achieve continuous growth and structural change” (Cox, 1989, 231). This tendency and dynamism of the state lie in the structure of the state-society which contains that (a) the state does not possess enough capacity to reshape society, and (b) social forces and private sectors are not strong and coherent enough to organize itself. The new form of the state and its closed and well-organized entities remain as a central actor in the transformation of the economy and the society. This reaction of the neo-mercantilist developmentalist state is the result of “the impact of foreign economic penetration and the gradual inclusion of a country within the world capitalist economy and the nature of the local response by social and political forces to this impact” (idem, p.234). Hence in this process, the state determines several duties for itself, such as “combinations of stricter control over access by foreign capital,

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increases in the rents extracted from resource exports, support for the national capital, expansion of the state sector, and increased foreign borrowing for investment according to state-determined plans” (idem, p.232). The neo-mercantilist developmentalist state has two important features: (1) the implementation of the economic liberalization form above and (2) the lack of unity within the state.

Firstly, to achieve economic development, the transformation goes with the execution of neoliberal economic policies, which is the dominant strategy of the world economy, known as neoliberalism. Harvey (2005) initially defines the phenomenon of neoliberalism as a theory of political-economic practices that indicates the power relationship between capital and labor in favor of the former. This policy is implemented through mostly “deregulation, privatization, and withdrawal of the state from many areas of social provision” (idem, p.2-3). This form of reconstruction of the global structure was a policy to make all social relations and economic activities subordinated to the necessities of the world economy and the free market sphere. In this way, the nature of capitalism, which is the maximization of profit and the accumulation of capital, will dominate all aspects of human life without the slightest restriction, except with social resistance. It starts with the privatization of the SOEs to absorb foreign capital to supplement the shortage of national capacities in order to stimulate investment and production. To execute these kinds of reforms within non-hegemonic societies in developing countries, “the bureaucracy became increasingly reliant on the abilities of the commercial bourgeoisie to provide the appearance of economic success (imports of consumer goods) and the ingredient of finance capital (foreign investment)“ (Ehteshami & Murphy, 1996, 759). The strategical economic liberalization entails several risks and opportunities. The uneven capitalist development has led to the unbalancing of the social, political, and economic conditions in the country during a historical process. The fact that the reshaping (liberalization) of the national economy resulted in the reshaping of social forces (including both the structure of the economy and social classes), the confident support of the military forces as the most well-organized and its direct link to the state is crucial to create and maintain the ‘order’ in favor of economic development and regime survival. This means that the dramatic impact of liberalization of the economy has unsphered that the power of military forces does not erose, in contrast, militias and paramilitaries wield substantial power. This aspect does not mean that the economy would be militarized, in contrast, the state needs loyal organized institutions to meet the requirement of economic development outside the scope of the state and, at the same time, to supply a strong control of the state over the economic development process. From this perspective, it is important to look at the economic reforms in Iran since 1989 and the expanding process of the IRGC into a leading actor in the various eras of the economy.

Secondly, at the level of the state’s form, one type of the neo-mercantilist developmentalist state is state. “In a situation where not internal social hegemony has become established, [...] the cartel-state would continue the path of dependent development” (Cox, 1989, 234). Parallel to the implementation of the liberalization of the economy, the state suffers from its significant lack of unity.

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Political instability within the state appears in different political factions which attempts to take a different position regarding the way of reforms to benefit most, and in the final analysis, to maintain and consolidate its power positions. The state’s cadres and prominent leaders “may be torn apart into rival factions competing for state’s resources, giving more scope for private capitalists, who favor and secure more liberal economic policies” (ibid). This situation creates a fertile ground for an intensive rival power position within the state, which “may lead to unwise investment, to the entrenchment of rival power positions within the state, and to corruption” (idem, p. 244). The rivalry between factions coincident with their attempts to secure the survival of the regime. This aspect helps us to analyze the power position of different political factions within the Islamic Republic and the maneuver of military forces within this internal cleft.

Hence, the transformation of the economy would be resisted through some factions of the bureaucratic bourgeoisie who believed that privatization of economy and power-sharing with private enterprises (include foreign economic actors) would lead to power loss, which, in turn, can threaten the existence of the state power. “For the sake of self-preservation - and to resist pressures to alter their economic policies - they used the means available to them, the security forces, to reimpose their authority (Ehteshami & Murphy, 1996, 764). The lack of unity within the state and the continuity of lack of state’s hegemony over the society are the political expressions of a stalled non-hegemonic society. This requires still the military forces which have to go with the transformation of the economy to secure the ‘order’ within the society.

1.3.3. Hypotheses

• H1: The top-down economic liberalization strategy by the Iranian neo-mercantilist developmentalist state caused fundamental conditions under which the involvement of the IRGC as the most well-organized and coherent institution was for the Islamic Republic critically important to have strict control over the reshaping of the economy, and to satisfy the implementation of economic liberalization at which the IRGC operates as the long-arm of the state in this process.

• H1-0: The top-down strategy of economic liberalization by the Iranian neo-mercantilist developmentalist state did not cause fundamental conditions under which the involvement of the IRGC as the most well-organized and coherent institution was for the Islamic Republic critically important to have strict control over the reshaping of the economy, and to satisfy the implementation of economic liberalization at which the IRGC operates as the long-arm of the state in this process.

The first hypothesis contains the economic mechanisms behind the IRGC’s involvement in the economy. As discussed above, the lack of unity of the state is an aspect of the neo-mercantilist developmentalist state. Therefore, economic mechanisms are influenced by the role of political

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factions. Political factions, as explained below, had an impact on the degree of the IRGC’s engagement in the economy, especially in the oil and gas industry. Therefore, our complimentary hypothesis is:

• H2: Intensive rivalry between political factions augment/diminish the involvement of the IRGC in the economy, especially the oil and gas industry.

• H2-0: Intensive rivalry between political factions did not augment/diminish the involvement of the IRGC in the economy, especially the oil and gas industry.

1.3.4. Argumentation: economic and political mechanisms

Based on the discussed theory in the previous section, I shall put forward how the IRGC has evolved with the transformation of the political economy (PE) of Iran in the post-revolution era. Looking at the development of the Iranian post-revolutionary PE after the Iran-Iraq War (1980-1989), the IRGC has parallel transferred to making intensive ties with, among other, various economic fields. This evolution can be adequately glossed by analyzing the tendencies and dynamics of the transformation of the Iranian PE from state corporatism to the neo-mercantilist developmentalist state. Both economic and political mechanisms caused the IRGC’s involvement in the economy.

1.3.4.1. Economic liberalization and the IRGC’s involvement in the economy

The arguments behind the first hypothesis are based on the economic mechanisms which drive from the top-down strategy of economic liberalization by the Islamic Republic as a form of the neo-mercantilist developmentalist state. The accumulation of political and economic crises and many other contradictions that the Islamic Republic during the first decade of its life has confronted associated with the state-led economy. The most important challenge for the regime was getting economic growth going (encouraging maximization of profit and capital accumulation) and maintaining its control over the society, including the economy to survive the regime. These challenges led the regime to adapt structural economic adjustment under the auspices of the International Monetary Fund (IMF) and the World Bank. Therefore, "non-dependence on the West" and "self-sufficiency," which were the main slogans of the Islamic Republic’s leaders for dozen years, gave way to the economic liberalization in the framework of "Washington Consensus". The mechanisms of the neoliberal economic policies based on deregulation on the scope of capital performance, privatization of SOEs and social services, and, the limitation of the government in the economy. The recommendation of these international financial institutions to applying their neoliberal policies centered on three pillars: (1) price stability and real exchange rate devaluations; (2) relying on the market mechanism by turning prices into a real indicator of resource scarcity, and relying on the private sector to drive growth; (3) opening of the national economy to international trade and export-led growth (Cammett, et al., 2015, 274). In other words, the logic of neo-liberalism is that by “getting the prices right” and “getting the state out of the way”, productivity and profitability will increase, production expands, consumption growth limits, import fall,

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exports rise. As a result of these developments, they claimed, the economy grows, employment increases, and, in particular, the shortage of foreign currency disappears (Nomani & Behdad, 2006, 90). The purpose of the economic liberalism policy is to change the power relationship between capital and labor, which the reconstruction of the distribution of income by increasing the share of capital accumulation (profit) and reducing the share of workers (wage).

In the context of the Iranian PE, in a condition under which the destruction of capitalist production relations, capital accumulation, and economic development, which induced by the 1979 Revolution and war with Iraq (1980-1989), led to a depth economic and political crisis. In this circumstance, “the bourgeoisie took its battle to the political arena and raised the banner of economic liberalism, demanding denationalization (privatization) of industries and deregulation of the market” (Behdad, 2000, 12). Therefore, Iran’s postwar political leader, under the leadership of the Pragmatist faction, led by President Akbar Hashemi Rafsanjani (1989-1997), moved toward significant economic liberalization based on a state-led economic reconstruction. Specifically, adapting the neoliberal economic policies in Iran included three essential components: (1) unification of the exchange rate and floating the currency, the rial; (2) decontrolling prices and eliminating subsidies; and (3) the privatization of state-owned enterprises (SOEs) (idem, p. 14). This strategy has been implemented by successive Iranian governments from 1989 until nowadays.

Within our model of analysis, there will be sought how the implementation of the economic liberalization generated some appropriate conditions for the IRGC’s involvement in the economy. Stems from the fact that private sectors in the post-revolutionary period were weakened and marginalized, the involvement of the IRGC and many other parastatal foundations in the economy was vitally important for the Islamic Republic, to have strong control over the reshaping of the economy. This was also an opportunity for parastatal entities to benefit the state initiative of privatization. Regarding the privatization of SOEs as an important mechanism, “for governments to reduce their role in the economy and expand the play of market forces, the state itself must be strengthened” (Haggard & Kaufman, 1992, 25), which is being a critical challenge for the Islamic Republic. To encourage the economic liberalization policies through privatization of SOEs and, at the same time, to intervene continuously in the economy, the state has to be autonomic in relation to public sectors. To fulfill this requirement, “governments need to carve institutions out of the state apparatus that is unconstrained by such linkages” (Harris, 2013, 48). As a consequence of these trends, for instance, after decades of implementation of economic liberalization in the 1990s, the state and parastatal institutions (bonyads and military forces) were still the main player in the economy (Behdad & Nomani, 2008, 99).

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So, there are two important economic mechanisms/factors involved in the IRGC’s presence in the economy: (1) privatization of SOEs and (2) foundation of domestic contractors to satisfy the attraction of foreign investment.

(1) The privatization of State-Owned Enterprises (SOEs) provides a legal way for parastatal entities

and the IRGC’s affiliated companies to become one of the most winners of this policy. For instance, during the first period of the privatization process, half of the 331 divested companies went to parastatal foundations (Muradi, 2005, 52). The privatization of SOEs is an important economic factor for the increasing engagement of the IRGC as a dominant actor in the economy, which led gradually - and it is theoretically and logically expected - to its shift into the oil and gas industry. This strategy has been followed by all of the Iranian government since 1989. As Harris (2013) emphasized, “the popular consensus among political factions within the Islamic Republic, no matter where they lie on the ideological spectrum, is that massive and rapid privatization of state-owned assets is needed as an economic panacea for the country’s woes” (Harris, 2013, 46). Nevertheless, this process is, however, influenced by different political factions, as a catalyst factor, when they control the government’s institutions (see 1.1.4.2). That is, given the fact that each faction represents its own patronage network - mainly for mobilization of social groups and classes to take over and maintain the power - “[w]ith government control being key to business opportunities, profit-seekers curry favor with politicians and decision-makers give contracts to “their” entrepreneurs” (Bjorvatn & Selvik, 2008, 12-13) (see more in the next section, 1.3.4.2).

(2) Foundation of domestic contractors in the oil and gas industry: The founding of domestic

contractors in the era of the petroleum sector by the Islamic Republic was the other factor by which the IRGC’s subsidiary companies expanded their activities and has become one of the most dominant players in the oil, gas, and petrochemical sector. The arguments are the following. Given the fact that the political economy of Iran is critically dependent on petroleum revenues, in line with the economic liberalization policy, the Iranian government introduced the “buyback” contracts model as a mechanism for attracting foreign investment into the Iranian energy sector (see 3.3.2). To pull on foreign investment, during Rafsanjani’s tenure, mani (semi)private affiliated companies have been established and reached its peak during Khatami’s tenure to satisfy the needs of attracting international oil companies in the petroleum sector (Maloney, 2015, 394). This trend is better understood “as being the continuation of a trend toward oil sector development by quasi-state player, with the progressive rise in importance of a new set of domestic contractors, most notably companies associated with the IRGC” (Yong, 2013, 12). This trend is, I assume, a requirement of the Iranian economy to integrate into the world economy, alongside the close control of the state in the sector by established (semi)private contractors and the IRGC’s associated companies as long-arms of the state. This process is indeed influenced by the intervention of the political factions as a mediator factor.

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As a political mechanism, factionalization of the state contributes an important role, but as a catalyst factor, in the involvement of the IRGC in the economy, among others the oil and gas industry. As some scholars stress, factionalism is one of the most characters of post-revolutionary Iran and dominating the political economy of Iran since the 1979 Revolution (Amuzegar, 2009; Gheissari & Nasr, 2006; Farzanegan, Bjorvatn & Schneider, 2011; Bjorvatn & Selvik, 2008). According to the definition of Beller and Belloni (1978), a faction is a “relatively organized group that exists within the context of some other group and which (as a political faction) competes with rivals for power advantages within the larger group of which it is a part” (p.419). In our approach, as before mentioned, factionalism is a product of a non-hegemonic society in which different component of the state-cartel (factions) take up positions within the state to capture shares of the rents and other revenues flowing through the state undermines consistency in the disposition of state-controlled resources (Cox, 1988, 243). Given the fact that Iran as a resource-rich country is a rentier economy and the form of the state is highly factionalized, some studies examined the role of the factionalism in rens-seeking in Iran. In other words, “in Iran, politics also determined how, to whom, and over what networks economic resources flowed during the process of restructuring domestic firms and markets” (Harris, 2013, 48).

(3) Factionlization of the state. Regarding the second hypothesis, the intensive rivalry between

political factions catalyzes and reinforced the involvement of the IRGC in the economy, especially the oil and gas industry. This is the outcome of the lack of unity within the state by which the prominence involvement of the IRGC is among others resulted in competition between political factions and elites who use economic policy as a battleground for factional struggles (Harris, 2013, 47). The study of Farzanegan, Bjorvatn, and Schneider (2011) on ‘oil revenues, political power, and economic growth in Iran: theory and evidence’ confirmed that “higher levels of balance of power in the political system and bolder competition among different political groups in a factionalized political system like Iran reduce the positive effects of oil wealth on growth.” This means, in terms of the rivalry between political factions to capture shares of oil rents, that “when oil revenues are “high”, the rent-seeking argument dominates, implying that increased power balance is negative for overall growth” (p. 32). Moreover, Bjorvatn and Selvik (2008) in their study on ‘destructive competition: Factionalism and rent-seeking in Iran’ concluded that “the reallocation of power will lead to a reallocation of factors of production in favor of the stronger group” (p.18). Consequently, as Maloney (2015) points out, “in conjuncture with their financial muscle has come political influence; by virtue of intricate personal and institutional ties with the government, the bonyads have become pivotal actors in the enduring rivalry among the ideologically oriented factions within the clerical establishment” (p. 148).

Given that the significant involvement of the IRGC in the economy started since 1989, to analyze the role of the political factions as a catalyst factor for augmenting/diminution of the IRGC’s

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involvement in the economy, the second period of post-revolutionary Iran (since 1989) will be divided over four sub-periods: (I) Pragmatic conservatives faction, under the leadership of Hashemi Rafsanjani (1989-1997), (II) Reformist faction during the Mohammad Khatami’s tenure (1997-2005), (III) Neo-conservative faction, known as Principalist (Osulgarayan) during the presidency of Mahmood Ahmadinejad (i.e. alliance of Builders of Islamic Iran, the IRGC and Basij forces) (2005-2013), (IV)

and Moderation faction (E’tedaal), which was established as a result of an alliance of ‘Pragmatic conservatives’ and ‘Reformists’ under the leadership of Hassan Rouhani (since 2013).

X

Causal Mechanisms

Y (Outcome)

Main CNs Mediator

•The state imposes

authoritatively upon industry, workforce, the society to maintain order, to regulate working conditions, to promote social harmony, and to

eliminate conflict

•Using/establishing military forces to freezing social conflicts within the soicety.

State Corporatism (1979-1989)

• Top-down strategy of the reconstruction of the economy (economic liberalization) •Continuity of the state's control

over the economy

• Lack of unity (factionalization) within the state

Nature of the neo-mercantilist developmentalist state in Iran

(since 1989) •Increasing the involvement of the parastatal and military entities in the economy Consequences Transformation of the State’s form

Figure 1.1 Causal mechanisms involved in the evolution of the IRGC from a military institution into a dominant

player in the economy, especially in the oil and gas industry.

IRGC as a m ili tary institutio n Economic Liberalization Privatization of SOEs Foundation of domestic contractors in the oil and

gas industry Fa ctio n liz ati o n o f the sta te

The IRGC’s involvement in the economy

Reinforcement/undermin ing of the IRGC's engagement in the oil and gas industry

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1.4.

Research method

This research is based on the intensive study of a single case which is the evolution of IRGC as a military institution into a domestic dominant player in Iran’s key energy resources. The emerging of the IRGC as a determinant contractor in the oil and gas industry can be considered as an extreme case. Studying an extreme case, as Seawright and Gerring (2008) declare, is suitable for an exploratory analysis that is looking for possible causes of a certain outcome. In this case, our specific research is being conducted into possible causes of the evolution of the IRGC into an economic player in the Iranian economy, particularly the oil and gas industry.

Given that the evolution of the IRG is the product of a chain of political-economic developments during a historical process, and the applied critical theory has a historical approach to analyzing social realities, the applying of the ‘process-tracing method’ is the most suitable analytical method. The process-tracing method refers to a style of analysis used to reconstruct a causal process that occurred in a single case (Gerrin, 2007, 216). George and Bennett (2005) define the process tracing as “a procedure for identifying steps in a causal process [– the causal chain and causal mechanism –] leading to the outcome of a given dependent variable of a particular case in a particular historical context” (p.176).

This analysis aims to open up the black box of causality to study more directly the causal mechanism whereby various political-economic factors/mechanisms contribute to producing the IRG as a powerful economic actor. Here, a mechanism contains “a set of hypotheses that could be the explanation for some social phenomenon (Hedstroem & Swedberg, 1998, 25). The formulated hypotheses of this thesis are the starting point to explain the mechanisms that may have caused the IRGC’s expansion to an economic player. To examine whether the posed hypotheses as a set of causal mechanisms exist in reality, it is necessary to be operationalized in terms of developing predicted empirical observables (see Figure 1.3).

For investigating and tracing causal mechanisms (see Figure 1.2), as argued in the previous section (1.3.4), I examined how the top-down strategy of economic liberalization by the Islamic Republic led to the involvement of the IRGC in the economy. To achieve that, I examined the probabilistic and deterministic factors (Mahoney & Goertz, 2006). Specifically, I examined (a1) the privatization of the SOEs by which the IRGC and other parastatal foundations got access to the transferred share of SOEs and benefit the most from that strategy. Next, I looked for (a2) the foundation of various domestic

Source: Beach and Pedersen (2013)

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contractors in the oil and gas industry, among other the IRGC’s affiliated companies, as a strategy of the neo-mercantilist developmentalist state to maintain its control over the energy sector. Finally, I examined how (a3) political factions as a mediator factor influenced (Y) the involvement of the IRGC in the economy. Here, a1 and a2 are necessary conditions (determinant) for occurring Y, and a3 is a supplementary condition that guarantees the augmenting/diminution of Y. In this process, a1 and a2 are the necessary causes of Y. In our case, the presence of the IRGC in the economy (Y) necessarily implies the presence of the top-down strategy of economic liberalization (a1 and a2). Moreover, (a3) factionalization of the state is also a necessary condition, but not determinant, for the augmenting/diminution of occurring Y (see also Trampusch & Palier, 2016).

To examine these causal mechanisms, I sought and collected various evidence to expose the underlying factors involved in this process. Doing that, I took advantage of a large variety of primary and as well as secondary sources. Under primary sources, appropriated sources were selected from a wide variety of publications in the Persian language based on relevance, which includes news and data from the Web site of Khatam al-Anbia (the IRGC’s affiliated company), National Iranian Oil Company (NIOC), the Iranian Privatization Organization (IPO), Central Bank of Iran (CBI), Islamic Parliament Research Center (IPRC), official Persian newspapers and news agencies, official Web sites of Iranian governments’ institutions and leader. Because of the sensitivity of the thesis’ subject and the limitation of primary sources in terms of the IRGC’s activities in Iran, a set of secondary sources were selected from relevant books and peer review articles in the English and Persian languages. Regarding the data collection, it is necessary to note that there is a lack of complete and transparent information about the scope and size of the IRGC’s property and the real awarded contracts to the IRGC’s affiliated companies. Nevertheless, I employ attentive description, examination of qualitative and quantitative evidence in historical sequence in connection with posed hypotheses premises to investigate causal relationships, which strengthens the internal validity of the research.

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Figure 1.3 Causal mechanisms that caused the evolution of the IRGC as a military institution into a dominant contractor in the oil and gas industry

.

Theoretical/ hypothesized

causal mechanism (CM) Part 1 of CM Part 2 of CM Part 3 CM Part 4 CM Outcome

Top-down strategy of the neo-mercantilist developmentalis t state in Iran Political Mechanisms: factionalization (a3) Rafsanjani's goverment Khatami's goverment Ahmadinejad's goverment Rouhani's goverment Economic mechanisms (a1and a2) Economic liberalization => Economic liberalization => Economic liberalization => Economic liberalization (X-1) Privatization of SOEs Privatization of SOEs Privatization of SOEs Privatization of SOEs (X-1) Founding of contractors in energy sector Founding of contractors in energy sector Founding of contractors in energy sector Founding of contractors in energy sector IRGC's involvement in economy by its subsidiaries IRGC's enter in energy sector Reinfocement of the IRGC in energy sector Continuity of IRGC in energy sector Prominence of the IRGC's engagement in the oil and gas industry (Y) The involvement of

the IRGC’s affiliated companies in the

economy

The Political Economy of the IRGC’s involvement in the Iranian Oil and Gas Industry: a Critical Analysis