How the Iranian Economy Actually Works

Core argument. Torbadi and Sherefadine argue Iran functions less as a conventional authoritarian state than as a "mafia state": citizens and firms are rewarded based on loyalty to the Islamic Republic rather than treated equally under law. Sherefadine frames it explicitly — in this hierarchy, a Hezbollah or Houthi fighter ranks above a Tehran University professor in claims on state resources, which is why the government can fund proxies abroad while struggling to provide free school milk domestically.

The mechanism. The authors trace how this developed institutionally. Post-1979 nationalization gave the government of oil, mining, banking and shipping; a later privatization wave was captured by insiders close to security forces rather than genuine private buyers, with land banked or resold rather than production restarted. Religious foundations (bonyads), created with genuinely charitable mandates (aid to war veterans, wealth redistribution), were granted import rights free of government audit or taxation — a precedent set in the 1980s by Mehdi Karubi, who as an MP passed legislation letting his foundation import without oversight, and later, ironically, tried and failed to impose transparency on the same system as a reform-era parliamentary speaker. That precedent metastasized into "invisible ports": IRGC-run jetties bypassing all customs. A vivid instance: in 2004, at the opening of a new international airport meant to rival Dubai, the IRGC drove armored vehicles onto the runway and scrambled a fighter jet to block landings because the operating contract had gone to a Turkish-Austrian firm rather than to them — the airport shut for months until state firms took over. Once past a revenue threshold, private businesses face demands for equity or protection payments from security-linked intermediaries; the authors describe this literally as a "mafia" dynamic. Torbadi estimates roughly half of Iranian oil exports are now sold directly by the Revolutionary Guards rather than the oil ministry, a shift that accelerated as sanctions cut off conventional government revenue and the state instead compensated security forces with access to oil sales.

The same capture pattern hit Iran's tech sector. After the 2015 nuclear deal and 4G rollout, a genuine startup ecosystem emerged — a Digikala (Amazon analog), Snapp (Uber analog), food-delivery apps — insulated from US competitors by sanctions and funded partly by returning expats and foreign VCs betting Iran could be "the next Russia or China." The sector's association with the Rouhani government drew a backlash from hardline factions: smear campaigns, arrests, office raids, followed by intermediaries with ties to both the security state and bunyads offering protection in exchange for roughly 5% equity stakes. Snapp eventually sold a large stake to a bonyad; Digikala sold 40% of its shares to a bonyad-linked telecom; a separate rideshare competitor launched with direct IRGC financing.

What has to be true / what breaks the view. Sherefadine's structural claim is that Iran's problem isn't simple corruption but genuine multi-faction competition — Ahmadinejad, Rouhani and others each empowered their own loyalists in turn, and the Revolutionary Guards, clerical foundations, and elected government all compete for economic turf, which the authors liken to feuding factions or, in Torbadi's framing, competing Greek gods each demanding tribute. This chaos, they argue, is more damaging to business certainty than outright corruption would be alone — a single, stable "gang" (their analogy) would be more investable than several competing ones. The 2020 COVID vaccine episode is offered as proof the ideology and self-interest are often inseparable: Khamenei blocked Western vaccine imports on ideological/suspicion grounds, then awarded the domestic vaccine contract to his own conglomerate. Sherefadine states plainly that Iran has never treated economic growth as an end in itself; officials have periodically urged setting aside ideology to unlock foreign investment and a durable US deal, and every supreme leader — Khomeini and, for 37 years, Khamenei — has declined that trade. Torbadi says she would need much more evidence before revising that assessment.

On the current war, Sherefadine argues the regime's pain tolerance is structurally higher than Washington's: Iranian inflation is near triple digits and casualties in the hundreds or thousands are absorbable, whereas US domestic sensitivity to a 25-basis-point Fed move, gasoline prices, or 18 soldier deaths is comparatively acute — this is offered as one reason the Islamic Republic has sustained the conflict. He notes Trump has been trying to keep oil under $100 a barrel, with talk of negotiations and conciliatory statements resuming whenever prices approach that level, though Sherefadine doesn't believe the current standoff is sustainable indefinitely given the economic cost to Washington. Torbadi adds that hardline factions inside Iran are currently attacking the president and foreign minister for even negotiating a US memorandum of understanding, and that Iran's own post-war economic outlook increasingly points toward Chinese rather than Western investment, per comments from parliamentary speaker Mohammad Bagher Ghalibaf.