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Trade mafia
U.S. sanctions helping corrupt businesses in Iran

By Japeh Youssefi
May 25, 2001
The Iranian

I am here to appeal to the US government to remove sanctions on Iran. Specifically, in the area of software development for Internet-based business applications. I am neither a politician nor a scholar who can lecture this distinguished audience on various aspects of US economic sanctions against Iran.

But, as a businessman, I can tell you that US sanctions so far have had minimal impact on Iran's economy as a whole, in comparison to what Iran has done to itself. In fact, if one looks at Iran's economic policies, one would realize that these policies have effectively created more stringent, self-imposed economic sanctions on Iran than any sanction laws passed by the US Congress.

Iran's self-imposed economic barriers are the result of:

-- Politically-driven monetary policies
-- The existence of a multi-level currency exchange rate
-- Making the collecting of interest on borrowed loans unconstitutional
-- Unchecked high rates of inflation
-- Politically-driven protectionist regulations
-- The existence of ineffective subsidies
-- The non-transparency and ambiguity of various trade laws
-- Corrupt custom practices, and
-- Lack of concern for the rule of law

Iran has the youngest population on the planet. Over 75% of all Iranians are under the age of 25. Iran's youth are educated, vibrant, and hard working. They are also the most important segment of the population supporting the social and economic reform programs of President Khatami.

Unfortunately, they are also the most deprived segment of Iranian society in terms of economic opportunities. Iranian youth will define the future course of Iran; therefore, they should be considered the most important part of US foreign policy towards Iran.

Experience has shown that young individuals are the best candidates for learning and creating leading-edge software products. In the US, there is a chronic shortage of professional software developers. The huge demand for these hi-tech professionals has created a tremendous cost barrier for many small businesses in the US that want to take advantage of all the opportunities the Internet offers. In effect, this cost barrier has contributed to a slowdown within the high-tech sector, by eliminating investments in e-commerce by small businesses.

Iranian youths are a unique, untapped, and inexpensive labor pool for the development of low-cost, Internet-based, software applications. Having access to this valuable labor pool would benefit the vast, but cost-conscious small business enterprises in the United States. And, it would be a logical starting point in the progress towards broader economic and cultural exchange between Iran and the United States.

After Iran's 1979 revolution, political events in the country resulted in the confiscation of many businesses operated by various individuals and groups who were seen as anti-revolutionaries by the new government in Iran. In the end, these businesses were handed over to various individuals and organizations that supported the Revolution.

Unfortunately, many of the individuals in charge of running these organizations did not possess the required business and technical expertise to effectively manage these companies. As a result, many of these businesses failed and were shut down. Some of these organizations survived because they had exceptionally qualified, educated, and dedicated managers at the helm.

However, the vast majority of these businesses survived by politically influencing Iranian laws and regulations in their favor. In effect, these companies have created a class of government-endorsed monopolies. Today, 22 years after the revolution, these businesses have become so powerful and entrenched within the power apparatus of Iran's regime that they have become the most significant obstacle to much-needed economic, social, and political reforms in Iran.

Various Iranian reformist publications refer to these businesses as the "Trade Mafia". US Trade-Sanctions against Iran have been extremely beneficial to the Trade Mafia. US sanctions have diverted the Iranian people's attention from the political and economic mischief of the Trade Mafia. Because of existing US sanctions, the Trade Mafia has been able to effectively eliminate healthy and vibrant competition, while maintaining their monopolies.

The Trade Mafia is determined on depriving Iranian youth of their hopes and dreams. They persistently compel Iran's youth to surrender their ideals and visions of a modern Iran. Various pressure groups financed and organized by the Trade Mafia have been used to disrupt peaceful and legally assembled gatherings of student groups. Often, these disruptions are accompanied by violence.

The Trade Mafia promotes a backward, rigid, and illogical status quo to protect and promote its own financial interests. And it hopes to block any reforms sought by President Khatami by creating a sense of hopelessness among his most loyal supporters, the Iranian youth.

Today, many investment opportunities in Iran are impossible to finance and are considered high risk. This economic chaos is a direct result of the heavy-handed lobbying efforts of various segments of the Trade Mafia in Iran. In Iran, there are only a very few segments of the economy that can:

-- Create a vibrant small business opportunity;
-- Survive the Trade-Mafia's obstructions;
-- Require minimal investment; and
-- Benefit Iranian youth.

Therefore, in comparison, US economic sanctions have had relatively little to do with the creation of Iran's economic chaos. Instead, US sanctions have been used as a diversionary tactic by the Trade Mafia to protect its own financial interests and preserve special concessions provided to its members by various government entities.

Without sanctions, Iranians would have an opportunity to scrutinize the activities and privileges of the Trade Mafia. This scrutiny would likely create the starting point in the process towards economic reforms long sought by the Leader Ayatollah Ali Khamenei.

Investments in software development opportunities are somewhat immune from the existing economic chaos in Iran. Software development businesses could essentially start as basement operations and flourish from there. Initial capital investment for software development is minimal, allowing many entrepreneurs to finance themselves. The most valuable asset of these businesses is intellectual property-- an asset that is immune from the Trade Mafia's takeover tactics.

The primary market for these newly developed software products would be the US, a market well beyond the reach of the Trade Mafia. The means of getting software products to the market would be through e-mail and the Internet, thus bypassing Iran's corrupt customs service and various obstructive trade regulations.

The Iranian leadership, as well as various caring and concerned religious leaders from both conservative and reformist camps, would most likely support the removal of sanctions for software development as a starting point.

Furthermore, according to the US National Safety Council, by the year 2005, 350 million PC's will become obsolete, with at least 55 million units ending up in US landfills as waste. By allowing companies like ISmart to gather these obsolete PC's and send them as gifts to various Iranian schools and small businesses, we can:

-- Protect the environment by preventing the dumping of hazardous waste material found in PC's into our landfills
-- Reduce disposal and recycling costs
-- Create hardware training for the youth in Iranian schools
-- Create means for access to the Internet from Iranian schools and facilitate the concept of dialogue among civilizations for the massive Iranian youth population
-- Provide free PC's for various software development startups
-- Provide a good-will gesture from the people of America to the Iranian people.

In addition, this program can serve as a model to the UN effort to eliminate the "Digital Divide" that exists between developing and developed countries.

In conclusion, the removal of sanctions could transfer Iran-US disputes from the public arena to the trade negotiation table. And, by adopting internationally acceptable economic policies and standards, a common ground would be established for dialogue between Iran and the United States. This will be beneficial for US interests in the Middle East and could be a possible starting point towards creating stability within that region.

All of this requires political courage and statesmanship. It will not be easy for any politician to chart his way through the maze of Iranian politics and culture. Therefore, I strongly urge all interested American politicians and businessmen to fully utilize the experience and knowledge of politically active Iranians who maintain good working relations with the Government of Iran.

Understanding Iranian culture and its ways is not a science, but rather an art form.


Japeh Youssefi is the CEO of ISmart Corporation. He presented this speech at the American Iranian Council's conference on US-Iran relations in Washington DC (March 22, 2001).

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