U.S. sanctions helping corrupt businesses in Iran
By Japeh Youssefi
May 25, 2001
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
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
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
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
-- 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
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
-- Provide free PC's for various software development startups
-- Provide a good-will gesture from the people of America to the Iranian
In addition, this program can serve as a model to the UN effort to eliminate
the "Digital Divide" that exists between developing and developed
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).