Operation Ayatollah Moneybags

With tensions rising in the Persian Gulf, the Trump administration has ratcheted up its sanctions against Iran to an unprecedented level, intensifying an existing banking blockade. But the White House has also selected new targets, including by placing personal sanctions on the Iranian supreme leader, Ayatollah Ali Khamenei.

The attempt to punish Khamenei may seem an expression of petty vindictiveness against Iran’s top political leader, rather than a part of any consistent economic strategy. Regime-affiliated media in Iran have dismissed the move precisely in this way. But the opposite is true: Khamenei is the leader of a vast business empire that sustains the country’s clerical elite, and allows it to fund regional conflict and terrorism, while shielding it from public accountability. Shedding light on the vast parallel economy that is largely under Khamenei’s control could be the key to collapsing the very foundation of the regime.

Khamenei’s influence over the economy comes in the form of the bonyads, or foundations, whose vast endowments were originally compiled largely from money and property from the Shah-era government’s state-owned and state-backed enterprises and from religious minorities (primarily Jews and Bahais) expropriated after the Islamic Revolution. Today, the foundations are run by state-affiliated actors but are not beholden to institutions like the presidency or parliament, thus limiting elected officials’ influence over the economy.

This is not to suggest that Khamenei has direct control over all the bonyads. But his office is personally in charge of one of the wealthiest, the Setad Ejraiye Farmane Hazrate Emam, or Headquarters for Executing the Order of the Imam (typically called Setad, for short). According to a detailed 2013 investigative report by Reuters, Setad traces its origins to a direct order from Ayatollah Ruhollah Khomeini shortly before his death in 1989 to create an entity “to manage and sell properties abandoned in the chaotic years” of the revolution. In the years since, “it has morphed into a business juggernaut that now holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.” It’s now estimated to be worth between $100 billion and $200 billion.

Khamenei also has influence over the bonyads he doesn’t directly control. The Imam Reza Foundation, for example, in the holy city of Mashhad, is reported to be worth billions of dollars and is the largest landowner in the city. Until recently, it was led by Ayatollah Ebrahim Raisi, an influential cleric and current head of the judiciary who is rumored to be a possible successor to Khamenei as supreme leader. Raisi had significant autonomy over the operations of the bonyad, but he always needed Khamenei’s consent to maintain his control. The bonyad system thus allows Khamenei to rule like a feudal king, receiving fealty and support from lesser lords such as Raisi and other members of the clerical establishment.

Washington’s latest sanctions will help remove whatever insulation the governing classes have enjoyed from the travails of the broader economy. Khamenei’s Setad doesn’t simply enjoy close ties to other foundations and businesses in Iran; it depends on its economic relationships around the world, especially investments in Europe (these include attempts to buy European refineries). Individuals and companies doing business with Setad and its subsidiaries could now face severe sanctions from the United States.

More importantly, sanctioning Khamenei and other top regime officials—including, reportedly, Foreign Minister Mohammad Javad Zarif—sends an unmistakable message about the purpose of the Trump administration’s maximum pressure policy against Iran. Above all, it clarifies the close relationship between the economic and political goals of the policy. The United States isn’t interested in harming the Iranian economy for its own sake but rather to persuade (and, if necessary, to force) the government to curtail the entire spectrum of its malign activities.

These latest sanctions will make it harder for Iran to immediately agree to a new diplomatic deal focused on the country’s nuclear program; having been personally targeted by sanctions, Khamenei is unlikely to be eager to enter negotiations anytime soon with the Trump administration. One has to assume this isn’t an oversight by Washington but rather a strategic choice: The United States wants more profound changes to Iranian behavior beyond the nuclear portfolio, even if the only way to achieve those goals involves the collapse of the regime, rather than traditional negotiations.

Washington is right to believe it has leverage for such ambitious goals. Iran has witnessed widespread demonstrations and civil unrest since December 2017; the initial demonstrations were reported to have been sparked by public anger over the Hassan Rouhani administration’s new budget, which increased funding for government-affiliated bonyads and religious institutions. The Trump administration appears to have calculated that sanctions in general and those targeting Khamenei in particular will not only arouse additional popular anger but weaken the supreme leader’s patronage system. The regime could face popular revolt or even defections. It may be true that someone like Raisi, a part and parcel of the regime, may not ultimately defect from Khamenei, but that cannot be said of lower-ranking acolytes and foot soldiers.

Khamenei’s rule is sustained by Iran’s unaccountable and often independent bonyad-driven economy. Sanctioning the Setad will not have the immediate effect of regime change, but over time it will hollow out the regime’s support base. For the Trump administration and the barandazan (regime overthrowers), Khamenei remains the primary obstacle in bringing fundamental change to Iran and the end of decades of unrelenting U.S.-Iran tensions.

Sanctioning Khamenei and the bonyads will no doubt further devastate Iran’s long-suffering population. But it could also fuel the growing popular movement that seeks the regime’s overthrow once and for all.