Iran’s Social Security Organization Reveals Corruption Cases Worth €19m
Iran’s Social Security Organization has disclosed information about several corruption cases related to petrochemical firms affiliated with it that occurred about 12 years ago.
Iran’s Social Security Organization has disclosed information about several corruption cases related to petrochemical firms affiliated with it that occurred about 12 years ago.
The issue of possible fraud or some sort of corruption is not straightforward as one might expect in a typical Western company. There are Iranian nuances in the case that makes it a bit different.
Mehr Petrochemicals produces the highest-grade polyethylene in the Middle East but it stands at the verge of bankruptcy, according to Eghtesad Online (Economy Online) a recognized website in Iran reporting on economic issue.
The firm belongs to Persian Gulf Holding, a large Iranian quasi-governmental company that claims to be an independent entity, with 15 subsidiaries.
Mehr Petrochemicals, as an Iranian company is supposed to repatriate its foreign currency earnings according to law, as it exports products and receives government dollars at preferential rates when it for importing equipment or chemicals. The problem is that it has failed to bring back $170 million to the country and apparently the money has simply vanished.
The Iranian Inspector General’s office has issued a report saying that Mehr owes close to $100 million locally and its export revenues are missing.
The danger in the company going bankrupt and shutting down is loss of gas output in the South Pars fields in the Persian Gulf, Iranian media say. Mehr plays a role in gas production because it needs it for producing petrochemicals.
In the middle of the scandal stands a mysterious and unnamed foreign investor, reportedly a firm registered in Italy. The story goes back seventeen years, when Mehr Petrochemicals was established with a 60-percent foreign stake by a Japanese-Thai consortium, with some management rights over the company.
In 2018, in the wake of renewed economic sanctions by the United States, the foreign investor decided to divest of its stake in the company. It offered to sell its share to the Persian Gulf Holding for a certain price, which has not been disclosed. Iran appointed a commission to assess the value of the asset and it came back with a very low estimate that the foreign stakeholder refused.
At this point, the mysterious Italian company entered the picture and offered enough money to the Japanese-Thai consortium to buy their shares.
The whole affair of not buying the consortium’s shares and then agreeing to an Italian company, that according to Iranian media had no track record in the petrochemicals business, to buy 60 percent of Mehr is all shrouded in mystery and lack of transparency. This is common in Iran’s sprawling public and quasi-public sector that controls 80 percent of the economy.
Political and economic interests and spheres of influence are often so closely intertwined that it is impossible for the media and even members of parliament to demand and receive transparency.
The so-called Italian investor could well be a group of well-connected government and military officials who simply offered a very low price to the original foreign investor who bulked, and then set up a front company abroad and bought the 60-percent share themselves.
With Iran short of natural gas, local media warn of a worse situation this winter if Mehr Petrochemicals stops operations. There is already ongoing labor strikes and protests as many other petrochemical and oil outfits linked to the government delay salaries.
Reports in newspapers, websites and in social media indicate that the President Ebrahim Raisi’s administration might be pondering a new round of gasoline price increase, as some say Iran’s daily production has dropped from 107 million liters to 101 million.
The government that controls the distribution of energy and fuel in the country has been offering perhaps the world’s cheapest prices to consumers, with subisdized gasoline going for as little as 22 US cents a gallon.
A similar move to raise prices in November 2019 led to days of nationwide protests and the killing of at least 1.500 protesters.
A hardliner political figure, former lawmaker Hossein-Naghavi Hosseini, said this week that former President Hassan Rouhani should be put on trial for the 2019 nationwide protests.
At the time, the government was criticized by politicians and media for the way it handled both the price rise and the ensuing dangerous unrest that quickly turned into an anti-regime uprising.
In an interview with Didban Iran website on Saturday, September 10, Naghavi Hosseini added that Iran's Supreme Council of National Security was also responsible for the events that followed the price hike.
Naghavi-Hosseini further charged that one of Rouhani's ministers without naming him and said the minister was waiting for a regime change in Iran.
The ex-lawmaker, who is the former spokesman of the parliamentary committee for national security and foreign policy, reiterated that some of Rouhani's ministers were utterly enjoying wat was happening.
Naghavi-Hosseini added that Rouhani should have increased the gasoline price gradually year by year. But he waited for seven years and suddenly tried to make up for his inaction in the seventh year of his presidency.
Vice President Solat Mortazavi on Saturday [September 10] said that President Raisi will under no circumstance allow any increase in the price of gasoline. However, he added that the promise not to raise prices is for up to the end of the current Iranian year on March 20, 2023.
Earlier, Interior Minister Ahmad Vahidi had also denied the rise in the price of gasoline. Vahidi added that "some people spread rumors about an imminent rise in the price of gasoline and the reduction of subsidized gasoline quota, but I deny those rumors."
The denial came while many media reports in Iran said that gas stations sell only 30 liters of gasoline at the subsidized price of 15,000 rials per liter every month and anything beyond that should be bought at 30,000 rials per liter (about $1 or $2.5 per gallon). Meanwhile, many drivers complained on social media that 30 liters of gasoline per month is not enough for them.
An Iran International report in June predicted that Iranians will most likely experience their next shock when the government reduces fuel subsidies and prices rise dramatically, pushing inflation even higher. The report said that the government is once again thinking of raising gasoline prices although officials and members of parliament continue to deny that it will happen this year.
Official estimates in Iran put the total annual subsidy of cheap energy and fuel as high as $60 billion, which is more than the country’s oil export revenues.
In an interview released on Sunday, the organization’s managing director Mirhashem Mousavi talked about the cases for the first time to the media, mentioning that one of the cases is worth $2.5 million, another is €2.5 million and a third is about 50 million UAE dirhams.
He said that the cases are being pursued since 2010 and 2011 but no verdict has been issued.
Mousavi added that five high-priced properties, valued at more than half of the total properties of the organization, have been given to others with a deed but the organization has not been able to get more than five percent of the price of one of the properties.
The cases were related to the Social Security Investment Company (SSIC, also known by its Persian acronym SHASTA), one of Iran's major state-owned investment companies, and the investment arm of the Social Security Organization, which provides healthcare and pension benefits for a large population of Iranian middle and working-class members.
The revelations came as a $170 million embezzlement case has left one of Iran’s natural gas producers in serious trouble. Mehr Petrochemicals produces the highest-grade polyethylene in the Middle East but it stands at the verge of bankruptcy, (Economy Online). The firm belongs to , a large Iranian quasi-governmental company that claims to be an independent entity, with 15 subsidiaries.
