Who’s Behind the Appointment of Iran’s Incompetent Economics Chief?

The Islamic Republic of Iran has been a textbook theocracy for 47 years. It also has been a full-fledged kakistocracy, government by the least qualified, least capable, and often most unscrupulous. The latest appointment—attributed to the absent Supreme Leader Mojtaba Khamenei—is a case in point.

Mojtaba reportedly replaced Ali Agha-Mohammadi, head of the Economic Affairs Working Group of the Office of the Supreme Leader’s Review Deputy and one of the longest-serving figures in the Supreme Leader’s Office, with Ehsan Khandouzi. The job’s cumbersome title describes the heart of Iran’s economic machinery, overseeing investment policy for the economic cartels operating under the supreme leader’s supervision.

Agha-Mohammadi was Ali Khamenei’s economic adviser and occupied a succession of influential positions. His career included running a football club and becoming a deputy head of Iran’s state television. Above all, however, Agha-Mohammadi was the “court treasurer” of Ali Khamenei’s economic empire.

The cartels under the supreme leader’s supervision have swallowed enormous sections of Iran’s economy. Khamenei’s economic cartels alone control perhaps 60 percent of the country’s wealth, while the companies affiliated with his office are said to account for 50 percent of Iran’s gross domestic product.

Agha-Mohammadi played a pivotal role in running this unaccountable economic empire, whose privileged access to power and capital has crowded out competition and weakened the competitiveness of Iran’s wider economy. His rise owed less to competence than to political obedience.

So why replace him with Ehsan Khandouzi?

If competence were the criterion, the answer would be difficult to find in Khandouzi’s record. Khandouzi served as economy minister under former President Ebrahim Raisi. During Khandouzi’s tenure, the Iranian currency dived and triggered price increases in essential goods and everyday necessities.

Iran economist Masoud Nili pointed to severe foreign-exchange imbalances, unprecedented records in import volumes, and billions of dollars in “errors and missing statistical items”—$11.3 billion—in the balance of payments during Khandouzi’s tenure.

Khandouzi is also a staunch opponent of Iran joining the Financial Action Task Force and the greater transparency membership demands. Instead, he increased the Islamic Revolutionary Guard Corps’ share of the public budget under various pretexts and pursued a policy of extracting more taxes from the population.

The quality of Khandouzi’s economic reports reaching Ali Khamenei was hardly better. Khamenei dismissedreports as “hollow and nonsensical.” Yet Khandouzi has qualities that may matter considerably more in Tehran than an ability to understand economics and basic mathematics. He is a devoted advocate of long-term strategic relations with China, and has urged the Pezeshkian government to place Iran’s economy more firmly at Beijing’s disposal. After the beginning of the 40-day war, he adopted two positions: praise for China and support for keeping the Strait of Hormuz closed.

It may not be clear who appointed him, but it is clear why he was appointed. He is anti-American, a Sinophile, devoted to the Islamic Revolutionary Guard Corps, and most importantly, a yes-man. In the Islamic Republic, those may be more valuable qualifications than understanding economics.

The purpose of Khandouzi’s appointment appears to be less about putting a competent economist in charge than about putting a reliable political operative at the center of the supreme leader’s economic machinery. His task is to preserve the interests of the Islamic Revolutionary Guard Corps and to increase their share of Khamenei’s cartels. There is, however, a large question hanging over the appointment.

For 37 years, the real activities and figures of Khamenei’s economic empire have been among the Islamic Republic’s most guarded secrets, known only to the Economic Affairs Working Group of the Office of the Supreme Leader’s Review Deputy. Khandouzi’s appointment has been attributed to Mojtaba, but it remains unclear who ordered the change. The answer is unclear, but it is indicative of which direction the country is going.