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Lawmaker Says Iran Car Manufacturers Mired In Corruption

Iran Khodro car factory. Iranian car industry is struggling amid sanctions, while reports of widespread corruption also circulate. File photo

Iran's car manufacturing industry is suffering from "widespread financial corruption," a member of Majles (parliament) has disclosed.

"Widespread financial corruption has turned automakers in Iran into a powerful Mafia," the spokesman of the parliament's Commission 90, Bahram Parsaei reiterated on Saturday, August 17.

Speaking to the state-run Iran Students News Agency (ISNA) Parsaei, a pro-reform lawmaker, maintained that $250 million was spent for designing a new trunk for the French Peugeot 206 model, while with the same amount of money they could have run a new production line.

"Peugeot 206 is manufactured in France, but they have only added a [new] trunk to it in Iran, and renaming it as Peugeot SD," Parsaei said.

Meanwhile, according to the lawmaker, two giant automakers in Iran owe $9 billion to the banks and $7.5 billion to parts manufacturers.

Furthermore, the automakers have accumulated up to $9 billion in losses, while they sold $7.5 billion of cars, the city of Shiraz representative to Majlis asserted.

Iranian car manufacturers are mostly directly or indirectly government-owned and their losses impact either government institutions or government-owned banks.

Reports on widespread financial corruption in Iran have been rife in recent months.

But U.S. sanctions have also heavily impacted the car industry. European automakers which supply most parts to Iranian factories have largely stopped doing business with Iran.

The Islamic Republic Justice Department has banned Javad Soleimani the CEO of SAIPA, one of the two giant car makers in the country, from leaving the country, local news outlets reported last week.

Earlier, its spokesman announced that prosecutors have indicted the top managers of SAIPA.

"Based on the indictments, six of the SAIPA top managers are presently under arrest, while 25 others are charged with corruption," he noted.

SAIPA, an acronym for the French "Société Anonyme Iranienne de Production des Automobiles", was established during the reign of the pro-West monarch of Iran, Shah Mohammad Reza Pahlavi, in 1965 with 75% Iranian ownership, to assemble Citroëns under license for the Iranian market. In 1975 the Iranian state withdrew from the company.

In the meantime, reports are saying that the Judiciary has also banned the CEO of the other giant auto manufacturer (Iran Khodro), Hashem Zare', from leaving Iran. Nevertheless, the authorities have not yet commented on the reports.

"During Mahmoud Ahmadinejad's second term of presidency (2009-2013), the government forced Iran Khodro to run a car production line in another country," Parsaei affirmed, adding, "$90 million was invested for the venture, but it was wasted away since the host country declared that it would not provide the line with electricity for ten years. Therefore, such a huge national asset was lost, but nobody was held accountable for it."

However, Parsaei refrained from naming the host country.

In the meantime, Masan Nahas, head of the Iran – Syria Chamber of Commerce recently said that Iran had agreed to open three factories in Syria before the end of August.

Two of the factories are going to produce skimmed milk and medicine for cancer, and the third, will be a car manufacturing factory, Nahas told Al-Watan newspaper.

The development coincides with the sharp decline in the output of Iranian car factories as a result of U.S. sanctions that have made it impossible to procure raw materials and spare parts impossible, as noted recently by Iran's Industry Ministry.

In repeated mass demonstrations in Iran since 2017, protesters have voiced their anger at their government's policy of devoting money and resources for regional allies, such as Assad and the Lebanese Hezbollah.

Meanwhile, Iranian car manufacturer Iran Khordo has experienced a 36 percent drop in output since March.