Crypto, drugs and human trafficking: this is how the Iranian regime survived 38 days of war

● For years they helped Iran launder money. Then she flipped over them
● The phone call that came at the last minute and pushed Iran to a ceasefire
● Dozens of countries declare the Revolutionary Guards a “terrorist organization”. Who refused?

This announcement received almost no coverage, but in practice it revealed a wider truth about the economic campaign against Iran. Oil may be at the center of international discourse, but it is far from the only source of income. Alongside legitimate exports of saffron, pistachios and petrochemical products, arms in the form of straw companies, smuggling, arms trade and even crypto-currencies operate under the radar – tools that allow the Revolutionary Guards to continue financing the war when the world tries to “stifle” them financially.

How significant is the phenomenon? Although no official figure has been published, estimates indicate that the scope of the “shadow economy” in Iran ranges from 20% to 30% of the GDP, with some researchers estimating that it is even about a third of the total economic activity.

Banks and straw companies

When talking about the financing of the Iranian war machine, it is important to separate two entities that sometimes tend to mix them up. The State of Iran and the Revolutionary Guards are not one entity, and each of them has separate budgets and sources of income. In fact, the Revolutionary Guards have a variety of channels for injecting capital that bypass the oil revenues – from internal banking networks, such as Sepah Bank, which flow billions of dollars to the government unofficially, to the operation of straw companies.

The model of straw companies is simple: these are fictitious companies that often operate in countries with relatively weak financial regulation, such as the United Arab Emirates or China. They register under a neutral name and are owned by unknown strawmen, and start operating in an apparently legitimate manner. The same companies offer various products – from electronics and raw materials to industrial equipment and even alternative banking in the form of small private banks. On paper they run completely kosher businesses, sign contracts and open bank accounts that allow them to operate freely.

However, in practice they serve as a conduit for the sale of Iranian products and developments – oil, petrochemical products and metals – without any regulator being able to trace their true origin. As soon as an American authority identifies such a company and imposes sanctions on it, it is usually already closed and reopened under a different name and address, with new owners – and the cycle starts all over again.

“Thus, among other things, Iran circumvents the sanctions imposed on it by the West,” explains Sima Shein, senior researcher and former director of the “Iran and the Shiite Axis” research program at the Institute for National Security Studies (INSS). “Through the same straw companies, they also purchase western developments, such as parts and technologies used to manufacture UAVs.”

Government contracts

Another method by which the Revolutionary Guards finance their activities is by taking over huge government contracts through companies they control, even if not directly. “The Iranian regime is taking over contracts and creating a monopoly within Iran in the fields of construction and infrastructure,” explains Ella Rosenberg, an expert researcher on Iran’s economy and terrorist financing at the Jerusalem Center for Foreign and Security Affairs (JCFA) and a member of the Deborah Forum. “In many cases, the same companies receive payment for these contracts but the projects are not carried out, and at the end of the chain the regime’s coffers get richer. This is what happened last winter, when the electricity infrastructure was not properly maintained.”

“Khatem Al-Anbiya” Corporation is a clear example of one of these economic arms. The company, which was established after the revolution and acts as the main engineering and executive arm of the regime, serves as an umbrella organization for a network of hundreds of subsidiary companies operating in ostensibly civilian fields – from agriculture and transportation to real estate, pharmaceuticals and energy. The Iranian news agency ISNA reported in September 2024 that the corporation was responsible for the development of several oil and gas refineries, including the “South Fars” gas field in the Gulf.

Khatam al-Anbia, like her counterparts, operates under a civilian guise but at the same time deals in sensitive military areas. Among other things, it is involved in the nuclear project, the missile program, the establishment of weapons factories and the construction of military bases and infrastructures, alongside the operation of research institutes. Although it is based in Iran, its activities cross borders and thus it helps in circumventing the sanctions.

The company operates in a variety of projects throughout the Middle East, Africa, Asia and Central and South America. In countries where Iranian involvement is particularly deep – including Iraq, Syria, Lebanon and Yemen – the corporation is involved in the construction of bases, railways, roads and tunnels, as well as in agricultural projects and residential projects. In Syria, for example, a significant part of the military bases established in the east of the country under the Assad regime were built with the direct assistance of Khatam al-Anbiya.

And how extensive is the company’s activity? According to data from the “Alma” research institute, which specializes in security challenges in the north, Khatam al-Anbia employs between 30 and 40 thousand people, and its total capital has been estimated in recent years at about 250 billion dollars.

“charity funds”

Another major source of funding for the regime is the Bonyads – ostensibly charitable funds, which have developed over the years into economic empires. These institutions were established in the late 1970s, after the Islamic revolution, to manage assets confiscated from the previous regime and to support the weak, but in practice they operate as pro-government institutions with extensive business activity and minimal supervision. “These funds are exempt from paying tax and are an effective means of money laundering,” explains Rosenberg.

The Boniads are directly involved in major economic projects in Iran and abroad. They build infrastructures, operate manufacturing plants, manage logistics companies and invest in real estate, agriculture and tourism. For example, a subsidiary of the Mostazapan Foundation dominates the fields of construction and food and is involved in large-scale development projects. A review by the Janes Research Institute, which specializes in intelligence and security, shows that the United Arab Emirates even signed a contract worth $30 million with the foundation for the construction Road in the Hajar Mountains in the east of the country. Other funds manage hotels, shipping companies and financial entities.

In the sanctions sector, the picture is more complex. Some of the Boniads – especially those directly linked to the Supreme Leader’s office – have been sanctioned by the West, but it is believed that their network of affiliates is not fully or consistently covered. The decentralized structure, the use of subsidiaries and the activity under civilian or humanitarian cover, make effective enforcement difficult.

Weapons, drugs and more

Besides controlling companies and charitable foundations, the Revolutionary Guards over the years have developed a parallel and illegal income system, based on smuggling, gray trade and financial circumvention mechanisms. This activity is considered one of the most flexible and difficult sources of funding for the organization.

According to estimates published in 2021 by the National Council of Resistance in Iran (NCRI), an opposition organization based in Europe, the Revolutionary Guards are involved in the smuggling and trafficking of products such as alcohol, tobacco, drugs and weapons – into and from Iran. According to the reports, the profit margin from this activity may reach 200% to 300%, with annual revenues estimated at billions of dollars.

A significant part of the activity includes the sale of weapons and logistical support to actors identified with the “axis of resistance”, such as Hamas, Hezbollah and the Shiite militias in Iraq. “The Iranians sell UAVs and missiles to various countries, such as Sudan and Russia, and in the past also to Venezuela,” Shane adds.

“On this issue, a point that is less talked about is human trafficking, sometimes minors only 15 to 18 years old,” notes Rosenberg. “We are talking about the kidnapping of young people from countries like Pakistan and Afghanistan for the purposes of slavery. In some cases, Iran serves as a sort of subcontractor for external clients and receives payment for it.”

Crypto

Another channel that Iran has turned to in recent years is the world of cryptocurrency – a tool that enables financial activity that is difficult to track. According to the Jerusalem Institute for Strategy and Security (JISS), Iranian authorities use decentralized currencies to purchase equipment, finance emissaries and pay agents outside the country. Last September, the National Headquarters for Economic Combating Terrorism (MTL) announced the identification of 187 USDT wallet addresses that were marked as belonging to the Revolutionary Guards. The blockchain analysis company Elliptic indicated that these wallets alone concentrated activity to the extent of 1.5 billion dollars.

In addition, according to reports, Iran has developed an extensive Bitcoin mining industry. By 2023, about 100,000 of the 180,000 mining servers in the country were owned by government officials or the Revolutionary Guards. “A lot of the regime’s energy is directed at the crypto world,” Shane says. “They trade and pay in decentralized currencies as another way to circumvent the sanctions. This is a relatively gray area, but it is expanding in Iran.”

The prominent crypto exchange in Iran is Nobitex. It was established in 2018 and is responsible, according to estimates, for about 90% of all transactions in decentralized currencies in the country. According to reports by the company Chainalysis, from its inception until 2025, over 11 billion dollars have been transferred through it.

The activities of Novitex received international attention due to possible involvement in the circumvention of the sanctions of the Ayatollah regime. A report by the analytics company TRM points to connections between the stock market and the Houthis, Russia and Islamic Jihad, as well as Telegram channels affiliated with Hamas. However, an analysis by TRM from August 2025 shows that criminal activity or that which circumvents sanctions constitutes only 0.9% of the total transactions on the stock exchange – a figure indicating that most of the trading is carried out by private clients in Iran.

With the outbreak of the war, the flow of crypto assets from Novitex jumped by 700%. Along with private investments, the Iranian authorities may have moved to delist state assets from the local stock market to protect them from impairment, freezes or new sanctions. In the months leading up to the attack, the “Sparrow of Prey” hacker group destroyed $90 million worth of cryptocurrencies from Novitex, with most of the funds being transferred to unrecoverable addresses.

Eventually, whether through straw companies, Boniads or Bitcoin, the Iranians found ways around Western sanctions. “At best, only 5% of the sanctions in the world are actually enforced,” concludes Rosenberg.