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Tiny, Wealthy Qatar Goes Its Own Way, and Pays for It

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DOHA, Qatar — For the emir of Qatar, there has been little that money can’t buy.

As a teenager he dreamed of becoming the Boris Becker of the Arab world, so his parents flew the German tennis star to Qatar to give their son lessons. A lifelong sports fanatic, he later bought a French soccer team, Paris Saint-Germain, which last summer paid $263 million for a Brazilian striker — the highest transfer fee in the history of the game.

He helped bring the 2022 World Cup to Qatar at an estimated cost of $200 billion, a major coup for a country that had never qualified for the tournament.

Now at age 37, the emir, Sheikh Tamim bin Hamad al-Thani, has run into a problem that money alone cannot solve.

Since June, tiny Qatar has been the target of a punishing air and sea boycott led by its largest neighbors, Saudi Arabia and the United Arab Emirates. Overnight, airplanes and cargo ships bound for Qatar were forced to change course, diplomatic ties were severed and Qatar’s only land border, a 40-mile stretch of desert with Saudi Arabia, slammed shut.

Not even animals were spared. Around 12,000 Qatari camels, peacefully grazing on Saudi land, were expelled, causing a stampede at the border.

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The Boycott

One afternoon last August, I drove to Aqua Park, a water park in the desert 20 minutes outside Doha, to see how Qatar was surviving the boycott. Inside the park, where midday temperatures reached 120 degrees, men and women wearing swimsuits mingled freely, although bikinis were discouraged. Screaming children barreled down the Boomerango, the park’s largest ride. American warplanes rumbled overhead, bound for battle zones in Iraq and Syria.

Aqua Park is a few hundred yards from Al Udeid, the American air base whose runway lights glitter in the distance. The base, with 10,000 American service personnel, has been Qatar’s strategic jewel for over a decade, one major reason it could defy its neighbors. Now the Emirates was pressuring the United States to close it.

The park is a typical Qatari business in that no Qataris work there: The park’s manager, Mohammed Firdous Raj, is Malaysian, the lifeguards are Kenyan and other employees are Lebanese and Egyptian. Before the boycott, one quarter of its business came from Saudi tourists, who made the 25-minute drive from the border. But now the desert highway was half-empty, as were many hotels in Doha.

“We’d like them to come back,” Mr. Raj said of the Saudis. But the park’s owner, a former Qatari government minister, had allowed him to discount ticket prices, so business was about the same. “It’s a pity about the Saudis,” he said with a shrug. “Either way, we will manage.”

The boycott has inflicted some pain on Qatar. With its only land border closed, its ships blocked from passing through Emirati ports and its planes restricted from flying over neighboring airspace, import costs have soared. The stock exchange lost one-fifth of its value last year. Foreign workers, unable to party in Dubai on weekends, grumble about the claustrophobia of buttoned-up Doha. And the travel bans have torn apart families, whose relatives have straddled borders for centuries.

But for the most part, daily life in Doha is largely unchanged. Pricey wine flows in five-star hotels, work continues on a new metro system, and a striking National Museum, shaped as a series of giant intersecting discs, is set to become the city’s latest architectural marvel.

On weekends, young Qatari men go “dune bashing” — riding tricked-out four-wheel drive vehicles at high speed along mountainous dunes, sometimes flipping over. Qatar’s central bank says it has a $340 billion war chest to help weather the crisis.

And the boycott has backfired in some respects. The trade restrictions have forced Qatar into deeper economic ties with Iran, while Tamim has become the object of a fervent personality cult. The emir’s image adorns billboards draped off skyscrapers, and he is lionized in saccharine songs hailing his steely leadership. “He’s the embodiment of the philosopher king,” said Dana al-Fardan, one such balladeer.

His ministers, making a virtue of necessity, are developing new trade and transportation links. To make up for lost Saudi milk, they created a new dairy industry from scratch in the desert. In a surreal tableau one day in July, German cows toddled down the ramp of a Qatar Airways Airbus at the Doha airport, the first arrivals of around 4,000 cattle flown in from Europe, Australia and California.

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A strident nationalism has displaced the old talk of “brotherly” ties between the countries. Qatari pilgrims claimed they had been prevented from traveling to Mecca in Saudi Arabia, and showing sympathy for Qatar has become a criminal offense in Bahrain, Saudi Arabia and the Emirates.

Any hopes that the Trump administration could end the crisis were scuppered by its chaotic policy. Mediation efforts by Mr. Tillerson, who had decades of experience in Qatar as an energy executive, were repeatedly undercut by Mr. Trump, who at a Washington fund-raiser mocked the way that Qatar is pronounced.

Although Mr. Trump has since stopped his attacks on Qatar, presenting himself as a mediator, some senior advisers continue the fight. Breitbart News Network, which until recently was run by Mr. Trump’s onetime ideological firebomber Stephen K. Bannon, has published dozens of articles attacking Qatar as a rogue ally.

Is Qatar soft on terrorism? Some of the charges are red herrings, American officials say. Tamim cut funding to most extremist militias in Syria and Islamist groups in Libya in 2015, at the urging of the Obama administration. His cordial ties with Iran are a matter of necessity because the two countries share the giant gas field that is the source of Qatar’s wealth.

Where Qatar does have a case to answer, officials say, is in its treatment of Qatari citizens accused of financing terrorist groups like Al Qaeda. Trials of accused financiers, when they take place, occur in secret, making it hard to know what punishment, if any, is imposed.

Abd al-Rahman al-Nuaymi, a former university professor and financier who has been designated a terrorist by the United Nations and the United States, was tried secretly in 2015 and acquitted. He now lives openly in Doha, albeit with restrictions on his banking and ability to travel, said a former United States treasury official who was briefed on the case. A senior Qatari official said that prosecutors were preparing to try him again.

But similar charges can be laid at the feet of Qatar’s foes. The Saudis have long been accused of exporting radical Islam across the world through hard-line madrassas. Iran’s biggest trading partner in the region is not Qatar but Dubai. Human rights abuses and press freedom restrictions are far harsher in the Emirates.

For Qatar’s supporters, the hypocrisy reveals what they say is the boycott’s true goal: to cut down or take out Qatar’s youthful emir, the royal who refuses to go along to get along.

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Cold War in the Desert

For Tamim, the ultimate aim of his neighbors is to oust him from power. In the interview with The Times, he cited as precedent the 1996 Saudi-sponsored coup attempt against his father. “This was always the warning at the back of our heads,” he said.

His fears may be justified. In the early days of the boycott, two American officials said, Saudi and Emirati leaders mulled possible military action against Qatar. The precise details were unclear, but the talk was deemed serious enough for Mr. Tillerson to personally warn the Saudi and Emirati leaders against precipitous action. Mr. Trump later repeated that advice in a call to Saudi leaders.

Yousef al-Otaiba, the Emirati ambassador to Washington, denied in an interview that there was ever a military plan. “We never contemplated it,” he said.

But even the suggestion of military action highlighted how the old rules have been shattered in the Gulf. The six-nation Gulf Cooperation Council, the regional body that is supposed to resolve such disputes, has been invisible during the crisis. Instead the Saudis have promoted a string of exiled Qatari businessmen as potential political rivals to Tamim.

The Qataris appear to have returned fire on the hacking front. For months American news media outlets have received stolen emails intended to embarrass Mr. Otaiba, the Emirati ambassador. The emails appear to come from Russia, but Saudi media reports say Qatar was behind them.

Qatar denied any involvement in the hacking. “Qatar, as a matter of policy and principle, does not engage in cyber crimes or traffic in ‘fake news,’” the government said in a statement to The Times on Sunday.

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Nothing suggests that the dispute will be resolved anytime soon. Although the Saudis and Emiratis may have overestimated the boycott’s ability to pressure Qatar, they may feel they have little to lose by continuing it.

“I think they are content to bleed Qatar,” said Mr. Roberts, the analyst. “There’s an indignant anger at what they see as a rich, cocooned, perfidious little state that is finally feeling the consequences of its actions.”

But as the dispute moved to the skies last week, with accusations of Qatari warplanes buzzing Emirati commercial jets, it highlighted how easily the crisis could escalate.

Both sides are bolstering their militaries. Since June, Tamim has ordered 36 F-15 warplanes from the United States, 24 Typhoon jets from Britain and 24 Rafale fighter jets from France — a sevenfold increase for an air force that currently has just 12 aircraft.

In December, his foes announced a new Saudi-Emirati military and economic alliance that further sidelines the Gulf Cooperation Council, which includes Qatar.

Days later, Tamim hosted a lavish banquet for President Emmanuel Macron of France at Idam, a French restaurant on the top floor of the Museum of Islamic Art that offers a shimmering panorama over the Doha skyline.

Over a sumptuous meal prepared by the celebrity chef Alain Ducasse, the two leaders toasted the deals they had signed that morning. The emir had ordered another 12 French fighter jets.

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Qatar’s foes accuse it of financing terrorism, cozying up to Iran and harboring fugitive dissidents. They detest Al Jazeera, Qatar’s rambunctious and highly influential satellite network. And — although few say it openly — they appear intent on ousting Qatar’s young leader, Tamim, from his throne.

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DOHA, Qatar — For the emir of Qatar, there has been little that money can’t buy.

As a teenager he dreamed of becoming the Boris Becker of the Arab world, so his parents flew the German tennis star to Qatar to give their son lessons. A lifelong sports fanatic, he later bought a French soccer team, Paris Saint-Germain, which last summer paid $263 million for a Brazilian striker — the highest transfer fee in the history of the game.

He helped bring the 2022 World Cup to Qatar at an estimated cost of $200 billion, a major coup for a country that had never qualified for the tournament.

Now at age 37, the emir, Sheikh Tamim bin Hamad al-Thani, has run into a problem that money alone cannot solve.

Since June, tiny Qatar has been the target of a punishing air and sea boycott led by its largest neighbors, Saudi Arabia and the United Arab Emirates. Overnight, airplanes and cargo ships bound for Qatar were forced to change course, diplomatic ties were severed and Qatar’s only land border, a 40-mile stretch of desert with Saudi Arabia, slammed shut.

Not even animals were spared. Around 12,000 Qatari camels, peacefully grazing on Saudi land, were expelled, causing a stampede at the border.

Qatar’s foes accuse it of financing terrorism, cozying up to Iran and harboring fugitive dissidents. They detest Al Jazeera, Qatar’s rambunctious and highly influential satellite network. And — although few say it openly — they appear intent on ousting Qatar’s young leader, Tamim, from his throne.

Tamim denies the accusations, and chalks up the animosity to simple jealousy.

“They don’t like our independence,” he said in an interview in New York in September. “They see it as a threat.”

The boycott turned out to be the first strike of a sweeping campaign by the crown prince of Saudi Arabia, Mohammed bin Salman, that has electrified the Middle East. Obsessed with remaking his hidebound country and curbing the regional ambitions of its nemesis, Iran, the young, hard-charging Saudi has imprisoned hundreds of rivals at a five-star hotel in Riyadh, strong-armed the prime minister of Lebanon in a failed stab at Iran and stepped up his devastating war in Yemen.

The Saudi prince has shaped the Trump administration’s approach to the Middle East and his endeavors could have far-reaching consequences, potentially driving up energy prices, upending Israeli-Palestinian peace efforts and raising the chances of war with Iran.

The Qatar dispute is perhaps the least understood piece of the action, but it has a particularly nasty edge.

In September, at a normally soporific meeting of the Arab League in Cairo, Saudi and Qatari diplomats exchanged barbed epithets like “rabid dog” and heated accusations of treachery and even cruelty to camels. “When I speak, you shut up!” yelled Qatar’s minister of state for foreign affairs, Sultan bin Saad al-Muraikhi.

“No, you are the one who should shut up!” his Saudi counterpart shouted back.

The highly personalized rancor has the unmistakable air of a family feud. Qataris, Saudis and Emiratis stem from the same nomadic tribes, share the same religion and eat the same food. So their dispute has shades of quarreling cousins, albeit ones armed with billions of dollars and American warplanes.

The crisis took an alarming turn last week when the Emirates accused Qatar’s warplanes of harassing two Emirati passenger airliners as they crossed the Gulf. Untrue, said Qatar, which fired back with its own accusation that Emirati warplanes had already breached its airspace twice.

That the other Gulf countries even care about Qatar enough to despise it is a relatively new development.

For much of the 20th century, the country was a barren Persian Gulf backwater where pirates once lurked. Its people were desperately poor, typically diving for pearls in the summer and herding camels in the winter. For decades they lagged far behind their Saudi neighbors, who were in the midst of a heady oil boom. The ruling al-Thani family was riven by vicious internecine squabbles and periodic coups.

Then, in 1971, Qatar struck gas.

The discovery of the world’s largest gas field was initially a source of bitter disappointment. “People hoped for oil,” said Ahmed bin Hamad al-Attiyah, a former energy minister. But by the 1990s, new technology allowed gas to be liquefied and exported in tanker ships.

The emir, Tamim’s father, Sheikh Hamad bin Khalifa al-Thani, took a huge gamble. Ignoring naysayers, he poured $20 billion into a sprawling liquefaction plant at Ras Laffan, on Qatar’s north coast, with help from the energy giant Exxon Mobil. The company was then headed by Rex W. Tillerson, who is now secretary of state.

The bet paid off spectacularly. Gas boomed, and by 2010 Qatar accounted for 30 percent of the global market.

Since then, Qatar’s citizens, today numbering 300,000, have become very rich, very fast. Their average income of $125,000 is the highest in the world, over twice that of the United States or Saudi Arabia. The state cocoons them with free land, cushy jobs and American universities. Gleaming supercars and limousines cruise along Doha’s palm-lined corniche. Poor Qataris are hard to find.

The metamorphosis was equally dramatic for the Thanis. Once the lords of a desolate peninsula of sand dunes and salt flats, they have become strutting sophisticates on the global stage: style icons who are celebrated in Vanity Fair and Vogue; art titans who splurge hundreds of millions on a Cézanne or a Gauguin; and media moguls who built Al Jazeera, the groundbreaking television network that helped fan the Arab Spring in 2011.

In June, Qatar’s national colors lit up the Empire State Building, in which it owns a stake, a mark of its punchy ambition.

But Qatar’s swagger is deeply contentious among its neighbors. In their reach for global influence, the Thanis have pursued ambidextrous, sometimes contradictory policies — preaching the virtues of peace, education and women’s rights while bankrolling Islamist extremists in Syria and hosting the biggest United States military base in the Middle East.

To Saudi Arabia and the Emirates — and Bahrain and Egypt, who have joined them in the boycott — Qatar is a nation of vexatious meddlers, intoxicated by its own wealth, that needs to be cut down to size.

Three dueling, headstrong royals are at the center of the dispute.

Saudi Arabia’s Prince Mohammed, 32, is leading a campaign to overhaul and energize his stultified society, including with outlandish proposals such as a $500 billion city on the Red Sea run by robots. He has a staunch ally in Sheikh Mohammed bin Zayed al-Nahyan, 56, the hawkish crown prince of the Emirates, who has built a formidable military and shares his Saudi counterpart’s deep hostility toward Iran.

Both princes are arrayed against Tamim, the emir of Qatar. A towering man with a diplomatic mien, Tamim is in many respects a classic Gulf potentate: educated like his father at the Royal Military Academy Sandhurst in England, he has three wives and 10 children, and lives in several luxurious palaces in Doha, a futuristic city of glass towers and curling highways.

His rise to power in 2013, at the age of 33, offered a stark contrast with the gerontocracy of Saudi Arabia, where rulers clung to their thrones till reaching their deathbeds. And his easy manner belies a stubborn streak that his neighbors see as the mark of a dangerous gadfly.

The baroque feuding among the three leaders — a twisting tale of cyberespionage, propaganda salvos, palace intrigue and high-stakes desert hunts — is worthy of an ancient Gulf power drama. Played by rich men in flowing white robes known as thobes, it has been called the “Game of Thobes.” But it also represents a profound moment of reckoning for the glimmering city-states of the Gulf.

Having largely avoided the turmoil of the Arab Spring in 2011, they find themselves hurtling toward an uncertain new economic and political order. At the center of the tumult is Qatar, the Lilliputian contender that for years punched above its weight and is now thrust into the fight of its life.

In downtown Doha, behind the imposing palace where the emir holds court twice a week, lies a discreet new museum that tells an ugly story with bracing honesty.

Through a series of polished exhibits, the museum, the Bin Jelmood House, delves into Qatar’s ignominious history of slavery, which was not abolished here until 1952. An evocative video recreates the suffering of the African slaves shipped from Zanzibar to dive for pearls, the mainstay of Qatar’s economy until the mid-20th century. A price list outlines the trade’s heartless calculations: 1,200 rupees, then about $550, for a driver in 1926; 1,500 rupees for a cook in 1909.

The museum, in its willingness to openly address the sins of the past, mirrors the image the Thanis seek to project for their country — open and enlightened, less dour than archconservative Saudi Arabia, more restrained than freewheeling Dubai in the United Arab Emirates.

While Saudi women will finally be allowed to drive in June, Qatari women have been driving for decades. In Qatar, there are cinemas, bars and even female race jockeys. Christians can worship openly. Although Qataris share the puritanical Wahhabi strand of Islam with Saudi Arabia, there are no public beheadings or other spectacles that offend the modern conscience.

Tamim lauds his country’s democratic values. In 50 years, he recently predicted, Al Jazeera will be seen to have “changed the whole idea of free speech in the region.” In many respects, it already has.

But the openness goes only so far.

In 2012, a Qatari poet was sentenced to life in prison for insulting the royal family. (Tamim pardoned him in 2016.) Al Jazeera’s Arabic channel offers blistering coverage of other Arab heads of state but treats Qatar’s royals with kid gloves. Since 2016, the authorities have blocked Doha News, a rare online news outlet that provides critical reporting. In 2005, the government stripped 5,000 tribesmen, accused of disloyalty, of their Qatari nationality.

Although foreign workers make up 90 percent of Qatar’s three million residents, they have paltry rights, and Qatar’s World Cup preparations have been marred by a stream of reports by human rights organizations about abuses of migrant workers. A new law announced in October could significantly improve the situation if it is put in place.

Even the slavery museum is not quite as it seems. To avoid offending Qataris about a delicate aspect of their history, it opened in 2015 without the fanfare usually accorded a royal project.

As a result, few Qataris seem to have heard of the museum, and it is often empty.

For over a century, Qatar’s rulers were plagued by insecurity, usually at the hands of their own relatives.

Tamim’s grandfather toppled a cousin as emir in 1972, only to be pushed from the throne himself by his son, Hamad, in 1995. The ousted emir, who learned of his fate while on vacation in Switzerland, denounced his son as an “ignorant man” and then retreated into exile.

Once the gas billions flowed, starting in about 2000, family tensions eased, paving the way for an ambitious, reform-minded cast of royals.

Tamim’s mother, Sheikha Mozah bint Nasser Al-Missned, 58, is one of the most famous people in the Arab world, known for her glittering gowns, ageless looks and advocacy of education and social issues. Sheikha Mozah, as she is known, behaves like a Western-style first lady, speaking at United Nations conferences and touring refugee camps in safari wear with a lightly bound scarf over her head.

She carved out her own power base through a multibillion-dollar foundation that created a philharmonic orchestra by recruiting musicians from 30 countries, built an $8 billion research hospital and brought branches of American universities, including Georgetown, Northwestern, Carnegie Mellon and Texas A&M, to Qatar.

Tamim’s younger sister, Mayassa, is Qatar’s culture czarina — an art world behemoth who, at the age of 30, had an estimated annual budget of $1 billion. (The Metropolitan Museum of Art in New York typically spends about $30 million on new acquisitions.) In 2008 she cajoled the architect I. M. Pei out of retirement to build the acclaimed Museum of Islamic Art in Doha, and later snapped up major works by Gauguin, Francis Bacon and Damien Hirst. When she bought Cézanne’s “Card Players,” with its un-Islamic scene of drinking and gambling, for an estimated $250 million in 2011, it was the world’s most expensive painting.

In Europe, Qatari royals have a reputation as high rollers with a yen for ostentatious real-estate and aristocratic prestige. After the 2008 financial crash, they bought Greek islands, French castles and so many iconic London properties — including Harrods department store, a share in Heathrow Airport and the Shard, western Europe’s tallest building — that it periodically induces anxious headlines in the British press about Qatar’s owning “more of London than the Queen.”

That much is true, British officials say, but Queen Elizabeth II doesn’t seem to mind: She has repeatedly dined at the $400 million Park Lane mansion of Hamad bin Abdullah al-Thani, a suave, thirtysomething cousin of the emir whose staff members are said to be dressed in the period style of the television series “Downton Abbey.”

In the Middle East, though, Qatar’s rulers have deployed their wealth to assert their independence from their larger neighbors.

For decades, Saudi Arabia, which is 186 times as large, treated Qatar as a virtual vassal state. In the 1940s, Saudi rulers took a slice of Qatar’s modest oil revenues; later they nibbled at Qatar’s territory and dictated its foreign and defense policy.

Tamim’s father, Hamad, accused the Saudis of trying to oust him in a failed coup in 1996 — a bitter episode that has framed the decades of simmering rivalry ever since.

Striking out on their own, the Qataris at first played the role of regional peacemaker, turning Doha into a sort of Geneva-on-the-Gulf where protagonists from wars in Sudan, Somalia and Lebanon could hash out their differences in five-star hotels. They embraced America, hosting a vast air base since 2003, the year of the Iraq war, and won popular influence through Al Jazeera, whose provocative style irked just about every Arab government.

The Qataris hosted leaders from the Palestinian militant group Hamas, causing Israeli officials to call Doha a “Club Med for terrorists.”

But it was the Arab Spring in 2011 that truly set Qatar apart. As grass-roots movements rose up against the established order across the Middle East, the Saudis and Emiratis were alarmed by the growing strength of political Islamists, like Egypt’s Muslim Brotherhood, which they feared could spread chaos in their own countries.

Qatar supported the Islamists.

“We stood by the people,” Tamim told “60 Minutes” in October. “They stood by the regimes. I feel that we stood by the right side.”

The emir could afford to be bold. Qatar had vast wealth, a sprawling American air base just a few miles from his palace and no domestic opposition to speak of.

“There was a feeling they could do anything they wanted, as long as they threw enough money at the problem,” said Kristian Coates Ulrichsen, the author of “Qatar and the Arab Spring.” “Their self-confidence was at a peak.”

But in Riyadh and Abu Dhabi, frustration was brewing.

Fittingly, the alliance between the crown prince of Saudi Arabia, Mohammed bin Salman, and his Emirati counterpart, Mohammed bin Zayed, was cemented with a falcon hunt, a cherished rite of Gulf royalty that involves elaborate entourages and great expense — a single hunting falcon can cost $250,000.

In February 2016, the two princes traveled to the eastern desert of Saudi Arabia on a hunting safari, followed by summer shooting expeditions in France and Wales, trips that bonded the hyperactive 32-year-old Saudi and the older, like-minded Emirati. As well as a modernizing vision for their countries, they share a penchant for Shakespearean drama.

After Mohammed bin Salman ousted his rival for the throne in June, royal photographers filmed the prince kissing his rival’s hand, then his knee, in a sign of respect. Hours later the man was locked in his palace.

Their military alliance has drawn accusations of overreach. In Yemen, where they lead a devastating yet ineffective air war against the Iran-aligned Houthi faction, their forces face accusations of committing war crimes and stoking famine.

“They are two peas in a pod who see the need for unusual action in unusual times,” said David B. Roberts, a Gulf expert at King’s College London.

They are also united by a desire to put Tamim in his place.

Until recently, the royal rivalry was most evident in their global contest for the most expensive and attention-grabbing ventures. In the Emirates, Dubai has the world’s tallest building, while Qatar has the 2022 World Cup and a number of American universities.

In the art world, a Saudi royal bought Leonardo da Vinci’s “Salvator Mundi” for $450 million in November, eclipsing Qatar’s Cézanne purchase. The da Vinci painting, reported to have been bought for the crown prince, will hang in Abu Dhabi, which recently opened an extension to the Louvre.

They flame each other through their media. Al Jazeera gives free rein to Saudi dissidents, while Sheikha Mozah is the object of lurid, often misogynistic insults in the Saudi, Emirati and Egyptian media, where she is portrayed as a power-hungry manipulator of weak men.

But at its core the rivalry is political. It matters little that Qatar lost its Arab Spring bets: Across the region, Islamist forces bankrolled by Doha are vanquished or in retreat. Still, Qatar’s neighbors view it with near pathological suspicion.

That mistrust burst into the open in 2014 when Saudi Arabia and the Emirates withdrew their ambassadors from Doha, setting off a diplomatic crisis that ended nine months later with a smooth reassurance from Tamim that he would meet their concerns.

Then last year, without warning, those tensions spiked again.

The crisis that set off the Gulf’s biggest confrontation in decades started with a series of random, seemingly unrelated events. And in vintage 2017 fashion, they involved fake news and the new American president, Donald J. Trump.

In March, a sulfurous dispute erupted over the fate of Alaa Alsiddiq, an Emirati dissident who has been living in Doha since 2013. After she published an article on Al Jazeera’s website about women’s rights in the Gulf, the Emiratis, who had canceled her passport, renewed longstanding demands that Tamim send her home.

The emir refused, telling one Western ambassador that he feared she could be tortured or killed. Emirati fury grew.

A second instance involved a huge ransom payment. In April, a private Qatari jet carrying $300 million landed in Iraq to free a party of 26 Qatari falcon hunters, including nine royals, who had been kidnapped by a pro-Iranian militia. Although who ultimately benefited remains shrouded in mystery, Tamim’s critics pointed to the episode as proof of his willingness to recklessly indulge extremists.

It also offered a powerful talking point with the new American president.

Even before Mr. Trump landed in Saudi Arabia in May, on the first foreign trip of his presidency, he appeared to be firmly in the Saudi camp. For months, the Saudi and Emirati leadership had cultivated a close relationship with Jared Kushner, the president’s adviser and son-in-law.

Mr. Kushner, a foreign policy neophyte, absorbed the princes’ views on the region, including their hostility to Qatar, a senior State Department official said, describing the relationships as very close.

In Riyadh, Mr. Trump signaled his burgeoning relationship by posing alongside 81-year-old King Salman with their hands on a glowing orb — an image that was meant to project solidarity but which gave them the appearance of movie villains and inspired a rash of internet memes.

Mr. Trump also met with Tamim, and the Qatari leader thought it went well. But two days later, back in Doha, the emir was shaken from his sleep with disturbing news: Someone had hacked the state-run Qatar News Agency and posted on its website a report of the emir calling Iran a “superpower,” lauding Hamas and speculating that Mr. Trump might not last long in power.

The report was pure fiction, but Qatar’s neighbors pounced on it as the real thing. Within minutes, pundits at Emirati and Saudi television stations were expounding on the perfidy of Qatar and issuing heated denunciations. Tamim frantically called his ministers and had the article taken down.

Thinking the problem solved, he settled in to watch a big National Basketball Association game, the Golden State Warriors and the San Antonio Spurs. In fact, his troubles had just started.

Over the following weeks, Emirati and Saudi news outlets accelerated their attacks on Qatar, accusing it of threatening Gulf stability. Several conservative think tanks in Washington joined the chorus. Then on June 5, without warning, the four-country boycott crashed onto Qatar.

Mr. Trump was eager to take credit.

“During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology,” he wrote in a tweet the next day. “Leaders pointed to Qatar — look!”

American intelligence officials determined that the planting of the fake news story had been orchestrated by the Emirates, which had been quietly pushing for a boycott of Qatar since 2016, a United States official told The New York Times.

“The smoking gun leads to Abu Dhabi,” the seat of Crown Prince Mohammed bin Zayed, he said, citing briefings from intelligence officials. “There is no ambiguity.” Moreover, the official said, the Saudi crown prince, Mohammed bin Salman, had prior knowledge of the ruse and had signaled his approval.

Yousef al-Otaiba, the Emirates’ ambassador to Washington, said his country “categorically denied” any involvement in the hack. The Saudi government did not respond to a request for comment.

One afternoon last August, I drove to Aqua Park, a water park in the desert 20 minutes outside Doha, to see how Qatar was surviving the boycott. Inside the park, where midday temperatures reached 120 degrees, men and women wearing swimsuits mingled freely, although bikinis were discouraged. Screaming children barreled down the Boomerango, the park’s largest ride. American warplanes rumbled overhead, bound for battle zones in Iraq and Syria.

Aqua Park is a few hundred yards from Al Udeid, the American air base whose runway lights glitter in the distance. The base, with 10,000 American service personnel, has been Qatar’s strategic jewel for over a decade, one major reason it could defy its neighbors. Now the Emirates was pressuring the United States to close it.

The park is a typical Qatari business in that no Qataris work there: The park’s manager, Mohammed Firdous Raj, is Malaysian, the lifeguards are Kenyan and other employees are Lebanese and Egyptian. Before the boycott, one quarter of its business came from Saudi tourists, who made the 25-minute drive from the border. But now the desert highway was half-empty, as were many hotels in Doha.

“We’d like them to come back,” Mr. Raj said of the Saudis. But the park’s owner, a former Qatari government minister, had allowed him to discount ticket prices, so business was about the same. “It’s a pity about the Saudis,” he said with a shrug. “Either way, we will manage.”

The boycott has inflicted some pain on Qatar. With its only land border closed, its ships blocked from passing through Emirati ports and its planes restricted from flying over neighboring airspace, import costs have soared. The stock exchange lost one-fifth of its value last year. Foreign workers, unable to party in Dubai on weekends, grumble about the claustrophobia of buttoned-up Doha. And the travel bans have torn apart families, whose relatives have straddled borders for centuries.

But for the most part, daily life in Doha is largely unchanged. Pricey wine flows in five-star hotels, work continues on a new metro system, and a striking National Museum, shaped as a series of giant intersecting discs, is set to become the city’s latest architectural marvel.

On weekends, young Qatari men go “dune bashing” — riding tricked-out four-wheel drive vehicles at high speed along mountainous dunes, sometimes flipping over. Qatar’s central bank says it has a $340 billion war chest to help weather the crisis.

And the boycott has backfired in some respects. The trade restrictions have forced Qatar into deeper economic ties with Iran, while Tamim has become the object of a fervent personality cult. The emir’s image adorns billboards draped off skyscrapers, and he is lionized in saccharine songs hailing his steely leadership. “He’s the embodiment of the philosopher king,” said Dana al-Fardan, one such balladeer.

His ministers, making a virtue of necessity, are developing new trade and transportation links. To make up for lost Saudi milk, they created a new dairy industry from scratch in the desert. In a surreal tableau one day in July, German cows toddled down the ramp of a Qatar Airways Airbus at the Doha airport, the first arrivals of around 4,000 cattle flown in from Europe, Australia and California.

A strident nationalism has displaced the old talk of “brotherly” ties between the countries. Qatari pilgrims claimed they had been prevented from traveling to Mecca in Saudi Arabia, and showing sympathy for Qatar has become a criminal offense in Bahrain, Saudi Arabia and the Emirates.

Any hopes that the Trump administration could end the crisis were scuppered by its chaotic policy. Mediation efforts by Mr. Tillerson, who had decades of experience in Qatar as an energy executive, were repeatedly undercut by Mr. Trump, who at a Washington fund-raiser mocked the way that Qatar is pronounced.

Although Mr. Trump has since stopped his attacks on Qatar, presenting himself as a mediator, some senior advisers continue the fight. Breitbart News Network, which until recently was run by Mr. Trump’s onetime ideological firebomber Stephen K. Bannon, has published dozens of articles attacking Qatar as a rogue ally.

Is Qatar soft on terrorism? Some of the charges are red herrings, American officials say. Tamim cut funding to most extremist militias in Syria and Islamist groups in Libya in 2015, at the urging of the Obama administration. His cordial ties with Iran are a matter of necessity because the two countries share the giant gas field that is the source of Qatar’s wealth.

Where Qatar does have a case to answer, officials say, is in its treatment of Qatari citizens accused of financing terrorist groups like Al Qaeda. Trials of accused financiers, when they take place, occur in secret, making it hard to know what punishment, if any, is imposed.

Abd al-Rahman al-Nuaymi, a former university professor and financier who has been designated a terrorist by the United Nations and the United States, was tried secretly in 2015 and acquitted. He now lives openly in Doha, albeit with restrictions on his banking and ability to travel, said a former United States treasury official who was briefed on the case. A senior Qatari official said that prosecutors were preparing to try him again.

But similar charges can be laid at the feet of Qatar’s foes. The Saudis have long been accused of exporting radical Islam across the world through hard-line madrassas. Iran’s biggest trading partner in the region is not Qatar but Dubai. Human rights abuses and press freedom restrictions are far harsher in the Emirates.

For Qatar’s supporters, the hypocrisy reveals what they say is the boycott’s true goal: to cut down or take out Qatar’s youthful emir, the royal who refuses to go along to get along.

For Tamim, the ultimate aim of his neighbors is to oust him from power. In the interview with The Times, he cited as precedent the 1996 Saudi-sponsored coup attempt against his father. “This was always the warning at the back of our heads,” he said.

His fears may be justified. In the early days of the boycott, two American officials said, Saudi and Emirati leaders mulled possible military action against Qatar. The precise details were unclear, but the talk was deemed serious enough for Mr. Tillerson to personally warn the Saudi and Emirati leaders against precipitous action. Mr. Trump later repeated that advice in a call to Saudi leaders.

Yousef al-Otaiba, the Emirati ambassador to Washington, denied in an interview that there was ever a military plan. “We never contemplated it,” he said.

But even the suggestion of military action highlighted how the old rules have been shattered in the Gulf. The six-nation Gulf Cooperation Council, the regional body that is supposed to resolve such disputes, has been invisible during the crisis. Instead the Saudis have promoted a string of exiled Qatari businessmen as potential political rivals to Tamim.

The Qataris appear to have returned fire on the hacking front. For months American news media outlets have received stolen emails intended to embarrass Mr. Otaiba, the Emirati ambassador. The emails appear to come from Russia, but Saudi media reports say Qatar was behind them.

Qatar denied any involvement in the hacking. “Qatar, as a matter of policy and principle, does not engage in cyber crimes or traffic in ‘fake news,’” the government said in a statement to The Times on Sunday.

Nothing suggests that the dispute will be resolved anytime soon. Although the Saudis and Emiratis may have overestimated the boycott’s ability to pressure Qatar, they may feel they have little to lose by continuing it.

“I think they are content to bleed Qatar,” said Mr. Roberts, the analyst. “There’s an indignant anger at what they see as a rich, cocooned, perfidious little state that is finally feeling the consequences of its actions.”

But as the dispute moved to the skies last week, with accusations of Qatari warplanes buzzing Emirati commercial jets, it highlighted how easily the crisis could escalate.

Both sides are bolstering their militaries. Since June, Tamim has ordered 36 F-15 warplanes from the United States, 24 Typhoon jets from Britain and 24 Rafale fighter jets from France — a sevenfold increase for an air force that currently has just 12 aircraft.

In December, his foes announced a new Saudi-Emirati military and economic alliance that further sidelines the Gulf Cooperation Council, which includes Qatar.

Days later, Tamim hosted a lavish banquet for President Emmanuel Macron of France at Idam, a French restaurant on the top floor of the Museum of Islamic Art that offers a shimmering panorama over the Doha skyline.

Over a sumptuous meal prepared by the celebrity chef Alain Ducasse, the two leaders toasted the deals they had signed that morning. The emir had ordered another 12 French fighter jets.

Nytimes

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Iran

How Corruption and Cronyism in Banking Fueled Iran’s Protests

- 21IranCorruption facebookJumbo - How Corruption and Cronyism in Banking Fueled Iran’s Protests


Photo
Exchange rates posted on a store window on Thursday in Tehran’s financial district. Credit Arash Khamooshi for The New York Times

TEHRAN — At 25 percent, the interest rate paid on a savings account at the Caspian Finance and Credit Institution in Tehran was a better return than Mehrdad Asgari could earn investing in his own business renting out construction equipment. So in December 2016, he jumped at the chance, depositing $42,000 in a savings account.

Before long though, Caspian stopped allowing withdrawals. After three months, it stopped paying interest. Finally, in May, it shut its doors for good — becoming one of the largest in a long series of failures of Iranian financial institutions in recent years. The closings have destroyed the savings of thousands of people, imperiled the banking system and helped fuel the antigovernment protests that roiled the country late last year.

The weeklong demonstrations across Iran, centered in religiously conservative, working class towns and cities rather than Tehran, were the broadest display of discontent since the Green Movement protests in 2009, following a disputed presidential election. The outpouring of anger was directed not only at President Hassan Rouhani, who won re-election promising to revitalize the economy, but also the country’s supreme leader, Ayatollah Ali Khamenei. Thousands of people were arrested and 25 were killed, some of them, families of the victims say, at the hands of their jailers.

“I got angry and swore at them,” Mr. Asgari said recently, referring to Caspian, adding that he joined other jilted depositors in demonstrations that he had learned about on social media.

The cascade of defaults, economists say, was not just the result of risky banking practices, but also a case study in official corruption — a major reason Iranians found their losses so infuriating. Adding to their outrage, Iranian officials made a series of statements blaming the victims for not being more careful with their money.

Continue reading the main story

Many of the institutions, including those that merged in 2016 to form Caspian, were allowed to gamble with deposits or run Ponzi schemes with impunity for years, in part because they were owned by well-connected elites: religious foundations, the Islamic Revolutionary Guards Corps or other semiofficial investment funds in the Iranian state.

“If there is a little less corruption, our problems will be solved,” demonstrators have chanted at protests against the financial failures.

Bijan Khajepour, an Iranian economist based in Vienna, estimated that as many as hundreds of thousands of people lost money because of the collapsing financial institutions. Iranians have a term for the growing class of victims: “property losers,” or “mal-baakhteganin Persian.

Many of the failing institutions sank the money into speculative investments during a real estate bubble, lent to well-connected friends or charged usurious interest rates to desperate borrowers. Now, regulators have quietly steered many of the companies into mergers with larger banks to try to absorb their losses, but that has created a worsening problem of bad loans and overvalued assets throughout the banking system.

Economists say that as many as 40 percent of the loans carried on the books of Iranian banks may be delinquent.

“The whole financial system in Iran is in a very fragile state,” said Borghan N. Narajabad, an economist in Washington who has studied the system.

The International Monetary Fund warned last month that Iran’s banks and lenders “need urgent restructuring and recapitalization,” calling for write-downs of overvalued assets and a crackdown on loans to insiders. The problem has grown so big, the fund warned, that the money required to prop up the banks will “cause government debt and interest outlays to rise substantially.”

Photo
Women hold signs denouncing financial institutions during a protest driven by anger over economic problems in Tehran last October. Credit Arash Khamooshi for The New York Times

Even Iran’s supreme leader, Mr. Khamenei, has acknowledged responsibility for the growing number of victims of “problematic financial institutions.”

“These appeals must be dealt with and heard out,” he said this month. “I myself am responsible; all of us must follow this approach.”

The corruption underlying the bank failures has long been an open secret. In December, a lawmaker, Mahmoud Sadeghi, released a document listing the Top 20 debtors who had failed to meet payment deadlines for Sarmayeh Bank, which is co-owned by a pension fund for teachers. The loans totaled $1.9 billion, and almost all appeared to be held by well-known insiders.

Among them was Hossein Hedayati, a business tycoon and former member of the Revolutionary Guards, whose swift rise was so conspicuous that websites speculated about the sources of his sudden wealth. The document released by the lawmaker showed that Mr. Hedayati owed $285 million, and in a television program discussing the loan, another lawmaker, Mohammad Hassannejad, accused Mr. Hedayati of using a series of front companies to swing the loans and hide his role.

Mr. Hedayati dialed in to the program, sputtering with rage; he denied borrowing from Sarmayeh and threated to “sue everyone,” but has yet to follow through on the threat.

After the 1979 Iranian Revolution, the new Islamic Republic initially nationalized all banks, among other industries. It also created a variety of semiofficial holding companies controlled by the supreme leader, senior clerics or top military commanders. Over the years, many of the companies have evolved into sprawling conglomerates with major roles in even the ostensibly private economy.

Clerics controlled religious foundations, called bonyads, that acquired commercial businesses. The largest of these, under the supreme leader, now makes up “15 to 20 percent” of the Iranian economy, according to an estimate by Hooshang Amirahmadi, an economist at Rutgers University who studies Iran. The elite Revolutionary Guard Corps controls a separate business empire.

All the semiofficial holding companies have major advantages over private businesses in favorable access to capital, tax exemptions and political connections. And most or all of them have been plagued by accusations of inefficiency and mismanagement, in addition to insider dealing and other forms of corruption.

Government reformers took steps to open up the banking business in the late 1990s and early 2000s, first by allowing religious foundations to set up loosely regulated savings and loans, ostensibly to serve the poor. The opening of private banks or the sale of shares in state banks soon followed.

But under a conservative president, Mahmoud Ahmadinejad, who came to power in 2005, semiofficial bodies controlled by clerics, the Revolutionary Guards or their allies dominated the newly private financial sector. An internal study produced in 2013 showed that semiofficial state bodies owned seven of the 17 private banks. Among them, the Revolutionary Guards controlled at least two, while the army, the police, the municipality of Tehran and a giant religious foundation close to the Guards controlled the others.

Among those financial institutions not directly controlled by these semiofficial bodies, the largest were usually run by individuals close to the same ruling elite, economists and diplomats say. They say that made it almost impossible for even the best-intentioned regulators to police the banks.

“The involvement of opaque government institutions like the Revolutionary Guards works contrary to transparency, and the lack of transparency is a recipe for poor banking practices,” said Sir Simon Gass, who was the British ambassador to Tehran from 2009 to 2011, in a recent interview. “The Central Bank of Iran tries to inject discipline into the system but with limited success.”

The outsize returns promised by the banks and financial institutions lured capital that might better have gone to more productive uses, contributing to an economic downturn brought on, in part, by international sanctions imposed because of Iran’s nuclear program. Economists say that helps explain why most sectors of the Iranian economy outside the oil industry have yet to reap the benefits of the sanctions’ repeal after the nuclear deal with the West.

Photo
The Caspian Finance and Credit Institution in Tehran was closed due to bankruptcy. Credit Arash Khamooshi for The New York Times

When lenders began to fail over the past few years, some senior Iranian officials tried to blame the borrowers, noting that many of the institutions were not officially licensed or guaranteed by the Central Bank.

“How many times do you want to be bitten by a snake from the same hole?” asked Mohammad Bagher Nobakht, a government spokesman, in an interview with the semiofficial news agency ILNA. Officials, he added, “told people several times but still they invested.”

Mohammad Bagher Olfat, a Muslim cleric who is deputy chief of the judiciary, said that jilted borrowers shared the blame with the lenders and regulators.

“Yes, their money is gone, but they shouldn’t expect the state to pay for their loss,” he told the same news agency.

It was not just the buyer-beware response of officials in the absence of oversight and transparency that outraged the victims. In 2016, Iranians were scandalized by leaks about the high salaries of executives at state-run companies, including $50,000 bonuses paid to eight managers of a state-owned insurance company (when an Iranian laborer might earn $200 a month).

In that context, the release of a draft budget that proposed raising outlays for clerics’ pet projects and their families while eliminating the $12 a month cash subsidy provided to 30 million Iranians and raising fuel prices by 50 percent provided the spark that ignited the protests.

They were upset to read about the $2 million — a 9 percent increase — that went to the son of the late Ayatollah Shahab ad-Din Muhammad Hussein Marashi Najafi to maintain his father’s library, and the $15 million provided to the grandson of Ayatollah Ruhollah Khomeini, the founder of the Islamic Republic, to publish the late leader’s works.

But some Iranians had already had enough. When Mr. Asgari was told in May that Caspian was closing without repaying his $42,000, he stepped outside and checked the encrypted social media app Telegram, where he found many groups for “property losers” victimized by Caspian and others like it.

“We organized demonstrations in front of their head office,” he said. Bowing to pressure, the government eventually refunded most of his original deposit but deducted the three interest payments he had received. (The government has since tried to block the use of Telegram in Iran.)

Arash Tajaloo, 42, a civil engineer in Tehran, deposited a total of $414,000 with Caspian in the spring of 2016, when the institution was promising him interest payments of as much as 30 percent a year. Caspian started restricting his withdrawals after six months, offering the excuse of temporary technical problems.

“They kept buying time, week after week,” he said in an interview over Telegram.

A lawsuit he filed was consolidated into a class action, “given the large number of cases,” he said. He says he joined protests in front of Parliament, the presidential palace and the residence of the supreme leader, and took part in a 33-day sit-in outside the courthouse.

Caspian has promised to repay him about one-eighth of his original deposits, he said, but he has yet to see any of it.

“We still have not received either our deposits or the interest on them for 13 months,” he said.

Continue reading the main story

TEHRAN — At 25 percent, the interest rate paid on a savings account at the Caspian Finance and Credit Institution in Tehran was a better return than Mehrdad Asgari could earn investing in his own business renting out construction equipment. So in December 2016, he jumped at the chance, depositing $42,000 in a savings account.

Before long though, Caspian stopped allowing withdrawals. After three months, it stopped paying interest. Finally, in May, it shut its doors for good — becoming one of the largest in a long series of failures of Iranian financial institutions in recent years. The closings have destroyed the savings of thousands of people, imperiled the banking system and helped fuel the antigovernment protests that roiled the country late last year.

The weeklong demonstrations across Iran, centered in religiously conservative, working class towns and cities rather than Tehran, were the broadest display of discontent since the Green Movement protests in 2009, following a disputed presidential election. The outpouring of anger was directed not only at President Hassan Rouhani, who won re-election promising to revitalize the economy, but also the country’s supreme leader, Ayatollah Ali Khamenei. Thousands of people were arrested and 25 were killed, some of them, families of the victims say, at the hands of their jailers.

“I got angry and swore at them,” Mr. Asgari said recently, referring to Caspian, adding that he joined other jilted depositors in demonstrations that he had learned about on social media.

The cascade of defaults, economists say, was not just the result of risky banking practices, but also a case study in official corruption — a major reason Iranians found their losses so infuriating. Adding to their outrage, Iranian officials made a series of statements blaming the victims for not being more careful with their money.

Many of the institutions, including those that merged in 2016 to form Caspian, were allowed to gamble with deposits or run Ponzi schemes with impunity for years, in part because they were owned by well-connected elites: religious foundations, the Islamic Revolutionary Guards Corps or other semiofficial investment funds in the Iranian state.

“If there is a little less corruption, our problems will be solved,” demonstrators have chanted at protests against the financial failures.

Bijan Khajepour, an Iranian economist based in Vienna, estimated that as many as hundreds of thousands of people lost money because of the collapsing financial institutions. Iranians have a term for the growing class of victims: “property losers,” or “mal-baakhteganin Persian.

Many of the failing institutions sank the money into speculative investments during a real estate bubble, lent to well-connected friends or charged usurious interest rates to desperate borrowers. Now, regulators have quietly steered many of the companies into mergers with larger banks to try to absorb their losses, but that has created a worsening problem of bad loans and overvalued assets throughout the banking system.

Economists say that as many as 40 percent of the loans carried on the books of Iranian banks may be delinquent.

“The whole financial system in Iran is in a very fragile state,” said Borghan N. Narajabad, an economist in Washington who has studied the system.

The International Monetary Fund warned last month that Iran’s banks and lenders “need urgent restructuring and recapitalization,” calling for write-downs of overvalued assets and a crackdown on loans to insiders. The problem has grown so big, the fund warned, that the money required to prop up the banks will “cause government debt and interest outlays to rise substantially.”

Even Iran’s supreme leader, Mr. Khamenei, has acknowledged responsibility for the growing number of victims of “problematic financial institutions.”

“These appeals must be dealt with and heard out,” he said this month. “I myself am responsible; all of us must follow this approach.”

The corruption underlying the bank failures has long been an open secret. In December, a lawmaker, Mahmoud Sadeghi, released a document listing the Top 20 debtors who had failed to meet payment deadlines for Sarmayeh Bank, which is co-owned by a pension fund for teachers. The loans totaled $1.9 billion, and almost all appeared to be held by well-known insiders.

Among them was Hossein Hedayati, a business tycoon and former member of the Revolutionary Guards, whose swift rise was so conspicuous that websites speculated about the sources of his sudden wealth. The document released by the lawmaker showed that Mr. Hedayati owed $285 million, and in a television program discussing the loan, another lawmaker, Mohammad Hassannejad, accused Mr. Hedayati of using a series of front companies to swing the loans and hide his role.

Mr. Hedayati dialed in to the program, sputtering with rage; he denied borrowing from Sarmayeh and threated to “sue everyone,” but has yet to follow through on the threat.

After the 1979 Iranian Revolution, the new Islamic Republic initially nationalized all banks, among other industries. It also created a variety of semiofficial holding companies controlled by the supreme leader, senior clerics or top military commanders. Over the years, many of the companies have evolved into sprawling conglomerates with major roles in even the ostensibly private economy.

Clerics controlled religious foundations, called bonyads, that acquired commercial businesses. The largest of these, under the supreme leader, now makes up “15 to 20 percent” of the Iranian economy, according to an estimate by Hooshang Amirahmadi, an economist at Rutgers University who studies Iran. The elite Revolutionary Guard Corps controls a separate business empire.

All the semiofficial holding companies have major advantages over private businesses in favorable access to capital, tax exemptions and political connections. And most or all of them have been plagued by accusations of inefficiency and mismanagement, in addition to insider dealing and other forms of corruption.

Government reformers took steps to open up the banking business in the late 1990s and early 2000s, first by allowing religious foundations to set up loosely regulated savings and loans, ostensibly to serve the poor. The opening of private banks or the sale of shares in state banks soon followed.

But under a conservative president, Mahmoud Ahmadinejad, who came to power in 2005, semiofficial bodies controlled by clerics, the Revolutionary Guards or their allies dominated the newly private financial sector. An internal study produced in 2013 showed that semiofficial state bodies owned seven of the 17 private banks. Among them, the Revolutionary Guards controlled at least two, while the army, the police, the municipality of Tehran and a giant religious foundation close to the Guards controlled the others.

Among those financial institutions not directly controlled by these semiofficial bodies, the largest were usually run by individuals close to the same ruling elite, economists and diplomats say. They say that made it almost impossible for even the best-intentioned regulators to police the banks.

“The involvement of opaque government institutions like the Revolutionary Guards works contrary to transparency, and the lack of transparency is a recipe for poor banking practices,” said Sir Simon Gass, who was the British ambassador to Tehran from 2009 to 2011, in a recent interview. “The Central Bank of Iran tries to inject discipline into the system but with limited success.”

The outsize returns promised by the banks and financial institutions lured capital that might better have gone to more productive uses, contributing to an economic downturn brought on, in part, by international sanctions imposed because of Iran’s nuclear program. Economists say that helps explain why most sectors of the Iranian economy outside the oil industry have yet to reap the benefits of the sanctions’ repeal after the nuclear deal with the West.

When lenders began to fail over the past few years, some senior Iranian officials tried to blame the borrowers, noting that many of the institutions were not officially licensed or guaranteed by the Central Bank.

“How many times do you want to be bitten by a snake from the same hole?” asked Mohammad Bagher Nobakht, a government spokesman, in an interview with the semiofficial news agency ILNA. Officials, he added, “told people several times but still they invested.”

Mohammad Bagher Olfat, a Muslim cleric who is deputy chief of the judiciary, said that jilted borrowers shared the blame with the lenders and regulators.

“Yes, their money is gone, but they shouldn’t expect the state to pay for their loss,” he told the same news agency.

It was not just the buyer-beware response of officials in the absence of oversight and transparency that outraged the victims. In 2016, Iranians were scandalized by leaks about the high salaries of executives at state-run companies, including $50,000 bonuses paid to eight managers of a state-owned insurance company (when an Iranian laborer might earn $200 a month).

In that context, the release of a draft budget that proposed raising outlays for clerics’ pet projects and their families while eliminating the $12 a month cash subsidy provided to 30 million Iranians and raising fuel prices by 50 percent provided the spark that ignited the protests.

They were upset to read about the $2 million — a 9 percent increase — that went to the son of the late Ayatollah Shahab ad-Din Muhammad Hussein Marashi Najafi to maintain his father’s library, and the $15 million provided to the grandson of Ayatollah Ruhollah Khomeini, the founder of the Islamic Republic, to publish the late leader’s works.

But some Iranians had already had enough. When Mr. Asgari was told in May that Caspian was closing without repaying his $42,000, he stepped outside and checked the encrypted social media app Telegram, where he found many groups for “property losers” victimized by Caspian and others like it.

“We organized demonstrations in front of their head office,” he said. Bowing to pressure, the government eventually refunded most of his original deposit but deducted the three interest payments he had received. (The government has since tried to block the use of Telegram in Iran.)

Arash Tajaloo, 42, a civil engineer in Tehran, deposited a total of $414,000 with Caspian in the spring of 2016, when the institution was promising him interest payments of as much as 30 percent a year. Caspian started restricting his withdrawals after six months, offering the excuse of temporary technical problems.

“They kept buying time, week after week,” he said in an interview over Telegram.

A lawsuit he filed was consolidated into a class action, “given the large number of cases,” he said. He says he joined protests in front of Parliament, the presidential palace and the residence of the supreme leader, and took part in a 33-day sit-in outside the courthouse.

Caspian has promised to repay him about one-eighth of his original deposits, he said, but he has yet to see any of it.

“We still have not received either our deposits or the interest on them for 13 months,” he said.

Nytimes

Continue Reading

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