Seven years ago, the UN and Western powers began subjecting Tehran to steadily harsher economic sanctions. Around the same time, an organisation controlled by Supreme Leader Ayatollah Ali Khamenei started to study how some developing economies managed to grow fast.

Setad, as the organisation is known, had amassed billions of dollars in property seized from Iranian citizens. What Iran lacked and needed, Setad decided, was conglomerates on a par with those of South Korea, Japan, Brazil and the US.

According to an account this year by a senior official in the unit that oversees Setad's financial investments, Ali Ashraf Afkhami, the organisation also picked the perfect candidate to create an Iranian national champion: Setad itself.

The ayatollah's organisation would go on to acquire stakes in a major bank by 2007 and in Iran's largest telecommunications company in 2009. Among dozens of other investments, it took over a giant holding company in 2010.

An organizational chart labeled "Setad at a Glance," prepared in 2010 by one of Setad's companies and seen by Reuters, illustrates how big it had grown. The document shows holdings in major banks, a brokerage, an insurance company, power plants, energy and construction firms, a refinery, a cement company and soft drinks manufacturing.

Today, Setad's vast operations provide an independent source of revenue and patronage for Supreme Leader Khamenei, even as the West squeezes the Iranian economy harder with sanctions in an attempt to end the nuclear-development program he controls.

"He has a huge sum at his disposal that he can spend," says Mohsen Sazegara, a co-founder of the powerful Islamic Revolutionary Guard Corps military force, who is now living in exile in the US. "When you have this much money, that's power itself."

Even as Setad was gaining ever-greater control over the Iranian economy in recent years, the Western powers knew of the organization and its connection to the supreme leader - the one man with the power to halt Tehran's uranium-enrichment program. But they moved cautiously, and Setad largely escaped foreign pressure.

In July 2010, the European Union included Mohammad Mokhber, president of Setad, in a list of individuals and entities it was sanctioning for alleged involvement in "nuclear or ballistic missiles activities." Two years later, it removed him from the list.

In June, the US Treasury Department added Setad and 37 companies it "oversees" to its list of sanctioned entities. Khamenei wasn't named in the announcement, but a Treasury official later told a Senate committee that Setad is controlled by the supreme leader's office.

Asked why Khamenei himself wasn't targeted, US officials told Reuters they did not want to play into the hands of Iranian officials who maintain that Washington's ultimate goal in pressuring Iran with sanctions is to topple the government.

"Regime change is not our policy," said one US official. "But putting pressure on this regime certainly is."

By the time Setad felt the pressure, it was already a giant.

Setad was founded with modest ambitions. Its genesis was a two-paragraph order issued in 1989 by Khamenei's predecessor, Ayatollah Ruhollah Khomeini, shortly before he died. The order directed two aides to sell and manage properties that had supposedly been abandoned during the chaotic years following the 1979 Islamic Revolution, and channel much of the proceeds to charity. The edict ultimately sparked a new organisation whose full name in Persian is "Setad Ejraiye Farmane Hazrate Emam" - the Headquarters for Executing the Order of the Imam.

According to one of its co-founders, Setad was meant to last two years. But under Khamenei's control, it remained in business, amassing a giant portfolio of real estate by claiming in Iranian courts, sometimes falsely, that the properties were abandoned. In fact, many were seized from members of religious minorities, and business people and other Iranians living abroad.

Since 2000 it has moved into almost every area of the economy.

In an interview, David Cohen, the Treasury Department's Under Secretary for Terrorism and Financial Intelligence, said Setad now generates "billions of dollars a year" in revenue. He added that "the supreme leader's own money is handled and invested in" a Setad division known as the Tadbir Economic Development Group, although he said the amount isn't known. A Treasury Department spokesman said Tadbir also manages investments for "other leadership figures" in Iran, but didn't name them.

The Iranian president's office, the foreign ministry and Tadbir Economic Development Group didn't respond to requests for comment. Iran's embassy in the UAE issued a statement calling Reuters' findings "scattered and disparate" and said that "none has any basis." It didn't elaborate.

Setad's total net worth is difficult to pinpoint due to the secrecy of its accounts and because its stakes in companies frequently change. But Reuters was able to identify holdings of real estate, corporate investments and other assets in Setad's control worth about $95 billion. That estimate is based on statements by Setad officials, data from the Tehran Stock Exchange and company websites, and information from the Treasury Department.

About $52 billion of that sum is in property. The head of Setad's real-estate division said the property unit was worth that amount at a press conference in 2008. It is possible that this figure has risen or fallen since then as the portfolio has evolved.

Setad also has an estimated $43 billion or more in corporate holdings, Reuters found:

* The US Treasury Department assessed Rey Investment Co, controlled by Setad, as worth about $40 billion in 2010, the year Setad took control of it. (The Treasury did not put an overall value on Setad).

* Through a subsidiary, Setad bought a 19 percent stake in Telecommunication Co of Iran, the country's largest telecom provider, for about $3 billion.

* Reuters also identified at least 24 publicly traded companies not named in the recent Treasury sanctions in which Setad, or a company it invested in, held a minority stake. At the current official exchange rate, those investments are worth more than $400 million, according to valuations from the Tehran Stock Exchange and data gleaned from the exchange and company websites.

* Reuters further identified 14 companies Setad has investments in - often through other businesses - that couldn't be valued because they are not publicly traded.

The Revolutionary Guards, the powerful military unit tasked with protecting Iran from both domestic and foreign threats, has long held a pivotal role in the country's economy, with extensive holdings in defense, construction and oil industries, according to the US State Department.

Khamenei appoints Setad's board of directors but delegates management of the organisation to others, according to one former employee. This person said the supreme leader is primarily concerned about one thing: its annual profits, which he uses to fund his bureaucracy.

"All he cares about is the number," this person said. - Reuters