While Iran has been under an arms embargo for decades, and is currently under pressure to halt development of nuclear weapons, and ballistic missiles to deliver them with, the country does have some legitimate weapons needs. For example, Iranian troops have been fighting an increasingly bloody war with drug smugglers along their border with Afghanistan and Pakistan. This fighting gets particularly nasty because the drug smugglers are from Sunni tribes (usually Pushtun or Baluchi), that often believe the Shia Moslem Iranians are heretics. That makes the fighting about religion, as well as money. The fighting picked up after the Taliban were taken down in late 2001. After that, the drug business grew larger, and the smugglers saw Iran as a prime access rout to European and Persian Gulf customers, as well as a good market in itself. With so many Iranians rapidly becoming drug addicts, the government sent thousands of troops and police to the Afghan and Pakistani borders, to try and stop the smugglers. This soon turned into a fierce battle, as the smugglers would often try and fight their way past Iranian patrols, or even ambush Iranian forces. The smugglers also tended to have better weapons than the Iranians, as well as night vision devices and satellite telephones.
Iran makes a lot of its own small arms, but does not have the technical expertise to produce high tech things like .50 caliber sniper rifles, electronic sights for rifles, and other military electronics (ground radars and other sensors). Thus Iran has turned to anyone who will supply it with the high tech weapons it wants. Because of the Iranian nuclear weapons program, illegal, and legal, imports into Iran are closely watched by many intelligence organizations. The United States recently slapped sanctions on nine companies caught supplying weapons to Iran. Six of them were Chinese. But the Austrian firm was providing equipment most likely to end up in the hands of terrorists attacking American troops. Steyr-Mannlicher insisted that the deal was legit. If Steyr-Mannlicher cannot get out from under the sanctions, it will not be able to sell goods inside the United States.
Iran just got itself, and Austrian rifle maker Steyr-Mannlicher, in trouble when the Austrians sold 800 HS50 12.7mm (.50 caliber) sniper rifles to Iran. The Austrians believe that the Iranians want the rifles for use against Afghan and Pakistani drug smugglers. The United States sees the weapons as eventually being used against U.S. troops.