The war on Iranian arms smuggling has been intensifying since September 11, 2001. Most countries cooperate in this effort, but not all. The same is true for American companies. The U.S. asks that those involved in the import and export of U.S. military equipment (and components) to report suspicious inquiries that might be an illegal attempt to purchase restricted (by laws governing which countries are forbidden to import American military tech) items. As a result the U.S. receives over a thousand tips a month and about ten percent of these trigger a formal investigation. But only two or three percent of those investigations leads to an arrest and fewer result in a conviction. The problem is that there are many legitimate foreign importers of U.S. military tech, especially “dual (commercial and military) use” items. Many of these items pass through several brokers before ending up with an actual user (or manufacturer who incorporates the part into a larger system). During that process there is lots of opportunity for components to be diverted to an unauthorized user, especially one skilled at forging documents.
Iran and North Korea have been particularly fond of this scam. And even though their agents (usually from other nations, sometimes Americans) are often caught the smugglers have so many operations going on (via hundreds of fake front companies and agents, many of them not even aware that the ultimate buyer is not supposed to be getting this stuff) that they simply consider the arrests and confiscated items a cost of doing business.
Because of decades of economic sanctions Iran has come to depend on China to help smuggle forbidden items into Iran. China opposes the sanctions but goes through the motions of observing them. Despite official sanction support China has always been the ultimate source of many forbidden military and nuclear research items for Iran. This includes Western gear, especially stuff from the United States that the rapidly growing Chinese economy has legitimate buyers for. These American items are usually obtained by Chinese trading companies, who serve as a one-stop-shopping source for many countries. The trading companies break American laws when they ship some types of restricted (by American regulations) gear to embargoed nations. This is done using forged documents and bribes that mask these operations, often for years or indefinitely. These Chinese exporters have little fear of punishment at home because the Chinese government refuses to discipline its wayward firms.
But these trading/smuggling companies can be hurt in other ways. That’s because U.S. regulators can reach just about every other country (even China) using the enormous U.S. presence in the international banking system. But the Chinese traders consider occasional fines and business interruption a cost-of-doing-business and pass these extra costs onto customers like Iran. Thus as the sanctions on Iran grow more formidable, prices Iran must pay go up and the Chinese profits increase even more.
This kind of smuggling employs techniques that Iran has used successfully for a long time. Many Western suppliers would simply charge a much higher price to cover the risk of being found out and prosecuted. There are, as the Iranians know well, a lot of Western suppliers who are willing to take the risk. But as the risk of getting caught, and the penalties increased in the last decade many Westerners abandoned this lucrative business to the Chinese who will help protect smugglers who are also willing to do a job for China from time to time.