Procurement: Iran Maintains The Chinese Connection

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January 23, 2015:   On December 5th a Chinese citizen (Sihai Cheng) flew into Boston from Britain, under guard, and was arrested for organizing a smuggling operation to obtain thousands of components (mostly American pressure transducers) Iran needed for enriching uranium (for nuclear power plants and nuclear weapons). Sihai Cheng was caught attempting to buy these items for a Chinese company and then smuggle them into Iran. Sihai Cheng was arrested in Britain during February 2014 and indicted on April 4th for espionage. Cheng fought the American extradition effort but lost and was sent to the United States for trial. Cheng is accused of working with an Iranian citizen and two Iranian companies to carry out the plan. The Iranians told Cheng that the transducers (made in China by an American company) were to be smuggled into Iran for a “secret project.” If convicted Cheng could face up to twenty years in prison. Cheng was caught, in part, because of help from the U.S. company (MKS) that makes the transducers.

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 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 can mask these operations for years. 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 passes 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 will 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, increase more and more Westerners abandon this lucrative business to the Chinese.

The war on Iranian arms smuggling has been intensifying in the last decade. Most countries cooperate, but not all. While Turkey has been getting cozy with Iran, the Turks still enforce international trade sanctions against Iran. But as Turkey encourages its companies to do more business with Iran, there are more opportunities to smuggle forbidden goods to assist Iranian nuclear weapons and ballistic missile projects. Iran takes advantage of this whenever possible.

Ever since the U.S. embargo was imposed in 1979 (after Iran broke diplomatic protocol by seizing the American embassy), Iran has sought, with some success, to offer big money to smugglers who can beat the embargo and get needed industrial and military equipment. This is a risky business, and American and European prisons are full of Iranians, and other nationals, who tried, and often failed, to procure forbidden goods. The smuggling operations are currently under more scrutiny, and attack, because of Iran's growing nuclear weapons program. But the Iranians simply offer more money and more smugglers step up to keep the goodies coming.

 

 


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