Closing Loopholes: Another Vital Aspect of Sanctions on Iran

By Michael Jacobson

In the coming weeks, the United States and its allies will attempt to push additional Iran sanctions through the UN Security Council. Defense Secretary Robert Gates has indicated that "the United States and like-minded countries" could also impose at least some additional sanctions on their own. Although stronger sanctions are certainly needed to deter Iran on the nuclear issue, they alone are unlikely to pressure Tehran into changing its behavior. Just as important are efforts to plug the gaps and loopholes in the current sanctions regime.

Iranian Evasion

A number of overlapping sanctions are already in place against Iran, imposed by the UN, European Union, Britain, and the United States. One of the primary means of evading these regimes is through re-exports. Generally, export-control laws distinguish between different countries in determining the legality of a specific transaction. For example, dual-use goods, which can have commercial or military applications (including in the nuclear sector), may be sent to some countries but not to others. Iran often takes advantage of this framework, evading U.S. laws and international sanctions by setting up front companies and middlemen in countries to which these types of items can be legally exported. In most cases, the sellers are not told that the goods will be re-exported to Iran -- though many other sellers are willing to turn a blind eye.

The best known of these re-export hubs is Dubai, where thousands of Iranian businesses engage in illicit trade. Extensive re-export networks can also be found in Malaysia, Hong Kong, Thailand, Singapore, and Europe. These networks allow Iranians to procure much-needed American and European technology that they would otherwise be unable to obtain. A recent Associated Press report described a case in which a Chinese company used a Taiwan-based agent to divert more than a hundred pressure gauges (a device with both commercial and nuclear applications) to Iran, misleading the Swiss seller about the ultimate destination.

Iran's procurement networks extend to U.S. shores as well. In December 2009, for example, California-based suspect Jirair Avanessian was indicted for illegally exporting a specialized vacuum pump -- a device with potential nuclear applications -- to Iran via the United Arab Emirates. According to the Justice Department, he was directed by an individual in Iran.

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