Chinese pieces to Iran’s nuclear puzzle

If Mehdi Kamyabi Pour, press officer at Iran’s embassy in Bangkok, is to be believed, accusations that his country is developing nuclear weapons are “absolutely unfounded”. Nuclear weapons, he recently asserted, have no place in Iran’s defense doctrine and his country “has strongly condemned the use of such inhumane weapons”.

Pour’s statement appeared in the March 13 edition of the Bangkok Post in response to an article the daily newspaper published about Iran’s attempts to obtain nuclear-related material and devices in Asia and its extensive shipping networks in the region. Military analysts claim East Asia is becoming Iran’s main

source of such items and often the origin of these nuclear-related goods is China.

Iran has always denied that it has a nuclear weapons program, insisting that its research into atomic energy is for strictly peaceful purposes. If that were the case, skeptics argue, there should be more transparency and less secrecy surrounding the country’s procurement of materials for its defense industries. And analysts wonder why many of these materials are obtained through a clandestine network of front companies, often disguised as freight forwarding or electronic businesses?

The United States, European Union and United Nations have all imposed sanctions on Iran over its nuclear program. However, Iran’s attempts to procure nuclear-related materials through unorthodox channels predates those restrictions. Many of the goods Iran continues to obtain through the same means are classified as “dual-use” items with both civilian as well as military applications and thus are not necessarily prohibited under the sanctions regime. Still, secrecy and convoluted arrangements through front companies and obscure middlemen surround Iran’s imports of goods even in this category.

The easiest way to source such materials has always been to use a middleman in a third country, which is then declared as the end user of items actually destined for Iran. Dubai in the United Arab Emirates (UAE) was previously the re-export hub for these clandestine activities, and for years Iran imported more goods through Dubai than its own ports. In January 2005, a Tehran Chamber of Commerce official disclosed that there were more than 4,650 Iranian companies in Dubai and that Iranian interests contributed 45% of fixed investments and 10% of all investment in the sprawling Jebel Ali Free Zone near Dubai City.

Iranians make up around a quarter of Dubai’s resident population, and with more than 450,000 Iranians living in the emirate it currently serves as Iran’s most important banking center anywhere in the world. To be sure, many of these companies belong to Iranian individuals with few or no ties to the government in Tehran, and some are actually dissidents who preferred to stay in Dubai rather than in the strictly controlled Islamic Republic of Iran. At the same time, the Iranian government ran a number of front companies in Dubai which were often listed as “end users” for goods procured in third countries.

Since the 9/11 terrorist attacks in the US, which were financed partly by remittances from banks in Dubai, the UAE has been more cooperative. In March 2007, Stuart Levey, the US undersecretary for terrorism and financial intelligence, traveled to Dubai to warn Arab bankers to halt dealings with Iran or face US sanctions. Levey alleged that even innocuous-looking trade with Iran could bankroll the country’s disputed nuclear program.

The pressure seems to have paid off. In August last year, the American ambassador to the emirates, Richard Olson, stated that, “Today, our countries have a prosperous and cooperative relationship.” That warming trend was most recently seen by the UAE’s agreement to send warplanes in support of the still ongoing military action against Libya, to which the US is a leading participant.

Chinese middlemen
Because the US in particular now has better cooperation from the UAE, Iran is increasingly turning to countries and territories like China, Hong Kong, Taiwan and Malaysia to obtain what it needs to keep its contested nuclear industry running. In May last year, Chen Yi-lan, alias Kevin Chen, a 40-year old Taiwanese passport holder, pleaded guilty in a court in Miami to charges of “conspiring to illegally export dual-use commodities to Iran”. He had been apprehended on the Pacific island of Guam, a US territory, while arranging a roundabout shipment of embargoed goods to Iran via Hong Kong and Taiwan.

According to court testimony, since 2007 he had used Hong Kong freight forwarders Acteam Logistics and Tex-Co to transship, or conspire to transship, US goods bound for Iran, including MIL-S-8516 sealing compound with military applications, glass-to-metal pin seals, which are used in vacuum components, and circular hermetic connectors. These goods can be used commercially but have military and nuclear applications as well. (He was also charged with transshipping P200 turbine engines and spare parts that can be used in unmanned aerial vehicles, or drones.)

The fear among Western countries is that Iran needs these and other goods for its uranium enrichment program and that it intends to use highly enriched uranium to manufacture nuclear weapons. To successfully enrich uranium requires centrifuges – the manufacture of which Iran commissioned to a company known as the Iran Centrifuge Technology Company, or TSA. According to information posted on the website and dated 6 August 2006, TSA is “currently producing P1 and P2 centrifuges. This company plays a very important role in the regime’s nuclear activities and the regime has kept it secret. The company’s chair, Jafar Mohammadi, is a top expert in the manufacture of centrifuges. He was transferred to TSA from the ministry of defense … Some of the sensitive centrifuge parts such as magnets are being bought on the black-market.”

The apparent link to the ministry of defense seems to contradict the Iranian government’s assertion that its nuclear program is a strictly civilian project. TSA reportedly manufactures centrifuges for another company known as the Kalaye Electric Company (KEC) but are actually for use at the enrichment site at Nantanz, a huge complex covering 100,000 square meters and located eight meters underground, according to a report by the Carnegie Endowment for International Peace and Then International Atomic Energy Agency (IAEA) director general Mohamed ElBaradei visited the site in February 2003 and reported that 160 centrifuges were complete and ready for operation, with 1,000 more then under construction at the site. It is now believed by security analysts that at least 7,000 centrifuges have been installed at Nantanz.

Nearly 200 front companies and other entities linked to Iran’s efforts to procure materials for its nuclear program are now on the UN’s and EU’s lists of “suspected entities”. Among them is a seemingly insignificant Iranian company called Javedan Mehr Toos. According to an April 3, 2010 report in the Asian Wall Street Journal and additional information supplied to Asia Times Online by Western security analysts, the little known Iranian firm acquired critical valves and vacuum gauges made by French company KD Valves-Descote, which was formerly owned by US industrial conglomerate Tyco International. Both firms told the Journal they knew nothing about the case.

Yasa Part, another small Iranian company which also goes under the name Shetab Gaman, was listed by the EU on July 26, 2010, as “an entity linked to Iran’s proliferation-sensitive nuclear activities or Iran’s development of nuclear weapon delivery systems”. The EU’s eyes are also focused on a company called Sanat Pajoohan Amin, which deals in titanium and aluminum alloys, maraging steel and other dual-use goods. The company’s website,, announces that it does business “in the name of God” with partners in China, Germany, Turkey and France.

Security analysts familiar with the situation told Asia Times Online that Aras Farayande, Festival Metals, Paya Mavad and Parto Sanat are also on the EU’s list of “suspected entities”. Parto Sanat, another Iran-based company, is on the sanctions lists of Australia and Japan for suspected links with Iran’s nuclear or ballistic missile programs. According to the EU’s designation, the company is a “manufacturer of frequency changers and it is capable of developing/modifying imported foreign frequency changers in a way that makes them usable in gas centrifuge enrichment”.

Proliferation for profit
The list of companies could be much longer, but the specifications and dimensions of the parts needed by Iran are based on designs copied from the Pakistani P-1 centrifuge design which were sold to them by the now defunct proliferation network led by Pakistani nuclear scientist Abdul Qadeer Khan.

Widely known as the “father” of Pakistan’s uranium enrichment program, his semi-clandestine network spanned from Europe to the Middle East and even as far as North Korea until he was dismissed under US pressure as head of the Khan Research Laboratories in Kahuta Pakistan in 2001. After years of house arrest, a Pakistani court in 2009 ruled he could travel freely inside the country.

Others have picked up where Khan’s network left off. “New procurers are being discovered as they attempt to obtain the same goods,” a security analyst told Asia Times Online. “The P-1 centrifuge design is notoriously unreliable and frequently fails in a catastrophic manner resulting in the machines having to be replaced rather than repaired. It’s estimated that Iran has to produce between 120-180 new centrifuges every month to maintain the present number of machines as seen at Natanz and reported by the IAEA.”

Those new procurement entities are generally Iranian companies which also carry out legitimate business inside the country, according to Western military analysts and an Asia Times Online investigation. The companies task a number of competing middlemen based outside Iran to quote them prices for the supply of the same goods. Depending on the urgency of the requirement, Iran may offer many times the market value of these items to the middleman who claims to be able to offer the best deal.

The outcome is often cut-throat competition between rival suppliers. The middlemen are known to approach manufacturers of the controlled goods on behalf of “clients”, which are just phoney names given to the supplier. Having obtained the goods, the middlemen often conceal their final destination from shipping companies by providing false end-user certificates, typically citing the final destination of the goods as China, Malaysia and, at least previously, Dubai – from where the same goods are then re-exported to Iran.

The middlemen, however, are not all cut from the same cloth. According to one analyst: “The profiles of these middlemen vary, but there are many common points. They are of various nationalities, but most often Chinese, or still some people of Iranian descent living in Dubai. They are indifferent to the cause of the Iranian procurement program but attracted by the possibility of making a large profit and therefore not shy to commit the fraud required to obtain and deliver the goods.”

Porous sanctions
Or, in other words, people like Kevin Chen, who was arrested in Guam last year when he made the mistake of offering his services to an undercover officer working for the Office of Export Enforcement at the US Commerce Department’s Bureau of Industry and Security. He was caught red-handed, but there are many others who are still assisting Iran in its efforts to circumvent international sanctions regimes.

Concealed under layers of middlemen, front companies and other individuals, Iran’s procurement continues virtually unabated, although action is taken whenever a secret deal is alleged. For instance, in October 2008 the US barred the China Shipbuilding & Offshore International Corporation from entering into contracts with the US government because it allegedly supplied materials used in making weapons of mass destruction not only to Iran but also to North Korea and Syria.

Last year’s acquistion of valves and vacuum gauges by Javedan Mehr Toos was struck through a little-known intermediary known as Vikas Kumar Talwar. According to US government documents reviewed by Asia Times Online, Talwar represents China’s Zhejiang Ouhai Trade Corporation, a subsidiary of the Wenzhou-based Jinzhou Group.

On October 18 last year, the Washington Post quoted a senior official from a Western intelligence agency as saying that Chinese firms had been discovered “selling high-quality carbon fiber to Iran to help it build better centrifuges, which are used in enriching uranium”.

Before Hong Kong’s return to China in 1997, the local government closed seven companies, including four which were suspected of supplying Iran with military-related goods from China. In recent years, at least one of those companies has started up again and is selling goods from China.

Authorities in Hong Kong, the world’s third-largest port, have begun to enforce more vigorously the territory’s export laws, and even Malaysia – a country often mentioned in this context – has introduced tougher measures. Last year, Malaysia passed the so-called Strategic Trade Act, which, the Malaysian paper Business Times reported at the time, was meant to protect “Malaysia and Malaysian exporters from being exploited by proliferators”.

The new law was enacted after a February 2004 Malaysian police report had implicated Scomi Precision Engineering, a company owned in part by Kamaluddin Abdullah, the businessman son of then prime minister Abdullah Badawi, in shipping centrifuge parts through Khan’s network to Libya. The company denied any wrongdoing, saying that it was unaware of what the nuclear-related equipment was going to be used for.

But the extent of China’s involvement in the trade is still a mystery. In March 2009, it was discovered in an official investigation that Taiwanese company Heli-Ocean Technology Co Ltd had shipped 108 pressure transducers to Iran. The gauges, dual-use items that are essential for centrifuge uranium enrichment, were ordered from Inficon Holding AG, a Swiss manufacturer. Heli-Ocean, which serves as Inficon’s agent in Taiwan, said the company that placed the order was a Chinese one, Roc-Master Manufacture and Supply Company, which originally asked for delivery of the transducers to its Shanghai location.

Then, in a way typical of convoluted re-exports to Iran, the company requested that Heli-Ocean deliver the parts to Moshever Sanat Moaser in Tehran on the assurance that they were not intended for Iran’s nuclear program. Taiwan’s bureau of foreign trade investigated the affair and determined that its export rules had not been violated because at the time it occurred the parts involved were not included on its list of “strategic high-tech commodities”. Security analysts say it was just another example of how Iran eludes sanctions aimed at preventing the country from developing weapons of mass destruction.

Source: / atimes /

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