Shutting Down Iran’s Nuclear Smugglers

The Islamic Republic has for decades relied on the global black market to build its nuclear program. Can negotiators now design a plan for policing it?

An Iranian technician works at the Isfahan Uranium Conversion Facilities (UCF), 420 kms south of Tehran, 03 February 2007. Iran opened the doors to its uranium conversion plant today in a bid to show its good intentions amid mounting international pressure for a halt its controversial nuclear programme. A delegation of Non-Aligned Movement (NAM) and Group of 77 representatives arrived at the facility in the central city of Isfahan together with foreign and Iranian journalists for a guided tour.  AFP PHOTO/BEHROUZ MEHRI (Photo credit should read BEHROUZ MEHRI/AFP/Getty Images)
An Iranian technician works at the Isfahan Uranium Conversion Facilities (UCF), 420 kms south of Tehran, 03 February 2007. Iran opened the doors to its uranium conversion plant today in a bid to show its good intentions amid mounting international pressure for a halt its controversial nuclear programme. A delegation of Non-Aligned Movement (NAM) and Group of 77 representatives arrived at the facility in the central city of Isfahan together with foreign and Iranian journalists for a guided tour. AFP PHOTO/BEHROUZ MEHRI (Photo credit should read BEHROUZ MEHRI/AFP/Getty Images)

For 30 years, Iran scoured the international black market for raw materials for an atomic program built almost entirely with foreign supplies. International sanctions have made it more difficult over the last decade for Tehran to acquire nuclear components. But they have also had an unintended consequence: Iran now has one of the world’s most sophisticated systems for smuggling nuclear technology.

Tehran’s smuggling prowess presents yet another challenge for negotiators struggling in Vienna this week to clinch a landmark agreement to limit Iran’s nuclear program. World powers are grappling with how to monitor Iran’s nuclear energy system — and give the Islamic Republic legal channels to purchase raw materials for its upkeep — without letting Tehran divert equipment to a secret weapons program.

Iran’s smuggling networks are as much a source of pride to Tehran as they are a point of anxiety for the United States and its allies. World powers have long feared Iran has moved closer to obtaining the means and resources to build a nuclear bomb, even as the Islamic Republic insists its nuclear program is only for peaceful purposes.

“We are proud that we bypass sanctions because the sanctions are illegal,” Iranian President Hassan Rouhani boasted during a news conference in Tehran in August 2014.

Iran has hidden its nuclear purchases behind a web of front companies, banks, and international middlemen that stretches from the United States and Germany to South Korea to China. Additionally, Beijing has resisted efforts to disclose the activities of Chinese traders that move the vast majority of illicit goods into Iran. And efforts to interdict the shipment of banned technology into Iran has largely stalled during the ongoing negotiations. Moreover, governments seeking commercial deals with Tehran essentially have stopped reporting Iranian violations, according to the June 2 findings by U.N. experts who are responsible for enforcing sanctions against the Islamic Republic.

In Vienna, negotiators have been drawing up plans for a so-called “procurement channel” — an import control system that will permit Iran to purchase approved materials for its nuclear program as part of a comprehensive nuclear pact. The initial June 30 deadline for those talks has been extended to July 7.

Some weeks, or months, after a final accord is struck, the U.N. Security Council will lift or suspend a raft of U.N. sanctions resolutions dating to 2006 that have prohibited Iran from enriching and reprocessing uranium. They also include a trade ban on arms, especially ballistic missiles. In their place, the council will adopt a new resolution endorsing the nuclear deal and spelling out its terms.

While the new resolution will suspend some financial and trade sanctions, it will retain some key measures, including those limiting the transfer of sensitive technologies and activities, according to an April 2 U.S. fact sheet that outlined the preliminary agreement with Iran. Samantha Power, the U.S. ambassador to the United Nations, has assured Congress that any violations by Iran will result in the automatic reimposition of sanctions. China and Russia, she said, will not be able to stop it.

The new resolution will also set the terms for the procurement channel and empower international inspectors to scrutinize “the supply chain that supports Iran’s nuclear program,” according to the fact sheet. The purpose is “to prevent diversion to a secret program.” It remains unclear, however, whether the U.N. panel of experts, the International Atomic Energy Agency (IAEA), or even some other newly created unit will take responsibility for monitoring Iran’s nuclear trade.

Achieving such assurances will not be easy. Iran’s fragmented procurement routes could emerge as a “real headache” for international inspectors trying to prevent abuse, said Nick Gillard, a former Australian defense expert on nuclear nonproliferation issues who currently is mapping out Iran’s nuclear-buying activities as a researcher at King’s College London’s Project Alpha. Iran’s various defense and energy agencies, including the Atomic Energy Organization and its subsidiaries, as well as the armed forces and military logistics departments, each have their own procurement channels. “It’s not highly centralized,” he said. “The buyers for these programs don’t work in the same office.”

Because a final deal will let Iran operate a nuclear energy program, the Security Council will have to lift and reconfigure existing U.N. sanctions that prohibit Tehran from purchasing materials that could be used for enriching uranium. But that can only happen after Iran addresses a series of concerns over the scale and history of its nuclear program, dials back some of the most controversial activities at its nuclear facilities at Fordow and Arak, provides international inspectors access to military sites, and details its allegedly covert military effort to develop a nuclear warhead.

The Islamic Republic began its nuclear shopping spree back in 1985, when its Atomic Energy Organization bought designs for its first-generation centrifuges from a network led by the founder of Pakistan’s nuclear weapons program, A.Q. Khan. In secret, Iran built a massive nuclear complex deep underground at Natanz; it was exposed for the first time by an Iranian dissident in 2002 and forced Tehran to acknowledge its uranium-enrichment program. The program since has steadily grown to more than a dozen facilities spread throughout the country. U.S. officials are confident that Iran now has the technical know-how to produce enough fissile material for one nuclear bomb in two to three months.

“You think about it: Since 2003 they have been able to manufacture altogether 25,000 centrifuges,” said Olli Heinonen, the IAEA’s former chief of safeguards who is now a senior fellow at Harvard University’s Belfer Center for Science and International Affairs. In 2006, Iran had only 164 first-generation centrifuges installed in its enrichment plant in Natanz. Today, Iran acknowledges it has installed 19,000 centrifuges in nuclear enrichment facilities, including more than 1,300 more advanced centrifuge models. “Most of the raw materials for these centrifuges — high-strength aluminum, carbon fiber, and maraging steel — are probably imported,” Heinonen said.

“How successful has Iran been at this game? You have to give them credit — they have been very successful,” Gillard added.

Gillard estimated that Iran has easily spent more than a billion dollars in foreign purchases over the past 30 years. Project Alpha, he said, has compiled 330 cases of known Iranian efforts to acquire components for its nuclear program, with a confirmed estimate of $250 million in costs. The total amount of trade is impossible to know. But Gillard believes the $250 million is only a fraction — perhaps 20 or 30 percent — of Iran’s spending on nuclear imports.

“Most of Iran’s current nuclear infrastructure has been built with foreign help,” Ian Stewart, also of Project Alpha, wrote in an unpublished report titled “Iran’s Illicit Procurement Activities: Past, Present and Future.” “Building the nuclear power plant at Bushehr, for example, was started by Germans and finished by Russians,” Stewart added. “The United States built Tehran’s research reactor, and Russia helped develop a heavy-water production plant at Arak and a uranium mine at Saghand. The Saghand mine was finished with Chinese help.”

Recent years have witnessed scores of incidents in which Iranian-chartered ships carrying weapons or nuclear components have been seized in foreign ports. China and the United Arab Emirates have been cited as the main transit hubs for illicit goods destined for Iran, according to Project Alpha. It cited one estimate indicating that as much as 90 percent of ballistic missile and nuclear technology passes through Chinese ports.

International sanctions, which include a web of financial penalties, have scared off some of the most reputable suppliers that have sold Iran sensitive dual-use goods for fear of running afoul of American authorities. Dual-use items can be used for both military purposes and mundane industrial tasks.

The smuggling was also reportedly impeded by covert efforts to sabotage Tehran’s nuclear program, including through the assassination of Iranian scientists and the introduction of Stuxnet malware in 2010, which infected equipment at several facilities, including the one at Natanz.

The U.N. panel of experts has “documented a well-established, sophisticated effort to maintain” smuggling networks over the last four years for the illicit procurement of nuclear-related goods, said former panel member Jacqueline Shire. Because of the international sanctions, “Iran has been forced to use illicit channels for virtually all of its nuclear-related procurement,” Shire told Foreign Policy.

The panel’s June 2 report found that Iran has scaled back its nuclear activities since it began negotiating with world powers for an accord to ease the sanctions. It found no evidence that Iran has violated the terms of the Joint Plan of Action, which it signed in November 2013 with the United States and other major powers.

At the same time, however, Iran has continued to violate a range of sanctions on the export of ballistic missiles and conventional arms, the panel found, citing reports of alleged weapons transfers to Syria, Lebanon, Iraq, and Yemen, as well as to groups like Hezbollah and Hamas. “[S]ome Member States informed the Panel that, according to their assessment, the Islamic Republic of Iran’s procurement trends and circumvention technique remain basically unchanged,” the panel concluded. This April, Britain informed the U.N. panel of experts that it “is aware of an active Iranian nuclear procurement network which has been associated with Iran’s Centrifuge Technology Company (TESA) and Kalay Electric Company (KEC),” the June 2 report noted. KEC is subject to Security Council sanctions.

“Iran continues to demonstrate special interest in high-grade machine tools which could contribute to nuclear and missile activities as well as wider industrial applications,” the report concluded. However, it noted a potential “general reduction of procurement activities by the Iranian side” and suggested that some governments may have decided to hold off on reporting on Iranian violations “to avoid any possible negative impact on ongoing negotiations.”

In late 2014, the United States informed the U.N. panel of experts that “it had observed no recent downturn in procurement” since the nuclear talks had begun, according to a confidential November 2014 account described to Foreign Policy. The United States also said it had detected “an increase in procurement” for the heavy-water reactor at Arak, which world powers believe could be used to produce plutonium.

The United States did, however, cite a “relative decrease in centrifuge enrichment related-procurement” in recent months, according to the account. And Iran has permitted IAEA monitoring of the Arak facility, which would be rendered incapable of producing plutonium under a comprehensive nuclear deal.

Shire said Iran has shown a preference for smuggling in high-quality raw materials from established Western suppliers in the United States and Europe. But she said the sanctions have forced Iran to “settle for cheaper-made, less reliable substitutes by producers in Asia.”

One way Tehran has evaded sanctions, Shire said, is by purchasing low-grade components that are not adequate for a nuclear program — and therefore are not included on nuclear-control import lists of items restricted for sale to Iran. In such cases, Iran has had to “either make do with lower performance or possibly seek to modify the items after purchase,” she said.

A new Security Council procurement channel, then, would have to prevent Iran from using such tactics to evade the improper import of nuclear goods. Shire said governments would have to closely watch for goods that are not on lists of banned imports and be vigilant in monitoring proliferation-sensitive transfers to Iran.

Heinonen favors a highly focused control regime that prohibits a relatively small number of sensitive technologies from entering the country. They would include items that are absolutely vital to enrichment, reprocessing of uranium, or weaponizing a nuclear explosive. There is a fairly limited universe of companies that produce high-tech equipment capable of running a nuclear program, and soliciting their support in stopping smuggling is crucial.

“In the end, a nuclear control system can’t control everything,” Heinonen said, noting that the expansion of Iran’s oil industry will require a flood of dual-use materials entering the country. “If you end up trying to control every valve going into the country, it’s going to be a hell of a difficult job. You select some from the list of items that are really important, and then you can control it.”

In the past, Iran has outsourced key technical components for its nuclear program, including electrical control systems for centrifuges, which are made in Turkey and smuggled into Iran, according to Heinonen. He said this remains a key monitoring gap for nuclear inspectors. “You can do a lot outside the country and bypass export controls,” he said.

At the same time, Gillard and other nonproliferation experts say a decade of U.N. sanctions aimed at curtailing Iran has opened the door to the seizure of materials in foreign ports. “These measures have been an important restricting factor in capping the Iranian efforts,” Gillard said. “They have prevented the Iranians’ advanced centrifuge capability from really blossoming.”

Part of the challenge ahead will involve accommodating special interest groups in Iran, including the Islamic Revolutionary Guard, which has amassed enormous wealth through illicit smuggling and would be threatened by a properly implemented nuclear deal. Gillard said he believes the Revolutionary Guard would be “pretty savvy and flexible” in turning some of its business legit: “They will find ways to make money out of the new process.”

Politically, he said, agreeing on the procurement channel in the negotiations “should be a no-brainer.”

“The West wants to see an end to Iran’s procuring illicitly, and the Iranians want to obtain things from abroad,” Gillard said. “It’s in the interest of both sides to minimize violations.”

Yet he acknowledged that there will be immense difficulties in monitoring imports and noted “lots of avenues through which illicit procurement can occur.”

The even bigger challenge is in exposing nuclear technology that could be diverted to covert facilities that are not monitored by the IAEA. Iranian Supreme Leader Ali Khamenei recently and publicly vowed to block inspectors from Iran’s most sensitive military sites, a condition that the United States and its European allies consider unacceptable.

Any violations uncovered at such sites must be punished, Heinonen said, either through sanctions or restrictions on certain imports. “If they are caught, there should be consequences,” he said.

Photo credit: Behrouz Mehri/AFP/Getty Images

Colum Lynch is a senior staff writer at Foreign Policy. Twitter: @columlynch

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