Protected: Week 3 Discussion • Global Trade & WMD

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  • I am planning to leave a discussion response to the above questions. I thought, though, I’d provide a link to the full video on the A.Q. Khan Network, as produced by the BBC. It makes for fascinating viewing (and is referred to and utilized in the first video): https://www.youtube.com/watch?v=TCnE4v3JEP8

    Dr. Tom Hunter18 June 2014
  • I believe that it is not possible to determine if Iran is getting better at hiding its trafficking efforts or if it intentionally undertaking less trafficking. The condundrum that arises from this question is that if they are getting better at hiding these activities, the less able the international community is less able to detect these events, thus resulting in less evidence of previously high levels of illicit trafficking attempts. In addition, it may be that Iran now, with its nuclear program more well established, may require less dual-use or prohibited equipment than it did in the past (particularly large items such as manufacturing machines, etc.) and therefore may have less need to conduct illicit trafficking operations. Therefore, either scenario is possible and plausible. Only through the actual seizures of illicit shipments will the international community be able to establish which of these is true. It may be, and I would argue, that Iran is both improving its smuggling and trafficking technoques, and it has less need for many items that are now (legally or illegally) in its possession.

    Having said that, it has, as the years have gone by, become more difficult every year for Iran to procure the dual-use or wholly illegal items to support its nuclear program, due to the increased unification of the internatioanl community and the international control regimes that prohibit such transactions and procurement efforts. In addition, the ever-increasing levels of sanctions, while clearly not halting the Iranian nuclear program, have certainly had a major impact on its development. Unfortunately, Iran has adapted to these sanctions, and to international interdiction efforts, by manipulating the systems in place to keep its nuclear program in check. It has mastered the ability to prolong the imposition of sanctions and to stretch out negotiations with the international community, almost certainly in an effort to provide Iran with more time to actually procure those items the sanctions and restrictions seek to defeat as far as Iran obtaining those critical items.

    The methods that are in place (sanctions, primarily) are effective tools, as they cost Iran a great deal in economic losses each year that they are enforced. So, those must be continued, at a minimum, if diversion of those items is to be enforced. Moreover, these sanctions could be (and seem to be routinely threatened by the control regimes and states) strengthened in order to further weaken Iran’s economic base and possibly destabilise the country to such a point that Iran must abandon its nuclear program and allow for full inspections of its facilities and the dismantlement of that program. In addition, a more aggressive policy with regard to the boarding of Iran-bound vessels could be imposed by the international community, by which more liberal legal policies are put in place to make such boardings on the high seas legal. Similarly, any nations sharing borders with Iran could impose stronger inspection criteria and enforcement, utilizing their law enforcement and military forces to enhance detection and smuggling prevention.

    Iran, however, seems intent on continuing down the road to the development of a nuclear weapon, and it may come to pass that intelligence developed by the international community or by a state or states (i.e. United States, United Kingdom, etc.) is at some point able to prove that the program has progressed beyond the point that Iran requires further illicit shipments and has progressed to the phase at which is can produce weapons-grade nuclear materials. In the case of Israel, in particular, this may necessitate the final option: a military strike (or series of strikes) against known or suspect Iranian facilities. Israel has made clear its intention to retain its right to “self-defense” and that it may act unilaterally to attack Iran. In addition, the US has also indicated that the military option is not wholly off the table, depending on future developments.

    Dr. Tom Hunter18 June 2014
  • This slowdown could be explained by Iran using more opaque procurement, or the news report less actively with regard to this topic.
    It may also be the case that Iran has deliberately slowed the pace of procurement, possibly coinciding with a change in the political climate under President Rouhani and the start of the nuclear talks.
    After Rouhani replaced Mahmoud Ahmadinejad , he pledged to reduce confrontation with the international community over its nuclear activities. He agreed to restart stoped negotiations with the six powers in a deal which required Iran to stop enrichment of uranium to 20 percent — which is a possible pathway to nuclear arms — and to reveal its apparently peacful nuclear programm in exchange for the easing of some Western sanctions.A final agreement between Iran and the US, Russia, China, Britain, France and Germany would lead to the lifting of all sanctions, which have crippled its oil-based economy. So why does it seem so impossible that there is a decrease in Iran’s procurement activities?

    Lisa19 June 2014
  • All of the comments are of course “opinion” because who the heck really knows? I always suspect that for every rogue shipment that is discovered being diverted to Iran , there are 50 that are not discovered. This is with any sort of criminal activity. Government budget crises too may have reduced enforcement resources – could that be the reason for the perceived decrease?

    As for the 2nd part of discussion question, it is possible to do more to monitor dual use items, however, those actions seem unacceptable as they would stifle legitimate commerce. For example, a country could add mandatory legal requirement that end use statements be obtained and vetted by a seller/exporter prior to export of certain valves etc. IN other words, pushing more burden onto a seller/exporter. But this would add more cost into the seller’s supply chain and therefore reduce profits.

    Shelley20 June 2014
  • The article provides several examples of concealment and possible deception – hiding titanium tubes in other piping, using freight forwarders instead of consignees on shipping documentation, and even an Iranian government directive to establish front companies to work around sanctions against banned companies. It would seem that the apparent decrease in procurement activities through more obvious trafficking is due to an increase in concealment measures to get around the known red flags. In order to curb these banned procurement activities, additional methods could be taken by more countries/companies to ban export of dual-use items to any Iranian company, and to examine any purchase orders that include potential dual-use items to companies with any ties to Iran. Additionally, if “Tehran has hinted that it would not oppose modifying the plant” from a heavy water reactor to a light water reactor, this should be pursued more aggressively by the United States and its European allies, as this would make the plant less threatening and suspicious of illicit activity.

    Erin C.20 June 2014
  • UN sanctions against Iran have been replicated by countries who care for world peace: BAFA in Germany, METI in Japan, BIS in U.S…These measures did not overlap. They actually reinforced control of cargo moving across oceans and borders. In brief, not only exports but re-exports are also controlled. All the “red flags”, “Know your customer” guidelines have been posted on various websites of customs and commerce departments of multitude countries. Protecting trade equals protecting each country national security.
    We should appreciate FIATA International Freight Forwarders Association issuing a notice to its members warning about the increased use of counterfeit Bills of Lading in connection with shipments to and from Iran” FIATA clearly understands its association and members need to exercise utmost care and caution; not only for their own benefits but for the sake of the whole humanity.

    Bachlien Scanlan20 June 2014
  • As others have noted it is not possible with the information given to know why fewer shipments have been caught. There are many possible reasons including an actual decline in attempted concealment. As has been stated multiple times many attempts to circumvent export controls are not directly orchestrated by the government but instead by businessmen looking to make a profit. While in Iran most likely has had a mix of both types of attempts decreases in government sponsored/orchestrated attempts is one explanation. This would not stop attempts altogether, however, as those motivated by profit may attempt to avoid these controls without coordinating with the government. In addition to a real drop in procurements it could also be due to improved concealment, redirection of foreign intelligence assets in light of other crises, or political decisions not to divulge that information to the UN.

    In the cases like the valves where the purchaser does have both a legitimate end-use and an illegitimate one there are limited options. One possibility is to only export the item in conjunction with a larger apparatus such that it is cost prohibitive to purchase the entire system just to acquire the valves. In the case of hiding titanium tubes inside steel pipes the solution is both improved export inspection of bills of lading to countries like Iran and improved export control education programs and laws so that companies understand the potential downsides of circumventing export controls and face financial hardship when they are caught.

    Cameron21 June 2014
  • The valves are an interesting case as Iran has an “established demand” (in contrast to the hidden titanium tubes) . How to deal with such items? Controlling them could ultimately lead to the degeneration of the legitimate petrochemical industry. Moreover, without the obtained computer file, there probably couldn’t have been established a connection between Arak and the valves.

    Marco22 June 2014
  • Distinguishing illicit procurement from legitimate ones will never be easy. We can try to monitor the nominal amounts that would be requires by a specific industry as a means to determine whether Iran is really pursuing changes in their program but cases like the Titanium tubes make I hard to believe that there aren’t alternative objectives.

    Antonio22 June 2014
  • I don’t think it is possible to answer the question regarding whether there is less trafficking or Iran is hiding its activities more effectively. For each item at issue (valves, tubes) there are legitimate non-WMD uses, hence they are classically dual use. Unless the final intended usage of the items can be established, it is not possible to find a violation. If, as Iran claims, they have no WMD-related plans for the items, they should be able to provide proof of the final destination and installation.

    Emphasis needs to be placed on development of non-WMD technology. Export controls, etc., are meant to prevent the use of items in the development and manufacture of WMDs, not to prohibit their legitimate use in a country’s economy for peaceful purposes.

    Regarding Iran’s Supreme National Security Counsel’s directives to assist KAA to facilitate illicit trade, the only “proof” is western diplomats’ statements that the report was “supported by intelligence”. Troubling as the possibility is that this facilitation might be happening, there is no concrete evidence presented in the article to draw any conclusions.

    patricia22 June 2014
  • I agree with everyone else; it is not easy to determine whether this is a result of Iran complying with international demands, or merely finding an effective way around controls and/or sanctions. The fact that Iran has openly said it would be willing to compromise by redesigning the heavy-water reactor at Arak is an example of sanctions having their bite, but the truth is that Iran has been lying to the international community for decades, so short of their nuclear and ballistic missile program being shelved tomorrow, or a very strict deal that favors Western powers over Iran’s ability to enrich, careful attention must be paid to ensure they are not circumventing the system.

    The key is Iran’s record; I agree that they must provide proof of all dual-use devices, including final destination and installation. Even if after a deal is struck, if any, it will be a long time before Western powers reach the next stage of negotiations, so trust will have to be developed incrementally, and all shipments to Iran containing these and similar items must be scrutinized heavily to ensure they are keeping their word.

    Scott Sharon22 June 2014
  • The global illicit network is highly complex and operates like a global market commodity exchange where different requirements and demands are met using elaborate pipelines that cross continents, languages and cultures.
    There are some practical mechanisms for dealing with the problems described above. One would be for governments and law enforcement agencies to pursue the key personnel who enable the illicit trade to occur—the “shadow facilitators” or “super fixers, or illegal shipment. There should be proper
    Cooperation and mutual agreement between countries for fighting and sharing resource and information and implemented very hard enforcement in place so that no one is thinking of doing this . Shifting the compliance responsibility to the company and allowing only proper and limited freight forward or third party /middle man after performing due diligence.its simple, either Iran allows international monitors into their country or the sanctions remain in place.

    Umesh23 June 2014
  • At the moment I think it is not simple to establish if there is a decrease in trafficking controlled items by IRAN. Also because it would be better to know which will be the use of this product.There is the name of the Iranian Company importer; well let’s start to see how they want to use these 10 tubes. Maybe UN could ask the participation of experts to assist on the use of these tubes as to discard the possibility of WMD use. By an Iranian point of view the return should be represented to be closer to UN and the Vienna’s talks and the help given by Western Governments considering the Iraq situation.
    About the valves for heavy-water reactor at Arak, it is obvious that a Country put under restrinctions could try to procure items in violations of UN Sanctions, but at the moment with the Vienna’s Talks it is important to establish that the Iranian imports should be managed in a transparency way and not with front companies. Iran should declare the use of these valves and to maintain the intent of using the reactor for civilian purposes and not for military ones

    Laura23 June 2014
  • As most people have pointed out, maybe Iran has slowed down, maybe Iran has gotten better, maybe Iran no longer has a need for such a system of proliferation. However Iran has a long history of claiming one thing while appearing to do the opposite. Even if Iran has slowed down procurement, the downtime could be for planning purposes in order to develop a better strategy.

    As for the issue of diversion, the key may be incentivzing Iran to comply an perform actions such as changing Arak to a light-water reactor. This would be the carrot approach, by providing assistance to Iran’s civilian programs. Another approach would be to try to disincentivize procurement efforts. Punish the unscrupulous or careless middleman and supplier even more. If there is one thing that was driven home by the lectures and case studies, it’s that the punishment really don’t fit the crime. Such an action would probably require more diplomatic efforts to make punishment a priority; the French were clearly uncooperative in the second case study.

    Matt23 June 2014
  • I agree with several of the previous entries that it is impossible to know whether the committee’s observations are due to Iran slowing illicit activities or just becoming better at deception. The 2013 Special Economic Directives Division directive (supposedly still in effect with the new government, though I would like to read more on that claim) indicates efforts to establish front companies to circumvent attention paid to KAA. However, as negotiations are on-going between Iran and the P5+1, the possible continued existence of this directive may just serve “bargaining leverage” for Iranian negotiations to prove to the West that they still have means of acquiring the items they desire if negotiations break down.

    In terms of methods to avoid illicit transfer of controlled items, the example of the German and Indian valves is particularly interesting. The valves have a dual-use nature with the peaceful and vibrant petrochemical industry in Iran, which acts as one layer of justification for their import. However, even if the valve can be proven to be transferred to Arak, the heavy-water plant’s role as a producer of medical radioisotopes acts as a second layer of peaceful justifications. Iran would need to answer for why the transfer was made, but this internal supply chain is difficult to track and easy to justify (e.g. the crippling sanctions regime places unfair and harmful restrictions of Iran’s medical needs).

    Timothy W23 June 2014
  • Naturally, there is no point arguing whether Iran is conducting illegal trafficking of controlled good or it is acquiring valves, as it is in this case in good faith, due to the lack of information provided. I have found two interesting things however – it seems to me that the main arguments supporting the notion that Iran is evading UN sanctions is the shipment of 1767 valves, of which 1163 have already reached their destination and the 2013 Directive ordering Iranian banks and state firms to facilitate the procurement processes with front companies.

    As regards the first argument, it is interesting to note that the article mentions that Iran has “an established need for such valves” but it does not mention exact numbers of valves from previous shipments, which only leads me to question the methods which flagged this particular shipment as suspicious.

    Furthermore, as regards the second argument – the Directive, I really do find it rather strange the Special Economic Directives Division of Iran’s Supreme National Security Council would order an illegal conduct with an official and most importantly publicly accessible document. Perhaps if the articles cited the document…

    Anyhow, with that limited information any arguments are as good as guesses, so I am looking forward to the final and official report on the matter.

    L.L. Sakaliyski23 June 2014
  • The apparent decrease in Iran’s procurement activities is probably a bit of both less trafficking (perhaps on account of Iran’s talks to pursue a long term nuclear deal) as well as Iranian companies becoming better at hiding these activities, though my sense is that it is more of the latter. Intelligence reports concerning the directive from the Special Economic Directives Division of Iran’s Supreme National Security Council to establish front companies to facilitate the evasion of sanctions – and indeed Iran’s use of front companies in other countries as we saw in this week’s assignment – would support this contention.

    As far as “assuring” that diversion of this kind does not happen, this is perhaps an unrealistic goal – or one which is overly optimistic. There are too many potential suppliers out there, varying in their level of sophistication and their ability to conduct thorough due diligence. This is further complicated where, as in this case, you have a legitimate industry with a legitimate need for a particular item/technology, and that same item / technology can also be put to use for illicit ends within the same country. Even companies with sophisticated internal compliance programs and ample resources to employ them would be hard pressed not to make mistakes in such situations. Perhaps the best way to minimise mistakes here is to foster closer cooperation between companies and government agencies that are in possession of the latest intelligence. For example, prior to entering into a transaction with a party for the first time, seek the assistance of the US commercial service in performing a background check on that company. Another related step would be to seek trade references from multiple companies that you have done business with in the past and can trust. Ultimately suppliers are responsible for conducting proper/reaonable due dilignece on their customers – specifically, what the item will be used for, by whom, and where – and determining whether the answers to these questions make sense (or are there any red flags)? When in doubt the seller must be prepared to walk away.

    James23 June 2014
  • I am a skeptic. If it looks like a duck, and swims like a duck, and quacks like a duck, there is an excellent chance its a duck. It is entirely possible that Iran has procurred all of the materials mentioned for peaceful purposes. However if they want to be treated as above suspicion, they should stop acting suspiciosly. Ordering titanium tubes inside of steel, listing freight forwarders as consignees, and directing banks o assist in the establishment of front companies are all suspicious activities.

    Sarah B23 June 2014
  • It isn’t fully possible to say whether Iran is becoming better at hiding its nuclear weapons program or if it is indeed scaling back its attempts to obtain nuclear capabilities. I would argue that with the very fragile negotiations currently in process, and Iran’s emergence as one of the only stable powers in the Middle East, it may be making a good faith effort and holding off on weapons development. With a more moderate presidential administration, Iran has opportunities to build influence and legitimacy on an international level without necessarily needing to obtain nuclear weapons. The greater sway it has over the crises in Iraq and Syria, the less threatening the United States and Israel may become. Of course, it’s always possible that they are becoming more sophisticated in their attempts to hide their programs, but it seems that they would have much to lose if they were discovered.

    In order to tighten up controls on exports to Iran, monitoring and regulatory bodies like this UN panel and the IAEA can target freight forwarding firms for monitoring, or provide best practices resources, trainings, and support to firms who wish to improve their businesses. Coordination with the FIATA can help with this.

    Additionally, to prevent the use of legitimate industries as a cover for illicit trafficking, the UN panel and the IAEA should increase monitoring efforts, and possible work to restructure sanctions that place responsibility on the exporting firm. This way, firms will think twice before doing business with Iran-based organizations who may be working on weapons programs.

    Finally, negotiations between Iran and the IAEA, as well as Iran and Washington should continue. Keeping Iran at the negotiating table provides an opportunity to offer incentives and disincentives for trafficking, and gives Iran motivation for good faith efforts to step away from nuclear weapons development.

    Emma F23 June 2014
  • It is complicated to determine whether Iran is genuinely downsizing its nuclear programme or whether the country is simply being smarter about evading controls. There is most probably a combination of both, and that demands countries to both better enforce exisiting laws on trade controls or adopt them if they don´t have them, and to ensure that they can´t be outsmarted if there are illicit intentions. Strict oversight of the sanctions and their prolongation should prevail if there is concrete evidence of Iran attempting to use items illicitly and if there are no transparent mechanisms for verifying activities; the US and Europe should continue to pressure changes to a light-water reactor in Arak as opposed to a heavy-water one and to continue insisting on reducing levels of highly enriched plutonium; work with the industry should continue – engaging the freight forwarders association is a positive step forward in working together with the industry to get them involved, aware, active and part of the chain of actors that need to ensure existing laws are enforced. This should be done across the board and throughout similar industries. If inspecting every single one of the millions of containers that flow freely through waters day by day is an impossible task, there are ways of working with the industry and with border controls authorities to prioritise, to target more effectively and to work on a risk-based approach. All of these measures contribute to prevent Iran from successfully deviating commodities or dual-use items towards a military programme rather than for peaceful uses. So, in a sense, it is not so much an issue of trying to resolve if they are cheating the system or if they are genuinely collaborating, but rather a question of ensuring that they are unable to divert items for non*-peaceful purposes, and the above mentioned measures, among many others, ought to contribute towards that objective.

    Nicolas L.23 June 2014
  • I don’t think there’s anyway to confirm whether or not the decrease represents decreased trafficking or just better trafficking. However, I tend to lean towards the latter. Front companies and established networks can’t keep operating once they’re uncovered. It’ll always be a cat and mouse game.

    There are a couple measures that could be instituted to slow the diversion of dual-use items (I say slow because diversion won’t ever be stopped 100%). One is strong end-use monitoring regimes. It’s not merely enough to take the license applicant and the end-user at their word. Governments must also conduct actual checks at various stages in the shipment process to ensure that the commodities are going where they’re supposed to go and being use how they’re supposed to be used. Additionally, the practice of allowing freight forwarders to serves as consignees or end-users should be ended. Finally, end-use certificates should not only be signed by the end-user, but by the host-government. This gets them involved in the process and potentially motivates them to stem trafficking as they have skin in the game.

    Cameron L.23 June 2014
  • It seems that Iran still has many options for concealing its import and procurement of controlled items. The classified report highlights the use of freight-forwarding firms as well as petrochemical companies as avenues of trafficking that remain open to Iran. Ultimately, it will be difficult for us to make anything more than an educated guess as to the current state of Iran’s procurement of controlled items.

    However, it is important to put this matter in the broader context of the negotiations for a long-term deal with Iran. Hypothetically, If Iran had grown adept at hiding its trafficking activities, it would likely benefit from drawing out talks with other world powers. By doing so, Iran would able to buy more time to acquire needed items, while also achieving relief from some of the most debilitating sanctions it faces. Given this scenario, it is not hard to imagine that Iran could be making use of functioning import networks, if only because Iranian leaders are hedging their bets when it comes to reaching a long-term deal with other world powers.

    Steven Y23 June 2014
  • I do not believe that there are sufficient monitoring abilities as of today to answer conclusively this hyperbolic question. The fact that the FIATA has issued a warning of fraudulent Bill of Ladings from Iran is disturbing. However, it is a positive that logistical organizations are willing to increase their awareness of the illicit trafficking. Going beyond the sanctions and government embargoes of dual-use trade to Iran would be more cooperation with the logistics community and governments and incorporating more electronic data interchange (EDI) systems that track PO to end user more efficiently and better monitored by governments.

    Derek W23 June 2014
  • In my opinion, there is no evidence to determine if Iran’s decrease in procurement activities is real or not. Iran may not need as many materials as they did before may be they are better at hiding them or may be the political changes in the country and the on-going negotiations slowed down their WMD program.

    However, the exporting country could help tackling diversion by:

    1. Developing a computerized licensing system/database including:
    • End users
    • End uses
    • Consignees
    • Foreign consignees
    • Type of commodities
    • Previous transactions

    This database is to be consulted by licensing officers prior to authorization of the export.

    2. Creating a watch list including suspicious applicants

    3. Running all exports against the watch list and other country’s watch lists if possible

    4. Requiring end-user documentation certified by the host government

    5. Enhancing end-use monitoring systems by conducting pre-shipment and post-shipment checks

    6. Conducting targeted checks based on risk profiling:
    • Routes of concern
    • Ports of concern
    • Designation of freight forwarders as consignees or end user
    • Intermediary not known
    • Suspicious-looking documentation

    7. Sharing information with other countries.

    8. Building capacity for customs control officials.

    8. Working with logistical organizations to help them identify suspicious shipments.

    Manuel Martínez24 June 2014
  • It is very difficult to establish the real picture of these activities from Iran´s government. But since my point of view, the two ideas, could be part of the strategy in the long term, undertaking less trafficking to comply with the six world powers, but at the same time their networks procurements are getting better at hiding the illicitly procurements materials because always you need spare parts for operation and maintenance of the industrial installations.

    The case of the German and Indian valves, it is a challenge to the exports control activities, because they´re a dual-use nature and the heavy petrochemical industries in Iran and other countries in the region, are the justification to import these type of components. However, the methods could be used to assure that diversion of the valves or other key components does not happens, are between others:
    – Share information of the different cases of concealing materials, with the producers;
    – Monitoring freight forwarding companies for, or provide best practices resources, trainings, and support to firms by regulatory national and international bodies to improve the control;
    – The regulatory national and international bodies, should increase monitoring efforts and create a warning list including suspicious firms or applicants.
    – Each country should restructure sanctions that also place responsibility on the exporting firm.

    Rodolfo Gamboa24 June 2014
  • The decrease of Iran´s procurement activities seen by the committee is because they are gettig better to hiding it, acoording to the expert´s report. They have found better ways to circumvent security and intelliegence services in adquiring sensitive components and materials for its nuclear activities. For instance, the concealment of the titanium tubes inside steel pipes which are used for petrochemical industry purposes (manufacrtured and shipped from China but ordered in Tehran), or its efforts to obtain valves; both items useful fot the manufacture of a heavy-water nuclear reactor at Arak.

    Better regulations, controls and monitoring over the end-use and end-users could be implemented to assure that dversion of the kind spoken of in the artiche, such as the valves case, does not happen. In this sense, experts recommend to governments the vigilance over freight-forwarding firms but also is important to have regulations on the form of the documents and avoid them to be counterfeit (such as the Bills of landing but also the end-use and end-user certificates). As well as, the incorporation of some evaluation criteria for the export of dual-use items like quantities, controls on transhipment, strenghtening the regime of license regardless the techonology level of elements involved bearins in mind that there woul be a potential risk that a transaction of these items could support weapons of mass destruction programs.

    Karina Hinojosa24 June 2014
  • This is precisely why dual-use commodities complicate the ability to manage true commercial uses and controlled end uses. Of course as the regulations evolve to encompass changes in technology and fill the gaps previously exposed in other cases, the illicit traffickers evolve as well. This is not to say that any dual-use item going to Iran is for a controlled end-use but how would a supplier truly know. It has been my experience that each questionable case must be reviewed and due diligence performed. And frankly, it is a requirement with the everchanging trade environment. In the US, the law states that the exporter cannot have knowledge at the time of export nor can it knowingly engage with sanctioned parties (SDN/entity). Therefore its incumbant upon the exporter to “know your customer”, be aware of red flags, and ask questions. Ultimately, if a supplier cannot get comfortable with the transaction then they should not fulfill an order.

    Of course, there may be pressure from Sales to make money but one bad order could wipeout the entire company. This is where trade compliance professionals and sales must work together.

    Erin T24 June 2014
  • There is, of course, no way of truly knowing the cause for the decrease in illicit procurement attempts. One suspects, however, that if Iran feared that such activity jeopardized a nuclear deal with the West, it would have ceased it completely. This would imply that the known cases mentioned in this article and the UN report are not the only instances of illicit procurement, and that there are in fact cases where Iran has managed to evade sanctions and export controls.

    This need not suggest that Iran is proceeding with a full-scale weapons program; at this stage the more likely scenario is that Tehran is hedging. If a final deal is struck, Tehran can claim such illicit procurement activities were simply in support of its desire for peaceful nuclear energy and necessary in the face of extreme sanctions. On the other hand, if negotiations yield nothing, the Iranian nuclear program, in whatever form it would take moving forward, will not have been harmed due to utter logistical inactivity.

    In the absence of complete transparency on the part of the end-user, companies and governments seeking to prevent the redirection of dual-use items can only cooperate extensively with one another to ensure accurate and relevant information is available to all parties involved. This is challenging, as it requires working across industries, national borders, and between intelligence and commercial activities. Without such full, transparent coordination, however, there will always be technologies and capabilities that slip through the cracks in the export control system.

    Pat D.24 June 2014
  • The only real indicators we can follow as outsiders come from publicly available information. Monthly reports from the IAEA that Iran is in compliance with its obligations under the interim deal and conflicting accounts of whether or not Iran has maintained the agreed limit of 1 million barrels per day in oil sales paint a very gray picture. Taken with the assigned Reuters article, the best answer is that Iran is pursuing a two track policy with respect to the interim deal: halt enrichment and limit oil sales while continuing to pursue the requisite nuclear technology. Though contrary to the “good faith” nature of the interim deal, the Reuters article noted “such practices are not necessarily illegal.” Suspicion, legal gray areas, and mistrust reign supreme on all sides.

    Enhanced and more effective internal compliance programs on the part of companies and export control systems on the part of nations would decrease and deter the illicit procurement methods described by the report.

    Brett S24 June 2014
  • Iran has been under sanctions for a very long time, which also means that they have had a long time to build networks, and frankly speaking have practice evading the sanctions placed upon them. It is of course impossible to know what Iran’s plan is in regards to the procurement and the nuclear program. I suspect that it is possible that Iran doesn’t have a crystallized plan that they want nuclear weapons, but perhaps is scared of what would happen if they don’t have the plausible capability to produce them. If Iran does want a nuclear weapons program- we can not stop them short of invading them. This is the lesson of North Korea- North Korea is smaller and more cut off from the world, but they have developed an impressive nuclear and missile program. We can increase the economic costs of developing the program, or delay it with computer viruses, sanctions, even air strikes, but none of this would truly prevent any thing in the long run. The best strategy in this case is diplomacy, better to make them not want nuclear weapons than to try to prevent them from getting them. Not that any option is easy in this case.

    As to preventing the shipping of these items to Iran- one way would be to make sure that companies are fully aware of what items are to be restricted, and what they need to do in regards to due diligence. Also, there needs to be a meaningful punishment. There have been several cases of banks working with Iran even though it goes against certain sanctions- and it is unlikely that they didn’t know. The punishment has to be more severe than any possible gain

    Leon Whyte24 June 2014
  • Personally I think that they are probably getting better at hiding it. However, I feel it is hard to make that kind of determination when you are only hearing about certain cases where they are in fact caught. The article certainly exposes their creativity – like using steel pipes to encase and conceal titanium tubes. That is outright deception for an illicit activity. The same goes for the purchase of the valves where they were clearly not used for the legitimate petrochemical industry that they were purchased for.

    It is very hard to determine from the onset of a purchase order if the items will in fact be used for legal petrochemical production or illicit nuclear weapons production. The items are dual use. Quantity could be key in a scenario like this. If they need 500 valves for a petrochemical manufacturing facility and they order 1,000 – there’s a red flag. Can the UN tour those facilities? Can they have a running record or valves required and expected lifespan? What about using a core exchange system? Send us 100 depleted ones and we’ll send you 100 new ones. There are many possibilities, which I’m sure have all been thought of at some point – implementation, tracking, and responsible oversight would be the key. I’m also sure the CIA has thought to use RFiD or GPS tracking chips in shipping containers to see where they ultimately end up.

    Robert F.24 June 2014
  • It’s a vicious cycle, isn’t it? Sanctions are levied against Iran, which does still have legitimate industrial needs — and the only way it can get equipment for those legitimate needs is to take actions that appear to be very suspicious. Or perhaps Iran is really being crafty and trying to import illicit items expressly for use in its nuclear program.

    The reality is that we don’t know — because, even to this day, we cannot determine what Iran’s true intentions are. Technical capabilities and political objectives are very separate things, but far too often, as policy analysts and decision makers, we conflate the two. We see evidence of technical capability, and draw a conclusion about intent.

    What we do know is that there is still a tremendous amount of work that can be done to prevent illicit shipments of sensitive equipment and technology — regardless of the recipient country’s true intentions. And that work is predicated on the strengthening of public-private partnerships — that is, closer collaboration between governments and private industry. All of the suggestions offered by Manuel Martinez above are right on point, and the principle underlying those ideas is that of encouraging and incentivizing private companies to elevate nonproliferation as a corporate principle, right on track with environmental responsibility. What if, in a given company’s annual shareholder report, that obligatory section that discusses how ethical and socially responsible the company is also mentions how the company is committed to preventing the spread of nuclear weapons? That is norm setting and norm enforcement — and if even one company that manufactures or distributes dual-use goods signs onto this principle and engages in “self-regulation,” a cascade will follow.

    Rizwan L24 June 2014
  • While I am agree somewhat that there is a great amount of difficulty and ambiguity in pinpointing decrease in nuclear and missile development as a result of greater compliance to controls or more effective means of concealment of illegal export activities, I am inclined to more strongly side with the latter. The fact of the matter is that the deed/actions of activities under the Iranian government or under nodes/networks that fall under the eye of Iranian sovereignty show at the very least a certain negligence to the issue – such as was the case of discovering hidden titanium tubes within manufactured steel pipes. While no formal reports were made as to connect the potential nuclear uses of the titanium tubes, the fact alone that measures were made to conceal and evade normal export control policies and attempts to illegally smuggle it on the behalf of Tehran is already cause for suspicion. This goes for the same of valves being purchased for Arak heavy-water reactors – user endsites that have clear potential nuclear and WMD development applications. The fact of the matter is, Iran and the most of the developed world exists in a globalized economy dependent on transfers of goods, services, and raw materiel / core components. Thousands upon thousands of transactions and shipments occur daily; what is not to say that for every legitimate action is made, an unknown amount of illicit export violations and transfer occur as well? The case studies show the complexities of such schemes, and the many nodes and connections that made the possible – and understanding how those illicit acts work and function requires months (if not) years of investigating and building a case. If indeed Tehran wishes to persuade international coalitions of its compliance then it must provide and compile an ongoing record of good diligence; additional stories of illicit activities must no longer come to light – or at least such incidents should not arise with linkages of the Tehran who stand to benefit occur and should publicly and consistently display efforts to limit export violations under its own borders (because as was referenced in the lectures – illicit export violations had occurred at the behest of solo entrepreneurs utilizing connections and middlemen; and while, these illustrated incidents wherein governments stood to benefit for governmental gain in nuclear development, these entrepreneurs are driven by profiteering motivations and services may not always be in service to a government).

    Sanctions remain an effective means of diversion coupled with calls for international coalition-led pressure and diplomacy. Calls for greater scrutiny and transparency should be encouraged – although, this is a slippery slope because it could negatively impeded on Iranian economic growth or the protection of state and economic secrets. While punitive pressures maintain pressure, it can have the adverse effect of driving ever more complex and covert means to achieve goals by evading detection. The fact is that Iran has made multiple attempts in the past to do so in defiance of international calls. Alternate forms of soft power methods such as somehow creating additional incentives for Iran to comply to controls would beneficial.

    Chris Samson24 June 2014
  • Believe it or not, Iran may or may not be telling the truth! I know it sounds inconceivable, but evidence points to both sides of the coin. However, it IS evident that they are attempting to conceal dual-use items, which (when caught), should be made very transparent to the international community accompanied by a formal, documented request for explanation from the freight forwarders, host country, and end-user so as to truly highlight the reputational impact and its far reach. Whether further punishments are to be carried out would be a side-item to the impact of such testimony.

    As a culmination of much of the international press that Iran has endured due to their nuclear proliferation program, it is commendable that they publically made the “hinted at” concession to modify their heavy-water plant. To ensure this is followed through with, and as part of current sanctions, it seems worth pursuing to negotiate a timeline with Iranian diplomats to wind down /modify their plant in Arak over the course of an agreed upon number of years with milestones along the way. This would both ensure the safe(r) return to civilian purposes for the enrichment process, and have (financial, diplomatic, embargo-oriented, etc.) repercussions if the agreement were not adhered to. As part of this agreement, irregular monitoring of their facilities should be a staple. This would ensure they are not able to deceive the system put in place to prevent the proliferation of WMD.

    Although the question posed is whether Iran is hiding more dual-use items or undertaking less trafficking, it seems to me that the overarching question is why they would do either. Perhaps they ARE trafficking less, in which case we must consider the option that they may already have a great deal of the required technology for WMD proliferation, and that like the other case we watched, Iran is more in the quality control phase. Perhaps they are simply taking less conventional routes through suppliers (like Myanmar potentially acted with N. Korea) by unconventional land routes. There are many options, but at the end of the day, we simply do not know. Countermeasures for this kind of activity are very difficult to enforce. Perhaps this is part of the problem. In the import/export world, the majority of guidelines are designed with “punishment” in mind. One possible solution to retool the mindset of the industry and provide incentives to industry professionals who “go the extra mile” in monitoring their front and back end-users. It seems that right now, a company can only move down on the list of trusted companies…but why not incentivize them to move up? It would be difficult to diplomatically monitor countries’ export activities, but erecting a system in which the industry professionals themselves would have the two-fold potential benefit of ensuring both their compliance and their colleagues’. And again, this would encompass domestic changes in exporting legislation, freight forwarders, industry professionals, and the array of individuals and companies involved in the exporting microcosm.

    Brandon S25 June 2014
  • As was mentioned in one our lectures for this week, Iran lacks trust based on its own experience of having been attacked with WMD – chemical warfare – during its war with Iraq. How did Iraq develop this capacity – where did the type or warfare originate? Western science advanced this knowledge and know-how. Because the international community was slow to respond to the suffering of the Iranian people in this situation, they have felt the need to protect themselves.

    The same can be said of all of the nuclear powers. Actually, I heard this week from a friend in Paris that she was now being required to teach young children about the necessity of fighting in wars to defend their country!

    So, we need to do everything in our power to create a fair system and work strenously not only to control the flow of the materials to create WMD and also to build trust within the international community, supporting U.N. initiatives. Many people seem to have forgotten the actual results of WWI and WWII, and why countries with great ideological differences were able to sit down at the table to negotiate a future where such tragedies could be avoided. Our business communities and governments around the world must strengthen their commitment to this process – rather than contribute to mutual fear and paranoia.

    I agree with what Rizwan L. and Manuel M. say above that preventing the spreading of WMS:
    “is predicated on the strengthening of public-private partnerships — that is, closer collaboration between governments and private industry. All of the suggestions offered by Manuel Martinez above are right on point, and the principle underlying those ideas is that of encouraging and incentivizing private companies to elevate nonproliferation as a corporate principle, right on track with environmental responsibility. What if, in a given company’s annual shareholder report, that obligatory section that discusses how ethical and socially responsible the company is also mentions how the company is committed to preventing the spread of nuclear weapons? That is norm setting and norm enforcement — and if even one company that manufactures or distributes dual-use goods signs onto this principle and engages in “self-regulation,” a cascade will follow.”

    Valerie "Terry" Ellis25 June 2014
  • As was mentioned in one our lectures for this week, Iran lacks trust based on its own experience of having been attacked with WMD – chemical warfare – during its war with Iraq. How did Iraq develop this capacity – where did the type or warfare originate? Western science advanced this knowledge and know-how. Because the international community was slow to respond to the suffering of the Iranian people in this situation, they have felt the need to protect themselves.

    The same can be said of all of the nuclear powers. Actually, I heard this week from a friend in Paris that she was now being required to teach young children about the necessity of fighting in wars to defend their country!

    So, we need to do everything in our power to create a fair system and work strenously not only to control the flow of the materials to create WMD and also to build trust within the international community, supporting U.N. initiatives. Many people seem to have forgotten the actual results of WWI and WWII, and why countries with great ideological differences were able to sit down at the table to negotiate a future where such tragedies could be avoided. Our business communities and governments around the world must strengthen their commitment to this process – rather than contribute to mutual fear and paranoia.

    I agree with what Rizwan L. and Manuel M. say above that preventing the spreading of WMS:
    “is predicated on the strengthening of public-private partnerships — that is, closer collaboration between governments and private industry. All of the suggestions offered by Manuel Martinez above are right on point, and the principle underlying those ideas is that of encouraging and incentivizing private companies to elevate nonproliferation as a corporate principle, right on track with environmental responsibility.” I love the idea of encouraging companies to include their commitment to nonproliferation in their statements about ethical and socially responsible corporate behavior . Every company should include this – and this type of information should be included in every university business and finance degree program.

    Valerie "Terry" Ellis25 June 2014
  • Is there a way to edit our replies here! In the second version of my reply, I shortened the quote I gave from Rizwan commenting on Manuel’s reply, and summarized what I particularly agree with. Here’s what I said:

    I love the idea of encouraging companies to include their commitment to nonproliferation in their statements about ethical and socially responsible corporate behavior . Every company should include this – and this type of information should be included in every university business and finance degree program.

    Valerie "Terry" Ellis25 June 2014
  • I also want to second Bachlien’s statement that we appreciate the FIATA International Freight Forwarders Association issuing a notice to its members warning about “the increased use of counterfeit Bills of Lading in connection with shipments to and from Iran.”

    Valerie "Terry" Ellis25 June 2014
  • I believe the best way to prevent the illegal shipments, as described in the article, is to increase random inspections of transport ships and punishment for individuals caught trying to circumnavigate export control processes. This can be done through ensuring we have international agreements that clearly define the punishments for a transport being caught in international waters.

    Ashley26 June 2014
  • I’m going to dodge taking a strong position on this first question by suggesting that they are likely doing _both_: the amount of actual sanction circumvention has fallen since Rouhani took office, but they are also getting better at hiding it. We have to remember that the regime in Iran is not monolithic. There are many different factions. The Revolutionary Guard is likely doing everything it can to set up front companies to dodge the burdensome sanctions is faces. At the same time, the members of the regime most heavily involved in the P6+1 talks would likely want to have such smuggling slow down or come to a halt to avoid any embarrassing revelations during these delicate negotiations.

    How best to prevent diversion? One challenge is that there are many different players along the transaction chain ranging from front companies to freight forwarders, crooked customs officials, unwitting transhipment facilitators, etc. In addition to conducting outreach with freight forwarders, governments can also try to work with legitimate companies to put hidden tracking devices on shipments. Shipments of dual-use products could then be tracked as they made their way to the true end-user.

    Moyara2 July 2014

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