Thursday, June 27, 2013

How Iranian Procurement Agents Dodge US Sanctions

How Iranian Procurement Agents Dodge US Sanctions


Since 2010, U.S. sanctions have aggressively targeted Iran’s technological efforts to advance its nuclear program. But while hundreds of companies are under U.S. sanctions, Iranian front companies are still operating undisturbed.

How could this be? In many instances, the companies are targeted but their management is not. So, when hit by sanctions, Iranian procurement agents close shop and open new companies.

Take, for example, the story of Mr Asghar Shori Khosroshahi. He is the current managing director of Irex International, a company established in Düsseldorf, Germany, in late 2009.
Officially, Irex is an import-export company for the car industry. Company papers describe Irex International as Ezam Group’s branch in Germany – and link it to Harrington Automotive, a Dubai-based company transshipping automobile spare parts to Iran. The company’s legal address is with a prestigious office service provider – its shiny plaque nestled inconspicuously among dozens of others in Düsseldorf’s elegant shopping arcade, the Kö Galerie.

A closer look reveals that the company’s main shareholder is Abbas Iravani, a car industry captain who chairs the Ezam Group in Iran, an Islamic art magnate, and a close confidant of Iran’s former President, Ali Akbar Hashemi Rafsanjani. Mr Khosroshahi is a minority shareholder and the only member of the company board to reside in Germany.

Mr Khosroshahi is also an important link between several banned Iranian companies.

Last month, President’s Obama’s Treasury Department blacklisted Iran’s automotive sector with new sanctions due to its role in Iran’s proliferation efforts. A few days later, the Treasury sanctioned and exposed a broad network of companies operating in Germany, Croatia, Dubai and Iran, which are controlled by the office of Iran’s Supreme Leader, Ayatollah Ali Khamenei.

Company records show that Mr Khosroshahi sat on the board of Iran’s largest car-maker, Iran Khodro, in the early 1990s. In 1996, he was dispatched to London to manage Khodro’s local branch – IKCO Finance LTD. Within a year, he was in Düsseldorf, where he remained associated with IKCO Trading, until 2010.

Meanwhile, Khosroshahi also served as managing director (2003-2009) for MCS International, which was banned for its ties to Iran’s ministry of intelligence. Khosroshahi also worked for Croatia’s Cylinder System (CSC), a company banned last week by Washington, which still lists him as its general manager.

There is no concrete evidence that Irex International is up to mischief. However, there are plenty of reasons to be concerned. The parent company Ezam’s main client is Iran Khodro – they account for 74 percent of Ezam’s sales.

Interestingly, the company launched a new website in early April 2013, advertising itself as the ”leading world manufacturer of custom built hydraulic cylinders” since 1974, which is odd, considering that the company was incorporated only in 2009. A closer look also reveals that the website is a masterpiece in plagiarism – it is an edited copy of the website for Hyco Alabama, an American producer of hydraulic cylinders used in the car industry. Hyco Alabama belongs to a global group of companies headquartered in Germany. Both Hyco and its parent company, Weber Hydraulik, were unaware of the plagiarism and did not appear to have given prior consent to such use.

The exact role of Mr. Khosroshahi in all of this is still unclear, not to mention the many companies with which he has become associated. However, there is reason to suspect that he fits the description of an Iranian procurement agent.

Whether he does it will be subject to the discretion of the U.S. Treasury. In the meantime, Khosoroshahi’s story is a reminder that sanctioning companies alone is insufficient. Washington can redress this shortcoming by expanding sanctions to target both companies and their managers. After all, companies could not assist Iran’s proliferation networks without the senior managers who sign off on their purchases of dual-use and banned materials.

Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies, where Mark Dubowitz is the executive director.
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Bee's Note:

May 13, 2013 Iran’s Golden Loophole By Gary Clark, Rachel Ziemba Iran is exploiting loopholes in U.S. sanctions laws to obtain gold to replenish its FX reserves. These are its principal hedge against a severe Balance of payments crisis, and thereby help the country withstand international pressure Over its nuclear program.