Suspicious Iranian Dealings Could Imperil Nuclear Agreement

U.S. intelligence agencies and their international partners are seeing a flurry of inquiries by Iran about importing potentially sensitive technologies controlled by last year’s nuclear deal – but outside of channels specifically set up to vet these goods, according to officials and experts.

Despite the activity by Iranian nationals — some of them identified as smugglers — in the nearly ten months since the agreement began implementation, not a single sales proposal is known to have gone through the nuclear deal’s Joint Commission and its Procurement Working Group, as the deal requires. It’s eerily quiet.

Political fodder

But the volume is rising on intel chatter about Tehran’s nuclear-related technology inquiries in Europe and China.

Interpretations of the new intelligence vary. Those who oppose the July 2015 agreement are quick to label ambiguous trade activity as evidence that Iran has not relinquished its long-term nuclear arms ambitions.

Deal proponents tend to be more forgiving, saying no evidence has surfaced of any illicit Iranian procurement since January, when the arrangement entered into force.

As Republican Donald Trump assumes the presidency, the intelligence about Iran’s ambiguous contacts is sure to become political fodder. Trump accused the Obama White House and his election opponent, Democrat Hillary Clinton, of being soft on Iran.

The outgoing president’s critics have charged that he and U.S. allies are so invested in the signature deal’s success that they’ve been willing to overlook what may be Iran’s early violations. During the campaign, Clinton was under pressure to pledge stricter enforcement of the pact’s terms.

A “disastrous” deal

Trump has vowed to “renegotiate” what he has called a “disastrous” deal, but has not yet offered a clear vision for how to prevent Iran from developing a turnkey bomb capability.

Backing out of the United Nations-sponsored pact could alienate Washington’s partners in the negotiations, and even have little effect on reversing U.S. sanctions, many of which have yet to be lifted.

Experts largely agree that scrapping the deal entirely would be a win for Iranian hard-liners, and could spell doom for moderates in Iran’s May 2017 presidential election.

During the campaign, Trump also made contradictory statements about the deal, complaining that sanctions have prevented U.S. companies from doing business in Iran. He said in August 2015 that rather than “rip up” the agreement, he would “police that contract so tough they don’t have a chance.”

Relief from economic sanctions

Under the deal, the so-called P5+1 nations offered Iran significant relief from economic sanctions and trade restrictions, in exchange for capping a wide array of the nation’s nuclear activities. Iran can acquire civil nuclear technologies or dual-use items, but only with the approval of multinational oversight bodies.

Those involved in the negotiations say the road to implementation was bound to be bumpy, as Iran expands the legitimate import of goods for its growing economy. They also urge restraint in response to mixed signals from opposing power factions inside Iran.

Yet, nobody outside of Tehran seems to know for certain why Iran and its would-be supplier nations have not yet fully used the nuclear deal’s so-called “procurement channel.”

Will Iran bypass the agreed process in a bid to obtain technologies that would have little chance of winning the oversight bodies’ approval? Or is it just too early in the agreement’s implementation to expect these vetting processes to begin?

Thus far, Iran’s P5+1 interlocutors — China, France, Germany, Great Britain, Russia and the United States — are watching quietly with no public comment.

Compounding the problem: The United Nations hasn’t yet hired a planned team of up to 11 deal-enforcement personnel, including four investigators.

Even after the team is formed early next year, as expected, it is “not yet clear on what basis they will be able to undertake investigations,” said Ian Stewart, until recently a UK defense ministry official.

Carbon fiber and centrifuge rotors

A scant few details about Iran’s explorations of sensitive imports have come to light publicly since January 16, the day the nuclear deal got started.

Meetings of the Joint Commission and its subgroups are held privately. A European Union spokesperson for the panels last month wouldn’t say whether any newly pending Iranian nuclear or dual-use deals had been discussed.

In July, a Washington-based think tank found that Iran’s Atomic Energy Organization had pursued purchasing tons of carbon fiber, a dual-use material applicable to making advanced centrifuge rotors for enriching uranium.

Their report says the contacted supplier and its government — which the New York Times identified as Germany — denied the Iranian request before the nuclear deal’s review panels could consider it.

It has not yet been revealed which other sensitive technologies Iranians are currently scouting in the global marketplace. Dual-use goods can include industrial components like valves, pressure sensors or electrical systems, all capable of playing a role either in banned nuclear processes or legitimate enterprises, like manufacturing, scientific research or medicine.

If manufactured to high-quality standards, these items can raise red flags for their potential application to any covert nuclear projects. At the same time, Iran might justifiably be expected to seek advanced technologies as it expands future oil and gas production.

The China connection

The same Washington think tank, the Institute for Science and International Security, also revealed in July that several Iranian entities that had previously been sanctioned for supporting Tehran’s illicit nuclear programs are “now very active in procuring goods in China.”

These organizations — some of which produce or buy aluminum, steel or other raw materials — were taken off sanctions lists when the Iran deal was put into practice this year.

David Albright and Andrea Stricker, who co-authored both reports, said “their resurgence in China warrants special scrutiny and concern” because “many of these formerly sanctioned entities are well versed in making illicit procurements.”

It may be a challenge to get Chinese and other prospective industrial exporters — many of which are unfamiliar with Iran-accord requirements and only loosely regulated — to voluntarily step forward and report their proposals to international authorities.

One transfer proposal for a temporary exhibit of dual-use items was submitted earlier this year, but withdrawn before it could be considered, according to a UN report in July.

Still, the Procurement Working Group’s long-empty agenda has defied early expectations. Supporters have been eager to prove out the Iran deal’s functionality, and demonstrate that legitimate trade with the Persian Gulf nation offers global economic and security benefits.

A “cultural problem”

Deal skeptics experts had earlier imagined Iran would deluge the oversight body with more proposed dual-use tech sales than it could easily handle, perhaps slipping some items with military uses more easily past international scrutiny, according to Albright, his think tank’s executive director.

He attributes the submissions lag in part to “a cultural problem”: an Iranian economy built largely around years of sanctions. To meet demand for imported goods, Iran’s marketplace relied heavily on “committed smugglers,” Albright said in an interview. “They have all sorts of networks set up all over the world.”

It would take Iran a while to reconfigure its economy and adjust to the new and slower import-review processes, according to Albright and others.

Over the summer, Iran created a process for issuing end-user certifications that could help the international bodies differentiate between valid and prohibited technology-transfer proposals.

During the deal negotiations, the P5+1 nations demanded end-user licensing “to prevent Iran from being able to say that it did not have knowledge of import, should [the] goods subsequently be diverted,” said Stewart, who leads Project Alpha, a European Union-affiliated effort to help implement export controls and counter illicit trade, at King’s College London.

“I think it’s fair to say that the [procurement] channel has so far been used less than was anticipated,” he said.

While Iran’s administrative sluggishness has played a role in delaying the procurement review process, so has “hesitancy in the financial sector,” Stewart said. The deal relies on foreign investment as an incentive for Iranian compliance with the nuclear-related restrictions.

Unfair competition?

Concerns about unfair competition also are discouraging proposal submissions, Albright said.

Business executives have complained recently that if they submit a proposal to supply X goods to Iran at Y price, nothing in the nuclear agreement prevents P5+1 members of the Procurement Working Group from tipping off other manufacturers, despite UN guidance assuring confidentiality.

Alternative suppliers might exploit proprietary information to pounce on a competitive opportunity, undercutting a pending deal by offering Iran better terms.

“This whole secrecy thing wasn’t thought through…. If someone violates the [review panel’s] secrecy, there’s [no penalty] called for at all,” Albright said. “But if they make everything secret, that’s also not workable.”

Likewise, the agreement’s option for a rapid “snapback” to full sanctions in the event of an unresolved suspected violation is having a dampening effect on some of Iran’s prospective trade partners.

Global suppliers and Iran’s potential financiers have been skittish about negotiating transactions until they have greater confidence in the regime’s intentions and the country’s economic stability.

Bad actors or profiteers

In planning for how the agreement would be carried out, “I don’t think enough thought has been given to bringing a country [reliant] on the smuggling into the legitimate marketplace,” Albright said.

“I’m always concerned about bad actors or profiteers … trying to exploit a situation for their own ends,” Army General Joseph Votel, the commander of U.S. forces in the Middle East, told The Globalist in a brief July interview. Bad actors, Votel said, don’t share “the values that we would expect [of], and that are associated with, state actors.”

To make a profit, any seller needs a buyer. Here the buyer may be a state actor.

Continued Iranian smuggling may imply there are interested parties in Iran with the cash and desire to restart the nation’s fizzled nuclear arms program. Enter the elite Islamic Revolutionary Guard Corps or “IRGC” — hard-liners who oppose Western influences on Iran and almost certainly aim to derail the nuclear deal.

“It is fully within the competency of the IRGC to do it and want to do it,” said Richard Nephew, who until last year was the U.S. State Department’s principal deputy coordinator for sanctions policy. “We have seen for years and years people who look like freelancers, but for all intents and purposes are agents of the Iranian government.”

The Iranian compliance question

Mark Dubowitz, executive director of the Foundation for Defense of Democracies and an Iran-deal detractor, does not see in the nuclear deal any evolution in Iranian intentions.

In July congressional testimony, he cited “serious concerns about Iran’s ongoing illicit procurement and the U.S. and international community’s failure to hold Iran accountable for its illegal activities.”

But deal backers suggest such statements are inflammatory and not backed up by evidence.

Nephew told The Globalist that “no real, rock-solid indications” have emerged of Iran attempting to acquire goods for banned nuclear activities. Stewart echoed that he is “not aware of any prohibited nuclear-related procurements that have taken place illicitly outside of the channel.”

If critics of the agreement cry foul on virtually any Iranian compliance question, no matter how minor, the snapback provision could make scrapping the deal a self-fulfilling prophecy.

“It is absolutely expected and probably true that there are people in Iran seeking dual-use technologies that are nuclear-related,” said Nephew, who was the lead sanctions expert on the U.S. team that negotiated the deal.

“There are lots of different goods that have reasonable civil applications. There are lots of goods that don’t,” he said in an interview.

Sorting one from the other, Nephew said, “was always going to be the biggest challenge” in implementing the Iran deal, known formally as the Joint Comprehensive Plan of Action or JCPOA.

Smoke, yes, but fire?

Under the agreement terms, neither a prospective seller nor Iran must notify the procurement panel until a formal technology is ready for acquisition. Initial inquiries and discussions may legitimately proceed for months or even years without Procurement Working Group involvement.

So while some Iran-watchers think they see smoke, it’s not clear there’s any fire. Western intelligence may have detected suspicious activity well before any requirement kicked in for an Iran-supplier nation to report to the international bodies that oversee deal implementation.

But Dubowitz has called the provision to review potential dual-use transfers only after a proposal is submitted a “fatal flaw.”

“As the JCPOA is structured, Iran could continue its attempts to procure [nuclear or dual-use] goods illegally, but until it succeeds in acquiring a good and then is caught with the illegal item, the P5+1 are unlikely to count the incident as a violation,” he said in a July report co-authored with Annie Fixler.

Iran has long been accused of playing a double game: Embracing limited reforms on the one hand and hedging its bets on the other.

Despite the continued influence of Iranian hardliners, no evidence has emerged since the deal was struck indicating that Iran’s leaders condone any technology procurement for banned nuclear activities, according to several Western officials and issue experts.

A matter of control

Iranian Supreme Leader Ali Khamenei has backed President Hassan Rouhani’s gambit to negotiate and implement the deal. Even assuming the best of intentions, though, these leaders may be unable to prevent every single activity the JCPOA pact prohibits.

“I always thought we’d come across officials in the procurement field [who were] instructed to do something prior to January 16, 2016,” said Nephew, now on the faculty of Columbia University.

Deep inside the Iranian bureaucracy, he said, a few apparatchiks may be implementing outdated orders — essentially on autopilot.

Stewart also thinks “it’s inevitable that dual-use goods will be inadvertently exported to Iran without the required authorizations. There needs to be a program of enforcement, awareness-raising and outreach to minimize and respond to such cases,” he said.

In fact, some new signs suggest that import proposals may finally be entering the review pipeline.

“I understand that cases are beginning to work their way through the procurement channel process,” Stewart said this week. “But I am unaware what stage these cases are at or whether the cases have been approved or otherwise.”

A reporter’s renewed inquiries to the responsible EU and UN bodies over the past week have gone unanswered.

In a bad, fuzzy space

Until the implementation processes further coalesce and Trump takes office, Western intelligence agencies may have few alternatives but to quietly monitor signs of what may turn out to be illicit trafficking.

Before the U.S. presidential election, Nephew told The Globalist “we may be in this bad, fuzzy space for a long time.”

Following Trump’s victory at the polls, though, the former Obama administration official said the president-elect’s past statements about attacking Iran could actually hasten Tehran’s clandestine efforts to acquire whatever technologies it sees as necessary for its defense.

“I think we will see attempted procurements contrary to the JCPOA as a hedge against the kind of rhetoric and suggestions that Trump made while running for president,” Nephew said in an interview late this week. “Iranian procurement people know U.S. sanctions can really complicate their lives, and they may try to get ahead of that.

“It’s not certain that they will,” he added. “But it wouldn’t surprise me if they did.”

Editor’s note: This article was independently reported with partial funding support from a Ploughshares Fund journalism grant.