Shahed drones have been the iconic symbol of arms proliferation in recent years. Their spread, encompassing a geographic arc from the Red Sea to the Volga River, has also been one of the most consequential and instructive proliferation cases in the past decade. This report traces the history of Iran’s and, subsequently, Russia’s efforts to procure and mass-produce the German-designed engines that power Shahed suicide drones and the role played by Chinese investors in making those engines available to them. It then outlines the policy lessons that can be drawn from the engines’ proliferation and offers recommendations to prevent similar developments from occurring in the future.

Table of Contents

• Introduction: The Shahed-136 and Its Consequences
• How the Proliferation of the L550E Unfolded
  • Iran’s Early Illicit Procurement Efforts and Drone Development
  • The Takeover of Limbach and Iran’s Drone Dealings in China
  • The Ukraine War and Proliferation to Russia
  • Graphic Timeline
• Counterproliferation Lessons
  • Applying Aspects of Export Controls on Iran and Russia to China
  • Foreign Investment Screening for Common Dual-Use Goods Manufacturers
  • Secondary Sanctions for Parent and Sister Companies
• Network Map

Introduction: The Shahed-136 and Its Consequences

The Iranian-designed Shahed-136 suicide drone and its various knockoffs and close relatives[1] are not weapons of mass destruction (WMD) in the usual sense—they are cheap cruise missile substitutes that carry a conventional warhead less powerful than a standard 155mm artillery round[2]—but they have caused a massive amount of destruction. Iran used them to wreck Saudi Aramco oil facilities in 2019, reportedly halving Saudi Arabia’s oil output temporarily;[3] the Houthis have used them to attack commercial vessels in international waterways, sharply reducing trade through the Red Sea from late 2023 onward;[4] and Russia uses them almost nightly to terrorize Ukrainian cities and cripple Ukraine’s electricity grid.[5]

Although Shahed-136s were designed by Iran (specifically, by the Islamic Revolutionary Guard Corps (IRGC)’s Shahed Aviation Industries, from which they derive their name), they are not built from scratch with materials available in Iran, Russia, or Yemen. They require a supply of imported electronic components to power their sensors and navigation systems. Most importantly, they use a piece of Western technology to get in the air and fly: a Limbach 550E (L550E) piston engine designed by a small German aircraft motor company established in 1963.[6]

The circumstances by which first Iran and then Russia were able to acquire, copy, and then use the L550E for the large-scale production of Shahed-type drones show the growing importance of export controls on widely-traded dual-use goods (i.e., goods with both civilian and military applications), including controls on the transfer of knowledge necessary to make them. Crucially, the Limbach case also shows the need for those controls to have a geographic scope beyond just the end-use countries, the importance of screening foreign investments in firms that produce dual-use goods, and the imperative of holding the owners and affiliates of sanctions-evading companies to account.

While the Limbach proliferation case is complex and gaps remain in our knowledge of it, the basic outline becomes clear through an analysis of open sources: Proliferation of the L550E, and with it the Shahed-136, quietly ramped up in parallel with a Chinese company’s acquisition of the Limbach firm before bursting into the world’s view with Russia’s 2022 invasion of Ukraine, Tehran’s decision to supply Moscow with drones, and Russia’s successful push to mass produce its own version of the Shahed-136—with that Chinese company’s help.

An L550E engine amid wreckage of a Russian Geran-2 (Shahed-136) drone recovered in Kharkiv, Ukraine in 2023. (Photo Credit: Kharkiv Region Prosecutor’s Office)

How the Proliferation of the L550E Unfolded

Iran’s Early Illicit Procurement Efforts and Drone Development

Iran first showed an interest in Limbach’s engines in 2005-2006, when it likely illicitly acquired as many as 34 L550E engines through front companies in the Netherlands and Taiwan, according to leaked U.S. diplomatic cables. The State Department believed that Iran continued to seek L550Es through a United Arab Emirates-based front company in 2007-2008. The United States suspected that the engines were being sought for drone projects by state-owned aircraft producer Iran Aircraft Manufacturing Industries (HESA), and German authorities reportedly opened an investigation into Limbach Flugmotoren GmbH over the 2005-2006 exports. These early Iranian efforts followed a traditional illicit procurement pattern, with the intermediary companies falsifying export licensing documents and shipping the engines to Iran through third countries in the Middle East.[7]

In 2010, IRGC-linked Iranian drone entrepreneur Yousef Aboutalebi claimed to have reverse-engineered drone engines comparable to American, British, and German models.[8] By March 2011, his company, Mado, was advertising copies of the Limbach L550E and L275 engine models, which it labeled as MD550 and MD275, respectively.[9]

In February 2012, Ababil-3 reconnaissance drones produced by HESA began to be seen over Syria.[10] One that was downed by anti-Assad rebels in June 2013 contained what appeared to be the Mado MD550 copy of the L550E engine.[11] Their numbers were relatively few, however: according to open-source research, only 51 Ababil-3 sightings were reported in Syria between 2012 and 2013.[12] Because the Ababil-3 is a reusable platform, a smaller number of drones likely accounted for the sightings.

It was not until December 2014 that Iran displayed a delta-wing suicide drone resembling the later Shahed-136 and -131 models.[13] The drone then disappeared from public view for five more years, reemerging only in 2019. The reason for the lag is unclear, but it is possible that the supply of engines or other components was a constraint. A small fleet of reusable reconnaissance drones like the Ababil-3 could be maintained using the engines Iran had illicitly imported or with small-scale production of reverse-engineered copies as components became available. An effective arsenal of single-use drones like the Shahed-136 would require mass production based on a steady supply of inputs.

The Takeover of Limbach and Iran’s Drone Dealings in China

A corporate transaction in Germany began a process that may have helped free Iran of supply constraints and later enabled Russia to mass-produce Shahed-136 derivatives. Limbach Flugmotoren appears to have spent its first several decades as a family-owned business. In December 2011, however, the family sold the business to Shuide Chen,[14] a Germany-based businessman who hails originally from Xiamen, China.[15] A few months later, in May 2012, a company named Fujian Delong Aviation Technology was established in Xiamen. Its majority shareholder was (and remains) an individual named Congming Chen, and its board of directors includes several other people with the same surname.[16] In November 2012, Congming Chen established Xiamen Limbach Aircraft Engine Co. as a producer and distributor of Limbach engines in China.[17]

Another series of company registrations, seemingly unconnected, subsequently unfolded in Iran and China. In May 2013, Aboutalebi formally established Oje Parvaz Mado Nafar Company (Mado) in Iran. Its chairman was Abdollah Mehrabi, the commander of the IRGC Aerospace Force’s research and development unit.[18] By September 2013, Beijing Micropilot UAV Flight Control Systems, a Beijing-based drone company that had been in business since 2002, began to advertise MD550 and MD275 engines on its website,[19] reportedly making it the only company other than Mado to do so.[20]

In October 2013, Aboutalebi established a trading company in Hong Kong, Mado Import and Export Company, with help from a China-based individual named Ma Jie.[21] Then, in July 2014, Beijing Micropilot established its own branch in Hong Kong.[22] Iranian entities commonly use companies in Hong Kong to process payments for their transactions in China, circumventing U.S. financial sanctions on Iran.[23]

When the Shahed-136 precursor appeared in Iran in December 2014, however, there was no apparent thread connecting Limbach Flugmotoren, Fujian Delong Aviation, Xiamen Limbach, Beijing Micropilot, and Mado other than the sequential chronology of their corporate actions and the Limbach engines themselves. It seemed plausible—and remains possible—that Aboutalebi and Mado were successful enough in reverse-engineering the engines they had obtained in the early 2000s and establishing a domestic supply chain for needed components that they were able to produce more engines indigenously than their Iranian military clients needed, and that they were selling the surplus on the Chinese market through Beijing Micropilot primarily for profit.

Subsequent developments cast doubt on that scenario, however. First, in 2017, Fujian Delong Aviation acquired Limbach Flugmotoren outright, and Congming Chen kept Shuide Chen as the German company’s managing director.[24] The move clarified that Limbach was being run as a Chinese-owned family of companies under the direction of Congming Chen. It also meant that the supply chains and know-how necessary to produce Limbach engines likely were (and continue to be) shared between the German and Chinese branches of that corporate family.

Second, information recently published by the U.S. Treasury Department indicates that Mado has been buying engine-related goods from China, not just selling its own products there. According to the Treasury, Qian Xi Long Trading Co., a Hong Kong company founded in 2012 by Aboutalebi’s Chinese business partner and Mado fixer Ma Jie, received hundreds of thousands of dollars over the years from several apparent front companies based in Turkey[25]—a money-laundering tactic commonly used by Iran to pay its foreign suppliers.[26] Recently, Qian Xi Long Trading also sent more than $450,000 to another Hong Kong company to purchase aluminum alloy castings and spark plug caps, two items used for manufacturing engines.[27]

Third, an Emirati press report in 2020 claimed, citing intelligence reports, that Iran was smuggling drone engine technology to the Houthis from the city of Xiamen after Germany’s domestic intelligence service cracked down on illicit aircraft engine exports from Germany following an incident in 2015.[28] The report did not name the smugglers or their suppliers, but it is noteworthy that Limbach has had a presence in both Germany and Xiamen since 2012.

Meanwhile, Shahed suicide drones were making their debut. In September 2019, the Shahed-131 was used in the attack on Saudi oil facilities,[29] which was claimed by the Houthis but believed by the United States to have been orchestrated by Iran.[30] The Shahed-131 is smaller than the Shahed-136 and does not use a Limbach engine,[31] but the U.N. Panel of Experts on Yemen matched its debris to another Western-designed engine sold by Mado and Beijing Micropilot.[32] In March 2021, the Houthis displayed a Shahed-136 copy called Waid-2 at a military exhibit in Sana’a.[33] And in July 2021, Iran used a delta-wing suicide drone to attack the Israeli-linked ship MV Mercer Street in the Gulf of Oman.[34]

The available evidence does not prove that the Limbach family of companies sold engines or components to Mado or other Iranian entities, much less knowingly. Yet the circumstantial evidence indicates that Mado’s Chinese operations funneled engine-related goods to Iran from the Chinese market, where Limbach was an active player. Limbach’s owners knew that Iran had sought its products in the past, and—insofar as most businesses seek to secure their intellectual property and reputations as well as monitor their competition—it seems likely they would have known since at least 2013 or 2014 that Mado-branded copies of Limbach’s engines were being advertised in both Iran and China and used in Iranian military drones. That knowledge should have triggered precautions. But, as events in Eastern Europe would soon show, caution did not appear to be foremost on Congming Chen’s mind.

The Ukraine War and Proliferation to Russia

The Shahed-136 came into its own after Russia invaded Ukraine in 2022, and Xiamen Limbach was implicated in supplying L550E engines for it. Iran began to supply Russia with Shahed-136s in the fall of 2022 and helped Russian companies establish a factory to manufacture them in the Alabuga Special Economic Zone located on a tributary of the Volga River in the Russian region of Tatarstan. By mid-2023, the Alabuga plant was mass-producing Shahed-136 drones relabeled with the name Geran-2.

Iran’s role in Russia’s production declined over the course of 2023, and in the second half of that year Russia cut out the middleman and began to produce a Shahed-136 derivative called Garpiya with components sourced directly from China. Russian military-industrial company Izhevsk Electromechanical Plant Kupol (IEMZ Kupol), which oversees Garpiya drone production, purchased the necessary L550E engines from Xiamen Limbach using intermediaries in both China and Russia.[35] These suppliers, including Xiamen Limbach, were all sanctioned by the United States in October 2024 and by the European Union in December 2024.[36] Notably, in its justification for listing Xiamen Limbach, the European Union said it suspects the company of having shared the L550 design with entities involved in producing Shahed-136 engines.[37]

The proliferation of Limbach engines did not end with Russia. Since the October 7, 2023, Hamas terrorist attack on Israel and the ensuing Israel-Hamas war, the Houthis have frequently used Shahed-136 drones to attack commercial ships transiting the Red Sea.[38] In addition, the U.N. Panel of Experts on Yemen identified a Limbach L275 engine produced by Mado that was recovered from a Houthi drone used to strike Tel Aviv in 2024.[39]

Graphic Timeline

Credit: Wisconsin Project. Click the image to open an enlarged version in a new tab.

Counterproliferation Lessons

The Limbach engine proliferation case involved parallel developments unfolding on two continents over two decades, but its basic outline is nonetheless clear. A German company whose dual-use goods were already being sought by Iran was acquired by a Chinese firm, at first through a Germany-based businessman with connections to China and then outright. In parallel, Iran scaled up its use of the company’s engine models in its military drones, which it proliferated to the Houthis and Russia. When Russia cut out the Iranian middleman, Limbach’s Chinese owners were seemingly willing to oblige it by selling engines to the Russian end user from their Xiamen branch.

By the time that Chinese branch was sanctioned in 2024, the cat was out of the bag. Xiamen Limbach presumably has the designs and knowledge it needs to continue producing the L550E and other engines in China despite sanctions, and Mado may have the ability to manufacture the engines independently in Iran, too (i.e., without relying heavily on components imported from China or elsewhere). The important questions, then, are whether the proliferation of Limbach engines could have been prevented in the first place and how to prevent a similar leak of Western dual-use technology in the future.

The engines’ proliferation at scale, likely beginning sometime between 2013 and 2017, seems to have been driven by two interlinked methods that went beyond traditional smuggling: foreign investment resulting in the acquisition of the German company by a Chinese buyer and, correspondingly, the transfer of technology, some of it likely in the form of knowledge, that enabled the engines and their parts to be produced in China and possibly in Iran.

Limbach’s products were not cutting-edge technology and would not have been considered highly sensitive for export to China in the 2010s. Shuide Chen’s 2011 purchase of Limbach Flugmotoren may not have raised any red flags. However, Fujian Delong Aviation’s subsequent acquisition of the company in 2017 should have raised some, namely Iran’s past efforts to illicitly acquire L550E engines and the appearance of Mado-branded copies of those engines on the Chinese market in 2013.

Today, the case for intervening in such a transaction is clearer. China is increasingly aligned with Russia and Iran and is a major conduit of dual-use goods to them; the risks of intangible technology transfers (ITT) are more widely appreciated and more tightly controlled; and goods that are below traditional export control thresholds are now understood to pose proliferation risks. There are useful lessons to be learned and policy steps that could be taken to lower the odds of a repeat of the Limbach engine scenario.

Applying Aspects of Export Controls on Iran and Russia to China

The first takeaway is not unique to the Limbach case. It is that no export control regime aimed to obstruct the acquisition of dual-use goods by Iran or Russia can be effective unless it also controls the export of those goods to China. How to do so without a decoupling of the Chinese and Western economies is a difficult question with inevitable economic and security tradeoffs.

A February Iran Watch report offers a proposal for a modified Destination of Diversion Concern designation that would impose licensing requirements for exports of dual-use goods to Chinese companies that meet criteria associated with common red flags for export control violations, such as a recent registration date or being a sole proprietorship. The first requirement, for instance, would have brought Xiamen Limbach under scrutiny had it sought to import engines from Limbach Flugmotoren shortly following its establishment in late 2012. That may not ultimately have prevented Xiamen Limbach from producing L550E engines in China, but it may have delayed it—as well as Iran’s Shahed drone development and/or production timelines.

Foreign Investment Screening for Common Dual-Use Goods Manufacturers

The second lesson is that, as the European Commission has stated, “Investment screening complements dual-use export control.”[40] This is particularly true for controlling intangible technology transfers. Once a company has been acquired by a foreign owner, it is difficult to prevent its knowledge from being shared with the parent company or sister companies abroad.

The European Union’s foreign investment review system is a patchwork, however. The European Commission cannot approve or disapprove investments, though it can make a recommendation after being notified by national authorities.[41] National-level review systems vary. As of October, Croatia, Cyprus, and Greece had no foreign investment screening mechanism in place.[42] Some countries such as Portugal have a system in place but have rarely if ever used it to block a transaction, while others such as France have relatively active screening mechanisms.[43] The European Commission has proposed an updated regulation to ensure that all member states have a screening mechanism that adheres to a common minimum scope for triggering a review.[44]

The United States, on the other hand, has a well-established foreign investment review process led by the Committee on Foreign Investment in the United States (CFIUS). Preventing risky exports and technology transfers out of the country is only one part of the screening process, which places heavy emphasis on securing U.S. supply chains from disruption. Current policy regarding the risk of outbound transfers focuses on capabilities and technologies that “are fundamental to United States technological leadership” such as high-end microelectronics, artificial intelligence, biotech, and quantum computing.[45]

In 2023, both the European Union and the United States expanded their export control regimes for Iran and Russia to include common, lower-tech items that are mainly produced in the West but which the two targeted countries have sought for use in missiles and drones. These categories of goods—which include items such as aircraft engines, avionics, ball bearings, electronic chip components, and machine tools—are specified on three overlapping lists: the U.S. Commerce Department’s list of items covered by its Iran Foreign Direct Product (FDP) Rule,[46] the European Union’s annex of drone-related goods prohibited for export to Iran,[47] and the jointly-developed Common High Priority List (CHPL) of items sought by Russia for military use.[48]

Implementation of these controls on shipments has proven challenging given the high volume at which the listed goods are traded. Screening foreign investments in the U.S. and European companies that manufacture the listed goods may prove to be a more easily achievable task. Doing so would increase the likelihood that leading manufacturers of those dual-use items continue to be owned and controlled in the West. Such a state of affairs, even with a leaky system for preventing shipments from being diverted to Iran or Russia, would be preferable to a scenario in which companies in Iran, Russia, or China are able to produce those goods at scale and quality and then ship them wherever they wish, as now appears to be the case with Limbach engines.

The United States and the European Union could modify their screening guidance so that foreign investment in companies manufacturing goods contained on the abovementioned lists triggers the review process. The European Commission could achieve this outcome by modifying the annex of technologies in its proposed investment screening regulation to include the items listed in Annex II to Regulation (EU) 2023/1529 (the EU’s list of goods used for Iranian drones) and on the CHPL.[49] In the United States, the result could likely be achieved through an executive order directing CFIUS to review foreign investments in manufacturers of goods listed on the CHPL or the Iran FDP Rule list.[50]

The existence of such a requirement in 2011 may not have prevented the purchase of Limbach Flugmotoren by Shuide Chen (it is unclear whether he was a German citizen or a Chinese national at the time), but it would have brought greater scrutiny to the company’s takeover by China-based Fujian Delong Aviation in 2017.

Secondary Sanctions for Parent and Sister Companies

The third lesson is that there may be situations in which it is necessary to sanction upwards or laterally within a corporate family—i.e., to target the parent or sister companies of an entity that has carried out sanctionable behavior—in order to deter a company’s ultimate beneficiaries from violating sanctions or export controls.[51]

Although Xiamen Limbach has had its assets frozen by both the European Union and the United States, Congming Chen and Fujian Delong Aviation remain unsanctioned. That is despite the fact that Mr. Chen controls Xiamen Limbach—not merely as its ultimate beneficiary, but also as its chairman, executive director, and manager.[52] Moreover, Limbach Flugmotoren appears to be continuing operations despite Congming Chen’s continued role as its ultimate beneficiary and his connection to Xiamen Limbach’s violation of E.U. sanctions on Russia.

This seems to be a light penalty given the scale of Russia’s proliferation of Shahed-type drones.  On its own, it would be unlikely to deter Congming Chen from selling engines to Russia (or to Iran or the Houthis), and he already has an unsanctioned vehicle with which to continue doing so: Fujian Delong Aviation set up another Limbach-branded company in the Chinese city of Xi’an, Xi’an Limbach Aircraft Engine Co., shortly before Xiamen Limbach was sanctioned last year.[53]

Both the European Union and the United States have legal authorities to designate the owners and affiliates of entities that have engaged in sanctionable behavior. The European Union maintains the authority to freeze the assets of legal persons “associated” with entities supporting Iran’s drone program,[54] which ought to encompass Congming Chen and Fujian Delong Aviation through their connection with Xiamen Limbach. The United States reserves the authority to designate entities that have materially assisted a sanctioned entity.[55]

When applying financial sanctions is not an option, the United States and the European Union’s member states can avail themselves of legal avenues to force the divestment of or impose oversight on foreign owners implicated in sanctions or export control evasion. The United States has statutory grounds to seek divestment through its courts when foreign owners of a U.S.-based entity might take action that threatens U.S. national security.[56] Some E.U. member states, including Germany and the Netherlands, have similar provisions in their laws.[57] In September, for instance, the Dutch government took control of the microchip producer Nexperia due to its concerns about Nexperia’s Chinese parent company, Wingtech, which the U.S. Commerce Department had earlier placed on its Entity List for “aiding China's government's efforts to acquire entities with sensitive semiconductor manufacturing capability.”[58] The United Kingdom had previously ordered Wingtech to divest from a facility in Britain.[59]

Should the U.S. and E.U. authorities learn that companies controlled by Congming Chen are continuing to circumvent sanctions or export controls, they should make use of those options. Sanctioning Fujian Delong Aviation and compelling its divestment from Limbach Flugmotoren would not put the cat back in the bag in the Shahed-136 engine case, but it would serve as a potent warning for other companies that are thinking of pulling open the strings.

Network Map

Credit: Wisconsin Project. Click here to open an enlarged version of the network map in a new tab.