- Policy Briefs
Mentioned Suspect Entities & Suppliers:
On May 9, a senior Iranian defense official announced the recent test of "a missile with a range of 2,000 kilometers and a margin of error of 8 meters." Iran's defense minister quickly refuted the specifics of this claim, but not the test itself. This appears to be the latest in a series of Iranian missile tests since last October, all of which are considered by Western officials to be "in defiance of" a new U.N. Security Council resolution that took effect on January 16— the same day as the nuclear agreement.
The response to such activity should be more sanctions aimed at Iran's missile program. New sanctions, unfortunately, will not be forthcoming from the United Nations, where they would have the broadest impact. The new resolution is more permissive in its treatment of Iran's ballistic missile activity than previous resolutions addressing the country’s missile program. Instead, it will be up to the United States and other concerned countries to respond. These sanctions should target not only Iranian entities supporting the missile program, but, more critically, Iran's extensive network of foreign suppliers.
Since the nuclear agreement took effect, however, only the United States has taken—limited—action against these illicit procurement networks. In January, a handful of companies and individuals operating in Hong Kong and the United Arab Emirates were blacklisted for supplying material and equipment related to carbon fiber production to Iran's Navid Composite Materials Company. These transfers took place "since at least early 2015," according to the U.S. Treasury Department. Navid Composite is a subsidiary of U.N.-sanctioned Sanam Industrial Group and carbon fiber can be used in ballistic missile components. In March, the U.S. Commerce Department targeted a global network of companies supplying U.S.-origin items to "an Iranian party associated with the Iranian Defense Industry." This network operated in Hong Kong and U.A.E., but also in India, Malaysia, the Netherlands, Singapore, and Switzerland.
A focus on Iran's illicit network of foreign suppliers will be critical going forward. Iran remains dependent on imports to improve the range and accuracy of its missiles. And the new U.N. resolution maintains restrictions on Iranian imports of missile and missile dual-use technology for a period of eight years. But while dozens of Iranian missile developers remain on the U.N. blacklist, none of Iran's foreign suppliers are listed. The United Nations has never targeted these suppliers and is even less likely to do so now. Most of these suppliers are not well known and could continue to operate in the absence of robust national enforcement. National sanctions would help expose these networks, raise their transaction costs, and complicate their operations.
The case of Li Fang Wei (Karl Lee) is an example of the value—and limitations—of such national action. His infamous case is an illuminating study of how the illicit procurement networks that have supplied Iran’s weapons program operate in practice. Since at least the early 2000s, he has run a cluster of companies located in Dalian, a port city in northeastern China. At first, Li traded with Iran using his own company, LIMMT Metallurgy and Minerals Company, or one of the firm’s many aliases. As he came under greater scrutiny, Li shifted tactics. He began to establish waves of front companies in China to help carry out transactions, moving on to a fresh set of companies whenever the previous batch came onto the radar of the U.S. government.
In response, Li has been heavily and repeatedly sanctioned by the United States. He was indicted twice, in 2009 and 2014, for his fraudulent use of the U.S. financial system in carrying out sales to Iran. He is also the subject of a $5 million reward for information leading to his arrest, a rarity in the proliferation/export control world. And he has been under continual U.S. State and Treasury Department sanctions for a number of years, with the most recent round of State sanctions coming in September 2015. But in the absence of action from the Chinese government to shut down individuals like Li and his network, they can continue to operate with relative impunity.
Li’s assistance to Iran’s missile program has been considerable, and reveals Iran's reliance on foreign goods. The list of missile-related items he has supplied, or attempted to supply, includes accelerometers, gyroscopes, high-grade aluminum alloys, maraging steel rods, tungsten metal powder, tungsten-copper alloy plates, and graphite cylinders. Equally troubling has been his customer list in Iran: subsidiaries of Defense Industries Organization (DIO) that are directly involved in missile development, including Khorasan Metallurgy Industries, Amin Industrial Group, Shahid Sayyade Shirazi Industries, and Yazd Metallurgy Industries. Li has also done business with Shahid Bagheri Industrial Group, Iran’s key developer of solid-fueled ballistic missiles. All of the above-mentioned entities are still sanctioned by the United Nations, because of their involvement in Iran’s missile program.
Iranian officials have made clear that they will not stop missile work as a result of the nuclear agreement. This means not only the continuation of high-profile tests, but Iran's continued reliance on foreign procurement networks that support missile development. In the absence of new U.N. sanctions—or a vigorous oversight body like the now-disbanded U.N. Panel of Experts to investigate violations—it will be up to governments to investigate procurement networks and punish key suppliers, like Li. This is especially important in the post-agreement environment, when trade with Iran is expected to flow more freely than it has in recent years.
 "Commander Says Iran Tests 2000km-Range Ballistic Missile," Tasnim News, May 9, 2016, https://www.tasnimnews.com/en/news/2016/05/09/1070472/commander-says-iran-tests-2000km-range-ballistic-missile
 "Iranian DM Denies Test-Firing of Ballistic Missile," Fars News, May 9, 2016, http://en.farsnews.com/newstext.aspx?nn=13950220001309