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Archive for the ‘Iran Sanctions’ Category

Apr

28

The ICE Repo Man Cometh

Posted by Clif Burns at 6:53 pm on April 28, 2010

Ice Agent A court battle raging between Italian company Tiber Aviation s.r.l. and Bell Helicopter Textron Inc. turns on whether Tiber was actually intending to ship a helicopter to Iran or whether Bell told that story to a special agent of the Bureau of Industry and Security (“BIS”) in order to secure the government’s help in repossessing the helicopter. The latest chapter in the saga occurred earlier this month when ICE agents formally seized the helicopter in question.

According to a complaint filed by Tiber against Bell in a federal court in Texas, Tiber purchased three helicopters from Mexico-based Helicopteros y Vechiculos Aereas Nacionales (“Helivan”) for $22 million. Two of the helicopters were shipped directly from Mexico to Italy, while the third was sent to the U.S. to be taken apart and shipped to Italy after Tiber discovered that this was a cheaper method of getting the helicopter to Italy. Although Helivan purported to sell the helicopters with clear title, Bell asserts that they were financed under a lease agreement to Helivan and that Bell still had title to the helicopters, including the one still in Texas. According to Tiber, that interest was not properly recorded by Bell.

Tiber alleges that rather than seeking to exercise its claimed interest as owner of the helicopter, Bell took a more novel approach to repossessing the aircraft — namely, that Bell went to the field office of BIS in Dallas and alleged that Tiber was planning to ship the helicopters to Iran. Shortly therafter Bell and a BIS special agent went to the facility of United Rotocraft, where the helicopter was awaiting disassembly, and told United Rotocraft that the helicopter was being seized, whereupon they all got into the helicopter and flew it off to a hangar in Arlington, Texas. For its part, Tiber denies that it intended to ship the helicopter to Iran and, resorting to some colorful language in the complaint, compares Bell to a schoolyard bully stealing Tiber’s lunch money. (Since the helicopter is worth around $7-8 million, that was obviously money for a pretty big lunch.)

Bell, of course, denies in the answer and counterclaim that it filed in the Texas court, that it was trying to steal Tiber’s helicopter or even Tiber’s lunch money claiming, first, that it had validly recorded its interest in the helicopter and therefore still owned it. But Bell also admits that it went to BIS to allege that the helicopter was destined for Iran, although once it spoke with BIS it learned that the helicopter was already subject to an ongoing investigation by BIS. Bell says that it learned that the helicopter was destined for Iran from an unidentifed source that informed Bell that a Helivan mechanic was in Iran providing training and maintenance on the other two helicopters.

Far be it from me to speculate as to who is telling the truth here. The only thing I can say with certainty here is that $8 million dollars would buy several tons of school cafeteria mac and cheese.

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Apr

27

U.S. Seeks to Extradite German for Iran Shipments

Posted by Clif Burns at 7:45 pm on April 27, 2010

Three Flags A recent article in today’s international edition of Der Spiegel reports on an interesting analogue, in Germany, to the Majid Kakavand case in France. Just as the court in France seems likely to deny the request by the U.S. for extradition, the German court has already refused a U.S. request to arrest a German citizen for allegedly illegal shipments from Germany to Iran by way of Malaysia.

U.S. investigators have been trying to get Germany to arrest and extradite a German citizen who allegedly belongs to a network smuggling U.S. electronic components to Iran to be used in roadside bombs in Iraq and Afghanistan. But a German court is blocking the move.

The case has to do with temperature and humidity gauges as well as valves that regulate water flow – the kind of things you can pick up in any sanitation-equipment store.

What makes it unusual is that it also has to do with a request by American law-enforcement officials for their German counterparts to search through the office of a man they have in their sights and confiscate, in particular, “electronic data, written correspondence, invoices and lists of addresses.”

What’s more, these same officials would also like the Germans to extradite the suspect – a German citizen who, for legal reasons, can only be identified as “N.” – so he can face criminal charges in the U.S. As far as the Americans are concerned, the ethnic Iranian businessman from the northern German city of Kiel is an enemy of the state who deserves to be put in prison for up to five years

Well, even if Der Spiegel can’t reveal who “N.” is, we can. He’s Djamshid Nezhad. In September 2008, Mr. Nezhad was made a denied party (as part of the second wave of Mayrow General Trading designations) and was named as a defendant in this indictment in a federal court in Florida.

N. continues to plead his innocence and claims that this has all been a big mistake. But the U.S. is still investigating him. Last year, American officials unsuccessfully petitioned their German counterparts to detain N. Their hopes were stymied when an upper district court for the northern state of Schleswig-Holstein, which is home to Kiel, blocked the request, saying it couldn’t find any factual basis that justified launching a criminal inquiry into N.’s deliveries. The court based its decision on the fact that both German and European law permits the exportation of the components he traded. “The subject is accused of doing something that does not constitute a criminal offense in Germany,” the court found.

Still, the court’s views aren’t wholeheartedly shared by German customs officials, who believe the parts N. ordered from the U.S. could certainly be classified as “dual-use,” thereby rendering their exportation illegal. “One should have applied for an export permit in this country depending on the specification of the components,” said one customs investigator.

What’s interesting here is that, as in the Kakavand case, the extradition request will depend on whether or not the items are on Germany’s list of dual-use items which, of course, is derived from the Wassenaar list, also implement by the U.S. in the Commerce Control List of dual-use items requiring export license. Note also that the U.S. is not claiming that Nezhad’s valves and gauges were used in IEDs shipped by Iran to Iraq. It’s likely that they didn’t. Instead, the government’s interest is based solely on the claim that he is part of a network of exporters, some of whom exported items that were used in the detonation mechanisms for the IEDs.

I’m increasingly of the opinion that the United States is not really expecting to win these cases as much as it is trying to send a message to potential exporters to Iran. The message is that the U.S. will do whatever it can to make your life difficult if you try to ship things from the U.S. to Iran. And if you do ship things to Iran, you might want to limit your international travel plans. Take the family from Germany to Disneyland? Not in this lifetime.

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Apr

21

OFAC Licenses Exports of Anti-Censorship Software to Iran

Posted by Clif Burns at 10:27 pm on April 21, 2010

Category: Iran Sanctions

Iranian Web Censorship Last week the Censorship Research Center issued a press release announcing that the Office of Foreign Assets Control (“OFAC”) issued a license authorizing the export of the Center’s Haystack software to Iran. That software permits Internet surfers in Iran to circumvent controls by the Iranian government which prohibit access to certain Internet sites within Iran.

The software functions by using encryption to hide an Iranian user’s connection to Haystack’s servers by encrypting the communications with that server within innocuous communications to unblocked sites. According to Haystack, the only way for Iran to counter Haystack would be to block all Internet access.

Two things are interesting here. First, the issuance of this specific license indicates that the general license issued by OFAC back in March for “software incident to the exchange of personal communications over the Internet” is not unlimited. The Haystack software is not personal communications software although it does enable other personal communications software to operate in Iran.

Second, although the exact strength or method of encryption isn’t revealed, it has to be assumed to be fairly strong. The company describes its encryption as follows:

even if our methods were compromised, our users’ communications would be secure. We use state-of-the-art elliptic curve cryptography to ensure that these communications cannot be read. This cryptography is strong enough that the NSA trusts it to secure top-secret data, and we consider our users’ privacy to be just as important.

Chances are good based on this description that export of this software to private end-users in countries other than Iran would have required filing a request for review with the Department of Commerce and, potentially, a waiting period prior to export. The authorization of this export indicates that the current administration believes that facilitation of internet communication in Iran is sufficient to override concerns that would otherwise be present due to the software’s use of encryption.

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Apr

14

Iran Continues to Play the Name Game

Posted by Clif Burns at 5:43 pm on April 14, 2010

Category: Iran Sanctions

Fifth Ocean Renamed Back in March 2009, this blog reported that Iran was skirting sanctions imposed by the Office of Foreign Assets Control (“OFAC”) on Iran’s state shipping line, the Islamic Republic of Iran Shipping Lines (“IRISL”). OFAC had sanctioned all 123 of the IRISL’s vessels, and Iran almost immediately thereafter got busy changing the names of each of its vessels. As of March 2009 the names of 45 ships had been changed.

According to this report from the Wisconsin Project on Nuclear Arms Control released on April 9, Iran continued to change the names of IRISL vessels as fast as it could paint them over, and by March of this year IRISL had changed the names of 35 more vessels, making a total of 80 re-christened, so to speak, vessels. In addition, the IRISL has been changing nominal ownership of these ships to shell companies in Malta, Germany and Hong Kong. And to further distance itself from these ships, a new management company — Soroush Sarzamin Asatir SSA — now manages the ships in IRISL’s stead.

Of course, the OFAC designation listed the unique identifiers assigned to these boats by the International Maritime Organization, and these identifying numbers can’t be changed. Still, the Wisconsin Project report frets that it may be difficult for U.S. exporters to comply now with the sanctions because the IMO number isn’t always listed in the cargo documents, the letters of credit or other associated shipping documents. Apparently, the folks at the Wisconsin Project aren’t terribly familiar with this new-fangled thing called the Internet, because a quick Google search brought me to the sight of Vesseltracker.com, where entry of one of the new names, like “Decker” for example, quickly brings up the correct IMO number, which then can be searched against OFAC’s list.

The money line from the IRISL report, however, was this:

Iran has made more of an effort to circumvent the sanctions imposed on IRISL than the United States has made to enforce them.

Ouch.

The next day, in a Wall Street Journal article on the Wisconsin Project’s report, Adam Szubin, the director of OFAC, tried to ease the sting of the Wisconsin Project’s allegations with this not very convincing response:

Szubin said his agency “deliberates carefully about the timing of its public designations,” adding, “We may choose to delay a public identification to allow for additional surveillance or to secure cooperation with foreign allies.”

Mr. Szubin also said the Iranian company’s actions signaled the sanctions were having an effect. “Since its designation [by the Treasury], IRISL has taken a number of steps to mask its commercial activities and disguise the ownership of its ships. IRISL’s attempts to deceive third parties are consistent with its past practices, and a measure of the impact that U.S. sanctions have had.”

I don’t see how additional time for surveillance comes into play here since the name changes are a matter of public record. Less convincing still is the spin that the IRISL’s evasion of the sanctions is some kind of proof of their effectiveness. It’s rather like saying that when a criminal goes fugitive it is proof that law enforcement is doing its job. But irrespective of when and how quickly OFAC gets around to getting the correct names on its list, exporters should determine and search the IMO numbers for each vessel they use to export their goods.

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Apr

13

Closed for the Weekend

Posted by Clif Burns at 7:48 pm on April 13, 2010

Category: BIS • Iran Sanctions

“Hillbilly,” a regular reader and commenter here, brought to my attention news reports last week, like this one, that indicated that the Bladerunner 51, a high-speed boat that holds the speed record for circumnavigating Great Britain, is now in the hands of the Iranian Navy. Regular readers may recall a post on this blog in January 2009 about a Temporary Denial Order (“TDO”) issued by the Bureau of Industry and Security (“BIS”) which attempted to block the transfer of the craft by a South African company, Icarus Marine (Pty) Ltd. BIS believed that Icarus was planning to load the Bladerunner 51 onto an Iranian merchant shipping vessel and send it to the Tadbir Sanaat Sharif Technology Development Center in Tehran. Thereafter it was feared that the boat would be transferred to the Iranian Navy, which would try to use the boat as an attack craft.

When I first wrote about the TDO, I expressed some scepticism about its effectiveness. Certainly the two Iranian entities named in the order would simply ignore it, and there was no obvious reason that the South African party would obey it. Now, however, it appears that the TDO had another purpose, at least according to this article in the Washington Post:

The U.S. Commerce Department’s Bureau of Industry and Security asked South African authorities to block the transfer. It voiced concern that Iran’s Revolutionary Guards intended to use the boat as a “fast attack craft.” The bureau noted that similar vessels had been armed with “torpedoes, rocket launchers and anti-ship missiles.”

Nonetheless, the loading went ahead because, according to one source, no one saw the U.S. notice sent by fax on a weekend.

So, if this report is to be believed, the TDO was designed not as much to deter Icarus but to prompt the South African government to take action and prevent the loading of the Bladerunner 51 onto the Iranian merchant vessel. That plan failed because BIS sent the TDO on a weekend, when the South African government was, not surprisingly, closed.

Another interesting factoid is that the U.S. also had a plan for special forces to intercept the Iranian merchant vessel carrying the Bladerunner 51. That plan was called off, no doubt because of the concern that the Bladerunner, as then configured, was not subject to the arms embargo set forth in paragraph 5 of U.N. Security Council Resolution 1747.

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