Reported by: Darya Dolzikova, Daniel Salisbury

On December 16, CIA Director William Burns expressed concern over what he believes to be “at least the beginnings of a full-fledged defense partnership” between Iran and Russia. A few days earlier, the Russian military launched a wave of Iranian-made unmanned aerial vehicles (UAVs) in an attack on Kyiv. These developments followed months of Iranian UAV use by Russian forces in Ukraine and discussion of potential Iranian missile transfers to the Russian military. Recent reports also suggest that the Wagner Group, a Russian private military company, has purchased infantry rockets and missiles from North Korea, several months after US officials first suggested Russia had approached that country for munitions.

Cooperation in the economic and military sphere between countries under sanctions and arms embargoes is not a new phenomenon. Recent reports of Russian procurement of military equipment from Iran and North Korea, therefore, come as no surprise. As Russia faces ever-tightening restrictions on its economy and military procurement, Moscow will likely continue leveraging trade opportunities that Tehran and Pyongyang present, relying on well-established methods of illicit trade and sanction evasion. To develop more effective countermeasures, it is important to understand how Moscow may rely on established sanction-evasion practices and the unique challenges it may present.

Long experience in arms trade under sanctions. Tehran, Pyongyang, and Moscow all have extensive experience living and trading under sanctions. Iran has been subject to a US trade embargo since the 1979 Islamic Revolution and—because of its nuclear program—to progressively expansive international trade restrictions, including in arms and weapons systems. As part of the 2015 Iran nuclear deal (the Joint Comprehensive Plan of Action, or JCPOA), most international restrictions on trade with Iran have been lifted, including many—although not all—prohibitions on weapons trade.

North Korea and the Soviet Union had faced similar trade restrictions since the 1950s—including embargoes on arms and technology by members and allies of the Western bloc of countries. Since 2006, North Korea has also been subject to universal and vastly expanding UN sanctions as a direct result of Pyongyang’s nuclear-related activities. In Russia’s case, many Western controls were relaxed following the collapse of the Soviet Union. However, following Moscow’s illegal annexation of Crimea and invasion of eastern Ukraine in 2014, Western countries reintroduced some restrictions on arms-related transfers to Russia. These have been further expanded after Russia’s full-scale invasion of Ukraine in February 2022.

Despite restrictions, all three countries managed to procure weapons and related dual-use technologies to sustain—and advance—their military capabilities. The Soviet Union constructed a vast military-industrial complex during the Cold War by harnessing domestic capabilities and procuring from Western markets, both legally and illicitly. Iran and North Korea have also managed to advance their nuclear and missile programs despite sanctions, sometimes by cooperating. North Korean arms and related technologies—often based on Soviet designs supplied to Pyongyang by Moscow during the Cold War—have made their way to, among other countries, Syria, Myanmar, Cuba, the Democratic Republic of the Congo, and Uganda. Iran has also provided extensive military support to the Syrian regime during the country’s civil war and has armed destabilizing non-state actors across the Middle East.

Reusing and adapting sanction-evasion methods. Illicit transfers and procurement of weapons and related technologies by Russia, Iran, and North Korea have historically relied on sanction-evasion strategies that have allowed sanctioned entities to obscure their involvement in the prohibited movement of goods. These methods have relied on the establishment of complex procurement and financial networks, involving a myriad of front companies, bank accounts, and procurement agents in third countries with poor sanction-compliance practices. Diplomats and intelligence officers have leveraged government resources and diplomatic privileges to support the creation and operation of these networks. Corrupt facilitators—which include government officials, compliance officers, lawyers, and accountants—have “greased the wheels” or turned a blind eye where needed.

If Moscow seeks to expand its military and economic cooperation with Tehran and Pyongyang, it will rely on many of these same tried-and-tested methods of sanction evasion and illicit procurement. Russian companies have already demonstrated their reliance on front companies and procurement agents in Europe, North America, and Asia to source Western components for their integration into military systems. The chief executive officer of one Russian logistics company, Novelco, even gave a seminar on trade under sanctions, highlighting the value of “friendly” countries like Turkey as transshipment hubs. Many of the countries targeted by Moscow to facilitate illicit trade—including Turkey, the United Arab Emirates, and Hong Kong—have been well-established jurisdictions of convenience for sanction evaders, like Iran and North Korea.

China’s apparent unwillingness to support sanctions on Russia is particularly concerning. The country has facilitatedNorth Korean circumvention of UN sanctions in the past. It is also the top importer of Iranian oil (in defiance of US sanctions on the purchase of Iranian petroleum) and has reportedly facilitatedthe illicit transfer of missile technology between Iran and North Korea. Hong Kong and Chinese entities already appear to be acting as intermediaries in the supply of Western components for integration into Russian weapons systems. As a major economy, and a key financial and shipping hub, China’s willingness to cooperate with Western efforts at stemming Russian trade in arms and related technologies will be a key factor in their success.

Russia will undoubtedly also look to recent Iranian and North Korean successes in sanction evasion as it seeks to adapt established practices to new realities. Countries and banks that have demonstrated their continued inability—or unwillingness—to root out sanctioned Iranian and North Korean activities, will likely attract illicit business from Moscow as well. North Korean and Iranian sanction-evasion methods for trade in certain commodities (like coal or oil) may also provide learning opportunities for Moscow.

Read full report: https://thebulletin.org/2022/12/triple-threat-russia-iran-and-north-korea-trade-arms-to-get-around-sanctions/amp/