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Is the Additional Protocol Sufficient to Verify Iran’s Nuclear Program?

By Simon Chin and Valerie Lincy

Iran has agreed to implement the International Atomic Energy Agency’s (IAEA) Additional Protocol as part of a comprehensive nuclear deal, but Iranian negotiators have been reluctant to grant the Agency inspection rights that go beyond the Additional Protocol, such as allowing access to military sites.[1]  Is the Additional Protocol sufficient for the IAEA to verify that Iran is complying with a final agreement and not secretly developing a nuclear weapon?

What the Additional Protocol Covers—and What it Doesn’t

The Additional Protocol was developed by the IAEA after the First Gulf War, when it became clear that Iraq had exploited a loophole in the standard IAEA Safeguards Agreement and used undeclared facilities – not subject to IAEA inspections – to build a clandestine nuclear weapons program.  The Additional Protocol expanded the type of facility considered part of a country’s declared nuclear program and also granted inspectors limited access to undeclared sites.  The U.S. State Department, in its April 2 fact sheet, described the Additional Protocol as a means of “providing the IAEA much greater access and information regarding Iran’s nuclear program, including both declared and undeclared facilities.”

What specifically does the Additional Protocol cover?

  • An expanded declaration that includes “nuclear fuel cycle-related research and development activities not involving nuclear material,” such as uranium mines and mills and reports on trade in sensitive nuclear items.
  • “Complementary access” (pre-approved access) to all declared facilities in the expanded declaration, usually on at least 24-hours notice.
  • “Complementary access” to undeclared sites “to carry out location-specific environmental sampling” on at least 24-hours notice.

The IAEA’s right to access undeclared sites is restricted to localized environmental sampling for the purposes of resolving “a question relating to the correctness or completeness” of a country’s declaration.  That right is furthered qualified: if a country “is unable to provide such access, every reasonable effort shall be made to satisfy Agency requirements, without delay, at adjacent locations or through other means.”

The Additional Protocol does not authorize “anytime, anywhere” inspections, and the access it provides to undeclared sites could be limited by Iran.  There might be cases where IAEA inspectors would need to use tools other than environmental sampling to resolve their questions.  And, in practice, a country could deny the IAEA access to sites not officially declared as a part of its nuclear program – like Iran’s military sites – without violating the Additional Protocol.

“Anytime, Anywhere” Inspections—The Right Standard?

Some experts have advocated for “anytime, anywhere” inspections.  Olli Heinonen, former Deputy Director-General for Safeguards at the IAEA, recently warned that “Without unfettered access to people and all sites in Iran, and if limitations and sanctuaries are carved out, it will be impossible to convincingly certify that Iran is fully complying with its undertakings.”

The U.N. Special Commission (UNSCOM) was granted “anytime, anywhere” access in Iraq after the first Gulf War.  Quite literally, inspectors had the legal right to go anywhere, anytime, with the exception of “presidential sites” exempted by then-U.N. Secretary General Kofi Annan.  Their authorities included:

  • “The right to unimpeded access to any site or facility for the purpose of the on-site inspection”
  • “Unrestricted freedom of entry and exit without delay or hindrance”
  • “Unrestricted freedom of movement without advance notice within Iraq”
  • “The right to designate any site whatsoever for observation, inspection or other monitoring activity”
  • “The right to request, receive, examine and copy any record, data or information or examine, retain, move or photography, including videotape, any item relevant … and to conduct interviews”
  • “The right to take and analyse samples of any kind as well as to remove and export samples for off-site analysis”

And so on.  In practice, however, inspections in Iraq were not “unfettered,” as inspectors were drawn into an adversarial game of “cat and mouse” with Iraqi officials, who sought to frustrate, obfuscate, and delay inspectors at every turn.  Former U.N. weapons inspectors, speaking at a roundtable discussion recently hosted by the Wisconsin Project, observed that “anytime, anywhere” inspections – while necessitated by Iraqi deception – were inherently confrontational.  They were also meant to be a short-term remedy – needed to verify the dismantlement of Saddam Hussein’s weapons programs after the war – and not intended to be sustained over the long-run.  For these reasons, the former inspectors did not view the Iraq model of “anytime, anywhere” as a good precedent for Iran.

Additional Protocol Plus?

Negotiators in the ongoing talks with Iran appear to be grappling with the task of defining IAEA inspection rights that go beyond the Additional Protocol – which is necessary but not sufficient – but fall short of the “anytime, anywhere” standard. They should look at the challenge inspection procedures included in the Chemical Weapons Convention (CWC).  Iran is a party to the CWC, which authorizes the following:

  • An on-site challenge inspection of any facility or location in the territory of a member-state
  • A fixed timetable for every step of the inspections process, beginning with the initiation of the challenge inspection
  • “Managed access” procedures that allow negotiations over the extent of access to be granted and permit the challenged state to protect sensitive information not relevant to the inquiry

No challenge inspection has been mounted under the CWC, but the authority to do so is clear: access to suspect sites is mandatory and does not include the right of refusal. The CWC also describes procedures to manage inspector access, which offer substantial rights and protections to the country to be inspected. The CWC’s model of strong inspection rights – where no site is off-limits – balanced by managed access procedures could offer negotiators a solution that addresses the concerns of both sides.

Footnotes: 

[1] One notable exception: according to the U.S. State Department fact sheet released on April 2, Iran has agreed to “continuous surveillance” of its centrifuge production and storage facilities.  The Additional Protocol only grants IAEA inspectors periodic access to certain centrifuge production facilities.

Evaluating a Nuclear Deal with Iran

By Valerie Lincy

Presentation for Congressional Staff at the Rayburn House Office Building

Throughout the ongoing talks on Iran’s nuclear program, the Wisconsin Project on Nuclear Arms Control and Iran Watch have been supportive of a diplomatic solution to the nuclear issue but concerned about the potential ramifications for the future of the non-proliferation regime.  As an organization, the Wisconsin Project has had a long-standing and deep commitment to the principles of non-proliferation.

To be considered successful, a nuclear agreement with Iran must achieve the goals set by the United States: cutting off what the administration calls Iran’s “four pathways” to a nuclear weapon and keeping Iran at least one year from making a nuclear weapon. According to our calculations, which we have recently updated on Iran Watch, Iran could currently produce enough fuel for one bomb in about two months.

Three of the four pathways involve preventing Iran from using its declared nuclear facilities to make a nuclear weapon in a “breakout” scenario: Iran would use either the uranium enrichment plants at Natanz or Fordow to make highly enriched uranium for a bomb, or it would extract plutonium from spent fuel at the Arak heavy water reactor.

What is needed to cut off the highly-enriched uranium pathways at Natanz and Fordow?  The deal should reduce the number of centrifuges enriching uranium and reduce the number of installed centrifuges.  Ideally, the excess centrifuges should be taken apart and removed from the country.  If that is not attainable, then the centrifuges should be dismantled and not merely disconnected.  The worst option would be to leave the centrifuges in the enrichment plants and simply disconnect them.  The dismantlement and removal of Iran’s centrifuges are important because if a deal falls apart, Iran would be left with most of its centrifuge infrastructure and could easily pick up where it left off.

The deal should also limit Iran’s work on its advanced centrifuges.  Iran must not be allowed to perfect these machines during the term of the agreement and then emerge at the other end ready to mass produce centrifuges that are twice as efficient as the first-generation IR-1 centrifuges currently operating.

The agreement should also reduce Iran’s stockpile of low-enriched uranium, which currently stands at 8.7 tons.  This material is in gaseous form, which can be further enriched to weapon-grade.  According to the White House fact sheet released in April, the stockpile will be reduced to 300 kg.  What will happen to the 8-plus tons of excess enriched uranium gas?  Ideally, it should be removed from the country.  If that is not attainable, then it should be converted to a form that is difficult to re-convert and further enrich.  The worst option would be to dilute the excess uranium and keep it in gaseous form, as this would be the easiest for Iran to re-enrich.  This material, then, could be used to reconstitute the nuclear program if the deal falls apart. Iran’s current uranium stockpile, if further enriched, is large enough to fuel about 8 nuclear bombs.

All of these numbers are intimately related.  If Iran is permitted to keep more centrifuges, then the deal must correspondingly reduce the amount of low-enriched uranium it can stockpile, or else a 1 year breakout time will not be achieved.

To cut off the third pathway – the plutonium pathway – the deal should require Iran to reconfigure its Arak heavy water reactor to be smaller and produce less plutonium.  The White House fact sheet appears to accomplish this, as the reactor would be redesigned and the existing core destroyed or removed from the country.  According to the fact sheet, the spent fuel from the reactor will also be sent out of the country for the lifetime of the reactor, and Iran has also agreed not to do any spent fuel reprocessing indefinitely.

The fourth pathway involves Iran using undeclared sites to “sneakout” and make nuclear weapons.  Monitoring and verification are the best tools to guard against this outcome..  Specifically, the deal must include a combination of extra authority for on-site inspectors and also the use of remote monitoring and intelligence.

In April, the Wisconsin Project hosted a roundtable discussion on the subject of monitoring and verification in Iran, and the panel included former United Nations weapons inspectors in Iraq as well as former U.S. government officials with non-proliferation expertise.   The roundtable discussion arrived at a set of findings on what a nuclear agreement with Iran must contain.  These requirements include:

  • The right to inspect any facility or location in Iran, including military sites.  No site can be of-limits. There are ways to manage access, in order to respect Iran’s sensitivities about military secrets, but the authority to inspect any site in Iran is essential.  A possible model for inspections in Iran is the Chemical Weapons Convention’s “challenge inspections,” which Iran has accepted.  Under the CWC, countries cannot refuse or excessively delay access.  Inspectors’ authority must go beyond the Additional Protocol’s “complementary access” procedures, which are restrictive in terms of what inspectors can do at undeclared sites.  Parameters for enhanced inspections must be set in advance and cannot be a source of dispute from day 1 of the agreement.
  • The right to see facility plans, procurement documents, lab notebooks, personnel files, as well as to interview personnel.  This type of information helps inspectors decide where to launch a challenge inspection.
  • Inspections teams led by the IAEA but augmented by expert personnel from the P5+1, including bomb experts, experts in centrifuge manufacturing, and officials with counterintelligence expertise. Iran must not have the right to veto individual inspectors.
  • The ability to use the latest technology for inspections and to upgrade what is used without a cumbersome approval process.
  • The use of intelligence information by inspectors to support implementation of the agreement.
  • The right to verify all nuclear and dual-use imports, including at locations that have nothing to do with the nuclear program.  All procurement of this kind must take place through an established “white channel,” or “procurement channel,” and any procurement outside this channel should be considered a violation of the agreement.  The deal must create a bright line between legitimate and illicit trade, and Iran must not be allowed to continue its illicit procurement activities.

In order to fulfill U.S. objectives, the deal should also include the following:

  • A declaration by Iran about its past and ongoing nuclear work.  This does not appear to be a requirement at present but is important for several reasons.  Declarations have been an integral part of all arms control agreements.  The declaration would also be an early sign of whether Iran is accepting monitoring and verification in an honesty way.  It would allow countries to assess whether Iran is withholding information.  It also provides a baseline for inspectors on where to look and can also alert them to sites of potential concern.  A declaration would also provide information and assurance to countries, like Israel and Saudi Arabia, which are not part of the negotiations.
  • The requirement to cooperate with the IAEA in resolving questions about the “possible military dimensions” of Iran’s nuclear program – that is, Iran’s alleged nuclear weapons related work in the past.  The “PMD” issue is important to resolve for several reasons.  Disclosures about the “PMD” issue from Iran would provide a basis for IAEA inspectors to access military sites where the work occurred, as well as access to related documents and personnel.  Ignoring “PMD” also undercuts the authority of the IAEA, which leads inspections in Iran and has been demanding answers to these questions for years.  A resolution would also provide public answers to these questions that can be scrutinized by other governments, NGOs, and by the public.
  • A clear process for dispute resolution.  The deal must create some type of Joint Commission involving the P5+1, the European Union, and Iran, to which inspections teams can report violations, inconsistencies, and ambiguities.  The Joint Commission needs to work quickly: disputes cannot be allowed to languish unresolved.  The parties to the deal must avoid a long process that gets bogged down in deciding first whether there has been a violation and only then deciding how to respond. The Joint Commission should define specific categories of punishment to correspond with likely categories of violation.  Most violations will be small and non-egregious: ambiguities or creeping violations, rather than a major breach of the terms of the agreement.  The main option to respond to violations will be the re-imposition of sanctions, which some countries will see as disproportionate.  Therefore, the agreement need a pre-determined scale of response established in advance.  No country should wield a veto in this setting, or few disputes will be resolved.
  • Sanctions relief in stages.  The Iran deal under discussion is more akin to a “cash for access” arrangement than a Cold War arms control agreement, which were built upon the principal of reciprocity between the United States and the Soviet Union.  If the bulk of the sanctions on Iran are lifted early, then most of the “cash” will already have been handed over. This reduces Iran’s incentive to grant access to inspectors and leaves only a frail instrument — the re-imposition of sanctions when most have already been lifted — to punish violations.  Sanctions, therefore, must be lifted only gradually, as a confidence-building measure to reward compliance.  The nuclear-related sanctions, once lifted, will be difficult to reinstate, especially in response to minor violation.  Other sanctions on Iran must remain in place, especially those related to ballistic missiles and terrorism.  Since ballistic missiles will not be covered by the final agreement, sanctions on Iran’s missile program will be essential, including a willingness of the United States to sanction Iran’s foreign suppliers.

Even if the agreement meets all of the parameters set out above, there would still be negative consequences for striking a deal with Iran.

The “sunset clause” means that the restrictions on Iran’s nuclear program are not indefinite.  After 10 or 15 years, Iran can largely do what it wants in terms of enrichment and reactors.  If it develops a commercial-scale enrichment operation, Iran could become poised to produce nuclear weapons very quickly and have the status of a nuclear-weapons threshold state, like Japan.

The framework agreement also has left Iran’s missile program largely to the side.  Nuclear-capable ballistic missiles are part of the U.N. Security Council’s resolutions and are an integral part of a nuclear weapons program.  They have little military value other than as a delivery system for nuclear weapons.
The agreement will also have consequences for regional security and the broader non-proliferation regime.  Countries like Saudi Arabia and Turkey may seek similar capabilities, or seek, at a minimum, to mirror Iran’s nuclear weapons threshold status.  Countries asked to accept the U.S. “gold standard” for nuclear cooperation agreements and forego uranium enrichment and spent fuel reprocessing (like the United Arab Emirates), may be reluctant to do so.

The agreement could also set a dangerous precedent for the non-proliferation regime.  A country that is a founding member of the NPT and has violated its treaty obligation for years, including by conducting nuclear weaponization work, will be allowed to maintain uranium enrichment, which is among the most proliferation-prone technologies.

Four Reasons Why Accounting for Iran’s Alleged Nuclear Weapons Work Still Matters

By Simon Chin and Valerie Lincy

Secretary of State John Kerry appears to have conceded a key issue in the ongoing nuclear talks with Iran: whether Iran will have to account for alleged past activities related to nuclear weapons development.

In a video call with reporters at the State Department on June 16, Secretary Kerry said: “We’re not fixated on Iran specifically accounting for what they did at one point in time or another. We know what they did.  We have no doubt. We have absolute knowledge with respect to the certain military activities they were engaged in. […] It’s critical to us to know that, going forward, those activities have been stopped and that we can account for that in a legitimate way.  That clearly is one of the requirements, in our judgment, for what has to be achieved in order to have a legitimate agreement.”

Despite Secretary Kerry’s confidence that the United States understands what Iran “did at one point or another” and can assess the direction of Iran’s nuclear program without an accounting of past activities, the International Atomic Energy Association (IAEA) has long hoped to complete its investigation into what it calls the “possible military dimensions” of Iran’s program — alleged past research related to developing nuclear weapons.

It may be that the U.S. intelligence community has “absolute knowledge” of the alleged weaponization activities in question, though it’s a difficult point to confirm in an unclassified setting.

But even if answers to the IAEA’s long-standing questions would not yield any new intelligence for the U.S. government, here are four reasons why the PMD issue still matters:

1.  An acknowledgment from Iran about its past nuclear-weapons-relevant work would provide a basis for IAEA inspectors to access military sites where such work occurred and to related documents and personnel — access that Iran has been reluctant to concede.  Without such an acknowledgement, the authority for the IAEA to inspect military sites and other undeclared facilities is weakened.

2.  Taking the PMD issue off the table undercuts the valuable work of the IAEA and its Director-General Yukiyo Amano, who have prioritized the PMD investigation and raised this issue more insistently than has the United States and its P5+1 negotiating partners.

3.  Unlike whatever classified intelligence the United States may possess, the IAEA investigation would yield public answers about Iran’s past nuclear-weapons work that could be scrutinized by countries without intelligence sharing agreements with the United States — and by the public at-large.

4.  Transparency on the PMD issue would be a sign of good faith from Iranian leaders and an early test of whether Iran is serious about maintaining a peaceful nuclear program.

Secretary Kerry’s remarks signal that the P5+1 are prepared to ease sanctions on Iran before the full resolution of the IAEA’s PMD file.  With the PMD issue no longer tied to the implementation of a final agreement, Iran may continue stonewalling the investigation, thus undermining the authority of the IAEA and weakening verification efforts by Agency inspectors – all while reaping the rewards of sanctions relief.

U.N. Panel Reports “Drastic” Reduction in Reporting on Illicit Iranian Procurement

By Simon Chin and Valerie Lincy

No new instances of illicit procurement by Iran have been confirmed over the past year, according to a June 2 report by the U.N. Panel of Experts.  According to the Panel, this lack of reporting “could reflect a general reduction of procurement activities by the Iranian side or a political decision by some Member States to refrain from reporting to avoid any possible negative impact on ongoing negotiations” with Iran.

Still, the report described several confirmed cases of procurement and attempted procurement for Iran’s nuclear program that took place over one year ago.  These cases involved networks relying on well-known methods to evade export control laws and international sanctions, including: transshipment through third countries to mask the final destination; the use of front companies; falsifying shipment statements to remove references to Iranian ports; falsifying the reported end use of controlled goods; seeking goods that are just below control thresholds; the involvement of people of Iranian extraction living overseas; financial transfers through companies and financial institutions located outside Iran; and the misappropriation of funds held in overseas accounts belonging to the Central Bank of the Iran.

The cases highlighted by the Panel included:

  • The attempted procurement of a frequency converter by Farayand Pas Company in Tehran from Finland.  A Finnish manufacturer in 2011 agreed to sell a frequency converter – which (at certain levels) are used as the power supply for gas centrifuges – to a Pakistani engineering company. The Pakistani freight forwarder requested that the consignee on the airway bill be changed to the Iranian company without alerting the Finnish manufacturer.  The shipment was ultimately impounded by Dubai customs authorities for inconsistent documentation.
  • The procurement of items for Iran’s solid-fuel missiles on behalf of Shahid Bagheri Industrial Group (SBIG) by Behzad Sahabi, a German citizen of Iranian background (identified only as “Dr. B.” by the Panel).  Between 2012 and 2013, Dr. B procured non-listed dual-use items – including polystyrene, vacuum pumps, butterfly valves, pressure reducers, flame detectors, and magnetic valves – from Germany and other countries.  The items were first shipped to Dr. B’s company in the United Arab Emirates before being re-exported to a string of SBIG front companies in Tehran.  The front company names include: Aban Commercial and Industrial Group, Mehr Engineering and Industrial Group, Saba Machinery Supply Co., Selm Commercial Co., Tabesh Engineering and Trading Corporation, Alae Industrial Co., Pooya Commercial and Engineering Co., and Kimia Trading Co.  Some of these names have not been included on any national blacklists or warning lists.
  • Two shipments of Nuclear Suppliers Group-controlled carbon fiber to from the United States to Iran (one of which was delivered), and the attempted procurement of a carbon fiber winding machine.  In 2008, Hamid Reza Hashemi, a U.S. national operating a company in Tehran, shipped carbon fiber from the United States to Iran via Luxembourg and Dubai.  A later shipment in 2008 of the same material routed through the United Kingdom was intercepted by British authorities.  In 2011, Hashemi sought to purchase a carbon fiber winding machine from a U.S. supplier.
  • Two shipments of aluminium tubes sent from Malaysia to Iran in 2012.  The Malaysian consignor, NBH Industries SDN BDH of Kuala Lumpur, sent two separate shipments of aluminium tubes with potential use in Iran’s centrifuge program to an Iranian consignee, Automotive Industries Gohar Yaghot Neshan of Khoramabad.

The Panel also cited two recent procurement cases, previously reported by Reuters, about which information was received too late for the Panel to complete an investigation, including: information provided by the U.K. government about “an active Iranian nuclear procurement network” associated with the Iran Centrifuge Technology Company and Kalaye Electric Company; and information about the attempted procurement of compressors in January 2015 from Howden CKD, a U.S.-owned company in the Czech Republic.

What Will Inspectors Need in Iran?

By Simon Chin and Valerie Lincy

NATIONAL REVIEW

As the negotiations over Iran’s nuclear program approach the June 30 deadline for a final deal, a crucial issue remains unresolved: inspections.

The country’s supreme leader has proclaimed military sites strictly off-limits to inspectors, while the French foreign minister, Laurent Fabius, has said such inspections are a key priority. If the ongoing talks hold to form, the United States will either concede the issue or seek a compromise solution. The latter may be possible; the former would be dangerous.

The concessions the United States and its P5+1 partners have already made — permitting Iran to maintain a limited uranium enrichment program for 15 years, and an unlimited one afterward — make the prospective task for inspectors daunting. They will need to confirm that Iran is abiding by the restrictions on its nuclear program, oversee its ongoing and declared program, and monitor the country for any secret nuclear work or nuclear-related military work. As Foreign Minister Fabius recently said, “the best agreement, if you cannot verify it, it’s useless.”

So what, specifically, would inspectors need in order to provide adequate assurance that Iran does not develop nuclear weapons, either by “breakout” at declared facilities, or by “sneakout” using secret sites?

A panel of former U.N. weapons inspectors and U.S. nonproliferation specialists, brought together by the Wisconsin Project on Nuclear Arms Control (where we work) to address this question, recently agreed on a firm list of requirements for effective inspections. At the same time, they sought to frame some of the measures so as not to drive away Iranian negotiators. Their recommendations include the following:

  • A full declaration by Iran of its past and present nuclear work, which would be an essential starting point for monitoring and verification. In an effort to avoid controversy, the declaration could take the form of a consolidation and updating of the various declarations Iran has made since 2003.
  • The right to inspect any facility or location in Iran, including military sites, under the principle of “managed access.” Iran has accepted this principle in another arms-control agreement, the Chemical Weapons Convention.​​​
  • ​​Ready access to documents, facility plans, and key personnel, which is essential for verifying Iran’s declaration and for guiding inspections.
  • ​​Inspection teams led by the International Atomic Energy Agency and augmented by expert personnel from the P5+1 countries, with access to upgradable, open-source monitoring equipment. The use of efficient monitoring equipment could reduce the need for on-site inspectors, who are perceived as more intrusive.​​​
  • ​The right to verify and monitor the end-use of all nuclear and missile-related imports made through an established procurement channel, including in non-nuclear sectors.
  • ​An international oversight body composed of all parties to the agreement, which has the benefit of including the P5+1 without excluding Iran. A joint commission of some kind has been a feature of every successful arms-control agreement.

The panel also stressed the importance of resolving the IAEA’s outstanding questions about Iran’s alleged weaponization activities — what the IAEA calls the “possible military dimensions” of Iran’s nuclear program. The IAEA’s investigation is essential for understanding the country’s past nuclear-weapons-relevant work, and would offer a basis for inspectors to access military sites where such work occurred and to examine relevant documents and personnel.

Another important conclusion: Experience with past arms-control agreements also led the panel to conclude that the ability to enforce inspection obligations will inevitably decrease over the course of 15 years. Sanctions are the most plausible response to an Iranian violation, but unlike reciprocal arms-control agreements, such as the Cold War treaties between the United States and the Soviet Union, there is no symmetry between less-than-egregious violations and the probable options for response.

Importantly, the Iran deal under discussion is more akin to “cash for access” arrangements, and if the bulk of the sanctions on Iran are lifted early, then most of the “cash” will already have been handed over. This reduces Iran’s incentive to grant access to inspectors and leaves only a frail instrument — the re-imposition of sanctions when most have already been lifted — to punish violations. The panel thus recommended that sanctions be lifted only gradually, as a confidence-building measure to reward compliance.

At the same time, the former weapons inspectors, based on years of playing “cat and mouse” with Saddam Hussein in Iraq, cautioned against the potential for inspections to turn adversarial. Inspections must be business-like and cooperative, particularly if they are to be sustained over the life of a 15-year agreement. Should any cheating occur, unlike in Iraq inspectors are most likely to encounter an accumulation of ambiguities or small violations rather than dramatic evidence of illicit activity. The oversight body envisioned by the panel would allow these ambiguities and inconsistencies to be addressed expediently before they undermine the overall agreement.

Inspections in Iran need not be “anytime, anywhere” like the authority given to inspectors in Iraq after the first Gulf War. That level of access was necessary for inspectors because Iraq lied on its very first declaration and inspectors had to proceed on the assumption that the Iraqis were cheating. For Iran, the panelists instead proposed the Chemical Weapons Convention’s (CWC) framework of “challenge inspections” under “managed access” — a framework that would allow inspectors to access any location in Iran on a fixed timetable but also afford Iran certain rights and protections. Under the CWC, to which Iran is a party, any member state can call for an on-site challenge inspection of any facility or location in the territory of another member state.

The weeks after the announcement of the April 2 framework agreement have been marked by public backtracking by Iranian officials from commitments previously made in the negotiations, perhaps in a bid to extract further concessions. A certain amount of give-and-take is inevitable.

Yet on this crucial issue of inspections, U.S. negotiators should not scramble to reach yet another accommodation in order to seal a final agreement. Rather, they need to hold firm on inspections, as they are the only way to ensure the full implementation of any deal that is eventually reached.

More Cracks in Iran Sanctions

By Simon Chin and Valerie Lincy

Last week saw the emergence of another illicit nuclear procurement effort by Iran. On May 13, Reuters reported that Czech authorities had stopped an attempt by Iran in January to purchase $61 million worth of compressors, which can be used in uranium enrichment.  Reuters had gained access to a report by a U.N. Panel of Experts.

This report comes on the heels of two other reports of sanctions evasion this month: the British government warned the U.N. Panel of “an active Iranian nuclear procurement network” involving two well-known Iranian proliferators, and Iran’s Mahan Air took delivery of nine large commercial aircraft worth over $300 million by using front companies and leasing arrangements.  Taken together, these developments raise questions about the durability of the sanctions against Iran and how illicit procurement will be dealt with if a final nuclear deal is reached.

Mahan Air’s scheme successfully breached sanctions that have exacted a heavy toll on Iran’s aviation industry.  It netted nine used Airbus jets that were reportedly once owned by Virgin Atlantic.  According to a May 11 report in the Financial Times, Mahan Air, which has been sanctioned by the United States and European Union for its ties to the Islamic Revolutionary Guard Corps (IRGC), is suspected of using Iraq’s Al-Naser Airlines as a front to buy aircraft from Europe.  The European sellers were apparently unaware of the final destination of the airplanes, as Mahan used a series of leasing arrangements and contracts to evade export controls.  The U.S. Treasury Department has implicated Mahan Air in sending advisers, weapons and funds to Syria and Yemen on behalf of the IRGC’s Qod’s Force.  Western authorities fear that the Airbus planes – eight Airbus A340s and one Airbus A320 manufactured between 2001 and 2009 – could be used for the same purpose.

Meanwhile, the Czech Republic, according to the Reuters report, blocked an attempted purchase by Iran in January of $61 million worth of compressors, which can be used in centrifuge cascades.  According to a draft of the U.N. Security Council’s Panel of Experts report, seen by Reuters, Iran attempted to buy the compressors from the U.S.-owned company Howden CKD Compressors based in Prague.  After false documentation intended to bypass export controls raised suspicions, Czech authorities blocked the transaction.  An earlier leak from the U.N. Panel of Experts revealed that the British government in April implicated Kalaye Electric and the Iran Centrifuge Technology Company (TESA) – two companies under international sanctions with well-established ties to Iran’s uranium enrichment program – in “an active Iranian nuclear procurement network.”

How will future illicit procurement efforts be handled?  According to the U.S. government, as part of a final deal with Iran a dedicated procurement channel will be established “to monitor and approve, on a case by case basis, the supply, sale, or transfer to Iran of certain nuclear-related and dual use materials and technology.”  And the arms and missile embargo on Iran “should remain in place for some time,” according to congressional testimony by U.S. Ambassador to the U.N. Samantha Power on April 15.

Presumably, sanctions would be the tool of choice to deter or punish any procurement outside of the “white channel.”  According to Ambassador Power, “We are going to secure an arrangement to allow for snapback in New York that doesn’t require Russian or Chinese support.”  Yet Russia’s U.N. Ambassador Vitaly Churkin, in comments on May 13, rejected a snapback mechanism: “There can be no automaticity, none whatsoever.”  Taken with Russia’s decision last month to lift its ban on the delivery of the S-300 air defense system to Iran, this is a sign that certain members of the P5+1 will likely be less resolute in upholding sanctions on Iran going forward, regardless of whether a final deal is reached.

UK Reports Active Nuclear Procurement Involving Sanctioned Companies

By Simon Chin and Valerie Lincy

The British government informed the U.N. Panel of Experts in April of “an active Iranian nuclear procurement network” involving two blacklisted Iranian companies, according to a Reuters report published on April 30.  If confirmed, Iran’s continuing efforts to procure uranium enrichment technology would represent a violation of U.N. Security Council resolutions and once again raise the question of how illicit procurement will be handled in a comprehensive nuclear deal with Iran.

A draft of the U.N. Panel’s annual report, according to Reuters, disclosed: “The UK government informed the Panel on 20 April 2015 that it ‘is aware of an active Iranian nuclear procurement network which has been associated with Iran’s Centrifuge Technology Company (TESA) and Kalay Electric Company (KEC).’”  Kalaye Electric is under U.N. Security Council sanctions, while TESA has been sanctioned by the United States and European Union.  Both companies have been linked to Iran’s uranium enrichment program.  The report did not offer any additional details, and the Panel said the information had been received too recently to be independently verified.

Kalaye Electric, based in Tehran, has long been associated with Iran’s uranium enrichment program and was among the first entities sanctioned by the U.N. Security Council in 2006.  A state-owned company subordinate to the Atomic Energy Organization of Iran, Kalaye Electric was the primary site for the assembly and testing of IR-1 centrifuges between 1997 and 2002 until operations were moved to Natanz.  It supplied the Pilot Fuel Enrichment Plant at Natanz and was also responsible for the construction of the Fordow Fuel Enrichment Plant.  Kalaye Electric had operated in secret until it was discovered and declared to the International Atomic Energy Agency (IAEA) in 2003.  The facility lived on as a centrifuge research workshop and contributed to the development of the IR-2, IR-3, IR-4, and IR-5 centrifuge designs.  According to Wired reporter Kim Zetter’s 2014 book, Countdown to Zero Day, Kalaye Electric was targeted in a May 2010 attack by the Stuxnet computer worm, reportedly as a means of spreading Stuxnet to Natanz.

TESA manufactures centrifuge parts and, according to the U.S. Treasury Department, “plays a crucial role in Iran’s uranium enrichment nuclear program.”  The company is involved in the production of Iran’s IR-1 centrifuges, operates an assembly complex at Natanz, and carries out work for Kalaye Electric.  TESA was sanctioned by the European Union in 2010 and by the United States in 2011.

The British government’s warning to the U.N. Panel of Experts is the latest sign of Iran’s continued defiance of U.N. Security Council resolutions, which prohibit Iran’s access to proliferation-sensitive items.  Just last month, the U.S. Justice Department indicted four companies and five individuals for participating in an illicit Iranian procurement network that conspired to circumvent export controls on dual-use goods.  TESA, in fact, was named as a client of one of the indicted companies.  The framework agreement for the nuclear deal with Iran reportedly includes a dedicated procurement channel for Iran’s nuclear program.  But how will the agreement deal with violations, if Iran continues to rely upon its existing procurement networks to supply its nuclear program?

Taiwanese Man Charged with in Conspiracy to Export Sensitive Microelectronics to Iran

Arthur Shyu, a senior manager of Hosoda Taiwan Co. Ltd., was indicted on April 16, 2015, along with eight other defendants, as part of a procurement network that allegedly supplied at least $24-million worth of U.S.-origin microelectronics to end users in Iran.  The exported items allegedly included electronics with application in surface-to-air and cruise missiles.

Shyu was charged with 12 counts, including illegally exporting controlled electronics to Iran in violation of the International Emergency Economic Powers Act (IEEPA) and money laundering.  Shyu was also added, on April 23, 2015, to the U.S. Entity List of end users subject to heightened export license requirements due to their involvement in proliferation activities or other activities of national security concern.

According to the indictment, Shyu received orders for goods from Bahram Mechanic, owner of Faratel Co. in Tehran, Iran and Smart Power Systems in Houston, Texas, and procured the items from the United States and suppliers in other countries.  Shyu then allegedly shipped the goods either directly to Iran or through Turkey, using an Istanbul-based company called Golsad Istanbul Trading.   As part of the conspiracy, Shyu allegedly instructed others in the network in how to falsify documents, conceal the origin of funds, and re-route payments in order to evade export controls and avoid drawing attention from regulatory authorities.

The end user for the controlled electronics  in Iran was allegedly Faratel Co., which designs and produces uninterruptible power supplies (UPS), including for the Ministry of Defense, Atomic Energy Organization of Iran (AEOI), and Iranian Centrifuge Technology Company.  The network was allegedly active between July 2010 and April 2015.

The other defendants indicted in the case included Mechanic, Khosrow Afghahi, Tooraj Faridi, Matin Sadeghi, Faratel Co, Golsad Istanbul Trading Ltd., Hosoda Taiwan Co. Ltd., and Smart Power Systems Inc.  Hosoda is a Taipei-based trading company. Afghani is a dual U.S. and Iranian citizen who was the managing director and part owner of Faratel and the minority owner of its sister company, Smart Power Systems.  Faridi is a dual U.S. and Iranian citizen who  was a vice president of operations at Smart Power Systems and an engineer at Faratel. Sadeghi is a Turkish national who operated Golsad Istanbul Trading Ltd., which allegedly served as the as the transshipment point for the dual-use U.S.-origin electronics exported illegally to Iran.

As part of the prisoner exchange agreement with Iran, President Barack Obama granted clemency in January 2016 to Mechanic, Faridi, and Afghani—all dual U.S. and Iranian citizens who had pleaded not guilty to the charges and had been  awaiting trial.  Federal prosecutors subsequently moved to dismiss charges against Faratel, Golsad Istanbul, and Smart Power Systems.  The charges against Shyu and Hosoda Taiwan Co. have not been dropped.  As of February 2016, Shyu has not been arrested.

Sources:

[1] Indictment, United States of America v. Bahram Mechanic, Khosrow Afghahi, Tooraj Faridi, Faratel Co., Smart Power Systems Inc., Arthur Shyu, Hosoda Taiwan Co., Ltd., Matin Sadeghi, and Golsad Istanbul Trading Ltd., U.S. District Court, Southern District of Texas, Case No. 15 CR 204, April 16, 2015,available at http://www.justice.gov/sites/default/files/opa/press-releases/attachments/2015/04/17/ieepa_indictment.pdf, accessed on February 24, 2016

[2]  “Four Companies and Five Individuals Indicted for Illegally Exporting Technology to Iran,” U.S. Department of Justice, April 17, 2015, available at http://www.justice.gov/opa/pr/four-companies-and-five-individuals-indicted-illegally-exporting-technology-iran, accessed on February 24, 2016.

[3] “Addition of Certain Persons to the Entity List,” U.S. Department of Commerce, Bureau of Industry and Security, Federal Register Vol. 80, No. 78, April 23, 2015, available at http://www.gpo.gov/fdsys/pkg/FR-2015-04-23/pdf/2015-09442.pdf, accessed on April 28, 2015.

[4] Adam Sege, “Feds Drop More Charges in $24M Iran Export Suit,” Law 360, February 10, 2016, available at https://www.law360.com/articles/757446/feds-drop-more-charges-in-24m-iran-export-suit, accessed on February 24, 2016.

Illegal Iranian Procurement Network Exposed

By Simon Chin and Valerie Lincy

The Justice Department has charged four companies and five individuals for participating in an international network that illegally procured $24 million in controlled goods for the Iranian military and for nuclear end-users.  According to a 24-count federal indictment unsealed on April 17, the procurement network conspired to export sensitive American-made electronic components with military applications to Iran via companies in Taiwan and Turkey, in violation of U.S. law.  The network allegedly began operating in July 2010 and was still active at the time of the indictment.  Its exposure raises the question of how ongoing illegal procurement by Iran will be handled as part of a final nuclear agreement.

The alleged ringleader of the operation was Bahram Mechanic, a 69-year-old resident of Houston, Texas.  Mechanic is the majority owner of Faratel Co. in Tehran and sister company Smart Power Systems (SPS) in Houston.  Faratel and SPS design and manufacture uninterrupted power supplies (UPS), an electronic component critical for air defense systems, missile systems, and the nuclear energy sector.  Faratel’s client list included the Iranian Ministry of Defense, the Atomic Energy Organization of Iran, and the Iranian Centrifuge Technology Company (TESA).

The network allegedly procured at least $24 million worth of U.S.-origin microelectronic components, including microcontrollers, digital signal processors, transformers, and ferrite cores, needed for the manufacture of UPSs.  Using a shopping list of goods sought by Faratel in Iran, Mechanic directed one of his associates, a Taiwanese businessman named Arthur Shyu, to use his company, Hosoda Taiwan Ltd., to obtain the export-controlled items from sources worldwide. Shyu would then either ship the goods directly to Iran or through a “cut out” in Turkey, a shipping company named Golsad Istanbul Trading Ltd.  Between July 2010 and the time of the arrests, Faratel received at least 250 shipments in Iran totaling 28 million parts.

According to the indictment, Mechanic was previously investigated by U.S. enforcement authorities for illegal trade with Iran, resulting in one criminal conviction and one civil action.  Mechanic then used his knowledge of U.S. restrictions “to devise a sophisticated trans-national network of individuals and companies to mask their activities […] and continue to expand his illegal transactions with Iran.”

His experience showed.  The network relied on well-known methods to get around U.S. export control law and international sanctions, including: transshipment through third countries to mask the final destination; undervaluing goods; falsifying product codes to remove military designations; mingling export-controlled items with non-controlled items to avoid scrutiny; falsifying shipment statements to remove reference to Iranian ports; modifying and tailoring payments to ensure that amounts and bank names would not raise flags; and the use of personal email accounts to discuss how to evade U.S. law.

In all, nine defendants are charged with violating the International Emergency Economic Powers Act (IEEPA). Mechanic and two U.S.-based associates, Tooraj Faridi of Houston and Khosrow Afghani, are in federal custody.  Shyu and the operator of the Turkish shipping company, Matin Sadeghi, have outstanding arrest warrants and are believed to be outside of the United States.

Seven foreign nationals and companies were added to the Department of Commerce’s Bureau of Industry and Security Entity List.  In addition to listing Faratel, Shyu, Hosoda Taiwan Ltd., and Golstad Istanbul Trading, the Commerce Department also designated two managers at Faratel in Tehran — Arash Servatian and Elaheh Siahpoush — and Abbas Goldoozan, a company official at Golstad Istanbul Trading.

This Iranian-based network operated during nuclear talks with the United States, in violation of U.S. export control laws and despite international sanctions against Iran. This raises the question of how illicit procurement will be treated if a nuclear agreement is reached between Iran and the P5+1 countries.

According to the Obama administration’s “fact sheet” on the framework agreement, a dedicated procurement channel will be established for Iran’s nuclear program “to monitor and approve, on a case by case basis, the supply, sale, or transfer to Iran of certain nuclear-related and dual-use materials and technology.”  But many questions persist.  How will violations of procurement channel restrictions be handled?  Will the channel cover only items destined for Iran’s nuclear program?  How will procurement of dual-use items for other sectors be monitored?  As in this case, Iran’s civilian industries could act as procurement agents for illicit government activity.  They provide additional avenues for evading sanctions on missile and other military technology.  These critical questions must be resolved by the June 30 deadline.

Obama Fends Off Congress but Putin Complicates Talks

By Simon Chin and Valerie Lincy

The Senate Foreign Relations Committee unanimously approved a compromise bill yesterday that would allow Congress to review and vote on any nuclear agreement with Iran.  The White House has indicated that it would sign the bill.

Yet even as the Obama administration reduced a potential deal-killing threat at home, it faces a challenge in its international coalition.  On April 13, Russia announced the sale of the S-300 air defense system and an oil-for-goods swap with Iran – moves that could complicate the negotiations and the implementation of a final agreement.

The compromise on the Iran Nuclear Agreement Review Act, brokered by Senate Foreign Relations Committee chairman Bob Corker and ranking member Ben Cardin, requires the administration to submit the final agreement for a 30-day congressional review.  The bill states that Congress does not have the authority to approve the agreement but allows Congress to pass a resolution of disapproval and halt the lifting of the congressionally-imposed sanctions on Iran.  The President would then have up to 12 days to respond to a resolution of disapproval, after which Congress would have 10 days to override a veto.  During this formal review period, the President would be prohibited from exercising his waiver authority to lift sanctions.

The legislation, which the administration feared would contain “poison pill” provisions, was watered down in the compromise.  The bill was stripped of language requiring the administration to certify that Iran is not sponsoring terrorism against Americans and does not require Tehran to recognize the state of Israel.  The administration would be required to submit regular reports on Iran’s support of terrorism and its ballistic missile program, but those reports would not trigger sanctions.

While the White House had opposed previous incarnations of the bill, the legislation, as voted out of committee, now makes it less likely that Congress will kill the nuclear deal.  Under the structure of the bill, Congress has three options regarding sanctions relief.  If Congress passes a resolution of approval, the President would regain his authority to waive sanctions immediately.  If Congress takes no action, the President would regain his waiver authority after the 30-day review period.  If Congress passes a resolution of disapproval within 30 days, the President would be prohibited from exercising his waiver authority going forward.  The President, of course, can veto any resolution of disapproval and therefore only requires the support of 34 senators to waive sanctions and implement the deal.

The legislative maneuvering in Congress elicited a dismissive reaction from Tehran.  Iranian President Hasan Rouhani, speaking today in Rasht, stated that the “current disputes” between the President and the Senate are “none of our business” and that Iran is not negotiating with the U.S. Congress but with the governments of the P5+1 nations.

Yet as the White House removed a potential obstacle to a deal on the home front, Russia has thrown up a new hurdle in the international coalition.  Russian President Vladimir Putin issued an executive order on April 13 ending a ban on the delivery of the S-300 air defense system to Iran.  Russian officials claim that this was a self-imposed ban, put in place in 2010 by then-Russian President Dmitri Medvedev under diplomatic pressure from the United States and Israel.  These governments argued that the S-300 system would help shield Iran’s nuclear infrastructure from possible attack.  The S-300 is a long-range surface-to-air missile complex that is mobile and able to target aircraft and missiles.

According to an April 13 statement by Russian Foreign Minister Sergey Lavrov, Russia’s ban was not required by U.N Security Council resolutions.  He described the S-300 system as defensive and therefore not covered by U.N. restrictions.  Yet Resolution 1929 of June 2010 prohibits countries from supplying Iran with “battle tanks, armoured combat vehicles, large caliber artillery systems, combat aircraft, attack helicopters, warships, missiles or missile systems,” as defined by the U.N. Register of Conventional Arms.  The resolution also calls upon countries to “exercise vigilance and restraint over the supply, sale, transfer, provision, manufacture and use of all other arms and related materiel.”

U.S. State Department spokesperson Marie Harf indicated on April 13 that the United States does not consider the sale of the S-300 a violation of U.N. sanctions.   Nonetheless, Harf said that Secretary of State John Kerry raised concerns over the sale in a conversation with Foreign Minister Lavrov.  The announcement of the arms sale, and the oil-for-goods swap, at such a sensitive moment in the nuclear negotiations signals potential cracks in the P5+1 coalition.  The S-300 deal potentially gives Iran greater leverage in the negotiations.  And the eagerness of Russia to do business with Iran signals that the phased implementation of sanctions relief may be difficult to implement in practice.