Export violation: business evades sanctions by creating a Turkish shell company to sell machines to Iran for nuclear programDecember 4, 2012
Spanish tax authorities raid Basque company, seize documents
A Durango manufacturer, Ona Electroerosión, has violated Spanish customs laws by smuggling dual-use technology to Iran, according to official reports.
Ona has denied the charges, saying that it sought two permits for sales of machinery to Iran in 2009. One permit was approved; one, denied. Ona says it cancelled the sale to Iran for the permit that was denied, and maintains that the machinery it sold to another client in Turkey was among the simplest pieces of equipment in their catalog.
This version of events described by Ona not seem plausible. Why continue trying to sell the same equipment that Spanish officials prohibited for Iran to to a firm in Turkey—-Iran’s next door neighbor and one of Iran’s closest trade partners?
European companies have long been active in Iran, but we’re not talking about selling a Peugeot. This is machinery used to make fans that Spanish authorities believe will be used in Iran’s nuclear operations.
The results of the raid have not been made public yet. Presumably, the company will face a multi-million dollar fine at a minimum. If the allegation is true that Ona Electroerosión was determined to deliver the goods to Iran to the point of using a front company to facilitate the sale, then it is not just guilty of gross negligence in its export compliance program. Under that circumstance, arrests and criminal prosecution of Ona’s senior management is justified.
Here’s one of the more precise news reports on the scandal. From Reuters via CNBC on Nov. 26:
Spanish company embroiled in nuclear smuggling scheme with Iran
BILBAO (Reuters) – A company from Spain’s Basque country smuggled machinery to Iran for likely use in the country’s nuclear program through an elaborate scheme involving a shell company in Turkey, Spanish tax authorities said on Monday.
Spain’s tax agency said the company had managed to send over seven machines designed to make parts for turbines used in energy plants, in a scheme that violated United Nations security council sanctions against Iran.
A source close to the operation named the company involved as ONA Electroerosion.
The machines, sold for nearly 1 million euros ($1.30 million), were destined for use in Iran’s nuclear development program, according to the agency’s investigations to date.
The U.N., the United States and the European Union have imposed sanctions on Iran for refusing to halt nuclear enrichment, which Western powers fear is part of a plan to amass the capability to produce nuclear weapons.
Iran argues its atomic work is for use in medicine and generating electricity.
The company, based in the Basque municipality of Durango, had been denied a license to export seven fan-manufacturing machines to Iran in September 2009, precisely because of fears they could be used in the nuclear program.
But it later duped Spanish customs by using an intermediary company set up in Turkey by its Iranian business partner, and shipped the machinery to Istanbul before dispatching it to Tehran.
Spain’s tax agency said it had raided the company’s premises on November 13, removing documents and other information it was still analyzing.
Its operation, dubbed “Kakum”, began earlier this year, when it became suspicious of the company’s activities.
No one has yet been arrested or charged in relation to the scheme, the agency said, though added those responsible could face prison sentences and a fine of close to 6 million euros.