Black Navy

Tracking the Iranian-backed fleet that’s fueling the Assad regime.

It's hardly a secret that the Iranian regime views the current grinding war in Syria as more of a domestic than a foreign-policy concern. Its elite Islamic Revolutionary Guard Corps' Quds Force has been training and financing a host of Shiite and Alawite sectarian militias in Syria to fight a war that Syrian President Bashar al-Assad's conventional military and traditional paramilitary proxies have been unable to win on their own. Without the direct military intervention of Iranian-backed Hezbollah in Qusayr and Homs this year, those territories would still be under rebel control. Not for nothing has Mehdi Taeb, a confidant of Iranian Supreme Leader Ali Khamenei, famously described Syria as Iran's "35th province," the loss of which would spell the fall of the Islamic Republic.

But now documentary evidence has come to light showing that Iran -- which had previously been helping the regime in Damascus sell and ship its own sanctioned oil to international buyers -- is shipping light crude into Syria under terms that practically amount to pro bono petroleum imports. Simply put, the Iranian regime is giving its natural resources away at a time when its own people are starving thanks to debilitating international sanctions on its nuclear program.

A packet of documents Foreign Policy obtained last week indicates that Iran has been "selling" shipments totaling around 4 million barrels of light crude oil over the last year to Syria at a 10 percent discount, at least since May of this year, when global oil prices were around $98 per barrel. The discounted cost borne by the Assad regime -- about $88 per barrel, not including transport fees -- appears to be paid out of a long-term $3.6 billion line of credit for energy imports that Tehran issued Damascus a few months ago to help it counteract the economic impacts of a devastating nearly three-year civil war. In reality, however, Assad may never be able to repay this loan -- not that the Iranians likely even expect him to, given that they view his survival as inextricable from their own. This means that not only are the Iranians selling Assad oil at a bargain, but they're floating him the money to buy it at that reduced rate.

David Butter, an expert on the Middle East's energy sector at London-based think tank Chatham House, calculates that prior to the war, crude oil production in Syria was 385,000 barrels per day, of which around 150,000 barrels were exported and the rest processed through refineries for domestic consumption. But domestic production started to fall rapidly in 2012 when violence in the country escalated. "Now Syria is only producing 20,000 barrels per day and importing daily around 130,000 barrels of crude plus products from abroad," says Butter. By the regime's own admission, Syria's oil sector is now on the verge of collapse, with direct or indirect losses estimated at $2.9 billion as of October 2012. The country's oil minister has reckoned that Damascus is spending $400 million per month on fuel imports.

A letter dated May 12, 2013, signed by S. Moradinasab, managing director of Sahand Naft Iran Ltd., a trading services company affiliated with Iran's oil ministry, and addressed to Mohammad Alrobeh, the president of Sytrol, Syria's state-owned oil firm (which has been sanctioned by the United States and the European Union), confirms the 10 percent discount as having been certified by the "latest resolution in the Special Economic Plan Committee." This blandly named committee, says David Patrikarakos, author of Nuclear Iran: The Birth of an Atomic State, is one of many set up by the Islamic Republic "for managing certain aspects of the economy and, in some cases, allocating funds to particular projects." Patrikarakos notes that this one is clearly linked to the crisis in Syria. Additionally, the packet of documents includes a contract, dated May 31, 2013, certifying the sale of over a million barrels of Iranian light crude to Syria, which was delivered to the port of Banias "during April 2013" via the Camellia, an oil tanker owned by a company with a registered address at offices belonging to the National Iranian Tanker Co. (NITC) in Tehran, the largest tanker company in the Middle East and a subsidiary of the National Iranian Oil Co. The contract stipulates that the purchase would either be transacted directly between the Central Bank of Iran and the Central Bank of Syria or "by the credit line which has been allocated by Iranian government to Syria."

This refers to an agreement that Syria and Iran signed this past July that extends a $3.6 billion long-term line of credit from Tehran to the Assad regime, allowing the latter to buy oil products. According to Reuters, the credit line was agreed to as part of a deal that "will allow Iran to acquire equity stakes in investments in Syria," meaning that Iran's investment in Syrian state institutions likely goes beyond building militias and enhancing the regime's flagging security apparatus. Tishreen, a pro-government Syrian daily, reported in May that Adib Mayaleh, the governor of the Central Bank of Syria, had acknowledged for the first time the extent of Iran's concessionary loans to Syria was actually $7 billion. This money allows Damascus to pay for everything from energy to agricultural goods and textiles.

"I can't see Assad repaying this loan anytime soon," Patrikarakos told me. "He may not even be around in another year or two to do so." But a freebie oil deal to the Syrian regime may have dire populist consequences back in Iran. There's growing perception among the Iranian people that its clerical government is squandering crucial funds on foreign adventurism rather than on domestic exigencies.

Parvaneh Vahidmanesh, an Iranian human rights activist based in Washington, thinks the mullahs' behavior is disgraceful. In an email to me, she wrote: "The Iranian government has money to support the Assad regime, to provide it with almost free oil, but it has no money to support its own population at a time when people in the capital city can't afford to buy meat and when schools in poor districts are burning down because of cheap, faulty heating systems. Why is the money of Iranian children being used for guns and bombs in Syria?" Patrikarakos believes such opinions are widespread in Iran. "The Iranians are suffering badly from sanctions and they're wasting money -- money they don't have -- giving it to Hezbollah and Assad," he says. "Floating Syria's energy sector is politically stupid, too, because the greater threat to the mullahs is their own population more than the fall of Assad."

Furthermore, Iran isn't only running its chief natural resource gratis to Assad. It's also spending extra money on sophisticated methods of dodging international sanctions enforcers -- such as registering foreign shell companies and adopting "flags of convenience" for its oil tankers. Most vessels listed in the documents packet as responsible for transporting the millions of barrels of light crude to Syria have previously been reported on as case studies in Iran's maritime craftiness in skirting a far-reaching oil embargo. For instance, the Baikal, owned by NITC and sailing under Tanzanian registration, was quarantined off the Greek island of Syros a year ago because of suspicions that its cargo and transport violated EU sanctions. Yet in the documents obtained by Foreign Policy, it is shown as having transported 1,100,635 barrels of Iranian light crude to the Syrian port of Banias in December 2012. A quick search on Equasis, a ship-tracking service, also reveals that the Volga, which shipped almost 850,000 barrels to Assad in February of this year, had its name changed to the Ramtin in June of this year. It now sails under the Iranian flag and is owned by Tabuk Maritime Inc., the address of which is registered to a management company in Dubai.

But perhaps the most interesting tanker is the Tour 2, transporter of 978,321 barrels of light crude to Banias in January. Originally named simply the Tour, this ship is notorious for opportunistically swapping flags and owners to move oil around the world -- both from Iran and from other rogue states. It was originally registered to ISIM Tour Ltd., a Maltese company owned by ISI Maritime. Along with nine other Maltese companies, ISI Maritime got caught in the U.S. Treasury Department's net in 2011 for being a front associated with Islamic Republic of Iran Shipping Lines (IRISL), the entire fleet of which was sanctioned by the United States in 2008 and then by the United Nations and the EU in 2010. (The ISI Maritime disclosure evidently had little impact at the time in Malta, an EU country subject to European sanctions law.) But the story didn't end there: ISIM Tour's parent company was Irano Hind Shipping Co. (a joint venture between the Shipping Corporation of India and IRISL), which was itself sanctioned by the United Nations in 2010. India dissolved that partnership in 2012 after the U.N. Panel of Experts on Iran, a body appointed by the U.N. Security Council to monitor sanctions enforcement, recommended that member states freeze the company's assets.

According to the Financial Times, the Tour 2 switched flags and owners in the space of 24 hours in March 2012 after sailing from one Syrian port to another to extract Assad's crude for export to a legally restricted marketplace (prior to EU sanctions, Syria had sold 95 percent of its modest oil exports to the European Union). On March 24, 2012, a day after the Tour 2 docked at the Syria port of Tartus, and following concerns raised about the ship's true owners, Transport Malta, the company that manages Malta's maritime registry, issued a statement saying that it had decided to suspend the vessel's registration certificate and remove it entirely from the Maltese shipping register. But after the Tour 2 traveled from Tartus to Banias, it simply exchanged its Maltese mast for a Bolivian one, bid goodbye to ISIM Tour as owner, and said hello to Auris Marine Co., an entity registered in the Marshall Islands, which isn't subject to EU jurisdiction. However, Auris Marine was annulled hours after this transaction occurred, the Financial Times also reported. Then Forbes discovered in January of this year that the Tour 2's new owner had become a different Auris Marine Co., this one registered in Belize and already under suspicion for owning another Iranian tanker found to be trafficking oil to Syria. And as the Wall Street Journal previously determined, in a story about yet another Iranian oil tanker, this Belize-based Auris Marine "is ultimately controlled by an IRISL subsidiary." Its current registered address is Irano Hind's offices in Tehran.

Much of the problem in charting the provenances and sinuous histories of Iranian ships owes to the kind of clever maneuvering outlined above. A workshop report published in January by the International Institute for Strategic Studies (IISS), a multinational think tank that partners with the U.N. Panel of Experts on Iran, found that "[t]o date, more than 100 changes in names in vessels related to Iranian shipping have been noted," all of them creating a nightmare for sanctions enforcement efforts. In one case, Iran even set up a company in an unnamed Pacific Island state for just 20 days for the purpose of conducting a single shipping operation.

Still, despite all the work Iran puts into its game of maritime subterfuge, it's not impossible to further bottleneck its petroleum trade or at least make the cost of transporting crude, especially to Assad's criminal regime, more prohibitively expensive. You can change an oil tanker's name or flag, but you can't change its IMO number -- that is, the unique identifier issued to every vessel by the International Maritime Organization. This means that the slippery vessels mentioned above are actually quite easy to keep an eye on.

One Iran-sanctions expert I consulted, who would only talk on background, indicated that monitors do keep an eye on most of the Islamic Republic's ships, but may not kick up a fuss because of certain geopolitical sensitivities (ongoing P5+1 nuclear talks, a Syrian peace initiative, etc.) or an awareness that a zero-tolerance enforcement regime isn't viewed favorably by all comers. For instance, in September, the Luxembourg-based General Court -- Europe's second-highest court -- canceled sanctions against IRISL after it found that the European Union had offered insufficient evidence tying the shipping company to Iran's nuclear program. (The European Union is fighting that ruling and taking preliminary steps to reimpose sanctions on IRISL.)

But while plenty of countries are both willing and legally entitled to conduct energy deals with the Islamic Republic, most insurance companies, port authorities, sea captains, and other necessaries of the global shipping industry still prefer to do business with legitimate partners, not pariah states. Many non-EU countries are also susceptible to Western pressure to cut the mullahs off completely. Tanzania, for instance, is on record as saying that it will deflag any Iranian ships it may have sold its colors to; Belize claims to have undertaken efforts to get Iranian-owned vessels taken off its national register. As for the Marshall Islands, erstwhile host of the first Auris Marine Co., it is cited by IISS as among the flag states that "take their responsibilities seriously," referring to proper "know-your-customer" vetting procedures. It also helps that the Marshall Islands' corporate and shipping registries are located in Fairfax County, Virginia, which makes the CIA headquarters a convenient neighbor.

Much of the oil going from Iran to Syria is no doubt designated to keep Assad's brutal war machine functioning, and with discounts and loans it's effectively free, meaning that the true expense is being borne by the beggared Iranian people. As for Syria, the worst humanitarian catastrophe of the 21st century -- which previously featured the use of chemical weapons and now includes a state-perpetrated terror-famine in Damascus and a nationwide polio epidemic -- shows no sign of dissipating. Indeed, since Assad's unleashing of sarin gas on Aug. 21, his confidence has only grown. Yet the West, which is reluctant to arm Syrian rebels and is dead set against intervening directly in the civil war, still expects a brokered solution with a regime that has no incentive to broker one and is now sustaining itself on free oil. Perhaps before walking into the Geneva 2 peace protocol in November, the so-called Friends of Syria could get creative and at least try to obstruct Iran's energy largesse to a mass-murdering dictator.

Sahandnaftiran Letter

Camellia Contract 1

Camellia Contract 2

Total Operational Costs of Mt Baikal

Total Operational Cost of Mt. Tour2

Total Operational Cost of Mt Volga



Is South Korea Stealing U.S. Military Secrets?

Their tanks, missiles, and electronic warfare gear look an awful lot like ours.     

Defense Secretary Chuck Hagel watched a live-fire exercise in South Korea last month in which American and Korean tanks operated side-by-side in a display of military might between two trusted partners fond of describing theirs as a "blood alliance."

But just beneath that relationship's surface is a growing unease. South Korea, one of America's strongest partners in East Asia, is aggressively targeting U.S. advanced technology for its own use in a variety of Korean weapons programs, Foreign Policy has learned. From anti-ship missiles, electronic warfare equipment, torpedoes, a multiple-launch rocket system, and even components on a Korean-made Aegis destroyer, the United States is concerned about the uncanny resemblance those systems bear to American weaponry. Even the tanks Hagel watched on the range that day may be partial knock-offs: The Korean models have fire control systems that appear to be all-but-identical to the American versions.

Though the United States long has had systems in place to monitor technology-sharing with allies, the case with South Korea has become particularly acute in the last few years. As the United States pivots East and Asia's once sleepy defense industries begin to awaken, it has quietly begun to scrutinize its technology-sharing relationships with such allies, conducting secret but robust "dialogues" -- diplomatic-speak for a series of private exchanges on tech-sharing between the two countries -- to ensure that American secrets stay that way.

That's particularly true of South Korea, which on Sept. 30 celebrated the 60-year anniversary of the mutual defense treaty with the United States. The Koreans hosted Hagel for two large military parades, followed by a gala evening event with fruit drinks the color of the Korean flag, glowing speeches about the alliance, and much talk of katchi kapshida -- "we stand together."

But the United States is watching closely as the South Korean defense industry shoots for a larger market share. The country is gaining a reputation for gleaning as much as it can from American advanced technology, exploiting any opening it sees. The very fact that discussions are underway with South Korea is a sign of the level of concern, an administration official says. As the Obama White House counters mounting worries among European allies that it is listening in on top leaders' conversations, the United States is also scrambling to make sure South Korea isn't absconding with the secrets that have made American defense platforms world-class.

The South Koreans are known for making knock-offs and improving upon them. But from a variety of Korean-made sensor equipment, anti-ship missiles, and electronic warfare systems, the United States sees the Koreans going after American technology and, potentially, copycatting it.

"They are very good at taking full advantage of any loopholes with any type of agreement," a former government official who worked in Seoul told FP.

That's problematic on several levels. Not only could Seoul sell its newly-acquired advanced weaponry to another country that could use it against American interests, but proprietary American technologies could be sold by other countries to undermine the American defense industry. That would come just as the U.S. industry confronts the biggest shrinkage of Pentagon dollars in more than a decade and is looking to diversify its markets overseas.

Hagel stood there that day at the Rodriguez Live Fire Complex in Korea with his senior military assistant, Lt. Gen. Robert "Abe" Abrams, after whose father the famous American tank was named. The South Koreans's K1 tank was based on the design of the Abrams, but the Koreans have added their own touches, from a hydro-pneumatic suspension and torsion bars to a fording kit for crossing rivers. The newest version of the K1 tank, the K1A1, possesses upgrades that include a 120mm smoothbore gun, updated electronics, and a top-of-the-line fire control system to improve accuracy and effectiveness. But the irony of the joint exercise designed to put the relationship on display may not have escaped either Hagel or Abrams as they stood there that day. American officials fear that fire control system aboard the K1A1 tank is essentially a rip-off of its own technology, which, if true, would represent a theft of a sensitive -- and marketable -- capability.

Ditto for the Koreans's Haesung anti-ship missile, first developed in the late 1990s to be better than the American-made Harpoon anti-ship missile. Again, American defense officials have raised concerns with the Koreans that the technology upon which the Harpoon missile is based is very similar to the American technology.

The relationship between the United States and South Korea on the point of technology-sharing is extremely sensitive, so much so that a number of outside experts who would normally speak to such an issue refused to do so or would only talk privately out of a fear of insulting a trusted ally. Kath Hicks, the former principal deputy undersecretary of defense at the Pentagon until leaving earlier this year, summed it up: "The alliance is incredibly important to us and it's incredibly important to them, and there are things about friendships that are best discussed in private."

But leaks within the South Korean news media recently indicated South Korea has begun to use its press to take swipes at the United States. One story in August in Hankook Ilbo suggested South Korea faced a backlash from the United States: "The United States has reportedly launched an investigation into whether the ROK has stolen U.S. military technologies in developing its weapons," the story said. "Observers speculate the United States may intend to put the brakes on the ROK's growing weapons exports."

Speaking to the issue for the first time, American officials dismiss the idea of a series of "investigations," but do say that as they look to the evident ambitions of South Korea's defense industry, they must be extremely wary. The concerns with South Korea come at a critical time for the United States. It is attempting to display its commitment to the Asia-Pacific, spending billions of dollars to do so. But it is also relying on its regional partners to take responsibility for more and more of the security needs in the region as its defense dollars shrink. That means the demand for U.S. technology and weapons systems are growing. But so is the suspicion that as some allies' defense industries mature, standing too close to them -- and sharing too much technology -- poses a significant risk. The fears about South Korea's demand for weapons technology are not new. Direct evidence that the country is stealing American technology is hard to come by, but the suspicions harbored by U.S. officials are so pronounced that a senior Pentagon official was willing to take the unusual step of speaking on the record to FP about them.

"We need people to have good capabilities," said Beth McCormick, the head of the Pentagon's Defense Technology Security Administration, or DTSA, in an interview in her office a few miles from the Pentagon. "But at the same time, when we provide that technology, the United States has the perspective that we want to make sure that it is used for the purpose for which we provide it." McCormick would not discuss any specific platforms on which DTSA is applying additional scrutiny, saying only that the United States is in a robust "dialogue" with Korea and must ensure that the technologies it shares, even with trusted allies, are properly safeguarded. "We really want to have an advanced dialogue with Korea because we saw the fact that Korea has definitely made it very clear that they want to have a bigger, indigenous defense industry," McCormick said.

Right now, the dialogue between the two countries is focused heavily on the potential sale of the advanced F-35 Joint Strike Fighter to the South Koreans. American officials are putting into place a strict security agreement to ensure that nothing is shared, either with the wrong people, or for use by a buyer of a Korean-made copycat for Korea's own competitive purposes. The South Koreans are interested in the F-35, but their interest comes at the same time as South Korea's bid to build its own stealth jet, raising bureaucratic eyebrows in the United States. It could be the equivalent of South Korea taking a fighter jet on a test drive, as it were, flying it around the corner to kick its tires, only then to return it to the dealership and say it's not interested, but first looking under the hood and taking some pictures.

"If any country is taking our JSF around the corner to try to exploit it, that's going to be a real problem," McCormick said.

Under the Arms Export Control Act, allies can re-sell certain American technologies but only after approval from the U.S. State Department that the country is in compliance with the "end use" of that technology.

The United States can't be too careful, McCormick said. If, in the future, the U.S. government sees that its technology has been exploited, that will have a deleterious effect on the technology-sharing relationship with that country, she said. "If we have any information or any evidence that there are issues out there, it immediately raises concerns for us, and depending upon what we think about it, it might affect what type of technology we might provide in the future," she said.

The Koreans have been receptive, McCormick said, creating a government agency similar to her own to monitor and protect the technology. But there remains a worry about that agency's independence since it falls under another one that is helping to promote the South Korean defense industry -- a matter, in effect, of the fox guarding the henhouse.

None of these concerns surprises U.S. government officials who have worked Korea issues. The former government official who worked in Seoul but who would only speak on background said the South Koreans have an aggressive stance toward technology as they build their defense business. And while it's unclear if they are stealing American secrets, they'll do whatever is possible. "If they thought they would have a really good chance of getting away with it? Probably," the former official said. Unlike France or Israel, South Korea has never had a reputation like other American allies for being overly aggressive as an economic spy. But as its ambitions for its defense industry grow, experts who know South Korea note that Seoul has long had an appetite for American secrets. It paid former U.S. Navy intelligence analyst Robert Kim to slide the government critical intelligence in the late 1990s. Kim was caught and sentenced to 10 years in prison in 1997. Such practice is a fact of life, the former U.S. government official said. "Friends spy on friends," the individual as much as shrugged.

In May 2011, Young Su Kim, a former vice president at a Colorado-based firm, Rocky Mountain Instrument Company, helped in the illegal export to South Korea of military technical data for prisms that are used in guidance or targeting systems in unmanned aerial vehicles, AC-130 gunships, tanks, and missile systems. He was sentenced to five years behind bars, according to data provided by the Department of Justice.

And in 2010, Juwhan Yun, a naturalized American citizen of Korean orgin was sentenced to 57 months in prison after pleading guilty to attempting to illegally export to South Korea components for a 20mm gun and a Russian fighter jet, RD-180 rocket propulsion systems, and other technology without the State Department's approval. He was arrested the year before in Florida and later indicted for attempting to purchase rocket materials for a company working on the Korean Satellite Launch Vehicle, according to the Justice Department. Yun had also been convicted in 1989 of conspiracy for violating the Arms Export Control Act in connection to exporting 500 quarter-ton bombs of sarin gas to Iran, none of which made it to its final destination, according to data provided by Justice.

Driven by its fears of aggression from the North -- as well as its strong desire to export its wares -- South Korea has never kept secret its ambitions to build an indigenous defense business. Seoul has marketed its defense products not only in Asia but in Europe and even the United States. The Stockholm International Peace Research Institute ranks South Korea as 16th in arms exporters globally under the top six: the United States, Russia, Germany, France, China, and Britain.

"They are minor league," said Siemon Wezeman, a senior researcher at the Stockholm International Peace Research Institute. "Medium league at best." But, Wezeman said, they are extremely active, marketing their defense products around the world. "They have big hopes for more arms sales, and if you believe them, they will be in a couple of years at the same level as Israel, Germany, and France," he said, adding the caveat: "It's probably a bit overly optimistic."

South Korea put itself on the map late last year when Norway made overtures toward South Korea to build a conventional submarine. Much of the technology upon which such a platform is based comes from the Germans. But the sub is an example of Korean innovation. Unlike the Japanese, who are seen in many ways as imitators, the Koreans are themselves more inventive, taking what they glean from other exporters and improving upon it.

"Don't underestimate the Koreans," Wezeman said. "They are quite capable of doing very advanced things themselves."

Many experts believe that South Korea uses the threat posed by North Korea to build its own defense industry -- and justify drawing American advanced technology closer. Within South Korea, the country sees itself as a developed ally of the United States, but as its defense industry inches its way onto the global stage, it feels increasingly entitled to obtain the best, most advanced technology available. That may be coming at the expense of the United States, which is viewed differently within Korea by different generations. The Korean War-era generation views the United States as a strong partner, the one that helped win the war and for whom loyalty is paramount. But a younger, more tech-savvy generation is growing up in a Korea that sees itself as, at least one day, a peer competitor.

At the same time, South Korea isn't completely sure of itself when it comes to operational control of forces on the Peninsula. Currently, the United States retains authority over all forces in South Korea. If there was a significant provocation from North Korea, for example, the U.S. commander in South Korea would assume control not only of his own 28,000-person force, but South Korea's as well. The United States for years has wanted to hand over operational control of those forces to its ally. But so far that hasn't worked. Efforts to formalize the transfer of control, in 2009 and again in 2012, never went through. Currently, that formal transfer is scheduled for 2015, but again, the South Koreans want to delay it.

Strategically, the South Koreans are still very much dependent on the United States. But when it comes to defense exports, the country is emerging as one ready to move out of the nest. And the United States is worried the student has access to too many of the teacher's lesson plans.

"Now they are on the level of where they can be competitive with us," says the former government official. "At what point does the student become the teacher?"