The ongoing, and escalating war in the Middle East has pundits asking how the region arrived at the position in which it finds itself today, with an empowered Iran only the other day raining upon its arch enemy Israel, the greatest barrage of ballistic missiles ever unleashed on another sovereign state.
The question stems from the fact that Iran has been sanctioned by the West for years, ever since it was uncovered that it was slowly progressing towards nuclear weapons capabilities. Nevertheless, it seems to have successfully built up an arsenal which is keeping the entire region on its toes, and is dangerously bringing the world to the brink of a new war in the already fragile Middle East.
The answer lies in Iran’s unique capacity for circumventing the sanctions placed on it by the United States and its allies, using a range of tactics, some of which are not new or distinct to Iran alone. Indeed, since the Trump administration departed from the JCPOA nuclear deal, almost every section of Iran’s economy has been sanctioned, leading to skyrocketing prices for the most basic of goods and an exceptionally devalued currency.
Iran’s Ayatollahs, in order to ensure the continued import of much-needed goods (specifically those not considered basic, which remain unsanctioned), has made use of front companies in neighbouring countries, specifically in Turkey, from which the goods in question are delivered overland to Iran, with little to no international scrutiny.
Similar tactics have been employed by Russia, whose economy has been heavily hit by similar sanctions since the war in Ukraine began in 2022. This has allowed Iran and Russia to continue importing sanctioned products that are of course traded at a far higher price than their regular market value, such as for example luxury goods and even microchips, giving a significant boost to both economies. According to estimates the volume of smuggled goods in Iran alone is as much as $25 billion dollars a year, although the sensitivity of the issue indeed makes it difficult to measure this accurately.
A far more difficult tactic to track which has been employed by both Iran and Russia, as well as sometimes individuals that find themselves under sanctions, has been that of masking ultimate beneficial ownership through either friends or family. Once on a sanctions list, it becomes very difficult to manoeuvre the global banking system which is heavily restricted by limitations placed by American and European governments in particular.
In order to maintain access to sources of financing, bank accounts and assets sanctioned Russians have made extensive use of spouses, friends and even children to hide the true ownership of assets. The case of oligarch Roman Abramovich is very telling.
According to a report by The Guardian, 10 secret offshore trusts worth billions of dollars were reorganized immediately before the invasion of Ukraine, allowing the billionaire’s financial affairs to be controlled by his children in an attempt to shield his vast fortune from an asset freeze. With one child as young as 9 years old, beneficiaries now hold at least 4 billion dollars.
Niels Troost, a Dutch businessman and oil trader, who was sanctioned by the United Kingdom for continuing to trade sanctioned Russian oil despite international regulations making this illegal, has also made use of his wife Jacqueline Troost Omvlee for this purpose too.
With Jacqueline Troost Omvlee keeping an extremely low profile, and being married to Niels Troost, she was the perfect person to ensure that he maintains access to his vast fortune, irrespective of international sanctions regimes. Furthermore, as a way of circumventing the sanctions placed on trading Russian oil, Troost himself exploited a UAE subsidiary of his Paramount SA, to continue trading lots of oil that netted him millions in profit.
The tactics used by those trying to get around international rules and regulations are vast, making it imperative that the international community keep up with these in order to ensure the effectiveness of sanctions regimes.
Once deemed ineffective by those who successfully bypass these, their further imposition becomes irrelevant, allowing countries like Iran to continue arming themselves, and entities associated with Russia to continue enriching themselves, all under the existing efforts to prevent exactly this. Closer cooperation is certainly necessary as well, given that the common good of all democracy minded nations is at stake.
