Illegal Reexports from UAE to Iran Reported in New York Times

On April 2, 2008, the New York Times reported that the Bush Administration has been concerned about American-made items such as computer circuits, aircraft parts, specialized metals, and gas detectors that are controlled for export purposes and have been found in Iran and Iraq. In general, the controlled items were exported to the United Arab Emirates and then illegally reexported to Iran or Iraq.

The article states that last year, U.S. military investigators discovered American-made computer circuits in bomb detonators used in Iraq against U.S. forces. By reading the serial number of the chip and studying shipping records, investigators determined that the chip had been manufactured by AMD in Sunnyvale, CA and sold to Mayrow General Trading in Dubai. A spokesperson for AMD told the New York Times that the company had cooperated with the investigation and added that its customers are bound by agreements not to re-export its products to Iran. The U.S. did not have jurisdiction over Mayrow, a foreign company, but was angered that UAE counterparts had not immediately moved to close Mayrow.

The report states that the discovery of the computer circuits in the bomb detonators set off a clash when the Bush Administration cited the diversion of computer circuits to Iran and then to Iraq, as proof that the UAE were failing to prevent American technology from falling into the wrong hands. American officials stated that other controlled items have moved through Dubai, one of the emirates, to Iran, Syria, and Pakistan.

The article states:

 

The diplomatic face-off, which drew little public attention, prompted the United States to threaten tough new controls on exports to the United Arab Emirates, an ally. The nation had invested billions to become a global trading hub and had begun a campaign to burnish its image in the United States after the uproar in 2006 over a proposal to allow a Dubai company manage some American port terminals.

The administration backed down only after the emirates promised to pass their own export control law. But it is unclear that much has changed nearly a year after the confrontation.


Despite the new UAE export control laws, Iranian traders have found little evidence that the law has been broadly enforced. The article states that the U.S. has been concerned about the diversion of exports to the UAE since 2002 when the Commerce Department sent Mary O'Brien, an inspector, to the UAE for end use checks. From her spot checks of factories, freight forwarders, and other companies that had ordered U.S. export controlled products, Commerce officials stated that it was clear that the products were being diverted on a grander scale than imagined.
 

An entity said to be a woodworking shop, for example, had ordered a sophisticated American machine for making metal parts. The device, Ms. O'Brien knew, could also shape components for a missile system. The supposed factory contained almost no sawdust, and the few employees could not explain how they intended to use the machine.
 

"This is not right," Ms. O'Brien said she had said to herself, convinced that she had turned up her first "briefcase business"- open for inspection, but closed for good as soon as she walked out.


In Ms. O'Brien's 4 years of end user checks, nearly 40% were unfavorable in that the regulated items were found to be missing or the recipient would not cooperate. These end user checks helped jump start many criminal investigations into the diversion of controlled U.S. commodities diverted to Iran. As of last year, 58 inquiries (about half of the total) involved the United Arab Emirates.

The NYT reports that the Commerce Department had proposed new export controls for "governments unwilling or unable to cooperate with the U.S. in its interdiction efforts," which would require special reviews before certain dual-use items could be exported to such nations. Last year, nearly $12 billion worth of American goods were exported to the UAE. Diplomats and lobbyists from the UAE appealed to the State Department and White House and promised the Commerce Department that the UAE would adopt its own export control law, staving off the new reforms. The export control law was adopted in the UAE last August. In fact, the UAE claims to have shut down 12 companies late last year suspected of illegal exports or money laundering and recently arrested a Jordanian businessman who tried to import a metal used in nuclear reactors with the intention of selling to other countries.

Commerce and State officials say that they are encouraged by the steps taken by the UAE, but said that an export licensing system must still be introduced and other enforcement steps taken. Mario Mancuso, the Commerce Under Secretary for export administration stated, "The UAE has made progress, but more needs to be done."