farhad emam Farhad Emam
Publish Date : 03/11/2016

China-Iran Trade Sanctions and Restrictions

It is reported by Simon Denyer from Washington Post on March 7, 2016 that:

The United States will place export restrictions on Chinese telecom giant ZTE for allegedly selling U.S. technology to Iran prompting an angry response from the Chinese government and causing trading in the company’s shares to be suspended in Hong Kong on Monday.

What are the “export restrictions” to be imposed by the US on ZTE? According to the same report, ZTE’s suppliers will need to apply for an export license before selling U.S. equipment or parts to China’s largest telecom equipment company.

As explained in “An overview of O.F.A.C. Regulations involving Sanctions against Iran”:

In general, a person may not export from the U.S. any goods, technology or services, if that person knows or has reason to know such items are intended specifically for supply, transshipment or re-exportation to Iran. Further, such exportation is prohibited if the exporter knows or has reason to know the U.S. items are intended specifically for use in the production of, for commingling with, or for incorporation into goods, technology or services to be directly or indirectly supplied, transshipped or re-exported exclusively or predominately to Iran or the Government of Iran.

The restrictions imposed on Iran-China trade go far beyond the above case.

I. Huawei

As explained by Wayne M. Morrison in a report titled “China-U.S. Trade Issues” published on December 15, 2015:

In May 2010, Huawei bought certain intellectual property assets of 3Leaf Systems (an insolvent U.S. technology firm) for $2 million. A February 2011 letter issued by Senators Jim Webb and Jon Kyl to then-Commerce Secretary Gary Locke and then-Treasury Secretary Tim Geithner stated: “We are convinced that any attempt Huawei makes to expand its presence in the U.S. or acquire U.S. companies warrants thorough scrutiny. Moreover, the 3Leaf acquisition appears certain to generate transfer to China by Huawei of advanced U.S. computing technology. Allowing Huawei and, by extension, communist China to have access to this core technology could pose a serious risk as U.S. computer networks come to further rely on and integrate this technology.”

It was mentioned in the same letter that Huawei “had ties to the Iranian government”. On January 3, 2012, Eric Engleman reported on the website of Bloomberg.com:

Six U.S. lawmakers urged the State Department to investigate whether Huawei Technologies Co. violated U.S. law by supplying sensitive technology to Iran. Huawei, China’s largest maker of phone equipment, said Dec. 9 it would voluntarily restrict business in Iran because of that country’s “increasingly complex situation.”

As reported by Steve Stecklow for Reuters on October 25, 2012, the companies involved in the above transactions were:

1) Soda Gostar Persian Vista, a Tehran-based supplier of Huawei equipment in Iran;

2) MTN Irancell; and

3) CommScope Inc. in Hickory, N.C. - which owns Andrew.

The objective of the transaction was to purchase Andrew antennas and other equipment and use the products in Huawei systems, according to CommScope. There was also an allegation that Huawei wanted to sell to MTN Irancell 36 cellular tower antennas made by Andrew for 14,364 euros.

II. Other Chinese sanctioned companies

The names of following Chinese sanctioned companies appear in different reports:

a.  LIMMT Economic and Trade Company Ltd (since 2006);

b. BST Technology;

c. Trade Company and China Precision Machinery Import and Export Corporation (CPMIEC),

d. Dalian Sunny Industries;

e. Taian Foreign Trade General Corporation;

f. Zibo Chemical Equipment Plant;

g. Liyang Yunlong Chemical Equipment Group Company;

h. China North Industries Corporation (NORINCO); and

i. Sino Metallurgy and Minmetals Industry Co. Ltd.

III. Chinese citizens who are subject to sanctions

It is not necessary to mention names of some Chinese citizens who are subject to sanctions or restrictions on dealing with Iran. Instead, it may be useful to look at a brief report of the United States Attorney Office, Southern District of New York under the title of “Li Fangwei Charged in Manhattan Federal Court with Using A Web of Front Companies To Evade U.S. Sanctions” (April 29, 2014). According to this report:

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Li Fangwei has used subterfuge and deceit to continue to evade U.S. sanctions that had been imposed because of his illicit trade in prohibited materials with Iran. Previously having been exposed as a violator of those sanctions, Li spun a web of front companies to carry out prohibited transactions essentially in disguise. He now stands charged with serious crimes, and millions of his dollars have been seized. It is the hope of this Office not only that Li’s banned commerce cease once and for all, but that he be apprehended and brought before the bar of American justice.”

As a result of the above charges, LI FANGWEI is charged with seven separate offenses:

Count One: Conspiracy to violate the International Emergency Economic Powers Act;

Counts Two and Three: Substantive violations of the International Emergency Economic Powers Act;

Count Four: Money laundering conspiracy;

Count Five: Conspiracy to commit wire fraud and bank fraud; and

Counts Six and Seven: Wire fraud.


IV. Practical consequences of sanctions and restrictions

Did the above sanctions and restrictions stop Chinese companies from transferring their technology to Iran? According to Mohammad Hossein Malaek, Iran’s former ambassador to China and foreign affairs analyst, as reported on the website of Iranian Diplomacy (Irdiplomacy.ir) on August 18, 2010:

U.S-supported sanctions could not freeze the trade partnership between Iran and China, but they add to the already existing problems. Tehran can still supply its demands through cash purchase and Beijing won’t cut the economic ties. Things will be the same, only with more courts and legal obstacles.

In a recent meeting of the presidents of Iran and China, they agreed to expand their bilateral ties and to increase trade to $600 billion in the next 10 years. It is reasonable to expect that this new honeymoon will result in “more courts and legal obstacles”, as far as transfer of technology to Iran is concerned. Conflicting interests of Iran and the US in this respect explain the real cause of the matter: Iran is in dire need of the most advanced technologies, especially in the field of oil and gas, and the US will take all the required measures to stop transfer of highly sophisticated American technologies to Iran.

This policy even extends to imposing a ban on accepting Iranian students to certain American universities. As reported by Tom McKay on the website of mic.com on February 18, 2015, the University of Massachusetts Amherst made the following announcement last year:

The university has determined that recent governmental sanctions pose a significant challenge to its ability to provide a full program of education and research for Iranian students in certain disciplines and programs. Because we must ensure compliance with applicable laws and regulations, the university has determined that it will no longer admit Iranian national students to specific programs in the College of Engineering (i.e., chemical engineering, electrical and computer engineering, mechanical and industrial engineering) and in the College of Natural Sciences (i.e., physics, chemistry, microbiology and polymer science and engineering) effective Feb. 1, 2015.

Could these measures stop transfer of knowledge and technology to Iran? It is difficult to give a positive response to this question. The real challenge, therefore, is not to impede or restrict this transfer but to find the best ways and means of a knowledge-based relationship that can support durable scientific and technological development of Iran. Briefly put, those who eat the apple of knowledge cannot stop the others from eating it and taking a bite from this apple should not result in an exile to the desolate island of sanctions and restrictions. 

All rights reserved for Mr. Farhad Emam. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without his prior written permission and shall have legal consequences.

You can also follow us on:

1. Twitter: @lawiniran

2. Facebook: https://www.facebook.com/Lawinirancom-169230710097564/

3. Linkedin: https://www.linkedin.com/in/farhad-emam-22735a51