The skies above Iran are looking pretty unfriendly right now.
As of this summer, about half of the Islamic Republic’s civilian aircraft fleet, which is operated by 23 separate airlines, is grounded. That’s primarily because US sanctions prevent the carriers from purchasing spare parts. As a result, the state of Iran’s increasingly dilapidated commercial aviation industry has fallen behind Afghanistan’s.
Iran has been under sanctions of one form or another since the country’s 1979 Islamic Revolution. These days the United States sanctions Iran as punishment for its pursuit of nuclear weapons and support of terrorist organizations.
The “nuclear deal” brokered by the Obama administration in 2015 briefly relieved Iran from the crippling sanctions. But last year, US president Donald Trump reinstated the sanctions, violating the agreement, and launched what he calls a “maximum pressure” campaign against the country. The Trump administration has so far blacklisted hundreds of banks, people, and companies working with Iran.
Because of this, Iran has once again been forced to get what it needs on the black market. Airplane parts are high on its shopping list.
A July advisory issued by the US Treasury Department warns anyone “considering continued aviation business with Iran” that its commercial airlines play a supporting role in the country’s “efforts to foment regional violence through terrorism, its weapons programs, and other destabilizing activity.” The departments goes on to say that Iran uses the country’s commercial carriers to send fighters and weapons abroad, including Syria.
One of those carriers is Mahan Air, Iran’s first private airline, which operates a fleet of 55 jets and transports roughly 5 million passengers annually. Its planes include both US- and European-made aircraft.
Established in 1992, the US Treasury blacklisted the Tehran-based company in 2011 for providing financial, material, and technological support to the Qods Force, a special forces unit within Iran’s Islamic Revolutionary Guard, facilitating the unit’s arms shipments, and transporting operatives and weaponry for Hezbollah, a political organization based in Lebanon with a military wing the US government designates a terrorist group.
“It’s pretty clear from the airline’s flight routes and activities that they support IRGC-QF operations,” former US Air Force colonel and intelligence officer Cedric Leighton told Quartz, using an acronym for the Qods Force. “It’s highly likely that the airline’s private ownership is just a front for IRGC-QF activity.”
Last year the United States sanctioned multiple entities linked to Mahan, including overseas sales agents and front companies used to obtain aircraft parts. Earlier this month, the US Treasury Department’s Office of Foreign Assets Control placed sanctions on three Mahan sales agents operating in the United Arab Emirates and Hong Kong. Italy, France, and Germany have banned Mahan flights from landing in their countries, reportedly due to pressure from the US government.
A “resistance economy”
With such strict international controls in place, Iran has been forced to operate a “resistance economy,” in the words of Iranian Supreme Leader Ayatollah Ali Khamenei. This means increasing domestic production, when possible. For most everything else, it means procuring necessities—like spare parts for aging commercial aircraft—through overseas networks willing to work around US sanctions.
For Mahan Air, these have included businesses incorporated in Europe, the South Caucasus, the Gulf, and Southeast Asia, including Malaysia, Emanuele Ottolenghi, an expert on Iranian sanctions evasion at the Foundation for the Defense of Democracies, a Washington, DC think tank, told Quartz.
Indonesia can now be added to that list, according to a grand jury indictment filed in US federal court last week.
Prosecutors say Jakarta-based aerospace executive Sunarko Kuntjoro supplied Mahan with new and refurbished spare aircraft parts between 2011 and 2018, concealing their actual destination by routing the shipments through front companies in Singapore, Thailand, and Hong Kong. Kuntjoro, the majority owner and president of PT MS Aero Support in Jakarta, falsely claimed that the parts were intended for Indonesian air carriers and suppliers, court filings say.
Mahan allegedly paid some $3 million for the components, which included flight computers, actuators, and collision-avoidance system processors.
“Many of the items listed in the indictment are very basic to the aviation business,” Leighton said. “You can’t fly a modern airplane without them. This shows that US sanctions placed on Iranian entities have had a significant effect on Iran’s ability to sustain business and governmental operations.”
The indictment says Kuntjoro was assisted by people and companies identified only as “Conspirator A,” “Conspirator B,” Person C,” and “Person D.” The US government has seized $350,000 held by Conspirator B and Company C in accounts at HSBC Bank and Bank of America. Mustafa Oveici, an Iranian citizen and an executive for Mahan Air, is named in the indictment but has not been charged.
Mahan Air did not respond to a request for comment. Quartz was unable to reach Kuntjoro, who does not have a lawyer listed in court records.
A “dirty business”
Leighton said people do these kinds of things primarily for the money. They may have some ideological or religious predisposition to work with a certain government or country, but are often “politically agnostic,” he said. In many cases they are financially desperate, and either fail to consider the risks of getting caught or believe the risk of getting caught is minimal.
Last June, a New Jersey woman pleaded guilty to helping smuggle more than 20,000 export-restricted aircraft parts from the United States to Iran. Mahan Air was among the recipients of the illicit shipments, which were worth more than $2 million.
US prosecutors said the woman, Joyce Eliabachus, operated out of her modest suburban home. She repackaged and shipped the parts to seemingly legitimate front companies in the United Arab Emirates and Turkey. A network of Iranian co-conspirators then forwarded them on to the actual buyers in Iran. The money for the purchases flowed from Iran through Turkey to the United States, obscured within a complex web of shell companies and pseudonymous bank accounts designed to confuse investigators and hide the true identities of the end users.
These circuitous arrangements, obviously, make things far more expensive than usual, and brand-name aircraft parts procured on the black market can cost many times the normal retail price.
“It’s simple,” an Iranian airline official told Reuters in 2016. “If this costs $10,000, I had to pay $70,000…After decades of doing this you see a lot. Everyone takes their cut. It’s a dirty business.”
Another one of Mahan Air’s foreign facilitators, a Turkish national named Gülnihal Yegane, first appeared on law enforcement’s radar in 2013.
At the time, Rahim Bazdar, an Iranian connected to the Qods Force, was under surveillance by Turkish investigators. During wiretaps of Bazdar’s phone, they reportedly heard Yegane complain to him that he had not been paid after buying export-controlled, US-made airplane parts on behalf of Mahan Air. Yegane was sanctioned in 2018 by the US Treasury for operating “multiple businesses that purchase and/or receive aviation parts from foreign vendors, including export-controlled, U.S.-origin items, who then forward those parts to Mahan Air.”
“There is no getting around the US sanctions,” trade lawyer Anahita Thoms told The New York Times earlier this year, after a Norwegian Air Boeing 737 on its way from Dubai to Oslo was forced to land in Iran due to technical issues.
The latest case involving Mahan Air and its network of enablers is “just the tip of the iceberg when it comes to illicit Iranian activities in Southeast Asia, particularly in Indonesia, Singapore and Thailand,” Leighton said. “This would be an area worthy of further exploration for both intelligence services and journalists—but remember, the Iranians often play for keeps.”