US Diplomatic Cargo: Iran Sanction Violations

Diplomatic goods for the U.S mission in Kabul are being diverted across the Iranian border before re-entering Afghanistan. The U.S. Government’s exposure to security risk and employ of contractors in violation of sanctions through the use of this practice will likely impact USAID, NATO, Department of Defense and the Department of State as these entities are reliant on the transfer of goods from Karachi to Kabul.

Our investigation represents a preliminary enquiry into the practice with the research developed through interviews with logistics contractors with first-hand knowledge of the sanctions violations by companies subcontracted to U.S. companies.

 

Key Findings

 
  • U.S. Government cargo is being moved from Karachi Port through Iran (sanction violation) instead of the Afghanistan-Pakistan border due to problems on the borders such as long delays, expense, and violence.
    • This includes diplomatic cargo and food-supplies for U.S. Missions (Embassy);
    • Diplomatic cargo is being ‘cross-loaded’ as diplomatic cargo is not subject to fees;
    • Vehicles become untraceable for periods of up to 7 days while they transit;
      • During this period, there is no control over sensitive goods being shipped to and from embassies. Cargo could be subject to manipulation including harmful tampering.
  • Freight is not securely sealed – the containers are sealed with generic locks that can be easily replaced by drivers;
    • Logistics contractors state that drivers of these trucks have 5-6 of this type of security lock in their vehicles that would allow containers to be easily opened and resealed;
  • Local drivers are sourced from the ‘adda,’ the local Pakistani market, and there is no vetting of these drivers and the pool of workers is reported to include individuals with Jihadist sympathies;
  • Despite the charges against Anham FZCO, a UAE based defense contractor by the Department of Justice, which includes this specific practice – the behavior of crossing the Iranian border to deliver cargo to Afghanistan is reported by logistics contractors continues unabated.
  • This practice has not only occurred in Afghanistan but has also been reported to have taken place in Iraq.

 

Source of the Issue

 
  • Government contracting is based on a hierarchical structure where the U.S Government awards a large contract to a ‘Prime’. The ‘Prime’ then hires a ‘Sub-Prime’ who in turn hires other companies; in the case of logistics often smaller local companies;
    • As the provision of service descends through the contracting chain the concept of responsibility becomes diluted as does the control over the sub-contracting parties;
  • Simultaneously, there is enormous pressure on the ‘Prime’ and ‘Sub-Prime’ to deliver in hostile environments where violence and political instability (internal and external) make the conduct of business in these settings unpredictable;
    • Unpredictable environments whether border closures, violence or political disputes between neighboring states creates delays and increases the cost of doing business and therefore lowers the performance and profits of all the contractors in the supply-chain;
    • For local contractors the ‘Foreign Corrupt Practices Act’ is meaningless – enforcing this law against a driver in Pakistan or the local contractor would be difficult.
      • There is no meaningful deterrent for them to dissuade violating sanctions by passing through Iran to maintain delivery and profitability;
      • It is not in the interest of the ‘Prime’ or ‘Sub-Prime’ to challenge these behaviors as it invokes issues of contractual responsibility and contributes to their cost and delivery efficiencies.
        • It is advantageous to the ‘Prime’ and ‘Sub-Prime’ to allow this behavior to continue and maintain plausible deniability;

 

Recommendations

 
  • During our interviews with logistics contractors in mid-level management who spoke on the condition of anonymity, there are viable and cost comparative solutions;
  • Of the solutions presented the most convincing of these and which warrants further examination is the use of ‘Air Cargo’ delivered from Dubai World Central Airport in the UAE to the U.S. military bases in Afghanistan;

 

Air-Cargo Advantages

  1. Analysis by supply-chain professionals suggests that it is cost-competitive to land freight;
  2. Eliminates the issues of sanction violations immediately as goods are no longer routed by road from Karachi Port to Afghanistan;
    • Eliminates any security threats to diplomatic cargo or other sensitive materials;
    • Eliminates any risks from cross-loading of cargo with diplomatic shipments;
  3. Eliminates delays at borders that results in food-spoilage and increased costs to contractors;
  4. Removes the motivation for the ‘Prime’ and ‘Sub-Prime’ to turn a blind eye to these unlawful practices;
  5. Decreases time and handling by 50% - fresher food-supply for the U.S mission in Afghanistan or Iraq;
  6. Goods can be securely transported from U.S military bases in Afghanistan to their final destination removing the risk of tampering, contamination, or other interference with the goods in transit;
  7. Removes the harm to the integrity of the mission when contractors such as Anham FZCO are found violating sanctions;
  8. Provides more value for the dollar spent.

 

Summary

 
Category: Investigation
Countries: Afghanistan, Pakistan & Iran
Information: Primary Source Interview
Period: 2019 - 2020
Funding: Internal